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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2022
Or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
(Commission File Number) 001-39317 
ON SEMICONDUCTOR CORPORATION
(Exact name of registrant as specified in its charter)  
Delaware 36-3840979
(State or other jurisdiction of
incorporation or organization)
 (I.R.S. Employer
Identification No.)
5005 E. McDowell Road
Phoenix, AZ 85008
(602244-6600

(Address, zip code and telephone number, including area code, of principal executive offices)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.01 per shareONThe Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  x    No  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act
Large Accelerated Filer
  
Accelerated filer 
Non-accelerated filer 
  
Smaller reporting company
Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  x

The number of shares outstanding of the issuer's class of common stock as of the close of business on October 26, 2022:
Title of Each ClassNumber of Shares
Common Stock, par value $0.01 per share432,423,573




Table of Contents
ON SEMICONDUCTOR CORPORATION FORM 10-Q

TABLE OF CONTENTS

 
Part I: Financial Information
Item 1. Financial Statements (unaudited)
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II: Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
Signatures

(See the glossary of selected terms immediately following this table of contents for definitions of certain abbreviated terms)



Table of Contents
ON SEMICONDUCTOR CORPORATION
FORM 10-Q
GLOSSARY OF SELECTED ABBREVIATED TERMS*
Abbreviated TermDefined Term
0% Notes0% Convertible Senior Notes due 2027
1.00% Notes1.00% Convertible Senior Notes due 2020
1.625% Notes1.625% Convertible Senior Notes due 2023
3.875% Notes3.875% Senior Notes due 2028
ADASAdvanced driver-assistance systems
AECAutomotive Electronics Council
Amended Credit AgreementCredit Agreement, dated as of April 15, 2016, as subsequently amended, by and among the Company, as borrower, the several lenders party thereto, Deutsche Bank AG, New York Branch, as administrative agent and collateral agent, and certain other parties, providing for the Revolving Credit Facility and the Term Loan “B” Facility
Amended and Restated SIPON Semiconductor Corporation Amended and Restated Stock Incentive Plan, as amended
ASUAccounting Standards Update
CAMT
Corporate alternative minimum tax
Commission or SECSecurities and Exchange Commission
ESPPON Semiconductor Corporation 2000 Employee Stock Purchase Plan, as amended
Exchange ActSecurities Exchange Act of 1934, as amended
FASBFinancial Accounting Standards Board
GTATGT Advanced Technologies Inc.
IPIntellectual property
IPRDIn-process research and development
IRSUnited States Internal Revenue Service
OEMOriginal Equipment Manufacturer
QCSDivision within ASG, primarily associated with the legacy Quantenna division
Revolving Credit FacilityA $1.97 billion revolving credit facility created pursuant to the Amended Credit Agreement
ROURight-of-use
RSURestricted stock unit
Securities ActSecurities Act of 1933, as amended
Term Loan "B" FacilityA $2.4 billion term loan "B" facility created pursuant to the Amended Credit Agreement

* Terms used, but not defined, within the body of the Form 10-Q are defined in this Glossary.



