01—Abstract
Summary
Summary of the 10-K filed February 6, 2023. Cited figures are marked; the original filing is the authoritative source.
ON Semiconductor Corporation, operating under the onsemi brand, reported record 2022 results in this 10-K filed February 6, 2023.
Revenue rose to $8,326.2 milliona from $6,739.8 million in 2021, an increase of 23.5%. Gross margin expanded to 49.0% from 40.3%, and operating income reached $2,360.0 million versus $1,287.6 million. Net income attributable to the company was $1,902.2 million, compared with $1,009.6 million in 2021.
Results were driven by a product mix focused on higher-margin products, higher average selling prices, and savings from restructuring. Cash flow from operations was $2,633.1 millionb, and capital expenditures were $1,005.0 million, which the company expects to rise to about 20% of revenue in 2023. The company is shifting toward a lighter internal fabrication model.
In 2022 it divested wafer facilities in Belgium, Maine, Idaho and Japan, wound down its QCS business (which drove $330.0 millionc of goodwill impairment and $56.8 million of intangible impairment), and acquired the East Fishkill, New York fab from GlobalFoundries for $406.3 million on December 31, 2022. Its focus is on SiC capacity expansion and automotive and industrial end-markets, which together represented 40.4% and 27.5% of 2022 revenue. Balance-sheet items to note include $3,228.3 million of gross debt, $2,919.0 million of cash and cash equivalents, and $1,086.0 million outstanding under the Term Loan B facility.
Management approved a new share repurchase program of up to $3.0 billiond running from February 8, 2023 through December 31, 2025. The company disclosed that the 1.625% Notes became convertible during the first quarter of 2023 because the stock price threshold was met, and that approximately $236.3 million of the EFK purchase price was paid on January 3, 2023.
02—Key points
Key Highlights
- Revenue of $8,326.2 million in 2022, up 23.5% from $6,739.8 million in 2021, with PSG, ASG and ISG growing 22.4%, 18.4% and 41.7%, respectively.
- Gross margin rose to 49.0% from 40.3%, and gross profit reached $4,077.2 million, driven by a higher-margin product mix and price increases.
- Net income attributable to ON Semiconductor Corporation was $1,902.2 million (diluted EPS of $4.25), compared with $1,009.6 million (diluted EPS of $2.27) in 2021.
- Goodwill and intangible asset impairment of $386.8 million, mainly tied to the wind-down of the QCS division, which the company approved as an exit plan in September 2022.
- Capital expenditures of $1,005.0 million in 2022, with the company expecting about 20% of revenue in 2023 as investments in SiC capacity and facilities continue.
- Total debt principal of $3,228.3 million at year-end, with a new share repurchase program of up to $3.0 billion authorized for February 2023 through December 2025.
- Acquisition of the East Fishkill, New York fab for $406.3 million at year-end 2022, with $236.3 million paid in January 2023.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2022, On Semiconductor kept $0.23.
- Revenue$8.33B100.0%
- Cost of revenue−$4.25B51.0%
- Gross profit$4.08B49.0%
- Operating costs−$1.72B20.6%
- Operating income$2.36B28.3%
- Interest, other & tax−$457.8M5.5%
- Net income$1.90B22.8%
Where FY2022 revenue went
$8.33B- Cost of revenue: $4.25B, 51% of revenue
- Net income: $1.90B, 23% of revenue
- Operating costs: $1.72B, 21% of revenue
- Interest, other & tax: $457.8M, 5.5% of revenue
Kept 23% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2022filed February 6, 2023Financial Statements
FY2022 against FY2021
| Line item | FY2022FY2021 | Change |
|---|---|---|
| Revenue | $8.33B$6.74B | +23.5% |
| Cost of Revenue | $4.25B$4.03B | +5.6% |
| Gross Profit | $4.08B$2.71B | +50.2% |
| Operating Expenses | $1.72B$1.43B | +20.4% |
| Operating Income | $2.36B$1.29B | +83.3% |
| Interest Expense | $94.90M$130.40M | −27.2% |
| Net Income | $1.90B$1.01B | +88.4% |
| EPS (Basic) | $4.39$2.37 | +85.2% |
| EPS (Diluted) | $4.25$2.27 | +87.2% |
| Shares Outstanding (Basic) | 433.20M425.70M | +1.8% |
| Shares Outstanding (Diluted) | 448.20M443.80M | +1.0% |
05—Questions
Frequently Asked Questions
What drove the improvement in profitability in 2022?
The company attributed the increase in operating and net income mainly to significantly better gross margins, which came from higher revenue in focused end-markets, favorable product mix, increases in average selling prices and savings from restructuring. Operating income rose to $2,360.0 million from $1,287.6 million.
What is the company doing with its manufacturing footprint?
The company is moving toward a lighter internal fabrication model. In 2022 it divested wafer facilities in Oudenaarde, Belgium, South Portland, Maine, Pocatello, Idaho and Niigata, Japan, for roughly $275.0 million in aggregate, and it acquired the East Fishkill, New York facility. It plans to ramp East Fishkill and expand SiC capacity in the Czech Republic, Hudson, New Hampshire and South Korea.
What does the QCS wind-down mean for the company?
The board approved an exit plan to wind down QCS in September 2022. The company recorded $330.0 million of goodwill impairment and $56.8 million of intangible impairment related to the division, and it recorded $50.1 million in total QCS-related restructuring, asset impairment and other charges. The company says it is directing investment toward strategic focus areas.
How is the company's debt structured and what are its near-term obligations?
Gross long-term debt was $3,228.3 million at December 31, 2022, including a $1,086.0 million Term Loan B, $805.0 million of 0% Notes due 2027, $700.0 million of 3.875% Notes due 2028 and $137.3 million of 1.625% Notes due 2023. Expected 2023 maturities are $148.3 million. The company had about $1.5 billion available under its Revolving Credit Facility.
What share repurchase activity has the company undertaken?
The company repurchased $259.8 million of common stock under its program in 2022, and the prior program expired on December 31, 2022 with about $1,036.0 million unused. In February 2023 the board approved a new program allowing up to $3.0 billion of repurchases from February 8, 2023 through December 31, 2025, with no minimum purchase requirement.
06—Continue