Q1 2025 STMicroelectronics NV Earnings Call
Speaker Change: [music].
Moira: Ladies and gentlemen, welcome to the STMicroelectronics First Quarter 2025 earnings release conference call and live webcast. I am Moira, the call-to-call operator. I would like to remind you that all participants will be in listen-only mode and the conference has been recorded.
Ladies and gentlemen, welcome to the SG Micro electronics first quarter 2025 earnings release conference call and live webcast I am Moira the chorus call operator, I would like to remind all participants will be in listen only mode and the conference has been recorded.
The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and one on your telephone. For operator assistance, please press star and zero.
<unk> will be followed by a Q&A session. You can register for questions at any time by pressing star one on your telephone.
Speaker Change: Operator assistance. Please press Star Zero the conference must not be recorded for publication on freight cost.
The conference must not be recorded for publication or broadcast.
Jerome Ramel: At this time, it's my pleasure to hand over to Jerome Ramel, EVP Corporate Development and Integrated External Communications. Please go ahead.
Speaker Change: At this time, it's my pleasure to hand over to Jerome Ramel, EVP corporate development and integrated external communications. Please go ahead.
Thank you, everyone, for joining our first quarter 2025 financial report call.
John Marshall: Thank you everyone for joining our first quarter 2025 commercial return call hosting the call today is John Marshall as you put it on and Chief Executive Officer, joining Jean Marc on the call today, although window, Guangxi, President and CFO and Marco Cassis within Antonella, Cobra and discrete Mems sensor control groups and head of <unk>.
Jean-Marc Chéry: Hosting the call today is Jean-Marc Chéry, ST President and Chief Executive Officer. Joining Jean-Marc on the call today are Lorenzo Grandi, President and CFO, and Marco Cassis, President, Analog Power and Discrete MEMS and Sensor Groups, and Head of STMicroelectronics Strategy, System Research and Application and Innovation Office.
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This live webcast and presentation materials can be accessed on ST Investor Relations website. A replay will be available shortly after the conclusion of this.
Speaker Change: Slide webcast and presentation materials can be accessed on ESG Investor Relations web site.
Speaker Change: A replay will be available shortly after the conclusion of this call.
Unknown Executive: This call will include forward-looking statements that involve risk factors that could cause ST results to differ materially from management expectations and We encourage you to review the Safe Harbor Statement contained in the press release that was issued with the result this morning, and also in STMO's recent regulatory filing for a full description of this research.
Speaker Change: This call will include forward looking statements that involve risk factors that could cause <unk> to differ materially from management's expectations and plans.
Speaker Change: We encourage you to review the Safe Harbor statement contained in the press release that was issued with as a result of this money.
Speaker Change: So we SG most recent regulatory filings for a description of the three spec tools.
Also, to ensure all participants have an opportunity to ask questions during the Q&A session, please limit yourself to one question and a brief follow-up.
Speaker Change: Also to ensure all participants have an opportunity to ask questions. During the Q&A session. Please limit yourself to one question on any brief Puma.
Jean-Marc Chéry: Now I'd like to turn the call over to Jean Marchéry, STPredinant and CEO. Thank you, Jerome. Good morning, everyone, and thank you for joining ST for our Q1 2025 earnings conference call.
Now I'd like to turn the call over to Sean partially SG, putting it in steel.
Sean: Thank you Gil.
Speaker Change: Good morning, everyone and thank you for joining in exchange for a while Q1 2020 slide elements hotels group.
I will start with an overview of the first quarter, including business dynamics.
Sean: I will start with an overview of the first quartile equal.
Speaker Change: Including our business dynamics.
And I will hand over to Lorenzo for the detailed financial overview.
Lorenzo: And I will hand over to Lorenzo for the detailed financial guidance.
Jean-Marc Chéry: I will then comment on the outlook and conclude before answering your questions. So starting with Q1. In a persistently uncertain environment, our first quarter net revenues were in line with the midpoint of our business outlook range. driven by higher revenues in personal electronics. offset by lower revenues in automotive and industrial compared to expectations. Q1 gross margin was slightly below the midpoint of our business outlook range, mainly due to product on the year-over-year baby. Q1 Net revenue decreased 27.3% to $2.52 billion. Gross margin decreased to 33.4% from 41.7%. Operating margin decreased to 0.1% from 15.9% and net income decreased 89.1% to $50,000,000, $56,000.
Speaker Change: I will then comment on behalf of Duke and conclude Vishal on selling your questions.
Speaker Change: So starting with Q1.
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Speaker Change: Offset by lower home with you afterwards.
Speaker Change: And industry compared to expectations.
Speaker Change: Q1 gross margin was slightly below that the sponsor for all business outlook range.
Speaker Change: Mainly due to product mix.
Speaker Change: On the Euro although your baby's Q1, net carbon use decreased 27, 3%.
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Speaker Change: Gross margin decreased to 33 point focus from 41, 7%.
Speaker Change: Operating margin decreased to 0.1%.
Speaker Change: 59% and.
Speaker Change: And net income decreased.
Speaker Change: 89, 1% to $50 million.
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Let's now discuss our business dynamics during Q1. In automotive, we expect Q1 to be the low point of our automotive revenues. During the quarter, we saw lower revenues across all geographies. The current situation on trade and tariffs is creating uncertainty in car production levels. leading to a SLAG.1 revision of forecasts for the year. More pronouns for electrical vehicle volume. Despite this, Our book-to-bill ratio was above 1. In dollar terms, bookings were also up significantly quarter on quarter. During the quarter, we continue to execute our strategy in car electrification. We had wins with both silicon carbide and silicon devices and modules.
Speaker Change: Let's now discuss the business dynamics, you'll end Q1.
Speaker Change: Even hostile bid season, we expect Q1 to be the low point of our ultimate achievable.
Speaker Change: During the quarter, we saw mobile revenues across all geographies.
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Speaker Change: Leading to a slightly overwhelmed the initial forecast for the year.
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Speaker Change: In total sales bookings were also up significantly quarter on quarter.
During the quarter, we continued to execute our strategy he got a presentation.
Speaker Change: We are doing with the booths silicon carbide and silicon devices and modules.
for new on-board charger and traction inverter designs, as well as with our smart power and smart fuse solutions for electric vehicle power systems. We remain focused on solid execution in-power and discrete for car electrification in the continuing challenging market environment.
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Speaker Change: We remain focused on solid execution equal in each case for carrying tissue geisha.
Speaker Change: The continuing challenging market on the augment.
Incarn Digitalization. We saw further traction with our portfolio of automotive microcontrollers. Automotive microcontrollers are one of our revenue co-drivers beyond the medium term horizon. We are confirming strong progress in executing our roadmap with many new products. Set to launch in 2025 and in 2020. across our Stellar and SCM32A product family. We are also continuing to see strong designing momentum in China, EMEA, and the Americas, with both large-scale OEMs and tier 1s. during Q1. Our StellarP microcontroller family was selected in a dual inverter power train application by a fast-growing OEM in China. And we continue to expand our business with our current high-volume automotive microcontrollers in applications like iVacuum Air Compressor System.
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Speaker Change: We saw fill self culture with a portfolio of automotive microcontrollers.
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Speaker Change: We are confirming strong progress in executing our roadmap with many new products.
Speaker Change: Set to launch in 2025 and in 2026.
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Speaker Change: We also continue to see strong design win momentum in China.
Speaker Change: In the Americas with both large scale Oems Ngls.
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Speaker Change: During Q1.
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Speaker Change: And we have to offer what kind of application by the fast growing OEM in China.
Speaker Change: And we continue to expand our business with a pure I review with the Wuxi Microcontrollers.
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To support the challenges of developing software-defined vehicles, we recently announced our extensible memory offer for Stellar microcontrollers. ST's proprietary PCM technology enables the smallest memory cell size for the automotive market. Thanks to this, our customers can benefit from increased headroom to continuously innovate their products over time and in the field, while also simplifying logistics. In ADAS, we saw our customer Mobileye IQ 6H being adopted to improve safety and driving comfort in high-volume vehicles. This enables M3 driving, smart parking, and improved occupant and pedestrian detection with a single integrated system. We also introduce our newest family of global navigation satellite systems, receivers, aimed at advanced driving systems for ADAS and autonomous driving.
Speaker Change: To support the challenges of developing software defined nature, we recently advanced our external seaborne remember we own soil.
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Speaker Change: Thanks to this our customers can benefit from increased headroom to continuously innovate as our products, although style and innovation, while also simplifying logistics.
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Speaker Change: This enables entry diving smart parking and improved occupancy and fitness club detection with a single integrated system.
Speaker Change: We also introduced our new SVP of global navigation satellite system initiatives.
Speaker Change: At advanced lighting system for Adas and noticeable value.
They are the industries first to integrate multi-constellation and a co-advanced signal processing in a single diode. With our automotive-grade sensors, we have a number of WINS for HEDAS vehicles, angle detection, and occupancy monitoring applications. Also, this is a clear growth opportunity for us in the mid-future.
