onsemi Reports Record Third Quarter 2022 Results

ON SEMICONDUCTOR CORPORATION UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS (in millions, except per share data)
	Quarters Ended									Nine Months Ended
	September 30, 2022			July 1, 2022			October 1, 2021			September 30, 2022			October 1, 2021
Revenue	$	2,192.6		$	2,085.0		$	1,742.1		$	6,222.6		$	4,893.7
Cost of revenue (exclusive of amortization shown below)		1,134.3			1,047.9			1,021.3			3,165.9			3,011.6
Gross profit		1,058.3			1,037.1			720.8			3,056.7			1,882.1
Gross margin		48.3	%		49.7	%		41.4	%		49.1	%		38.5	%
Operating expenses:
Research and development		145.4			161.6			154.5			463.8			494.4
Selling and marketing		69.5			73.1			68.4			213.7			223.4
General and administrative		84.9			83.2			75.7			246.0			221.3
Amortization of acquisition-related intangible assets		21.9			21.9			24.7			65.1			74.5
Restructuring, asset impairments and other, net		40.3			(1.7	)		(1.7	)		25.6			58.3
Goodwill and intangible asset impairment		271.8			115.0			—			386.8			2.9
Total operating expenses		633.8			453.1			321.6			1,401.0			1,074.8
Operating income		424.5			584.0			399.2			1,655.7			807.3
Other income (expense), net:
Interest expense		(23.7	)		(22.1	)		(31.9	)		(67.4	)		(98.4	)
Interest income		4.9			1.1			0.5			6.4			1.1
Loss on debt refinancing and prepayment		—			(7.3	)		—			(7.3	)		(26.2	)
Gain on divestiture of business		0.2			1.9			10.2			2.1			10.2
Other income (expense)		0.9			6.4			(5.8	)		9.4			(2.4	)
Other income (expense), net		(17.7	)		(20.0	)		(27.0	)		(56.8	)		(115.7	)
Income before income taxes		406.8			564.0			372.2			1,598.9			691.6
Income tax provision		(94.9	)		(107.4	)		(61.8	)		(299.4	)		(106.8	)
Net income		311.9			456.6			310.4			1,299.5			584.8
Less: Net income attributable to non-controlling interest		—			(0.8	)		(0.7	)		(1.6	)		(1.1	)
Net income attributable to ON Semiconductor Corporation	$	311.9		$	455.8		$	309.7		$	1,297.9		$	583.7

Net income for diluted earnings per share of common stock	$	312.4		$	456.3		$	309.7		$	1,299.4		$	583.7
Net income per share of common stock:
Basic	$	0.72		$	1.05		$	0.72		$	2.99		$	1.38
Diluted	$	0.70		$	1.02		$	0.70		$	2.90		$	1.32
Weighted average common shares outstanding:
Basic		432.9			434.2			430.6			433.5			423.8
Diluted		448.7			447.0			440.7			448.3			443.1

