Earnings call transcript Q1 2023

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Operator

Good day and thank you for standing by. Welcome to the Conference Call to review First Quarter of Fiscal Year 2023 Financial Results. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions]. today's being that advised be conference recorded. is Please

hand over Head to would go Capital now speaker conference to like ahead. Please Relations. Franklin, I your the today, and Investor Markets of Sam

Sam Franklin

everyone, morning, call. earnings Good Operator. you, and to quarter GlobalFoundries welcome XXXX first Thank

CFO. with Reeder, On and the Thomas CEO; today me call Dr. are Caulfield, David

is a A short available GF's accompanying our will at website released presentation. on Investor available with slide financial on today's and quarter Relations while first ago, being This made be webpage. call investors.gf.com, replay we are results, recorded along our which

IFRS During directly adjusted this call, reconciliations are we will measures release IFRS today's financial present for most slides. both and The in non-IFRS accompanying measures and available measures. and adjusted non-IFRS comparable press the

these and or and forward-looking be terms identified future you tense. are on such results expect, statements Certain as remind be subject anticipate use change. Such call would may may deemed unaudited today's believe, by by the statements the can I that of be to statements. to financial intend,

we not forward-looking obligation may these today. statements. from materially we Actual statements should forward-looking place on and differ any statements not update forward-looking undertake undue to do any results You make reliance

the cause may in our XX, issued SEC from the SEC results press Risk risks on XXXX. uncertainties with Form the described For today in the caption and XX-F under about Factors Report factors on April release as please filings, refer more information the that to materially we statements, our differ actual filed forward-looking to well Annual section as including

results also quarter provide on current business first and a providing which our We the end XXXX environment on Dave with markets will following begin Tom call second and update today's and provide guidance. details technologies, will summary quarter

that limit you We open questions request one with questions. follow-up. the call your one to please will We then for

for to the turn now over call remarks. his Tom prepared I'll

Thomas Caulfield

call. everyone you, our Thank earnings Sam, first to quarter and welcome,

with and challenging line resilient provided February, are to a results in to report backdrop. I'm pleased the QX as macroeconomic guidance we cyclical that in amidst to deliver performance continue we financial

will by second me than current semiconductor the industry, extend providing at least the mobile expected, particularly and through on as smart as and end the coming more demand such in communications, rebalancing slowly markets we as the and environment. start to home lower update data of in of Let that quarter, in Similar a the infrastructure, end believe the down well markets devices, electronics centers, that consumer previously inventories others brief are general. business

return the decline improvements are range. high-single-digit Though, the to in inventory now the occur to would Despite sequential revenue we peak inventory the update, XXXX happen expecting point in is to more likely models, discussions our and quarter quarterly the likely of own that to continue modest quarter that recent mid the customers prior of quarter represent first to have percentage continued in into of Based and the conversations of anticipated our our we mark we quarter-to-quarter slight year will average wafer, previously and half that and on forecast fourth anticipating on per than the first revenue, XXXX. forecasting internal year-over-year selling growth, throughout later slowly customers well half sequential revenue the year. in year-over-year will that levels are point revenue low or second and with previously price the ASP low demand first will the our anticipated growth cycle. most we with XXXX, Based the more anticipate revenue normalized of our more the XXXX, will and

in markets, further markets. comment this we the growing faster the such end headwinds segments and the and IoT, defense, healthy aforementioned automotive section. demand aerospace Despite will in industrial as see his in on continue David to

single we continuing LTAs. sign customers at wins new grow and our source design to Additionally, are

sequentially earnings margin now partially let X% color Coupled gross by headwinds. ASP we provide results. end wafer of which me on XX% of now at declined touch strong $X.XX, update help XX.X% a shipments quarter, of reduced quarter, range. Let resulted the resilient partnership with will on our some proactively but our manage industry in with offset gross give execution, a In GF year-over-year quarter, in adjusted activities. improvements first financials to being in guidance the to for and costs reported in this customer and continue year-over-year adjusted more our offset the mix. margin brief and operational adjusted revenue as on and we our me moment, were of the We the per high broader delivered share recent Dave a our

to across our product data with prepayments in partnership million $XXX build to infrastructure with progress qualifications, differentiated LTAs. communications, fees GF we customer first in and added which billion five quarter Consistent quarter, roughly the the and markets. during serving our revenues respect approximately automotive, to $X.X as and center, continue end under incremental mobile product of these strategy, as continuing platforms, our long-term With additional access added agreements of make smart IoT well an new we devices customer needs

with product automotive competitive expanded we highly growing management automotive our portfolio. products new capabilities adds product on our BCDLite This voltage feature Starting grade. differentiated with XXX additional on line handling continue automotive, power to deliver at

XXCLO of five customers no In most Fiber market, second Ayar the first X of our solutions Renesas the less were using data Conference we industry's Ayar specifically and Communications center their demos optical terabytes Optical and Labs end data technology. center recent chip-to-chip to in photonics, for March, including communications, at per demonstrated infrastructure connectivity. also GF shared our than the solution pleased Labs have

module are components, into way of our will amplifier. end devices, making front including features next enhanced the leading of tier noise smart RF technology XSW. be line enhanced releases delivery accelerating mobile product premium based low an handsets. For its the for on silicon-on-insulator we This That's

the In controllers an secure Nordic; for intelligence their Bluetooth delivering innovate recently in leader on range RF market This and focused solutions non-volatile micro for efficiency of as is integrated embedded example continue exciting the announced customer application more solution share our security. to low memory XXFDX. series industry-leading this IoT, it differentiated power edge. our at GlobalFoundries low using enhanced energy memory of chip XXFDX, we One is efficiency product next-generation technologies and embedded enables an single at power

research a a partnership advanced efforts leadership our development Georgia initiatives. of partnership activities, announced agreement we and university executed including and their range in continuing silicon strategic Finally, photonics, research Tech. with GF under packaging capabilities agreement spans broad Labs, workforce This

as guidance and dedicated I world teams execute our deliver to to summarize, am the on in and targets that the around pleased stakeholders. To continue our resilient line with financial to performance to we customers report our our set

you, to that, over With Dave.

