Form 8-K
ON SEMICONDUCTOR CORP false 0001097864 0001097864 2023-10-30 2023-10-30

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

October 30, 2023

Date of Report (Date of earliest event reported)

ON Semiconductor Corporation

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   001-39317   36-3840979

(State or other jurisdiction

of incorporation)

  (Commission File Number)  

(IRS Employer

Identification No.)

 

  

ON Semiconductor Corporation

5701 N. Pima Road

Scottsdale, Arizona

      85250
   (Address of principal executive offices)       (Zip Code)

(602) 244-6600

(Registrant’s telephone number, including area code)

(Former name or former address, if changed since last report.)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading
Symbol(s)

  

Name of each exchange

on which registered

Common Stock, par value $0.01 per share   ON    The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).

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. ☐

 


Item 2.02.

Results of Operation and Financial Condition.

On October 30, 2023, ON Semiconductor Corporation announced in a news release its financial performance for the third quarter ended September 29, 2023 and other related material information (the “Earnings Release”). A copy of the Earnings Release is attached hereto as Exhibit 99.1 and incorporated herein by reference.

The information in Item 2.02 of this Current Report on Form 8-K, including Exhibit 99.1, is being furnished under Item 2.02 and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to liability under that section, nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, regardless of any general incorporation language in such filing, except as shall be expressly set forth by specific reference in such filing.

 

Item 9.01.

Financial Statements and Exhibits.

 (d) Exhibits

The below exhibit is furnished as part of this Current Report on Form 8-K.

 

Exhibit No.

  

Description

99.1    News release for ON Semiconductor Corporation, dated October 30, 2023, announcing financial performance for the third quarter ended September 29, 2023
104    Cover Page Interactive Data File (embedded within the Inline XBRL document)

 


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

     

 ON SEMICONDUCTOR CORPORATION

 (Registrant)

Date: October 30, 2023     By:  

 /s/ Thad Trent

     

 Thad Trent

 Executive Vice President, Chief Financial Officer and Treasurer

EX-99.1

Exhibit 99.1

onsemi Third Quarter 2023 Results Exceed Expectations

Achieves record revenue in automotive and industrial end markets

SCOTTSDALE, Ariz, – Oct 30, 2023 – onsemi (the “Company”) (Nasdaq: ON) today announced results for the third quarter of 2023 with the following highlights:

 

   

Revenue of $2,180.8 million; GAAP and non-GAAP gross margin of 47.3 percent

 

   

GAAP operating margin and non-GAAP operating margin of 31.5 percent and 32.6 percent, respectively

 

   

GAAP diluted earnings per share and non-GAAP diluted earnings per share of $1.29 and $1.39, respectively

 

   

Record automotive revenue of $1.2 billion, and increased 33 percent year-over-year

 

   

Record industrial revenue of $616 million, up slightly year-over-year

“Our disciplined approach and execution resulted in another solid quarter, demonstrating the resilience in our business amid market softness,” said Hassane El-Khoury, president and chief executive officer of onsemi. “We continue to drive structural improvements and efficiencies, most notably in our silicon carbide operation, with the completed expansion of the world’s largest, state-of-the-art silicon carbide fab in South Korea for 150 and 200 millimeter wafers.”

Selected financial results for the quarter are shown below with comparable periods (unaudited):

 

       GAAP         Non-GAAP    
  (Revenue and Net Income in millions)      Q3 2023       Q2 2023       Q3 2022       Q3 2023       Q2 2023       Q3 2022   
  

 

 

   

 

 

 

Revenue

     $2,180.8         $2,094.4         $2,192.6        $2,180.8         $2,094.4         $2,192.6   

Gross Margin

     47.3 %        47.4 %        48.3 %       47.3 %        47.4 %        49.3 %  

Operating Margin

     31.5 %        32.2 %        19.4 %       32.6 %        32.8 %        35.4 %  

Net Income attributable to ON Semiconductor Corporation

     $582.7         $576.6         $311.9        $608.4         $583.3         $639.4   

Diluted Earnings Per Share

     $1.29         $1.29         $0.70        $1.39         $1.33         $1.45   

 

1


Revenue Summary

(in millions)

(Unaudited)

 

  

 

 

      
     Three Months Ended               
 Business Segment    Q3 2023      Q2 2023     Q3 2022    

  Sequential  

  Change  

    

Year-over-  

Year Change 

 

 

   

 

 

 

 PSG

    $ 1,230.6      $ 1,119.8     $ 1,116.1       10 %        10 %  

 ASG

     621.6        649.5       734.3       (4)%        (15)%  

 ISG

     328.6        325.1       342.2       1 %        (4)%  
  

 

 

   

 

 

 

 Total

    $   2,180.8      $   2,094.4     $   2,192.6       4 %        (1)%  
  

 

 

   

 

 

 

FOURTH QUARTER 2023 OUTLOOK

The following table outlines onsemi’s projected fourth quarter of 2023 GAAP and non-GAAP outlook.

