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GlobalFoundries is on a Roll: The 3 Point Breathtaking Blueprint on the Company’s Direction (NASDAQ:GFS)

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Globalfoundries Inc is a semiconductor company that had a robust first quarter of fiscal year 2023, surpassing revenue and EPS estimates. With a revenue of $1.84 billion and normalized EPS of $0.52, the company’s financial performance exceeded expectations. Global Foundries Inc’s financial success can be attributed to its investment in capital expenditures and technology upgrades, which is reflected in its cash flow from investing activities.

The company created strategic partnerships with Georgia Tech and Amkor Technology Inc., which allow it to access cutting-edge research and expertise in sophisticated packaging solutions and silicon photonics. Additionally, Global Foundries Inc was awarded financing by the European Commission to construct a new production facility in Crolles, France, which will enable the company to broaden its product offering in high-performance chips in key European markets. The company also acquired land in New York to expand its current campus and meet the growing demand for its differentiated solutions.

Global Foundries Inc has a new CFO, Tim Stone, with over 20 years of experience in Amazon’s global business, and a new CBO, Niels Anderskouv, with over 25 years of experience in the semiconductor industry. These two new senior executives contribute a breadth of experience and expertise that will aid GlobalFoundries in achieving its growth goals and maximizing shareholder value.

Finally, the company is committed to defending its innovation and market advantage, as demonstrated by its lawsuit against IBM for breaching its contractual obligations and fiduciary duties by disclosing confidential information about GlobalFoundries’ technology and business plans.

Sector Technology
Industry Semiconductors & Semiconductor Equipment
Industry View In – Line
Market Capitalization $30.13B

Globalfoundries Inc: Earnings Insights & Expectations

Global Foundries Inc delivered a robust first quarter of fiscal year 2023, with revenue exceeding estimates by $10.23 million and reaching $1.84 billion. The company also surpassed both non-GAAP and GAAP EPS estimates, reporting a normalized EPS of $0.52 (beat by $0.03) and a GAAP EPS of $0.46 (beat by $0.02).

Financial Performance:

The first quarter of 2023 was good for Global Foundries Inc. The total revenue for the quarter that was reported by the company was $1.841 billion. The gross margin came in at 28.0%, and the adjusted gross margin came in at 28.5%. The operating margin came in at 15.8%, while the adjusted operating margin clocked in at 17.7%. The company reported a net income of $254 million for the period, while the adjusted net income was $290 million. In addition, the EBITDA after adjustments was stated to be $655 million. In conclusion, the company reported a total of $3,232 million in cash, cash equivalents, and marketable securities.The revenue estimate for the upcoming quarter is $1.83 billion, with an EPS estimate of $0.50 on a normalized basis and $0.42 on a GAAP basis.

During the first quarter of 2023, the company generated a significant cash inflow of $479 million from its operating activities. This increase was mainly due to adjustments for non-cash expenses, as well as an increase in deferred income taxes and other non-cash operating activities. However, the company experienced a net change in working capital of $174 million during the quarter, which had an impact on its cash flow from operating activities. In comparison, during the first quarter of 2022, the company had a higher cash inflow from its operating activities due to a significant increase in net change in working capital, including an increase in inventories and accounts receivable.

The company used $586 million in cash for investing activities during the first quarter of 2023, primarily for the purchase of property, plant, equipment, and intangible assets. This is an increase compared to the $639 million used in the same period a year ago, reflecting the company’s continued & consistent investment in capital expenditures and technology upgrades. The company’s financing activities during the first quarter of 2023 resulted in a net cash inflow of $10 million, which is lower than the $118 million in the same period last year. This decrease was primarily due to a decrease in proceeds from debt, net, offset by an increase in proceeds from the issuance of equity instruments and other. As a result, Global Foundries Inc ended the first quarter of 2023 with a cash & cash equivalents of $2,256 million, compared to $3,264 million at the end of the same period a year ago.

Discovering Growth Drivers : $GFS

  • Strategic Partnership for Research & Development

The deal between Global Foundries and Georgia Tech was referred to as a Strategic University Partnership. This collaboration covers a wide variety of research efforts, such as leading capacities in advanced packaging, silicon photonics, and initiatives for workforce development. This arrangement demonstrates the company’s dedication to innovation as well as its desire to work closely with preeminent academic institutions. Through its partnership with Georgia Tech, Global Foundries will be able to gain access to cutting-edge research and expertise in a number of areas that are essential to the development of its distinctive solutions. Chips used in a variety of applications, including 5G, data centres, automotive, and aerospace, can benefit from advanced packaging and silicon photonics, two crucial technologies. These technologies enable higher performance, lower power consumption, and greater integration than was previously possible. GF will be able to attract and keep experienced engineers and technicians that are able to support the company’s growth and expansion ambitions with the assistance of workforce development efforts. This partnership will also bolster GF’s position and reputation in the United States, where the company has four production plants and employs more than 10,000 people.

