Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion in conjunction with our audited historical consolidated financial statements, which are included in the 2023 Form 10-K, and our unaudited consolidated financial statements for the fiscal quarter ended September 27, 2024, which are included elsewhere in this Form 10-Q. This Management's Discussion and Analysis of Financial Condition and Results of Operations contains statements that are forward-looking. These statements are based on expectations and assumptions as of the date of this Form 10-Q and are subject to risks, uncertainties and other factors. Actual results could differ materially because of the factors discussed below or elsewhere in this Form 10-Q. See Part II, Item 1A. "Risk Factors" of this Form 10-Q and Part I, Item 1A. "Risk Factors" of the 2023 Form 10-K.

Executive Overview

onsemi Overview

We provide intelligent power and intelligent sensing solutions with a primary focus towards automotive and industrial markets to help our customers solve challenging problems and create cutting-edge products for a better future. Our intelligent power technologies enable the electrification of the automotive industry that allows for lighter and longer-range electric vehicles, empowers efficient fast-charging systems and propels sustainable energy for the highest efficiency solar strings and industrial power. Our intelligent power solutions for the automotive industry allow our customers to exceed range targets with lower weight and reduce system cost through efficiency. We are utilizing our extensive range of power technologies to address the growing power demands of artificial intelligence and data centers. Our intelligent sensing technologies support the next generation industry, allowing for smarter factories and buildings while also enhancing the automotive mobility experience with imaging and depth sensing that make advanced vehicle safety and automated driving systems possible.

We believe the evolution of the automotive industry, with advancements in autonomous driving, ADAS, vehicle electrification, and the increase in electronics content for vehicle platforms, is reshaping the boundaries of transportation. Through sensing integration, we believe our intelligent power solutions achieve superior efficiencies compared to our peers. This integration allows lower temperature operation and reduced cooling requirements while saving costs and minimizing weight. In addition, our power solutions deliver power with less die per module, achieving higher range for a given battery capacity.

During the first quarter of 2024, we renamed our Advanced Solutions Group ("ASG") reportable segment to Analog and Mixed-Signal Group ("AMG") and reorganized the existing divisions within PSG and AMG. See Note 2: ''Segments and Revenue'' in the notes to the unaudited consolidated financial statements included elsewhere in this Form 10-Q for additional information regarding the segment reorganization. As of September 27, 2024, we were organized into the three operating and reportable segments of PSG, AMG and ISG.

Business Strategy Developments

Our primary focus continues to be on profitable revenue with stable gross margin by capturing high-growth megatrends in our focused end-markets of automotive and industrial infrastructure. We design products in highly-differentiated markets focused on customer needs while optimizing and right-sizing our manufacturing footprint to support growth and maintain gross margins through efficiencies and new product development. We are focused on achieving efficiencies in our operating and capital expenditures, capital allocation on research and development investments and resources to accelerate growth in high-margin products.

2024 Business Realignment

In an effort to streamline resources, drive organizational efficiencies, consolidate our global corporate footprint, and align with our "Fab Right" manufacturing strategy, we initiated the 2024 business realignment efforts during the second quarter of 2024. Under this business realignment, approximately 1,100 employees were notified of their employment termination and around 200 additional employees were reassigned or asked to relocate to another site so far. During the nine months ended September 27, 2024, we incurred severance and other related charges of approximately $70.1 million and asset impairments and other charges of approximately $29.5 million. For additional information, see Note 4: ''Restructuring, Asset Impairments and Other Charges, Net'' in the notes to our unaudited consolidated financial statements included elsewhere in this Form 10-Q.

Share Repurchases

During the quarter ended September 27, 2024, we repurchased approximately 2.8 million shares of common stock for an aggregate purchase price of $200.4 million. For additional information, see Note 7: ''Earnings Per Share and Equity'' in the notes to our unaudited consolidated financial statements included elsewhere in this Form 10-Q.