 

    

Total onsemi

GAAP

  

  Special  

  Items **  

  

  Total onsemi  

Non-GAAP***

     

Revenue

   $1,950 to $2,050 million    -     $1,950 to $2,050 million

Gross Margin

   45.4% to 47.4%    0.1%    45.5% to 47.5%

Operating Expenses

   $314 to $329 million    $14 million    $300 to $315 million

Other Income and Expense (including interest), net

   ($4 million)    -     ($4 million)

Diluted Earnings Per Share

   $1.10 to $1.24    $0.03    $1.13 to $1.27

Diluted Shares Outstanding *

   444 million    6 million    438 million

 

*

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 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 $52.97 for the 0% Notes, and $103.87 for the 0.50% Notes, the non-GAAP diluted share count and non-GAAP net income per share include the anti-dilutive impact of the hedge transactions entered concurrently with the 0% Notes, and the 0.50% Notes, respectively. At an average stock price per share between $52.97 and $74.34 for the 0% Notes, and $103.87 and $156.78 for the 0.50% Notes, the hedging activity offsets the potentially dilutive effect of the 0% Notes, and the 0.50% Notes, respectively. In periods when the quarterly average stock price exceeds $74.34 for the 0% Notes, and $156.78 for the 0.50% Notes, the dilutive impact of the warrants issued concurrently with such notes is included in the diluted shares outstanding. GAAP and non-GAAP diluted share counts are based on either the previous quarter’s average stock price or the stock price as of the last day of the previous quarter, whichever is higher.

 

**

Special items may include: amortization of acquisition-related intangibles; expensing of appraised inventory fair market value step-up; non-recurring facility costs; in-process research and development expenses; restructuring, asset impairments and other, net; goodwill impairment charges; gains and losses on debt prepayment; 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.

 

2


***

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.

TELECONFERENCE

onsemi will host a conference call for the financial community at 9 a.m. Eastern Time (ET) on October 30, 2023 to discuss this announcement and onsemi’s 2023 third quarter results. The Company will also provide a real-time audio webcast of the teleconference on the Investor Relations page of its website at http://www.onsemi.com. The webcast replay will be available at this site approximately one hour following the live broadcast and will continue to be available for approximately 30 days following the conference call. Investors and interested parties can also access the conference call by pre-registering here.

 

3


About onsemi

onsemi (Nasdaq: ON) is driving disruptive innovations to help build a better future. With a focus on automotive and industrial end-markets, the company is accelerating change in megatrends such as vehicle electrification and safety, sustainable energy grids, industrial automation, and 5G and cloud infrastructure. onsemi offers a highly differentiated and innovative product portfolio, delivering intelligent power and sensing technologies that solve the world’s most complex challenges and leads the way to creating a safer, cleaner, and smarter world. onsemi is recognized as a Fortune 500® company and included in the Nasdaq-100 Index® and S&P 500® index. Learn more about onsemi at www.onsemi.com.

# # #

onsemi and the onsemi logo are trademarks of Semiconductor Components Industries, LLC. All other brand and product names appearing in this document are registered trademarks or trademarks of their respective holders. Although the Company references its website in this news release, information on the website is not to be incorporated herein.

 

Krystal Heaton

   Parag Agarwal

Director, Head of Public Relations

   Vice President - Investor Relations & Corporate Development

onsemi

   onsemi

(480) 242-6943

   (602) 244-3437

Krystal.Heaton@onsemi.com

   investor@onsemi.com

This document includes “forward-looking statements,” as that term is defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical facts, included or incorporated in this document could be deemed forward-looking statements, particularly statements about the future financial performance of onsemi, including financial guidance for the fourth quarter of 2023. Forward-looking statements are often characterized by the use of words such as “believes,” “estimates,” “expects,” “projects,” “may,” “will,” “intends,” “plans,” “anticipates,” “should” or similar expressions or by discussions of strategy, plans or intentions. All forward-looking statements in this document are made based on our current expectations, forecasts, estimates and assumptions and involve risks, uncertainties and other factors that could cause results or events to differ materially from those expressed in the forward-looking statements. Certain factors that could affect our future results or events are described under Part I, Item 1A “Risk Factors” in the 2022 Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on February 6, 2023 (the “2022 Form 10-K”) and from time to time in our other SEC reports. Readers are cautioned not to place undue reliance on forward-looking statements. We assume no obligation to update such information, which speaks only as of the date made, except as may be required by law. Investing in our securities involves a high degree of risk and uncertainty, and you should carefully consider the trends, risks and uncertainties described in this document, our 2022 Form 10-K and other reports filed with or furnished to the SEC before making any investment decision with respect to our securities. If any of these trends, risks or uncertainties actually occurs or continues, our business, financial condition or operating results could be materially adversely affected, the trading prices of our securities could decline, and you could lose all or part of your investment. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by this cautionary statement.

