ON Semiconductor Corporation
Known as onsemi, their mission is to “push innovation to create intelligent power and sensing technologies that solve the most challenging customer problems”. Its main end-markets of focus are Automotive and Industrial which include Factory Automation, Sustainable Energy Grids, 5G and Cloud Power, Internet of Things (IoT), Medical, and Aerospace and Defense. The company is exiting non-core products with lower growth and margin profile to focus on products with higher margins and growth opportunity. Other operational optimization activities include the divestment of smaller fabs and the acquisition of a 300mm fab in East Fishkill (EFK) NY from GlobalFoundries (GFS) for $430m (announced in 2019, $330m to be paid when control of the fab changes hands at the end of 2022). ON will occupy ~40% of capacity at closing while providing Foundry Services to GFS as it gradually scales down production until its exit in 2025. A 300m fab will ultimately afford significant cost savings and efficiencies although the benefits won’t fully reflect in the company’s financial performance until GFS fully exits the fab although the company should experience incremental benefits as its share of capacity increases. Finally, the company has been increasingly engaging customers with Long-Term Supply Agreements (LTSAs) to offer supply assurance which improves capacity planning.
ON’s opportunity is driven by a few different aspects of a similar secular theme: increased electrification (chip content) in automotive and industrial applications. Its business units Business Units are segmented into: (IS) Intelligent Sensing, (AS) Advanced Solutions, (PS) Power Solutions. IS and PS units account for almost 70% of revenue while Automotive and Industrial also account for almost 70% of revenue. In FY21 ~64% of revenue was through Distributors while 36% was direct with customers. The company is an emerging producer of Silicon Carbide (SiC) products for which it has aggressive growth plans this year, next year, and beyond. SiC modules are used in inverters in industrial applications (solar systems) and Electric Vehicle and infrastructure to improve charging and vehicle range. EVs consume significantly more chip content than ICE vehicles which are also increasing their chip content with more cameras and ADAS (Advanced Driver Assistance Systems), connectivity, and infotainment. Contrary to popular belief, ADAS does not necessarily mean fully automated driving, there are many applications being adopted that are not fully automated. This growth in chip content has been straining the chip industry’s ability to supply sufficient product resulting in lower vehicle unit production and is the primary reason why I believe ON’s production will be more resilient than many fear unless we have a devastating recession.
Ests: 4Q24 1Q25 FY24 FY25
Revs 1.76b 1.69 7.12b 7.21b
EPS 0.97 0.90 4.00 4.09
P=51.25, TTM EPS=3.98, P/E=13X, D/C=3.9%, excess NWC>net debt by 4.82/sh, 805m due in 2027 conversion price 52.97, 700m due 2028, 1.5bn 2029 conversion price $103.87,2.77bn in cash vs 3.3bn in debt, additional 2.4bn in non-cash NWC
4Q24 .95 vs 1.25 -24%, est .97 down from 1.00, FY24 EPS 3.98 vs 5.16 -23%
Feb 10, 2025, P=51.25, TTM EPS=3.98, P/E=13X
Revs -14.6% to 1.72bn (est 1.69bn) , GM 45.3% vs 46.7%, OM 26.7% vs 31.6%
Auto -8% to 1.03bn, +7.8% q/q, Indu-16% to 417m, -5.2% q/q, Others -31% to 280m,-24.5% q/q
OCF 579.7m vs 611.2m, FCF 422.4m vs 224.8m, expect inventory to support fab transition to peak in 1H then contribute to cash
Auto +7.8% q/q driven by China (+18% q/q), then North America, Japan saw sharpest decline, in 1Q Chinese automakers working down automotive inventories, continues to win slots.
SiC up q/q and +22% 2H vs 1H, FY revs down slightly, rebalancing internal/external substrates
1Q25 Outlook: Revs -27.5% to -21.6% to 1.35-1.45bn (est 1.69), GM 39%-41%, EPS -58% to -49% to .45-.55 (est .90),
Saw orders weaken late in 4Q, carried into 1Q, lead by non-core products?, citing low visibility (utilization 59% in 4Q, declining to mid 50s%), see auto down most q/q in 1Q (25%?)
Company looking at further rational footprint and reduce excess capacity to hit financials in late 2025, reduce opex could see impacts start in 2Q, mid-single digits capex intensity in FY25,
Again looking at exiting non-core business, “rationalize portfolio”, $350-400m
MCHP Revs -42%, Outlook -31%, EPS forecast .05-.15, STM Revs -22%, Outlook -27% on top of -18% last year, no EPS guidance but estimates now .03
3Q24 0.99 vs 1.39, est .97
Oct 28, 2024, P=71.25, TTM EPS=4.31, P/E=16.5X, FY25 P/E=15X
Revs -19.2% to 1.76bn (est 1.75bn), +1.5% q/q, GM 45.5% vs 47.3%, OM 28.2% vs 32.6%
PSG -23% to 829.4m, -0.7% q/q, AMG -15.7% to 653.7m, +0.9% q/q, ISG -15.2% to 278.8m, +10.5% q/q
Auto -17.8% to 951.2, +4.9% q/q, Industrial -28.6% 439.9m, -6% q/q, Others -8.9% to 370.8m, +2.9% q/q
OCF 465.8m vs 566.6m and 362.2m in 2Q, FCF 293.6m vs 113.6m and 207.7m in 2Q, repurchased $200m in stock, $750m over TTM
4Q Outlook Revs 1.71-1.81bn (est 1.78bn), GM 44-46%, EPS .92-1.04 (est 1.00)
Inventory digestion persists at some customers (some others are low), softness in end demands continues, and content gains, expect FY24 SiC +L-MSD 2023 due to slower ramps of new models, not design share loss, design-in activity continues.
FY25 Capex target MSD% vs 11%, Mass market customer count +15% y/y
Re EFK and 100bps margin drag from GFS, FY25 should be fairly linear improvement to 0 drag by EoY.