Table of Contents

PART I: FINANCIAL INFORMATION

Item 1. Financial Statements (unaudited)
ON SEMICONDUCTOR CORPORATION
CONSOLIDATED BALANCE SHEETS
(in millions, except share and per share data)
(unaudited)
September 30,
2022
December 31,
2021
Assets
Cash and cash equivalents$2,450.2 $1,352.6 
Receivables, net857.3 809.4 
Inventories1,575.4 1,379.5 
Assets held-for-sale135.0  
Other current assets291.5 240.1 
Total current assets5,309.4 3,781.6 
Property, plant and equipment, net2,762.1 2,524.3 
Goodwill1,600.4 1,937.5 
Intangible assets, net373.8 495.7 
Deferred tax assets409.9 366.3 
Other assets645.1 520.6 
Total assets$11,100.7 $9,626.0 
Liabilities, Non-Controlling Interest and Stockholders’ Equity
Accounts payable$791.7 $635.1 
Accrued expenses and other current liabilities766.7 747.6 
Liabilities held-for-sale37.3  
Current portion of long-term debt165.3 160.7 
Total current liabilities1,761.0 1,543.4 
Long-term debt3,046.5 2,913.9 
Deferred tax liabilities30.5 43.2 
Other long-term liabilities586.1 521.1 
Total liabilities5,424.1 5,021.6 
Commitments and contingencies (Note 11)
ON Semiconductor Corporation stockholders’ equity:
Common stock ($0.01 par value, 1,250,000,000 shares authorized, 606,766,278 and 603,044,079 issued, 432,406,805 and 432,472,818 outstanding, respectively)
6.1 6.0 
Additional paid-in capital4,598.8 4,633.3 
Accumulated other comprehensive loss(23.4)(40.6)
Accumulated earnings3,760.1 2,435.1 
Less: Treasury stock, at cost: 174,359,473 and 170,571,261 shares, respectively
(2,685.6)(2,448.4)
Total ON Semiconductor Corporation stockholders’ equity5,656.0 4,585.4 
Non-controlling interest20.6 19.0 
Total stockholders' equity5,676.6 4,604.4 
Total liabilities and stockholders' equity$11,100.7 $9,626.0 


See accompanying notes to consolidated financial statements
4


Table of Contents
ON SEMICONDUCTOR CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(in millions, except per share data)
(unaudited)
 Quarters EndedNine Months Ended
 September 30,
2022
October 1,
2021
September 30,
2022
October 1,
2021
Revenue$2,192.6 $1,742.1 $6,222.6 $4,893.7 
Cost of revenue (exclusive of amortization shown below)1,134.3 1,021.3 3,165.9 3,011.6 
Gross profit1,058.3 720.8 3,056.7 1,882.1 
Operating expenses:
Research and development145.4 154.5 463.8 494.4 
Selling and marketing69.5 68.4 213.7 223.4 
General and administrative84.9 75.7 246.0 221.3 
Amortization of acquisition-related intangible assets21.9 24.7 65.1 74.5 
Restructuring, asset impairments and other, net40.3 (1.7)25.6 58.3 
Goodwill and intangible asset impairment271.8  386.8 2.9 
Total operating expenses633.8 321.6 1,401.0 1,074.8 
Operating income424.5 399.2 1,655.7 807.3 
Other income (expense), net:
Interest expense(23.7)(31.9)(67.4)(98.4)
Interest income4.9 0.5 6.4 1.1 
Loss on debt refinancing and prepayment   (7.3)(26.2)
Gain on divestiture of business0.2 10.2 2.1 10.2 
Other income (expense)0.9 (5.8)9.4 (2.4)
Other income (expense), net(17.7)(27.0)(56.8)(115.7)
Income before income taxes406.8 372.2 1,598.9 691.6 
Income tax provision(94.9)(61.8)(299.4)(106.8)
Net income311.9 310.4 1,299.5 584.8 
Less: Net income attributable to non-controlling interest (0.7)(1.6)(1.1)
Net income attributable to ON Semiconductor Corporation$311.9 $309.7 $1,297.9 $583.7 
Net income for diluted earnings per share of common stock (Note 9)312.4 309.7 $1,299.4 $583.7 
Net income per share of common stock:
Basic$0.72 $0.72 $2.99 $1.38 
Diluted$0.70 $0.70 $2.90 $1.32 
Weighted-average shares of common stock outstanding:
Basic432.9 430.6 433.5 423.8 
Diluted448.7 440.7 448.3 443.1 
Comprehensive income, net of tax:
Net income$311.9 $310.4 $1,299.5 $584.8 
Foreign currency translation adjustments(1.8)(0.3)(8.4)(2.8)
Effects of cash flow hedges and other adjustments7.7 3.9 25.6 11.8 
Other comprehensive income, net of tax5.9 3.6 17.2 9.0 
Comprehensive income317.8 314.0 1,316.7 593.8 
Comprehensive income attributable to non-controlling interest (0.7)(1.6)(1.1)
Comprehensive income attributable to ON Semiconductor Corporation$317.8 $313.3 $1,315.1 $592.7 

