Business Wire | Aug 8, 2020 01:15PM EDT

ON Semiconductor Reports Second Quarter 2020 Results

Aug. 08, 2020

PHOENIX--(BUSINESS WIRE)--Aug. 08, 2020--ON Semiconductor Corporation (Nasdaq: ON) today announced that 2020 second quarter revenue was $1,213.5 million, down approximately 10 percent compared to 2019 second quarter revenue. 2020 second quarter revenue was down approximately 5 percent as compared to 2020 first quarter revenue.

"Despite disruption from COVID-19 pandemic, we continue to make strong progress towards our key strategic initiatives. To achieve our gross margin target, we have accelerated the pace of manufacturing optimization. In addition, we have made outstanding progress in ramp of our 300mm manufacturing processes at East Fishkill fab with our 300mm wafer production starting in the second quarter, significantly ahead of schedule. With expected decline in COVID-19 related costs and ongoing recovery in global macroeconomic activity, we expect to see sustained improvement in our margins," said Keith Jackson, president and CEO of ON Semiconductor. "Our design win pipeline continues to expand rapidly with multiple strategic wins for our power, analog and sensor products in automotive, industrial, and cloud-power applications.

"We are beginning to see moderate recovery in demand across most end-markets and geographies, and we expect this recovery to continue in near term driven by improving global macroeconomic activity."

Second Quarter Results (GAAP)

(in millions, except Year-Over- Sequentialper share data) 2Q 2020 2Q 2019 Year 1Q 2020 Change Change

Revenue $1,213.5 $1,347.7 (10 )% $1,277.9 (5 )%

Gross Profit $374.3 $499.0 (25 )% $402.7 (7 )%

Operating Income $43.1 $158.3 (73 )% $18.6 132 %

Net Income (Loss)Attributable to ON ($1.4 ) $101.8 (101 )% ($14.0 ) 90 %SemiconductorCorporation

Diluted Earnings $0.00 $0.24 (100 )% ($0.03 ) 100 %(Loss) Per Share

Diluted Shares 410.1 417.7 (2 )% 410.6 - %Outstanding

Second Quarter Results (Non-GAAP)

(in millions, except Year-Over- Sequentialper share data) 2Q 2020 2Q 2019 Year 1Q 2020 Change Change

Revenue $1,213.5 $1,347.7 (10) % $1,277.9 (5) %

Gross Profit $374.3 $499.6 (25) % $402.7 (7) %

Operating Income $89.7 $211.4 (58) % $84.0 7 %

Net Income Attributableto ON Semiconductor $50.2 $175.0 (71) % $42.8 17 % Corporation

Diluted Earnings Per $0.12 $0.42 (71) % $0.10 20 % Share

Diluted Shares 411.0 413.8 (1) % 412.8 - % Outstanding

Second Quarter Key Cash Flow Items

Year-Over- Sequential(in millions) 2Q 2020 2Q 2019 Year 1Q 2020 Change Change

Cash Taxes, net of $5.6 $12.9 (57) % $9.9 (43) %indemnification

Operating Cash Flow $154.5 $222.4 (31) % $166.0 (7) %

Free Cash Flow $81.2 $68.9 18 % $33.7 141 %



THIRD QUARTER 2020 OUTLOOK

Based on product booking trends, backlog levels, and estimated turns levels, the Company anticipates 2020 third quarter revenue to be approximately $1,200 million to $1,330 million.

GAAP and Non GAAP gross margin for third quarter of 2020 is expected to be between 32.0 percent and 34.0 percent.

The 2020 third quarter outlook also includes anticipated stock-based compensation expense of approximately $17 million to $19 million. Net cash paid for income taxes is expected to be $17 million to $22 million.

The following table outlines ON Semiconductor's projected third quarter of 2020 GAAP and non-GAAP outlook.

Total ON Special Total ON Semiconductor Items *** Semiconductor GAAP Non-GAAP****

Revenue $1,200 to $1,200 to $1,330 million $1,330 million

Gross Margin 32.0% to 34.0% 32.0% to 34.0%

Operating Expenses $307 to $327 $30 to $34 $277 to $293 million million million

Other Income and Expense $42 to $45 $9 to 10 $33 to $35(including interest expense), net million million million

Diluted Shares Outstanding ** 416 million 5 million 411 million

* Convertible Notes, Non-cash Interest Expense is calculated pursuant to FASB's Accounting Standards Codification Topic 470: Debt.

Diluted shares outstanding can vary as a result of, 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 in which the quarterly average stock price per share exceeds $18.50, the non-GAAP diluted share count and non-GAAP net income per share include the impact of the Company's hedge transactions issued concurrently with our 1.00% convertible** notes. As such, 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% convertible notes. In periods when the quarterly average stock price per share exceeds $20.72, the non-GAAP diluted share count and non-GAAP net income per share include the anti-dilutive impact of the Company's hedge transactions issued concurrently with the 1.625% convertible notes. At an average stock price per share between $20.72 and $30.70, the hedging activity offsets the potentially dilutive effect of the 1.625% convertible notes. Both GAAP and non-GAAP diluted share counts are based on the Company's stock price as of July 3, 2020.

