ON Semiconductor Corp., FCFF calculation

US$ in thousands

12 months ended:	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Net income attributable to ON Semiconductor Corporation	2,183,700)	1,902,200)	1,009,600)	234,200)	211,700)
Net income attributable to non-controlling interest	1,900)	1,600)	1,600)	2,200)	2,200)
Net noncash charges	654,600)	979,700)	829,700)	646,600)	747,500)
Changes in assets and liabilities, exclusive of acquisitions and divestitures	(862,700)	(250,400)	(58,900)	1,300)	(266,700)
Net cash provided by operating activities	1,977,500)	2,633,100)	1,782,000)	884,300)	694,700)
Cash paid for interest expense, net of tax¹	63,098)	65,044)	84,594)	86,189)	75,136)
Purchase of property, plant and equipment	(1,575,600)	(1,005,000)	(444,600)	(383,600)	(534,600)
Proceeds from sale of property, plant and equipment	4,000)	59,100)	14,000)	6,300)	1,900)
Deposits (made) utilized for purchases of property, plant and equipment	36,500)	(31,000)	(47,400)	2,200)	4,600)
Finance ROU assets obtained in exchange of lease liabilities	—)	(25,400)	(22,300)	—)	—)
Free cash flow to the firm (FCFF)	505,498)	1,695,844)	1,366,294)	595,389)	241,736)

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

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The analysis of the financial data over the five-year period reveals notable trends in the company’s cash flow performance.

Net Cash Provided by Operating Activities: There is a consistent upward trend in net cash provided by operating activities from 2019 to 2022, starting at 694.7 million USD in 2019 and increasing steadily each year to reach a peak of approximately 2.63 billion USD in 2022. However, in 2023, a decline is observed, with the amount decreasing to around 1.98 billion USD, indicating a potential slowdown in cash generation from core business operations.
Free Cash Flow to the Firm (FCFF): Free cash flow to the firm also shows a strong growth trajectory from 2019 through 2022. Beginning at about 241.7 million USD in 2019, FCFF nearly doubles in 2020 to approximately 595.4 million USD. This upward momentum continues more sharply in 2021 and 2022, reaching a high of roughly 1.70 billion USD. A significant decrease occurs in 2023, with FCFF dropping to 505.5 million USD, suggesting either increased capital expenditures, reduced operating cash flow, or both.

Overall, the data indicates robust growth in the company’s cash flows through 2022, reflecting improving operational efficiency and effective cash management. The decline in both operating cash flow and FCFF in 2023 warrants attention as it may impact future investment capacity and financial flexibility.

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ON Semiconductor Corp., interest paid, net of tax calculation

US$ in thousands

12 months ended:	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Effective Income Tax Rate (EITR)
EITR¹	13.80%	19.40%	12.70%	21.00%	22.70%
Interest Paid, Net of Tax
Cash paid for interest expense, before tax	73,200)	80,700)	96,900)	109,100)	97,200)
Less: Cash paid for interest expense, tax²	10,102)	15,656)	12,306)	22,911)	22,064)
Cash paid for interest expense, net of tax	63,098)	65,044)	84,594)	86,189)	75,136)

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

¹ See details »

² 2023 Calculation
Cash paid for interest expense, tax = Cash paid for interest expense × EITR
= 73,200 × 13.80% = 10,102

The effective income tax rate (EITR) exhibits notable fluctuations over the examined periods. Starting at 22.7% in 2019, it decreased to 21% in 2020 and further declined significantly to 12.7% in 2021. The rate then increased to 19.4% in 2022 before decreasing again to 13.8% in 2023. This pattern indicates variability in tax obligations that may be influenced by changes in tax regulations, company profitability, or tax planning strategies during these years.

The cash paid for interest expense, net of tax, measured in thousands of US dollars, shows an overall fluctuating trend with a peak in 2020. Beginning at 75,136 thousand USD in 2019, it rose to 86,189 thousand USD in 2020. Subsequently, it slightly decreased to 84,594 thousand USD in 2021, followed by a more pronounced reduction to 65,044 thousand USD in 2022 and a further decrease to 63,098 thousand USD in 2023. This downward trend after 2020 suggests efforts to reduce debt levels or improved interest expense management over recent years.

Effective Income Tax Rate (EITR): Decreases observed from 22.7% in 2019 to a low of 12.7% in 2021;; Increase to 19.4% in 2022 followed by a decline to 13.8% in 2023;; Indicates variable tax environment or strategic tax management.
Cash Paid for Interest Expense, net of tax: Increase from 75,136 thousand USD in 2019 to 86,189 thousand USD in 2020;; Gradual decline thereafter to 63,098 thousand USD by 2023;; Reflects potential reduction in borrowing costs or debt obligations over time.