ON SEMICONDUCTOR CORPORATION UNAUDITED CONSOLIDATED BALANCE SHEETS (in millions)
	September 30, 2022	July 1, 2022	December 31, 2021
Assets
Cash and cash equivalents	$ 2,450.2	$ 1,791.6	$ 1,352.6
Receivables, net	857.3	1,138.1	809.4
Inventories	1,575.4	1,563.2	1,379.5
Assets held-for-sale	135.0	—	—
Other current assets	291.5	292.4	240.1
Total current assets	5,309.4	4,785.3	3,781.6
Property, plant and equipment, net	2,762.1	2,709.8	2,524.3
Goodwill	1,600.4	1,815.4	1,937.5
Intangible assets, net	373.8	452.6	495.7
Deferred tax assets	409.9	375.7	366.3
Other assets	645.1	649.9	520.6
Total assets	$ 11,100.7	$ 10,788.7	$ 9,626.0
Liabilities, Non-Controlling Interest and Stockholders’ Equity
Accounts payable	$ 791.7	$ 793.8	$ 635.1
Accrued expenses and other current liabilities	766.7	754.3	747.6
Liabilities held-for-sale	37.3	—	—
Current portion of long-term debt	165.3	165.2	160.7
Total current liabilities	1,761.0	1,713.3	1,543.4
Long-term debt	3,046.5	3,047.4	2,913.9
Deferred tax liabilities	30.5	36.8	43.2
Other long-term liabilities	586.1	581.1	521.1
Total liabilities	5,424.1	5,378.6	5,021.6
ON Semiconductor Corporation stockholders’ equity:
Common stock	6.1	6.1	6.0
Additional paid-in capital	4,598.8	4,565.9	4,633.3
Accumulated other comprehensive loss	(23.4)	(29.3)	(40.6)
Accumulated earnings	3,760.1	3,448.2	2,435.1
Less: Treasury stock, at cost	(2,685.6)	(2,601.4)	(2,448.4)
Total ON Semiconductor Corporation stockholders’ equity	5,656.0	5,389.5	4,585.4
Non-controlling interest	20.6	20.6	19.0
Total stockholders' equity	5,676.6	5,410.1	4,604.4
Total liabilities and stockholders' equity	$ 11,100.7	$ 10,788.7	$ 9,626.0

ON SEMICONDUCTOR CORPORATION UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions)
	Quarters Ended									Nine Months Ended
	September 30, 2022			July 1, 2022			October 1, 2021			September 30, 2022			October 1, 2021
Cash flows from operating activities:
Net income	$	311.9		$	456.6		$	310.4		$	1,299.5		$	584.8
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		139.6			138.4			149.9			418.6			456.4
(Gain) loss on sale and disposal of fixed assets		(16.5	)		—			2.0			(33.1	)		2.3
Gain on divestiture of business		(0.2	)		(1.9	)		(10.2	)		(2.1	)		(10.2	)
Loss on debt refinancing and prepayment		—			7.3			—			7.3			26.2
Amortization of debt discount and issuance costs		2.6			2.8			2.9			8.6			8.0
Share-based compensation		26.9			27.1			22.7			76.5			74.1
Non-cash interest on convertible notes		—			—			7.0			—			17.6
Non-cash asset impairment charges		11.9			—			3.3			18.6			10.8
Goodwill and intangible asset impairment charge		271.8			115.0			—			386.8			—
Change in deferred tax balances		(71.3	)		(31.6	)		44.2			(64.6	)		39.5
Other		(0.7	)		0.8			0.2			0.6			0.2
Changes in assets and liabilities		326.4			(293.7	)		(83.5	)		(214.9	)		(54.3	)
Net cash provided by operating activities	$	1,002.4		$	420.8		$	448.9		$	1,901.8		$	1,155.4
Cash flows from investing activities:
Purchase of Property, Plant and Equipment ("PP&E")	$	(271.1	)	$	(218.1	)	$	(93.2	)	$	(663.0	)	$	(275.0	)
Proceeds from sale of PP&E		20.8			1.5			—			59.0			6.6
Deposits made for purchase of PP&E		(22.3	)		(33.0	)		(18.7	)		(53.7	)		(21.5	)
Divestiture of business, net of cash transferred and deposits received		—			77.6			3.4			90.5			3.4
Payments related to prior acquisition		—			—			—			(2.4	)		—
Purchase of available-for-sale securities		(1.7	)		(8.5	)		(43.8	)		(18.0	)		(43.8	)
Proceeds from sale or maturity of available-for-sale securities		10.2			10.4			2.8			24.0			2.8
Net cash used in investing activities	$	(264.1	)	$	(170.1	)	$	(149.5	)	$	(563.6	)	$	(327.5	)
Cash flows from financing activities:
Proceeds for the issuance of common stock under the ESPP	$	5.7		$	4.7		$	6.2		$	18.2		$	18.5
Payment of tax withholding for RSUs		(4.1	)		(4.5	)		(2.2	)		(67.4	)		(34.2	)
Repurchase of common stock		(77.2	)		(89.7	)		—			(166.9	)		—
Issuance and borrowings under debt agreements		—			500.0			—			500.0			787.3
Reimbursement of debt issuance costs		—			—			—			—			2.7
Payment of debt issuance and other financing costs		—			—			(0.3	)		—			(3.8	)
Repayment of borrowings under debt agreements		(2.7	)		(502.7	)		(4.1	)		(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		—			—			(0.7	)		—			(3.0	)
Payment of finance lease obligations		(1.6	)		(10.9	)		—			(12.5	)		—
Dividend to non-controlling shareholder		—			—			—			(2.2	)		—
Net cash used in financing activities	$	(79.9	)	$	(103.1	)	$	(1.1	)	$	(240.3	)	$	(517.8	)
Effect of exchange rate changes on cash, cash equivalents and restricted cash		(0.6	)		(1.9	)		(0.2	)		(3.2	)		(1.0	)
Net increase in cash, cash equivalents and restricted cash		657.8			145.7			298.1			1,094.7			309.1
Beginning cash, cash equivalents and restricted cash		1,814.6			1,668.9			1,092.5			1,377.7			1,081.5
Ending cash, cash equivalents and restricted cash	$	2,472.4		$	1,814.6		$	1,390.6		$	2,472.4		$	1,390.6

ON SEMICONDUCTOR CORPORATION RECONCILIATION OF GAAP VERSUS NON-GAAP DISCLOSURES (in millions, except per share and percentage data)
		Quarters Ended									Nine Months Ended
		September 30, 2022			July 1, 2022			October 1, 2021			September 30, 2022			October 1, 2021
Reconciliation of GAAP to non-GAAP gross profit:
GAAP gross profit		$	1,058.3		$	1,037.1		$	720.8		$	3,056.7		$	1,882.1
Special items:
a)	Non-recurring facility costs		—			—			2.5			—			3.2
b)	Impact of business wind down		23.1			—			—			23.1			—
	Total special items		23.1			—			2.5			23.1			3.2
Non-GAAP gross profit		$	1,081.4		$	1,037.1		$	723.3		$	3,079.8		$	1,885.3
Reconciliation of GAAP to non-GAAP gross margin:
GAAP gross margin			48.3	%		49.7	%		41.4	%		49.1	%		38.5	%
Special items:
a)	Non-recurring facility costs		—	%		—	%		0.1	%		—	%		0.1	%
b)	Impact of business wind down		1.1	%		—	%		—	%		0.4	%		—	%
	Total special items		1.1	%		—	%		0.1	%		0.4	%		—	%
Non-GAAP gross margin			49.3	%		49.7	%		41.5	%		49.5	%		38.5	%
Reconciliation of GAAP to non-GAAP operating expenses:
GAAP operating expenses		$	633.8		$	453.1		$	321.6		$	1,401.0		$	1,074.8
Special items:
a)	Amortization of acquisition-related intangible assets		(21.9	)		(21.9	)		(24.7	)		(65.1	)		(74.5	)
b)	Restructuring, asset impairments and other, net		(40.3	)		1.7			1.7			(25.6	)		(58.3	)
c)	Goodwill and intangible asset impairment		(271.8	)		(115.0	)		—			(386.8	)		(2.9	)
d)	Third party acquisition and divestiture-related costs		(2.3	)		(0.2	)		(2.4	)		(5.5	)		(4.0	)
e)	Impact of business wind down		6.8			—			—			6.8			—
	Total special items		(329.5	)		(135.4	)		(25.4	)		(476.2	)		(139.7	)
Non-GAAP operating expenses		$	304.3		$	317.7		$	296.2		$	924.8		$	935.1
Reconciliation of GAAP to non-GAAP operating income:
GAAP operating income		$	424.5		$	584.0		$	399.2		$	1,655.7		$	807.3
Special items:
a)	Non-recurring facility costs		—			—			2.5			—			3.2
b)	Impact of business wind down		16.3			—			—			16.3			—
c)	Amortization of acquisition-related intangible assets		21.9			21.9			24.7			65.1			74.5
d)	Restructuring, asset impairments and other, net		40.3			(1.7	)		(1.7	)		25.6			58.3
e)	Goodwill and intangible asset impairment		271.8			115.0			—			386.8			2.9
f)	Third party acquisition and divestiture-related costs		2.3			0.2			2.4			5.5			4.0
	Total special items		352.6			135.4			27.9			499.3			142.9
Non-GAAP operating income		$	777.1		$	719.4		$	427.1		$	2,155.0		$	950.2
*Reconciliation of GAAP to non-GAAP operating margin (operating income / revenue)* :**
GAAP operating margin			19.4	%		28.0	%		22.9	%		26.6	%		16.5	%
Special items:
a)	Non-recurring facility costs		—	%		—	%		0.1	%		—	%		0.1	%
b)	Impact of business wind down		0.7	%		—	%		—	%		0.3	%		—	%
c)	Amortization of acquisition-related intangible assets		1.0	%		1.1	%		1.4	%		1.0	%		1.5	%
d)	Restructuring, asset impairments and other, net		1.8	%		(0.1	) %		(0.1	) %		0.4	%		1.2	%
e)	Goodwill and intangible asset impairment		12.4	%		5.5	%		—	%		6.2	%		0.1	%
f)	Third party acquisition and divestiture-related costs		0.1	%		—	%		0.1	%		0.1	%		0.1	%
	Total special items		16.0	%		6.5	%		1.6	%		8.0	%		2.9	%
Non-GAAP operating margin			35.4	%		34.5	%		24.5	%		34.6	%		19.4	%
Reconciliation of GAAP to non-GAAP income before income taxes:
GAAP income before income taxes		$	406.8		$	564.0		$	372.2		$	1,598.9		$	691.6
Special items:

a)	Non-recurring facility costs		—			—			2.5			—			3.2
b)	Impact of business wind down		16.3			—			—			16.3			—
b)	Amortization of acquisition-related intangible assets		21.9			21.9			24.7			65.1			74.5
c)	Restructuring, asset impairments and other, net		40.3			(1.7	)		(1.7	)		25.6			58.3
d)	Goodwill and intangible asset impairment		271.8			115.0			—			386.8			2.9
e)	Third party acquisition and divestiture-related costs		2.3			0.2			2.4			5.5			4.0
f)	Loss on debt refinancing and prepayment		—			7.3			—			7.3			26.2
g)	Actuarial losses on pension plans and other pension benefits		—			—			5.5			—			5.5
h)	Non-cash interest on convertible notes		—			—			7.0			—			17.6
i)	Gain on divestiture of business		(0.2	)		(1.9	)		(10.2	)		(2.1	)		(10.2	)
	Total special items		352.4			140.8			30.2			504.5			182.0
Non-GAAP income before income taxes		$	759.2		$	704.8		$	402.4		$	2,103.4		$	873.6
Reconciliation of GAAP to non-GAAP net income attributable to ON Semiconductor Corporation:
GAAP net income attributable to ON Semiconductor Corporation		$	311.9		$	455.8		$	309.7		$	1,297.9		$	583.7
Special items:
a)	Non-recurring facility costs		—			—			2.5			—			3.2
b)	Impact of business wind down		16.3			—			—			16.3			—
b)	Amortization of acquisition-related intangible assets		21.9			21.9			24.7			65.1			74.5
c)	Restructuring, asset impairments and other, net		40.3			(1.7	)		(1.7	)		25.6			58.3
d)	Goodwill and intangible asset impairment		271.8			115.0			—			386.8			2.9
e)	Third party acquisition and divestiture-related costs		2.3			0.2			2.4			5.5			4.0
f)	Actuarial losses on pension plans and other pension benefits		—			—			5.5			—			5.5
f)	Loss on debt refinancing and prepayment		—			7.3			—			7.3			26.2
g)	Non-cash interest on convertible notes		—			—			7.0			—			17.6
h)	Gain on divestiture of a business		(0.2	)		(1.9	)		(10.2	)		(2.1	)		(10.2	)
i)	Adjustment of income taxes		(24.9	)		(7.3	)		40.4			(35.1	)		41.7
	Total special items		327.5			133.5			70.6			469.4			223.7
Non-GAAP net income attributable to ON Semiconductor Corporation		$	639.4		$	589.3		$	380.3		$	1,767.3		$	807.4
Adjustment of income taxes:
Tax adjustment for special items (1)		$	(74.0	)	$	(5.4	)	$	(6.3	)	$	(105.9	)	$	(38.2	)
Other non-GAAP tax adjustment (2)			49.1			(1.9	)		46.7			70.8			79.9
	Total adjustment of income taxes	$	(24.9	)	$	(7.3	)	$	40.4		$	(35.1	)	$	41.7

