ON Semiconductor Reports Second Quarter 2016 Results

For the second quarter of 2016, highlights include:

  • Total revenues of $877.8 million
  • GAAP earnings per diluted share of $0.06, non-GAAP earnings per diluted share of $0.21
  • GAAP and non-GAAP gross margin of 35.1 percent
  • GAAP operating margin of 8.6 percent, and non-GAAP operating margin of 12.3 percent

PHOENIX — (BUSINESS WIRE) — August 6, 2016 — ON Semiconductor Corporation (Nasdaq: ON) today announced that total revenues in the second quarter of 2016 were $877.8 million, up approximately seven percent compared to the first quarter of 2016. During the second quarter of 2016, the company reported GAAP net income of $25.1 million, or $0.06 per diluted share. The second quarter 2016 GAAP net income was negatively impacted by approximately $63.4 million of special items, details of which can be found in the attached schedules.

Second quarter 2016 non-GAAP net income was $88.5 million, or $0.21 per diluted share, compared to $70.3 million, or $0.17 per diluted share, for the first quarter of 2016. A reconciliation of these non-GAAP financial measures (and other non-GAAP measures used elsewhere in this release) to the company's most directly comparable measures prepared in accordance with U.S. GAAP are set forth in the attached schedules and on our website at http://www.onsemi.com. Additional information on revenue by end market, region, distribution channel, business units and share count can be found on the "Investors" section of our website.

Total company GAAP and non-GAAP gross margin in the second quarter was 35.1 percent. For the second quarter of 2016, GAAP operating margin was 8.6 percent, and non-GAAP operating margin was 12.3 percent.

Adjusted EBITDA for the second quarter of 2016 was $161.7 million. Adjusted EBITDA for the first quarter of 2016 was $141.5 million.

"Our execution momentum continued in the second quarter with strong revenue growth and margin expansion," said Keith Jackson, president and CEO of ON Semiconductor. "We intend to continue on our current trajectory of margin expansion as ongoing optimization of our operations should enable us to deliver further improvements in our margins.

"Traction in our strategic end-markets of automotive, industrial, and mobile devices remains strong, even though the global macroeconomic conditions and overall demand environment continue to be subdued. We remain well positioned to outgrow the semiconductor industry, driven by strength of our product portfolio and design win pipeline."


"Based on product booking trends, backlog levels, and estimated turns levels, we anticipate that total ON Semiconductor revenue will be approximately $885 to $925 million in the third quarter of 2016," Jackson said. "Backlog levels for the third quarter of 2016 represent approximately 80 to 85 percent of our anticipated third quarter 2016 revenue. The outlook for the third quarter of 2016 includes stock-based compensation expense of approximately $13 million to $15 million. Net cash paid for income taxes is expected to be $5 million to $9 million."

The following table outlines ON Semiconductor's projected third quarter of 2016 GAAP and non-GAAP outlook.



Total ON Semiconductor


Items ***


Total ON Semiconductor

Revenue $885 to $925 million $885 to $925 million
Gross Margin 34.6% to 36.6% 34.6% to 36.6%
Operating Expenses $225 to $237 million $25 to $27 million $200 to $210 million
Net Interest Expense / Other Expenses* $9.5 to $12.5 million $9.5 to $12.5 million

Convertible Notes, Non-cash Interest Expense,
Pre-acquisition Interest Expense

$22 to $29 million $22 to $29 million
Diluted Share Count ** 420 million 420 million
*   Convertible Notes, Non-cash Interest Expense is calculated pursuant to FASB's Accounting Standards Codification (“ASC”) Topic 470: Debt. Includes interest expense related to acquisition of Fairchild Semiconductor.
** Diluted share count can vary for, among other things, the actual exercise of options or vesting of restricted stock units, the incremental dilutive shares from the company's convertible senior subordinated notes, and the repurchase or the issuance of stock or convertible notes or the sale of treasury shares. In periods when the quarterly average stock price per share exceeds $18.50, the Non-GAAP diluted share count and Non-GAAP net income per share includes the anti-dilutive impact of the company’s hedge transactions, issued concurrently with the 1.00% Notes. At an average stock price per share between $18.50 and $25.96, the hedging activity offsets the potentially dilutive effect of the 1.00% Notes and warrants.
*** Special items may include: amortization of acquisition-related intangibles; expensing of appraised inventory fair market value step-up; inventory valuation adjustments; purchased in-process research and development expenses; restructuring, asset impairments and other, net; goodwill impairment charges; gains and losses on debt prepayment; non-cash interest expense; interest incurred for acquisition related financing for periods prior to the acquisition close; actuarial (gains) losses on pension plans and other pension benefits; income tax adjustments related to these special items; and certain other special items, as necessary. These special items could change significantly and are subject to swings from period to period. As a result, we are not able to reasonably estimate and separately present the individual impact of these special items. For this reason, we use a projected range of the aggregate amount of special items in order to calculate our projected non-GAAP operating expense outlook.
**** Regulation G and other provisions of the securities laws regulate the use of financial measures that are not prepared in accordance with GAAP. We believe these non-GAAP measures provide important supplemental information to investors. We use these measures, together with GAAP measures, for internal managerial purposes and as a means to evaluate period-to-period comparisons. However, we do not, and you should not, rely on non-GAAP financial measures alone as measures of our performance. We believe that non-GAAP financial measures reflect an additional way of viewing aspects of our operations that - when taken together with GAAP results and the reconciliations to corresponding GAAP financial measures that we also provide in our releases - provide a more complete understanding of factors and trends affecting our business. Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies' non-GAAP financial measures, even if they have similar names.

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