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Speaker Change: Also this is a clear growth opportunities for us in the region.
Jean-Marc Chéry: in Industrial. We expect Q1 to be the low point in terms of provenance. In Q1, orders were also up versus Q4, and Overall, inventory decreased. particularly for smart industrial and, to a lesser extent, power energy. By region, the improvement in inventory was driven by Asia, while we have not seen a significant improvement in Europe and in America. All of which to be the ratio was a good one. During the quarter, we had wins for our power and other portfolio across a range of applications. This included motor control, industrial drives, wire goods, solar panels, air conditioning, and data switching.
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Speaker Change: We expect Q1 to be the low point in terms of.
Speaker Change: In Q1 were also up versus Q4 and.
Speaker Change: Overall inventories decreased.
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Speaker Change: In Americas.
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Speaker Change: During the quarter.
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At the end of March.
Speaker Change: At the end of March we signed a development and manufacturing agreements for gallium nitride technology in those items.
Jean-Marc Chéry: We signed a development and manufacturing agreement for gallium nitride technology with Innoscience. It includes a joint development initiative on GaN-powered technology as well as a reciprocal agreement allowing each company to use the other front-end manufacturing capacity. This allows ST to accelerate our roadmap in GaN power technology to complement our silicon and silicon carbide offerings.
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Speaker Change: These hurdles SG to accelerate our work about you can get but what technology to complement our CD, good and silicon carbide offering.
Jean-Marc Chéry: For ST, this is a further step in the China for China operating model, coming on top of the joint venture with CENAN for front-end manufacturing of silicon carbide, and the foundry agreement with HS-DWAVES on multiple technologies, including 40 nanometer batteries. in Embedded Processing, our STM32 microcontroller. continued to gain traction with the broad developer community. Facing the current challenging market conditions, we were able to reconfirm our number one ranking of the general purpose microcontroller market in 2024. with a market share that has consistently grown sequentially from Q2 2024 onwards. In 2024, our software ecosystem grew 30% to over 1.3 million unique users.
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Speaker Change: Facing as a cure of challenging market conditions, we were able to reconfirm, our number who are the Hong King of Brasilia hub stockholders of microcontroller market in 2024.
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Speaker Change: In 2024 overall software ecosystem grew 70% to over $1 3 million unique users.
And we continue to see a strong growth trend in the first quarter of 2020. One area of particularly strong growth is in edge AI projects developed on our tools. Over the past 12 months, we saw over 160,000 projects More than twice the number in the previous 12 months. We continue to reinforce our portfolio and ecosystem with new innovative products. leveraging our popularity 40nm and 18nm process node technology. In 2025-2026, we plan to introduce 18 new LANs leveraging modern non-volatile memory technologies at and below 40 nanometers. Between 25 and 27, the percentage of our STM32 overview coming from this advanced product at 40nm and below, we've doubled.
Speaker Change: And we continue to see a strong growth trend in the first quarter of 2025.
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Speaker Change: Particularly strong growth easy to edge AI projects develop on our tools.
Speaker Change: Over the past 12 months, we saw although the 160000 projects.
Speaker Change: More than twice the number in the previous 12 months.
Speaker Change: We continue to reinforce to our portfolio and ecosystem with new innovative products.
Leveraging our copy LNG 40 nanometer.
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Jean-Marc Chéry: reinforcing our leadership in this market segment. Based on our design in momentum, we are equipped to grow faster than the market, going back to well above 20% market share. In personal electronics, Q1 was slightly better than expected, while communication equipment and computer peripherals was in line with our expectations. Here, our engaged customer programs are progressing to the planet. Our high level of innovation and ability to execute with MEMS and optical sensing as well as with our analog technology portfolio are a key competitive advantage, enabling us to win and grow our business. And our specialized proprietary technologies also position us for growth in low-earth orbite satellites and data centers.
Speaker Change: Reinforcing our leadership in this market segment.
Speaker Change: Based on the well design in a moment, we are equipped to grow faster than the market going back to well above 20% market share.
Speaker Change: The best Atlantic towards Q1 was slightly better than expected, while communication equipment and computer sales was in line with our expectations.
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For example, during the quarter We introduced new technologies to enable higher performance optical interconnect in data centers and AI clusters. Our silicon photonics and next generation bi-seamless propriety technologies bring better performance to address the ongoing evolution of optical interconnect for customers like Amazon Web Services.
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We introduced new technologies to enable video.
Speaker Change: The foremost subsequent declination in data center and AI ecosystem.
Speaker Change: Our silicon Photonics and next generation by stimulus book, the ICT technologies bring it bit of their four malls to address the ongoing evolution of optical interconnect for customers like Amazon Web services.
Jean-Marc Chéry: Finally, in terms of corporate development activities. During Q1, ST announced the detail of its 3 years program to reshape the manufacturing footprint and resize the global cost base. We also confirmed the annual cost savings target in the high triple digit million dollar range, exiting 2027. The reshaping and modernization of ST's manufacturing operations aims to achieve two main objectives. Reutilizing planned investments towards future-ready infrastructures such as 300mm silicon and 200mm silicon carbide water taps. to enable them to reach a critical scale and maximizing the productivity and efficiency of legacy 160 millimeter capability. and Mature 200mm capability.
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Speaker Change: Budd digit billion dollar hedged exiting 2027.
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Speaker Change: To achieve two main objectives.
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Speaker Change: 200 millimeter silicon carbide wafer fabs.
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Speaker Change: And maximizing the productivity and efficiency of legacy whether currency CBD midst of capabilities and mature to owners in the midst of capabilities.
This program is expected to see up to 2,800 people leaving the company globally on a voluntary basis over three years, on top of normal attrition. This is expected to occur mainly in 26 and 27.
Speaker Change: This program is expected to see up to 2008 total of people, leaving the company globally, a little value basis of the PFS.
Doug: Doug of bubble attrition.
Doug: This is expected to accrue mainly in 2020 seven.
Jean-Marc Chéry: To conclude, for sustainability, we issued our first annual integrated report during the quarter. This report integrates our sustainability statement detailing our performance in 2024. We remain on track for our commitment to becoming carbon-neutral by 2027 on Stop 1 and 2, and on product transportation, business travel, and ongoing communities for Stop 3. Our Carbon Neutrality Program includes a comprehensive strategy covering the reduction of direct and indirect greenhouse gas emissions and the sourcing of 100% renewable electricity by 2027.
To conclude the study BTG, we issued our first annual integrators equal during the quarter <unk> booked integrates our sustainability statements detailing of our performance in 2000 to install.
Doug: We remain on track for our commitments to be could be jumbo told by 2027, OIBDA scope, one and two and on.
Doug: Product transportation business common in oncology community Foster Creek.
Doug: Our carbon neutrality program includes a copay LLC strategy eco really delayed you shed of direct and indirect hours gas emissions as the sourcing of one of the best served with renewable electricity by 2027.
Lorenzo Grandi: Now, over to Lorenzo, who will present our key financial figures. Thank you, Jean-Marc. Good morning, everyone.
Lloyd Xu: Now over to Lloyd Xu with the key financial figures.
Lloyd Xu: Thank you Mark and good morning, everyone.
Lorenzo Grandi: Before commenting Q1 results. Let me remind you that following this reorganization into two product groups and four reportable segments, announced in January 2024, we have made further progress in reorganizing our global product portfolio.
Doug: Before commenting on Q1 results.
Doug: Let me remind you that the following easily organizational into two product groups and four reportable segments announced in January 2024.
Doug: We estimate the pharma for rock in.
Doug: In reorganizing our global product portfolio.
This results in some adjustments to our reportable segments, effective starting January 1st, 2021. without modified subtotals at product group level.
Doug: These results and some adjustments to our reportable segments effectiveness stopped in January.
Doug: First in 2025 without a more defined Super Bowl comps a.
Robert: Robert <unk>.
Therefore, from Q1 2025, we report revenues and operating income according to those four adjusted reportables. For more details, please refer to the appendix of the earnings press release we published today.
Doug: And therefore.
Doug: From Q1, 'twenty five we reported revenues and operating income according to those and for adjusted our reportable segments.
Doug: For more details please refer to the appendix of the earnings press release that we published today.
Lorenzo Grandi: And now let's start with a detailed review of the first quarter, starting with revenues on a year-over-year basis. By reportable segments, analog products, MEMS, and sensors, AMS, was down 23.9%, mainly due to a decrease in analog. Power & Discrete Products decrease at 37.1%. Embedded processing, AMP, revenues declined 29.1% mainly due to general purpose and automotive RF and optical communication decline 19.2%. Buy and market. Automotive decline by about 39%. industrial by about 30% Personal electronics by about 11% and communication equipment and computer peripheral increase by about 1%. On a year-over-year, sales to OEMs decreased 25.7%. and 31.2% to distribute.
Doug: And now let's stop that we that the data review of the first quarter, starting with the revenues on a year over year basis.
Doug: By reportable segments analog.
Doug: Problems, Maths and Samsung <unk> was down $23, 9%, mainly due to a decrease in analog.
