ON Semiconductor Corp. (NASDAQ:ON)

The financial data reveals several key trends over the five-year period from 2019 to 2023. The net operating profit after taxes (NOPAT) shows a significant upward trajectory overall. Starting at approximately 341 million USD in 2019, it experienced a dip in 2020 to about 263 million USD. However, from 2020 onwards, there was a robust recovery and growth, with NOPAT increasing substantially to approximately 1.2 billion USD in 2021, nearly doubling to almost 2 billion USD in 2022, and reaching over 2 billion USD in 2023. This suggests an overall improvement in operational profitability, particularly starting in 2021.

The cost of capital shows a gradual increase over the years, rising from 16.3% in 2019 to peak at 20.86% in 2022 before slightly decreasing to 20.46% in 2023. This indicates a rising hurdle rate or increased risk perception over time, which could affect investment decisions and valuation metrics.

Invested capital has steadily increased throughout this period, starting from approximately 6.86 billion USD in 2019 and rising each year to about 10.9 billion USD in 2023. This consistent growth in invested capital indicates ongoing investment and expansion of the asset base, suggesting efforts to support business growth or capacity enhancement.

The economic profit, which adjusts for the cost of capital, shows a negative value in the first four years, indicating that returns did not cover the cost of capital. Economic losses worsened from -777 million USD in 2019 to nearly -1.04 billion USD in 2020, then improved substantially in 2021 to around -293 million USD. Notably, in 2022 economic profit turned positive, albeit modestly at approximately 37 million USD, indicating that returns at that time exceeded the cost of capital. However, in 2023 economic profit reverted back to negative territory at around -162 million USD, suggesting a decline in economic value creation despite a higher NOPAT and continued investment.

In summary, the data indicates strong operating profit growth post-2020 accompanied by increasing invested capital and higher cost of capital. However, consistent economic profit generation remains a challenge, with only a brief positive period in 2022. This implies that while operational performance has improved significantly, the company faces ongoing pressure to generate returns sufficiently exceeding its increasing capital costs.

Net income attributable to ON Semiconductor Corporation

The net income shows a consistent upward trend over the five-year period. Starting from approximately 211.7 million US dollars in 2019, it increased modestly to 234.2 million in 2020. A significant jump occurred in 2021, with net income more than quadrupling to around 1.009 billion. This strong growth continued through 2022 and 2023, reaching about 1.902 billion and 2.184 billion US dollars respectively, indicating robust profitability improvement and operational performance over time.

Net operating profit after taxes (NOPAT)

NOPAT values display some fluctuations initially but then show a marked increase from 2021 onward. In 2019, NOPAT was approximately 340.6 million US dollars but declined to 262.8 million in 2020. Starting 2021, there was a substantial rise to around 1.214 billion US dollars. The upward trajectory continued into 2022 and 2023 with NOPAT reaching roughly 1.992 billion and 2.074 billion US dollars respectively. This pattern suggests improved operational efficiency and effective tax management contributing to growing operating profitability.

The financial data reveals notable fluctuations in both the provision for income taxes and cash operating taxes over the five-year period ending December 31, 2023.

Provision (benefit) for income taxes

This item shows significant volatility throughout the periods. In 2019, the provision was a positive value of 62,700 thousand US dollars, indicating income tax expense recognition for that year. In 2020, there was a reversal to a tax benefit of 59,800 thousand US dollars, suggesting the company recognized a tax benefit rather than an expense. Following this, 2021 experienced a sharp increase in tax provision to 146,600 thousand US dollars, more than doubling the 2019 figure. The upward trend continued markedly in 2022, reaching 458,400 thousand US dollars, the highest in the period under review. In 2023, the provision decreased somewhat to 350,200 thousand US dollars, although it remained substantially higher than the values reported in 2019 through 2021.

Cash operating taxes

Cash operating taxes demonstrate an overall increasing trend over the five years. Beginning at 79,994 thousand US dollars in 2019, the amount increased modestly to 90,557 thousand US dollars in 2020. In 2021, there was a slight decline to 84,769 thousand US dollars. However, a pronounced upward shift occurred in 2022, with cash operating taxes escalating dramatically to 457,073 thousand US dollars. This elevated level sustained into 2023 with a further slight increase to 470,018 thousand US dollars.

In summary, both the provision for income taxes and cash operating taxes experienced considerable growth from 2021 onwards, with particularly sharp increases in 2022 and 2023. The provision for income taxes fluctuated between an expense and a benefit in the early years but settled into a notably higher expense level in later years. The cash operating taxes overall trend upward, with a pronounced rise starting in 2022, possibly aligning with the increases in the provision for income taxes, indicating higher taxable income or changes in tax positions and payments during those years.