 

4


ON SEMICONDUCTOR CORPORATION

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions, except per share data)

 

    Quarters Ended   Nine Months Ended
     September 
29, 2023
   June 30, 2023     September 
30, 2022
   September 
29, 2023
   September 
30, 2022

 Revenue

   $  2,180.8      $  2,094.4      $  2,192.6      $  6,234.9      $  6,222.6  

 Cost of revenue

    1,150.1       1,101.0       1,134.3       3,293.3       3,165.9  
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Gross profit

    1,030.7       993.4       1,058.3       2,941.6       3,056.7  

 Gross margin

    47.3  %      47.4  %      48.3  %      47.2  %      49.1  % 

 Operating expenses:

         

Research and development

    143.4       145.3       145.4       427.1       463.8  

Selling and marketing

    68.2       71.6       69.5       211.6       213.7  

General and administrative

    110.7       87.2       84.9       273.8       246.0  

Amortization of acquisition-related intangible assets

    12.0       12.0       21.9       39.0       65.1  

Restructuring, asset impairments and other charges, net

    9.4       2.6       40.3       63.5       25.6  

Goodwill and intangible asset impairment charges

                271.8             386.8  
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total operating expenses

    343.7       318.7       633.8       1,015.0       1,401.0  
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Operating income

    687.0       674.7       424.5       1,926.6       1,655.7  
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Other income (expense), net:

         

Interest expense

    (16.2     (16.4     (23.7     (59.0     (67.4

Interest income

    25.7       24.0       4.9       66.8       6.4  

Loss on debt prepayment

                      (13.3     (7.3

Gain (loss) on divestiture of business

    (0.1     0.5       0.2       (0.7     2.1  

Other income (expense)

    1.1       (1.3     0.9       4.5       9.4  
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense), net

    10.5       6.8       (17.7     (1.7     (56.8
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Income before income taxes

    697.5       681.5       406.8       1,924.9       1,598.9  

 Income tax provision

    (114.6     (104.4     (94.9     (302.7     (299.4
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Net income

    582.9       577.1       311.9       1,622.2       1,299.5  

 Less: Net income attributable to non-controlling interest

    (0.2     (0.5           (1.2     (1.6
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Net income attributable to ON Semiconductor Corporation

   $ 582.7      $ 576.6      $ 311.9      $ 1,621.0      $ 1,297.9  
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

         

 Net income for diluted earnings per share of common stock

   $ 583.1      $ 577.0      $ 312.4      $ 1,622.2      $ 1,299.4  
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Net income per share of common stock:

         

Basic

   $ 1.35      $ 1.34      $ 0.72      $ 3.76      $ 2.99  
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted

   $ 1.29      $ 1.29      $ 0.70      $ 3.61      $ 2.90  
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Weighted average common shares outstanding:

         

Basic

    431.2       431.7       432.9       431.6       433.5  
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted

    450.7       448.7       448.7       449.3       448.3  
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5


ON SEMICONDUCTOR CORPORATION

UNAUDITED CONSOLIDATED BALANCE SHEETS

(in millions)

 

      September 29,  
2023
    June 30, 2023       December 31,
2022
 

 Assets

     

 Cash and cash equivalents

   $ 2,679.2       $ 2,622.2       $ 2,919.0   

 Receivables, net

    958.2        944.4        842.3   

 Inventories

    2,084.8        1,964.4        1,616.8   

 Other current assets

    363.2        399.2        351.3   
 

 

 

   

 

 

   

 

 

 

 Total current assets

    6,085.4        5,930.2        5,729.4   

 Property, plant and equipment, net

    4,314.5        3,991.4        3,450.7   

 Goodwill

    1,577.6        1,577.6        1,577.6   

 Intangible assets, net

    312.8        326.3        359.7   

 Deferred tax assets

    579.3        502.4        376.7   

 ROU financing lease assets

    43.0        44.6        45.8   

 Other assets

    368.7        390.2        438.6   
 

 

 

   

 

 

   

 

 

 

 Total assets

   $ 13,281.3       $ 12,762.7       $ 11,978.5   
 

 

 

   

 

 

   

 

 

 

 Liabilities and Stockholders’ Equity

     

 Accounts payable

   $ 911.3       $ 907.5       $ 852.1   

 Accrued expenses and other current liabilities

    665.4        654.1        1,047.3   

 Current portion of financing lease liabilities

    5.2        7.0        14.2   

 Current portion of long-term debt

    912.9        912.1        147.8   
 

 

 

   

 

 

   

 

 

 

