01—Abstract
Summary
Summary of the 10-Q filed October 28, 2024. Cited figures are marked; the original filing is the authoritative source.
onsemi (ON Semiconductor Corporation) reported third-quarter 2024 revenue of $1,761.9 milliona, down from $2,180.8 million a year earlier, a decrease of $418.9 million, or approximately 19%.
Gross margin fell to 45.4% from 47.3%, and operating income dropped to $445.4 millionb from $687.0 million. Net income attributable to the company was $401.7 million, or $0.93 per diluted share, compared with $582.7 million, or $1.29 per diluted share, in the prior-year quarter. The filing attributes the decline mainly to lower demand in the automotive and industrial end-markets, which reduced sales volume across all three segments: PSG, AMG and ISG.
For the nine months ended September 27, 2024, revenue was $5,359.8 millionc, down approximately 14% year over year, and net cash provided by operating activities was $1,326.7 million. The company began a 2024 business realignment in the second quarter under its "Fab Right" manufacturing strategy. Approximately 1,100 employees were notified of termination and about 200 were relocated, with expected total severance and related charges of approximately $72 million, of which about $70 million was recognized through the first nine months.
Liquidity remained substantial, with cash, cash equivalents and short-term investments of approximately $2.8 billiond and approximately $1.1 billion available under the Revolving Credit Facility. The 0% Notes, with $796.4 million outstanding, are classified as a current liability because of a share-price trigger that allows conversion during the fourth quarter of 2024.
The company repurchased 2.8 million shares for $200.4 million in the quarter, leaving approximately $2.0 billion authorized under its Share Repurchase Program. Legal matters include a securities class action and related derivative suits concerning the company's SiC business, which the company says it will vigorously defend.
02—Key points
Key Highlights
- Q3 2024 revenue was $1,761.9 million, down $418.9 million, or approximately 19%, from $2,180.8 million in Q3 2023; PSG revenue fell approximately 23%, AMG approximately 16%, and ISG approximately 15%.
- Gross margin declined to 45.4% from 47.3%, with gross profit down $231.3 million, or approximately 22%, driven by lower sales volume from existing products and new products.
- Operating income was $445.4 million versus $687.0 million, and diluted EPS was $0.93 versus $1.29; restructuring, asset impairments and other charges rose to $29.1 million from $9.4 million.
- Nine-month revenue was $5,359.8 million, down approximately 14%, and nine-month operating cash flow was $1,326.7 million, compared with $1,366.3 million a year earlier.
- The 2024 business realignment affected approximately 1,100 terminated employees and about 200 relocated employees, with approximately $72 million in expected severance and related charges.
- Liquidity was approximately $2.8 billion in cash and short-term investments, with approximately $1.1 billion available under the Revolving Credit Facility; the $796.4 million 0% Notes are classified as current.
- The company repurchased $200.4 million of stock in Q3 2024 and had approximately $2.0 billion remaining under its Share Repurchase Program, which runs through December 31, 2025.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2024, On Semiconductor kept $0.23.
- Revenue$1.76B100.0%
- Cost of revenue−$962.5M54.6%
- Gross profit$799.4M45.4%
- Operating costs−$354.0M20.1%
- Operating income$445.4M25.3%
- Interest, other & tax−$43.7M2.5%
- Net income$401.7M22.8%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2024filed October 28, 2024Financial Statements
Q3 FY2024 against Q3 FY2023
| Line item | Q3 FY2024Q3 FY2023 | Change |
|---|---|---|
| Revenue | $1.76B$2.18B | −19.2% |
| Cost of Revenue | $962.50M$1.15B | −16.3% |
| Gross Profit | $799.40M$1.03B | −22.4% |
| Operating Expenses | $354.00M$343.70M | +3.0% |
| Operating Income | $445.40M$687.00M | −35.2% |
| Net Income | $401.70M$582.70M | −31.1% |
| EPS (Basic) | $0.94$1.35 | −30.4% |
| EPS (Diluted) | $0.93$1.29 | −27.9% |
| Shares Outstanding (Basic) | 427.00M431.20M | −1.0% |
| Shares Outstanding (Diluted) | 431.70M450.70M | −4.2% |
05—Questions
Frequently Asked Questions
Why did revenue and profitability decline in the third quarter of 2024?
The filing attributes the decline primarily to a decrease in demand in the automotive and industrial end-markets. Revenue fell $418.9 million year over year, and gross profit was hurt by lower sales volume from existing products (about $162 million impact) and new products (about $77 million impact), partly offset by about $8 million from lower-margin manufacturing services revenue at the EFK location.
What is the 2024 business realignment and what does it cost?
The realignment, begun in the second quarter of 2024, aims to streamline resources, consolidate the global corporate footprint and align with the "Fab Right" manufacturing strategy. About 1,100 employees were notified of termination and around 200 were relocated or reassigned. The company expects approximately $72 million in total severance, related benefit and ancillary charges, of which about $70 million was recognized in the first nine months of 2024, and substantially all of the remaining expense is expected in the rest of 2024.
Does onsemi have enough liquidity to meet its debt obligations?
The company states that cash on hand, cash from operations and Revolving Credit Facility availability are adequate for working capital and other needs for at least the next 12 months. It had approximately $2.8 billion in cash, cash equivalents and short-term investments and approximately $1.1 billion available under the Revolving Credit Facility. The $796.4 million 0% Notes are classified as current because of a share-price condition, and the company reports it was in compliance with its debt covenants.
How is the company returning capital to shareholders?
In the quarter ended September 27, 2024, onsemi repurchased approximately 2.8 million shares for an aggregate purchase price of $200.4 million, including fees. Under the Share Repurchase Program, up to $3.0 billion may be repurchased through December 31, 2025, and approximately $2.0 billion remained authorized as of September 27, 2024. The company expects to continue the program subject to market conditions and other factors, and the board may modify, suspend or terminate it at any time.
What legal risks does the filing disclose?
The filing discloses a putative securities class action, Hubacek v. On Semiconductor Corp., alleging misleading statements about the company's SiC business under Sections 10(b) and 20(a) of the Exchange Act. The motion to dismiss the second amended complaint was filed on October 10, 2024, with briefing expected to be completed by December 20, 2024. Related derivative actions, Mumme and Chan, were stayed pending resolution of the class action. The company believes it has strong legal defenses and will vigorously defend the claims.
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