On Semiconductor Corporation · NASDAQ:ON
On Semiconductor — Investor Day (March 2017)
26 slides from On Semiconductor's investor day presentation, Mar 10, 2017
Slide 1: Financial Analyst Day, Phoenix, Arizona
Confidential Proprietary Financial Analyst Day Phoenix, Arizona March 10, 2017 Exhibit 99.5
Slide 2: Rethink Energy Efficiency. Financial Analyst Day
RETHINK ENERGY EFFICIENCY. Financial Analyst Day | Phoenix, Arizona | March 10, 2017
Slide 3: Agenda - Analyst Day 2017
Agenda Analyst Day 2017 Introduction - Parag Agarwal8:00-8:05 Strategic Overview - Keith Jackson8:05-8:35 Q&A Analog Solutions Group - Bob Klosterboer 8:50-9:20 Image Sensor Group - Taner Ozcelik 9:20-9:50 Break Power Solutions Group – Bill Hall10:05-10:35 Q&A Finance - Bernard Gutmann10:50-11:20 Q&
Slide 4: Safe Harbor Statement and Non-GAAP and Forecast Information
Safe Harbor Statement and Non-GAAP and Forecast Information This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are often characterized by the use of words such as “believes,” “estimates,” “expec
Slide 5: Bernard Gutmann, Chief Financial Officer
Bernard Gutmann, Chief Financial Officer RETHINK ENERGY EFFICIENCY.
Slide 6: Driving operating leverage and free cash flow growth
Driving operating leverage and free cash flow growth Analyst Day 2017 ON Semiconductor
Slide 7: Key Takeaways
Analyst Day 2017 Key Takeaways 1 Target Model for 2020: 40% gross margin, 21% opex intensity, and 19% operating margin 2 3 FCF Growth and Margin Expansion Synergies, operational improvements & operating leverage to drive FCF growth & margin expansion – revenue growth not a prerequisite for margin, E
Slide 8: Fairchild Synergies Update, Target Model, FCF, Capital Allocation
Fairchild Synergies Update Target Financial Model Path to Target Model FCF Model Capital Allocation Analyst Day 2017 aGENDA
Slide 9: Raising Fairchild Synergies Target
Analyst Day 2017 Raising Fairchild Synergies Target Synergy targets based on Fairchild’s 2015 results
Slide 10: Target model 2020
Analyst Day 2017 Target model 2020 1 2 3 4 5 6 Revenue - $5.6 Billion Gross Margin 40% Operating Expenses 21% Operating Margin 19% Profit before tax $950 million Cash tax rate 12 percent 7 Non-GAAP EPS of $2.00 8 Free cash flow - $900 million
Slide 11: Path to 2020 target model - Revenue
Analyst Day 2017 Path to 2020 target model - Revenue Automotive CAGR 7 to 9% Industrials CAGR 3 to 5% Computing CAGR -6% to -4% Communications CAGR 2 to 4% Consumer CAGR -5% to -7% revenue CAGR of 3%, assuming industry cagr of 1.5-2% ¹: FY2016 represents Q4’ 16 Annualized values; The chart may not b
Slide 12: Path to 2020 target model - Gross Margin
Fallthrough – 150 bps 50% fall through on incremental revenue Manufacturing efficiencies – 80 bps Insourcing of back-end production Analyst Day 2017 Path to 2020 target model – Gross Margin Mix – 90 bps Improving mix of automotive, industrial and communications Divestitures– 40 bps Divestiture of no
Slide 13: Manufacturing consolidation
Analyst Day 2017 Manufacturing consolidation Front End-Manufacturing 9 major fabs worldwide – Four 8 inch and five 6 inch Transition production to 8 inch network Consolidation of 6 inch network Potential cost savings of $60 million annually starting in 2019 Back-end manufacturing Most efficient back
Slide 14: Change in mix 2016 to 2020
Analyst Day 2017 Change in mix 2016 to 2020 4Q16 2020
Slide 15: Path to 2020 target model - Operating Margin
Opex Synergies – 70 bps Synergies from Fairchild Acquisition GM Fall Through – 480 bps Gross margin improvement Analyst Day 2017 Path to 2020 target model – operating Margin Opex Leverage– 60 bps Leverage from revenue growth ¹: FY2016 represents Q4’ 16 Annualized values.
Slide 16: Opex to grow at half the rate of revenue growth
Opex to grow at rate half of revenue growth Analyst Day 2017 Operating expenses Opex Intensity to subside Synergies from Fairchild Strong track record of generating opex leverage
Slide 17: Path to 2020 target model - FCF
1 Operating cash flow – 21-23% of revenue Net cash interest - $100-110 million Cash taxes - 12% of pretax income Depreciation & amortization – 6-7% of revenue Capital expenditure – 6-7% of revenue Analyst Day 2017 Path to 2020 target model – FCF Free Cash Flow – 15-17% of revenue 2 3 4 5 6
Slide 18: On track to generate $900m in annual free cash flow
Analyst Day 2017 On track to generate $900m in annual free cash flow Key Cash Flow Contributors Synergies from Fairchild Operating leverage Operational Improvements ¹: FCF defined as Operating Cash Flow less Capex. Disciplined Capital Spending
Slide 19: Revenue sensitivity to 2020 target model
Analyst Day 2017 Revenue sensitivity to 2020 target model ¹: FY2016A represents Q4’ 16 Annualized values. Margin, EPS & FCF growth without revenue growth
Slide 20: Aggressive deleveraging
Analyst Day 2017 Aggressive deleveraging Target net leverage ratio of 2x before end of 2018 Proactive and aggressive management of interest rate risk $600m untapped revolver in place for unexpected cash needs $500m of cash needed to operate the business Debt amortization schedule1 1: Convert redeeme
Slide 21: Capital Deployment
Analyst Day 2017 Capital Deployment 1 Achieve 2x net leverage before end of 2018 2 3 4 80% of FCF cash return to shareholders after achieving 2x leverage Acquisitions will need to return high RoIC Sufficient access to domestic cash
Slide 22: Taxes
Analyst Day 2017 TAXES 1 2 3 Tax Rate Non-GAAP cash tax of ~10% in 2017, and 11-12% in 2018-20 of non-GAAP pre-tax income Cash Repatriation $1.8 billion of offshore cash can be repatriated to the U.S. without incurring U.S. federal cash tax Position on US Tax Reform Given our substantial US based fr
Slide 23: Summary
Analyst Day 2017 Summary 1 Steep acceleration in free cash flow generation Margin expansion through synergies and operational improvements Revenue growth not a prerequisite for margin expansion Raising fairchild synergies target Aggressive deleveraging followed by capital returns to shareholders 2 3
Slide 24: Questions & Answers
Financial Analyst Day | March 10, 2017 Questions & Answers
Slide 25: Appendix: Non-GAAP Definitions and Reconciliations
Appendix: Non-GAAP Definitions and Reconciliations Some data in this presentation includes non-GAAP financial measures. Following is the reconciliations of non-GAAP financial measures used in this presentation to the most directly comparable measures under GAAP. Analyst Day 2017
Slide 26: For additional information visit www.onsemi.com
For additional information visit the ON Semiconductor corporate website www.onsemi.com or for official filings visit the SEC website www.sec.gov Analyst Day 2017 ON Semiconductor