David Reeder

Thank earnings our first and you, Tom, welcome call. to quarter

For the which call, will and metrics, excludes the compensation charges. remainder of including reference stock-based guidance, restructuring I adjusted

Our were the quarterly update. we financial in with line in results first range quarter provided our last

millimeter related billion, markets. driven wafers end First the driven and quarter revenue by the XX% approximately to prior in from an was shipments, reduced quarter, period, we equivalent primarily shipped approximately wafer and year decrease mobile $X.XX consumer XXX,XXX

includes other revenue, radicals, of approximately the engineering, Non-wafer markets items broadly quarter, by revenue for from revenue. total expectations. XX% our consistent which accounted mix. product ASP long-term Wafer year-over-year, for for in end approximately with driven agreements accounted increased expedite with improvement total as XX% pricing, non-recurring revenue better XX% fees, customer revenue well from continued of and first ramping our approximately as

devices Let approximately our represented quarter's me an mobile total XX% revenues on Smart the of now provide end markets. revenue. update by

First XX% broader RF continued well-publicized a reduced This correction ASPs, continuation from low-to-mid market. of the prior in mobile offset double-digit volumes year inventory was smart within products, transceiver the quarter smartphone mix period. the growth segments recorded the and which tier growth, by revenue partially growth by prior and from period, tier the driven audio declined decline year content premium principally and our in higher

normalized than from first the quarter work continues heard the during supply levels more remained and chain. We half will by second the throughout have believe first inventory of correction be as inventory inventory smart year. others, achieved inventory markets that largely the through you've in be most XXXX, As the the levels that mobile historical of will of higher the levels expected to half

RF towards continue growth our opportunities as We SoC greater value transceiver in rich Wi-Fi supporting tier and seek the handsets. focus the from smartphone segment premium to more feature we technologies on capture by transition

connected grew the revenue. driven was and home the this enable our volume for market XX% driven by well where and payments IoT technologies approximately X% growth as industrial quarter’s quarter, total to and of year-over-year, primarily the market we that end digital broadening wireless continue the to and by defense devices. in use representing approximately In business, industrial government aerospace design Year-over-year our as first our wins of revenue ramp

We expect demand the analog and correction portions and and for softness particularly mix the aerospace within markets smart more and consumer increased to near-term the card inventory end technologies, offset customer IoT centric market defense signal the largely next-generation and market. of

As Tom discussed, us. automotive continues growth strong to be segment a for

revenue. approximately representing grew total the XX% XXX% revenue quarter's quarter First of year-over-year,

in our and across connectivity, ramp we fourth infrastructures XXXX. continued discussed processing, a technologies see our As throughout results, quarter sensing, to vehicle expect

market. support growth add continue additional of content well allocate continued will to the as more automotive of silicon existing and have our within We capacity to as capacity the

our Next, data moving infrastructure, communications, and to market. end center

infrastructure, approximately to First this was in grew the market XXXX, XX% decline enterprise buildup first total line a and we approximately expected through revenue, center the to of quarter's later expectations. in year-over-year improve the which expect data broadly of the with revenue to half see for and in demand half XXXX. inventory quarter in X% second for wired softening XXXX, Due comprised of with of revenues end volumes

demand and this to Finally, year-over-year PC declined our XXXX. revenue. quarter's percentage of end X% comprised decline revenue our of a total computing in soft in first and and end expect to approximately market overall we as notebook quarter personal market be continues the continue the to XX%

$XXX the of create tax value awarded to in the manufacturing New the State significant the we state. investments proud the related State York in first million quarter, local tremendous Also we've We're with York for of were refund to New have the received by community. made partnered and a to of

the a and gross high For guided of was mix. adjusted point ASPs the which and improvement at end by into our was million, range of year-over-year roughly delivered higher translates approximately XXX we The product gross adjusted margin. first driven richer XX.X% basis quarter, $XXX profit

operating for Operating we manage quarter $XX expenses XX% million. about to declined our to approximately the represented approximately sequentially as of were prudently and the Total SG&A continue for was $XXX costs. total $XXX revenue. R&D expenses first quarter million million,

roughly margin XXX the We delivered points operating our translates which the the profit end above better of $XXX an than basis and for operating period high quarter, XX.X% million ago approximately range. into year of guided adjusted

incurred We First and $XXX million year was $XX of expense of ago quarter the million million, other quarter of first period. interest net $XX delivered adjusted the and expense net a approximately approximately increase million, we income an in tax from quarter. $XX

reported we quarter. result, per a share the for earnings As of adjusted diluted $X.XX

