On July 29, 2024, ON Semiconductor Corp (ON, Financial) released its 8-K filing for the second quarter of 2024. ON Semiconductor Corp (ON), a leading supplier of power semiconductors and sensors, reported a challenging quarter with declines in both revenue and earnings per share (EPS) compared to analyst estimates.
Company Overview
Onsemi is a prominent supplier of power semiconductors and sensors, primarily serving the automotive and industrial markets. The company is the second-largest power chipmaker globally and the leading supplier of image sensors to the automotive market. Onsemi has transitioned from a highly vertically integrated model to a hybrid manufacturing strategy, focusing on emerging applications such as electric vehicles, autonomous vehicles, industrial automation, and renewable energy.
Performance and Challenges
ON Semiconductor Corp (ON, Financial) reported revenue of $1,735.2 million for Q2 2024, a 17% year-over-year decline from $2,094.4 million in Q2 2023. This figure also fell short of the analyst estimate of $1,729.12 million. The company's gross margin decreased to 45.2% from 47.4% in the same quarter last year. Net income attributable to ON Semiconductor Corp was $338.2 million, down from $576.6 million in Q2 2023, resulting in a diluted EPS of $0.78, which missed the analyst estimate of $0.89.
Financial Achievements
Despite the challenges, ON Semiconductor Corp (ON, Financial) achieved a notable increase in free cash flow, which rose by approximately $250 million year-over-year. This improvement in cash flow is crucial for the company as it provides the financial flexibility needed to invest in strategic markets and expand its product portfolio.
Income Statement Highlights
| Metric | Q2 2024 | Q1 2024 | Q2 2023 |
|---|---|---|---|
| Revenue (in millions) | $1,735.2 | $1,862.7 | $2,094.4 |
| Gross Margin | 45.2% | 45.8% | 47.4% |
| Operating Margin | 22.4% | 28.2% | 32.2% |
| Net Income (in millions) | $338.2 | $453.0 | $576.6 |
| Diluted EPS | $0.78 | $1.04 | $1.29 |
Balance Sheet and Cash Flow
ON Semiconductor Corp (ON, Financial) reported total assets of $13,658.8 million as of June 28, 2024, with cash and cash equivalents amounting to $2,231.0 million. The company's total liabilities stood at $5,300.4 million, resulting in a stockholders' equity of $8,358.4 million. The increase in free cash flow highlights the company's ability to generate cash from its operations, which is essential for funding future growth initiatives.
Commentary and Outlook
“We remain dedicated to driving growth through market share gains, doubling down on investments in strategic markets, and expanding the breadth of our portfolio of industry-leading products with analog and mixed-signal solutions,” said Hassane El-Khoury, president and CEO, onsemi.
Looking ahead, ON Semiconductor Corp (ON, Financial) provided a revenue outlook for Q3 2024 in the range of $1,700 to $1,800 million, with a gross margin between 44.3% and 46.3%. The company expects diluted EPS to be between $0.85 and $0.97 on a GAAP basis.
Analysis
ON Semiconductor Corp (ON, Financial) faces significant challenges as it navigates a declining revenue environment and compressed margins. However, the company's strategic focus on high-growth markets such as electric vehicles and industrial automation positions it well for future growth. The increase in free cash flow is a positive indicator of the company's operational efficiency and financial health.
Investors will need to monitor ON Semiconductor Corp (ON, Financial)'s ability to execute its strategic initiatives and regain revenue growth in the coming quarters. The company's performance in emerging markets and its ability to manage costs will be critical factors in determining its future success.
Explore the complete 8-K earnings release (here) from ON Semiconductor Corp for further details.