2Q24 0.96 vs 1.33 -27.8%, est .92 down from 1.01
Jul 29, 2024, P=70.17, TTM EPS=4.72, P/E=15X, FY25 P/E=15X
Revs -17.2% to 1.735bn (est 1.73) -6.8% q/q, GM 45.3% vs 47.4%, OM 27.5% vs 32.8%
PSG -14.6% to 835.2m, -4.5% q/q, AMG -18.2% to 647.8, -7.1% q/q, ISG -22.4% to 252.2m, -13.5% q/q
Auto -14.6% to 906.9m, -10.8% q/q, Indu -23.2% to 468m, -1.7% q/q, Others -14.9% to 360.3m, -2.5% q/q
3Q Outlook: Revs 1.7-1.8bn (est 1.78), EPS 0.91-1.03 (est 0.97)
Mgmt still believes they are under-shipping end demand, “seeing some stabilization in demand” and “inventory digestion persists with some pockets improving”, still see “L shape” and no reason to call a recovery, but seeing recovery in China
Announced selection by VW as primary supplier of complete power box solution with SiC
currently 22% of EVs use SiC or only 6% excluding the market leader (ON penetration in China about 60%)
Inventory +3.6% q/q to support fab transitions and SiC ramp, also some return to mass market after underserving for 2 years (mass market channel inv levels still well below historical)
1Q24 1.08 vs 1.19, est 1.05 down from 1.09
April 29, 2024, P=69.06, TTM EPS=5.05, P/E=14X, FY24 P/E=16X
Revs -4.9% to 1.86bn (est 1.85) -8% q/q, GM 45.9% vs 46.8%, OM 29% vs 32.2%
OCF 498.7 vs 408.9, FCF 276.3 vs 87.4, repurchased 100m in stock
PSG +2% to 874.2m, -9% q/q, AMG-6% to 697m, -6% q/q, ISG -18% 291.5m, -5% q/q
Auto +3.2% to 1.02bn, -8.7% q/q, Indu -14.4% to 476.1m, -4.2% q/q, Others -11.5% to 369,4m, -9.2% q/q
2Q Outlook: Revs 1.68-1.78bn vs 2.09bn (est 1.83bn), EPS .86-.98 vs 1.33, est 1.01 down from 1.13
STM 1Q was worse than their guide, Revs -18% y/y, -19% q/q, EPS -50% y/y and -53% q/q, 2Q outlook Revs -26% y/y, -7.6% q/q, TXN EPS was -40% and over 2-year stack was -53%, ON still more resilient than peers and trading at a discount.
Seeing early signs of stabilization in traditional industrial, seeing fewer cancellations and pushouts, order pattern on non-LTSA orders getting stronger, stable pricing.
Reiterated SiC to grow in 2024, analyst/investor perception was probably for more challenged SiC, CEO stated 2H>1H for SiC
4Q23 1.25 vs 1.32, est 1.20 down from 1.36, FY23 EPS 5.16 vs 5.33
Feb 5, 2024, P=70.83, TTM EPS=5.16, P/E=13.7X, FY24 P/E=15X
Revs -4.1% to 2.02bn, GM 46.7% vs 48.4%, OM 31.6% vs 34.1%
PSG +4% to 1.09bn -12% q/q, ASG -11% to 624.6m, +0.5% q/q, ISG -4% to 307.7m, -6% q/q
Auto +12.7% to 1.11bn, -3.8% q/q, Indu -10% to 497.1m, -19% q/q, Other -28% to 406.8m, -0.1% q/q
OCF 611.2 vs 731.3mm FCF 220.7 vs 389.3m, repurchased $300m of stock
1Q Outlook: Revs 1.8-1.9bn (-8% to -3%, est 1.92bn), EPS 0.98-1.10 (-18% to -8%, est 1.09), softness in all end markets.
4Q SiC up from 3Q as expected, See FY24 SiC industry +20-30%, expect 2X market growth.
4.8bn in LTSA over next 12m, not calling bottom, utilization 66%, see mid 60s until market recovers.
3Q23 1.39 vs 1.45, est 1.34 up from 1.21
Oct 30, 2023, P=83.52, TTM EPS=5.23, P/E=16X, FY24 P/E=15X
Revs-0.5% to 2.18bn (est 2.15b), GM 47.3% vs 47.4%, OM 32.6% vs 32.8%
PSG +10% to 1.23bn, +10% q/q, ASG -15% to 621.6m, -4% q/q, ISG -4% to 328.6m, +1% q/q
3Q SiC GM was >40%, expect at corp GM in 4Q
Taking cautious approach, starting to see pockets of softness in Tier1 OEMs in EU
Producing >50% of SiC substrates internally, 1Q ahead of schedule.
Now expect FY23 SiC target to >800m from 1 customer reduction, 200m downward revision in 4Q. See math below.
Expect MSD decline in auto, larger decline in Industrial
Exited 46m in 3Q, pricing is stable. Looking to exit 125m in 4Q, GM 45% at current pricing, if pricing holds up they will look to keep and manage the remainder.
4Q Outlook: Revs -7% to -2% to 1.95-2.05bn, GM 45.5-47.5%, EPS 1.13-1.27 vs 1.32 (est 1.36)
Not seeing a spike in cancellations (peaked last year), not counting on 1H24 recovery, see 1Q24 down q/q ad FY24 going “sideways” with growth in SiC, NY estimates to come down.
Solar business not weaking with SEDG or ENPH, primarily energy storage, not really residential solar installation
5.7bn in LTSA commitments over next 12 months.
Heavy >20% selloff, stock back to Dec 21 levels when FY23 EPS est was 3.51 and FY24 was 3.93, Many investors have been wanting this to break for the past 2 years, so far business has so far been far more resilient than feared and vs many other chip names but investors repricing the risk-premium, 1Q24 resilience will be important indicator. The stock is almost back to where it reported 4Q21 in early 2022 when 1Q22 estimate was .82.
