ON Semiconductor Reports Third Quarter 2014 Results

PHOENIX — (BUSINESS WIRE) — October 30, 2014 — ON Semiconductor Corporation (Nasdaq: ONNN):

For the third quarter of 2014, highlights include:

Total revenues of $833.5 million
GAAP gross margin of 34.1 percent
Non-GAAP gross margin of 35.6 percent
GAAP net income per diluted share of $0.09
Non-GAAP net income per diluted share of $0.21
Closed the acquisition of Aptina Imaging

ON Semiconductor Corporation (Nasdaq: ONNN), driving energy efficient innovation, today announced that total revenues in the third quarter of 2014 were $833.5 million, up approximately 10.0 percent compared to the second quarter of 2014. During the third quarter of 2014, the company reported GAAP net income of $41.6 million, or $0.09 per diluted share. The third quarter 2014 GAAP net income was negatively impacted by approximately $51.6 million of special items. The complete special items detail can be found in the attached schedules. Results for third quarter of 2014 include the contribution from our recent acquisition of Aptina Imaging, which closed on August 15, 2014.

Third quarter 2014 non-GAAP net income was $93.2 million, or $0.21 per diluted share, compared to $89.7 million, or $0.20 per diluted share, for the second quarter of 2014. A reconciliation of these non-GAAP financial measures (and other non-GAAP measures used elsewhere in this release) to the company's most directly comparable measures prepared in accordance with U.S. GAAP are set forth in the attached schedules and on our website at http://www.onsemi.com. Additional information on revenue by end market, region, distribution channel and business unit, and share count can be found on the "Investors" section of our website.

On a mix-adjusted basis, average selling prices for ON Semiconductor in the third quarter of 2014 were down approximately two percent when compared to the second quarter of 2014. Total company GAAP gross margin in the third quarter was 34.1 percent and total company non-GAAP gross margin in the third quarter was 35.6 percent. For the third quarter of 2014, GAAP operating margin was 6.9 percent, whereas non-GAAP operating margin was 13.0 percent.

Adjusted EBITDA for the third quarter of 2014 was $157.8 million. Adjusted EBITDA for the second quarter of 2014 was $146.5 million.

“Our third quarter results and outlook for the fourth quarter were impacted by a slowdown in orders from certain geographies and end-markets," said Keith Jackson, president and CEO of ON Semiconductor. "However, during the past few weeks, we have noticed a recovery in orders for shipment in first half of 2015. Despite the recent slowdown, our design win momentum in automotive, industrial, and smartphone end-markets remains strong, and we believe that we remain well positioned to benefit from long term secular trends in these markets.

"Initial customer reception of our recent acquisitions of Truesense and Aptina Imaging has exceeded our expectations. These acquisitions have created tremendous new opportunities for the combined company and we are increasingly upbeat about the potential of these acquisitions, especially in the industrial and automotive end-markets."

FOURTH QUARTER 2014 OUTLOOK

“Based upon product booking trends, backlog levels, and estimated turns levels, we anticipate that total ON Semiconductor revenue will be approximately $835 million to $875 million in the fourth quarter of 2014.” Jackson said. “Backlog levels for the fourth quarter of 2014 represent approximately 80 to 85 percent of our anticipated fourth quarter 2014 revenue. Average selling prices for the fourth quarter of 2014 are expected to be down approximately one to two percent when compared to the third quarter of 2014. The outlook for the fourth quarter of 2014 includes stock-based compensation expense of approximately $11 million to $13 million."

The following table outlines ON Semiconductor's projected fourth quarter of 2014 GAAP and non-GAAP outlook.


ON SEMICONDUCTOR Q4 2014 BUSINESS OUTLOOK

	Total ON Semiconductor GAAP	Special Items ***	Total ON Semiconductor Non-GAAP****
Revenue	$835 to $875 million		$835 to $875 million
Gross Margin	31.8% to 33.6%	$13 to $15 million	33.4% to 35.4%
Operating Expenses	$237 to $249 million	$32 to $34 million	$205 to $215 million
Net Interest Expense / Other Expenses	$7 to $9 million		$7 to $9 million
Convertible Notes, Non-cash Interest Expense*	$2 million	$2 million	$0 million
Tax	$7 to $10 million	$2 to $3 million	$5 to $7 million
Diluted Share Count **	442 million		442 million

*	Convertible Notes, Non-cash Interest Expense is calculated pursuant to FASB's Accounting Standards Codification (“ASC”) Topic 470: Debt.

Diluted share count can vary for, among other things, the actual exercise of options or vesting of restricted stock units, the incremental dilutive shares from all of the company's convertible senior subordinated notes, and the repurchase or the issuance of stock or convertible notes or the sale of treasury shares.

***

Special items may include: amortization of intangible assets, amortization of acquisition-related intangibles, expensing of appraised inventory fair market value step-up, inventory valuation adjustments, 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, income tax adjustments to approximate cash taxes, actuarial (gains) losses on pension plans and other pension benefits, and certain other special items, as necessary.

****

Regulation G and other provisions of the securities laws regulate the use of financial measures that are not prepared in accordance with GAAP. 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.

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