Special items may include: amortization of acquisition-related intangibles; expensing of appraised inventory fair market value step-up; 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; actuarial (gains) losses on pension plans and other pension benefits; and certain other special items, as necessary. These special items are out of our control and could change*** significantly from period to period. As a result, we are not able to reasonably estimate and separately present the individual impact or probable significance of these special items, and we are similarly unable to provide a reconciliation of the non-GAAP measures. The reconciliation that is unavailable would include a forward-looking income statement, balance sheet and statement of cash flows in accordance with GAAP. 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.

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.

TELECONFERENCE

ON Semiconductor will host a conference call for the financial community at 9 a.m. Eastern Daylight Time (EDT) on August 10, 2020 to discuss this announcement and ON Semiconductor's 2020 second quarter results. The Company will also provide a real-time audio webcast of the teleconference on the Investor Relations page of its website at http://www.onsemi.com. The webcast replay will be available at this site approximately one hour following the live broadcast and will continue to be available for approximately 30 days following the conference call. Investors and interested parties can also access the conference call via telephone by dialing (877) 356-3762 (U.S./Canada) or (262) 558-6155 (International). In order to join this conference call, you will be required to provide the Conference ID Number, which is 6089248.

About ON Semiconductor

ON Semiconductor (Nasdaq: ON) is driving energy efficient innovations, empowering customers to reduce global energy use. The Company is a leading supplier of semiconductor-based solutions, offering a comprehensive portfolio of energy efficient power management, analog, sensors, logic, timing, connectivity, discrete, SoC and custom devices. The Company's products help engineers solve their unique design challenges in automotive, communications, computing, consumer, industrial, medical, aerospace and defense applications. ON Semiconductor operates a responsive, reliable, world-class supply chain and quality program, a robust compliance and ethics program, and a network of manufacturing facilities, sales offices and design centers in key markets throughout North America, Europe and the Asia Pacific regions. For more information, visit http://www.onsemi.com.

ON Semiconductor and the ON Semiconductor logo are registered trademarks of Semiconductor Components Industries, LLC. All other brand and product names appearing in this document are registered trademarks or trademarks of their respective holders. Although the Company references its website in this news release, information on the website is not to be incorporated herein.

This document contains "forward-looking statements," as that term is defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical facts, included or incorporated in this document could be deemed forward-looking statements, particularly statements about the future financial performance of ON Semiconductor, including financial guidance for the year ending December 31, 2020. Forward-looking statements are often characterized by the use of words such as "believes," "estimates," "expects," "projects," "may," "will," "intends," "plans" or "anticipates" or by discussions of strategy, plans or intentions. All forward-looking statements in this document are made based on our current expectations, forecasts, estimates and assumptions and involve risks, uncertainties and other factors that could cause results or events to differ materially from those expressed in the forward-looking statements. Among these factors are our revenue and operating performance; economic conditions and markets (including current financial conditions); risks related to our ability to meet our assumptions regarding outlook for revenue and gross margin as a percentage of revenue; effects of exchange rate fluctuations; the cyclical nature of the semiconductor industry; changes in demand for our products; changes in inventories at our customers and distributors; risks associated with restructuring actions and workforce reductions; technological and product development risks; enforcement and protection of our intellectual property rights and related risks; risks related to the security of our information systems and secured network; availability of raw materials, electricity, gas, water and other supply chain uncertainties; our ability to effectively shift production to other facilities when required in order to maintain supply continuity for our customers; variable demand and the aggressive pricing environment for semiconductor products; our ability to successfully manufacture in increasing volumes on a cost-effective basis and with acceptable quality for our current products; risks associated with our acquisitions and dispositions generally, including our ability to realize the anticipated benefits of our acquisitions and dispositions, including our acquisition of Quantenna; risks that acquisitions or dispositions may disrupt our current plans and operations, (including the risk of unexpected costs, charges or expenses resulting from acquisitions or dispositions and difficulties arising from integrating and consolidating acquired businesses, our timely filing of financial information with the Securities and Exchange Commission ("SEC") for acquired businesses and our ability to accurately predict the future financial performance of acquired businesses); competitor actions, including the adverse impact of competitor product announcements; pricing and gross profit pressures; risks associated with the addition of Huawei Technologies Co., Ltd. and its non-U.S. affiliates and subsidiaries, and other customers, to the U.S. Department of Commerce, Bureau of Industry Security Entity List; loss of key customers; risks associated with restructuring actions and workforce reductions; order cancellations or reduced bookings; changes in manufacturing yields; control of costs and expenses and realization of cost savings and synergies from restructurings; the costs to defend against or pursue litigation and the potential significant costs associated with adverse litigation outcomes; risks associated with decisions to expend cash reserves for various uses in accordance with our capital allocation policy such as debt prepayment, stock repurchases or acquisitions rather than to retain such cash for future needs; risks associated with our substantial leverage and restrictive covenants in our debt agreements that may be in place from time to time; risks associated with our worldwide operations, including changes in trade policies, foreign employment and labor matters associated with unions and collective bargaining arrangements, continuing political unrest in markets in which we do significant business, including Hong Kong, as well as man-made and/or natural disasters and public health and safety outbreaks affecting our operations or financial results, including as a result of the outbreak of the novel coronavirus disease 2019 (COVID-19) pandemic; the threat or occurrence of international armed conflict and terrorist activities both in the United States and internationally; risks of changes in U.S. or international tax rates or legislation; risks and costs associated with increased and new regulation of corporate governance and disclosure standards; risks related to new legal requirements; and risks and expenses involving environmental or other governmental regulation. Additional factors that could affect our future results or events are described under Part I, Item 1A "Risk Factors" in our 2019 Annual Report on Form 10-K filed with the SEC on February 19, 2020 (our "2019 Form 10-K") and from time to time in our other SEC reports. Readers are cautioned not to place undue reliance on forward-looking statements. We assume no obligation to update such information, except as may be required by law. You should carefully consider the trends, risks and uncertainties described in this document, our 2019 Form 10-K and other reports filed with or furnished to the SEC before making any investment decision with respect to our securities. If any of these trends, risks or uncertainties actually occurs or continues, our business, financial condition or operating results could be materially adversely affected, the trading prices of our securities could decline, and you could lose all or part of your investment. All forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by this cautionary statement.