Doug: Power and discrete problems.
Doug: Decreased 37, 1%.
Doug: Embedded processing A&P revenues declined 29, 1%, mainly due to general office in the ultra multi bank soon.
Doug: Okay, RF and optical communications declined 19 book.
Doug: By end market, our automotive <unk> declined by about 39%.
Doug: <unk> by about 32%.
Doug: Personal electronics by about 11% and <unk> manpack compute there.
Doug: Increasing by about 1%.
Doug: On a year over year space at two Oems decreased 25, 7% and 31 book to burn centers to distribute.
On a sequential basis, revenue decreased 20.7% in ANS. 34.1% in PowerDiscrete, 26% in AMP, and 16.5% in RF and OC. By end market, automotive declined by about 34%. in Dacia by about 18. Personal Electronics by about 17% and Communication Equipment and Computer Peripherals by about 4%.
Doug: On a sequential basis revenue decreased 27% the <unk> assay.
Doug: 74, 1% in power discrete.
Doug: <unk> expense Sancti E M D and 16, dark fiber <unk> and OCD.
Doug: By end market out of multi with declining by about 34% in dash that by about 18%.
Doug: External electronically by about 17% and communication to keep maintain computer pretty fat by about 40%.
Lorenzo Grandi: Turning now to profitability, gross profit in the first quarter was $841 million. decreasing 41.7% on a year-over-year basis. Gross margin was 33.4%, decreasing 830 basis points year-over-year. mainly due to product mix and to a lesser extent to higher unused capacity charges and lower safety.
Doug: Turning now to profitability gross profit in the first quarter was $841 million decreasing 41, 7% on a year over year basis.
Doug: Gross margin was 33, 4% decreasing 830 basis points.
Doug: Over to you.
Doug: Mainly due to product mix and to a lesser extent to higher unused capacity charges and lower six box.
Total net operating expenses, excluding restructuring, amounted to $830 million in the first quarter. This was better than anticipated, reflecting the continued strict monitoring of our expenses in the current market environment. In the second quarter of 2025, we expect a net OPEX to stand at between 860 and 870 million dollars, a 6% year-over-year difference. As a reminder, these amounts are net of other income and expenses and exclude restructuring.
Doug: Total net operating expenses.
Doug: Excluding our restructuring amounted to $830 million in the first quarter.
Doug: This was better than anticipated, reflecting the continued to strict monitoring of our expenses in the current market environment.
Doug: In the second quarter of 2025, we expect a net opex into stands at between 800, and <unk> hundred $70 million as we expect strength a year over year decline.
Doug: As a reminder, these amounts are net of other income and expenses and exclude those factors.
Doug: Yes.
Lorenzo Grandi: First quarter operating income was $3 million. Q1 operating margin was 0.1%, with AMS at 7.7%, P&D at minus 6.9%, EMP at 8.9%, NRF and OC at 13.9%. Q125 Net Income was $56,000,000 compared to the $530 million in the year-ago quote. Earnings per diluted share were $0.06 compared to $0.54. Net cash from operating activity decreased 33.2% in Q1 to $574 million. First quarter net capex was $530 million compared to the $967 million in Q1 2020. Free cash flow was positive $30 million in the first quarter compared to a negative $134 million in the year ago quarter.
Doug: First quarter operating income was $3 million.
Doug: Q1 operating margin was a zero to 1% with Ams at seven 7% the bnb, a minus six 9% in E M B a.
Doug: Okay.
Doug: 8% and Eric's and Oc at 13, 9%.
Doug: If you want to define net income was net.
Doug: $56 million.
Doug: Go back to the $513 million in the year ago quarter.
Doug: Okay.
Doug: Earnings per diluted share were <unk> <unk> compared to <unk> 64 on SaaS.
Doug: Net cash from operating activity decreased at 33, 2% in Q1 to $574 million.
Doug: First quarter net capex was at $530 million compared to <unk> $67 million in Q1 2024.
Doug: Okay.
Doug: Free cash flow was positive $30 million in the first quarter compared to a negative EBIT 134 medium velocity in the year ago Wassa.
Inventory at the end of this quarter was $3.01 billion. compared to the $2.69 billion in Q1. Days of sales of inventory at the quarter end was 167 days in line with our expectations. compared to 122 days for both the previous quarter and a year ago.
Doug: In battery at the end of this quarter was that $3 zero, one beyond August compared to $2 $69 billion in Q1.
Doug: Days of sales have been bad story at the quarter end. There was 167 days in line with our expectation.
Doug: Compared to 122 days for both the previous quarter end date, yet on Google.
Lorenzo Grandi: Cash dividend paid to two stakeholders in Q1 2025 totaled $72 million. In addition, ST executed a share buyback of $92 million. ST maintains its financial strength with a net financial position that remains solid at $3.08 billion as of March 29, 2020. reflecting total liquidity of $5.96 billion and total financial debt of $2.88 billion.
Doug: Cash dividends paid to stakeholders in Q1 25 in total is $72 million. In addition, SP execute the share buyback offer 92 medium boundless.
Doug: SD maintain its financial strength with a net financial position that could remain a solid lead that $308 billion as of March 29, 2025, reflecting properly <unk>.
Doug: Quite five adopt at $96 billion in total financial debt of $2 $88 billion.
Jean-Marc Chéry: Now back to Gianmarco who will comment on our outlook. Thank you, Lorenzo.
Jean Marc: Now back to Jean Marc who will comment on our outlook.
Jean Marc: Thank you Lorenzo.
Jean-Marc Chéry: Now let's move to our business outlook for Q2 2025. In the first quarter, our book-to-bill ratio improved, with both automotive and industrial above parity. We are expecting Q2 2025 revenues at $2.71 billion plus minus 350 basis points. At the midpoint, our Q2 2025 net revenues will decrease by 16.2% year-over-year and increase 7.7% sequentially. We expect our gross margin to be about 33.4% plus-minus 200 basis points impacted by about 420 basis points of unused capacity charters.
Jean Marc: Now, let's move on to our business outlook for Q2 2025.
Jean Marc: In the first quarter, our book to be the OSU improves with booths.
Jean Marc: Brazil Adidas field of both studies.
Jean Marc: We are expecting our Q2 2025 over news.
Jean Marc: <unk> 71, the video doorbell gross Magnus PLO up 50 basis points.
Jean Marc: At the midpoint of up to 2025 net revenues will decrease by 16, 2% <unk>.
Jean Marc: An increase of seven 7% sequentially.
Jean Marc: We expect our gross margin to be about 33, the 12% plus minus 200 basis points.
Jean Marc: Impacted by both for blood and 20 basis points of unused capacity charges.
This business outlook does not include any impact for potential further changes to global trade tariffs compared to the current situation.
Jean Marc: This business outlook does not include any impact from potential feltl changes to global pet tallies compare to the <unk> situation.
Jean-Marc Chéry: Board of Cooler 2025 Considering the level of uncertainty for the economy globally, and for ST and markets specifically, we are not providing an indication for the full year 2025 only. We plan to maintain our NET-CAPEX. plan for 2025 between $2 billion and $2.3 billion. mainly to execute the reshaping of our manufacturing footprint.
Jean Marc: For the full year 2025.
Jean Marc: Considering the level of uncertainty for the economy globally and for Este and buckets, specifically, we are not providing an indication for the full year 2025 volumes.
Jean Marc: We plan to maintain our net capex.
Jean Marc: For 2025 between 2 billion and $2 3 billion.
Jean Marc: Mainly to execute the reshaping of our manufacturing footprint.
Jean-Marc Chéry: to conclude. While we see Q1 2025 at the bottom, in the current uncertain environment, we are focusing on what we can control. We are maintaining strict expense control while protecting R&D. Continuously innovating to help and accelerate the competitiveness of our product and technology portfolio. We are on track with our company-wide program to reshape our manufacturing footprint and we confirm that the cost savings target is in the high triple-digit million dollar range exiting 2027.
Jean Marc: To conclude.
Jean Marc: Yes.
Jean Marc: While we see Q1 2025 at the bottom the jaws accepted on the augment we are focusing on what we can component.
Jean Marc: We are maintaining strict expense control while protecting R&D.
Continuously innovating to hedge and accelerates the competitiveness of our product and technology portfolio.
Jean Marc: Yeah.
We are on track with our co Peggy wide program to reshape along with restructurings with Greek.
Jean Marc: And we could see him that the cost savings target.
Jean Marc: The IEA triple digit million dollars of edge exiting 2027.
Jean Marc: Yes.
Jean-Marc Chéry: ST Medium-Term Growth Drivers remain solid. Specifically, they will come from MEMS and optical sensing solutions. General Purpose Microcontrollers, Analog and device for Low Earth Orbit Satellite Communication. While we see a lower and delayed growth in power indiscreet. due primarily to the well-known electrification market dynamics.
Jean Marc: S T medium term growth drivers remain solid.
Jean Marc: Specifically, there will come from men's and optical sensing solutions.
Jean Marc: <unk>.
Jean Marc: A look at.
Jean Marc: And device for <unk>.
