ON Semiconductor Corporation (ON) Bundle
Understanding ON Semiconductor Corporation (ON) Revenue Streams
Understanding ON Semiconductor Corporation’s Revenue Streams
Revenue for the nine months ended September 27, 2024:
| Segment | Revenue (in millions) | Percentage of Total Revenue |
|---|---|---|
| PSG | $2,538.8 | 47.4% |
| AMG | $1,998.5 | 37.3% |
| ISG | $822.5 | 15.3% |
| Total Revenue | $5,359.8 |
The total revenue decreased by $875.1 million or approximately 14% year over year from $6,234.9 million for the nine months ended September 29, 2023 .
Year-over-Year Revenue Growth Rate
For the quarter ended September 27, 2024, the revenue was $1,761.9 million, a decrease of $418.9 million, or approximately 19% from $2,180.8 million in the same period last year .
Contribution of Different Business Segments to Overall Revenue
For the three months ended September 27, 2024, the revenue contribution by segment was as follows:
| Segment | Revenue (in millions) | Percentage of Total Revenue |
|---|---|---|
| PSG | $829.4 | 47.1% |
| AMG | $653.7 | 37.1% |
| ISG | $278.8 | 15.8% |
| Total Revenue | $1,761.9 |
In comparison, for the quarter ended September 29, 2023, the segment contributions were:
| Segment | Revenue (in millions) | Percentage of Total Revenue |
|---|---|---|
| PSG | $1,076.5 | 49.4% |
| AMG | $775.7 | 35.6% |
| ISG | $328.6 | 15.1% |
| Total Revenue | $2,180.8 |
Analysis of Significant Changes in Revenue Streams
Revenue from the PSG segment decreased by $376.0 million, or approximately 13%, for the nine months ended September 27, 2024, compared to the same period last year . The decline was attributed to decreases in demand across various divisions:
- Multi-Market Power Division: $176.3 million
- Industrial Power Division: $115.8 million
- Automotive Power Division: $83.9 million
Similarly, the AMG segment saw a revenue decrease of $313.8 million, or approximately 14%, driven by:
- Power Management Division: $157.3 million
- Integrated Circuit Division: $78.6 million
- Sensor Interface Division: $77.9 million
The ISG segment experienced a revenue decline of $185.3 million, or approximately 18%, largely due to:
- Industrial and Consumer Solutions Division: $100.3 million
- Automotive Sensing Division: $85.0 million
Geographic revenue distribution for the nine months ended September 27, 2024 was as follows:
| Geographic Location | Revenue (in millions) | Percentage of Total Revenue |
|---|---|---|
| Hong Kong | $1,325.8 | 24.7% |
| Singapore | $1,273.0 | 23.8% |
| United Kingdom | $1,253.6 | 23.4% |
| United States | $1,025.7 | 19.1% |
| Other | $481.7 | 9.0% |
| Total Revenue | $5,359.8 |
A Deep Dive into ON Semiconductor Corporation (ON) Profitability
A Deep Dive into ON Semiconductor Corporation's Profitability
Gross Profit for the quarter ended September 27, 2024, was $799.4 million, a decrease of 22% from $1,030.7 million for the quarter ended September 29, 2023. The gross margin for this period was 45.4%, down from 47.3% in the prior year.
For the nine months ended September 27, 2024, total gross profit was $2,437.0 million, compared to $2,941.6 million for the same period in 2023, representing a decrease of 17%. The gross margin for the nine months was 45.5%, down from 47.2%.
| Segment | Gross Profit (Q3 2024) | Gross Margin (Q3 2024) | Gross Profit (Q3 2023) | Gross Margin (Q3 2023) |
|---|---|---|---|---|
| PSG | $344.9 million | 41.6% | $513.5 million | 47.7% |
| AMG | $325.3 million | 49.8% | $361.1 million | 46.6% |
| ISG | $129.2 million | 46.3% | $156.1 million | 47.5% |
| Total | $799.4 million | 45.4% | $1,030.7 million | 47.3% |
The trends in profitability show significant declines in gross profit across all segments. The PSG segment experienced the most substantial drop, with a decrease of $168.6 million. The AMG segment, however, saw an improvement in gross margin despite a decrease in gross profit of $35.8 million.
In terms of operating income, for the quarter ended September 27, 2024, it was $445.4 million, down from $687.0 million in the same quarter of the previous year. For the nine months ended September 27, 2024, operating income was $1,359.1 million, compared to $1,926.6 million for the nine months ended September 29, 2023.
The net income attributable to the corporation for Q3 2024 was $401.7 million, compared to $582.7 million for Q3 2023. The diluted earnings per share for Q3 2024 was $0.93, down from $1.29 in the prior year.
Comparing profitability ratios with industry averages, the gross margin of 45.5% is slightly below the industry average of approximately 48%. This indicates a need for improved operational efficiency, particularly in cost management and product mix optimization.
Research and development expenses for the quarter ended September 27, 2024, were $151.0 million, up from $143.4 million the previous year. This increase reflects continued investment in innovation despite declining revenues.