Results of Operations

Quarter Ended September 27, 2024 compared to the Quarter Ended September 29, 2023

The following table summarizes certain information relating to our operating results that has been derived from our unaudited consolidated financial statements (in millions):

			Quarters Ended
			September 27, 2024						September 29, 2023						Dollar Change
Revenue			$	1,761.9					$	2,180.8					$	(418.9)
Cost of revenue			962.5						1,150.1						(187.6)
Gross profit			799.4						1,030.7						(231.3)
Operating expenses:
Research and development			151.0						143.4						7.6
Selling and marketing			65.4						68.2						(2.8)
General and administrative			95.5						110.7						(15.2)
Amortization of acquisition-related intangible assets			13.0						12.0						1.0
Restructuring, asset impairments and other charges, net			29.1						9.4						19.7
Total operating expenses			354.0						343.7						10.3
Operating income			445.4						687.0						(241.6)
Other income (expense), net:
Interest expense			(15.7)						(16.2)						0.5
Interest income			28.6						25.7						2.9
Loss on divestiture of business			—						(0.1)						0.1
Other income (expense)			(3.7)						1.1						(4.8)
Other income (expense), net			9.2						10.5						(1.3)
Income before income taxes			454.6						697.5						(242.9)
Income tax provision			(51.9)						(114.6)						62.7
Net income			402.7						582.9						(180.2)
Less: Net income attributable to non-controlling interest			(1.0)						(0.2)						(0.8)
Net income attributable to ON Semiconductor Corporation			$	401.7					$	582.7					$	(181.0)

Revenue

Revenue was $1,761.9 million and $2,180.8 million for the quarters ended September 27, 2024 and September 29, 2023, respectively, representing a decrease of $418.9 million, or approximately 19%, year over year. We had one customer, a distributor, whose revenue accounted for approximately 12% and 11% of our total revenue for the quarters ended September 27, 2024 and September 29, 2023, respectively.

Revenue by operating and reportable segments was as follows (dollars in millions):

			Quarter Ended September 27, 2024						As a % of Total Revenue (1)						Quarter Ended September 29, 2023						As a % of Total Revenue (1)
PSG			$	829.4					47.1		%				$	1,076.5					49.4		%
AMG			653.7						37.1		%				775.7						35.6		%
ISG			278.8						15.8		%				328.6						15.1		%
Total revenue			$	1,761.9											$	2,180.8

(1) Certain amounts may not total due to rounding of individual amounts.

Revenue from PSG decreased by $247.1 million, or approximately 23%, for the quarter ended September 27, 2024 compared to the quarter ended September 29, 2023. Revenue from our Automotive Power Division, Multi-Market Power Division and Industrial Power Division decreased by $129.7 million, $58.9 million and $58.5 million, respectively, primarily driven by a decrease in demand in the automotive and industrial end-markets.

Revenue from AMG decreased by $122.0 million, or approximately 16%, for the quarter ended September 27, 2024 compared to the quarter ended September 29, 2023. Revenue from our Sensor Interface Division, Power Management Division and Integrated Circuit Division decreased by $65.4 million, $47.4 million and $9.2 million, respectively, primarily due to a decrease in demand in the automotive and industrial end-markets.

Revenue from ISG decreased by $49.8 million, or approximately 15%, for the quarter ended September 27, 2024 compared to the quarter ended September 29, 2023, largely driven by a decrease in revenue from our Industrial and Consumer Solutions Division and Automotive Sensing Division of $35.1 million and $14.7 million, respectively, primarily due to the decrease in demand for these products in the automotive and industrial end-markets.

Revenue by geographic location, based on sales billed from the respective country or region, was as follows (dollars in millions):

			Quarter Ended September 27, 2024						As a % of Total Revenue (1)						Quarter Ended September 29, 2023						As a % of Total Revenue (1)
Hong Kong			$	466.9					26.5		%				$	581.9					26.7		%
Singapore			449.5						25.5		%				506.8						23.2		%
United Kingdom			395.8						22.5		%				464.2						21.3		%
United States			281.9						16.0		%				424.5						19.5		%
Other			167.8						9.5		%				203.4						9.3		%
Total revenue			$	1,761.9											$	2,180.8

(1) Certain amounts may not total due to rounding of individual amounts.

Gross Profit and Gross Margin

Gross profit decreased by $231.3 million, or approximately 22%, to $799.4 million for the quarter ended September 27, 2024 compared to $1,030.7 million for the quarter ended September 29, 2023. This was primarily due to the decline in sales volume from existing products and new products which negatively impacted gross profit by approximately $162 million and $77 million, respectively, partially offset by approximately $8 million due to a reduction in the lower-margin manufacturing services revenue at our EFK location.

Our gross margin decreased by approximately 1.9 percentage points to 45.4% for the quarter ended September 27, 2024 from 47.3% for the quarter ended September 29, 2023, primarily due to changes as explained in the segment gross margin sections below.

Our gross profit by operating and reportable segments was as follows (dollars in millions):

			Quarter Ended September 27, 2024						As a % of Revenue						Quarter Ended September 29, 2023						As a % of Revenue
PSG			$	344.9					41.6		%				$	513.5					47.7		%
AMG			325.3						49.8		%				361.1						46.6		%
ISG			129.2						46.3		%				156.1						47.5		%
Total gross profit			$	799.4					45.4		%				$	1,030.7					47.3		%

Explanation for the fluctuation in gross profit amounts and gross margin percentages for the quarter ended September 27, 2024 compared to the quarter ended September 29, 2023 is provided below:

PSG gross profit decreased by $168.6 million, primarily driven by the decline in sales volume from existing products and new products which negatively impacted gross profit by approximately $91 million and $77 million, respectively. PSG gross margin decreased by 6.1 percentage points to 41.6% from 47.7% primarily as a result of the decline in volume, underutilization and the related impact of unfavorable product mix.

AMG gross profit decreased by $35.8 million, primarily driven by the decline in sales volume from existing products which negatively impacted gross profit by approximately $43 million, partially offset by improved gross profit of approximately $8 million due to the reduction in the lower-margin manufacturing services revenue at our EFK location. AMG gross margin increased by 3.2 percentage points to 49.8% from 46.6%, primarily due to the reduction in the lower-margin manufacturing services revenue at our EFK location and favorable changes in product mix.

ISG gross profit decreased by $26.9 million, primarily driven by the decline in sales volume from existing products. ISG gross margin decreased by 1.2 percentage points to 46.3% from 47.5%, primarily driven by unfavorable changes in product mix.

Operating Expenses

Research and development expenses were $151.0 million for the quarter ended September 27, 2024, as compared to $143.4 million for the quarter ended September 29, 2023, representing an increase of $7.6 million, or approximately 5%. The increase was primarily attributable to an increase in payroll-related expenses and production supplies.

Selling and marketing expenses were $65.4 million for the quarter ended September 27, 2024, as compared to $68.2 million for the quarter ended September 29, 2023, representing a decrease of $2.8 million, or approximately 4%. The decrease was primarily attributable to a decrease in sales commissions.

General and administrative expenses were $95.5 million for the quarter ended September 27, 2024, as compared to $110.7 million for the quarter ended September 29, 2023, representing a decrease of $15.2 million, or approximately 14%. The decrease was primarily attributable to a decrease in the bad debt provision with a strategic business partner, compared to the quarter ended September 29, 2023.

Other Operating Expenses

Amortization of Acquisition-Related Intangible Assets

Amortization of acquisition-related intangible assets was $13.0 million for the quarter ended September 27, 2024, as compared to $12.0 million for the quarter ended September 29, 2023, representing an increase of $1.0 million, or approximately 8%.

Restructuring, Asset Impairments and Other, Net

Restructuring, asset impairments and other, net was $29.1 million for the quarter ended September 27, 2024, as compared to $9.4 million for the quarter ended September 29, 2023. Charges incurred for the quarter ended September 27, 2024 primarily relate to restructuring actions during the period. See Note 4: ''Restructuring, Asset Impairments and Other Charges, Net'' in the notes to our unaudited consolidated financial statements included elsewhere in this Form 10-Q for additional information.