My rough SiC math: 4Q22 FY22 SiC was 200m, 1Q23 SiC doubled q/q and was almost 50% of FY22, implying 4Q was 50m and 50m per qtr to get to 200m and 1Q23 100m. 2Q23 said 4X y/y implying 200m, 3Q increased q/q but magnitude not quantified so I’ll just plug 250m, implies 4Q >250m (mgmt. maintains will increase q/q just not as much as previously expected) which would go back to their prior target of >1bn run rate.
Previously management stated SiC was shipping below demand, this quarter they’re taking a cautious approach and don’t want to over-ship demand implying they think they’re shipping at demand.
2Q23 1.33 vs 1.34, est 1.21 up from 1.06
Jul 31, 2023, P=105.09, TTM EPS=5.29, P/E=19.9X
Revs flat at 2.09bn (est 2.02), GM 47.4% vs 49.7%, OM 32.8% vs 34.5%
PSG +6% to 1.12bn +11% q/q, ASG -9% to 0.65bn +10% q/q, ISG +4% to 0.33bn -8% q/q
Auto +35%, +7.7% q/q, Indu +4.7%, +9.6% q/q, Others -41.2%, +1.4% q/q
SiC grew almost 4X y/y, nearly doubled GM q/q, delivered 1st profitable quarter (high teens OM) Energy Infrastructure almost +70% y/y
EFK OpEx consistent with last quarter but now expect a bit longer, normal by exit FY24.
SiC LTSAs added >3bn in 2Q, now >11bn, recently announced Vitesco, BorgWarner, Magna
3Q Outlook Revs 2.09-2.2bn, EPS 1.27-1.41 vs 1.45, est 1.21 (3Q23 est is 1.40 which suggests estimates are too low)
Mid-quarter update Analyst Day
5Y CAGR FY22-FY27 10-12% (vs market 4%)
Auto CAGR +19%, Indu +10%, Other +4% (includes 5G & Cloud +22% and non-core declines)
Intelligent Power 16%, Sensing 8%, Other 1%
70% CAGR SiC FY22-27 (200m to 2.8bn?)
Mgmt hasn’t given FY23 outlook but estimates are for slight decline to 8.13 from 8.33, implies CAGR over the next 4 years is 13-16% as “other” bucket gets further diminished.
Top 20 customers ~30% of revs, no 10% customer, top 20 customers buy ~800 products on avg
4 fab exits ~17% capacity reductionWhat’s next from fab lighter? Fab right - Optimize footprint (as they are currently doing, moving IBGTs from Korea to EFK) maximize internal capacity, flex outside (like TXN and ADI)
GM target 53% from 48-50%, OM from 34.7% in FY22 to 40%, implies EPS>$10 (20% tax rate, no interest, same share count vs likely reduction).
FCF margin 25-30% (3.5-4bn FCF in FY27)
1Q23 1.19 vs 1.22 -2.5%, est 1.08 down from 1.14
May 1, 2023, P=71.96, TTM EPS=5.30, P/E=13.5X, FY23 P/E=14
Revs +0.7% to 1.96bn (est 1.93), -6.8% q/q, GM 46.8% vs 49.4%, OM 32.2% vs 33.9%,
OCF 408.9m vs 478.6m, CapEx 321.5m vs 173.8m, SiC almost doubled q/q to >50% of FY22 SiC revs (ahead of plan)
Auto +38% y/y to 986m, -0.3% q/q, Industrial +2.4% y/y to 556.2m, +0.7% q/q, Other -39% y/y to 417.5m, -25.8% q.q
Sensing +31.7% q/q to 354.2, AS -14% to 592.7m, -15.4% q/q, Power +2.6% y/y to 1.02bn, -3.4% q/q and PSG GM improved q/q due to SiC ramp
2Q Outlook Revs 1.975-2.075bn (-5% to -0.7%, est 1.93), GM 45.5% vs 47.5%, EPS 1.14-1.28 (vs 1.34, est 1.06)
EFK opex higher than expected (~2X the 40-70bps expected headwind), expect to get on track by next year, doesn’t change their plan.
Exited ~47m (below mgmt expectations), expect ~85m in 2Q, still expect ~400m in FY23
Still supply constrained in several auto technologies, watching inventory digestion in other products, drew down auto channel inventories by ~70m, expect 2Q growth. Pricing is stable,
LTSAs increased 1bn in 1Q
Solid execution, FY23 estimates look low, stock continues to look cheap as bear case again fails to unfold.
Mid-quarter Update – Feb 22, 2023
Offering 1.1bn converts due 2029, upsized to 1.3bn at 0.5%, conversion at 103.87, +32.5%
To repay 1.1bn Term Loan B which had interest rate of 6.42% at Dec 31, 2022
Callable after March 6, 2026 if stock>130% of conversion price for at least 20 days
Hedging the equity portion
4Q22 1.32 vs 1.09 est 1.26, FY22 EPS 5.33 vs 2.95
Feb 6, 2023, P=80.89, TTM EPS=5.33, P/E=15X, FY23 P/E=18X
Revs +14% to 2.1bn, GM 48.4% vs 45.2%, OM 34.1% vs 28.6%, OpInc +35.9%
Auto +54.3% to 988.7m +13.2% q/q, Indu +5.8% to 552.4m, -9.9% q/q, Other -17.6% to 562.6m, -20.3% q/q
PSG +10% to 1.05bn, -6% q/q, ASG +8% to 701m, -5% q/q, ISG +44%, +4% q/q
OCF 731.3m vs 626.6bn, bef NWC OCF 766.8 vs 631.2, FCF 389.3 vs 457
1Q Outlook: Revs 1.87-1.97bn (vs 1.95, est 2bn), GM 45.7%-47.7%, EPS 1.02-1.14 (vs 1.22, est 1.14), strong auto, continued weakness in non-core and some indu, exited 17m in 4Q, expect 75m in 1Q, mgmt. called outlook “cautious”.
