onsemi Third Quarter 2023 Results Exceed Expectations


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

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

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

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
	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

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

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