GLOBALFOUNDRIES Inc. Q3 FY2024 earnings call

Business Execution

• Third quarter results reflect consistent execution towards strategic objectives, with revenue at the high end of the guidance range, meaningful year-over-year free cash flow generation, and gross margins consistent with年初 commentary despite lower factory utilization levels.

Design Wins

• Significant new design wins closed in 3Q, with approximately 90% of year-to-date design wins being sole source opportunities. A key design win with NXP on the 22FDX platform for automotive, IoT, and smart mobile devices, leveraging GF's global footprint.

Market Performance

• Automotive remains a key growth driver, offsetting short-term demand dynamics despite channel inventory issues, expecting high-single-digit revenue growth in 2024. Smart mobile devices returned to year-over-year revenue growth in 3Q, with design win momentum supporting content and feature expansion. Home and industrial IoT had sequential revenue growth but continued to face elevated channel inventories. Communications infrastructure and data center saw revenue declines but are gaining new design wins in power, connectivity, and optical networking.

In the third quarter, revenue was $1.739 billion, a 7% sequential quarterly revenue growth. Wafer revenue from end markets accounted for approximately 90% of total revenue. Non-wafer revenue was about 10% of total revenue. Smart mobile devices represented approximately 50% of the quarter's total revenue, with third quarter revenue increasing approximately 14% sequentially and approximately 11% from the prior year period. Home and industrial IoT markets represented approximately 18% of the quarter's total revenue, with third quarter revenue increasing approximately 4% sequentially and decreasing 25% from the year prior period. Automotive represented approximately 15% of the quarter's total revenue, with third quarter revenue decreasing approximately 5% sequentially and 16% from the year prior period. Communications infrastructure and data center end market represented approximately 7% of the quarter's total revenue, with third quarter revenue decreasing 14% sequentially and approximately 15% year-over-year.

Fourth Quarter 2024

• Expect total GF revenue to be between $1.8 billion and $1.85 billion. Non-wafer revenue expected to be approximately 10% of total revenue. Gross profit expected to be between $432 million and $481 million, mid-point at 25%. Operating profit expected to be between $232 million and $301 million. Earnings per share expected to be between $0.39 and $0.51.

Full Year 2024

• Maintain CapEx guidance of approximately $700 million and expect adjusted free cash flow generation in 2024 approaching $1 billion.

• Short-term demand and utilization dynamics impacting the end markets served. - Geopolitical factors causing customers to have incentives to produce locally within China, which may impact business opportunities.

Q: How to reconcile the strength GF is exhibiting in the second half of 2024 with the weakness of many customers and how it sets up for 2025?

A: GF's strength comes from the breadth of end markets played in, with high concentration in smart mobile devices and automotive growing high-single-digits. In 2025, 2024 started with Q1 as the low point in revenue and sequential growth every quarter, and 2025 is expected to be an up year for GF, with Q1 2025 year-over-year growth but on the high end of cyclicality from Q4 this year to Q1.

Q: What are the puts and takes on gross margin as we think of 2025?

A: Underutilization charges have had a positive effect, with roughly 4 points of benefit in Q1, 3 points in Q2, about 1.5 point in 3Q and a little less in 4Q. Net of that, there has been an improvement in gross profit margin as utilization stabilized with sequential revenue growth. As industry recovers and utilization improves, similar positive effects on gross profit margins are expected in 2025.