ON Semiconductor Corporation

Good day and thank you for standing by. Welcome to the ON Semiconductor Second Quarter 2021 Earnings Conference Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. If you require further assistance, please press star 0. I would now like to hand the conference over to your speaker today, Mr. Parag Garhwal, Vice President of Investor Relations and Corporate Development. Please go ahead.

Thank you, Rain. Good morning, and thank you for joining our Semiconductor Corporation Second Quarter 2021 Quarterly Business Conference Call. I'm joined today by Hassan El Khoury, our President and CEO, and Thad Trang, our CFO. This call is being webcast on the Investor Relations section of our website at www.onsunday.com. A replay of this webcast, along with our 2021 second quarter earnings list, will be available on our website approximately one hour following this conference call, and the recorded webcast will be available for approximately 30 days following this conference call. Additional information related to the latest hour and markets business segments, geographies, channels, share count, and 2021 and 2022 fiscal calendar is posted on the investor relations section of our website. Our earnings release and this presentation includes certain non-GAAP financial measures. Reconciliation of these non-GAAP financial measures to the most directly comparable measures in the GAAP are included in our earnings release, which is posted separately on our website in the investor relations section. During the course of this conference call, we will make projections on other forward-looking statements regarding the future events or future financial performance of the company. The words believe, estimate, project, anticipate, intend, may, expect, will, plan should have similar expressions intended to identify forward-looking statements. We wish to caution that such statements are subject to written uncertainty that could cause actual events to our results to differ materially from projections. Important factors that can affect our business, including factors that could create actual results to differ from our forward-looking statements, are described in our most recent Form 10-K, Form 10-Q, and our filings with the Securities and Exchange Commission. Additional factors are described in our earnings release for the second quarter of 2021. Our estimates for other forward-looking statements may change. and the company assumes no obligation to update forward-looking statements to reflect actual results, change assumptions, or other events that may occur, except as required by law. Our analytics date is scheduled for Thursday, August 5, in New York City. We look forward to seeing you in person later this week. Now, let me turn it over to Hassan. Hassan.

Thank you, Farag, and thank you, everyone, for joining us today. We delivered record results in Q2, driven by strong execution and broad-based strength and demand. We posted record revenue of $1.67 billion, an increase of 38% year-over-year and 13% quarter-over-quarter. The non-GAAP diluted earnings per share of 63 cents grew significantly year-over-year and quarter-over-quarter as a result of the work we have been doing to restructure the company and streamline our business. Our sharp focus on gross margin is beginning to show strong results with our Q2 non-GAAP gross margin increasing by 320 basis points quarter over quarter and by 760 basis points year over year. These sustainable improvements in our gross margin will continue as we rationalize our current portfolio and reallocate R&D investments to high growth and margin-accretive new product developments. To capture the full value of our products, we continue to evaluate our portfolio to eliminate any price-to-value discrepancies and focus our manufacturing on our strategic products. In addition, we continue to drive efficiency throughout our upstream and downstream supply chains and optimize our operations to reduce costs. The demand environment continues to be robust across all end markets. For the second quarter, we post a record revenue for the automotive and industrial end markets. In addition to the company's broad-based strengths in these markets, we are benefiting from the strong traction of our power and sensing products. The strong demand that we have seen over the last few quarters continue to outpace our ability to supply certain products, especially those manufactured by our foundry partners. Based on current booking trends and macroeconomic outlook, we expect that the demand will continue to outpace supply through the first half of next year. We are working collaboratively with our customers to ensure the uninterrupted supply of our products in the future, having entered into long-term supply agreements with many of them already and actively engaging in discussions with several others. Long-term supply agreements, or LTSAs, are a win-win for both customers and us by guaranteeing supply to the customer and at the same time providing better visibility and allowing us to better plan our capital allocation towards capacity expansion with a committed long-term demand outlook. Let me now discuss a few highlights of our strategic end markets starting with automotive. We set a new record for our automotive revenue in Q2 with revenue of $556 million. The success in automotive was driven by strength in our power and sensing product categories. We have emerged as a strategic supplier of highly differentiated technologies for electric vehicles with customers placing high value on the efficiency and footprint advantages provided by our power solution. Our engagement with leading global OEMs and Tier 1s continues to expand, and I am very bullish on our potential in the growing vehicle electrification market over the next few years. In addition to the industry-leading performance of our FETs, a key source of our differentiation is our expertise in packaging. which is critical for improving heat dissipation, increasing power output and a smaller footprint than our closest competitor, and reducing the weight and cost of a power module. The efficiency of our module allows our customers to make no tradeoffs between the cost of battery and the range of the vehicle. They get both. We continue to strengthen our leadership in automotive safety with new design wins and see the increased penetration of active safety features driving strong demand for our image sensors and ultrasonic sensors. In Q2, we secured significant wins for our image sensors on key platforms in Asia, and in a few cases, we displaced incumbents. With increasing sensor content, especially in new electric vehicle platforms, we remain bullish on our ADAS business. We recently announced that AutoX has selected our intelligent sensing technologies to enable 360 vision in its Generation 5 fully driverless robotaxi. On this platform, our 28 image sensors and four 3D LiDAR sensors eliminate blind spots and power full autonomy. The industrial end market, which includes military, aerospace, and medical, contributed revenue of $434 million in Q2, representing approximately 26% of our revenue. Excluding the impact from geopolitical factors related to a specific customer, Our second quarter industrial revenue increased by 29% year over year, driven by broad-based demand and strong performance by our power and sensing technology portfolio. We are seeing continuing momentum for our higher power modules and alternative energy applications. Given the investments in utility-scale solar installations, they're expected to grow worldwide to reduce the climate impact of fossil fuel-based power plants. With a broad range of power solutions and early engagement with key market disruptors, we are well positioned to grow in the market. On the industrial automation front, we saw steep year-over-year growth in our imaging revenue driven by machine vision and scanning applications. Now, I will turn the call over to Thad to provide additional details on our financial performance and guidance.