GLOBALFOUNDRIES Inc. Q4 FY2024 earnings call

Management Statement and Operational Highlights

• In 2024, delivered results exceeding guidance midpoints across revenue, gross margin, and EPS, and generated over $1 billion of adjusted free cash flow, significantly exceeding the target.
• Secured a record level of design wins across all end markets, with nearly 90% on a sole source basis.
• Entering 2025, expects continued design win momentum and improving demand outlook; first quarter 2025 guidance indicates modest year-over-year revenue growth, and full year 2025 expected to mark return to growth in key metrics.
• Strategic initiatives in Malta on track, with transfer of essential chip technologies and announcement of a first-of-a-kind center for advanced packaging and test capabilities supported by grants.
• End market performances: Automotive continued growth, smart mobile devices saw content growth, IoT had strong design wins, and communications infrastructure and data center had new opportunities.

Segment Performance

• Smart Mobile devices: Fourth quarter represented approximately 40% of total revenue. Fourth quarter revenue declined ~15% sequentially and ~4% from prior year; full year 2024 represented approximately 45% of total revenue, up 1% year-over-year. Longer term, well positioned to capture opportunities for increased silicon content in handsets.
• Automotive: Fourth quarter represented approximately 23% of total revenue. Revenue increased ~62% sequentially and ~30% year-over-year; full year 2024 represented approximately 18% of total revenue, up from 2% in 2020, and grew ~15% year-over-year. Expected meaningful revenue growth in 2025.
• IoT (home and industrial): Fourth quarter represented approximately 19% of total revenue, marked second consecutive quarter of sequential growth, up ~15% sequentially; full year 2024 represented approximately 19% of total revenue, down 21% year-over-year. Saw strong design win momentum but impacted by inventory management; expected to bottom out in 2024 and return to growth in 2025.
• Communications infrastructure and data center: Fourth quarter represented approximately 9% of total revenue, increased ~28% sequentially and ~18% year-over-year; full year 2024 represented approximately 9% of total revenue, down 33% year-over-year. Expected meaningful revenue growth in 2025 driven by AI accelerators, optical networking, and satellite communication.

Guidance

• First quarter 2025: Expected total revenue between $1.55 billion and $1.6 billion; non-wafer revenue expected to be approximately 10% of total revenue; gross profit between $341 million and $384 million; operating profit between $151 million and $214 million; earnings per share between $0.24 and $0.34.
• Full year 2025: Expect non-IFRS net CapEx to be approximately $700 million; expect to exit 2025 with adjusted gross margins of approximately 30% as customer demand and utilization improve and cost and productivity initiatives take effect.

Risks

• Actual results may differ materially from forward-looking statements due to factors in SEC filings including risk factors. Risks include macroeconomic headwinds impacting end markets, customer inventory management, and potential IP and supply chain challenges.

Question and Answer

Q: Provide explanation of expectation by end market for Q1 and if auto growth is expected to continue.

A: Thomas Caulfield noted Q1 2025 expected to show year-on-year growth, with auto expected to continue growth as it's a fifth year of revenue growth and has new socket wins ramping; comms infrastructure and data center expected to start growing due to design wins in satellite communications and photonics.

Q: Walk through how to get to 30% gross margin exiting 2025.

A: John Hollister said it's due to improving gross margin story, constructive pricing environment, improved factory utilization, structural cost improvement including roll-off of depreciation and amortization costs, and enriching product mix.