Interest Expense

Interest expense decreased by $0.5 million to $15.7 million during the quarter ended September 27, 2024, as compared to $16.2 million during the quarter ended September 29, 2023. The decrease was primarily due to the maturity of the 1.625% Notes in 2023. Our average gross long-term debt for the quarter ended September 27, 2024 was $3,379.9 million at a weighted-average interest rate of 1.9%, as compared to $3,499.5 million at a weighted-average interest rate of 1.8% for the quarter ended September 29, 2023. The calculation of our weighted-average interest rates includes the effect of our interest rate swap agreements.

Interest Income

Interest income increased by $2.9 million, or approximately 11%, to $28.6 million during the quarter ended September 27, 2024 compared to $25.7 million during the quarter ended September 29, 2023, primarily due to higher interest rates and increased balances in interest-bearing accounts.

Other Income (Expense)

During the quarter ended September 27, 2024, other income was $3.7 million compared to an expense of $1.1 million during the quarter ended September 29, 2023.

Income Tax Provision

We recorded an income tax provision of $51.9 million and $114.6 million for the quarters ended September 27, 2024 and September 29, 2023, respectively, representing effective tax rates of 11.4% and 16.4%, respectively. The decrease in our effective tax rate is mainly due to return-to-provision adjustments reflecting additional tax benefits from Foreign Derived Intangible Income.

For additional information, see Note 12: ''Income Taxes'' in the notes to the unaudited consolidated financial statements included elsewhere in this Form 10-Q.

Results of Operations

Nine Months Ended September 27, 2024 compared to the Nine Months Ended September 29, 2023

The following table summarizes certain information relating to our operating results that has been derived from our unaudited consolidated financial statements (in millions):

			Nine Months Ended
			September 27, 2024						September 29, 2023						Dollar Change
Revenue			$	5,359.8					$	6,234.9					$	(875.1)
Cost of revenue			2,922.8						3,293.3						(370.5)
Gross profit			2,437.0						2,941.6						(504.6)
Operating expenses:
Research and development			457.5						427.1						30.4
Selling and marketing			203.1						211.6						(8.5)
General and administrative			275.8						273.8						2.0
Amortization of acquisition-related intangible assets			38.5						39.0						(0.5)
Restructuring, asset impairments and other charges, net			103.0						63.5						39.5
Total operating expenses			1,077.9						1,015.0						62.9
Operating income			1,359.1						1,926.6						(567.5)
Other income (expense), net:
Interest expense			(47.0)						(59.0)						12.0
Interest income			83.6						66.8						16.8
Loss on debt prepayment			—						(13.3)						13.3
Loss on divestiture of business			—						(0.7)						0.7
Other income			(0.8)						4.5						(5.3)
Other income (expense), net			35.8						(1.7)						37.5
Income before income taxes			1,394.9						1,924.9						(530.0)
Income tax provision			(200.1)						(302.7)						102.6
Net income			1,194.8						1,622.2						(427.4)
Less: Net income attributable to non-controlling interest			(1.9)						(1.2)						(0.7)
Net income attributable to ON Semiconductor Corporation			$	1,192.9					$	1,621.0					$	(428.1)

Revenue

Revenue was $5,359.8 million and $6,234.9 million for the nine months ended September 27, 2024 and September 29, 2023, respectively, representing a decrease of $875.1 million, or approximately 14%, year over year. We had one customer, a distributor, whose revenue accounted for approximately 11% and 10% of our total revenue for the nine months ended September 27, 2024 and September 29, 2023, respectively.

Revenue by operating and reportable segments was as follows (dollars in millions):

			Nine Months Ended September 27, 2024						As a % of Total Revenue (1)						Nine Months Ended September 29, 2023						As a % of Total Revenue (1)
PSG			$	2,538.8					47.4		%				$	2,914.8					46.7		%
AMG			1,998.5						37.3		%				2,312.3						37.1		%
ISG			822.5						15.3		%				1,007.8						16.2		%
Total revenue			$	5,359.8											$	6,234.9

(1) Certain amounts may not total due to rounding of individual amounts.

Revenue from PSG decreased by $376.0 million, or approximately 13%, for the nine months ended September 27, 2024 compared to the nine months ended September 29, 2023. Revenue from our Multi-Market Power Division, Industrial Power Division and Automotive Power Division decreased by $176.3 million, $115.8 million and $83.9 million, respectively, primarily driven by a decrease in demand in the automotive and industrial end-markets.

Revenue from AMG decreased by $313.8 million, or approximately 14%, for the nine months ended September 27, 2024 compared to the nine months ended September 29, 2023. Revenue from our Power Management Division, Integrated Circuit Division and Sensor Interface Division decreased by $157.3 million, $78.6 million and $77.9 million, respectively, primarily due to a decrease in demand in the automotive and industrial end-markets.

Revenue from ISG decreased by $185.3 million, or approximately 18%, for the nine months ended September 27, 2024 compared to the nine months ended September 29, 2023, largely driven by a decrease in revenue from our Industrial and Consumer Solutions Division and Automotive Sensing Division of $100.3 million and $85.0 million, respectively, primarily due to the decrease in demand for these products in the automotive and industrial end-markets.

Revenue by geographic location, including local sales made by operations within each area, based on sales billed from the respective region, was as follows (dollars in millions):

			Nine Months Ended September 27, 2024						As a % of Total Revenue (1)						Nine Months Ended September 29, 2023						As a % of Total Revenue (1)
Hong Kong			$	1,325.8					24.7		%				$	1,602.5					25.7		%
Singapore			1,273.0						23.8		%				1,476.8						23.7		%
United Kingdom			1,253.6						23.4		%				1,326.8						21.3		%
United States			1,025.7						19.1		%				1,194.5						19.2		%
Other			481.7						9.0		%				634.3						10.2		%
Total revenue			$	5,359.8											$	6,234.9

(1) Certain amounts may not total due to rounding of individual amounts.

Gross Profit and Gross Margin

Gross profit was $2,437.0 million for the nine months ended September 27, 2024 compared to $2,941.6 million for the nine months ended September 29, 2023, representing a decrease of $504.6 million, or approximately 17%. This was primarily due to the decline in sales volume from existing products and new products which negatively impacted gross profit by approximately $487 million and $79 million, respectively, partially offset by approximately $62 million due to a reduction in the lower-margin manufacturing services revenue at our EFK location.

Our gross margin decreased by 1.7 percentage points to 45.5% for the nine months ended September 27, 2024 from 47.2% for the nine months ended September 29, 2023, primarily due to changes as explained in the segment gross margin sections below.

Our gross profit by operating and reportable segments was as follows (dollars in millions):

			Nine Months Ended September 27, 2024						As a % of Revenue						Nine Months Ended September 29, 2023						As a % of Revenue
PSG			$	1,059.1					41.7		%				$	1,377.9					47.3		%
AMG			986.0						49.3		%				1,075.3						46.5		%
ISG			391.9						47.6		%				488.4						48.5		%
Total gross profit			$	2,437.0					45.5		%				$	2,941.6					47.2		%

Explanation for the increase or decrease in gross profit amounts and gross margin percentages for the nine months ended September 27, 2024 compared to the nine months ended September 29, 2023 is provided below:

PSG gross profit decreased by $318.8 million, primarily driven by the decline in sales volume from existing products and new products which negatively impacted gross profit by approximately $240 million and $79 million, respectively. PSG gross margin decreased by 5.6 percentage points to 41.7% from 47.3%, primarily as a result of the decline in volume, underutilization and the related impact of unfavorable product mix.

AMG gross profit decreased by $89.3 million, primarily driven by the decline sales volume from existing products which negatively impacted gross profit by approximately $151 million, partially offset by improved gross profit of approximately $62 million from the lower-margin manufacturing services revenue at our EFK location. AMG gross margin increased by 2.8 percentage points to 49.3% from 46.5%, primarily due to the reduction in the lower-margin manufacturing services revenue at our EFK location.

ISG gross profit decreased by $96.5 million, primarily driven by the decline in sales volume from existing products. ISG gross margin decreased 0.9 percentage points to 47.6% from 48.5%, primarily driven by unfavorable changes in product mix.

