ON Semiconductor Corporation announced financial results for the first quarter of 2017. Total GAAP revenue in the first quarter of 2017 was $1,436.7 million, up approximately 76 percent compared to the same quarter last year, and up approximately 14 percent as compared to revenue in the prior quarter.
Non-GAAP revenue, which excludes the one-time impact from a change in revenue recognition to the “sell-in” method from the “sell-through” method, was $1,281.6 million, up approximately 57 percent as compared to the same quarter last year, and up approximately two percent as compared to revenue in the prior quarter.
We continue to demonstrate strong growth in our revenue and profitability, and our free cash flow generation has improved significantly year over year,” said Keith Jackson, president and CEO of ON Semiconductor.
“With a broad portfolio of analog, power and sensor products, operating leverage, and synergies from our acquisition of Fairchild, we believe that we are well positioned to benefit from improving industry demand environment.”
Mr. Jackson continued, “Business conditions continue to improve across most end-markets and geographies. Our momentum in key end-markets, including industrial, automotive and communications remains strong.
Commentary from our global customers in industrial, automotive and communications end-markets and macro-economic data point to improving business trends in 2017.”
Changes to Distributor Revenue Recognition
Effective Jan. 1, 2017, ON Semiconductor began recognizing revenue at the time it ships products to distributors with appropriate provisions for future price adjustments and returns (the “sell-in” method).
Prior to transitioning to the “sell-in” method, the Company utilized the “sell-through” method pursuant to which it deferred the recognition of revenue until distributors reported that they had sold the Company’s products to end customers. The Company historically has utilized the “sell-through” method due to its inability to reasonably estimate the provisions for future price adjustments and returns necessary for “sell-in” revenue recognition.
As a result of improvements in the Company’s systems and processes for sales in to the distribution channel implemented during the first quarter of 2017, the Company concluded that it is now able to reasonably estimate returns and pricing concessions such as ship and credit rights.
As a result of the change in the Company’s revenue recognition methodology, revenues for the first quarter of 2017 included a one-time adjustment, which has been excluded from the Company’s non-GAAP revenues in the table under the heading “First Quarter Results (non-GAAP).”
Definitions of the non-GAAP measures used in this release and reconciliation of non-GAAP financial measures used in this release to the Company’s most directly comparable measures prepared in accordance with GAAP are set forth in the attached schedules and on our website at http://www.onsemi.com. Additional information on revenue by end-market, region, distribution channel, business units and share count can be found on the “Investor Relations” section of our website.
SECOND QUARTER 2017 OUTLOOK
Based on product booking trends, backlog levels, and estimated turns levels, the Company anticipates that total revenue will be approximately $1,285 to $1,335 million in the second quarter of 2017.
Backlog levels for the second quarter of 2017 represent approximately 80 to 85 percent of anticipated second quarter 2017 revenue. The outlook for the second quarter of 2017 includes anticipated stock-based compensation expense of approximately $20 million to $22 million. Net cash paid for income taxes is expected to be $12 million to $16 million.
The following table outlines ON Semiconductor’s projected second quarter of 2017 GAAP and non-GAAP outlook.
ON Semiconductor will host a conference call for the financial community at 9 a.m. Eastern Time (EDT) on May 8, 2017, to discuss this announcement and ON Semiconductor’s results for the first quarter of 2017. 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 10094642.