See accompanying notes to consolidated financial statements
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ON SEMICONDUCTOR CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in millions, except share data) 
(unaudited)
Common StockAdditional Paid-in CapitalAccumulated Other Comprehensive LossTreasury StockNon-Controlling Interest
Number of sharesAt Par ValueAccumulated EarningsNumber of sharesAt CostTotal Equity
Balance at July 1, 2022606,427,684 $6.1 $4,565.9 $(29.3)$3,448.2 (173,104,824)$(2,601.4)$20.6 $5,410.1 
Shares issued pursuant to the ESPP149,300 — 6.0 — — — — — 6.0 
RSUs and stock grant awards issued189,202   — — — — —  
Partial settlement - 1.625% Notes
92   — — — — —  
Partial settlement of bond hedges - 1.625% Notes
— —  — — (90) —  
Payment of tax withholding for RSUs— — — — — (58,559)(4.1)— (4.1)
Share-based compensation— — 26.9 — — — — — 26.9 
Repurchase of common stock— — — — — (1,196,000)(80.1)— (80.1)
Comprehensive income— — — 5.9 311.9 — —  317.8 
Balance at September 30, 2022606,766,278 $6.1 $4,598.8 $(23.4)$3,760.1 (174,359,473)$(2,685.6)$20.6 $5,676.6 
Balance at December 31, 2021603,044,079 $6.0 $4,633.3 $(40.6)$2,435.1 (170,571,261)$(2,448.4)$19.0 $4,604.4 
Impact of the adoption of ASU 2020-06— — (129.1)— 27.1 — — — (102.0)
Shares issued pursuant to the ESPP403,518 — 18.2 — — — — — 18.2 
RSUs and stock grant awards issued3,318,351 0.1 (0.1)— — — — —  
Partial settlement - 1.625% Notes
330   — — — — —  
Partial settlement of bond hedges - 1.625% Notes
— —  — — (322) —  
Payment of tax withholding for RSUs— — — — — (1,091,890)(67.4)— (67.4)
Share-based compensation— — 76.5 — — — — — 76.5 
Repurchase of common stock— — — — — (2,696,000)(169.8)— (169.8)
Comprehensive income— — — 17.2 1,297.9 — — 1.6 1,316.7 
Balance at September 30, 2022606,766,278 $6.1 $4,598.8 $(23.4)$3,760.1 (174,359,473)$(2,685.6)$20.6 $5,676.6 

Balance at July 2, 2021599,397,171 $6.0 $4,470.3 $(52.2)$1,699.5 (168,864,960)$(2,339.2)$20.0 $3,804.4 
Shares issued pursuant to the ESPP171,146 — 5.5 — — — — — 5.5 
RSUs and stock grant awards issued170,159 — — — — — — —  
Payment of tax withholding for RSUs— — — — — (49,512)(2.2)— (2.2)
Share-based compensation— — 22.7 — — — — — 22.7 
Comprehensive income— — — 3.6 309.7 — — 0.7 314.0 
Balance at October 1, 2021599,738,476 $6.0 $4,498.5 $(48.6)$2,009.2 (168,914,472)$(2,341.4)$20.7 $4,144.4 
Balance at December 31, 2020570,766,439 $5.7 $4,133.1 $(57.6)$1,425.5 (158,923,810)$(1,968.2)$19.6 $3,558.1 
Stock option exercises4,000 — — — — — — —  
Shares issued pursuant to the ESPP570,732 — 17.6 — — — — — 17.6 
RSUs and stock grant awards issued2,782,381 — — — — — — —  
Shares issued for warrants exercise - 1.00% Notes
13,424,951 0.1 (0.1)— — — — —  
Partial settlement - 1.625% Notes
5,425,239 0.1 (141.7)— — — — — (141.6)
Partial settlement of warrants - 1.625% Notes
6,764,734 0.1 (0.1)— — — — —  
Partial settlement of bond hedges - 1.625% Notes
— — 339.0 — — (9,120,930)(339.0) 
Equity component - 0% Notes
— — 136.6 — — — — — 136.6 
Warrants and bond hedges, net - 0% Notes
— — (66.5)— — — — — (66.5)
Tax impact of convertible notes, warrants and bond hedges, net— — 6.5 — — — — — 6.5 
Payment of tax withholding for RSUs— — — — — (869,732)(34.2)— (34.2)
Share-based compensation— — 74.1 — — — — — 74.1 
Comprehensive income— — — 9.0 583.7 — — 1.1 593.8 
Balance at October 1, 2021599,738,476 $6.0 $4,498.5 $(48.6)$2,009.2 (168,914,472)$(2,341.4)$20.7 $4,144.4 
See accompanying notes to consolidated financial statements

