ON Semiconductor Reports Strong Performance in Third Quarter 2018October 28, 2018 by Paul Shepard
ON Semiconductor Corporation announced that total revenue in third quarter of 2018 was $1,541.7 million, up approximately 11 percent compared to revenue in third quarter of 2017. Third quarter 2018 revenue was up approximately 6 percent as compared to revenue in second quarter of 2018.
"Our strong performance in the third quarter clearly demonstrates the strength of our business, even in face of volatility in a few end-markets. The key driver of our business today is significant content increase in several applications in automotive, industrial and cloud power end-markets, as opposed to underlying unit growth in these end-markets,” said Keith Jackson, president and CEO of ON Semiconductor.
“With a strong design win pipeline and expanding portfolio of power, analog, and sensor products, we are well positioned to capitalize on key mega-trends in automotive, industrial and cloud power end-markets. Along with solid revenue performance, our operational execution continues to be robust, as demonstrated by our strong margin performance and free cash flow generation.
“Despite near term volatility in a few of our end-markets, we are upbeat about our long term outlook, and we are making prudent investments to sustain our revenue momentum and to further strengthen our industry-leading cost structure,” Jackson added.
Summary of Q3 results
- Revenue of $1,541.7 million
- Gross margin of 38.7 percent
- GAAP operating margin of 15.7 percent and non-GAAP operating margin of 17.8 percent
- Operating cash flow of $358.2 million and free cash flow of $227.8 million
- GAAP earnings per share of $0.38 and non-GAAP earnings per share of $0.57
FOURTH QUARTER 2018 OUTLOOK
Fourth quarter outlook includes contribution from ON Semiconductor Aizu Co., Ltd. ("OSA"), which is a manufacturing joint venture for an 8-inch wafer fab located in Aizu-Wakamatsu, Japan. With its recent purchase of additional 20 percent share in the joint venture, ON Semiconductor now owns 60 percent share in the joint venture, and consequently, the Company will report operational results of the joint venture in its consolidated financial statements starting with fourth quarter of 2018. As a part of that transaction, the Company may provide manufacturing services to the joint venture partner for up to six quarters starting from fourth quarter of 2018.
Based on product booking trends, backlog levels and estimated turns levels, the Company anticipates revenue in fourth quarter of 2018 to be approximately $1,480 to $1,530 million. Revenue outlook for fourth quarter of 2018 includes revenue of approximately $20 million from manufacturing services provided by OSA.
Gross margin for fourth quarter of 2018 is expected to be in range of 37.1 percent to 38.1 percent. Fourth quarter 2018 gross margin outlook includes negative impact of 50 basis points from manufacturing services provided by OSA. The outlook for fourth quarter of 2018 includes anticipated stock-based compensation expense of approximately $19 million to $21 million. Net cash paid for income taxes is expected to be $8 million to $12 million. The following table outlines ON Semiconductor's projected fourth quarter of 2018 GAAP and non-GAAP outlook: