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01/11 07:56
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call reveals several negative factors: a significant decline in automotive revenue, pricing pressures, workforce reductions, and declining utilization rates, all of which could impact margins negatively. Despite a strong share buyback plan, the financials show a drop in gross margin and a GAAP operating loss. The Q&A indicates uncertainty in market conditions and management's lack of clarity on key metrics. The positive aspects, such as increased free cash flow and share repurchases, are overshadowed by the broader negative trends, leading to an expected negative stock price movement.
Revenue $1,450,000,000, which is above the midpoint of guidance. Automotive revenue was $762,000,000, down 26% sequentially due to weakness in Europe and seasonality in Asia. Industrial revenue was $400,000,000, down 4% sequentially, but better than expected.
Non-GAAP Earnings Per Share $0.55, down from $1.80 in Q1 of 2024.
Non-GAAP Gross Margin 40%, down 530 basis points sequentially and 590 basis points year-over-year due to lower revenue and under absorption with lower utilization levels.
Free Cash Flow Increased 72% year-over-year to $455,000,000, representing 31% of revenue.
Share Buyback $300,000,000 of shares repurchased in Q1, which is 66% of free cash flow.
GAAP Gross Margin 20.3%, which includes restructuring charges.
GAAP Operating Expenses $868,000,000, which includes restructuring charges of $539,000,000.
GAAP Operating Margin Negative 39.7%.
GAAP Tax Rate 13.5%.
Diluted GAAP Earnings Per Share Loss of $1.15, compared to earnings of $1.40 in Q1 of 2024.
Cash and Short-term Investments $3,000,000,000, with total liquidity of $4,100,000,000.
Cash from Operations $602,000,000.
Capital Expenditures $147,000,000.
Inventory Days 219 days, down by $164,000,000 quarter-over-quarter.
Distribution Inventory Declined by $27,000,000 with weeks of inventory increasing to 10.1 from 9.6 in Q4.
Non-GAAP Operating Expenses $315,000,000, compared to $314,000,000 in the quarter a year ago.
Non-GAAP Operating Margin 18.3%.
Non-GAAP Tax Rate 16%.
Non-GAAP Diluted Share Count Approximately 422,000,000 shares.
New Product Launches: Onsemi has secured a new 750-volt plug-in hybrid electric vehicle (PHEV) design with a major U.S. automotive OEM, marking a transition from silicon to silicon carbide (SiC) in new PHEV platforms.
Image Sensors: Onsemi began shipments of an 8-megapixel image sensor to a leading OEM in China for ADAS systems, indicating a strong foothold in automotive applications.
Treo Platform: The Treo platform is expanding with new products including voltage translators and ultrasonic sensors, aiming for $1 billion in revenue by 2030.
Market Expansion in Automotive: Onsemi expects to have SiC in nearly 50% of new electric vehicle models launched in China, with significant ramp-up expected in late 2025.
AI Data Center Growth: AI data center revenue more than doubled year-over-year in Q1, driven by intelligent power solutions.
Operational Efficiencies: Onsemi reduced internal fab capacity by 12% to lower fixed costs, expecting annualized savings of $22 million.
Workforce Reduction: A global workforce reduction of 9% was implemented to drive sustainable efficiencies, expected to save $25 million in Q2.
Strategic Shift in Pricing: Onsemi is using pricing strategically to defend and increase market share in key areas, anticipating low single-digit pricing declines.
Focus on R&D Investment: Continued investment in R&D to deliver differentiated products and maintain technology leadership in key markets.
Macroeconomic Landscape: The company is navigating a challenging macroeconomic landscape, which has led to cautious customer behavior and inventory digestion.
Geopolitical Environment: An uncertain geopolitical environment poses risks, although the company has established a flexible and geographically diversified supply chain to mitigate these risks.
Tariff Concerns: While the company expects minimal direct impact from current tariff policies, there is caution regarding potential indirect impacts on customers.
Automotive Revenue Decline: Automotive revenue declined 26% sequentially, attributed to weakness in Europe and seasonality in Asia, particularly due to Chinese New Year.
Pricing Pressure: The company anticipates low single-digit pricing declines in certain areas due to competitive pressures and market conditions.
Workforce Reduction: A global workforce reduction of 9% was implemented to drive sustainable efficiencies, which may impact employee morale and operational capacity.
Utilization Rates: Utilization rates are expected to decline slightly in Q2, which could negatively impact gross margins.
Inventory Management: The company is managing inventory levels carefully, with a focus on maintaining a healthy balance while navigating the uncertain market.
Restructuring Charges: Restructuring charges related to capacity reductions and realignment may impact short-term financial performance.
Economic Factors: Overall economic factors, including demand fluctuations and customer caution, continue to pose risks to revenue growth.
Revenue: Q1 revenue of $1,450,000,000 exceeded the midpoint of guidance.
Gross Margin: Non GAAP gross margin of 40%.
Operational Initiatives: Focus on streamlining operations through a fab right approach and investing in R&D for differentiated products.
Supply Chain Strategy: Established a flexible and geographically diversified supply chain to enhance supply resilience.
Silicon Carbide Adoption: Secured a new PHEV design with a major U.S. automotive OEM, indicating a transition from silicon to silicon carbide.
Treo Platform: On track to double the number of products year over year, aiming for $1,000,000,000 commitment by 02/1930.
Q2 Revenue Guidance: Expected revenue in the range of $1,400,000,000 to $1,500,000,000.
Q2 Gross Margin Guidance: Non GAAP gross margin expected between 36.5% and 38.5%.
Q2 Operating Expenses Guidance: Expected OpEx in the range of $285,000,000 to $300,000,000.
Q2 Earnings Per Share Guidance: Non GAAP earnings per share expected to be in the range of $0.48 to $0.58.
CapEx Guidance: Expected capital expenditures in the range of $70,000,000 to $90,000,000.
Free Cash Flow Guidance: Intend to increase share repurchase to 100% of free cash flow.
Share Buyback Program: In Q1, ON Semiconductor repurchased $300,000,000 of shares, which accounted for 66% of free cash flow. For 2025, the company plans to increase share repurchases to 100% of free cash flow, with approximately $1,500,000,000 remaining on the repurchase authorization.
The earnings call shows mixed sentiments: positive momentum in AI and automotive sectors, strategic investments, and optimistic guidance. However, concerns exist over utilization rates, unclear responses from management, and non-repeating revenue impacting 2026. The Q&A highlights stabilization but cautious outlooks and vague management answers. Thus, the sentiment is neutral, reflecting balanced positives and negatives.
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