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ON SEMICONDUCTOR CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions) 
(unaudited)
 Nine Months Ended
 September 30,
2022
October 1,
2021
Cash flows from operating activities:
Net income$1,299.5 $584.8 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization418.6 456.4 
(Gain) loss on sale or disposal of fixed assets(33.1)2.3 
Gain on divestiture of business(2.1)(10.2)
Loss on debt refinancing and prepayment7.3 26.2 
Amortization of debt discount and issuance costs8.6 8.0 
Share-based compensation76.5 74.1 
Non-cash interest on convertible notes 17.6 
Non-cash asset impairment charges18.6 10.8 
Goodwill and intangible asset impairment charges386.8  
Change in deferred tax balances(64.6)39.5 
Other0.6 0.2 
Changes in assets and liabilities (exclusive of divestitures):
Receivables(67.2)(38.1)
Inventories(196.9)(71.5)
Other assets(48.6)(32.0)
Accounts payable68.8 25.6 
Accrued expenses and other current liabilities4.8 55.6 
Other long-term liabilities24.2 6.1 
Net cash provided by operating activities$1,901.8 $1,155.4 
Cash flows from investing activities:
Purchase of property, plant and equipment$(663.0)$(275.0)
Proceeds from sale of property, plant and equipment59.0 6.6 
Deposits made for purchase of property, plant and equipment(53.7)(21.5)
Divestiture of business, net of cash transferred90.5 3.4 
Purchase of available-for-sale securities(18.0)(43.8)
Proceeds from sale or maturity of available-for-sale securities24.0 2.8 
Payments related to prior acquisition(2.4) 
Net cash used in investing activities$(563.6)$(327.5)
Cash flows from financing activities:
Proceeds for the issuance of common stock under the ESPP$18.2 $18.5 
Payment of tax withholding for RSUs(67.4)(34.2)
Repurchase of common stock(166.9) 
Issuance and borrowings under debt agreements500.0 787.3 
Reimbursement of debt issuance costs 2.7 
Payment of debt issuance and other financing costs (3.8)
Repayment of borrowings under debt agreements(509.5)(1,218.8)
Payment for purchase of bond hedges (160.3)
Proceeds from issuance of warrants 93.8 
Payments related to prior acquisition (3.0)
Financing lease payment(12.5) 
Dividend to non-controlling shareholder(2.2) 
Net cash used in financing activities$(240.3)$(517.8)
Effect of exchange rate changes on cash, cash equivalents and restricted cash(3.2)(1.0)
Net increase in cash, cash equivalents and restricted cash1,094.7 309.1 
Cash, cash equivalents and restricted cash, beginning of period (Note 7)1,377.7 1,081.5 
Cash, cash equivalents and restricted cash, end of period (Note 7)$2,472.4 $1,390.6 

See accompanying notes to consolidated financial statements
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Table of Contents
ON SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

Note 1: Background and Basis of Presentation

ON Semiconductor Corporation (“onsemi,” “we,” “us,” “our,” or the “Company”) with its wholly and majority-owned subsidiaries operates under the onsemiTM brand.

The Company is organized into the following three operating and reportable segments:

The Power Solutions Group ("PSG");
The Advanced Solutions Group ("ASG"); and
The Intelligent Sensing Group ("ISG").

The Company's fiscal calendar year begins on January 1 and ends on December 31. The fiscal quarters contain a thirteen-week accounting period. Minor day adjustments are required in the first and fourth quarters to account for the Company's fiscal calendar year's starting and ending dates. The quarters ended September 30, 2022 and October 1, 2021 contained 91 days each. The nine months ended September 30, 2022 and October 1, 2021 contained 273 and 274 days, respectively.