Total Reported Debt & Leases

The total reported debt and leases showed a decreasing trend from 3,726,500 thousand USD at the end of 2019 to 3,272,400 thousand USD at the end of 2021. However, this downward trend reversed in the subsequent years, increasing to 3,512,400 thousand USD in 2022 and further to 3,623,800 thousand USD in 2023. Overall, the debt levels exhibit a moderate fluctuation with a reduction phase followed by a gradual increase.

Total ON Semiconductor Corporation Stockholders’ Equity

Stockholders' equity demonstrated consistent and considerable growth over the five-year period. Starting at 3,301,700 thousand USD in 2019, equity increased steadily each year, reaching 7,782,600 thousand USD by 2023. This reflects strong capital accumulation and possibly retained earnings or equity issuances that enhanced the company's net worth significantly over time.

Invested Capital

Invested capital showed a gradual upward trajectory throughout the period. Beginning at 6,857,500 thousand USD in 2019, it remained relatively stable through 2020 but increased notably to 7,560,500 thousand USD in 2021, followed by a sharper rise to 9,371,400 thousand USD in 2022 and 10,925,400 thousand USD in 2023. This trend indicates increasing investment in the company's operational assets, which may support business growth and expansion activities.

The financial data over the five-year period reveals notable fluctuations in economic profit, invested capital, and the economic spread ratio. These elements collectively offer insight into the company's operational efficiency and capital utilization over time.

Economic Profit

The economic profit exhibits a predominantly negative trend throughout the period, indicating that the company generally did not generate wealth above the cost of capital. A significant negative economic profit was observed in 2019 and deepened further in 2020 to more than one million US dollars in losses. This negative trend improved markedly in 2021, with losses substantially reduced. In 2022, the economic profit turned positive, albeit marginally, reflecting a brief period of value creation. However, in 2023, economic profit again reverted to a negative value, signaling a return to economic losses.

Invested Capital

Invested capital shows a steady and continuous increase over the entire period, indicating ongoing investments and growth in assets employed by the company. Starting at approximately 6.86 billion US dollars in 2019, it grew moderately in 2020 and 2021 before accelerating significantly in 2022 and 2023, reaching over 10.9 billion US dollars by the end of 2023. This rising trend suggests a strategy focused on expanding capital base and potentially increasing future capacity or operations scale.

Economic Spread Ratio

The economic spread ratio, which measures returns above the cost of capital as a percentage, remains negative for most years, mirroring the economic profit trend. From -11.33% in 2019, the spread worsens to -15.08% in 2020, indicating higher inefficiency or underperformance relative to invested capital cost. There is a notable improvement in 2021 and a positive margin recorded in 2022 (0.39%), hinting at a brief period where returns slightly exceeded the cost of capital. Nevertheless, this positive spread is not sustained, and the ratio falls back to negative territory in 2023 at -1.48%.

In summary, while invested capital consistently increased, indicating growth and potential expansion initiatives, the company struggled to convert this investment into positive economic profit consistently. The temporary improvement in 2022 suggests that efforts to enhance capital efficiency and profitability were partially successful but not maintained in the subsequent year. The volatility in economic spread ratio further underscores challenges in generating returns that exceed capital costs over the analyzed timeframe.

Revenue Trend

Revenue demonstrated a generally positive trajectory over the five-year period. Beginning at approximately $5.52 billion in 2019, revenue experienced a slight decline in 2020 to around $5.26 billion, likely reflecting external economic pressures. Subsequently, revenue increased notably in 2021 and 2022, peaking near $8.33 billion in 2022, before a marginal decrease to approximately $8.25 billion in 2023. This indicates recovery and growth with a slight recent decline.

Economic Profit Trend

The economic profit values remained negative for the majority of the examined periods, indicating that the company incurred economic losses during most years. The most substantial economic loss occurred in 2020, with a deficit exceeding $1 billion, reflecting possibly heightened costs or reduced profitability. Improvement is observable in 2021 and 2022, where losses decreased sharply and even turned positive in 2022 by about $37 million, suggesting enhanced efficiency or profitability. However, in 2023, economic profit reverted to a negative figure of approximately $162 thousand, showing a setback from the prior year's improvements.

Economic Profit Margin Analysis

The economic profit margin, which expresses economic profit relative to revenue, followed a similar pattern as economic profit. The margin was strongly negative in 2019 and reached its lowest point in 2020 at nearly -20%. A marked improvement occurred in 2021, with the margin narrowing to -4.35%, and it shifted to a positive margin of 0.44% in 2022, indicating a brief period where returns exceeded costs of capital. In 2023, the margin declined again to -1.96%, reflecting reduced profitability compared to the prior year.

Summary and Insights

Overall, the financial data reveal a firm navigating challenging economic conditions in the early part of the period, with a clear rebound in revenue and economic profit between 2021 and 2022. Despite reaching positive economic profit and margin in 2022, the subsequent year saw a reversal, with economic profit turning negative again and margins declining. This fluctuation suggests volatility in profitability and efficiency, warranting close attention to cost management and revenue sustainability going forward.