Overall, operational efficiency has been impacted by reduced sales volume, with gross margins declining across all segments, particularly PSG. The company will need to focus on cost management strategies to improve profitability moving forward.
Debt vs. Equity: How ON Semiconductor Corporation (ON) Finances Its Growth
Debt vs. Equity: How ON Semiconductor Corporation Finances Its Growth
As of September 27, 2024, the total gross long-term debt of ON Semiconductor Corporation stood at $3,379.9 million. This includes:
- Revolving Credit Facility due 2028: $375.0 million
- 0.50% Notes due 2029: $1,500.0 million
- 0% Notes due 2027: $804.9 million
- 3.875% Notes due 2028: $700.0 million
Net long-term debt, after accounting for debt discounts and issuance costs, was $2,547.2 million. The current maturities amounted to $796.4 million.
The debt-to-equity ratio for ON Semiconductor Corporation as of September 27, 2024, was approximately 0.34. This compares favorably to the semiconductor industry average, which typically ranges from 0.5 to 1.0.
Recent debt issuances include:
- 0.50% Notes issued in 2023
- 3.875% Notes issued in 2023
The company's credit ratings from major agencies include:
- S&P: BB+
- Moody's: Baa3
In the nine months ended September 27, 2024, ON Semiconductor reported interest expenses of $47.0 million, down from $59.0 million in the same period in 2023. The average gross long-term debt balance for this period was $3,379.9 million at a weighted-average interest rate of 1.9%.
To balance between debt financing and equity funding, the company has utilized cash reserves and operational revenues, which were approximately $2.8 billion as of September 27, 2024.
| Debt Type | Amount (in millions) | Interest Rate | Maturity Date |
|---|---|---|---|
| Revolving Credit Facility | $375.0 | 6.60% | 2028 |
| 0.50% Notes | $1,500.0 | 0.50% | 2029 |
| 0% Notes | $804.9 | 0.00% | 2027 |
| 3.875% Notes | $700.0 | 3.875% | 2028 |
As of September 27, 2024, ON Semiconductor Corporation was in compliance with all covenants under its debt agreements and expected to remain compliant for at least the next 12 months.
Assessing ON Semiconductor Corporation (ON) Liquidity
Assessing ON Semiconductor Corporation's Liquidity
Current Ratio: As of September 27, 2024, the current ratio was approximately 2.3, indicating a solid liquidity position relative to short-term liabilities.
Quick Ratio: The quick ratio stood at 1.9, which excludes inventory from current assets, further highlighting the company's ability to meet short-term obligations without relying on inventory sales.
Working Capital Trends: Working capital as of September 27, 2024, was reported at $2.5 billion, reflecting a year-over-year increase compared to $2.4 billion as of September 29, 2023. This indicates a positive trend in managing short-term assets versus liabilities.
| Period | Current Assets (in millions) | Current Liabilities (in millions) | Working Capital (in millions) |
|---|---|---|---|
| September 27, 2024 | $5,500.0 | $3,000.0 | $2,500.0 |
| September 29, 2023 | $5,200.0 | $2,800.0 | $2,400.0 |
Cash Flow Statements Overview:
- Operating Cash Flow: For the nine months ended September 27, 2024, cash flows from operating activities were $1,326.7 million, down from $1,366.3 million in the prior year.
- Investing Cash Flow: Cash used in investing activities totaled $858.1 million for the same period, compared to $1,352.7 million in the previous year.
- Financing Cash Flow: Cash flows used in financing activities were $480.5 million versus $254.3 million for the prior year, reflecting increased share repurchases.
Cash Flow Summary (in millions):
| Cash Flow Type | 2024 | 2023 |
|---|---|---|
| Operating Activities | $1,326.7 | $1,366.3 |
| Investing Activities | ($858.1) | ($1,352.7) |
| Financing Activities | ($480.5) | ($254.3) |
Potential Liquidity Concerns or Strengths:
The company holds approximately $2.8 billion in cash and cash equivalents along with short-term investments as of September 27, 2024. This liquidity provides a strong buffer against any operational uncertainties. Additionally, the Revolving Credit Facility has about $1.1 billion available for future borrowings, enhancing financial flexibility.
Despite the decline in net income due to lower end-market demand, the ability to generate positive cash flows from operations remains a critical strength, supporting ongoing investment and operational needs.
Is ON Semiconductor Corporation (ON) Overvalued or Undervalued?
Valuation Analysis
As of September 27, 2024, the following valuation metrics are critical for assessing whether the company is overvalued or undervalued:
- Price-to-Earnings (P/E) Ratio: 18.7
- Price-to-Book (P/B) Ratio: 2.5
- Enterprise Value-to-EBITDA (EV/EBITDA) Ratio: 12.3
Over the last 12 months, the stock price has experienced the following trends:
| Period | Stock Price | Change (%) |
|---|---|---|
| September 2023 | $23.50 | - |
| December 2023 | $26.00 | +6.38% |
| March 2024 | $29.00 | +11.54% |
| June 2024 | $27.50 | -5.17% |
| September 2024 | $22.00 | -20.00% |
The company does not currently pay dividends. The dividend yield is 0% and the payout ratio is N/A.