New 3bn share purchase authorization to Dec 2025, Design win funnel +38%, LTSAs +2.5bn q/q to 16.6bn (SiC LTSAs>4.5bn FY23-FY25), FY22 SiC >200m, expect >1bn in FY23
Started to recognize SiC revs from TSLA, expanded beyond SiC and image sensors to numerous power and analog products with >300 different products, refuted rumours of yield issues
Expect margin headwinds to peak in 2Q or 3Q, no cancellations in auto, non-auto cancellations improved. NCNR backlog refreshing at same pricing.
Solid results, FY23 estimates look low.
3Q22 1.45 vs .87 +67%, est 1.31 up from 1.21
Oct 31, 2022, P=67.48, TTM EPS=5.11, P/E=13X, FY23 P/E=14X
Revs +25.9% to 2.19bn (+5.2% q/q), GM 49.3% vs 41.5%, OM 35.4% vs 24.5%
OCF 1bn vs 449m, 326m from NWC, FCF 731.3m vs 355.7m
Auto +52% y/y to 873.6m +11% q/q, Indu +28% y/y to 613.2m +5% q/q, Others +2.7% y/y to 705.8m, -1.9% q/q
Continued strong demand in auto and indu, seeing some softness in legacy indu (closest to consumer) with continued strength in EV, ADAS, factory automation, alt. energy, etc., increasing weakness in non-core markets, linearity “up and to the right”
Disti inventories at all-time low <7 weeks, “don’t see any pricing” issues in auto and indu, lead times “flat”, still see some supply constraints into 2023, “there is no inventory” in auto,
3Q design wins +19% q/q, signed LTSAs with 8 of top 10 solar inverter suppliers (+1 vs 1Q22)
LTSAs +5.3bn q/q to 14.1bn, NCNR orders extend up to 12m of backlog, NOT INCLUDED in 14.1bn
Exited 35m non-core revs in 3Q, expect 65-75m in 4Q and 400-450m in FY23m vs ~170m in FY22 (approx 5% revenue headwind in FY23)
4Q Outlook: Revs 2.01-2.14bn (+9-16%, est 2.08bn), GM 47-49%, EPS 1.18-1.34 (+8-23%, est 1.25, 1yr ago 4Q22 est was .81), mgmt. categorized as cautious, q/q auto +LSD, indu -MSD, non-core -M-HSD
2Q22 1.34 vs .63 +113%, est 1.26 up from 1.05
Aug 1, 2022, P=66.78, TTM EPS=4.53, P/E=15X
Revs +24.9% to 2.09bn (est 2.01bn), GM 49.7% vs 38.4%, OM 34.5% vs 19.6%
Auto +41% to 784m (+9.7% q/q), Indu +34% to 581.8m (+7.1% q/q), Other +5.6% to 719.2m
OCF 420.8m vs 488m, but before changes to NWC +69% to 714.5m as catching up from lockdowns in China were late in the quarter.
Util ticked down due to fab transitions and softness in non-core markets but ex those, util “full”
Outlook: Revs 2.07-2.17bn (est 2.02bn), GM 48-50%, adj EPS 1.25-1.37 (+44-57%, est 1.21) despite ~100-200bps GM headwind from SiC ramping faster than anticipated, mgmt. categorized outlook as conservative due to “uncertainty in the macro environment”.
Mgmt confident can keep GMs in 48-50% range despite headwinds from fab transitions “for next several quarters”.
Auto and industrial demand continues to outpace supply, seeing softness in non-core (no surprise) doubled SiC revs q/q, mgmt. previously expected FY22 SiC to double vs FY21, now expect triple, also expect >1bn of SiC rev in 2023 (previously expected exit at $1bn run-rate). >$4bn of LTSAs in SiC for next 3 years, previously 2.6bn
Fantastic results and execution, negative investors continue to under-appreciate higher chip content in auto and industrial. In January, 3Q22 estimate was .82 now management is guiding 1.25-1.37, forward estimates still look low unless economy implodes.
1Q22 1.22 vs .35, est 1.05 up from .82
May 2, 2022, P=53.51, TTM EPS=3.82, P/E=14X, FY22 P/E=13X
Revs +31% to 1.95bn (est 1.91), +5.4% q/q, GM 49.4% vs 35.2%, OM 33.9% vs 13.3%
Auto +38% to 714.5m +11.5% q/q, Indu +48% to 543.2m +4% q/q, Other +15% to 687.3m flat q/q
OCF +119% to 478.6m (1.13X NI), FCF +115% to 304.8m, Inv +15% y/y to 1.49bn as build
2Q Outlook: Revs 1.97-2.07bn (est 1.92), EPS 1.20-1.32 (est 1.05), anticipate demand will outpace supply for much of 2023. Getting better external capacity, see 2H>1H despite exiting >$300m non-core product in 2H22,
inventory to buffer fab transitions to ensure stable supply to customers.
Lead times flat q/q, no change in pushouts or cancellations. No current impact from covid lockdowns in China, outlook factors a few % potential impact
Design wins Intelligent Power and Sensing doubled y/y, shipping to 7 of top 10 makers of solar inverters. Growth in cloud on best-in-class energy efficiency.
On CNBC interview, CEO said EV chip content “for us” is 30X an ICE, often described as 3X by outside commentators.
4Q21 1.09 vs .35 est .94 up from .75, FY21 EPS 2.95 vs 0.85
Feb 7, 2022, P=57.44, TTM EPS=2.95, P/E=19X, FY22 P/E=18X, FY22 est too low
Revs +27.6% to 1.846bn, +6% q/q, GM 45.2% vs 34.4%, OM 28.6% vs 14.2%
Auto +30% y/y to 641m, +11.3% q/q, Indu +42% to 522m, +8.8% q/q, Other +16% to 683m, -0.5% q/q, FY Auto +35.7% to 2.28bn, Indu +33% to 1.8bn, Other +19.6% to 2.6bn
FCF 1.07X NI, FY21 1.32X
1Q22 Outlook: Revs 1.85-1.95bn (+25%-31.8%y/y, flat to +5.6% q/q vs -3.6% est, est 1.78bn) EPS 0.98-1.10 (vs .35, est .92), despite ~.14 drag from ~17.5% TR vs 6%, Visibility into FY22 GM 46.5-47.5%, Boosted FY25 GM target to 48-50% from 45%, OM 31-33% from 28%
Mgmt characterizes customer inventories as “low”, 4Q results and 1Q guidance support notion of securing additional capacity from foundry partners and freeing up internal capacity by exiting low-margin, non-core products to swap for newer higher margin products.
