GlobalFoundries - $GFS - Earnings Analysis: Strong design win momentum provides a solid foundation for future growth.

Business Model

GlobalFoundries generates revenue by manufacturing semiconductors for various end markets, including Smart Mobile Devices, Communications Infrastructure & Data Center, Home and Industrial IoT, and Automotive.

Revenue Sources

• Wafer revenue (approximately 92% of Q4 2024 revenue).
• Non-wafer revenue, including reticles, non-recurring engineering, and expedite fees (approximately 8% of Q4 2024 revenue).

Income Statement Analysis

• Net revenue decreased by 1% year-over-year, from $1,854 million to $1,830 million.
• Gross profit decreased by 14% year-over-year, from $525 million to $449 million.
• Operating expenses increased significantly due to a $935 million impairment of long-lived assets.
• Operating loss was $(701) million compared to operating profit of $303 million in the prior year.
• Net loss was $(729) million compared to net income of $278 million in the prior year.
• Basic and diluted EPS were $(1.32) compared to $0.50 in the prior year.

Balance Sheet Analysis

• Cash and cash equivalents decreased from $2,387 million to $2,192 million.
• Total assets decreased from $18,044 million to $16,799 million, primarily due to the impairment charge on property, plant, and equipment.
• Total stockholders' equity decreased from $11,151 million to $10,824 million, reflecting the net loss for the year.
• Total liabilities decreased from $6,893 million to $5,975 million.

Cash Flow Analysis

• Net cash provided by operating activities decreased from $684 million to $457 million year-over-year.
• Net cash used in investing activities remained relatively stable at approximately $(92) million.
• Net cash used in financing activities increased significantly from $(87) million to $(452) million due to repayment of debt.
• Net decrease in cash and cash equivalents from $507 million to $(94) million.

Capital Allocation

GF is focused on making strategic investments in high-growth markets and geographies. The company prepaid $664 million on its outstanding Term Loan A facility in early 2025, demonstrating a commitment to managing debt. Capex for 2024 was $625 million, and is projected to be $700 million for 2025. The company is also returning capital to shareholders through share repurchases.

Management Commentary

GF team delivered solid financial results that exceeded the Non-IFRS midpoint of the guidance ranges provided in November.

Generated over $1 billion of Non-IFRS adjusted free cash flow due to focus on operational excellence.

Expect the full year 2025 to mark a return to growth across key revenue and profitability metrics.

The first quarter 2025 includes a roughly $80,000,000 underutilization benefit.

Overall Sentiment: Optimistic. Management expresses confidence in the company's ability to achieve growth in 2025 due to its strong design win momentum and strategic initiatives. However, they acknowledge continued macroeconomic headwinds and uncertainties.

Disclaimer: This report is for informational purposes only and not investment advice. The analysis is based on limited information and subject to change. Investing in securities involves risks, including potential loss of principal. Past performance doesn't guarantee future results. Always conduct your own research, understand the risks, and consult a financial professional before making investment decisions.