 Total current liabilities

    2,494.8        2,480.7        2,061.4   

 Long-term debt

    2,541.1        2,539.6        3,045.7   

 Deferred tax liabilities

    35.1        37.7        34.1   

 Long-term financing lease liabilities

    21.6        24.1        23.0   

 Other long-term liabilities

    684.7        677.0        607.3   
 

 

 

   

 

 

   

 

 

 

 Total liabilities

    5,777.3        5,759.1        5,771.5   
 

 

 

   

 

 

   

 

 

 

 ON Semiconductor Corporation stockholders’ equity:

     

 Common stock

    6.1        6.1        6.1   

 Additional paid-in capital

    4,745.8        4,714.6        4,670.9   

 Accumulated other comprehensive loss

    (44.9)        (37.4)        (23.2)   

 Accumulated earnings

    5,985.4        5,402.7        4,364.4   

 Less: Treasury stock, at cost

    (3,208.1)        (3,101.9)        (2,829.7)   
 

 

 

   

 

 

   

 

 

 

 Total ON Semiconductor Corporation stockholders’ equity

    7,484.3        6,984.1        6,188.5   

 Non-controlling interest

    19.7        19.5        18.5   
 

 

 

   

 

 

   

 

 

 

 Total stockholders’ equity

    7,504.0        7,003.6        6,207.0   
 

 

 

   

 

 

   

 

 

 

 Total liabilities and stockholders’ equity

   $   13,281.3       $   12,762.7       $   11,978.5   
 

 

 

   

 

 

   

 

 

 

 

6


ON SEMICONDUCTOR CORPORATION

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

 

    Quarters Ended     Nine Months Ended  
     September 29, 
2023
    June 30,
2023
     September 30, 
2022 
     September 29,
2023
     September 30, 
2022 
 

 Cash flows from operating activities:

         

Net income

   $ 582.9       $ 577.1       $ 311.9       $ 1,622.2       $ 1,299.5   

Adjustments to reconcile net income to net cash provided by operating activities:

         

Depreciation and amortization

    155.4        148.8        139.6        449.2        418.6   

(Gain) loss on sale and disposal of fixed assets

    2.5        3.6        (16.5)       7.3        (33.1)  

(Gain) loss on divestiture of businesses

    0.1        (0.5)       (0.2)       0.7        (2.1)  

Loss on debt prepayment

    —        —        —        13.3        7.3   

Amortization of debt discount and issuance costs

    2.9        2.9        2.6        8.7        8.6   

Share-based compensation

    31.1        31.6        26.9        90.4        76.5   

Non-cash asset impairment charges

    —        —        11.9        12.7        18.6   

Goodwill and intangible asset impairment charges

    —        —        271.8        —        386.8   

Change in deferred tax balances

    (79.4)       (28.1)       (71.3)       (109.0)       (64.6)  

Other

    10.8        (2.3)       (0.7)       1.5        0.6   

Changes in assets and liabilities

    (139.7)       (342.3)       326.4        (730.7)       (214.9)  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided by operating activities

   $ 566.6       $ 390.8       $ 1,002.4       $ 1,366.3       $ 1,901.8   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 Cash flows from investing activities:

         

Purchase of Property, Plant and Equipment (“PP&E”)

   $ (433.0)      $ (430.6)      $ (271.1)      $ (1,185.1)      $ (663.0)  

Deposits and proceeds from sale of PP&E

    0.2        0.9        20.8        2.8        59.0   

Deposits utilized (made) for purchase of PP&E

    12.9        36.2        (22.3)       32.4        (53.7)  

Divestiture of business, net of cash transferred

    —        —        —        —        90.5   

Purchase of available-for-sale securities

    —        —        (1.7)       —        (18.0)  

Proceeds from sale or maturity of available-for-sale securities

    12.7        10.0        10.2        33.5        24.0   

Payments related to acquisition of business

    —        —        —        (236.3)      $ (2.4)  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net cash used in investing activities

   $ (407.2)      $   (383.5)      $ (264.1)      $ (1,352.7)      $ (563.6)  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 Cash flows from financing activities:

         

Proceeds for the issuance of common stock under the ESPP

   $ 6.7       $ 5.9       $ 5.7       $ 19.9       $ 18.2   

Payment of tax withholding for RSUs

    (5.9)       (8.9)       (4.1)       (62.4)       (67.4)  

Repurchase of common stock

    (100.0)       (60.1)       (77.2)       (264.0)       (166.9)  

Issuance and borrowings under debt agreements

    —        375.0        —        1,845.0        500.0   

Reimbursement of debt issuance costs

    —        —        —        4.5        —   

Payment of debt issuance and other financing costs

    (0.3)       (6.5)       —        (11.7)       —   

Repayment of borrowings under debt agreements

    (0.1)       (390.0)       (2.7)       (1,603.8)       (509.5)  