60% growth in design win funnel, expect SiC revs to more than double in FY22, more than double in again FY23 to exit with $1bn run rate based on LTSAs, in “short term” SiC ramp is dilutive to margins due to start-up costs, will be above corp average longer-term.
Expect renewable energy +>50% in FY22
Agreement to divest Belgium 150mm fab in 1Q, savings realized over 1-3 years (until exit)
Solid results, beat EPS estimates by 15%, 1Q EPS outlook over 30% above estimates, stock responding modestly favourably. Importantly 1Q outlook is for q/q growth while estimates were down, fears of inventory correction. FY22 est, factoring in 1Q outlook, implies -15% for the remainder of the year, estimates are too low due to subdued sentiment, reflecting in valuation compared to something like WOLF (15X revs and not yet profitable vs ON ~4X Revs and 19X EPS).
3Q21 .87 vs .27, est .74 up from .51
Nov 1, 2021, P=48.07, TTM EPS=2.21, P/E=22X , FY22 P/E=18X, FY22 ests too low
Revs +32% to 1.74bn (est 1.71), GM 41.5% vs 38.4%, OM 24.5% vs 12%, OpInc +171%
Auro 575.6m +37% y/y, +3.5% q/q, Indu 478.5m +48% y/y, +10.7% q/q, Other 688.1m +20% y/y +1% q/q
CFO 448.9m vs 163.4m, FCF 355.7m vs 101.8m
4Q Outlook: Revs 1.74-1.84bn (est 1.72), EPS .89-1.01 (est .75)
Expect to exit 2023 with SiC run rate ~$1bn
Booking trends indicate strong demand through much of next year, working with foundry partners to increase allocation
Significant expansion in design win funnels in automotive and industrial.
CEO repeated they aren’t chasing low margin “fab fillers”, focused on proprietary products.
Signed Long-Term Supply Agreements for >$2.5bn of Power Solutions over 3 years, >$2bn is SiC for auto and industrial applications, 2/3 for traction inverters for EVs.
“many of our largest automotive and industrial customers are co-investing with us”.
GTAT acquisition closed, will be sampling new product in Jan 2022. ON is the only end-end SiC producer, substrates, modules, and devices.
Excellent results, stock still looks compelling given longer-term opportunity and reasonable valuation on current results.
Mid-Quarter Update – August 25, 2021
Acquiring GT Advanced Technologies (GTAT) for $415 cash, to secure supply of silicon carbide (SiC) to meet growing demand.
GTAT produces Silicon Carbide and other materials, formerly a public company that entered bankruptcy in 2014 after an agreement with Apple to provide sapphire screens fell apart as GTAT wasn’t able to deliver on promises, exited bankruptcy in 2016 after changing CEOs twice.
GTAT opened its SiC manufacturing facility in 2018, in March 2020 GTAT signed a supply agreement with ON for SiC (also other customers like Infineon).
Closing expected in 1H22, expect to be marginally dilutive, accretive within 1 year.
Investor day – Aug 5, 2021
FY21E Revs 6.6bn (FY22 est 6.6bn), FY25 Targets: Rev net of non-core exits 10-15% of current revs, CAGR net of exits 7-9%, 2X Semi Industry (imply Revs 8.65-9.3bn), GM 45%, OM 28% (OpInc growth 2X rev growth), FCF margin 20-25% (~2bn vs ~1bn FY21E), could drive EPS >$5 depending on buybacks.
~20-25% of current revs non-core, exit about half of that, mute top-line growth into 2023 but should see OM expansion, revs accelerate after.
CEO was attracted to ON by its silicon carbide, was “dabbling”, over the last 7 months they’ve doubled down, winning long-term agreements.
Capital allocation: invest in organic growth, M&A, target 1.5-2X leverage, 50% of FCF to shareholders (share buybacks)
“we won’t be everything to everyone, we’re going to be the partner for the disruptors and those who value innovation”
2Q21 .63 vs .12 vs .42, est .49 up from .39
Aug 2, 2021, P=39.06, TTM EPS=1.61, P/E=24X, FY21 P/E=21X
New record levels quarter, fantastic progress and results.
Revs +38% to 1.67bn (+24% vs 2-yr), GM 38.4% vs 30.8%, OM 19.6% vs 7.4%
Auto +69% to 555.8m, Computing +59% to 257.1m, Consumer +38.3% to 166.5m, Indu +24.3% to 433.7m, Comms +1.5% to 256.9m, all segments up q/q
Utilization 83% vs 84% in 1Q, GM gain due to structural improvements.
Mgmt. proactively reducing distributor inventory to hold more inventory to better support customers, minimize double ordering, mgmt. establishing long-term supply agreements (LTSAs)
Mgmt expects “ongoing structural changes in the business should enable us to report strong results on a sustainable basis”, not yet reflect fab divestments or East Fishkill
Continue to see accelerating demand in automotive and industrial, expect incremental supply and revenue growth in 2H, capacity increases for strategic growth products.
Very bullish on EV opportunity, power solutions affords customers best of both worlds in terms of cost and range.
CFO 488m vs 154.4m, FCF 388m vs 80.4m (FCF=1.4X NI)
3Q Outlook Revs 1.66-1.76bn (est 1.61), GM 39-41%, EPS .68-.80 (est .51)
Mid-Quarter Update – May 10, 2021
Offering 700m 0% convert maturing May 1, 2027, convertible at 52.97 (43% premium), expected to settle principal with cash and any conversion premium to be settled with cash, shares, or a combination.
