01—Abstract
Summary
Summary of the 10-Q filed July 29, 2024. Cited figures are marked; the original filing is the authoritative source.
onsemi (filed as ON Semiconductor Corporation) reported a sharp year-over-year decline in second-quarter 2024 results.
Revenue was $1,735.2 milliona, down $359.2 million, or approximately 17%, from $2,094.4 million in the second quarter of 2023. Gross profit fell to $784.0 million, and gross margin declined to 45.2% from 47.4%, which the company attributed mainly to lower volume. Operating income dropped to $388.5 million from $674.7 million, and diluted earnings per share were $0.78 compared with $1.29.
Restructuring, asset impairments and other charges rose to $72.5 millionb, reflecting the 2024 Business Realignment, under which approximately 1,000 employees were notified of termination and around 300 were reassigned or asked to relocate. The company expects total related costs of approximately $75 million, of which about $53 million was recognized in the quarter and six months. For the six months ended June 28, 2024, revenue was $3,597.9 million, down approximately 11%, and net cash provided by operating activities was $860.9 million, compared with $799.7 million a year earlier.
Capital expenditures were $376.9 millionc, and the company expects capital expenditures of 9% to 11% of revenue for the remainder of 2024. Cash, cash equivalents and short-term investments totaled approximately $2.7 billion, and the Revolving Credit Facility had approximately $1.1 billion available. The company repurchased 2.1 million shares for $150.1 million in the quarter and has approximately $2.2 billion remaining under its $3.0 billion program.
The $795.6 milliond of 0% Notes is classified as a current liability because a share-price conversion trigger was met, giving holders the right to convert during the quarter ending September 30, 2024. Segment results show Power Solutions Group revenue of $835.2 million (48.1% of total), Analog and Mixed-Signal Group revenue of $647.8 million (37.3%), and Intelligent Sensing Group revenue of $252.2 million (14.5%).
Remaining performance obligations under long-term supply agreements were approximately $14.7 billion, with about 30% expected to be recognized over the next twelve months. A securities class action related to the company's SiC business remains pending, and the company plans to file a motion to dismiss the amended complaint by July 30, 2024.
02—Key points
Key Highlights
- Q2 2024 revenue of $1,735.2 million fell $359.2 million, or approximately 17%, year over year, with declines in all three segments.
- Gross margin was 45.2% versus 47.4% a year earlier, and operating income fell to $388.5 million from $674.7 million.
- Diluted EPS was $0.78 for the quarter versus $1.29 in the prior-year quarter; net income attributable to the company was $338.2 million versus $576.6 million.
- The 2024 Business Realignment affected approximately 1,300 employees, with restructuring, asset impairments and other charges of $72.5 million in the quarter; total expected costs are approximately $75 million.
- Six-month operating cash flow was $860.9 million, and cash, cash equivalents and short-term investments were approximately $2.7 billion at June 28, 2024.
- The company repurchased $150.1 million of stock in the quarter and has approximately $2.2 billion remaining under its $3.0 billion repurchase program through December 31, 2025.
- The $795.6 million 0% Notes are classified as current debt due to a share-price conversion trigger, and the filing reports remaining performance obligations of approximately $14.7 billion under long-term supply agreements.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2024, On Semiconductor kept $0.19.
- Revenue$1.74B100.0%
- Cost of revenue−$951.2M54.8%
- Gross profit$784.0M45.2%
- Operating costs−$395.5M22.8%
- Operating income$388.5M22.4%
- Interest, other & tax−$50.3M2.9%
- Net income$338.2M19.5%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2024filed July 29, 2024Financial Statements
Q2 FY2024 against Q2 FY2023
| Line item | Q2 FY2024Q2 FY2023 | Change |
|---|---|---|
| Revenue | $1.74B$2.09B | −17.2% |
| Cost of Revenue | $951.20M$1.10B | −13.6% |
| Gross Profit | $784.00M$993.40M | −21.1% |
| Operating Expenses | $395.50M$318.70M | +24.1% |
| Operating Income | $388.50M$674.70M | −42.4% |
| Net Income | $338.20M$576.60M | −41.3% |
| EPS (Basic) | $0.79$1.34 | −41.0% |
| EPS (Diluted) | $0.78$1.29 | −39.5% |
| Shares Outstanding (Basic) | 429.10M431.70M | −0.6% |
| Shares Outstanding (Diluted) | 433.20M448.70M | −3.5% |
05—Questions
Frequently Asked Questions
Why did revenue and profitability decline in the second quarter of 2024?
The filing attributes the decline primarily to lower volume. Revenue fell to $1,735.2 million from $2,094.4 million, and management cited decreased demand in the automotive, industrial and communications end-markets. Gross profit declined by $209.4 million, with lower volume reducing gross profit by approximately $183 million on existing products and $47 million on new products, partly offset by about $20 million from a reduction in the lower-margin foundry business at the EFK location.
What is the 2024 Business Realignment and what will it cost?
The realignment is intended to streamline resources, consolidate the global corporate footprint and align with the company's 'Fab Right' manufacturing strategy. Approximately 1,000 employees were notified of termination and around 300 were reassigned or asked to relocate. The company expects total severance and related charges of approximately $75 million, of which approximately $53 million was recognized in the quarter and six months ended June 28, 2024, with substantially all of the remainder expected in the rest of 2024.
How is the company managing its debt and liquidity?
The company states that cash on hand, operating cash flow and the Revolving Credit Facility, which has approximately $1.1 billion available, are adequate for at least the next 12 months. The 0% Notes of $795.6 million are classified as current because the share-price condition was met, which lets holders convert during the quarter ending September 30, 2024. The company was in compliance with all debt covenants as of June 28, 2024, and expects to remain so for at least the next 12 months.
What are the company's capital return and capital spending plans?
The company repurchased 2.1 million shares for $150.1 million in the second quarter and 3.4 million shares for $250.1 million in the first half of 2024. Approximately $2.2 billion remains under the $3.0 billion Share Repurchase Program, which runs through December 31, 2025. Capital expenditures were $376.9 million in the first six months, and the company expects capital expenditures of 9% to 11% of revenue for the remainder of 2024. Management says it expects to continue the repurchase program subject to market conditions.
What legal risks are disclosed in the filing?
A putative securities class action, Hubacek v. On Semiconductor Corp., alleges that the company made misleading statements about its SiC business in violation of Sections 10(b) and 20(a) of the Exchange Act. The company will file a motion to dismiss the amended complaint on or before July 30, 2024, and believes it has strong legal defenses. Related stockholder derivative actions in Arizona are stayed pending resolution of the class action. The company states that it is not involved in any pending or threatened proceedings expected to have a material adverse effect.
06—Continue