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ON Semiconductor Corp., current EV/FCFF calculation, comparison to benchmarks

Selected Financial Data (US$ in thousands)
Enterprise value (EV)	31,363,822)
Free cash flow to the firm (FCFF)	505,498)
Valuation Ratio
EV/FCFF	62.05
Benchmarks
EV/FCFF, Competitors¹
Advanced Micro Devices Inc.	101.04
Analog Devices Inc.	36.96
Applied Materials Inc.	20.44
Broadcom Inc.	64.36
Intel Corp.	—
KLA Corp.	38.52
Lam Research Corp.	30.71
Micron Technology Inc.	239.22
NVIDIA Corp.	67.64
Qualcomm Inc.	14.34
Texas Instruments Inc.	105.80
EV/FCFF, Sector
Semiconductors & Semiconductor Equipment	178.86
EV/FCFF, Industry
Information Technology	60.06

Based on: 10-K (reporting date: 2023-12-31).

¹ Click competitor name to see calculations.

If the company EV/FCFF is lower then the EV/FCFF of benchmark then company is relatively undervalued.
Otherwise, if the company EV/FCFF is higher then the EV/FCFF of benchmark then company is relatively overvalued.

ON Semiconductor Corp., historical EV/FCFF calculation, comparison to benchmarks

	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Selected Financial Data (US$ in thousands)
Enterprise value (EV)¹	34,051,230)	35,060,420)	27,134,222)	19,667,423)	11,331,972)
Free cash flow to the firm (FCFF)²	505,498)	1,695,844)	1,366,294)	595,389)	241,736)
Valuation Ratio
EV/FCFF³	67.36	20.67	19.86	33.03	46.88
Benchmarks
EV/FCFF, Competitors⁴
Advanced Micro Devices Inc.	225.41	38.82	43.41	126.98	—
Analog Devices Inc.	25.61	23.12	39.16	27.12	21.67
Applied Materials Inc.	17.40	19.06	26.22	22.52	18.91
Broadcom Inc.	28.53	14.74	19.47	16.54	15.04
Intel Corp.	—	—	16.94	11.08	—
KLA Corp.	19.99	19.05	26.29	18.70	20.92
Lam Research Corp.	17.99	24.08	24.40	26.78	10.44
Micron Technology Inc.	—	16.58	28.79	188.88	13.85
NVIDIA Corp.	142.92	78.06	69.50	41.66	—
Qualcomm Inc.	11.61	18.18	17.47	30.89	14.91
Texas Instruments Inc.	89.85	27.02	24.20	27.67	—
EV/FCFF, Sector
Semiconductors & Semiconductor Equipment	60.28	34.98	26.15	21.95	—
EV/FCFF, Industry
Information Technology	34.37	26.67	27.51	23.95	—

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

¹ See details »

² See details »

³ 2023 Calculation
EV/FCFF = EV ÷ FCFF
= 34,051,230 ÷ 505,498 = 67.36

⁴ Click competitor name to see calculations.

Enterprise Value (EV): The enterprise value exhibited a consistent upward trend from 2019 through 2022, rising from approximately 11.33 billion US dollars to 35.06 billion US dollars. However, in 2023, a slight decline was observed, with the value decreasing to about 34.05 billion US dollars.
Free Cash Flow to the Firm (FCFF): The free cash flow to the firm showed significant growth through the period 2019 to 2022. It increased markedly from 242 million US dollars in 2019 to a peak of approximately 1.70 billion US dollars in 2022. In 2023, there was a notable contraction, with FCFF dropping to approximately 505 million US dollars.
EV to FCFF Ratio: This valuation ratio declined from 46.88 in 2019 to a low point around 19.86 in 2021, reflecting improved cash flow generation relative to enterprise value. The ratio stabilized somewhat in 2022 at 20.67 but then increased sharply to 67.36 in 2023, indicating a disproportionate decrease in free cash flow relative to enterprise value during the last year.
Summary of Trends and Insights: Overall, the data presents a scenario of rapid growth in enterprise value and cash flow generation up to 2022, suggesting enhanced operational performance or market valuation. However, the sharp decline in free cash flow and the corresponding spike in the EV/FCFF ratio in 2023 may signal emerging challenges in sustaining cash flow or changes in market perceptions of the company’s value. The increase in the EV/FCFF ratio in 2023 notably suggests that investors are paying a higher price for each dollar of free cash flow generated, which may raise questions about future cash flow sustainability or increased risk.

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ON Semiconductor Corp. (NASDAQ:ON)

Enterprise Value to FCFF (EV/FCFF)

Free Cash Flow to The Firm (FCFF)

Interest Paid, Net of Tax

Enterprise Value to FCFF Ratio, Current

Enterprise Value to FCFF Ratio, Historical