Record revenue of $1,669.9 million, an increase of 38 percent year-over-year

GAAP diluted earnings per share of $0.42 as compared to $0.00 in the quarter a year ago

Record non-GAAP diluted earnings per share of $0.63 as compared to $0.12 in the quarter a year ago

GAAP gross margin of 38.3 percent increased 310 basis points quarter-over-quarter and 750 basis points year-over-year

Non-GAAP gross margin of 38.4 percent increased 320 basis points quarter-over-quarter and 760 basis points year-over-year

Record free cash flow of $383.2 million or 22.9% of revenue

Revenue

Gross Margin

Operating Margin

Net Income (Loss) Attributable to ON Semiconductor Corporation

Diluted Earnings (Loss) Per Share

Business Segment

PSG

ASG

ISG

Total

Revenue

Gross Margin

Operating Expenses

Other Income and Expense (including interest expense), net

Diluted Earnings Per Share

Diluted Shares Outstanding **

Convertible Notes, Non-cash interest expense is calculated pursuant to FASB’s Accounting Standards Codification Topic 470: Debt.

Diluted shares outstanding can vary as a result of, among other things, the actual exercise of options or vesting of restricted stock units, the incremental dilutive shares from the Company’s convertible senior subordinated notes, and the repurchase or the issuance of stock or convertible notes or the sale of treasury shares. In periods when the quarterly average stock price per share exceeds $20.72 for the 1.625% Notes and $52.97 for the 0% Notes, the non-GAAP diluted share count and non-GAAP net income per share include the anti-dilutive impact of the Company’s hedge transactions issued concurrently with the 1.625% Notes and the 0% Notes, respectively. At an average stock price per share between $20.72 and $30.70 for the 1.625% Notes and $52.97 and $74.34 for the 0% Notes, the hedging activity offsets the potentially dilutive effect of the 1.625% Notes and 0% Notes, respectively. In periods when the quarterly average stock price exceeds $30.70 for the 1.625% Notes, and $74.34 for the 0% Notes, the dilutive impact of the warrants issued concurrently with such notes are included in the diluted shares outstanding. Both GAAP and non-GAAP diluted share counts are based on the Company’s stock price as of July 2, 2021.

Special items may include: amortization of acquisition-related intangibles; expensing of appraised inventory fair market value step-up; non-recurring facility costs, purchased in-process research and development expenses; restructuring, asset impairments and other, net; goodwill impairment charges; gains and losses on debt prepayment; non-cash interest expense; actuarial (gains) losses on pension plans and other pension benefits; and certain other special items, as necessary. These special items are out of our control and could change significantly from period to period. As a result, we are not able to reasonably estimate and separately present the individual impact or probable significance of these special items, and we are similarly unable to provide a reconciliation of the non-GAAP measures. The reconciliation that is unavailable would include a forward-looking income statement, balance sheet and statement of cash flows in accordance with GAAP. For this reason, we use a projected range of the aggregate amount of special items in order to calculate our projected non-GAAP operating expense outlook.

We believe these non-GAAP measures provide important supplemental information to investors. We use these measures, together with GAAP measures, for internal managerial purposes and as a means to evaluate period-to-period comparisons. However, we do not, and you should not, rely on non-GAAP financial measures alone as measures of our performance. We believe that non-GAAP financial measures reflect an additional way of viewing aspects of our operations that, when taken together with GAAP results and the reconciliations to corresponding GAAP financial measures that we also provide in our releases, provide a more complete understanding of factors and trends affecting our business. Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies’ non-GAAP financial measures, even if they have similar names.

Revenue

Cost of revenue (exclusive of amortization shown below)

Gross profit

Gross margin

Operating expenses:

Research and development

Selling and marketing

General and administrative

Amortization of acquisition-related intangible assets

Restructuring, asset impairments and other charges, net

Intangible asset impairment

Total operating expenses

Operating income

Other income (expense), net:

Interest expense

Interest income

Loss on debt refinancing and prepayment

Other income (expense)

Other income (expense), net

Income (loss) before income taxes

Income tax (provision) benefit

Net income (loss)

Less: Net income attributable to non-controlling interest

Net income (loss) attributable to ON Semiconductor Corporation

Net income (loss) per common share attributable to ON Semiconductor Corporation:

Basic

Diluted

Weighted average common shares outstanding:

Basic

Diluted

Assets

Cash and cash equivalents

Receivables, net

Inventories

Other current assets

Total current assets

Property, plant and equipment, net

Goodwill

Intangible assets, net

Deferred tax assets

Other assets

Total assets

Liabilities, Non-Controlling Interest and Stockholders’ Equity

Accounts payable

Accrued expenses and other current liabilities

Current portion of long-term debt

Total current liabilities

Long-term debt

Deferred tax liabilities

Other long-term liabilities

Total liabilities

ON Semiconductor Corporation stockholders’ equity:

Common stock

Additional paid-in capital

Accumulated other comprehensive loss

Accumulated earnings

Less: Treasury stock, at cost

Total ON Semiconductor Corporation stockholders’ equity

Non-controlling interest

Total stockholders’ equity

Total liabilities and stockholders’ equity

Net income (loss)

Adjusted for:

Restructuring, asset impairments and other charges, net

Intangible asset impairment

Interest expense

Interest income

Loss on debt refinancing and prepayment

Income tax provision (benefit)

Net income attributable to non-controlling interest

Depreciation and amortization

Third party acquisition and divestiture related costs

Adjusted EBITDA

Increase (decrease):

Restructuring, asset impairments and other, net

Interest expense

Interest income

Income tax (provision) benefit

Net income attributable to non-controlling interest

Third party acquisition and divestiture related costs

Loss (gain) on sale or disposal of fixed assets

Amortization of debt discount and issuance costs

Share-based compensation

Non-cash interest on convertible notes

Non-cash asset impairment charges

Change in deferred tax balances

Other

Changes in assets and liabilities

Net cash provided by operating activities

Cash flows from investing activities:

Purchase of property, plant and equipment

Deposits and proceeds from sale of property, plant and equipment

Deposits utilized (made) for purchase of property, plant and equipment

Purchase of business, net of cash acquired

Settlement of purchase price from previous acquisition

Net cash used in investing activities

Cash flows from financing activities:

Proceeds for the issuance of common stock under the ESPP

Payment of tax withholding for restricted stock units

Repurchase of common stock

Issuance and borrowings under debt agreements

Reimbursement of debt issuance costs

Payment of debt issuance costs

Repayment of borrowings under debt agreements

Payments related to prior acquisition

Payment for purchase of bond hedges

Proceeds from issuance of warrants

Net cash provided by (used in) financing activities

Effect of exchange rate changes on cash, cash equivalents and restricted cash

Net increase (decrease) in cash, cash equivalents and restricted cash

Beginning cash, cash equivalents and restricted cash

Ending cash, cash equivalents and restricted cash

Reconciliation of GAAP to non-GAAP gross profit:

GAAP gross profit

Special items:

a) Non-recurring facility costs

Total special items

Non-GAAP gross profit

Reconciliation of GAAP to non-GAAP gross margin:

GAAP gross margin

Special items:

a) Non-recurring facility costs

Total special items

Non-GAAP gross margin

Reconciliation of GAAP to non-GAAP operating expenses:

GAAP operating expenses

Special items:

a) Amortization of acquisition-related intangible assets

b) Restructuring, asset impairments and other, net

c) Intangible asset impairment

d) Third party acquisition and divestiture related costs

Total special items

Non-GAAP operating expenses

Reconciliation of GAAP to non-GAAP operating income:

GAAP operating income

Special items:

a) Non-recurring facility costs

b) Amortization of acquisition-related intangible assets

c) Restructuring, asset impairments and other, net

d) Intangible asset impairment

e) Third party acquisition and divestiture related costs

Total special items

Non-GAAP operating income

Reconciliation of GAAP to non-GAAP operating margin (operating income / revenue):

GAAP operating margin

Special items:

a) Non-recurring facility costs

b) Amortization of acquisition-related intangible assets

c) Restructuring, asset impairments and other, net

d) Intangible asset impairment

e) Third party acquisition and divestiture related costs

Total special items

Non-GAAP operating margin

Reconciliation of GAAP to non-GAAP income before income taxes:

GAAP income (loss) before income taxes

Special items:

a) Non-recurring facility costs

b) Amortization of acquisition-related intangible assets

c) Restructuring, asset impairments and other, net

d) Intangible asset impairment

e) Third party acquisition and divestiture related costs

f) Loss on debt refinancing and repayment

g) Non-cash interest on convertible notes

Total special items

Non-GAAP income before income taxes

Reconciliation of GAAP to non-GAAP net income attributable to ON Semiconductor Corporation:

GAAP net income (loss) attributable to ON Semiconductor Corporation

Special items:

a) Non-recurring facility costs

b) Amortization of acquisition-related intangible assets

c) Restructuring, asset impairments and other, net

d) Intangible asset impairment

e) Third party acquisition and divestiture related costs

f) Loss on debt refinancing and prepayment

g) Non-cash interest on convertible notes

h) Adjustment of income taxes

Total special items

Non-GAAP net income attributable to ON Semiconductor Corporation

Adjustment of income taxes:

Tax adjustment for special items (1)

Other non-GAAP tax adjustment (2)

Total adjustment of income taxes

Reconciliation of GAAP to non-GAAP diluted shares outstanding:

GAAP diluted shares outstanding

Special items:

a) Less: dilutive shares attributable to convertible notes

b) Add: dilutive shares attributable to share-based awards

Total special items

Non-GAAP diluted shares outstanding

Non-GAAP diluted earnings per share:

Non-GAAP net income attributable to ON Semiconductor Corporation

Non-GAAP diluted shares outstanding

Non-GAAP diluted earnings per share

Reconciliation of net cash provided by operating activities to free cash flow:

Net cash provided by operating activities

Special items:

a) Purchase of property, plant and equipment

Total special items

Free cash flow

Tax impact of non-GAAP special items (a-g) is calculated using the federal statutory rate of 21% for all periods presented.

The income tax adjustment primarily represents the use of the net operating loss, non-cash impact of not asserting indefinite reinvestment on earnings of our foreign subsidiaries, deferred tax expense not affecting taxes payable, and non-cash expense (benefit) related to uncertain tax positions.