Jean Marc: Communication.
Jean Marc: While we see lower and delayed growth in power discrete.
Jean Marc: <unk>.
Jean Marc: Well known electrification market dynamics.
Jean-Marc Chéry: We anticipate additional further growth beyond the medium-term horizon. Thanks to automotive microcontrollers and AI applications at the edge. and for Power Management and Cloud Optical Interconnect in Data Centers and AI Clusters. We will do so by leveraging our product and technology portfolio and roadmap and our competitive reshaped manufacturing footprint.
Jean Marc: We anticipate additional sales of growth beyond the imager Diablo reserve.
Jean Marc: Sales to automotive and Microcontrollers and AI applications at the edge.
Jean Marc: Hello management and cloud optical declinate in data centers and AI crystals.
Jean Marc: We will do so by Liberal edging Youre, correct that technology portfolio, and roadmap and our competitive reshaped manufacturing footprint.
Moira: Thank you, and we are now ready to answer your questions. We will now begin the question and answer session. Anyone who wishes to ask a question or make a comment may press star and one on their touch-tone telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use only handsets while asking a question.
Jean Marc: Thank you and we are now ready to upsell your questions.
Speaker Change: We will now begin the question and answer session anyone who wishes to ask a question or make a comment you May press star and one on the Touchtone telephone you will hear a tone to confront that you ran through the Q D.
Jean Marc: If you wish to remove yourself from the question queue.
Jean Marc: Press the star and two participants are requested to use only handsets when asking a question.
In the interest of time, please limit yourself to one question only. Anyone who has a question or a comment may press star and one at this time.
Jean Marc: The interest of time, please limit yourself to one question only.
Speaker Change: And I Wonder whether question or comments you May press star one at this time.
Jean Marc: Okay.
Francois Bouvigny: The first question comes from Francois Bouvigny from Bouvigny, please go ahead. Thank you very much. So, the first question that is in everybody's mind, and you saw it with TI yesterday, is how much your Q2 is driven by tariff pooling? So, effectively, you are plus 7% quarter-on-quarter guiding on the revenue side. And I was wondering if you saw any, you know, strange behavior or unusual behavior as maybe the industry is trying to get some inventories ahead of a tariff. So, just wanted to have your view on that. If you could provide any data that you have seen during the quarter that would support any pooling or not would be helpful.
Speaker Change: The first question comes from from probably need from moving please go ahead.
Speaker Change: Thank you very much and so the first question that is in everybody's mind and you saw it.
Speaker Change: Yes today is how much youll Q2 is driven by Terry.
Speaker Change: So effectively you are plus 7% quarter on quarter.
Amy: On the revenue side and I was wondering if you so Amy you know.
Amy: Trench behavior or unusual behavior as maybe the industry is trying to get some inventories ahead of the tariff. So just wanted to have your view on that is if you could provide any data that you have seen during the quarter, which supported you're putting on that would be helpful. That's my first question.
That's my first question.
Jean-Marc Chéry: No, we have not seen a specific QIN tariff. The Q2 forecast and guidance has been built smoothly in Q1 with our backlog we had entering the year, plus a booking plan that has been achieved on a very linear and smooth model. So no specific QIN due to tariff for Q2.
Amy: No we have not seen.
Amy: Uh huh.
Amy: Specifically in the third.
Amy: With wireless.
Amy: As of Q4.
Amy: Forecast and guidance.
Has been beat is smoothly in Q1.
Amy: Lisa welcome back look good.
Amy: Until he means of Yale.
Amy: Bookings plan that has been achieved on the very linear and smooth smooth similar with it so.
Amy: So no no specific coding the okay.
<unk>.
Amy: For Q2.
Thank you, François-David. Thank you, Jean-Marc.
Amy: Thank you consolidated thank you so mark maybe.
Unknown Executive: And maybe, yeah, the second question is on your inventories. I mean, if I look at your inventory on the balance sheet, it's back to all-time high from when I look at my model, both on the absolute side on the days of inventories. And I was wondering, what does it mean for the gross margin? Because it looks like it will take some time to, you know, clear these inventories. And with the uncertain environment on the top line, I was just wondering, you know, the consensus having gross margin increasing significantly in H2, is it really realistic, I mean, to have a significant improvement in gross margin, given where the inventories are?
Amy: Yes.
Amy: He is on the inventories I mean, if I look at your inventory in the balloon statistic back to all time high from.
Amy: When I look at my model, both from the absolute side on the on the days of inventories.
Amy: And then I was wondering what does it mean for the gross margin because it looks like it could take some time to.
Amy: This inventory, even with the uncertain environment on the top line.
Amy: I was just wondering you know the consensus having gross margin increasing significantly and it's too.
Speaker Change: Is it really realistic I mean to have a significant improvement in gross margin given where the inventories are.
I take this question about the inventory. Yes, it's true that our inventory in ending Q1 is, let's say, 167 days, is actually, let's say, on the high side, but this was expected, as you know, let's say, the revenue in Q1, also due to the particularly unfavorable calendar, the length of the quarter was a little bit, let's say, was lower than our normal trend, but at the end, we do expect to start already in this quarter to reduce the level of our inventory. We expect it to go slightly down in terms of days, more in the range of 160 days.
I take these westley on add about <unk> <unk>, yes, it's true that that wording in that.
Speaker Change: And in Q1 that is that let's say I went on better NAND 67 days is that he's actually let's say on the.
The high side, but this was expected as you'll know, let's say that revenue in Q1 also due to date.
Speaker Change: Equally and I'm, probably going to come in for the quarter was.
Speaker Change: It would be let's say.
Speaker Change: It's lower than that.
Speaker Change: All right.
Speaker Change: Brian.
Speaker Change: At the end it E. We do expect that to start already in this quarter to reduce the level of our wedding party.
Speaker Change: We expect that to go slightly down in Panama days and more in that Angel went down by 60 days I can see that during this quarter. We are also preparing to bid on.
Consider that during this quarter, we are also preparing the ramp-up for the personal electronics for Q3. So yes, clearly, let's say, we have a path for reduction of this inventory, let's say, over the year. Then I would say that, yes, clearly, this is something that we are monitoring strictly. And indeed, also during this quarter, we will have a. One of our sites still has one week of closure in order to keep under control this level of inventory.
Speaker Change: For the best on a related charges for Q3.
Speaker Change: So, yes, clearly let's say.
Speaker Change: We have a path fabry redaction of D. C band three let's say Olga.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: I would say that but yes, clearly DC.
Speaker Change: Something that we are monitoring strictly and indeed, they're also building.
Speaker Change: This quarter, we will have one of our side SD Wan that one week of closure.
Speaker Change: All of that to do.
Speaker Change: Their control at these sent these labor there'll be back.
And what does it mean for gross margin for H2? I mean, if inventory is coming down, does it mean that gross margin will... Can it go up as well? But in Q2, our guidance for the gross margin, as you have seen, is substantially to stay flat in respect to the first quarter. There are a few components of this dynamic of the gross margin. On one side, it's clearly, let's say, the gross margin is impacted negatively by the Manufacturing efficiency that we had during Q1 was impacted by the significant number of days of closure that we have done in our fabs and in our back-end plant.
Speaker Change: And what does it mean for gross margin for it's true I mean inventory is coming down does it mean that gross margin will.
Speaker Change: Can it go up as well.
Speaker Change: Now in Q2, our guidance for the gross margin as you have seen some.
Speaker Change: Stands ready to stay flat in respect then to today and through the first quarter and there are few components of these dynamic of the gross margin on one side that is clearly, let's say the gross margin in the east.
Speaker Change: <unk> been negatively by day.
Speaker Change: Manufacturing efficiency that we add that during Q1.
Speaker Change: Manufacturing efficiency during Q1, it was impacted by that significant number of days of closure that we haven't done it in our in our fab and in our back end plant, you'll know that when you add that these kind of that let's.
You know that when you have this kind of, let's say, actions to close the sites, not all the efficiency, let's say, not all the negative impact of this closure is captured by the unloading charges. There are some impact that is negatively impacting the efficiency, and this is reflected in the dynamic of the second quarter gross margin. On top of that, there is an unfavorable impact on the Eurodollars. moving from 1.06 to 1.0. This is offset on the other side by the improvement in the product mix. Product mix is improving as personal electronics is declining, automotive is improving, in the second quarter is improving also industrial.
Speaker Change: Let's say.
Speaker Change: Actual unsettled grows the size, they're not all the efficiency.
Speaker Change: Not all the Mega TV box of disclosure what is captured by the unloading charges said there are some impact.
Speaker Change: Negatively impacting the efficiency and these are reflected in the dynamic of the second quarter Fedex AG gross margin.
Speaker Change: On top of that that there is and how we're able and impact on <unk>.
Speaker Change: Moving from one zero seeks the landlords equally these visa offset on the other side there by the improvement in the product mix all those be exact.
Speaker Change: Is it improving as Exxon related product is declining.
Speaker Change: All PBC proving gain this quarter is improving also in vascular disease.
