ON Semiconductor Reports Fourth Quarter and 2017 Annual Results

For the fourth quarter of 2017, highlights include:
•Revenue of $1,377.5 million
•GAAP gross margin of 37. 3 percent and non-GAAP gross margin of 37.5 percent
•GAAP operating margin of 12. 1 percent and non-GAAP operating margin of 15.4 percent
•Operating cash flow of $224.3 million and free cash flow of $48.6 million
•GAAP earnings per share of $1.22 and non-GAAP earnings per share of $0.39

For 2017, highlights include:
•Revenue of $5,543.1 million and non-GAAP revenue of $5,388.0 million
•GAAP gross margin of 36.7 percent and non-GAAP gross margin of 37.0 percent
•GAAP operating margin of 12.3 percent and non-GAAP operating margin of 15.0 percent
•Operating cash flow of $1,094.2 million and free cash flow of $706.7 million
•GAAP earnings per share of $1.89 and non-GAAP earnings per share of $1.46

PHOENIX, Ariz. – Feb. 2, 2018 – ON Semiconductor Corporation (Nasdaq: ON) today announced that total revenues in the fourth quarter of 2017 were $1,377.5 million, up approximately nine percent compared to the same quarter last year. Fourth quarter revenue was down approximately one percent as compared to revenue in the third quarter of 2017.

"We once again delivered solid results, driven by strong demand for our products and by outstanding operating performance. With a broad portfolio of products for the industrial and automotive end-markets, ON Semiconductor is well positioned to benefit from the fastest growing end-markets in the semiconductor industry," said Keith Jackson, ON Semiconductor president and CEO. "We believe that we are in the early stages of realizing benefits of our investments in automotive and industrial end-markets. Increased adoption of ADAS, electric vehicles, machine vision and robotics should drive further acceleration in our revenue and margins. Customers are increasingly relying on us as a key provider of enabling technologies for newly emerging and disruptive applications in automotive and industrial end-markets.

"Demand for our products remains strong and our design win pipeline continues to expand. Our customers are upbeat about the near to mid-term demand outlook for their businesses. Amid a strong demand environment, industry wide supply-side dynamics remain healthy."

Q4 2017 Results

FIRST QUARTER 2018 OUTLOOK

Based on product booking trends, backlog levels and estimated turns levels, the Company anticipates that total revenue in the first quarter of 2018 will be approximately $1,340 to $1,390 million. The outlook for the first quarter of 2018 includes anticipated stock-based compensation expense of approximately $18 million to $20 million. Net cash paid for income taxes is expected to be $18 million to $22 million.

The following table outlines ON Semiconductor's projected first quarter of 2018 GAAP and non-GAAP outlook.

Q4 2017 Guidance

FINANCIALS

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

** Diluted share count 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 includes 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 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. Both GAAP and non-GAAP diluted share counts are based on the Company’s current stock price.

*** 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 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 Time (EST) on Feb. 5, 2018, to discuss this announcement and ON Semiconductor’s results for the fourth quarter of 2017 and year then ended. 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 through a telephone call 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 1175039.

This document contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. 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, 2018. 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 revenues and operating performance; economic conditions and markets (including current financial conditions); 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, technological and product development risks; enforcement and protection of our IP 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; legislative, regulatory and economic developments; competitor actions, including the adverse impact of competitor product announcements; pricing and gross profit pressures; loss of key customers; order cancellations or reduced bookings; changes in manufacturing yields; control of costs and expenses and realization of cost savings and synergies from restructurings; significant litigation; 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 acquisitions and dispositions (including from integrating and consolidating and timely filing financial information with the SEC for acquired businesses and difficulties encountered in accurately predicting the future financial performance of acquired businesses); 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 foreign employment and labor matters associated with unions and collective bargaining arrangements, as well as man-made and/or natural disasters affecting our operations and finances/financials; the threat or occurrence of international armed conflict and terrorist activities both in the United States and internationally; risks and costs associated with increased and new regulation of corporate governance and disclosure standards; risks related to new legal requirements, including laws, rules and regulations related to taxes and, in particular, the impact of the recently adopted tax reform legislation; risks involving environmental or other governmental regulation; and risks associated with our acquisition of Fairchild Semiconductor International Inc. ("Fairchild"), including: (1) intellectual property litigation matters relating to Fairchild; (2) our ability to retain key personnel; (3) competitive responses to the transaction; (4) unexpected costs, charges or expenses resulting from the transaction; (5) adverse reactions or changes to business relationships resulting from the transaction; (6) our ability to realize the benefits of the acquisition of Fairchild; (7) delays, challenges and expenses associated with integrating the businesses; and (8) our ability to comply with the terms of the indebtedness incurred in connection with the transaction. Additional factors that could affect our future results or events are described under Part I, Item 1A "Risk Factors" in our 2016 Annual Report on Form 10-K filed with the SEC on February 28, 2017 ("2016 Form 10-K") and from time-to-time in our other SEC reports. You should carefully consider the trends, risks and uncertainties described in this document, our 2016 Form 10-K, Part I, Item IA of our Form 10-Q for the quarter ended September 30, 2017 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. 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. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by this cautionary statement.

ON Semiconductor Full Web Site