Operating Expenses

Research and development expenses were $457.5 million for the nine months ended September 27, 2024, as compared to $427.1 million for the nine months ended September 29, 2023, representing an increase of $30.4 million, or approximately 7%. The increase was primarily attributable to an increase in payroll-related expenses and production supplies, partially offset by a decrease in variable compensation.

Selling and marketing expenses were $203.1 million for the nine months ended September 27, 2024, as compared to $211.6 million for the nine months ended September 29, 2023, representing a decrease of $8.5 million, or approximately 4%. The decrease was primarily attributable to a decrease in sales commissions.

General and administrative expenses were $275.8 million for the nine months ended September 27, 2024, as compared to $273.8 million for the nine months ended September 29, 2023, representing an increase of $2.0 million, or approximately 1%. The increase was primarily attributable to expenses associated with information technology initiatives, partially offset by a decrease in the bad debt provision with a strategic business partner and a decrease in variable compensation.

Other Operating Expenses

Amortization of Acquisition-Related Intangible Assets

Amortization of acquisition-related intangible assets was $38.5 million and $39.0 million for the nine months ended September 27, 2024 and September 29, 2023, respectively, representing a decrease of $0.5 million, or approximately 1%. The decrease was due to a reduction in amortization expense as certain intangible assets became fully amortized.

Restructuring, Asset Impairments and Other, Net

Restructuring, asset impairments and other, net was $103.0 million for the nine months ended September 27, 2024, as compared to $63.5 million for the nine months ended September 29, 2023, representing an increase of $39.5 million. Amounts incurred for the nine months ended September 27, 2024 related primarily to the business realignment efforts in the first nine months of 2024. See Note 4: ''Restructuring, Asset Impairments and Other Charges, Net'' in the notes to our unaudited consolidated financial statements included elsewhere in this Form 10-Q for additional information.

Interest Expense

Interest expense decreased by $12.0 million to $47.0 million during the nine months ended September 27, 2024, as compared to $59.0 million during the nine months ended September 29, 2023. The decrease was primarily due to higher variable-rate debt that was paid down and replaced by the 0.50% Notes in 2023. Our average gross long-term debt balance for the nine months ended September 27, 2024 was $3,379.9 million at a weighted-average interest rate of 1.9%, as compared to $3,363.9 million at a weighted-average interest rate of 2.3% for the nine months ended September 29, 2023. The calculation of our weighted-average interest rates includes the effect of our interest rate swap agreements.

Interest Income

Interest income increased by $16.8 million, or approximately 25%, to $83.6 million during the nine months ended September 27, 2024 compared to $66.8 million during the nine months ended September 29, 2023, primarily due to higher interest rates and increased balances in interest-bearing accounts.

Loss on Debt Prepayment

There was no loss on debt prepayment recognized for the nine months ended September 27, 2024, as compared to $13.3 million for the nine months ended September 29, 2023 due to the write-off relating to the partial repayment of the Term Loan "B" Facility in 2023.

Other Income (Expense)

Other income (expense) was an income of $0.8 million for the nine months ended September 27, 2024 as compared to $4.5 million for the nine months ended September 29, 2023.

Income Tax Provision

We recorded an income tax provision of $200.1 million and $302.7 million during the nine months ended September 27, 2024 and September 29, 2023, respectively, representing effective tax rates of 14.3% and 15.7%, respectively. The decrease in our effective tax rate is mainly due to return-to-provision adjustments reflecting additional tax benefits from Foreign Derived Intangible Income.

For additional information, see Note 12: ''Income Taxes'' in the notes to the unaudited consolidated financial statements included elsewhere in this Form 10-Q.

Liquidity and Capital Resources

Overview

Our principal sources of liquidity are cash on hand, cash generated from operations, available borrowings under our Revolving Credit Facility as well as new debt and/or equity issuances. In the near term, we expect to fund our cash requirements by utilizing any or a combination of these principal sources, including any amounts required to satisfy our current portion of long-term debt. Our cash and cash equivalents and short-term investments were approximately $2.8 billion as of September 27, 2024, and the Revolving Credit Facility has approximately $1.1 billion available for future borrowings.

