8-K: onsemi Reports Second Quarter 2024 Results, Free Cash Flow Jumps $250 Million Year-Over-Year

onsemi announced its second quarter 2024 financial results, highlighting a significant increase in free cash flow and continued growth in strategic markets.

Summary

• onsemi reported a revenue of $1,735.2 million for the second quarter of 2024.
• The company's GAAP gross margin was 45.2%, while the non-GAAP gross margin was 45.3%.
• GAAP operating margin was 22.4%, and non-GAAP operating margin was 27.5%.
• GAAP diluted earnings per share were $0.78, and non-GAAP diluted earnings per share were $0.96.
• onsemi generated approximately $650 million of free cash flow over the last twelve months, which was returned to shareholders through stock repurchases.
• The company's free cash flow increased by approximately $250 million year-over-year.
• Revenue decreased sequentially by 7% and year-over-year by 17%.
• The company is projecting third quarter 2024 revenue between $1,700 and $1,800 million.
• The projected GAAP diluted earnings per share for the third quarter is between $0.85 and $0.97, and non-GAAP diluted earnings per share is projected to be between $0.91 and $1.03.

Sentiment

Score: 5

Explanation: The sentiment is neutral to slightly negative due to decreased revenue and earnings compared to previous periods, although the increase in free cash flow and strategic market focus are positive.

Positives

• onsemi's free cash flow increased by approximately $250 million year-over-year.
• The company returned approximately $650 million of free cash flow to shareholders through stock repurchases over the last twelve months.
• onsemi is focused on driving growth through market share gains and investments in strategic markets.
• The company is expanding its portfolio of industry-leading products with analog and mixed-signal solutions.
• onsemi continues to strengthen its silicon carbide leadership position in the automotive sector.

Negatives

• Revenue decreased sequentially by 7% and year-over-year by 17%.
• GAAP and non-GAAP operating margins decreased compared to the previous quarter and the same quarter last year.
• Net income attributable to ON Semiconductor Corporation decreased to $338.2 million from $453.0 million in the previous quarter and $576.6 million in the same quarter last year.
• Diluted earnings per share decreased to $0.78 from $1.04 in the previous quarter and $1.29 in the same quarter last year.

Risks

• The company's future results could be affected by various factors, including market conditions and competition.
• The company's forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially.
• Investing in onsemi's securities involves a high degree of risk and uncertainty.
• The company's non-GAAP measures may not be comparable to those of other companies.

Future Outlook

The company projects third quarter 2024 revenue between $1,700 and $1,800 million, with GAAP diluted earnings per share between $0.85 and $0.97 and non-GAAP diluted earnings per share between $0.91 and $1.03.

Management Comments

• Hassane El-Khoury, president and CEO, stated that onsemi is dedicated to driving growth through market share gains and investments in strategic markets.
• He also mentioned the company is expanding its portfolio of industry-leading products with analog and mixed-signal solutions.
• The CEO highlighted the company's continued strengthening of its silicon carbide leadership position in the automotive sector, as reflected by their recent supply agreement with Volkswagen Group.

Industry Context

The announcement reflects onsemi's focus on the automotive and industrial end-markets, aligning with the broader industry trends of vehicle electrification, sustainable energy grids, and industrial automation. The company's emphasis on silicon carbide leadership also positions it well in the growing market for electric vehicle components.

Comparison to Industry Standards

• onsemi's gross margin of 45.2% is comparable to other semiconductor companies, but it is important to note that the industry is highly competitive and margins can vary significantly based on product mix and market conditions.
• Companies like Texas Instruments and Analog Devices, which also focus on analog and mixed-signal solutions, are key competitors, and their financial results provide a benchmark for comparison.
• The company's focus on silicon carbide is a strategic move to compete with companies like STMicroelectronics and Infineon, which are also investing heavily in this area.
• The free cash flow increase of $250 million year-over-year is a positive sign, but it is important to compare this to the cash flow performance of its peers to assess its relative strength.

Stakeholder Impact

• Shareholders will be impacted by the stock repurchases and the company's financial performance.
• Employees may be affected by the company's strategic decisions and financial results.
• Customers will benefit from the company's focus on innovative products and solutions.
• Suppliers will be impacted by the company's production and supply chain activities.
• Creditors will be interested in the company's ability to meet its financial obligations.

Next Steps

• onsemi will host a conference call on July 29, 2024, to discuss the second quarter results.
• The company will continue to focus on driving growth through market share gains and investments in strategic markets.
• onsemi will continue to expand its portfolio of industry-leading products with analog and mixed-signal solutions.

Key Dates

Keywords

semiconductor, onsemi, financial results, earnings, revenue, gross margin, operating margin, free cash flow, stock repurchase, silicon carbide, automotive, analog, mixed-signal