  •      Strategic Collaboration for Back-End Services

The first at-scale back-end facility in Europe was built thanks to a strategic relationship between Amkor Technology, Inc. and Global Foundries. GF moved its 300mm Bump and Sort lines from its Dresden location in Germany to Amkor’s operations in Porto, Portugal. The company’s objective is to optimise its global footprint and focus on its core strengths of front-end wafer production is illustrated by this cooperation, which reflects its strategy. The company will improve its asset utilisation and profitability by shifting its back-end activities to Amkor, which will result in a reduction in the amount of money it spends on capital expenditures and operational costs. Amkor is the preeminent provider of outsourced semiconductor assembly and testing services, and it possesses a wealth of experience in addition to specialised knowledge in the field of sophisticated packaging solutions. This will improve its customer service and satisfaction, as well as its competitive position in the European market, by utilising the expertise and capacity offered by Amkor. Through this agreement, the company  will also be able to contribute to the European Union’s efforts to achieve its aim of boosting the capacity and resiliency of its semiconductor production.

  •  Facility Expansion

The awarding of direct grant financing to Global Foundries and STMicroelectronics by the European Commission was granted in order to support the construction and operation of a new 300mm production facility in Crolles, which is located in the country of France. The funds are being made available in accordance with the European Chips Act, and the project will make it possible to develop a large-scale manufacturing site in Europe for high performance chips. This site will be able to address current and future key European markets, such as the automotive and industrial sectors, as well as the security, defence, and space industries. This project gives the company with a considerable potential to broaden its product offering and increase its production capacity in Europe, both of which the company intends to pursue. The new facility will be built on GF’s 22FDX platform, which offers a unique combination of low power consumption, high performance, and cost effectiveness for chips used in a variety of applications including automotive, industrial, 5G/6G, edge computing, and artificial intelligence.

o   The company paid $100 million for approximately 800 acres of land adjacent to its Fab 8 facility in Malta, New York. The acquisition of land will allow the company to expand its current campus and potentially construct a second facility in the future. These investments will assist GlobalFoundries in meeting the growing demand for its differentiated solutions, particularly among government and defence clients in the United States.

  •  Transition of Chief Financial Officer and Appointment of New Chief Business Officer:

The new CFO, Tim Stone, has more than 20 years of experience developing Amazon’s global business, in addition to serving as CFO for Ford Motor and Snap. Niels Anderskouv, the new CBO, has over 25 years of experience in the semiconductor industry with Texas Instruments, where he was in charge of the multibillion-dollar Analogue Power business23. These two new senior executives contribute a breadth of experience and expertise that will aid GlobalFoundries in achieving its growth goals and maximising shareholder value.

  •   Defending Innovation & Market Advantage

The company sued IBM in the U.S. District Court for the Northern District of New York, alleging that IBM breached its contractual obligations and fiduciary duties by disclosing confidential information about GlobalFoundries’ technology and business plans to Intel, Rapidus, and others. The company asserts that IBM’s actions have irreparably damaged its competitive position and reputation, and it seeks injunctive relief and damages. The lawsuit demonstrates GlobalFoundries’ commitment to defending its innovation and market advantage.

Company Description : (NASDAQ:GFS)

GlobalFoundries, Inc. is a semiconductor manufacturing services supplier. The company has developed expertise in the areas of manufacturing processes, an intellectual property (IP) title library, and distinctive transistor and device technologies. The Company is in the business of producing a wide variety of semiconductor devices, such as microprocessors, mobile application processors, baseband processors, network processors, radio frequency modems, microcontrollers, and power management units, among others. The company caters to a diverse variety of clients, including the industry pioneers in integrated circuit (IC) design, and it offers solutions that are optimised for the function, performance, and power demands of important applications. Its technology portfolio contains a variety of differentiated technology platforms, such as silicon-on-insulator (SOI) solutions for radio frequency (RF), fin field-effect transistors (FinFET), complementary metal-oxide semiconductors (CMOS), fully depleted SOI (FDX), silicon germanium (SiGe) products, and silicon photonics (SiPh).

Valuation Overview : Globalfoundries Inc

Valuation Ratios Current 2023E 2024E 2025E
EV/ Sales 3.67 3.90 4.00 4.10
EV/ EBITDA 10.22 10.43 9.91 10.51
EV/ EBIT 22.10 22.86 19.38 18.57
Price/Earnings 44.90 30.15 23.02 24.71

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