Let equivalents flow balance combined cash some $X.X from quarter, me $XXX the at end the operations cash cash, for our $XXX provide was million. Cash key metrics. first and the flow of the billion. or marketable of stood was revenue. quarter total now roughly approximately sheet XX% securities At CapEx quarter million and for of first

have $X revolving facility, We which billion also undrawn. credit remains

comment for the briefly year. guidance second quarter, to transition on will the the outlook I I for Before

the the slightly that on a As our low quarter revenue prepared year. Tom we point in his sequential the that we first in basis for and will believe commentary, XXXX, articulated throughout grow quarter-to-quarter-to-quarter-to-quarter represents

quarter inventory that a and half previously will our only to one the normalization we time, are increased discussions than of is the with on and models half at second signal expectation forecast of in volumes Although, internal customers anticipated. occur later guide based our second that our the XXXX levels

a XXXX on models, partially in in modest high-single-digits. mix we offset Based in and range, for high-single-digit improvements expect updated the year-over-year decline by to mid resulting revenue percentage volumes the decline points XXXX ASP will that shipment in year-over-year

our you the provide for with outlook quarter. me let Next, second

be total approximately billion and expect revenue between Of of We $X.XX this, to we total billion. GF revenue. expect revenue to be XX% $X.XX non-wafer

to expect million gross adjusted $XXX We profit between million. $XXX and be

million million. be operating between adjusted and expect We $XXX to $XXX profit

related expect be share-based Excluding to and for of OpEx million goods to million. between of be total which mid-point expect we the of $XXX the sold, roughly is guidance, is million $XXX OpEx. compensation $XX related $XX million, approximately million At we to to compensation and quarter, costs $XX our share-based approximately

the for million and between expense net $XX to and to and and interest expense million. $XX expect We million million quarter $XX be other between be $X tax

adjusted a diluted expect share million, XXX million and $XXX approximately count to between be $XXX of shares. net on We income million fully

share to for first We and expect per $X.XX quarter the adjusted earnings be $X.XX. between

XXXX, For expect to CapEx to the billion. be approximately full-year continued we $X.XX

us In update. in operational and proactive earnings summary, enabled decision we first guidance line with fourth our to performance the broadly business in deliver strong across quarter our results quarter ranges making provided

continuing are presented by delivering and set out the long-term the remain initiatives headwinds our their our We targets impacts and focused in as impacting to cyclical on our financial business tackle implementing challenges are goals on we to industry the strategic mitigate model.

turn over to With the call back Tom. I'll that,

Thomas Caulfield

Dave. Thanks,

more national, depends made economic, In application over exciting that require several and GF's offer the of But last on by security, differentiated semiconductors deep of We world opportunity proposition. this these even and on proud GF. we value deliver the chain for and ahead the markets are features, We customers our XX-year history partnerships. is the years. focusing and progress our innovation supplier achieve a supply via unique strong for our specifically end a we've specific customer

growth play story out automotive as to exciting such continued growth achieve significant engines industry. this heard of the IoT, and we've sectors in our two for You've as most

analog about to these Law and customer on and in designs, scaling. based allowing RF power add of technology range technology. because required bring edge our deliver class intelligence the markets different We platforms win with proprietary not digital we at all our these that efficiency FDX memory optimized is Moore's GF innovation in end security because we we wins and win with content world because embedded we a for across connectivity win markets industry-leading world-class technologies. What's is

our of to the continuing believe in we increasingly these an deliver The the heard continuing manufacturing in We as markets, role that proof We our in of so and play this GF role see are in secure revenue semiconductors vital that. markets, numbers, the invest call, it's is during the our early is in acceleration can differentiation driving future to on in we you industry. the the grow to criticality and of to to committed of world. global talent products global that secular are

team and the power for multi-billion journey. impeccable company's accelerate are our technology signal It and in mix business. delivering that an year delighted is and power commercial performance that Niels drive next financial and a GF our our the Niels dollar context be to Senior where business and career record brings own technologies, accomplished Industry our deep help analog who He veteran track joining following of Instruments in will his strategy, exciting driving Anderskouv joining I'm our expertise during and at last responsible the June to product Niels Officer us to execution. two was financial will deliver our President announce role of phase and as analog Vice in Officer. leadership our comes roadmap, and performance. technology go-to-market XX-plus Chief our Executive us leaders leadership as Business Texas and management,

sales product and will Our existing end to technology Niels. markets, teams report

communication pedigree He our experience CFO CFO technology-enabled delivering transparent in bring years a Stone to financial most Tim including Additionally, for guide Company, its and of joining laid GF be track recently at discipline, on Reeder Tim stakeholders. company. to today, is breadth to help for software Financial private roles, seasoned our Snap, business and Amazon investment Motor of Officer. our brings performance, With outcomes his foundation June on Ford Tim the business. GF XX public AWS a in senior brings focus at the as Chief as will vital company new AI Tim fast the in CFO accelerating world-class and experience and with record strong enhancing and moving that continuing GF as finance to finance chapter. will next industries a our by serves all will in perspectives and Devices including of David build GF,

after over left I me transitioning wish GF of me and coming Dave true behalf be GF months. personally. through family, will next to a the to markets Tim to and Reeder an imprint the indelible partner has Dave our his been has leaving chapter. on GF on Stone of transition David public the best On in entire the success