The accompanying unaudited financial statements as of and for the quarter and nine months ended September 30, 2022 have been prepared following generally accepted accounting principles in the United States of America ("GAAP"). Accordingly, the unaudited financial statements do not include all of the information and footnotes required by GAAP for audited financial statements. The balance sheet as of December 31, 2021 was derived from the Company's audited financial statements but does not include all disclosures required by GAAP for audited financial statements. In the opinion of the Company's management, the interim information contains all adjustments, which include normal recurring adjustments necessary for a fair statement of the results for the interim periods. The footnote disclosures related to the interim financial information contained herein are also unaudited. Such financial information should be read in conjunction with the consolidated financial statements and related notes thereto for the year ended December 31, 2021, included in the Company's Annual Report on Form 10-K for the year ended December 31, 2021, which was filed with the SEC on February 14, 2022 (the "2021 Form 10-K").

Use of Estimates

The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities at the date of the financial statements and the reported amount of revenue and expenses during the reporting period. Management evaluates these estimates and judgments on an ongoing basis and bases its estimates on experience, current and expected future conditions, third-party evaluations, and various other assumptions that management believes are reasonable under the circumstances. Significant estimates have been used by management in conjunction with the following: (i) future payouts for customer incentives and amounts subject to allowances and returns; (ii) valuation and obsolescence relating to inventories; (iii) measurement of valuation allowances against deferred tax assets and evaluations of uncertain tax positions and (iv) testing for impairment of long-lived assets and goodwill. Additionally, during periods where it becomes applicable, significant estimates will be used by management in determining the future cash flows used to assess and test for impairment of long-lived assets and goodwill and in assumptions used in connection with business combinations. Actual results may differ from the estimates and assumptions used in the consolidated financial statements.



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Table of Contents
ON SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(unaudited)


Note 2: Revenue and Segment Information

The Company is organized into three operating and reportable segments consisting of PSG, ASG and ISG. These segments represent the Company's view of the business, and its gross profit is used to evaluate the performance of the Company's segments, the progress of major initiatives and the allocation of resources. Gross profit is exclusive of the amortization of acquisition-related intangible assets.

A significant portion of the Company’s orders are firm commitments that are non-cancellable, including certain orders or contracts with a duration of less than one year. Certain of the Company's customer contracts are multi-year agreements that include firmly committed amounts ("Long-term Supply Agreements" or "LTSA's") for which the remaining performance obligations as of September 30, 2022 were approximately $14.1 billion (excluding the remaining performance obligations for contracts having a duration of one year or less). The Company expects to recognize approximately 31% of this amount as revenue during the next twelve months upon shipment of products under these contracts. Total sales estimates are based on negotiated contract prices and demand quantities, and could be influenced by manufacturing issues, supply chain constraints, and modifications to customer agreements, among other things. Accordingly, the amount represented by remaining performance obligations may not be indicative of the actual revenue recognized for future periods.

A portion of our LTSA’s include non-cancellable capacity payments which secure production availability for our customers' orders or represent deposits, which prepay a portion of a given customer’s product obligation. During the quarter and nine months ended September 30, 2022, the Company recorded capacity payments of $67.8 million and $104.1 million, respectively, which were recorded within contract liabilities. As of September 30, 2022, $22.3 million of the capacity payments were recorded in accounts receivable. Capacity payments totaled $143.8 million as of September 30, 2022, of which $40.3 million and $103.5 million were recorded as current liabilities and other long-term liabilities, respectively. Contract assets were $13.1 million as of September 30, 2022. During the quarter and nine months ended September 30, 2022, $4.7 million and $13.8 million, respectively, was recognized as revenue for satisfying the associated performance obligations.

Revenue and gross profit for the Company’s operating and reportable segments are as follows (in millions):
PSGASGISGTotal
For the quarter ended September 30, 2022:
Revenue from external customers$1,116.1 $734.3 $342.2 $2,192.6 
Gross profit$508.5 $381.7 $168.1 $1,058.3 
For the quarter ended October 1, 2021:
Revenue from external customers$892.1 $613.5 $236.5 $1,742.1 
Gross profit$346.0 $280.1 $94.7