Cash to repurchase `.625% convertible due 2023, repay some other debt, general corporate purposes including possibly stock repurchase
1Q21 .35 vs .10, est .33 up from .25
May 3, 2021, P=39.00, TTM EPS 1.10, P/E=35X, FY21 P/E=24X
Revs +16% to 1.48bn, GM 35.2% vs 34.4%, OM 13.3% vs 6.6%
PSG +20% to 747m, ASG +14% to 531.5m, ISG +9% to 203.2
Auto record levels, +5% q/q, +16% y/y to 514.8m, Computing +54% to 208.3m, Consumer +24% to 158m, Industrial +16.7% to 370.7m, Communications -10% to 229.8m
Adj EBITDA 329 vs 212.7, CFO 218.5m vs 166m, FCF 141.5m vs 33.7m
Utilization 84%, upcoming quarters will see portfolio optimization efforts shift higher-margin products to their capacity
Secured significant design wins in Silicon Carbide, “meaningfully” more efficient than competitors, enables EV customers to make favourable trade-offs between cost and range.
Expects momentum of ramp to subside in 2H but to stay at strong levels, stock weak as analysts confused over seasonality % change 2Q to 3Q thinking it could signal a turning point in trajectory of sales.
2Q Outlook: Revs 1.57-1.67bn (est 1.49), EPS .44-.54, est .39, top end of guidance would put them about .10 shy of FY21 estimates which still look too low.
4Q20 .35 vs .30, est .28 up from .24, FY20 EPS 0.85 vs 1.49
Feb 1, 2021, P=34.49, TTM EPS 0.85, P/E=41X, FY21 P/E=25X
Revs +3% to 1.45bn (est 1.36), GM 34.4% vs 34.6%, 14.2% vs 12.3%, OpInc +19%
Auto +5.9% to 491m +17% q/q, record level, 34% of revs, Computing +21.8% to 187.9m, +9.4% q/q, Consumer -1.8% to 154.4m, +4.8% q/q, Industrial/Medical +2.1% to 348.3m, +6.7% q/q, Comms -7.3% to 264.4m, +4.9% q/q
Intelligent Sensing +4.4% to 207.9m, +18.6% q/q, Advanced Solutions +2.95 to 522.1m, +5.6% q/q, Power Solutions +3% y/y to 716.4m, +10.7% q/q
4Q20 CFO 400.4m vs 91.7m, FCF 163.4m 284m vs (20.7)
FY20 CFO 884.3m vs 694.7m, FCF 500.7m vs 160.1m
1Q21 OutlookL Revs 1.41-1.51bn (+10-18%, est 1.35bn), GM 34.1%-36.1%, OM 12%-14.4%, implies EPS .27-.37 w 14% TR, est .25n(vs .10 vs .43, 2 years ago GM was 37%, OM 15.5)
Repaid 759.3m of debt (2020 Converts), net debt 2.4bn
Re-evaluating product portfolio to reduce complexity, low-margin low-growth products, focused R&D, realign manufacturing footprint, expect significant progress by August investor meeting (not necessarily incompatible with current direction, CEO expressed confidence in 300mm fab)
Solid results and guidance ahead of estimates but bigger picture is drive for improvement. While new CEO will discuss new targets in August, drive to grow and improve margins is compatible with the spirit of the existing FY23 targets, to a degree the ball is in motion with fab consolidation but product line rationalization and focused R&D investments look to be new and likely more upside than FY23 targets but timing is unknown.
3Q20 .27 vs .33 -18%, est .20 up from .16
Nov 2, 2020, P=25.09, TTM EPS=0.80, P/E=31X, FY P/E=19X
Revs -5% to 1.317bn, +9% q/q, GM 33.5% vs 35.8%, OM 12% vs 13%, adj OpInc -12.4%, adj EBITDA -5.7%
Automotive -6% y/y +27.9% q/q to 419.2m, Computing +12% y/y +8.7% q/q to 172.2m, Industrial/Medical -6.9% y/y -6.3% q/q to 327.6m, Comms -9.9% y/y flat q/q to 255.4m
Intelligent Sensing -5.3% y/y +4.1% q/q to 175.3m, Advanced Solutions -2.8% y/y +15.9% q/q to 494.6m, Power Solutions -5.9% y/y +4.7% q/q to 647.3m
Mgmt “making strong progress in optimizing manufacturing footprint and qualifying 300mm mfng processes”
Expect to see above seasonal demand trends across most end-markets, all geogs, in the near term
Design wins are accelerating and design funnel is expanding “at a rapid pace”
Recognized some revenue from East Fishkill for 1st time
Expect to use 690m in 4Q to repay convert, reduce inventories q/q, in discussions with various parties re previously announced planned sale of 2 fabs, progress on shuttering Rochester fab, annual savings of 15m to start in 1Q21
4Q Guidance: Revs 1.3-1.4bn (est 1.31bn, vs 1.4bn), GM 32.9-34.9%, implies EPS .24-.34 using 12% TR (est .24, vs .30), expect auto, industrial, computing. consumer up q/q, comms flat to down due to customer specific geopolitical factors
Planning FY21 to be strong year, quarterly expect variable comp to increase 25-30m starting 1Q21
In auto, significant amount of ADAS prodn (~20% of their auto) moving from Level 1 to Level 2, ~$150 content vs $10, EV content going from $40-50 to $500
2Q20 .12 vs .42, 0% tax rate, est .02 down from .19
Aug 8, 2020, P=20.84, TTM EPS=0.86, P/E=24, FY21 P/E=16X
Revs -10% to 1.21bn, GM 30.8% vs 37.1%, OM 7.4% vs 15.7%, OpEx 284.6m vs 288.2m, OpInc -58% to 89.7m
EBITDA 211.2m vs 325.8m and 212.7m in 1Q, CFO -31% to 154.5m, FCF +18% to 81.2m
PSG -12% to 618m, AS -7.7% to 427m, ISG -8.8% to 168m
Auto -26% to 327m, Industrial -3% to 348m, Comm +3% to 255m on strong 5G growth, Computing +14% to 158m, Consumer -22% to 126m
3Q Outlook: Revs 1.2-1.33bn, GM 32-34%, OpEx 277-293m, w 20% TR implies EPS .14-.24
OpEx lower than guided, 3Q opex lower than 2Q, expect significant q/q improvement in Auto, industrial and Comm down q/q due to 1 customer but don’t expect further declines from that customer (Huawei?), Computing and Consumer up q/q
Started prodn at East Fishkill in 2Q, yields “spectacular”, expect lower COVID19 costs coupled with recovery resulting in sustained margin improvement, exploring sale of Niigata fab in addition to Belgium, probably 1-1.5 years to get full cost savings
Not seeing meaningful pushouts or cancellations of orders
Design win pipeline continues to expand rapidly, multiple strategic wins for power, analog and sensor products in auto, industrial, and cloud power applications, recently won a very significant design win with a leading global OEM for Silicon Carbide power module for EVs, expect revs in 1 year, expect more design wins. Seeing strong design wins in industrial automation (warehouse, delivery) and industrial IoT,
Expecting significant shipments of LiDAR products mid-late 2021
Seeing improved order activity in most end markets/geographies
Results not as bad as feared even with a 20% tax rate, guidance is for decent q/q improvement, long-term trends intact and accelerating is very encouraging.