Q&A. Dave, it back I'll final turn your to head we for into thoughts before you

David Reeder

Tom. Thanks,

was and singular one diversified ago, feature the world's across a I with that GF's years and semiconductor Three talented mission, geographically leading joined diverse GlobalFoundries to foundry. only rich workforce, shared build

have progress geographically never across markets increasing towards to goal made as better our technology. serve this multiple tremendous best-in-class been diverse customers, secure, and with demand We a have positioned partner

the continue transition I welcoming GF has all I'm company GF progress him to With Tim coming to the the the Stone. as to the over over reins look months. hand forward to made, to complete we ready will and support

In deliver our closing, wanted customers. around for every extend the employees XX,XXX globe who appreciation day I to my to our

let's call With open the that, Q&A. Operator? for

Operator

[Operator Instructions]. Instructions]. Thank [Operator you.

first our line with Harlan JPMorgan. of the question And from comes Sur

line is open. now Your

Harlan Sur

morning. ask strong best team Good of for thanks Thanks luck profile question. for helping support letting the the on the me and and drive endeavors. future all execution a Dave

David Reeder

Thanks, Harlan.

Harlan Sur

pricing but not arms yes. mix team's differentiation, technology pricing which of and on is The Thank high -- based strategic. partnerships drives right, links, you. your sources The very the team's engagements right, very are

flip weakened competitors On the to supply/demand mean, side, have capacity. industry the continue I add dynamics

business? What to that that the on what's and is LTAs that the negotiating, say grow year. on ASP team track new the business trend LTAs new still you're winning, on You you're did ASPs about this

David Reeder

talked to XXXX in on about where XXXX. call We a we the in will XXXX think slightly time was in said versus We on for it it reiterating our pricing, increase reiterated on pricing QX, was again we year-over-year basis XXXX. kind that that we about I versus believe we when increase and November year thought pricing basis that here delivered going we're pricing Look, February. XXXX XXXX Harlan. Thanks, our first the year-over-year for in of a

the we LTAs winning our financial them out economic look we're we're five model. that another value we When to $X.X LTAs. in that about wins and of signing quarter think LTAs Those that in the and of the time deliver deliver D billion the needs GF long-term first

kind customers time the technology looking this their into capacity, Tom, they that think particularly geographies inventory capacity they're I hungry of out seeing that? channel. well the they and anything as perturbation and constraints are the you'd that add as through looking so want in And are with the They're delivers. in future, near-term in GF geographic to for diversification that where

Thomas Caulfield

Yes, bottom long-term the sign of is slowdown these kinds we and I'd in add, this agreements. our of

business, business. accretive design that accretive new business. all all look the quarter if source mix we're the single way business. over that's our at the we source XX% discipline And It's business. about wins sure we're design to driving about It's And Our model. make financial you win our design single first our for not around wins, are

Harlan Sur

Appreciate that. in And average then sequentially for you like QX. full-year grow revenues outlook should my on follow-up, QX given the and your revenue weaker still mid-single-digit

the ASP You've profile. got strong

year? the for think team the margin So margins? exit about the how or should profile gross at better we XX% Can of this year remainder gross the

David Reeder

Yes.

would That year of one stated I year. some high little the add want you for the that we bit to the When more you we entire ran very year to the think about at did for year. a for like Harlan, utilization entire but in almost time quarter know, give XXXX of the context. XX%s XXX% you or we'll XXXX, guide So a as color

delivered much what gross delivered in And as, X a XXXX. in But guided perspective, points actually mid-XXs would so in quarter, of in of yet, about run from with for at we it perspective, points gross first we X utilization when from roughly that very a line we margin. the you what year look every margin you was the of know is you when QX the XXXX, think we utilization

be able XXXX. baseline margin able for been to mix, reset operational we've gross improved good through performance improved the so pricing And to

And Q-to-Q-to-Q to so revenue, sequentially on lowest about when being we throughout a for would correlation there we full-year QX you and we our of believed a be would basis the expect that guide I revenue. gross the stated high think the year. quarter margin that

Operator

line question. the your next for moment from Mark One with Lipacis your Jefferies. And comes question next of

Your line is now open.

Mark Lipacis

us taking support Jefferies. my over question. thanks Really appreciate the that great all you're Dave, for at given Hi, sorry, leaving. here you've

So thank you for that.

David Reeder

Mark. you, Thank

Mark Lipacis

are on wondering, how very value. technology for trend is the back topic? is is customers reassuring, it your that, impacting is customers on are color I provide with manufacturing the a that, the if I'm bring because of to with part But like that engagements? or the imagine conversations high your this there value of the reassuring interesting to on your sounds with and you that that of engagement proposition a Maybe ability guess Thank can many your question great that topic telling is customers you. any I good which that you guys you quantify Or providing you're way having to or investors, local markets is

Thomas Caulfield

I the a very get world geological small are supply of important Thanks chain. think in Concentration lot balanced pockets for to for reasons. Mark. is geopolitical, first important; an to of reasons not a the realization more it of It's good how

sensitive have a problematic chain. the for down applications. of for be companies realization the awareness example, think to where fabulous China, very of in types more tell China, global there. don't implementation. is those A chains of out drive their I And if defense, Taiwan, of in now always aerospace supply shut comes applications would of and down businesses more in they lot execution, would and it energy could So out a lot supply you be

and anybody of you're talent, but to lot engineering we're design move. lot what an let plan future else. space, reuse conversations, next their technology only take a not and and think realistic designs over application a but for it's seeing trying That's built. companies it what's to me I planning who -- thinking say, existing more where is of So I it's to report don't -- on going and about it be important somewhere think