This is offsetting, let's say, the negative impact that we have related to the manufacturing that rightly you say is coming substantially from our Why I would say that in terms of pricing, we don't see any significant high pressure in terms of pricing. It's the normal trend that usually we experience quarter after quarter.
Speaker Change: <unk> offsetting the negative impact that we add back related to the manufacturing index at IP, you say is coming from Matt from especially from our backlog.
Speaker Change: Ah why I would say that the downward pricing, we don't see any significant re shoring Panama pricing is like North mine plan at Q3, we experienced that.
Speaker Change: Quarter after quarter.
Thank you very much. Thank you for that.
Speaker Change: Thank you very much.
Moira, can we move to the next question, please?
Speaker Change: Okay. Thank you Paul.
Speaker Change: Can we move to the next question. Please.
Janardan Menon: Yes sir, the next question is from Janardan Menon from Jefferies, please go ahead. Yeah, hi, good morning. Thanks for taking the question. Yesterday, going back to Texas Instruments, they were sounding quite bullish about their industrial business. They said that they're seeing a broad recovery across segments and geographies, and all their customers are at low levels of inventory. Those comments seem a little bit more bullish than the comments you've just made today on industrial. I'm just wondering why there would be a difference between the two.
Speaker Change: Yes, Sir the next question is from Jonathan <unk> from Jefferies. Please go ahead.
Jonathan: Yes, hi, good morning, Thanks for taking the question.
Yesterday going back to Texas instruments, they were sounding quite bullish about be the industrial business.
Jonathan: They said that they are seeing a broad recovery across segments and geographies.
Jonathan: And all their customers are at low levels of inventory.
Speaker Change: Comment a little bit more bullish than the comments, you've just made today on industrial.
Speaker Change: I'm just wondering why there would be a difference between the two is it that they have a more direct sales model and we'll see that improvement.
Is it that they have a more direct sales model, and we'll see the improvement in the – earlier than through the distribution channel, where you are selling some more? And when we talk about second half, would the level of recovery of industrial microcontrollers be a key factor, the level of – in terms of your gross margin outlook into the second half?
Speaker Change: In the earlier then through the distribution channel, where you are selling small.
Speaker Change: And when we talk about second half.
Speaker Change: What would the level of recovery of industrial Microcontrollers to be a key factor the level up.
Speaker Change: Tom video gross margin outlook into the second half.
Speaker Change: Okay.
Jean-Marc Chéry: So I take the question for the revenue. Well, it is clear that for industrial, we see some positive trend. I repeat that our Q1 Book 2 Bill was above 1. In terms of orders, dollar, okay, we were also up. But clearly, we have seen some inventory done in the smart industrial. and to a lesser extent in power energy. And also we see some positive dynamics by region, so especially in Asia, but still no improvement in Europe, particularly, and in America. So it's a point number one. Point number two, you know that our industrial market, let's say go to market is mainly related to general purpose microcontroller.
Speaker Change: So it takes a question for the foreseeable venue.
Speaker Change: While it is clear that the forward for <unk>, we see some.
Speaker Change: The positive.
Speaker Change: Positive trend I repeat that the.
Speaker Change: Well Q1 book to Bill was above one in terms of <unk>. Okay. We will also.
Speaker Change: Well Kelly.
Speaker Change: We have seen some inventory in this month into steel.
Speaker Change: And to a lesser extent in Boeing.
Speaker Change: And also we see some positive dynamic by region. So special year in Asia, but still no improvement in Europe, particularly in the.
In America.
Speaker Change: So point number one.
Speaker Change: But number two you know that.
Speaker Change: While our new CEO.
Speaker Change: Market.
Speaker Change: Let's say good go to market is mainly related to the horse microcontroller.
And there is still a situation of over-inventory on general purpose, going in the right direction, but at a slower pace than what we expected a few months ago.
Speaker Change: And there is still the situation of.
Speaker Change: Although inventory on generic <unk> growing in the high <unk>, but.
Speaker Change: At a slower pace.
Speaker Change: We expect a.
Speaker Change: Few months, a few months ago.
Jean-Marc Chéry: Bon, about H2. As I have said, we will not provide any indication about H2. Why? Because of the uncertainty of the environment, the low visibility we have. However, we already communicated that we are pretty confident about our engaged customer program in personal electronics and communication equipment and computer peripherals. Definitively, this increase in H2 versus H1 related to this engaged customer program will not represent the full H2 growth versus H1. Another part, it should be related to industrial market definitely, but it's too early to confirm this indication. It is something that probably will. But you are confirming that Q1 is the bottom in industrial, so it should be higher than Q1 at least.
Well about the issue.
Speaker Change: Uh huh.
Speaker Change: No.
Speaker Change: You have said that we will not provide any.
Speaker Change: In vacation.
Speaker Change: Got it.
Speaker Change: Why is that because of the uncertainty of the RVO in months.
Speaker Change: <unk>.
Speaker Change: <unk>, Okay, we already communicated that we are pretty confidence.
Speaker Change: About the <unk> system.
Speaker Change: <unk> and <unk>.
Speaker Change: Communication equipment, and computer software and a shareholder.
Speaker Change: This finished jewelry.
Speaker Change: Is this increasing issue versus ish one related to resist an engaged customer programs will not have preserved the food <unk> necessary, Sichuan and those of Bob Okay should be.
Speaker Change: Related to industrial bucket <unk> to believe but it's too early to consumer.
Speaker Change: These studies musician, but.
Speaker Change: This is something that.
Speaker Change: Probably will happen.
Speaker Change: Okay.
Speaker Change: Okay, but you are confirming that Q1 is the bottoming in industrial so it should be higher than Q1.
We confirm Q1 is the bottom in industrial.
Speaker Change: <unk> introduced the yoga.
Speaker Change: Yeah.
Thank you. Any further?
Speaker Change: Thank you Annie.
Janardan Menon: Janardan? So, you know, if the second half is, is on the, you know, personal electronics, where you have a engaged customer ramp into the second half, and just going back to the gross margin issue, where your personal electronics has lower gross margins than industrial automotive. So just from that perspective, is with the level of improvement, all things being equal, just assuming that there is no big tariff impact in the second half, would you, would your gross margin improvement be somewhat more muted? In the second part of the year, clearly at this stage it is a little bit difficult to give any precise indication in terms of gross margin where we will land.
Speaker Change: And you put up kind of them.
Speaker Change: So it would be.
Speaker Change: Second half is.
Speaker Change: He is on the.
Speaker Change: Personal electronics that you have engaged around customer ramp into the second half.
Speaker Change: And just going back to the gross margin issue.
Speaker Change: But some of that product has lower gross margins than industrial automotive.
Speaker Change: So just from that perspective would the level of improvement all things being equal just assuming that there is no big tariff impact in the second half or would you would your gross margin improvement would be somewhat more muted.
Speaker Change: My second part of the year. It clearly at these stages, a little bit difficult to give any precise indication in Panama, but gross margin wherever we land clearly we address some elements that we can share with you really think back down, albeit growing anger in Panama.
But clearly we have some elements that we can share with you. Clearly the impact of the growing in terms of personal electronics and with the significant content in terms of silicon will definitely help significantly our, let's say, reduction in terms of unloading charges and also improving in our manufacturing efficiency. And this is clearly a positive benefit that we will have in the second part of the year. Clearly in the second part of the year, as we were mentioning before, there will be improvement, expected improvement in the industrial that is very creative for us in terms of gross margin.
Speaker Change: Chronic and that with the significant content there in Panama Silicon will definitely added basis significantly our let's say a reduction in Panama.
Speaker Change: Unloading charges and also improving in our manufacturing.
Speaker Change: And this is clearly a positive.
Speaker Change: Benefits that we will lap in the second part of the clearly the second part of the year as we were.
Speaker Change: Turning before that we'd be improvement as expected improved $19 billion that you said that air craft people for us in Panama gross margin. So I would say that that these elements other elements that are supporting for us in Soma.
Jean-Marc Chéry: So I would say that these elements are elements that are supporting for us some, let's say, expected improvement moving from the first half to the second half. Clearly, let's say, there are also some headwinds that we have to take into consideration. One may be the dynamic of effects. et cetera. Anyway, I have to say that. It's fair to say that, let's say, the level of gross margin that we have seen is 1.8. will be the bot. for our cross-margin, cross-margin will improve moving Q3 and Q4. So, finishing on industrial revenue, what I can confirm to you is that the company will grow revenue at the midpoint of our guidance, 7.7%.
Speaker Change: As expected the improvement moving from first half to the second.
Speaker Change: Clearly, let's say there are also some headwinds that we absolute take into consideration are one that may be that the dynamic of FX.
Speaker Change: Clearly, let's say VSAT and viral mathiesen after let's say <unk> and.
Speaker Change: And the other element that we have to take into consideration is the fact that that as we have said many times that.
Speaker Change: The capacity reservation fees that we progressively go down.
Speaker Change: Also moving up from the first half into the second half.
Speaker Change: Anyway, I have to say that.