ON SEMICONDUCTOR CORPORATION

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions, except per share data)

Quarters Ended Six Months Ended

July 3, April 3, June 28, July 3, June 28, 2020 2020 2019 2020 2019

Revenue $ 1,213.5 $ 1,277.9 $ 1,347.7 $ 2,491.4 $ 2,734.3

Cost of revenue(exclusive of 839.2 875.2 848.7 1,714.4 1,721.6 amortization shownbelow)

Gross profit 374.3 402.7 499.0 777.0 1,012.7

Gross margin 30.8 % 31.5 % 37.0 % 31.2 % 37.0 %

Operating expenses:

Research and 156.1 171.0 147.0 327.1 298.8 development

Selling and 65.6 76.8 73.6 142.4 150.7 marketing

General and 62.9 71.2 74.1 134.1 147.0 administrative

Amortization ofacquisition-related 29.1 32.3 27.5 61.4 53.2 intangible assets

Restructuring,asset impairments 16.2 32.8 18.1 49.0 23.7 and other charges,net

Intangible asset 1.3 - 0.4 1.3 1.6 impairment

Total operating 331.2 384.1 340.7 715.3 675.0 expenses

Operating income 43.1 18.6 158.3 61.7 337.7

Other income (expense), net:

Interest expense (41.9 ) (42.5 ) (33.7 ) (84.4 ) (65.4 )

Interest income 1.5 1.9 3.0 3.4 5.5

Loss on debtrefinancing and - - (0.4 ) - (0.4 )prepayment

Other income (2.8 ) 0.1 (1.0 ) (2.7 ) 1.1 (expense)

Other income (43.2 ) (40.5 ) (32.1 ) (83.7 ) (59.2 )(expense), net

Income (loss) (0.1 ) (21.9 ) 126.2 (22.0 ) 278.5 before income taxes

Income tax (0.8 ) 8.2 (23.3 ) 7.4 (61.5 )(provision) benefit

Net income (loss) (0.9 ) (13.7 ) 102.9 (14.6 ) 217.0

Less: Net incomeattributable to (0.5 ) (0.3 ) (1.1 ) (0.8 ) (1.1 )non-controllinginterest

Net income (loss)attributable to ON $ (1.4 ) $ (14.0 ) $ 101.8 $ (15.4 ) $ 215.9 SemiconductorCorporation

Net income (loss)per common shareattributable to ON SemiconductorCorporation:

Basic $ - $ (0.03 ) $ 0.25 $ (0.04 ) $ 0.52

Diluted $ - $ (0.03 ) $ 0.24 $ (0.04 ) $ 0.52

Weighted averagecommon shares outstanding:

Basic 410.1 410.6 411.9 410.3 411.3

Diluted 410.1 410.6 417.7 410.3 417.8

ON SEMICONDUCTOR CORPORATION

UNAUDITED CONSOLIDATED BALANCE SHEETS

(in millions)

July 3, 2020 April 3, 2020 December 31, 2019

Assets

Cash and cash equivalents $ 2,060.4 $ 1,982.0 $ 894.2

Receivables, net 667.4 652.0 705.0

Inventories 1,285.4 1,251.9 1,232.4

Other current assets 131.2 146.4 188.4

Total current assets 4,144.4 4,032.3 3,020.0

Property, plant and equipment, 2,566.5 2,579.9 2,591.6 net

Goodwill 1,663.4 1,663.4 1,659.2

Intangible assets, net 527.8 558.2 590.5

Deferred tax assets 325.2 331.0 307.8

Other assets 300.5 256.0 256.4

Total assets $ 9,527.8 9,420.8 $ 8,425.5

Liabilities, Non-ControllingInterest and Stockholders' Equity

Accounts payable $ 522.9 503.9 $ 543.6

Accrued expenses and other 546.1 542.6 538.8 current liabilities

Current portion of long-term 695.6 689.6 736.0 debt

Total current liabilities 1,764.6 1,736.1 1,818.4

Long-term debt 4,044.8 4,043.0 2,876.5

Deferred tax liabilities 61.5 60.8 60.2

Other long-term liabilities 397.6 343.3 346.3

Total liabilities 6,268.5 6,183.2 5,101.4

ON Semiconductor Corporation stockholders' equity:

Common stock 5.7 5.7 5.7

Additional paid-in capital 3,854.6 3,830.3 3,809.5

Accumulated other comprehensive (67.6 ) (66.5 ) (54.3 ) loss

Accumulated earnings 1,175.9 1,177.3 1,191.3

Less: Treasury stock, at cost (1,732.5 ) (1,731.9 ) (1,650.5 )

Total ON Semiconductor 3,236.1 3,214.9 3,301.7 Corporation stockholders' equity

Non-controlling interest 23.2 22.7 22.4

Total stockholders' equity 3,259.3 3,237.6 3,324.1

Total liabilities and $ 9,527.8 9,420.8 $ 8,425.5 stockholders' equity

ON SEMICONDUCTOR CORPORATION

UNAUDITED RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED EBITDA AND

NET CASH PROVIDED BY OPERATING ACTIVITIES

(in millions)

Quarters Ended Six Months Ended

July 3, 2020 April 3, 2020 June 28, 2019 July 3, 2020 June 28, 2019

Net income $ (0.9 ) $ (13.7 ) $ 102.9 $ (14.6 ) $ 217.0 (loss)

Adjusted for:

Restructuring,asset 16.2 32.8 18.1 49.0 23.7 impairments andother, net

Intangibleasset 1.3 - 0.4 1.3 1.6 impairment

Interest 41.9 42.5 33.7 84.4 65.4 expense

Interest income (1.5 ) (1.9 ) (3.0 ) (3.4 ) (5.5 )

Loss on debtrefinancing and - - 0.4 - 0.4 prepayment

Income taxprovision 0.8 (8.2 ) 23.3 (7.4 ) 61.5 (benefit)

Net incomeattributable to (0.5 ) (0.3 ) (1.1 ) (0.8 ) (1.1 ) non-controllinginterest

Depreciationand 153.9 161.2 144.0 315.1 279.8 amortization

Amortization offair market - - 0.6 - 0.6 value step-upof inventory

Third partyacquisition and - 0.3 6.5 0.3 9.8 divestiturerelated costs

Indemnification - - - - (4.9 ) gain

Adjusted EBITDA 211.2 212.7 325.8 423.9 648.3

Increase (decrease):

Restructuring,asset (16.2 ) (32.8 ) (18.1 ) (49.0 ) (23.7 ) impairments andother, net

Interest (41.9 ) (42.5 ) (33.7 ) (84.4 ) (65.4 ) expense

Interest income 1.5 1.9 3.0 3.4 5.5

Income tax(provision) (0.8 ) 8.2 (23.3 ) 7.4 (61.5 ) benefit

Net incomeattributable to 0.5 0.3 1.1 0.8 1.1 non-controllinginterest

Amortization offair market - - (0.6 ) - (0.6 ) value step-upof inventory

Third partyacquisition and - (0.3 ) (6.5 ) (0.3 ) (9.8 ) divestiturerelated costs

Indemnification - - - - 4.9 gain

(Gain) loss onsale or (3.1 ) 0.2 - (2.9 ) 0.4 disposal offixed assets

Amortization ofdebt discount 3.0 3.0 3.4 6.0 6.6 and issuancecosts

Share-basedcompensation 18.0 15.7 27.3 33.7 47.0 expense

Non-cashinterest on 9.8 9.5 9.3 19.3 18.4 convertiblenotes

Non-cash assetimpairment 5.8 1.4 - 7.2 - charges

Change indeferred tax 6.7 (19.0 ) 3.3 (12.3 ) 32.3 balances

Other 1.8 - 5.8 1.8 1.5

Changes inassets and (41.8 ) 7.7 (74.4 ) (34.1 ) (244.2 ) liabilities

Net cashprovided by $ 154.5 $ 166.0 $ 222.4 320.5 $ 360.8 operatingactivities

Cash flows frominvesting activities:

Purchase ofproperty, plant $ (73.3 ) $ (132.3 ) $ (153.5 ) $ (205.6 ) $ (310.5 ) and equipment

Proceeds fromsale of 0.9 - 1.4 0.9 1.4 property, plantand equipment

Depositsutilized (made)for purchase of (1.7 ) 2.2 9.8 0.5 (0.3 ) property, plantand equipment

Purchase ofbusiness, net - (4.5 ) (867.0 ) (4.5 ) (867.0 ) of cashacquired

Settlement ofpurchase price - 26.0 - 26.0 - from previousacquisition

Purchase oflicense anddeposit made - - (100.0 ) - (100.0 ) formanufacturingfacility

Release ofescrow related - - 5.0 - 5.0 to divestiture

Net cash usedin investing $ (74.1 ) $ (108.6 ) $ (1,104.3 ) (182.7 ) $ (1,271.4 ) activities

Cash flows fromfinancing activities:

Proceeds forthe issuance ofcommon stock 3.9 7.5 $ 6.4 $ 11.4 $ 13.8 under theemployee stockpurchase plan

Proceeds fromexercise of - - 0.4 - 0.9 stock options

Payment of taxwithholding for (0.6 ) (16.0 ) (1.1 ) (16.6 ) (27.2 ) restrictedstock units

Repurchase of - (65.4 ) (50.8 ) (65.4 ) (125.8 ) common stock

Borrowingsunder debt - 1,165.0 900.0 1,165.0 904.3 agreements

Payment of debtissuance and - - (4.7 ) - (4.7 ) other financingcosts

Repayment of (4.3 ) (56.0 ) (26.4 ) (60.3 ) (38.6 ) long-term debt

Acquisitionrelated (0.6 ) (4.9 ) - (5.5 ) - payments

Payment offinance lease - - (0.2 ) - (0.4 ) obligations

Net cashprovided by(used in) $ (1.6 ) $ 1,030.2 $ 823.6 1,028.6 $ 722.3 financingactivities

Effect ofexchange ratechanges on (0.1 ) 0.2 0.3 0.1 0.3 cash, cashequivalents andrestricted cash

Net increase(decrease) incash, cash $ 78.7 $ 1,087.8 $ (58.0 ) 1,166.5 $ (188.0 ) equivalents andrestricted cash

Cash, cashequivalents andrestricted 1,982.0 894.2 957.1 894.2 1,087.1 cash, beginningof period

Cash, cashequivalents andrestricted $ 2,060.7 $ 1,982.0 $ 899.1 2,060.7 $ 899.1 cash, end ofperiod



ON SEMICONDUCTOR CORPORATION

RECONCILIATION OF GAAP VERSUS NON-GAAP DISCLOSURES

(in millions, except per share and percentage data)

Quarters Ended Six Months Ended

July 3, April 3, June 28, July 3, June 28, 2020 2020 2019 2020 2019

Reconciliation of GAAP gross profit tonon-GAAP gross profit:GAAP gross profit $ 374.3 $ 402.7 $ 499.0 $ 777.0 $ 1,012.7

Special items:

Amortization of a) fair market value - - 0.6 - 0.6 step-up of inventory

Total special items - - 0.6 - 0.6

Non-GAAP gross profit $ 374.3 $ 402.7 $ 499.6 $ 777.0 $ 1,013.3

Reconciliation of GAAP gross margin tonon-GAAP gross margin:GAAP gross margin 30.8 % 31.5 % 37.0 % 31.2 % 37.0 %

Special items:

Amortization of a) fair market value - % - % 0.1 % - % - % step-up of inventory

Total special items - % - % 0.1 % - % 0.1 %

Non-GAAP gross margin 30.8 % 31.5 % 37.1 % 31.2 % 37.1 %

Reconciliation of GAAPoperating expenses to non-GAAP operatingexpenses:GAAP operating expenses $ 331.2 $ 384.1 $ 340.7 $ 715.3 $ 675.0

Special items:

Amortization of a) acquisition-related (29.1 ) (32.3 ) (27.5 ) (61.4 ) (53.2 ) intangible assets

Restructuring, b) asset impairments (16.2 ) (32.8 ) (18.1 ) (49.0 ) (23.7 ) and other, net

c) Intangible asset (1.3 ) - (0.4 ) (1.3 ) (1.6 ) impairment

Third party d) acquisition and - (0.3 ) (6.5 ) (0.3 ) (9.8 ) divestiture related costs