So us tell today. remains present the this ahead, little that, still opportunity the net very in that you net P&L in of of heard an in you've all I would -- of for it

Mark Lipacis

Got auto you follow-up you. ramp for you basis, how helpful. could just think which Thank capacity. guys? auto a of And to vector continued you. year-over-year growth doubled -- kind over adding expect business the about continue like more on this this That's business, we the and than annually? think see how and how Is should you can about is next is the -- Or here talk several you're How you about you years? you on you doubling see remind us this just like

Thomas Caulfield

So all It's in what I'll water. you about reverse believe. go

that's at content believe XX% semiconductors off you which growth relatively from because base, and a electrified transition we the design like higher on call with industry, drives rate of from that combustion growth new automotive XX% the and models, we rate the If us. a somewhere an smaller an you've significant our seen new autonomous growth vehicle compounded, wins in connected engine starting ACE, internal eventually between to you'll but see we're what expect

we still that where on quarter feel be automotive our it billion, our was going go the rate. to million. we're Last up year, back Think earlier we revenue $X $XXX were year $XXX talking than around less XXXX; about head million mark. run was in about fourth a we bumping This if

growing base technology that and high So of on into to features have gain lot to importantly. But a is work visibility share more firmly the than base. in done I market we types we very is the we're doubling types harder of to going what feel this doubling applications the a and space. will small But cars confident grow on our not revenue this in big and that believe continue

Operator

Bank America Vivek moment your of from your One with next Arya question Securities. the of And line question. for comes next

Your line open. is now

Vivek Arya

really the Thanks on He'll best and wish next his for to question be thanks and adventure. Dave missed.

to wanted second customer a So historical ask Because year. talking your kind specific that customer some large market and first, I normal the towards of Is based about mentioned persisting to end XXXX on seasonality? kind on smartphone mark the smartphone weakness return Is the half based to orders? in that of the you trends. of was Tom,

the that's what to a I'm giving second you why could just trends? that some confidence return of half is So curious level seasonal mark

Thomas Caulfield

especially down, come Well, you telling modest was, if range it's certain half, -- the sequential see decrease look a starting saw the for industry with want down. from that to first will well have that's an customers inventories start on -- second we we're quarter, to inventories aggregate the in they bodes are result, let the inventories us to why I as in think And are very point growth. of revenue our see modest half. second normalization Inventories coming

channels feeding They us. to -- they're past they get more normalize how this the want

the trying more came muted make. a the half point a that the so is seeing, the was a is belief what second recovery. There And we recovery. be we to were And real we're That think was second into what I this change, would year. half strong

David Reeder

little And markets. a that if I build couple bit could in of just just a end on

volumes. bit but actually that a So silicon market respect we a segment. do premium that's the in of with bright segment, more play smart The of inventory that's held to segment mobile the only little premium the play also better. the as attach of us we where with segment up premium And of held in that some for market's that well spot market a that we there that not up -- is handset as more in challenged obviously some bit

would the I a has other or so I the defense talked bit point. But about quite IoT well up of little about that business maybe end aerospace earlier and sub side won't market also end call, then as talk reiterate that business the well. in side held as market is We the automotive the governmental industrial and

lower the to way and consumer very smartphone are some so those we helping markets end while are offset we've that weakness, in weakness. weakness, growing. general efficient And other seen been to capital do able to And capacity that some we've that have a we've of also seen businesses centric reallocate

Vivek Arya

are supposed And the has Because supposed back, with to my guys get come this or LTAs amount second given question about a that? to is, deliver out that on them of LTAs be been much what expectation say revenue were of if a year? the How think a executed pushed on the actual XXXX, let's canceled? depend report what I'm trying through What realization a sense right on is LTAs go that in to we year certain and how year? you were can right you has the for been is flexible and card how much to for

David Reeder

Great.

address as that it can me and you one Tom, build maybe well. then Let on

stated from such their to that GlobalFoundries we've would when healthy the So performing that and our way that we what were rational purpose? inflection isn't demand sit investments expected. market actually an stated and that for there perspective, LTA the was discussion customers, LTAs for was that purpose purpose that have would Well, in are equal stated a they framework that for a perhaps and points an made around in originally way, conversation we the in the maybe a down way materializing create

that there's too And recognize in inventory we're much where environment an the all channel. so we in

inventory isn't actually to continuing more channel the in ship just so And helpful.

And to about talked where duration, to customers LTAs. design looked to that elements volume, our and have at we with we've talked really Roadshow also about in the about share mean, as has them we price, customers I their economic enhance sat of down and not about into more early those talked three them main and and we life about as to framework spoken economic preserve entire was our worked win value the that opportunities we across can we the such talked that the we of to of come them capture that contract. that value if future have our we future wallet we even so play previously. had And

And so deliver we've able that. been to on

we an had We one to quarter, any underutilization have but had anything you'd framework to do I that also settlements That fee other GF. to settlement. value work announce, is last across but mentioned been what preserve, customer we enhance with fairly able not add we the to as have only one so, contracts those we discussed that? was where to well not Tom, that do economic And new publicized.