Speaker Change: You just have to say that let's say the level of gross margin that we have seen one in Q2 would be.
Speaker Change: The Basel.
Speaker Change: For our gross margin.
Speaker Change: And you will improve by moving up Q3 and Q4.
Speaker Change: So.
Speaker Change: Finishing on <unk>.
Speaker Change: Sure.
Speaker Change: Our renewables what the agenda confirm to you is.
Speaker Change: Is that.
Speaker Change: The company will withdraw the new adds a midpoint of <unk> guidance seven 7%.
Well, Industrial will do as well, very similar than the average of the company in terms of growth. The main detractor of the growth of Q2 versus Q1 is the usual seasonality for ST on personal electronics. But it's a good sign that for the first time since many quarters now that sequentially the industrial market we address will grow about 8% sequentially. That's very clear.
Speaker Change: While industry.
Speaker Change: We do is with very similar that the village of <unk>.
Speaker Change: Accompanying double goals.
Speaker Change: The amended talked to of the lows of Q2 versus Q1 is the usual seasonality choices on personnel make tweaks.
Speaker Change: It's a good sign that forces the first statement since.
Speaker Change: Many quarters know that sequentially.
Speaker Change: So your end market, we address will grow about 8% sequentially.
Thank you so much.
Speaker Change: That's very clear thank you so much thank.
Thank you, Janardan.
And Moira, we can move to the next question, please.
Speaker Change: Thank you Dan.
Speaker Change: We can move to the next question. Please.
Joshua Buchalter: The next question is from Joshua Buchalter from TD Co and please go ahead. Hey, guys. Thank you for taking my question. I appreciate all the color on the inventory on the balance sheet. I was wondering if you can maybe provide additional details on how you're viewing downstream inventory in the channel. I think you had mentioned entering the year, you were sort of at two months more than you were hoping. Was there any progress on that front in aggregate, getting channel inventory lower during the quarter and sort of where you see things now? Thank you.
Speaker Change: The next question is from Josh about Hauser from TD Cowen. Please go ahead.
Josh: Hey, guys. Thank you for taking my question.
Josh: I appreciate all the color on the inventory on the balance sheet.
Josh: I was wondering if you could maybe provide additional details on how you are viewing downstream inventory in the channel I think you had been.
Josh: You mentioned entering the year you were sort of at two months more than you were hoping.
Josh: Are there any progress on that front in aggregate are getting channel inventory lower during the quarter and sort of where you see things now thank you.
Yeah, yes, I take these these question about the inventory. This time inventory that you are mentioning is the inventory But during the last quarter in Q1, we have seen substantially one dynamic, a very clear reduction of inventory in the channel, mainly in Asia. This was, let's say, evident, while for what concern EMEA and America, we have not yet seen any significant reduction of our inventory in the channel. Let's say that today, even if we have seen, let's say, some improvement in the course of last quarter, still we have some excessive inventory. This is clear. We do expect, let's say, that in Q2, with this dynamic in terms of industrial and expectation of our, let's say, POS, so the sales of our distributor toward the final market, to have a significant step down in terms of inventory.
Josh: Yes.
Josh: Yeah, Yes, I take.
Josh: <unk> a question about the inventory.
Josh: These timing battery that you are mentioning distinct entered into China.
Josh: During the last quarter in Q1 that we have seen a substantially one dynamic of very clear reduction all being banker in the China, mainly in Asia. This was that was let's say.
Josh: As evidenced that Wiley and for what concern that UBI and.
Josh: America, we have not yet seen any significant reduction of our inventory in the China, let's say that the today, even if where we have seen let's say soma.
Josh: The improvement there.
Josh: In the course of last quarter.
Josh: Still we have some excess will be back loaded.
Josh: This is clear.
Josh: We do expect let's say that in Q2.
Josh: We've got these dynamic game Tam will be industrial and expectation all of our let's say.
Josh: The U S.
Josh: So the sales of our distributor to a refiner market that will have a significant step down in Panama in bandwidth.
Jean-Marc Chéry: So, for the time being, what I can say is that, yes, there is still some excess of inventory. This inventory should progressively go down, let's say, this excess of inventory should progressively go down toward a normal, let's say, situation already starting in the current quarter.
Josh: So for the time being and what they can say is that yes. There is still some excess of inventory. These are inventory shrink progressively go down that road safety successfully vantage will progressively go down.
Josh: A normal let's say situation.
Josh: What are they destocking.
Josh: Indeed in the current quarter.
Okay, thank you for the color there.
Speaker Change: Okay. Thank you for the color there and then maybe Mark I was hoping you could comment bigger picture on how you feel at ease position to sort of handle.
Joshua Buchalter: And then maybe Gianmarco, I was hoping you could comment bigger picture on how you feel ST's position to sort of handle the backdrop where the global trade environment is different than it has been in the past, in particular from a manufacturing standpoint. You know, have you have your conversations with your customers changed much over the last few weeks? I know you're not you're not guiding any changes. But I'd be curious to hear how your customers are viewing you guys given your significant manufacturing footprint internally, but also it being in Europe, like are you viewed as sort of a neutral third party in this or?
Speaker Change: The backdrop, where the global trade environment is different than it has been in the past in particular from manufacturing standpoint.
Speaker Change: Have you have your conversations with your customers changed much over the last few weeks I know youre not youre not guiding any changes but.
Speaker Change: But I'd be curious to hear how your customers are viewing you guys. Given your significant manufacturing footprint internally, but also would be in Europe. Like are you viewed as sort of a neutral third party in this or.
Unknown Speaker Any details you can give us on the flexibility of your manufacturing footprint across your locations would be helpful as well.
Speaker Change: Any details you can give us the flexibility of your manufacturing footprint.
Speaker Change: Across your locations would be helpful as well thank you.
Jean-Marc Chéry: Thank you. No, we have engaged since many quarters now, adjustment of our manufacturing footprint. Basically, there is a inno-science organ. And then, OK, we have a long-term agreement with HHS Grace, both for microcontroller, analog technology, and other power. So clearly, first, OK, we have worked since many quarters to have a China for China manufacturing infrastructure and ecosystem. Then, with our customer, we've already anticipated the reverse dynamic, which we move already in our wafer fab, either in Europe or in Singapore, and respectively from our assembly plant and test out of China or out of Taiwan, thanks to our infrastructure in the Philippines, in Malaysia, in Malta, and in Morocco.
Speaker Change: We have engaged since.
Speaker Change: Many equal sales no.
Speaker Change: The adjustment of our manufacturing footprint.
Speaker Change: Basically there is a.
Speaker Change: Two legs.
Speaker Change: One is are the most visible one Kelly is our China for China strategy well no.
Speaker Change: We have.
Speaker Change: It was about joint venture.
Speaker Change: We said that it was a fab that we'd be ready by the end of the helpfulness both it should stop silicon carbide, we obviously saw the strategic agreement with <unk>.
Speaker Change: Sales for gun and then okay. We have a long term agreement with efficient ways.
Speaker Change: Most volatile microcontroller.
Speaker Change: <unk> technology and also a boil so clearly first.
Speaker Change: We have worked since many cost oil to ever.
Speaker Change: China for China manufacturing, Firstly joined ecosystem, then with <unk>, we've already anticipated.
Speaker Change: This dynamic.
Speaker Change: Dynamic needs.
Speaker Change: We move all of AG what lessor.
Speaker Change: Fab is early.
Speaker Change: All in Singapore, and respectively from our Assembly and test.
Speaker Change: Of China Auto stay one six to.
First the jewel in the GDP in Malaysia in the meta in Milwaukee.
Speaker Change: <unk>.
Honestly and transparently, What happened early April? didn't change drastically anything. We have not seen any panic about customer or immediate reaction. I think, OK, it's urgent to wait and see because, OK, adaptation of the supply chain or decision to modify or structuralize the supply chain is very easy, easy, sorry, heavy, sorry, in terms of qualification, in terms of transfer of products, and so on and so forth. So we have not seen immediate reaction or very, let's say, classified emotional reaction about that. But I repeat, we have engaged a modification of our footprint structurally since many, many quarters.
Speaker Change: Honestly in postpartum.
Speaker Change: But at the Beverly appeal.
Didn't changed drastically anything.
Speaker Change: We have no seen 80 by each customer.
Speaker Change: All immediate reaction.
Phil Jones: <unk>, it's Phil Jones.
Speaker Change: To wait and see because at.
Speaker Change: Adaptation of the ablation or decision.
Speaker Change: Modifiers to Charlie's of supply shed.
Speaker Change: <unk> sorry.
Avi: Avi silly in Delmarva qualification demos wholesale products and so on so forth. So we have not seen immediate reaction or let's.
Avi: Let's say, let's say emotional lecture about debt, but IEP, we up gauge modification of awesome fleet stood Charlie seats minivan equal to <unk> of <unk>.
The reason why, OK, of course, we are waiting what will happen moving forward. But we do believe that the company is well equipped to face, OK, this situation.
Avi: We are reaching what we looked at burden being full up but we do believe that the company is well equipped to face okay.
Avi: Situations.