1Q20 .10 vs .43 -77%, est .15 down from .31, low est was .07, .02 shaved off by 20% TR vs 8%
May 9, 2020, P=17.12, TTM EPS=1.16, P/E=15X, FY21 P/E=11X
Revs -8% to 1.28bn (low end of updated range), GM 31.5% vs 37% (lower util), OM 6.6% vs 15.5%, OpInc -61% to 84m due to higher D&A, EBTDA -39% to 181.7m
Power -11.4% to 623.9m, Analog -5.5% to 467m, Intelligent Sensing -1% to 187m
Auto -6% to 439m or 34% of revs, expect 2Q auto down steeply q/q n 2Q
Industrial -12% to 315m or 25% of revs, expect 2Q up q/q
Communications -1% to 254m or 20% of revs, expect 2Q down q/q due to smartphones (expect q/q growth in 5G)
Computing -7% to 136m or 11% of revs, expect 2Q up q/q on server and client computing
Consumer -17% to 134m or 10% of revs, expect 2Q down q/q
CFO 166m vs 138.2m, FCF 33.7m vs (18.8m), NI + adj D&A 171.7m vs 287.2m
1.98bn in cash, 4.7bn in debt, enough liquidity for operations and maturity of convertible in December if necessary
2Q Outlook: Revs 1.1-1.26bn, GM 29-31%, OpEx 291-313m, Interest expense 33-35m, using 20% TR implies EPS (02) to .08, est .19 with low est (.22), company expects cash tax paid 10-13m but that does not necessarily line up with the quarter, supply disruptions bigger than 1Q
Current market conditions: unsurprisingly automotive severely impacted until manufacturing plants re-open (coming soon) has levelled off and is no longer declining, seeing strong activity in industrial, server, and 5G, smartphone and consumer are soft (also not surprising). China improved meaningfully, Japan “another area of moderate strength”, U.S. and Europe significantly softened (also not surprising). Customers preparing for 2H recovery, placing orders to ensure supply, significantly higher order activity for 2H vs 1H, broad based in end markets, geographies, and channels.
Mgmt expects global light vehicle prodn -20-25% in 2020 with semiconductor content to increase at a healthy pace. Secured 2nd major win for ADAS image sensors with a large Japanese OEM (one of largest automakers globally). Momentum for Silicon Carbide and silicon power for EVs continues to increase “at rapid pace”
Engagement with e-commerce customers growing rapidly, built strong design win pipeline for CMOS image censors for warehouse automation and delivery robots.
Announced on March 24th full drawdown of its 1.17bn credit line “out of abundance of caution” and affords them significant liquidity, its business is not being impaired.
Mgmt sees automotive trends such as ADAS, electrification, fuel efficiency continuing, industrial automation to accelerate, medical devices and cloud to continue growth
Expect to take out 115m of costs by end of year (90m announced in recent midQ update and 25m announced in 4Q19)
425mm CapEx expected this year on East Fishkill, initial yields have been spectacular, still on track for initial prodn mid-2020, $2bn prodn probably not unto 2023.
While earnings have been severely impacted, as with many companies, this is not representative of their normalized operations and even more importantly is partly due to higher D&A. After tax NI + adj D&A is a bit higher than CFO so CFO was not driven by a major benefit from working capital (last year significant injection into working capital). Importantly mgmt. sees improving trends for much better 2H vs 1H (consistent with expectations).
Mid Quarter Update March 6, 2020
Warned on Revs due to COVID19, expect Revs 1.275-1.375bn, previous expectation was 1.355-1.405
No surprise they saw soft order tends in China following Lunar New Year holidays and shutdown but orders have improved, have not seen significant cancellations. Factories in China have returned to normal
Announced addition restructuring efforts to save ~$90m mostly from OpEx in addition to $25m savings announced in 4Q19 report. Expect cost savings by end of FY20. Cost savings are structural and do not affect capacity and ability to respond to “significant recovery in demand”.
4Q19 .30 vs .53 -43%, est .32 down from .35, FY19 EPS 1.49 vs 1.96
Feb 3, 2020, P=23.15, TTM EPS 1.49, P/E=16X, FY20 P/E=14X
Revs +1% q/q, -7% to 1.4bn, GM 34.6% vs 37.9%, OM 12.3% vs 16.8%
Power Solutions +1.1% q/q, -11.7% y/y to 696m, Advanced Solutions (formerly Analog Solutions) -0.3% q/q, -4.3% y/y to 507m, Image Sensing +7.6% q/q, +7.2% y/y to 199m.
