Summary of GlobalFoundries (GFS) FY Conference Call Company Overview - GlobalFoundries is recognized as the third or fourth largest semiconductor foundry globally, specializing in mature and specialty manufacturing technologies across various segments including analog, power management, RF, wireless, IoT, automotive, and industrial markets [2][4] Industry and Market Trends - The semiconductor industry is emerging from a cyclical downturn that began in the second half of 2022, with GlobalFoundries reporting a recovery trend starting in 2024 [4][6] - Year-over-year growth was observed for the first time in eight quarters, with a 2% increase in top-line revenue in Q1 2024 [5][6] - The company anticipates continued growth throughout 2024, despite caution regarding tariffs and their potential impact on consumer demand [6] Revenue and Growth Insights - The revenue mix by end market indicates a recovery in smart mobile, IoT, comms infrastructure, and automotive sectors, with automotive expected to grow in the mid-teens percentage [7][30] - The CID (Communications Infrastructure and Data Center) business saw a 45% year-on-year growth, driven by advancements in silicon photonics and satellite communications [20][23] - GlobalFoundries aims to maintain a stable smart mobile market while increasing content in areas like haptics and audio [8][19] Customer Engagement and Tariff Impact - The company has not seen significant changes in customer forecasts post-tariff announcements, but there is increased interest in their offerings due to their global manufacturing footprint [12][11] - GlobalFoundries has a primary manufacturing presence in the U.S., Singapore, and Germany, which positions them favorably in light of tariff concerns [12] Operational Resilience - GlobalFoundries experienced a peak-to-trough decline of about 25%, significantly better than many customers who faced declines of 40-50% [13][14] - The company attributes its resilience to strong automotive revenue growth and capacity reservation agreements with customers [14][15] Technology and Product Development - The company is focusing on diversifying its technology offerings, particularly in automotive applications, with a strong emphasis on 40nm platforms and ADAS technologies [30][31] - In the IoT segment, GlobalFoundries is well-positioned to capitalize on low power consumption technologies, which are critical for battery-operated applications [34] Manufacturing Footprint and CapEx - GlobalFoundries is deploying $700 million in CapEx primarily for maintenance and capability enhancements rather than large-scale capacity expansion [50] - The company is working on diversifying its technology across its fabs to enhance resilience and support customer needs [47] Financial Performance and Projections - The company reported a gross margin of 24% in Q1 2024, with a target to reach 30% by year-end, aiming for a long-term gross margin target of 40% [52][56] - Free cash flow generation is strong, with a target of $1 billion or greater for 2024, supported by previous investments and operational efficiencies [60] Competitive Landscape - Despite increased competition from international players, GlobalFoundries maintains a strong design win pipeline, with 90% of design wins being sole source, attributed to their technology differentiation [61][62] Conclusion - GlobalFoundries is positioned uniquely within the semiconductor industry, leveraging its global footprint and differentiated technology to navigate current market challenges and capitalize on growth opportunities [64]

Financial Data and Key Metrics Changes - Revenues grew 10% year over year, exceeding $1,100,000,000 for the quarter [5][19] - Adjusted EBITDA reached $195,000,000, surpassing the top end of guidance by $15,000,000 [5][20] - Adjusted earnings per share came in at $0.72, beating the guidance range of $0.55 to $0.61 [5][20] - Free cash flow usage was $143,000,000, lower than Q1 2024 and modestly favorable to 2025 estimates [23] Business Line Data and Key Metrics Changes - Aerospace and Defense (A&D) represented 66% of total revenue in Q1, with defense sales growing 11% year over year [17][15] - Commercial jet engine sales grew 35% year over year, accounting for 37% of total Q1 revenue [12][13] - Airframe business represented 18% of Q1 revenue, with strong demand for titanium capabilities [14] - HPMC margins increased by 400 basis points year over year, driven by A&D core strength [21] Market Data and Key Metrics Changes - Industrial markets, representing approximately 20% of total business, are experiencing a wait-and-see posture from some customers [11] - Tariffs announced in 2025 represent approximately $50,000,000 in annual cost exposure prior to offsets, but minimal impact on full year earnings is anticipated [10][11] Company Strategy and Development Direction - The company is focused on high-value A&D applications, with a strategic evolution validated by a reclassification to aerospace and defense [17] - Plans to repurchase up to $250,000,000 in shares in Q2, reflecting confidence in current share price [8][29] - The company is leveraging a diversified global supply chain to manage costs effectively amid trade uncertainties [9][52] Management's Comments on Operating Environment and Future Outlook - Management remains confident in A&D demand, with robust backlogs and no cancellations reported [11][26] - The company anticipates Q2 results to mirror Q1, with growth expected later in the year [25] - Full year adjusted EBITDA guidance is affirmed at $800,000,000 to $840,000,000, with EPS guidance increased to $2.87 to $3.09 per share [25][30] Other Important Information - A new five-year agreement with Airbus worth approximately $1,000,000,000 was signed, significantly increasing participation [87][110] - The company has secured long-term contracts for critical alloys, ensuring supply stability into the next decade [113][116] Q&A Session Summary Question: Can you provide more color on aftermarket or MRO contribution to A&D growth this quarter? - Management noted strong demand from MRO, running at 40% to 50%, with expectations to double revenue from the GTF program in 2025 [36][38] Question: Do you think the U.S. and Ukraine mineral deal could impact ATI's sourcing of feedstock? - Management believes it could be positive in the long term, but not in the near term, as historical partnerships need qualification [44] Question: Can you elaborate on pricing at HPMC? - Pricing for titanium and nickel increased by 6% to 7% year over year, with long-term agreements allowing for price increases [49][50] Question: What offsets are in place for the $50,000,000 tariff impact? - Management highlighted a diversified supply chain, cost management, and contract mechanisms to mitigate tariff impacts [51][52][54] Question: Does the reiterated guide include contingencies for softer sales in industrial markets? - Yes, the guidance includes built-in risks related to industrial ordering patterns [63] Question: Can you discuss the growth of the isothermal forgings business? - The isothermal forgings business has grown substantially, with lead times extending into 2027 and expectations to exceed $1,000,000,000 in revenue this year [95] Question: What is the duration of contracts for sole source alloys? - Contracts for critical alloys extend into the middle of the next decade, with high barriers to entry for competitors [113][116]