01—Abstract
Summary
Summary of the 10-K filed February 5, 2024. Cited figures are marked; the original filing is the authoritative source.
ON Semiconductor Corporation, together with its subsidiaries operating under the onsemi brand, reported 2023 revenue of $8,253.0 milliona, a nominal decrease of 0.9% from $8,326.2 million in 2022.
Net income attributable to ON Semiconductor Corporation rose to $2,183.7 millionb from $1,902.2 million, and operating income increased to $2,538.7 million from $2,360.0 million. The company stated that these increases were primarily due to goodwill and intangible asset impairment charges of $386.8 million related to its QCS wind down in 2022, which did not recur in 2023. Gross margin declined about 190 basis points to 47.1% from 49.0%, as the decline in existing product revenue, higher manufacturing costs at the EFK location, and an unfavorable foundry impact weighed on gross profit, partly offset by roughly $320 million of gross profit from new product sales.
The company is organized into three segments: Power Solutions Group (53.9% of 2023 revenue), Advanced Solutions Group (30.2%) and Intelligent Sensing Group (15.9%). Automotive and industrial end-markets accounted for approximately 52% and 28% of revenue, respectively. Operating cash flow fell to $1,977.5 millionc from $2,633.1 million, while capital expenditures rose to $1,575.6 million, primarily for SiC capacity expansion.
The company guided 2024 capital expenditures to 10% to 12% of revenue. Cash and cash equivalents were $2,483.0 milliond at year end, against gross long-term debt of $3,379.9 million, including $804.9 million of 0% Notes that were classified as current on share price trigger provisions. The company repurchased $564.0 million of common stock under its $3.0 billion program, which runs through December 31, 2025, and repaid the 1.625% Notes.
It also issued $1.5 billion of 0.50% Convertible Senior Notes due 2029 and replaced its prior credit agreement with a $1.5 billion Revolving Credit Facility. The filing also discloses a 2023 business realignment that affected approximately 1,900 employees, with severance and related charges of $59.1 million, and a putative securities class action filed in December 2023 concerning the company's SiC business.
02—Key points
Key Highlights
- Revenue was $8,253.0 million in 2023, down 0.9% from $8,326.2 million in 2022, with ASG down 12.4% and PSG up 5.7%.
- Net income attributable to ON Semiconductor Corporation was $2,183.7 million, up from $1,902.2 million, helped by the absence of the $386.8 million goodwill and intangible impairment recorded in 2022.
- Gross margin fell to 47.1% from 49.0%, reflecting lower existing product revenue, higher EFK manufacturing costs and an unfavorable foundry impact.
- Operating cash flow decreased to $1,977.5 million from $2,633.1 million, while capital expenditures rose to $1,575.6 million, mainly for SiC capacity expansion.
- The company issued $1.5 billion of 0.50% Convertible Senior Notes due 2029 and repaid $1,086.0 million of Term Loan B borrowings.
- Share repurchases totaled $564.0 million in 2023 under a $3.0 billion program running through December 31, 2025, with $2,436.0 million remaining.
- Cash and cash equivalents were $2,483.0 million, against gross long-term debt of $3,379.9 million, of which $804.9 million of 0% Notes were classified as current.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2023, On Semiconductor kept $0.26.
- Revenue$8.25B100.0%
- Cost of revenue−$4.37B52.9%
- Gross profit$3.88B47.1%
- Operating costs−$1.34B16.3%
- Operating income$2.54B30.8%
- Interest, other & tax−$355.0M4.3%
- Net income$2.18B26.5%
Where FY2023 revenue went
$8.25B- Cost of revenue: $4.37B, 53% of revenue
- Net income: $2.18B, 26% of revenue
- Operating costs: $1.34B, 16% of revenue
- Interest, other & tax: $355.0M, 4.3% of revenue
Kept 26% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2023filed February 5, 2024Financial Statements
FY2023 against FY2022
| Line item | FY2023FY2022 | Change |
|---|---|---|
| Revenue | $8.25B$8.33B | −0.9% |
| Cost of Revenue | $4.37B$4.25B | +2.8% |
| Gross Profit | $3.88B$4.08B | −4.8% |
| Operating Expenses | $1.34B$1.72B | −21.7% |
| Operating Income | $2.54B$2.36B | +7.6% |
| Interest Expense | $74.80M$94.90M | −21.2% |
| Net Income | $2.18B$1.90B | +14.8% |
| EPS (Basic) | $5.07$4.39 | +15.5% |
| EPS (Diluted) | $4.89$4.25 | +15.1% |
| Shares Outstanding (Basic) | 430.70M433.20M | −0.6% |
| Shares Outstanding (Diluted) | 446.80M448.20M | −0.3% |
05—Questions
Frequently Asked Questions
How did onsemi's profitability change in 2023?
Net income attributable to ON Semiconductor Corporation rose to $2,183.7 million from $1,902.2 million, and operating income rose to $2,538.7 million from $2,360.0 million. The company attributed the increases primarily to the absence of the $386.8 million goodwill and intangible asset impairment recorded in 2022 related to its QCS wind down. Gross margin, however, declined to 47.1% from 49.0%.
Which segments and end-markets drove revenue?
PSG generated 53.9% of 2023 revenue, with revenue up 5.7% on growth in SiC and automotive power solutions. ASG generated 30.2% and declined 12.4% on lower Power Management Division revenue. ISG generated 15.9% and grew 3.0%. By end-market, automotive represented about 52% of revenue and industrial about 28%.
What is the company's debt and liquidity position?
Cash and cash equivalents were $2,483.0 million at December 31, 2023. Gross long-term debt was $3,379.9 million, including $804.9 million of 0% Notes that were reclassified as current based on share price trigger provisions. About $1.1 billion was available under the Revolving Credit Facility. The company stated it does not have any meaningful debt maturing in the next 12 months.
What are the key capital allocation priorities?
In 2023 the company spent $1,575.6 million on capital expenditures, primarily to expand SiC manufacturing capacity, and expects 2024 capital expenditures of 10% to 12% of revenue. It repurchased $564.0 million of common stock and expects to continue repurchases subject to market conditions. It has neither declared nor paid cash dividends since its initial public offering.
What restructuring and legal matters should investors note?
In 2023 the company realigned operations, notifying approximately 1,900 employees of termination, with severance and related charges of $59.1 million. In December 2023, a putative securities class action was filed alleging misleading statements about the SiC business, and a derivative action was filed in January 2024. The company believes it has strong defenses.
06—Continue