STMicroelectronics N : Q4 2022 CEO script

Q4 & FY 2022

Earnings Results

Jean-Marc Chery, President & CEO

January 26, 2023

Good morning and thank you for joining ST for our Q4 and Full Year 2022 earnings conference call.

Let me begin with some opening comments.

Starting with Q4:

• ST delivered net revenues and gross margin above the mid-point of our guidance.
• Net revenues of $4.42 billion increased 24.4% year-over-year and 2.4% sequentially. Gross margin was 47.5%.
• Operating margin was 29.1% and net income was $1.25 billion.

Looking at the full year 2022:

• Net revenues increased 26.4% to $16.13 billion, driven by strong demand in Automotive and Industrial, and our engaged customer programs. All three product groups contributed to the growth.
• Profitability improved on a year-over-year basis: gross margin was 47.3%, up from 41.7%; operating margin was 27.5%, up from 19.0%, and net income was $3.96 billion, almost doubling from $2.0 billion.
• We generated strong net cash from operating activities. We invested $3.52 billion in CAPEX and delivered free cash flow of $1.59 billion.

Our net financial position increased to $1.8 billion at December 31,

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2022 from $977 million one year ago.

On Q1 2023:

• At the mid-point, our first quarter business outlook is for net revenues of $4.20 billion, increasing by 18.5% year-over-year and decreasing 5.1% sequentially; gross margin is expected to be about 48.0%.

For the full year 2023:

• We will continue to execute our strategy, with a strong focus on Automotive and Industrial as a broad range supplier, and a selective approach in Personal Electronics and Communications Equipment and Computer Peripherals.
• We enter this year with a backlog higher than what we had entering 2022.
• We plan to invest about $4.0 billion in CAPEX, mainly to increase our 300mm wafer fabs and silicon carbide manufacturing capacity including our substrate initiative.
• Based on our strong customer demand and increased manufacturing capacity, we will drive the Company based on a plan for FY23 net revenues in the range of $16.8 billion to $17.8 billion, representing a growth range of 4% to 10% compared to FY22.

Now, let's move to a detailed review of the fourth quarter.

Both revenue and gross margin came above the mid-point of our guidance by 60 and 20 basis points, respectively.

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On a sequential basis, Q4 net revenues increased 2.4%, driven mainly by ADG, which increased 8.5%. MDG revenues increased 0.7% while AMS revenues decreased 3.0%.

On a year-over-year basis, net revenues increased 24.4%, with ADG and MDG growing 38.4% and 29.1% respectively, while AMS increased 7.0%. Year-over-year, sales to OEMs increased 26.8% and 19.5% to Distribution.

Gross profit was $2.10 billion, increasing 30.7% on a year-over-year basis. Gross margin was 47.5%, increasing 230 basis points year-over- year, mainly driven by favorable pricing, improved product mix and currency effects, net of hedging, partially offset by the inflation of manufacturing input costs.

Fourth quarter operating income increased 45.4% to $1.29 billion. Q4 operating margin was 29.1%, up from 24.9% in the year-ago period, with ADG at 27.7%, AMS at 25.8% and MDG at 35.8%.

Q422 net income was $1.25 billion, including a one-timenon-cash income tax benefit of $141 million, compared to $750 million in the year- ago quarter. Earnings per diluted share were $1.32 compared to $0.82.

Let's now discuss our full year results, starting with the business dynamics.

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2022 was a year marked again by strong demand in Automotive and Industrial, still impacted by supply chain challenges due to continuing shortages and capacity constraints. In the second half, we started to see a market softening in Personal Electronics and Computer Peripherals.

In Automotive, we again saw unprecedented demand across all geographies, driven by increasing semiconductor pervasion, structural transformation and inventory replenishment.

We continued to execute our strategy for car electrification, in particular in our silicon carbide business.

We added a wide range of wins in next generation electric vehicle designs with our power discrete solutions. The latest one is with Hyundai Motor, who has chosen our Acepack Drive SiC-MOSFETGen3-based power modules for traction inverters in its current-generation EV platform.

In silicon carbide for Automotive and Industrial, we achieved $700 million of revenues with silicon carbide in 2022, with a plan to be above $1 billion in 2023. We finished the year with 115 awarded projects, spread over 80 customers (adding 25 projects and 8 customers during 2022). About 60% of these projects are for automotive customers.

We continue to lead in silicon carbide, as we have moved to high volume production of our 3rd generation transistors for multiple automotive

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customers; and we will ramp our 4th generation transistor in volume in the second half of this year.

In car digitalization, we had a range of wins with our MCUs and power solutions for new zonal car architectures. We won designs with our next- generation Stellar automotive MCU and announced a cooperation model with Volkswagen-Cariad including the joint development of a System-on-Chip MPU. We also received awards with our partners Mobileye for ADAS and Autotalks for V2X. In our automotive sensors we continued to increase the scale of our business in inertial sensors, growing by over 40% year-over-year.

In global shutter imaging sensors, we received awards for five key programs during the year.

In Industrial, demand was also very strong throughout the year, especially in Power and Energy, Factory Automation and Robotics, and in Industrial Infrastructure- what we define as the B2B part of the Industrial market.

We continued to strengthen our embedded processing solutions leadership with our STM32 microcontroller and microprocessor families and ecosystem. We continued to win many designs in a wide range of industrial applications and to achieve record volumes and sales of STM32 products.

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