Payment for purchase of bond hedges

    —        —        —        (414.0)       —   

Proceeds from issuance of warrants

    —        —        —        242.5        —   

Payment of finance lease obligations

    (1.7)       (5.0)       (1.6)       (10.3)       (12.5)  

Dividend to non-controlling shareholder

    —        —        —        —        (2.2)  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net cash used in financing activities

   $ (101.3)      $ (89.6)      $ (79.9)      $ (254.3)      $ (240.3)  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

    (0.5)       (1.1)       (0.6)       (1.5)       (3.2)  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

    57.6        (83.4)       657.8        (242.2)       1,094.7   

 Beginning cash, cash equivalents and restricted cash

    2,633.2        2,716.6        1,814.6        2,933.0        1,377.7   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 Ending cash, cash equivalents and restricted cash

   $ 2,690.8       $ 2,633.2       $ 2,472.4       $ 2,690.8       $ 2,472.4   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

7


ON SEMICONDUCTOR CORPORATION

RECONCILIATION OF GAAP VERSUS NON-GAAP DISCLOSURES

(in millions, except per share and percentage data)

 

           Quarters Ended     Nine Months Ended  
            September 29, 
2023
     June 30, 2023       September 30, 
2022
     September 29, 
2023
     September 30, 
2022
 

Reconciliation of GAAP to non-GAAP gross profit:

         

 GAAP gross profit

   $ 1,030.7         $ 993.4         $ 1,058.3         $ 2,941.6         $ 3,056.7     
      

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

  Special items:

         

  a)

     Impact of business wind down     —          (1.8)         23.1          (3.9)         23.1     

  b)

     Amortization of acquisition-related intangible assets     1.4          1.4          —          4.2          —     
      

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     Total special items     1.4          (0.4)         23.1          0.3          23.1     
      

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 Non-GAAP gross profit

   $ 1,032.1         $ 993.0         $ 1,081.4         $ 2,941.9         $ 3,079.8     
      

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Reconciliation of GAAP to non-GAAP gross margin:

         

 GAAP gross margin

    47.3 %       47.4 %       48.3 %       47.2 %       49.1 %  
      

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

  Special items:

         

  a)

     Impact of business wind down     — %       (0.1) %       1.1 %       (0.1) %       0.4 %  

  b)

     Amortization of acquisition-related intangible assets     0.1 %       0.1 %       — %       0.1 %       — %  
      

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     Total special items     0.1 %       — %       1.1 %       — %       0.4 %  
      

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 Non-GAAP gross margin

    47.3 %       47.4 %       49.3 %       47.2 %       49.5 %  
      

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Reconciliation of GAAP to non-GAAP operating expenses:

         

 GAAP operating expenses

   $ 343.7         $ 318.7         $ 633.8         $ 1,015.0         $ 1,401.0     
      

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

  Special items:

         

  a)

     Amortization of acquisition-related intangible assets     (12.0)         (12.0)         (21.9)         (39.0)         (65.1)    

  b)

     Restructuring, asset impairments and other, net     (9.4)         (2.6)         (40.3)         (63.5)         (25.6)    

  c)

     Goodwill and intangible asset impairment charges     —          —          (271.8)         —          (386.8)    

  d)

     Third party acquisition and divestiture-related costs     (0.1)         1.4          (2.3)         1.2          (5.5)    

  e)

     Impact of business wind down     —          —          6.8          —          6.8     
      

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     Total special items     (21.5)         (13.2)         (329.5)         (101.3)         (476.2)    
      

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 Non-GAAP operating expenses

   $ 322.2         $ 305.5         $ 304.3         $ 913.7         $ 924.8     
      

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 Reconciliation of GAAP to non-GAAP operating income:

         

 GAAP operating income

   $ 687.0         $ 674.7         $ 424.5         $ 1,926.6         $ 1,655.7     
      

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

  Special items:

         

  a)

     Impact of business wind down     —          (1.8)         16.3          (3.9)         16.3     

  b)

     Amortization of acquisition-related intangible assets     13.4          13.4          21.9          43.2          65.1     

  c)

     Restructuring, asset impairments and other, net     9.4          2.6          40.3          63.5          25.6     

  d)

     Goodwill and intangible asset impairment charges     —          —          271.8          —          386.8     

  e)

     Third party acquisition and divestiture-related costs     0.1          (1.4)         2.3          (1.2)         5.5     
      

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     Total special items     22.9          12.8          352.6          101.6          499.3     
      

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 Non-GAAP operating income

   $ 709.9         $ 687.5         $ 777.1         $ 2,028.2         $ 2,155.0     
      

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

         

 GAAP operating margin

    31.5 %       32.2 %       19.4 %       30.9 %       26.6 %  
      

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

  Special items:

         

  a)

     Impact of business wind down     — %       (0.1)%       0.7 %       (0.1)%       0.3 %  

  b)

     Amortization of acquisition-related intangible assets     0.6 %       0.6 %       1.0 %       0.7 %       1.0 %  

  c)

     Restructuring, asset impairments and other, net     0.4 %       0.1 %       1.8 %       1.0 %       0.4 %  

  d)

     Goodwill and intangible asset impairment charges     — %       — %       12.4 %       — %       6.2 %  

  e)

     Third party acquisition and divestiture-related costs     — %       (0.1)%       0.1 %       — %       0.1 %  
      

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     Total special items     1.1 %       0.6 %       16.0 %       1.6 %       8.0 %  
      

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 Non-GAAP operating margin

    32.6 %       32.8 %       35.4 %       32.5 %       34.6 %  
      

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

         

 GAAP income before income taxes

   $ 697.5         $ 681.5         $ 406.8         $ 1,924.9         $ 1,598.9     
      

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

  Special items:

         

  a)

     Impact of business wind down     —          (1.8)         16.3          (3.9)         16.3     

 

8


ON SEMICONDUCTOR CORPORATION

RECONCILIATION OF GAAP VERSUS NON-GAAP DISCLOSURES (Continued)

(in millions, except per share and percentage data)

 

           Quarters Ended     Nine Months Ended  
            September 29, 
2023
     June 30, 2023       September 30, 
2022
     September 29, 
2023
     September 30, 
2022
 

  b)

     Amortization of acquisition-related intangible assets     13.4          13.4          21.9          43.2          65.1     

  c)

     Restructuring, asset impairments and other, net     9.4          2.6          40.3          63.5          25.6     

  d)

     Goodwill and intangible asset impairment charges     —          —          271.8          —          386.8     

  e)

     Third party acquisition and divestiture-related costs     0.1          (1.4)         2.3          (1.2)         5.5     

  f)

     Loss on debt prepayment     —          —          —          13.3          7.3     

  g)

     (Gain) loss on divestiture of business     0.1          (0.5)         (0.2)         0.7          (2.1)    
      

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     Total special items     23.0          12.3          352.4          115.6          504.5     
      

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 Non-GAAP income before income taxes

   $ 720.5         $ 693.8         $ 759.2         $ 2,040.5         $ 2,103.4     
      

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

         

 GAAP net income attributable to ON Semiconductor Corporation

   $ 582.7         $ 576.6         $ 311.9         $ 1,621.0         $ 1,297.9     
      

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

  Special items:

         

  a)

     Impact of business wind down     —          (1.8)         16.3          (3.9)         16.3     

  b)

     Amortization of acquisition-related intangible assets     13.4          13.4          21.9          43.2          65.1     

  c)

     Restructuring, asset impairments and other, net     9.4          2.6          40.3          63.5          25.6     

  d)

     Goodwill and intangible asset impairment charges     —          —          271.8          —          386.8     

  e)

     Third party acquisition and divestiture-related costs     0.1          (1.4)         2.3          (1.2)         5.5     

  f)

     Loss on debt prepayment     —          —          —          13.3          7.3     

  g)

     (Gain) loss on divestiture of a business     0.1          (0.5)         (0.2)         0.7          (2.1)    

  h)

     Income taxes     2.7          (5.6)         (24.9)         (21.2)         (35.1)    
      

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     Total special items     25.7          6.7          327.5          94.4          469.4     
      

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 Non-GAAP net income attributable to ON Semiconductor Corporation

   $ 608.4         $ 583.3         $ 639.4         $ 1,715.4         $ 1,767.3     
      

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
         

 GAAP net income for diluted earnings per share

   $ 583.1         $ 577.0         $ 312.4         $ 1,622.2         $ 1,299.4     

 Non-GAAP net income for diluted earnings per share

   $ 608.8         $ 583.7         $ 639.9         $ 1,716.6         $ 1,768.8     
         

Reconciliation of GAAP to non-GAAP diluted shares outstanding:

         

 GAAP diluted shares outstanding

    450.7          448.7          448.7          449.3          448.3     

  Special items:

         

  a)

     Less: dilutive shares attributable to convertible notes     (11.4)         (10.0)         (7.9)         (10.2)         (6.7)    
      

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     Total special items     (11.4)         (10.0)         (7.9)         (10.2)         (6.7)    
      

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 Non-GAAP diluted shares outstanding

    439.3          438.7          440.8          439.1          441.6     
      

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 Non-GAAP diluted earnings per share:

         

 Non-GAAP net income for diluted earnings per share

   $ 608.8         $ 583.7         $ 639.9         $ 1,716.6         $ 1,768.8     

 Non-GAAP diluted shares outstanding

    439.3          438.7          440.8          439.1          441.6     
      

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 Non-GAAP diluted earnings per share

