- Revenue: $1.74 billion, declined 7% sequentially and 17% year-over-year.
- Non-GAAP Gross Margin: 45.3%.
- Non-GAAP Operating Margin: 27.5%.
- Free Cash Flow Margin: 12%.
- Automotive Revenue: $907 million, declined 11% quarter-over-quarter and 15% year-over-year.
- Industrial Revenue: $468 million, down 2% sequentially and 23% year-over-year.
- Power Solutions Group Revenue: $835 million, decreased 15% year-over-year.
- Analog and Mixed Signal Group Revenue: $648 million, decreased 18% year-over-year.
- Intelligent Sensing Group Revenue: $252 million, decreased 22% year-over-year.
- GAAP Gross Margin: 45.2%.
- GAAP Operating Expenses: $396 million.
- Non-GAAP Operating Expenses: $308 million.
- GAAP Operating Margin: 22.4%.
- GAAP Tax Rate: 15.8%.
- Non-GAAP Tax Rate: 16%.
- GAAP Diluted EPS: $0.78.
- Non-GAAP Diluted EPS: $0.96.
- Cash and Short-term Investments: $2.7 billion.
- Cash from Operations: $362 million.
- Free Cash Flow: $208 million.
- Capital Expenditures: $154 million.
- Inventory: Increased by $78 million sequentially to 214 days.
- Q3 Revenue Guidance: $1.7 billion to $1.8 billion.
- Q3 Non-GAAP Gross Margin Guidance: 44.4% to 46.4%.
- Q3 Non-GAAP Operating Expenses Guidance: $305 million to $320 million.
- Q3 Non-GAAP EPS Guidance: $0.91 to $1.03.
- Q3 Capital Expenditures Guidance: $130 million to $170 million.
Release Date: July 29, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- ON Semiconductor Corp (ON, Financial) exceeded the midpoint of their guidance for revenue, non-GAAP gross margin, and non-GAAP earnings per share.
- The company is seeing stabilization in demand in core markets, with some pockets of improvement.
- ON Semiconductor Corp (ON) has secured significant design wins in power solutions, including a major deal with Volkswagen Group.
- The company continues to invest in its strategic portfolio, including the acquisition of SWIR Vision Systems to enhance its industrial and defense product offerings.
- ON Semiconductor Corp (ON) is a market leader in silicon carbide technology, with strong penetration in the Chinese BEV market and expanding applications in industrial and AI data centers.
Negative Points
- Q2 revenue declined 7% sequentially and 17% year-over-year, driven by ongoing inventory correction in the automotive and industrial end markets.
- Automotive revenue declined 11% quarter-over-quarter and 15% year-over-year.
- Industrial revenue was down 2% sequentially and 23% year-over-year.
- Revenue for all business groups (Power Solutions, Analog and Mixed Signal, Intelligent Sensing) saw significant year-over-year declines.
- The company is facing short-term demand uncertainty and continues to operate with underutilization, reaching a historical trough of 65%.
Q & A Highlights
Q: Any pluses or minuses by your three segments for the third-quarter guide? And how are you looking at the automotive business for the back half of the year?
A: The end markets played out as expected, with both automotive and industrial down. We saw some stabilization in industrial. For automotive, we expect it to be flat to up slightly in the third quarter. (Thad Trent, CFO)
Q: Can you walk us through the impact of East Fishkill and fab divestitures on gross margins over the next 6 to 12 months?
A: Utilization is the key driver in the short term, with each point of utilization being 15 to 20 basis points of gross margin improvement. East Fishkill is about 100-basis-point dilutive, which will moderate in 2025. Fab divestitures will benefit gross margins as demand picks up. (Thad Trent, CFO)
Q: How do you see your different end markets, especially automotive, performing in Q3?
A: We expect automotive and industrial to be flat to up slightly in the third quarter. (Hassane El-Khoury, CEO)
Q: How has the silicon carbide outlook fared given the deceleration in battery-powered EV demand?
A: We expect the BEV market to remain healthy with some short-term lumpiness. We are on track for 2x market growth in 2024. Our penetration in China is about 60%, and we expect ramps in Europe in the second half. (Hassane El-Khoury, CEO)
Q: How did the silicon carbide business trend in Q2, and what are your expectations for Q3?
A: We are not breaking out silicon carbide on a quarterly basis due to lumpiness. We are trending at 2x market growth and expect ramps in Europe in the second half. (Hassane El-Khoury, CEO)
Q: What is your plan for managing distribution inventory in the next few quarters?
A: We expect distribution inventory to be around nine weeks for the remainder of this year and into next year. (Thad Trent, CFO)
Q: Can you give us some thoughts on the onsemi silicon carbide backlog?
A: The silicon carbide backlog is healthy, with ongoing design and activity across automotive, industrial, and AI data centers. (Thad Trent, CFO; Hassane El-Khoury, CEO)
Q: How is the 200-millimeter silicon carbide ramp progressing?
A: We will qualify 8-inch silicon carbide this year, with revenue starting next year. We are on track with our expectations. (Hassane El-Khoury, CEO)
Q: How do you view the L-shaped recovery for the rest of the calendar year?
A: We expect a flat trajectory with no significant recovery. Some markets within automotive and industrial may fare better than others. (Hassane El-Khoury, CEO)
Q: What is the outlook for the intelligent sensing group, given the current market conditions?
A: The outlook depends on market recovery. We have a strong market share in automotive ADAS and are expanding in industrial with new products and the SWIR acquisition. (Hassane El-Khoury, CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