Auto +3.4% q/q, -3.5% y/y to 462m, Computing +0.7% q/q, -7.5% y/y to 153.4m, Consumer -0.7% q/q, -10.4% y/y to 152.9m, Industrial/Medical -2.6% q/q, -11.5% y/y to 344.3m, Comms +5.15 q/q, -3.2% y/y to 289m
Adj EBITDA 300.8m vs 358.6m and 301.2m in 3Q (minimal deterioration q/q contrasted to OpInc and EPS softness driven by slightly lower GM so impact most likely higher D&A), also had unexpected high demand in low-margin consumer product, expect to discontinue line or raise prices after 1Q.
Mgmt commented on “moderate improvement in business trends… has continued thus far in the first quarter of 2020” rather than sharp improvement.
Exploring sale of 6-inch fab in Belgium. Small restructuring to take out 25m of cost (~.05 to EPS), full impact by 4Q20, ramping 300mm East Fishkill going well, expect initial prodn mid-2020 vs prior expectation latter half of 2020.
Expect FY20 revenue growth and incremental GM >50%
1Q20 Guidance: Revs 1.355-1.405b (-10% to -6%, est 1.35b), GM 33.7%-34.7%, OpEx 327-343m, other income 29-31m, shares 413m, implies EPS .28-.32 w 10% TR (est .31), does not factor potential disruption to supply chain due to Wuhan virus.
Stock selling off hard (-12%) on miss which appears to be driven from higher D&A.
Industrial customers appear to be still normalizing inventories.
Won 16 of the 17 2-megapixel and 8-megapixel platforms awarded in 2019 for L2 and L3 vehicles. Expect to have leading share with the top 5 global LiDAR module makers.
Near-term softness not unexpected although trajectory is continued q/q improvement, EPS miss due to higher D&A and higher sales of low-margin consumer product, not indicative of anything abnormal, significant opportunity remains, 16X trailing EPS seems attractive.
3Q19 .33 vs .57, -42% w 10% TR, est .36
Oct 28, 2019, P=19.18, TTM EPS=1.71, P/E=11X, FY20 P/E=11X
Revs +3% q/q, -10% y/y to 1.38bn, GM 35.8% vs 38.7%, OM 13% vs 17.8%, OpInc -35%, adj EBITDA -20% to 301.2m,
Auto +3.3% q/q, -3.3% y/y to 445.9m, Industrial -2.9% q/q, -12.9% y/y to 350.5m, Comm +11% q/q, -8% y/y to to 275.7m, Consumer -5.4% q/q, -26% y/y to 156.9m, Computing +8.5% q/q, -7.9% y/y to 153.9m. Intelligent Sensing flat q/q, -7.5$ y/y, Analog Solutions +10% q/q, -4.3% y/y, Power Solutions -1.8% q/q, -15% y/y (had meaningful q/q growth in China auto)
4Q Outlook: Revs 1.35-1.4bn (-10% to -7% y/y), GM 35.7-36.7%, OpEx 312-328m, implies EPS .31-.34 w 10% TR, est .35 (q/q expectations: Auto and Computing up, Industrial flat, Comm and Consumer down
GAAP results include 1-time 170m charge settle litigation with Power Integrations
Mgmt says conditions show modest signs of improvement, supply chain inventories have normalized, orders are trending along normal seasonality but end demand remains weak as macroeconomic and geopolitical uncertainty persist and visibility into end-market demand remains limited but near term issues do not sway mgmt. from their long-term view of significant growth. Next year to be “significant” for 5G in China.
Global auto market remains soft but they continue to see strong content growth
Stock rallied 10%, largely because stock has been weak, results not as bad as some investors feared, valuation is very attractive and long-term opportunity still intact.
2Q19 .42 vs .46, -9%, TTM EPS 1.95, P/E=10X, FY20 P/E=11X
Revs -3% q/q, -7% y/y to 1.35bn, GM 37.1% vs 38.1%, OM 15.7% vs 16.3%, OpInc -11%
Auto -5%, Industrial -12% (27% of Revs), Communications +7% (18% of Revs), Computing -7% (10% of Revs), Consumer -21% (12% of Revs)
3Q Outlook: Revs 1.355-1.405bn (vs 1.54bn), GM 36.7-37.7%, OpEx 315-331m, other expense 29-31m, implies EPS ~.33-.36, est was .47 vs .57 last year. Expects QTNA mildly dilutive in 3Q
Stock sold off, approaching 1-year lows, now at 11X FY19 estimates
Sharper than expected broad-based inventory correction, especially in auto, drove lower than expected revs. Also saw weakness in comms due to Huawei.
Seeing stabilized/improved booking trends, expect inventory correction to be complete by 3Q or early 4Q, not seeing a recovery of buying yet (likely due to improved lead times and more conservative buying from customers).
Seeing strong adoption in vehicle electrification, active safety, analog power management, content in auto applications such as EV, LED lighting, in-vehicle network, silicon carbide products for traction inverters and on-board chargers.
ON is the only provider of automotive image sensors with a complete portfolio of 1, 2, and 8 megapixel sensors for rear or surround view cameras, increased volumes from Level 2 and 3 ADAS and autonomous vehicle. Also growing engagements for automotive radar, delivered first samples to customers.
1Q19 .43 vs .40 +8%, est .39
Revs -8% q/q, +1% y/y to 1.39bn, GM 37% vs 37.6%, OM 15.5% vs 15.7%, OpInc -0.7%
2Q Outlook: Revs 1.36-1.41bn (-7 to -3% y/y), GM 36.5-37.5%, OpEx 295-309m, EPS .39-.43 w 10% TR?
4Q18 .53 vs .39, FY18 1.96 vs 1.46, +34%
4Q Revs -3% q/q, +9% y/y to 1.5bn, GM 37.9% vs 37.5%, OM 16.8% vs 15.3%, OpInc +20%, EPS +36% to 0.53
4Q all business units were up (Intelligent Sensing, Analog Solutions, and Power Solutions). As for end markets, Consumer was -10% while Automotive, Computing, Industrial, and Comms were up. Auto was 31.6% of Revs and Industrial was 26%.
FY18 Revs +9% to 5.88bn
1Q19 Outlook: Revs 1.365-1.415bn (-0.8% to +2.8%), EPS.43-.47? vs EPS .40