   $ 1.39         $ 1.33         $ 1.45         $ 3.91         $ 4.01     
      

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

         

 Net cash provided by operating activities

   $ 566.6         $ 390.8         $ 1,002.4         $ 1,366.3         $ 1,901.8     

  Special items:

         

  a)

     Purchase of property, plant and equipment     (433.0)         (430.6)         (271.1)         (1,185.1)         (663.0)    
      

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     Total special items     (433.0)         (430.6)         (271.1)         (1,185.1)         (663.0)    
      

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 Free cash flow

   $ 133.6         $ (39.8)        $ 731.3         $ 181.2         $ 1,238.8     
      

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

9


ON SEMICONDUCTOR CORPORATION

RECONCILIATION OF GAAP VERSUS NON-GAAP DISCLOSURES (Continued)

(in millions, except per share and percentage data)

 

    Quarters Ended    

 

 
     December 31, 
2022
     March 31, 
2023
     June 30, 2023       September 29, 
2023
     Last Twelve 
Months
 

Net cash provided by operating activities

   $ 731.3       $ 408.9       $ 390.8       $ 566.6       $     2,097.6   

Purchase of property, plant and equipment

    (342.0)       (321.5)       (430.6)       (433.0)       (1,527.1)  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Free cash flow

   $ 389.3       $ 87.4       $ (39.8)      $ 133.6       $ 570.5   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
         

Revenue

   $     2,103.6       $    1,959.7       $     2,094.4       $ 2,180.8       $ 8,338.5   

Certain of the amounts in the above tables may not total due to rounding of individual amounts.

Total share-based compensation related to restricted stock units, stock grant awards and the employee stock purchase plan is included below:

 

    Quarters Ended     Nine Months Ended  
     September 29, 
2023
     June 30, 2023       September 30, 
2022
     September 29, 
2023
     September 30, 
2022
 

Cost of revenue

   $ 4.8       $ 4.9       $ 3.2       $ 13.4       $ 8.9   

Research and development

    5.3        5.2        4.9        15.0        14.5   

Selling and marketing

    4.7        5.0        4.1        13.8        12.2   

General and administrative

    16.3        16.5        14.7        48.2        40.9   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total share-based compensation

   $ 31.1       $ 31.6       $ 26.9       $ 90.4       $ 76.5   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

SUPPLEMENTAL FINANCIAL DATA

 

    Quarters Ended     Nine Months Ended  
     September 29, 
2023
     June 30, 2023       September 30, 
2022
     September 29, 
2023
     September 30, 
2022
 

Net cash provided by operating activities

   $ 566.6       $ 390.8       $ 1,002.4      $ 1,366.3       $ 1,901.8   

Free cash flow

    133.6        (39.8)       731.3        181.2        1,238.8   

Cash paid for income taxes

    99.8        192.5        126.7        327.4        329.5   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
         

Depreciation and amortization

   $ 155.4       $ 148.8       $ 139.6      $ 449.2       $ 418.6   

Less: Amortization of acquisition-related intangible assets

    13.4        13.4        21.9        43.2        65.1   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Depreciation and amortization (excl. amortization of acquisition-related intangible assets)

   $ 142.0       $ 135.4       $ 117.7      $ 406.0       $ 353.5   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

10


NON-GAAP MEASURES

To supplement the consolidated financial results prepared in accordance with GAAP, onsemi uses certain non-GAAP measures, which are adjusted from the most directly comparable GAAP measures to exclude items related to the amortization of acquisition-related intangibles, expensing of appraised inventory fair market value step-up, inventory valuation adjustments, 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, third party acquisition and divestiture-related costs, tax impact of these items and certain other non-recurring items, as necessary. Management does not consider the effects of these items in evaluating the core operational activities of onsemi. Management uses these non-GAAP measures internally to make strategic decisions, forecast future results and evaluate onsemi’s current performance. In addition, the Company believes that most analysts covering onsemi use the non-GAAP measures to evaluate onsemi’s performance. Given management’s and other relevant parties’ use of these non-GAAP measures, onsemi believes these measures are important to investors in understanding onsemi’s current and future operating results as seen through the eyes of management. In addition, management believes these non-GAAP measures are useful to investors in enabling them to better assess changes in onsemi’s core business across different time periods. These non-GAAP measures are not prepared in accordance with, and should not be considered alternatives or necessarily superior to, GAAP financial data and may be different from non-GAAP measures used by other companies. 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.

Non-GAAP Revenue

The use of non-GAAP revenue allows management to evaluate, among other things, the revenue from the Company’s core businesses and trends across different reporting periods on a consistent basis, independent of special items. In addition, non- GAAP revenue is an important component of management’s internal performance measurement and incentive and reward process as it is used to assess the current and historical financial results of the business and for strategic decision making, preparing budgets, obtaining targets and forecasting future results. Management presents this non-GAAP financial measure to enable investors and analysts to evaluate the Company’s revenue generation performance relative to the direct costs of operations of onsemi’s core businesses.