GAAP net income for diluted earnings per share		$	312.4		$	456.3		$	309.7		$	1,299.4		$	583.7
Non-GAAP net income for diluted earnings per share		$	639.9		$	589.8		$	380.3		$	1,768.8		$	807.4

Reconciliation of GAAP to non-GAAP diluted shares outstanding:
GAAP diluted shares outstanding			448.7			447.0			440.7			448.3			443.1
Special items:
a)	Less: dilutive shares attributable to convertible notes		(7.9	)		(5.4	)		(5.0	)		(6.7	)		(8.9	)
	Total special items		(7.9	)		(5.4	)		(5.0	)		(6.7	)		(8.9	)
Non-GAAP diluted shares outstanding			440.8			441.6			435.7			441.6			434.2
Non-GAAP diluted earnings per share:
Non-GAAP net income for diluted earnings per share		$	639.9		$	589.8		$	380.3		$	1,768.8		$	807.4
Non-GAAP diluted shares outstanding			440.8			441.6			435.7			441.6			434.2
Non-GAAP diluted earnings per share		$	1.45		$	1.34		$	0.87		$	4.01		$	1.86
Reconciliation of net cash provided by operating activities to free cash flow:
Net cash provided by operating activities		$	1,002.4		$	420.8		$	448.9		$	1,901.8		$	1,155.4
Special items:
a)	Purchase of property, plant and equipment		(271.1	)		(218.1	)		(93.2	)		(663.0	)		(275.0	)
	Total special items		(271.1	)		(218.1	)		(93.2	)		(663.0	)		(275.0	)
Free cash flow		$	731.3		$	202.7		$	355.7		$	1,238.8		$	880.4

ON SEMICONDUCTOR CORPORATION RECONCILIATION OF GAAP VERSUS NON-GAAP DISCLOSURES (Continued) (in millions, except per share and percentage data)
	Quarters Ended
	December 31, 2021			April 1, 2022			July 1, 2022			September 30, 2022			LTM
Net cash provided by operating activities	$	626.6		$	478.6		$	420.8		$	1,002.4		$	2,528.4
Purchase of property, plant and equipment		(169.6	)		(173.8	)		(218.1	)		(271.1	)		(832.6	)
Free cash flow	$	457.0		$	304.8		$	202.7		$	731.3		$	1,695.8

Revenue	$	1,846.1		$	1,945.0		$	2,085.0		$	2,192.6		$	8,068.7

(1)		Tax impact of non-GAAP special items (a-h) is calculated using the federal statutory rate of 21% for all periods presented.
(2)		For the periods related to the year ended December 31, 2021, the income tax adjustment primarily represents the use of the net operating loss, non-cash impact of not asserting indefinite reinvestment on earnings of our foreign subsidiaries, deferred tax expense not affecting taxes payable, and non-cash expense (benefit) related to uncertain tax positions. For the periods related to the year ended December 31, 2022, the income tax adjustment primarily relates to discrete tax and other non-GAAP adjustments.

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