STMicroelectronics NV (NYSE:STM) Q1 2018 Earnings Conference Call - Preliminary Transcript
Apr 25, 2018 • 03:30 am ET
Good morning. Thank you, everyone, for joining our first quarter 2018 financial results conference call. Hosting the call today is Carlo Bozotti, ST's President and Chief Executive Officer. Joining Carlo on the call today are Jean-Marc Chery, Deputy CEO and Designated President and CEO; Carlo Ferro, Chief Financial Officer; Georges Penalver, Chief Strategy Officer; and Lorenzo Grandi, Corporate Vice President, Corporate Control.
This live webcast can be accessed through ST's website. A replay will be available shortly after the conclusion of this call.
This call will include forward-looking statements that involve risk factors that could cause ST's results to differ materially from management's expectations and plans. We encourage you to review the safe harbor statement contained in the press release that was issued with the results this morning, and also in ST's most recent regulatory filings for a full description of these risk factors.
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.
And now, I'd now like to turn the call over to Mr. Carlo Bozotti, ST's President and CEO. Carlo?
Thank you, Tait, and thank you for joining us on our first quarter 2018 earnings conference call. Our agenda today includes a summary of the quarter, a detailed product group review, and our second quarter outlook. So, let us begin.
Our objective for 2018 is to leverage the results we achieve in 2017, continuing on the path of broad-based sustainable and profitable growth. Based on our first quarter results, we have started the year well on track. Revenues grew 22.2% year-over-year to reach $2.23 billion, and this is our sixth quarter in a row of double digit year-over-year sales growth. Also this quarter, we posted double-digit sales growth across all product groups and regions, thanks to our focus on Smart Driving and IoT applications.
On a sequential basis, revenues decreased 9.8%, 20 basis points better than the midpoint of our guidance. We delivered a better-than-seasonal performance in two end markets, Automotive and Industrial, well balanced between large customers and distribution, which represented 37% of our revenues in the first quarter.
Gross margin increased 220 basis points year-over-year to 39.9%. Manufacturing efficiency was the largest contributor, followed by product mix. These two improvements were slightly offset by normal pricing adjustments at the start of the year, as well as negative currency effects of about 80 basis points, as well as some one-time negative impact specific to the quarter.
On a sequential basis, our gross margin was 40 basis points above the midpoint of our guidance on better product mix. Operating income more than doubled to $269 million in comparison to the 2017 first quarter, thanks to strong improvements across all product groups with higher revenues, increased manufacturing efficiencies, and improved product mix. As a result, our operating margin reached 12.1%, increasing 480 basis points year-over-year from 7.3%.
Net income increased more than $131 million year-over-year to $239 million, driving diluted earnings per share