Non-GAAP Gross Profit and Gross Margin

The use of non-GAAP gross profit and gross margin allows management to evaluate, among other things, the gross margin and gross profit of the Company’s core businesses and trends across different reporting periods on a consistent basis, independent of non-cash items including, generally speaking, expensing of appraised inventory fair market value step-up, impact of business wind down and non-recurring facility costs. In addition, it is an important component of management’s internal performance measurement and incentive and reward process as it is used to assess the current and historical financial results of the business and for strategic decision making, preparing budgets, obtaining targets and forecasting future results. Management presents this non-GAAP financial measure to enable investors and analysts to evaluate our revenue generation performance relative to the direct costs of revenue of onsemi’s core businesses.

Non-GAAP Operating Income and Operating Margin

The use of non-GAAP operating income and operating margin allows management to evaluate, among other things, the operating margin and operating income of the Company’s core businesses and trends across different reporting periods on a consistent basis, independent of non-cash items including, generally speaking, expensing of appraised inventory fair market value step-up, impact of business wind down, non-recurring facility costs, amortization and impairments of intangible assets, third party acquisition and divestiture-related costs, restructuring charges and certain other special items as necessary. In addition, it is an important component of management’s internal performance measurement and incentive and reward process as it is used to assess the current and historical financial results of the business and for strategic decision making, preparing budgets, obtaining targets and forecasting future results. Management presents this non-GAAP financial measure to enable investors and analysts to evaluate the Company’s revenue generation performance relative to the direct costs of operations of onsemi’s core businesses.

Non-GAAP Net Income Attributable to onsemi and Non-GAAP Diluted Earnings Per Share

 

11


NON-GAAP MEASURES (Continued)

 

The use of non-GAAP net income attributable to onsemi and non-GAAP diluted earnings per share allows management to evaluate the operating results of onsemi’s core businesses and trends across different reporting periods on a consistent basis, independent of non-cash items including, generally, the amortization and impairments of intangible assets, expensing of appraised inventory fair market value step-up, impact of business wind down, non-recurring facility costs, restructuring, gains and losses on debt prepayment, actuarial (gains) losses on pension plans and other pension benefits, third party acquisition and divestiture-related costs, discrete tax items and other non-GAAP tax adjustments and certain other special items, as necessary. In addition, these items are important components of management’s internal performance measurement and incentive and reward process, as they are used to assess the current and historical financial results of the business and for strategic decision making, preparing budgets, setting targets and forecasting future results. Management presents these non-GAAP financial measures to enable investors and analysts to understand the results of operations of onsemi’s core businesses and, to the extent comparable, to compare our results of operations on a more consistent basis against those of other companies in our industry.

Free Cash Flow

The use of free cash flow allows management to evaluate, among other things, the ability of the Company to make interest or principal payments on its debt. Free cash flow is defined as the difference between cash flow from operating activities and capital expenditures disclosed under investing activities in the consolidated statement of cash flows. Free cash flow is not an alternative to cash flow from operating activities as a measure of liquidity. It is an important component of management’s internal performance measurement and incentive and reward process as it is used to assess the current and historical financial results of the business and for strategic decision making, preparing budgets, obtaining targets and forecasting future results. Management presents this non-GAAP financial measure to enable investors and analysts to evaluate our revenue generation performance relative to the direct costs of operations of onsemi’s core businesses.

Non-GAAP Diluted Share Count

The use of non-GAAP diluted share count allows management to evaluate, among other things, the potential dilution due to the outstanding restricted stock units excluding the dilution from the convertible notes that is covered by hedging activity up to a certain threshold. In periods when the quarterly average stock price per share exceeds $20.72 for the 1.625% Notes, $52.97 for the 0% Notes, and $103.87 for the 0.50% Notes, the non-GAAP diluted share count includes the anti-dilutive impact of the Company’s hedge transactions issued concurrently with the 1.625% Notes, the 0% Notes, and the 0.50% Notes, respectively. At an average stock price per share between $20.72 and $30.70 for the 1.625% Notes, $52.97 and $74.34 for the 0% Notes, and $103.87 and $156.78 for the 0.50% Notes, the hedging activity offsets the potentially dilutive effect of the 1.625% Notes, the 0% Notes, and the 0.50% Notes, respectively. In periods when the quarterly average stock price exceeds $30.70 for the 1.625% Notes, $74.34 for the 0% Notes, and $156.78 for the 0.50% Notes, the dilutive impact of the warrants issued concurrently with such notes are included in the diluted shares outstanding.

 

12