Total special items (46.6 ) (65.4 ) (52.5 ) (112.0 ) (88.3 )

Non-GAAP operating $ 284.6 $ 318.7 $ 288.2 $ 603.3 $ 586.7 expensesReconciliation of GAAPoperating income to non-GAAP operatingincome:GAAP operating income $ 43.1 $ 18.6 $ 158.3 $ 61.7 $ 337.7

Special items:

Amortization of a) fair market value - - 0.6 - 0.6 step-up of inventory

Amortization of b) acquisition-related 29.1 32.3 27.5 61.4 53.2 intangible assets

Restructuring, c) asset impairments 16.2 32.8 18.1 49.0 23.7 and other, net

d) Intangible asset 1.3 - 0.4 1.3 1.6 impairment

Third party e) acquisition and - 0.3 6.5 0.3 9.8 divestiture related costs

Total special items 46.6 65.4 53.1 112.0 88.9

Non-GAAP operating $ 89.7 $ 84.0 $ 211.4 $ 173.7 $ 426.6 incomeReconciliation of GAAPoperating margin to non-GAAP operatingmargin (operatingincome / revenue):GAAP operating margin 3.6 % 1.5 % 11.7 % 2.5 % 12.4 %

Special items:

Amortization of a) fair market value - % - % 0.1 % - % - % step-up of inventory

Amortization of b) acquisition-related 2.4 % 2.5 % 2.0 % 2.5 % 1.9 % intangible assets

Restructuring, c) asset impairments 1.3 % 2.6 % 1.3 % 2.0 % 0.9 % and other, net

d) Intangible asset 0.1 % - % - % 0.1 % 0.1 % impairment

Third party e) acquisition and - % - % 0.5 % - % 0.4 % divestiture related costs

Total special items 3.8 % 5.1 % 4.0 % 4.5 % 3.2 %

Non-GAAP operating 7.4 % 6.6 % 15.7 % 7.0 % 15.6 %marginReconciliation of GAAPincome (loss) before income taxes tonon-GAAP income beforeincome taxes:GAAP income (loss) $ (0.1 ) $ (21.9 ) $ 126.2 $ (22.0 ) $ 278.5 before income taxes Special items:

Amortization of a) fair market value - - 0.6 - 0.6 step-up of inventory

Amortization of b) acquisition-related 29.1 32.3 27.5 61.4 53.2 intangible assets

Restructuring, c) asset impairments 16.2 32.8 18.1 49.0 23.7 and other, net

d) Intangible asset 1.3 - 0.4 1.3 1.6 impairment

Third party e) acquisition and - 0.3 6.5 0.3 9.8 divestiture related costs

Loss on debt f) refinancing and - - 0.4 - 0.4 prepayment

Non-cash interest g) on convertible 9.8 9.5 9.3 19.3 18.4 notes

h) Indemnification - - - - (4.9 ) gain

Total special items 56.4 74.9 62.8 131.3 102.8

Non-GAAP income before $ 56.3 $ 53.0 $ 189.0 $ 109.3 $ 381.3 income taxesReconciliation of GAAPnet income (loss)attributable to ONSemiconductor Corporation to non-GAAPnet income attributableto ON SemiconductorCorporation:GAAP net income (loss)attributable to ON $ (1.4 ) $ (14.0 ) $ 101.8 $ (15.4 ) $ 215.9 SemiconductorCorporation Special items:

Amortization of a) fair market value - - 0.6 - 0.6 step-up of inventory

Amortization of b) acquisition-related 29.1 32.3 27.5 61.4 53.2 intangible assets

Restructuring, c) asset impairments 16.2 32.8 18.1 49.0 23.7 and other, net

d) Intangible asset 1.3 - 0.4 1.3 1.6 impairment

Third party e) acquisition and - 0.3 6.5 0.3 9.8 divestiture related costs

Loss on debt f) refinancing and - - 0.4 - 0.4 prepayment

Non-cash interest g) on convertible 9.8 9.5 9.3 19.3 18.4 notes

h) Indemnification - - - - (4.9 ) gain

i) Adjustment of (4.8 ) (18.1 ) 10.4 (22.9 ) 33.4 income taxes

Total special items 51.6 56.8 73.2 108.4 136.2

Non-GAAP net incomeattributable to ON $ 50.2 $ 42.8 $ 175.0 $ 93.0 $ 352.1 SemiconductorCorporationAdjustment of income taxes:Tax adjustment for $ (11.8 ) $ (15.7 ) $ (13.2 ) $ (27.6 ) $ (21.6 )special items (1)Other non-GAAP tax 7.0 (2.4 ) 20.0 4.7 51.0 adjustment (2)Tax indemnified by - - 3.6 - 4.0 third parties Total adjustment of $ (4.8 ) $ (18.1 ) $ 10.4 $ (22.9 ) $ 33.4 income taxes

