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onsemi Reports Record Revenue and Non-GAAP Earnings Per Share for Third Quarter 2021

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  • ON

PHOENIX, November 01, 2021--(BUSINESS WIRE)--ON Semiconductor Corporation ("onsemi") (Nasdaq: ON) today announced results for the third quarter of 2021 with the following highlights:

  • Record revenue of $1,742.1 million, an increase of 32 percent year-over-year

  • GAAP diluted earnings per share of $0.70 as compared to $0.38 in the quarter a year ago

  • Record non-GAAP diluted earnings per share of $0.87 as compared to $0.27 in the quarter a year ago

  • GAAP gross margin of 41.4 percent increased 310 basis points quarter-over-quarter and 790 basis points year-over-year

  • Non-GAAP gross margin of 41.5 percent increased 310 basis points quarter-over-quarter and 800 basis points year-over-year

  • Record GAAP operating margin of 22.9 percent increased 600 basis points quarter-over-quarter and 1,390 basis point year-over-year

  • Record non-GAAP operating margin of 24.5 percent increased 490 basis points quarter-over-quarter and 1,250 basis points year-over-year

  • Free cash flow of $355.7 million or 20.4 percent of revenue

"We delivered another quarter of record results driven by on-going execution of our new strategy with demand remaining strong for our intelligent power and sensing solutions in the automotive and industrial end-markets. We continue to execute our margin expansions plans which drove 310 basis points of non-GAAP gross margin improvement quarter-over-quarter. With a rapidly expanding design-win funnel for disruptive applications such as electric vehicles, ADAS, industrial automation, and alternative energy, coupled with ongoing transformational changes, we are making sustainable progress towards our target financial model," said Hassane El-Khoury, president and CEO of onsemi.

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

GAAP

Non-GAAP

(in millions, except per share data)

Q3 2021

Q2 2021

Q3 2020

Q3 2021

Q2 2021

Q3 2020

Revenue

$1,742.1

$1,669.9

$1,317.3

$1,742.1

$1,669.9

$1,317.3

Gross Margin

41.4 %

38.3 %

33.5 %

41.5 %

38.4 %

33.5 %

Operating Margin

22.9 %

16.9 %

9.0 %

24.5 %

19.6 %

12.0 %

Net Income attributable to onsemi

$309.7

$184.1

$160.6

$380.3

$275.8

$111.8

Diluted Earnings Per Share

$0.70

$0.42

$0.38

$0.87

$0.63

$0.27

Revenue Summary

($ in millions)

(Unaudited)

Three Months Ended

Business Segment

Q3 2021

Q2 2021

Q3 2020

Sequential
Change

Year over Year
Change

PSG

$

892.1

$

846.6

$

647.4

5

%

38

%

ASG

613.5

607.6

494.6

1

%

24

%

ISG

236.5

215.7

175.3

10

%

35

%

Total

$

1,742.1

$

1,669.9

$

1,317.3

4

%

32

%

FOURTH QUARTER 2021 OUTLOOK

The following table outlines onsemi's projected fourth quarter of 2021 GAAP and non-GAAP outlook.

Total onsemi
GAAP

Special
Items ***

Total onsemi
Non-GAAP****

Revenue

$1,740 to $1,840 million

$1,740 to $1,840 million

Gross Margin

41.8% to 43.8%

0.2%

42.0% to 44.0%

Operating Expenses

$338 to $356 million

$40 to $43 million

$298 to $313 million

Other Income and Expense (including interest expense), net

$31 to $34 million

$7 million*

$24 to $27 million

Diluted Earnings Per Share

$0.67 to $0.78

$0.22 to $ 0.23

$0.89 to $1.01

Diluted Shares Outstanding **

442 million

5 million

437 million

*

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 October 1, 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.

TELECONFERENCE

onsemi will host a conference call for the financial community at 9 a.m. Eastern Daylight Time (EDT) on November 1, 2021 to discuss this announcement and onsemi’s 2021 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 via telephone by dialing (888) 414-4458 (U.S./Canada) or: (646) 960-0166 (International). In order to join this conference call, you will be required to provide the Conference ID Number – which is 8631312.

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. With a highly differentiated and innovative product portfolio, onsemi creates intelligent power and sensing technologies that solve the world’s most complex challenges and leads the way in creating a safer, cleaner, and smarter world.

onsemi, and the onsemi logo are registered 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.

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 year ending December 31, 2021. Forward-looking statements are often characterized by the use of words such as "believes," "estimates," "expects," "projects," "may," "will," "intends," "plans" or "anticipates" 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 2020 Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC") on February 16, 2021 (the "2020 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, except as may be required by law. You should carefully consider the trends, risks and uncertainties described in this document, our 2020 Form 10-K and subsequent 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.

ON SEMICONDUCTOR CORPORATION

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions, except per share data)

Quarters Ended

Nine Months Ended

October 1, 2021

July 2, 2021

October 2, 2020

October 1, 2021

October 2, 2020

Revenue

$

1,742.1

$

1,669.9

$

1,317.3

$

4,893.7

$

3,808.7

Cost of revenue (exclusive of amortization shown below)

1,021.3

1,029.8

876.1

3,011.6

2,590.5

Gross profit

720.8

640.1

441.2

1,882.1

1,218.2

Gross margin

41.4

%

38.3

%

33.5

%

38.5

%

32.0

%

Operating expenses:

Research and development

154.5

166.3

156.1

494.4

483.2

Selling and marketing

68.4

76.1

65.3

223.4

207.7

General and administrative

75.7

73.2

62.2

221.3

196.3

Amortization of acquisition-related intangible assets

24.7

24.8

29.6

74.5

91.0

Restructuring, asset impairments and other charges, net

(1.7

)

17.5

9.0

58.3

58.0

Intangible asset impairment

2.9

1.3

Total operating expenses

321.6

357.9

322.2

1,074.8

1,037.5

Operating income

399.2

282.2

119.0

807.3

180.7

Other income (expense), net:

Interest expense

(31.9

)

(33.1

)

(42.2

)

(98.4

)

(126.6

)

Interest income

0.5

0.2

0.9

1.1

4.3

Loss on debt refinancing and prepayment

(26.2

)

(26.2

)

Gain on divestiture of business

10.2

10.2

Other income (expense)

(5.8

)

(1.1

)

0.4

(2.4

)

(2.3

)

Other income (expense), net

(27.0

)

(60.2

)

(40.9

)

(115.7

)

(124.6

)

Income before income taxes

372.2

222.0

78.1

691.6

56.1

Income tax (provision) benefit

(61.8

)

(37.9

)

83.1

(106.8

)

90.5

Net income

310.4

184.1

161.2

584.8

146.6

Less: Net income attributable to non-controlling interest

(0.7

)

(0.6

)

(1.1

)

(1.4

)

Net income attributable to ON Semiconductor Corporation

$

309.7

$

184.1

$

160.6

$

583.7

$

145.2

Net income per common share attributable to ON Semiconductor Corporation:

Basic

$

0.72

$

0.43

$

0.39

$

1.38

$

0.35

Diluted

$

0.70

$

0.42

$

0.38

$

1.32

$

0.35

Weighted average common shares outstanding:

Basic

430.6

427.7

410.8

423.8

410.5

Diluted

440.7

443.6

418.3

443.1

414.4

ON SEMICONDUCTOR CORPORATION

UNAUDITED CONSOLIDATED BALANCE SHEETS

(in millions)

October 1, 2021

July 2, 2021

December 31, 2020

Assets

Cash and cash equivalents

$

1,389.2

$

1,091.1

$

1,080.7

Receivables, net

720.0

676.0

Inventories

1,327.6

1,309.3

1,251.4

Other current assets

205.0

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