Avi: Yeah.
Thank you. I appreciate all the color.
Avi: Thank you appreciate all the color.
Stephane Houri: We can move to the next question, please. The next question comes from Stephane Houri from OdoBHF. Please go ahead. Yes, good morning. I have a question about your comments on the automotive market. Could you maybe clarify what's your vision about your own revenues on the automotive side this year versus the market? And also, you made a difference between electrification and let's say the bulk of the market. Please clarify these for us. Thank you. Well, indeed, in Q1, we have seen lower revenues in all geographies for automotive. and including a mild non-word revision for the forecast of the year because you know that automotive industry drives us with a frame order frame order backlog.
Avi: Thank you Josh.
Avi: Can move to the next question please.
Speaker Change: The next question comes from Stephane Houri from <unk>. Please go ahead.
Speaker Change: Yes good.
Speaker Change: Good morning, I have a question about your comments on the on the automotive market.
Speaker Change: Could you maybe.
Speaker Change: <unk> what's your.
Speaker Change: Vision about your own revenues.
Speaker Change: On the automotive side this year versus the market and also.
Speaker Change: You you've made the difference between our electrification and let's say the bulk of the of the market could you could you clarify. These four thank you very much.
Speaker Change: Well indeed are.
Speaker Change: In Q1 so.
Speaker Change: So we are seeing a lower level using origin rushes.
Speaker Change: Automotive.
Speaker Change:
Speaker Change: And including our combined non enrollment adhesion.
Speaker Change: For the forecast of the year, because you know that to them.
Speaker Change: The margin unusually diverse reasons framework.
Speaker Change: And we will deliver our backlog.
And clearly, this behavior is more pronounced on electrical vehicles. Well, the positive point is that at the same moment in Q1, our book-to-bill ratio was above 1 for specifically automotive and in terms of dollar terms, the bookings were also up quarter on quarter. The other positive point for 2025 is we believe that one risk factor has been alleviated, so the one in Europe, because now the European Union is proposing some smooth approach, okay, on a three-year flexibility for the carmaker to comply with the CO2 standard. Well, of course, we will wait for the vote, but this is good news.
Kelly: And Kelly.
Speaker Change: <unk>.
Speaker Change: <unk> is more core loans on the call.
Speaker Change: Vikas.
Speaker Change: Well the positive pointed that.
Speaker Change: At the same amount in Q1 <unk> book to Bill in onshore was above one for specific to Brazil, and the <unk>. The bookings were also up quarter on quarter.
Speaker Change: Those are positive points for 2025 years, we believe that the.
Speaker Change: What does this factor has been alleviated.
Speaker Change: So as the one in Europe, because no European Union, Brazil for Brazil subsidiary.
Speaker Change: Okay.
Speaker Change: On the trio flexibility for the company to comply with those seem to stand out.
Speaker Change: Of course, we will wait for the word better but this is a good news.
Jean-Marc Chéry: However, we believe that the current situation on trade and tariff is creating uncertainty on the level of car production, clearly, and there is still some other risk factors.
Speaker Change: While we believe that the current situation on credit is creating uncertainty on the level of California should clearly.
Speaker Change: There is still some ozone.
So, taking into account all these situations, we believe that Q1 is a low point for automotive. Excluding the capacity reservation fees, we expect our auto revenue will decline. Unfortunately, in 25 versus 24, and you know that the capacity reservation fee will decline substantially in 25 versus 24 by almost 300 million US dollars. So, so, so takeaway is Q1 is the bottom. Full Year Revenue should decline versus 24. We have the indication for that. Well, there is still some risk around the production of car. We know that some analysts provide a forecast at 92.4 million of car produced in 25, so a slight increase, but here we prefer to remain cautious and wait what will happen in the next few weeks, especially related to the tariff.
Speaker Change: Victor.
Speaker Change: So they came to <unk> since you're insured we believe that Q1 is a low point forward towards you.
Speaker Change: Excluding as a capacity reservation fees, we expect the relative revenue will decline.
Speaker Change: Unfortunately in 2005 versus 24.
Speaker Change: And you know that the capacity of the delicious she will decline substantially in 2005 versus 24 by almost 1 million USD. Yes. So so so takeaway is Q1 is a bottom.
Speaker Change: When you.
Speaker Change: Should decline versus 2004, we have the indication for that.
Speaker Change: And there is still some risk around them.
You've shown US go we know that someone that is provide the forecast up to $92 4 million of Cal produce in 2005, so a slight increase but we prefer to remain cautious and wait what we'd open. The next few weeks, especially related to the dice.
Stephane Houri: Okay. And just a quick follow-up. I know you're not guiding for 2025, obviously, but you haven't changed your CapEx budget, which in general means that basically the outlook, according to you, hasn't really changed. When you look at the consensus, you see a very strong increase in H2 versus H1, 20 to 25 percent. Does it mean that this kind of evolution in the second half is still possible? Well, there is two, two points is your question.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: And just a quick follow up I know you're not guiding for 2025.
Speaker Change: But you you haven't changed your Capex.
Speaker Change: <unk>, which generally means that basically the Yale kook. According to you hasn't really changed.
Speaker Change: When you look at the consensus you see very strong increasing.
Speaker Change: And H, two VLCC, each 120% to 25%.
Speaker Change: Does it mean that this kind of evolution in the second half.
Speaker Change: Is the key.
Speaker Change: Hum placebo.
Speaker Change: But it is there is two two points as your question well first of all I would like to tell you.
Well, first of all, I would like to clearly repeat that the main purpose of the CAPEX this year is to enable our reshaping that We will disengage from 150mm fan and we will disengage from 200mm fan. That's the reason why, OK, we need to increase our capacity on 300 millimetre Fab silicon, respectively 200 millimetre Fab silicon carbide, this point number one. And to have them at the right scale, because it will be a booster for our gross margin. Respectively, 300 millimetre Fab silicon is much more efficient than a 200 millimetre one, and the same for a 200 millimetre silicon carbide.
Speaker Change: Zee medical foods of the Capex is the shale is to enable a well the reshaping.
Speaker Change: We will do some gauge of the 150 millimeter fab and we will do some gauge from two of the other medium into hubs.
Speaker Change: That's the reason why okay, we need to increase capacity.
Speaker Change: In the midst of subs.
Speaker Change: The good respectively.
Speaker Change: The minutes of this.
Speaker Change: You can tell by this point number one and two of them in July at scale, because each will be a boost for gross margin.
Speaker Change: Respectively.
Speaker Change: 10000 years of subsidy good as much relationship to about <unk> <unk> to <unk>.
So the first objective of our capital expenditures this year is to enable our reshaping plan. Well, definitively, some part of the CAPEX has been dedicated to, as an example, an exchange. The device, OK, that will be introduced as one of the main engaged customer programs for H2 in personal electronics, which is an increasing dollar in the silicon content in the application, has requested some CAPEX to be spent in Q1. So one part of the CAPEX, of course, is mix adaptation, but it is also valid in test and finishing as well. So, I repeat, for 2025, the CAPEX is mainly submix adaptations, which are, let's say, awarded to us and true, and a main part of the CAPEX is to prepare our plan to grow in 2026-2027 in a different Reshapes Manufacturing Footprint.
Speaker Change: The first objective also well capital expenditures this year is to enable a reshaping.
Speaker Change: Reshaping plan.
Speaker Change: Definitively.
Speaker Change: So bulk of the Capex.
Speaker Change: <unk> dedicated to <unk> as an example, nyx edge.
Speaker Change: Uh huh.
Speaker Change: As a device okay.
Speaker Change: We'd be introduced.
Speaker Change: As one of the main one gauge customer pulls up four ish too intense for the clinics, which is.
Speaker Change: Encouraging.
Speaker Change: The dollar and the silicon content.
Speaker Change: The application also requested some capex in this space into what so what part of the Capex of course is mix adaptation, but it is also valued.
Speaker Change: Description issue as well.
Speaker Change: So I repeat for 2025, the Capex is mainly sublease adaptation, which are let's say.
Speaker Change: To us.
Speaker Change: Sure.
Speaker Change: The main part of the Capex is to keep Vale our plan to grow in 'twenty six 'twenty seven EOG for their homes.
Speaker Change: This shift manufacturing footprint.
This is really the objective of the CAPEX. So that's the reason why, OK, we still give this $2 billion to $2.3 billion range. But you see that in Q1, we are basically slightly above a $2 billion run rate. I bought H2. Well, again, we don't give any indication. We have some visibility, we have a backlog, but you know, now, our backlog, except the normal terms and conditions of our sales contract, the backlog is not particularly protected, so it could be canceled in case, OK, something happens at the economy, OK, for end of the year or 2026.
Speaker Change: This is a release of cumulative capex. So is that there isn't a royalty we see the easy stuff.
Speaker Change: <unk> two <unk> 3 billion.
Speaker Change: Wrench, but you see that in the Q1, we are basically slightly above $2 billion run rate.
Speaker Change: I want to ask two.
Speaker Change: Well again, we don't give any indication.