Thomas Caulfield

to that, overall of go the think to And to that do manage that of And I preserve term that the new is billion agreement to that partnership of and part as exactly with the and brought It of the wins downsides in together. agreement. $XXX create the and prepay to of $X.X has again, long-term industry, we're a was the we economic of billion the back opportunities the upsides quarter life was lot low a new And all new that. these. extending million operative still value intent. in calling $X.X and

Operator

your moment for next One question.

with Your next question Ross Bank. from comes of the line Deutsche Seymore

open. now Your line is

Ross Seymore

to wafer and see know question I a you it for side you equation, And guide is the on negotiations you metric up of analysis? and of up go I that you part but having Is correct, letting go is half second side that best year-over-year. to That if that down of like to in going the Are be the imply in slightly question? aggressively David, as of to with the the the the said year missing to the price going go. seems wanted you last just by pricing, do more be me is to sort double-digits. any ask of looks to is I'm this that LTAs first with luck. don't thanks math back Sad that pricing there full-year was guys guys, mix? units the to to pricing Hi going half discussed something

David Reeder

in continue to improve XXXX. the are Obviously in Sure, easier middle compares to pricing half always half the little last we've Ross. of than the would talked to of as the the second half ramp bit ramping started LTAs, we we've of about What which last is about a year. those first compares many the the talked

depending And is. very up, bump a so is bit to then pricing the of think business little what around mix and levels we you're think on the way stable, is current going we your the pricing about slightly at

double And a of about you the get you low-teens of think you year-over-year high-single-digit, what year, exactly when that's relatively mix that back lead so you of towards double the would And type half is. that mentioned. growth basis, then -- the kind you pricing final to as at depending the look flat on

Ross Seymore

you the in end that billion it by against segments there bumping said to go sound of sequential that up all back that you Got to seemed inventory down that going to things, that's you the market expect Thanks quarters anything really you go like was dollars It you so And in the that. get that like that necessarily, half earlier growth normalized, from pretty to side automotive it perspective, I in growth. for it. continue so back wouldn't go didn't itself. be half? down. like seems up but the should impressive could slight reiterated an fast said other expect Are the them then And

the automotive what's to growth? really offset So the

David Reeder

we about When and back good say, hearing you're the the us year, think us what in of we half say, slide, industrial you governmental Sure. the say you're growth hearing and about at feel IoT. looking you're sequential of industrial home when is portion the the really

on well taken market. low lower handset cautious outlook the good that's the well So of We've as end We as and about of IoT. A&D the a as industrial as business consumer feel end the more the automotive.

expected way you've the we've then then those and slightly comments if cautious the continues other kind end the markets, inventory markets, And low aforementioned macroeconomic perhaps what we better. good we malaise so we feel communicate you. then what we'll told heard and in outlook. the on that's just do that of If with the inventory is normalizes the about fact we'll line us be And taken the a just that

like feel we we've conservatively. So ourselves positioned

Operator

next moment for question. your One

line Your Stanley. of Morgan Moore the from with Joseph next question comes

now line open. Your is

Joseph Moore

let And good you. luck. Thank Great. me add my thanks and David to

In from guys terms obviously $X.XX quarter, revenue little billion a you last maintained for year. of the lower CapEx, this the your

that versus So confidence trying you're are trade-offs that trying just -- in are could of the the XXXX? making if walk I the drive what in the is kind business? you through to to what trade-offs us wonder between more flow And cash invest just

David Reeder

Sure.

today, So And these our first we've able LTAs that majority of let be some well Singapore. satisfy just related the start saying longer-term giving by FabXH with the that on to really we're there of the to in me as capability us campus that some those that really CapEx signed of to as signing is in past. LTAs

million to X.X deliver about million wafers last wafers to XXXX a we to immediately million just wafer direct actually and year your X.X in I our do increasing year context. XXXX wafers about million X north talked talked XXXX wafers bit I from address of do provide in Before I about very about of to expansion in this capacity. on X.X X plans, track we capacity we're question, your wafers little about our to million question. about much When that want to

what that on we're be just to anticipated mentioned. originally expansion track will less with for fact, total billion like that In I than capacity that CapEx probably $X something deliver

we for ourselves like wins. And through and we're appropriately in winning both future for growth that positioned so business design the we the feel have LTAs

with flow continue period. free trade-offs the make for to will We to cash regards

growth. I'll free for capacity we will call In be to well-positioned believe we you'd add that anything that the we last as And the reiterate with look stated fact, flow cash the thought flow that? cash to positive be future, then year. positive quarter future free we for would year. are for on very Tom, we this that we

Thomas Caulfield

positioned X Yes. the $X X,XXX, me the million the times plus do give not Joe, of even the price, facilities, on -- factories billion for business, P any here. let our future a revenue. Average without little revenue to just essentially Q non-wafer wafers, wafer we've

So grow to allow more to the we build and actually much is XXXX capital we going when respond planted the in to were capacity. than we've quickly that us to had market

and think and XXXX make deployed and beyond. XXXX positioned So really more capital company a eventual us capital we've that for it'll about the as to is growth I the efficient think the we lot

Joseph Moore

here's bit this And more fungibility, automotive, we MCU continue of Great. then Thank add of you grow processes little where about if hotspot things areas companies that. talked some are to memory you a type there terms like we terms broad of that. there are of any of oriented overall hear your some you've automotive still we non-volatile I centric but know say capacity, for specifically bottlenecks for where would of still the in guys in more? a can can your from that capacity, about utilization

Thomas Caulfield

in enough corridor perfect month is never matches supply world. that with This specific are every the demand to There's customers to scrambling platforms not every where a make we are there. features. day very Yes. a for funge And year capacity idea in there segments those

will deliver this in see the game we our of set that notwithstanding complete too. still to demand, year. we're trying customer that for see automotive that respond full we so a business on We of to still the And outlook

Operator

your for question. moment next One

of Your Co. Needham Rajiv Gill line the with next and from question comes

Your line is now open.