We require cash to: (i) fund our operating expenses, working capital requirements, outlays for strategic acquisitions and investments; (ii) service our debt, including principal and interest; (iii) incur capital expenditures; and (iv) repurchase our common stock. During the ordinary course of business, we evaluate our cash requirements and, if necessary, adjust our expenditures to reflect the current market conditions and our projected sales and demand. Our capital expenditures are primarily directed towards manufacturing equipment. Future capital expenditures may be impacted by events and transactions that are not currently forecasted.

We believe that our cash on hand, cash generated from our operations and the amounts available under the Revolving Credit Facility are adequate to meet our working capital requirements and other business needs for at least the next 12 months.

Operating Activities

Our cash flows from operating activities were $1,326.7 million and $1,366.3 million for the nine months ended September 27, 2024 and September 29, 2023, respectively. The decrease of $39.6 million was primarily due to a reduction in net income driven by lower end-market demand for our products partially offset by the timing of cash receipts and payments related to working capital balances.

Our ability to maintain positive operating cash flows is dependent on, among other factors, our success in achieving our revenue goals and manufacturing and operating cost targets. Management of our assets and liabilities, including both working capital and long-term assets and liabilities, also influences our operating cash flows.

Investing Activities

Our cash flows used in investing activities were $858.1 million and $1,352.7 million for the nine months ended September 27, 2024 and September 29, 2023, respectively. The decrease of $494.6 million was primarily attributable to a decrease in capital expenditures and payments for the acquisition of our EFK location during the nine months ended September 29, 2023 partially offset by the purchase of short-term investments. Our capital expenditures as a percent of revenue were approximately 10%, and we expect capital expenditures to be in the range of 8% - 10% of revenue for the remainder of 2024.

Financing Activities

Our cash flows used in financing activities were $480.5 million and $254.3 million for the nine months ended September 27, 2024 and September 29, 2023, respectively. The increase of $226.2 million was primarily attributable to increased share repurchases during the nine months ended September 27, 2024 compared to the same period in 2023. Additionally, during the nine months ended September 29, 2023, we had net cash outflows related to the establishment of our New Credit Agreement.

We do not have any meaningful debt maturing during the next 12 months. Our 0% Notes are also classified as a current liability based on share price trigger provisions. We expect to continue our Share Repurchase Program subject to market conditions, the price of our shares and other factors (including liquidity needs). However, the Share Repurchase Program may be modified, suspended or terminated by the Board of Directors at any time without prior notice.

Key Factors Potentially Affecting Liquidity

We believe that the key factors that could adversely affect our internal and external sources of cash include, among other considerations:

• changes in demand for our products, competitive pricing pressures, supply chain constraints, effective management of our manufacturing capacity, our ability to achieve further reductions in operating expenses, our ability to make progress on the achievement of our business strategy and sustainability goals, the impact of our restructuring programs on our production and cost efficiency, and our ability to make the research and development expenditures required to remain competitive in our business; and

• the debt and equity capital markets could impact our ability to obtain needed financing on acceptable terms or to respond to business opportunities and developments as they arise, including interest rate fluctuations, macroeconomic conditions, sudden reductions in the general availability of lending from banks or the related increase in cost to obtain bank financing and our ability to maintain compliance with covenants under our debt agreements in effect from time to time.

Debt Guarantees and Related Covenants

As of September 27, 2024, we were in compliance with the indentures relating to our 0% Notes, 0.50% Notes and 3.875% Notes and with covenants included in the New Credit Agreement. The 0% Notes, 0.50% Notes and 3.875% Notes are senior to the existing and future subordinated indebtedness of onsemi and its guarantor subsidiaries, rank equally in right of payment to all of our existing and future senior debt and, as unsecured obligations, are subordinated to all of our existing and future secured debt to the extent of the assets securing such debt.

Recent Accounting Pronouncements

For a discussion of recent accounting pronouncements, see Note 3: ''Recent Accounting Pronouncements and Other Developments'' in the notes to the unaudited consolidated financial statements included elsewhere in this Form 10-Q and our 2023 Form 10-K.