Release Date: February 11, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- GLOBALFOUNDRIES Inc (GFS, Financial) exceeded the midpoints of their guidance ranges across revenue, gross margin, and EPS for the fourth quarter of 2024.
- The company generated over $1 billion in adjusted free cash flow in 2024, significantly exceeding their target.
- Record level of design wins across all end markets, with almost 90% secured on a sole source basis.
- Strong growth in the automotive sector, with a 15% revenue increase in 2024, reaching a new annual record.
- Strategic initiatives in Malta are on track, diversifying the technology portfolio and enhancing manufacturing capabilities.
Negative Points
- Fourth quarter revenue showed a 1% decline compared to the prior year period.
- Average selling price per wafer decreased approximately 5% year-over-year due to changes in product mix and reduction in underutilization payments.
- Full year 2024 revenue was down 9% year-over-year due to prolonged industry downturn and weak economic conditions.
- A one-time $935 million impairment charge was incurred on long-lived assets related to legacy investments in the Malta facility.
- Gross margin for the full year 2024 declined by 380 basis points compared to 2023.
Q & A Highlights
Q: Can you provide some explanation of what your expectation is by end market for Q1, particularly in the automotive sector?
A: Thomas Caulfield, CEO: We expect continued growth in the automotive sector, marking the fifth consecutive year of revenue growth. Despite sluggish auto sales, our growth is driven by the number of sockets we've won and the ramping of these wins. Additionally, our communications infrastructure and data center end market is expected to grow due to key design wins in satellite communications and photonics platforms.
Q: Can you walk us through how you intend to achieve a 30% gross margin by the end of the year?
A: John Hollister, CFO: We see an improving gross margin story driven by improved factory utilization, structural cost improvements, and product mix enrichment. We expect a 15% reduction in depreciation and amortization costs, contributing to our goal of exiting the year with a 30% gross margin.
Q: How do you expect to maintain a high level of free cash flow in 2025?
A: John Hollister, CFO: We expect to continue strong free cash flow performance through a capital-efficient strategy, leveraging prior investments, and maintaining a modest CapEx. Working capital should normalize, and we anticipate generating similar free cash flow levels in 2025 as in 2024.
Q: Can you describe the impairment charge and its impact on depreciation expense?
A: John Hollister, CFO: The impairment charge relates to diversifying our Malta Fab's technology offerings. We conducted a comprehensive analysis and determined a $900 million impairment was appropriate. This contributes to the expected 15% decline in depreciation and amortization costs, although it's not the majority factor.
Q: How do you view the impact of China on your business, considering capacity expansion and restrictions?
A: Thomas Caulfield, CEO: Our differentiation is our best defense against capacity build in China. Chinese fabless companies seek diversification, and GF offers a diversified manufacturing footprint. We engage with Chinese companies aiming to become international players and explore China-for-China opportunities with partners, ensuring IP protection.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