Reconciliation of GAAPdiluted shares outstanding to non-GAAPdiluted sharesoutstanding:GAAP diluted shares 410.1 410.6 417.7 410.3 417.8 outstanding Special items:

Less: dilutive a) shares attributable - - (3.9 ) - (3.9 ) to convertible notes

Add: dilutive b) shares attributable 0.9 2.2 - 1.6 - to share-based awards

Total special items 0.9 2.2 (3.9 ) 1.6 (3.9 )

Non-GAAP diluted shares 411.0 412.8 413.8 411.9 413.9 outstandingNon-GAAP diluted earnings per share:Non-GAAP net incomeattributable to ON $ 50.2 $ 42.8 $ 175.0 $ 93.0 $ 352.1 SemiconductorCorporationNon-GAAP diluted shares 411.0 412.8 413.8 411.9 413.9 outstandingNon-GAAP diluted $ 0.12 $ 0.10 $ 0.42 $ 0.23 $ 0.85 earnings per shareReconciliation of netcash provided by operating activities tofree cash flow:Net cash provided by $ 154.5 $ 166.0 $ 222.4 $ 320.5 $ 360.8 operating activities Special items:

Purchase of a) property, plant and (73.3 ) (132.3 ) (153.5 ) (205.6 ) (310.5 ) equipment

Total special items (73.3 ) (132.3 ) (153.5 ) (205.6 ) (310.5 )

Free cash flow $ 81.2 $ 33.7 $ 68.9 $ 114.9 $ 50.3

(1) Tax impact of non-GAAP special items (a-h) is calculated using the federal statutory rate of 21% for all periods presented.

The income tax adjustment primarily represents the use of the net operating loss, non-cash impact of not asserting indefinite reinvestment(2) on earnings of our foreign subsidiaries, deferred tax expense not affecting taxes payable, and non-cash expense (benefit) related to uncertain tax positions.

Certain of the amounts in the above tables may not total due to rounding of individual amounts.

Details of the share-based compensation expense related to restricted stock units, stock grant awards and employee stock purchase plan is provided below:

Quarters Ended Six Months Ended

July 3, April 3, June 28, July 3, June 28, 2020 2020 2019 2020 2019

Cost of revenue $ 2.8 $ 2.5 $ 3.5 $ 5.3 $ 5.4

Research and 4.4 4.1 5.4 8.5 9.0 development

Selling and marketing 3.1 2.9 4.6 6.1 8.4

General and 7.7 6.2 13.8 13.8 24.2 administrative

Total share-based $ 18.0 $ 15.7 $ 27.3 $ 33.7 $ 47.0 compensation expense

NON-GAAP MEASURES

To supplement the consolidated financial results prepared in accordance with GAAP, ON Semiconductor uses certain non-GAAP measures, which are adjusted from the most directly comparable GAAP measures to exclude items related to the amortization of intangible assets, 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, actuarial (gains) losses on pension plans and other pension benefits, third party acquisition and divestiture related costs, tax impact of these items and certain other non-recurring items, as necessary. Management does not consider the effects of these items in evaluating the core operational activities of ON Semiconductor. Management uses these non-GAAP measures internally to make strategic decisions, forecast future results and evaluate ON Semiconductor's current performance. In addition, the Company believes that most analysts covering ON Semiconductor use the non-GAAP measures to evaluate ON Semiconductor's performance. Given management's and other relevant use of these non-GAAP measures, ON Semiconductor believes these measures are important to investors in understanding ON Semiconductor's current and future operating results as seen through the eyes of management. In addition, management believes these non-GAAP measures are useful to investors in enabling them to better assess changes in ON Semiconductor's core business across different time periods. These non-GAAP measures are not prepared in accordance with, and should not be considered alternatives or necessarily superior to, GAAP financial data and may be different from non-GAAP measures used by other companies. 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.

Adjusted EBITDA

Adjusted EBITDA is a non-GAAP financial measure that represents net income before interest expense, interest income, provision for income taxes, depreciation and amortization expense and special items. We use the adjusted EBITDA measure for internal managerial evaluation purposes, as a means to evaluate period-to-period comparisons and as a performance metric for the vesting and release of certain of our performance-based equity awards. SEC Regulation G and other federal securities laws regulate the use of financial measures that are not prepared in accordance with generally accepted accounting principles. We believe this measure provides important supplemental information to investors. However, we do not, and you should not, rely on non-GAAP financial measures alone as measures of our performance.