Rajiv Gill

questions for best taking my to you and luck well. Yes. of Thank as the you Dave

the if wonder the maybe more some the on the or end you're that's front customers, drivers Board the NFC across I mobile of seeing it in question is of smartphone smart given will the smart in break the just RF the could the in little correction with helpful. color on kind down specifically just So industry? it bit is of main one the where mobile on it module inventory a large of technology. Any with it a be more kind occurring the weakness. really softness terms that's market, of terms Is of you of

Thomas Caulfield

I'll David, Maybe start on one this Yes. now.

broadest with So year inventory and climbing, stroke what's is unit industry decline handsets the just weighted year an heavily this X% most double-digit the in sales. outlook? this is so Last in

than least content. pointed premium we the impacted before, are at have less high handset. out And where David handsets any other that's As

some of we important offsetting shipping are fact, In think decline. smart that that's this --this our faring this business I -- last because -- smart mobile better wins smart mobile design devices is year there's our had year device some

element QX of the feature it's that's revenue anything handsets, the to mobile of was high smart year. not this -- overall David, that? the smart that any mobile revenue fact in our or high, So XX% a it's for particular just volume in only add device fraction

David Reeder

No, stated, Tom. well

Rajiv Gill

some pricing. U.S. that regarding talked of Thanks. around terms the premium foundries domestic follow-up, are could just the of but pricing of the charge in if about kind you a if wafers been pricing, near-term, made there's discussions for my you in in long-term, And about think

chatter Is that. made that customers? for the you been Is of that in So there's are USA? about premium wafers with a reality pricing that kind something debating

Thomas Caulfield

this drives When it returns. capacity hearing you're I would require its put investments capacity and investments on competitive being say about way.

that what's on being you're so seeing do And nodes efficient agreements. is reality create most way? very healthy that that competitive make get creates capacity And and that really partnerships industry investments the long-term that in will it for companies do it's on -- industry constructive environment the capacities environment through the I It's in think investments. the these And a with on right partnership and economic put new answer to returns. healthy is put the does, and very how with being we it go a have what is and of we that economics the disciplined

Operator

comes question Chris moment from Danely One line next your question. for with And your next Citi. the of

now line is open. Your

Chris Danely

Hey, thanks, guys.

aggregate renegotiate? more going in about been been a pushed what's had the or year, you change terms on then specific the to of can and in Just to pricing just how little in have much get change you much talk this have what's out, of how LTAs

David Reeder

Capital Sure, our to utilized year. Chris. to were going back Day, if Look, go year essentially fully think thought we this we we be when you this of Markets

in the how channel that going inventory backdrop and that build and the to at year the expectation our LTAs POs, with wrong rolled looked this sell-through was I customers into we between year. in, we the was upon we recognized based was the kind we that our positions all continuing was looked that we're but at macroeconomic covered Now and of as with And inventory mean, not decision. the LTAs, that of

because the value sat we those down invested the started of able So had to framework LTAs we the the working on to with in preserve of capacity. economic we of that dollars those customers and contracts be

what I can't was but not contract really we not significant value that I contracts an with contract. so required value been the tell we ultimately economic specifically and believe XXXX, throughout we've for was forecast of that about and by as those working in it broadly say, that's that preserve annual model. I factored you are can a them fees underutilization to close that did our for I say those as meaningful certainly disclosed maybe where do year a can would customers way. fee. to have speak our take I our enhance underutilization the or disclosed well deliver And going long-term talked they contract there we're to

add most probably that Tom, would think I so the that's that, I add to And would you that that? anything there.

Thomas Caulfield

to how do question It's is not And you go like add the would When more elasticity, single if you work That's go the price source -- not price of it's and volume there's get think I Yes, at to the elasticity. if proposition minor an inventory provide this? by I -- if volume. price we that. price The our volume business, is price. customers. the I through is correction let's the share value win lower a

the can We in be business differentiate. to we in can differentiate have -- in better their single correction times that times. them products great inventory and the source supplier a They

David Reeder

I in point, that which contract add price And if down in went a we've could amended amendment. LTA don't the of know just I one

the you price try So decommitted, the to isn't you how being stimulate are decrease volumes inventory. conversation have too demand much when to do about when

So it's other usually direction. in going the the

clarification. a So helpful that's hopefully

Chris Danely

you be? manage great don't good this follow-up and helpful. job this before. of the and seems about sort about talk Is had Very more or have can expected, downturn a to duties are just what job? he's Thanks. coming little just guys of specific serious my And got this going that Niels, and longer reputation. over guess, genesis I CBO for to you a his I why he's the on Tom, think talk landing

Thomas Caulfield

nothing about Yes, requires future. It a do the a the and has uniqueness to our to markets. requirements our everything end the between very has of do with specific good. and downturn. the end It tight business coupling -- markets complexity foundry understanding of being We in

that those going, to end create to in So our be so much meet and lines then an where we way. by can and as in product drive markets we an customers markets technology aggressive definition understanding as our as future need the accelerated end development expert are

together executive integrate need those areas who we with of can three the one come that And to activity.

will Juan that Mike our and business team Niels commercial to our success to under report and with accelerate Hogan, and our under And so under with unit drive performance. commercial our financial technology altogether into development Gregg team Bartlett, integration, Cordovez,

Operator

one And for question. moment your next

Hosseini Your next question Mehdi SIG. comes of from the with line

Your open. line now is

Mehdi Hosseini

Yes. you a and follow-ups. Thanks follow-up? QX have for letting for me question. I ask a EBITDA two any do and have have XXXX in David, guides I

David Reeder

-- a EBITDA hope sequential hi about revenue on through doing growth. marginal well. you'd Mehdi, slight think would that from fall you're I the tracking basis, guide, Sure. as with I see EBITDA would

Q-to-Q-to-Q subsequent kind for of as XXXX. the So as true that are well second quarters holds I the think for where expecting we quarter of throughout year growth sequential remainder statement the

Mehdi Hosseini

there's the the good electric I what you best for us time drivers maybe correction, growth given It would to core of of for product learn some what correction? luck And industry. lot -- it. anxiety next remind increased outside content, great in you the wafer, and the drivers into is could wafers. key as those us and SOI smartphone or be are from the a you SOI if a in for vehicle question understand a cyclical endeavor. over But post-inventory remind key of I nature the And Tom. of especially want look outside which nothing of maybe of inventory your Got is you new you, to a of

Thomas Caulfield

higher starts CMOS by with It with for device voltage. technology for our memory for automotive. embedded microcontroller starts It

control embedded SOI, end suite and the power management front of with features which for think management, RF it's a applications you both technologies module power in and phones. of If beyond memory chips

FDX end so modules, for said on platforms, not And our just my definitely, bring of are the power low front it We our earlier I a remarks all to in player in range broad we platform. ultimate connectivity but for all embedded end to capability processing in levels strength and intelligent in plays having especially the to then by space. winning create secure IoT the our the and what And of solutions these that's memory industry-leading markets. is RF play

Mehdi Hosseini

to Is increased then threshold electric a there accelerate specifically kind see would just a of Or will this there a that that key increased or content? this any is adoption be milestone you is -- or a as vehicle? going pontificates vehicles for adoption Is milestone steady electric adoption?

Thomas Caulfield

But inflection and not the driver. if connectivity a model in and less of autonomous start could we one it. or was change So don't change it just model brands for it's of car of pick where to year-on-year cars, of I I down play in an go think electrification ICE applications. features car, And points range a about come because their think fleet strategy. units you'd look combustion how broad it's I years of fleets has just internal cars in those particular

standard each it fact, In a becomes year.

And So and as not cars. request. to transformation autonomous of range products the that's of industry, but think applications of electrification, to of this just and auto about suite the a connected to cars

Sam Franklin

we'll take question, Bella, one please. last

Operator

the Cowen Krish with Company. last of from All comes line question And right. and Sankar your

open. is Your line now

Krish Sankar

Yes. and number Either I've thanks Tom it's David, questions. good Thanks on endeavors. for taking for David, nice ASP, the next my help question one your and two see luck to on or volumes, a year double-digit year capacity into the industry, for then lower to more I online and despite next next think how up holding about ASPs ASPs follow-up. had as comes but nanometer

David Reeder

Capital back that So when ASPs you for XXXX, presentation. of kind I'll think that about Markets again, we point Day to

If covered kind back three see XXXX. of at squinted the capacity that of and we that that you about quarters for had stood chart, would LTAs you

It's the of memorialized already discussion a in I been happened. signed already so pricing a it's say And contract. has already that lot been and would

and does look is then you you future? look very, And I that new the well, wins the when new future pricing So we're very what pricing at holding and signing, LTAs like in well. the to design up look say, the

that put say public fact, financial had became -- actually as out a company. In accretive a we that delivering long-term I'd pricing it's model our is to we

interest future. double-digit business design over wins. very online attach that GF come nanometer constructive lot in And there's pricing where we source of of that is a than environment two-thirds QX more and nanometer single single so revenue time come has our in two regions that's it But accretive technologies. of a remains numbers will the the converge. some even of differentiated provide remained we've world stated, online. more single-digit XX% is as design in revenue we're More that capacity We've in kind I recognize our wins of and always capacity those and around source

about quite pricing. add? feel we so And Tom, anything good you would

Thomas Caulfield

this will Yes. the environment constructive economics of investment much we how over for next be industry for to all decade. a the It's fund back more for doubling forced the

Krish Sankar

do worry for a next curious, recovery? and could a well that shoe dampen or from up be of I'm the that as start and many, other getting you folks it. better Got it could folks you could what drop has then Super to follow-up. industry smartphones moderate be kind segment just stronger auto And many the pretty industry. held Obviously quick helpful. the

Thomas Caulfield

for key Look for transition customers and cars. is the are morning cars. a fact the talking talking provide sure customers. connected about to technologies is that horizon for we to that our we needs and meet that in See our driver automotive industry for make content and that the next more been we've as our these decade, this we autonomous differentiation add the best more electrification to this of to key see The and continue those GF developing

Operator

now have to We this the turn over questions I further any don't time. call Franklin. will back Sam at

Sam Franklin

of seeing Bella, for as circuit. you and us questions, you forward you, many today. always, joining the on thank and everyone Thank to the conference look Appreciate upcoming

Operator

call. concludes This conference for today's your participation. you Thank

day. You now a may disconnect. good Have

GLOBALFOUNDRIES (GFS) 9 May 232023 Q1 Earnings call transcript