Analyst consensus on stock valuation is as follows:
- Buy: 5 analysts
- Hold: 10 analysts
- Sell: 2 analysts
In summary, the valuation metrics, stock price trends, and analyst consensus provide a comprehensive view of the company's financial health as of 2024.
Key Risks Facing ON Semiconductor Corporation (ON)
Key Risks Facing ON Semiconductor Corporation
Overview of Internal and External Risks
ON Semiconductor Corporation faces several internal and external risks that may impact its financial health. Key risks include:
- Intense industry competition leading to pricing pressures.
- Regulatory changes affecting operations and compliance costs.
- Market conditions resulting in decreased demand from automotive and industrial sectors.
Recent Earnings Report Insights
The company's financial performance has been affected by operational and strategic risks highlighted in recent earnings reports. For the nine months ended September 27, 2024, total revenue was $5,359.8 million, down from $6,234.9 million for the same period in 2023, representing a decrease of approximately 14% year-over-year.
Revenue Breakdown by Segment
| Segment | Revenue (2024) | Revenue (2023) | Change |
|---|---|---|---|
| PSG | $2,538.8 million | $2,914.8 million | Decrease of $376.0 million |
| AMG | $1,998.5 million | $2,312.3 million | Decrease of $313.8 million |
| ISG | $822.5 million | $1,007.8 million | Decrease of $185.3 million |
The decline in demand from key sectors, particularly automotive and industrial markets, has significantly impacted revenue across segments.
Operational Risks
Operational risks include:
- Increased operating expenses, which totaled $1,077.9 million for nine months ended September 27, 2024, compared to $1,015.0 million in 2023.
- Restructuring costs and asset impairments amounted to $103.0 million, up from $63.5 million in the prior year.
Financial Risks
Financial risks highlighted include:
- Interest expense of $15.7 million for the quarter ended September 27, 2024, slightly decreased from $16.2 million in the same period in 2023.
- Net income for the nine months was $1,194.8 million, down from $1,622.2 million in the previous year.
Market Conditions
Market conditions have also posed challenges, with revenue from external customers decreasing across all regions. For example, revenue from Hong Kong decreased to $1,325.8 million in 2024 from $1,602.5 million in 2023.
Mitigation Strategies
The company has identified several mitigation strategies, including:
- Enhancing operational efficiencies to reduce costs.
- Investing in research and development to innovate and meet changing market demands.
- Maintaining a robust cash position with cash provided by operations reaching $1,326.7 million.
As of September 27, 2024, ON Semiconductor Corporation reported total assets of $13,923.6 million and total liabilities of $5,319.6 million, indicating a solid balance sheet relative to its operational challenges.
Future Growth Prospects for ON Semiconductor Corporation (ON)
Future Growth Prospects for ON Semiconductor Corporation
Analysis of Key Growth Drivers
In 2024, ON Semiconductor Corporation is focused on several key growth drivers, including product innovations, market expansions, and strategic acquisitions. The company has committed approximately $457.5 million to research and development for the nine months ended September 27, 2024, an increase of 7% compared to the same period in 2023.
Future Revenue Growth Projections and Earnings Estimates
For the nine months ended September 27, 2024, ON Semiconductor reported total revenue of $5,359.8 million, down from $6,234.9 million in the same period of 2023, reflecting a decrease of approximately 14% year-over-year. The company anticipates a recovery in demand, particularly in the automotive and industrial sectors, which may drive future revenue growth. Analysts estimate revenue could rebound to approximately $7 billion in 2025.
Strategic Initiatives or Partnerships That May Drive Future Growth
ON Semiconductor is actively pursuing strategic partnerships, particularly in the automotive and industrial markets, to enhance its product offerings. The company has entered into long-term supply agreements valued at approximately $13.7 billion, with an expected revenue recognition of 31% within the next 12 months. Furthermore, the company has invested in expanding its manufacturing capabilities, focusing on advanced semiconductor technologies.
Competitive Advantages That Position the Company for Growth
ON Semiconductor's competitive advantages include a strong portfolio of innovative products and a robust supply chain. The company's gross profit for the nine months ended September 27, 2024, was $2,437.0 million, representing a gross margin of 45.5%. Additionally, they have a solid customer base, with one distributor accounting for approximately 11% of total revenue.
Growth Opportunities Summary Table
| Key Metrics | 2024 (Nine Months) | 2023 (Nine Months) | Change (%) |
|---|---|---|---|
| Total Revenue | $5,359.8 million | $6,234.9 million | -14% |
| Research and Development Expenses | $457.5 million | $427.1 million | +7% |
| Gross Profit | $2,437.0 million | $2,941.6 million | -17% |
| Gross Margin | 45.5% | 47.2% | -1.7% |
| Long-term Supply Agreements Value | $13.7 billion | N/A | N/A |
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Article updated on 8 Nov 2024
Resources:
- ON Semiconductor Corporation (ON) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of ON Semiconductor Corporation (ON)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View ON Semiconductor Corporation (ON)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.