Non-GAAP Revenue

The use of non-GAAP revenue allows management to evaluate, among other things, the revenue from the Company's core businesses and trends across different reporting periods on a consistent basis, independent of special items. In addition, non-GAAP revenue is an important component of management's internal performance measurement and incentive and reward process as it is used to assess the current and historical financial results of the business and for strategic decision making, preparing budgets, obtaining targets and forecasting future results. Management presents this non-GAAP financial measure to enable investors and analysts to evaluate the Company's revenue generation performance relative to the direct costs of operations of ON Semiconductor's core businesses.

Non-GAAP Gross Profit and Gross Margin

The use of non-GAAP gross profit and gross margin allows management to evaluate, among other things, the gross margin and gross profit of the Company's core businesses and trends across different reporting periods on a consistent basis, independent of non-cash items including, generally speaking, expensing of appraised inventory fair market value step-up and the impact from the change in revenue recognition on distributor sales. In addition, it is an important component of management's internal performance measurement and incentive and reward process as it is used to assess the current and historical financial results of the business and for strategic decision making, preparing budgets, obtaining targets and forecasting future results. Management presents this non-GAAP financial measure to enable investors and analysts to evaluate our revenue generation performance relative to the direct costs of revenue of ON Semiconductor's core businesses.

Non-GAAP Operating Income and Operating Margin

The use of non-GAAP operating income and operating margin allows management to evaluate, among other things, the operating margin and operating income of the Company's core businesses and trends across different reporting periods on a consistent basis, independent of non-cash items including, generally speaking, expensing of appraised inventory fair market value step-up, the impact from the change in revenue recognition on distributor sales, amortization and impairments of intangible assets, third party acquisition and divestiture related costs, restructuring charges and certain other special items as necessary. In addition, it is an important component of management's internal performance measurement and incentive and reward process as it is used to assess the current and historical financial results of the business and for strategic decision making, preparing budgets, obtaining targets and forecasting future results. Management presents this non-GAAP financial measure to enable investors and analysts to evaluate the Company's revenue generation performance relative to the direct costs of operations of ON Semiconductor's core businesses.

Non-GAAP Net Income Attributable to ON Semiconductor and Non-GAAP Diluted Earnings Per Share

The use of non-GAAP net income attributable to ON Semiconductor and non-GAAP diluted earnings per share allows management to evaluate the operating results of ON Semiconductor's core businesses and trends across different reporting periods on a consistent basis, independent of non-cash items including, generally, the amortization and impairments of intangible assets, expensing of appraised inventory fair market value step-up, the impact from the change in revenue recognition on distributor sales, restructuring, gains and losses on debt prepayment, non-cash interest expense, actuarial (gains) losses on pension plans and other pension benefits, third party acquisition and divestiture related costs, tax indemnification by third parties, tax impact of these items and other non-GAAP adjustments and certain other special items, as necessary. In addition, these items are important components of management's internal performance measurement and incentive and reward process, as they are used to assess the current and historical financial results of the business and for strategic decision making, preparing budgets, setting targets and forecasting future results. Management presents these non-GAAP financial measures to enable investors and analysts to understand the results of operations of ON Semiconductor's core businesses and, to the extent comparable, to compare our results of operations on a more consistent basis against those of other companies in our industry.

Free Cash Flow

The use of free cash flow allows management to evaluate, among other things, the ability of the Company to make interest or principal payments on its debt. Free cash flow is defined as the difference between cash flow from operating activities and capital expenditures disclosed under investing activities in the consolidated statement of cash flows. Free cash flow is not an alternate to cash flow from operating activities as a measure of liquidity. It is an important component of management's internal performance measurement and incentive and reward process as it is used to assess the current and historical financial results of the business and for strategic decision making, preparing budgets, obtaining targets and forecasting future results. Management presents this non-GAAP financial measure to enable investors and analysts to evaluate our revenue generation performance relative to the direct costs of operations of ON Semiconductor's core businesses.

Non-GAAP Diluted Share Count

The use of non-GAAP diluted share count allows management to evaluate, among other things, the potential dilution due to the outstanding stock options and restricted stock units excluding the dilution from the convertible notes that is covered by hedging activity up to a certain threshold. In periods when the quarterly average stock price per share exceeds $18.50, the non-GAAP diluted share count includes the anti-dilutive impact of the Company's hedge transactions issued concurrently with the 1.00% convertible notes. As such, 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% convertible notes. In periods when the quarterly average stock price per share exceeds $20.72, the non-GAAP diluted share count includes the anti-dilutive impact of the Company's hedge transactions issued concurrently with the 1.625% convertible notes. As such, at an average stock price per share between $20.72 and $30.70, the hedging activity offsets the potentially dilutive effect of the 1.625% convertible notes.

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CONTACT: Kris Pugsley Corporate/Media Communications ON Semiconductor (312) 909-0661 kris.pugsley@onsemi.com

CONTACT: Parag Agarwal Vice President - Investor Relations & Corporate Development ON Semiconductor (602) 244-3437 investor@onsemi.com