Speaker Change: But we have some <unk>, we have a backlog, but you know no.
Speaker Change: I'll walk back look.
Speaker Change: Except as a non border.
Speaker Change: Devastating condition of a rough sense concoct the backlog is not particularly protect us so it could be a concern.
Speaker Change: <unk> okay.
Speaker Change: Subsea.
Speaker Change: It couldnt be okay for <unk> of 2026, so is that the reason why U K, we have been cautious.
So that's the reason why, OK, we have been cautious. However, what we can say, we can say that taking into account our engaged customer program, taking into account what I say on automotive, that Q1 is the bottom. Even if the full year will not show a growth, taking into account the trend of the inventory on industrial, we should expect to have H2 better than H1. Thank you very much.
Speaker Change: However, what we can say, we can say that taking into account our own gauge customer portal.
Speaker Change: Two our goal to what they say on Automotives that Q1 is about the ease of use of food.
Speaker Change: Sure gross they key into our goals the trend of the inventory on the new sealed we should expect to have is to basically all the nice one.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: Thank you very much.
Moira, can we move to the next question, please?
Speaker Change: How can we move to the next question. Please.
Sandeep Deshpande: The next question comes from Sandeep Deshpande from JP Morgan, please go ahead. Yeah, hi, thanks for letting me on. My first question is about tariffs. There have been some retaliatory tariffs from China on US product as such. Does this, has FTC seen any impact because of these retaliatory tariffs on their demand, for demand for their, your product from China at all, and whether there have been any changes in the environment because of this? And I have a quick follow up.
The next question comes from Sandeep Deshpande from Jpmorgan. Please go ahead.
Sandeep Deshpande: Yeah, Hi, Thanks for letting me on my first question is about that is.
Sandeep Deshpande: There have been some retaliatory tariff from China on U S product as such.
Sandeep Deshpande: This has FTC it any impact because of these modalities that it's on.
Sandeep Deshpande: Their demand for demand for your product from China at all and whether that would be any changes in the environment because of this and I have a quick follow up.
Sandeep Deshpande: We anticipate this is Christian.
Sandeep, can you repeat the question, please? Yeah, my question is about the Chinese retaliatory tariffs on products from the US as such, really, given that the retaliatory tariffs, there could be potential for tariffs on US semiconductor companies shipping into China. So does this have any potential impacts on STMicro? Well, as I told you, it is clear that with the current situation on tariffs... Our peers that have FABs in US for sure will be or could be penalized. We serve customers but again it may become Andreas speaking, I will supplying to Chinese customer product with value and with some stickiness.
Sandeep Deshpande: Sandy can you repeat the question please.
Sandeep Deshpande: Yes.
Speaker Change: Yes. My question is about the Chinese retaliatory tariffs on product from the U S. That's not really given that the retaliatory that if they could be potential for tariffs on U S. Semiconductor company shipping into China. So does this have any potential impacts on SD micro.
You bet.
Speaker Change: As I told you our volume to see how that Lisa <unk> situation.
Speaker Change: Debbie.
Speaker Change: Well Pearce.
Speaker Change: Uh huh.
Speaker Change: <unk> the U S.
Speaker Change: For sure will be or could be finalized.
Speaker Change: The <unk> well, but again.
Speaker Change: Our American peers at G III speaking.
Speaker Change: <unk> two Chinese customer.
Speaker Change: Product with value and the risk of the stickiness. So so again I repeat what I have said this should we need sogou, we don't see immediate value creation.
Jean-Marc Chéry: So, so again, I repeat what I have said a few minutes ago. We don't see immediate panic reaction or emotional reaction versus the situation. Why? Because indeed the situation is frozen for some days now. I do believe that customers and partners are waiting for the situation. We will move forward. But definitively, let's remain pragmatic. If some customers came to us and has taken decision in the past to allocate socket to our competitor for various reasons, and if today our product complies with the specification and complies in terms of performance and price and so on, yes, certainly we will acknowledge some trend that ST could be a new vendor solution taking into account this tariff increase for American peers in China.
Speaker Change: Reaction or emotional reaction visitors institution wide because of.
Speaker Change: Indeed, this is the situation as far as earnings for some days no I do believe that custom.
Speaker Change: Customers and partners.
Speaker Change: Oh is this situation we will move forward.
Speaker Change: But definitively.
Speaker Change: Allegedly made.
Speaker Change: Problematic.
Speaker Change: Some customers.
Speaker Change: Came to us and our.
Speaker Change: Stinker decision is robust to allocate still get to work completed drill floor Value's reason and if today.
Speaker Change: Complying with the specification and compliance in terms of performance and price and so on.
Speaker Change: Yes, certainly we will.
Speaker Change: Acknowledges some trend that they see could be.
Speaker Change: New logo solution.
Speaker Change: Into account size increase.
Speaker Change: American peers in China.
Thank you.
Sandeep Deshpande: My quick follow up is on again on your auto business. Can you talk about how your share has evolved at your major silicon carbide customer in the first quarter? And if we can assume that any share loss that has occurred has has already been factored into numbers or whether we will see further share loss at that customer through the rest of this year?
Speaker Change: I guess my quick follow up is on again on your auto business.
Speaker Change: Can you talk about.
Speaker Change: How your share it has evolved at all major silicon carbide customer in the first quarter and if we can assume that any share loss that has occurred has has already been factored into the numbers or whether we will see further share loss at that customer through the rest of this year.
Hello, I will comment and Marco Cassis will complement. So what we say, we have repeated since the two quarters. The way we have established the business relation with our main customer for silicon carbide was a warranty about some share. Okay, and it is automotive industry. And for automotive industry is a normal, let's say process to have multisource to have at least So for us, it was super well known that at a certain moment, okay, when the second source will be qualified and efficient, okay, our main customer will manage his manufacturing and supply chain with two sources.
Speaker Change: I will I will cover it in Mccook assistant will contribute so so what we say.
Speaker Change: <unk>.
Speaker Change: Since a few cross sales.
Speaker Change: Yeah.
Speaker Change: The way we have a <unk>.
Speaker Change: W. Schulke.
Speaker Change: Escalation that we sell well.
Speaker Change: Many customer for Silicon carbide.
Speaker Change: Was a warranty.
Speaker Change: Some shale, okay, and it is the automotive industry, and Toyota, which you'll just see ease of Nomura.
Speaker Change: Cause us too.
Speaker Change: Have resource to have at least two suits so for us into a super Alwyn norm.
Speaker Change: The southern women to key word the civil source will be qualified and shows our.
Speaker Change: Our main customer will manage.
Speaker Change: Restructuring and so great shape, which to source, we all of this situation.
Jean-Marc Chéry: We are in this situation. So we have absolutely not lost market share, because any reason, okay, we have simply coming back on the normal share, consistently with what is what we contractually sign, okay, with our customer. Well, then after, okay, where we pay attention is more about volume of cars sold by our main customer, production, inventory and so on and so forth. But here, you know we cannot comment.
Speaker Change: We are absolutely not lost market share because Indian reason, okay. We are simply coming back on the normal share consistently with what we just let the <unk> mill.
Speaker Change: Okay, well, we pay I touch on is more about.
Speaker Change: Where do you most golf so that they all want med customer for mature inventory and so on and so forth, but you don't see you know we cannot comment.
Marco Cassis: Marco, you want to add something? No, I just confirm what you just said. We moved towards the contract to our market share that we have with our major customers and there will be no erosion of market share going forward. And on the longer trend, we confirm that we will be present in the carbide market at least with a 30% or above market share overall.
Speaker Change: Let's just confirm what you asked.
You just see we move towards that.
Speaker Change: A lot of market share.
Speaker Change: Digital customers and yes, it would be no erosion of market share going forward.
Speaker Change: And on the longer planned we confirm that to repeat.
Speaker Change: <unk>.
Speaker Change: In the silicon carbide market at least a 30% market share.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: Thank you thank.
Thank you, Sandeep.
Moira: Unfortunately, we don't have any time for more questions. So this is ending our call for this quarter. Thank you very much, all of you, for being there. And we remain here at your disposal should you need any follow up questions. Sorry for the one that didn't have time to ask the question there. Thank you very much. Bye bye. Thank you. Bye. Thank you. Bye.
Speaker Change: Thank you Sandeep. Unfortunately, we don't have any time for one more question. So this is tending to our call for this quarter. Thank you very much all of you for being there and we remain here at your disposal should you need any follow up questions. So you've got the one that we don't have time to ask the question Bill. Thank you very much.
Speaker Change: Bye bye.
Speaker Change: Thank you bank. Thank you bye.
Speaker Change: Okay.
Moira: Ladies and gentlemen, the conference is now over. Thank you for choosing Corusco and thank you for participating in the conference. You may now disconnect your lines. Goodbye.
Speaker Change: Ladies and gentlemen, the conference is now over thank you for choosing chorus call and thank you for participating in the conference you May now disconnect your lines Goodbye.
Speaker Change: [music].
Speaker Change: Okay.
Okay.
Speaker Change: Okay.
Speaker Change: [music].