ON Semiconductor Corporation

Good day and thank you for standing by. Welcome to the OnSemi first quarter 2025 earnings conference call. At this time, all participants are on a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised today's conference is being recorded. I would now like to hand the conference over to your speaker today, Parag Agarwal. Please go ahead.

Thank you, Kevin. Good morning, and thank you for joining OnSami's first quarter of 2025 reserves conference call. I'm joined today by Hassan El Khoury, our president and CEO, and Thad Tran, our CFO. This call is being webcast on the Investor Relations section of our website at www.onsami.com. In the play of this webcast, along with our first quarter earnings release, 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 is posted on the investor relations section of our website. Our earnings release and this presentation include certain non-GAAP financial measures. Reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures, and a discussion of certain limitations when using non-GAAP financial measures are included in our earnings release, which is posted separately on our website in the Investors Relations section. During the course of this conference call, we'll make projections or other forward-looking statements regarding future events or the future financial performance of the company. We wish to caution that such statements are subject to risk and uncertainties that could cause actual events or results to differ materially from projections. Important factors that can affect our business, including factors that could cause actual results to differ materially from our forward-looking statements are described in our most recent Form 10Qs and other filings with the Securities and Exchange Commissions and in our earnings release for the first quarter. Our estimates or other forward-looking statements might 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. Now, let me turn it over to Hasan. Hasan?

Thank you, Parag. Good morning, and thanks to everyone for joining us on the call. Despite a challenging macroeconomic landscape, we delivered Q1 revenue of $1.45 billion and non-GAAP earnings per share of $0.55. Both exceeded the midpoint of our guidance, with non-GAAP gross margin of 40%. Our focus remains on streamlining our operations through our FabRite approach and investing in R&D to deliver differentiated products to our customers. Both initiatives aim to deliver gross margin expansion as the market recovers. In an uncertain geopolitical environment, our manufacturing network is a source of competitive advantage as we have proactively established a flexible and geographically diversified supply chain for our customers that not only enhances supply resilience, but also reduces our risk exposure. With 19 front and back-end facilities, in addition to our external network, we are well-positioned to respond effectively to tariff-related concerns. Based on our understanding of current tariff policies, our expectation is that there will be minimal direct impact to our business. At this time, we expect no major issues in servicing our global customer base and are assisting these customers to minimize their impact by optimizing our supply chains. Although we began to see early signs of stabilization with favorable booking trends towards the end of the first quarter in certain parts of the industrial market, inventory digestion persists and customers remain cautious as I described last quarter. While customers optimize their working capital in this extended downturn, we have used pricing to defend or increase share in strategic areas over the long term and expect low single-digit pricing decline in certain parts of our business. On the revenue side, following a strong Q4, our automotive revenue in the first quarter declined 26% sequentially in line with our expectations. Our industrial revenue was better than expected, decreasing only 44% sequentially. The traditional parts of the industrial market are starting to show signs of recovery. You'll recall this was the first part of industrial to show signs of weakness going into the downturn. Medical and aerospace and defense also increased sequentially, and our AI data center revenue, which we report as part of our other bucket, more than doubled year over year in the first quarter. Our differentiated intelligent power and sensing solutions enable us to deliver the performance and power efficiency that our customers need to thrive in their space. Through the downturn, we continued investing to diversify our portfolio and deliver differentiation as the market landscape continues to evolve. In automotive, while inventory digestion persisted in the first quarter, leading OEMs are adopting our silicon carbide in their next platform architectures. We have extended our technology leadership with our fourth-generation Elitsic MOSFET devices based on trench architecture. We have already secured a new 750-volt plug-in hybrid electric vehicle, or PHEV, designed with one of our major U.S. automotive OEMs. This signals the beginning of a transition from silicon to silicon carbide in new PHEV platforms to extend vehicle range and reach a broader customer base. adding to our penetration in full battery electric vehicles, or BEVs, where we continue to gain share over incumbents. Based on the latest electric vehicle launches in China, most of which were unveiled last week at the Shanghai Auto Show, we expect to have our silicon carbide in nearly 50% of the new models. Most of these new models are set to ramp in late 2025, including a PHEV with our silicon carbide. Broader adoption of SICK in PHEVs is expected over the next few years as OEMs redesign hybrid platforms to meet tightening global emission standards and capitalize on the performance offered by silicon carbide technology to extend the range. We're also winning with our image sensors and automotive applications, which continue to be a differentiator for OnSemi. The superior performance of our technology makes OnSemi the partner of choice for the top automakers. In the first quarter, we began shipments of our 8-megapixel image sensor to the leading OEM in China with a global footprint where we expect to be designed into ADAS systems for their low-, mid-, and high-end vehicles. Another OEM based in Asia has selected our 8-megapixel image sensor for their next-generation ADAS platform. In AI Data Center, we continue to make progress in our strategy by leveraging our strengths in intelligent power, silicon carbide, and silicon power devices anchor that strategy, and are instrumental in every branch of the power tree. At the entry point of power into the data center, we are capitalizing on the transition to modular UPS systems with our ELISIG power module solutions, delivering higher efficiency and power density than traditional silicon solutions. We are shipping to the three largest UPS suppliers, and with a new platform wind that began ramping in Q1, We expect our revenue for UPS to grow between 40% and 50% for the full year over 2024. Within the power supply unit and the battery backup unit, our silicon carbide JFET combined with our T10 trench FETs to create a winning high-power AC to DC solution. SIG JFETs are essential in the transition from 3-kilowatt to 5-kilowatt PSUs required in the next-generation architecture, and only OnSemi has this distinctive technology. SIGJFET is superior in these high current solutions because it offers the lowest on resistance in a given footprint. Similarly, our T10 MOSFETs offer industry leading ultra low RDS on and reduce switching losses. We are ramping with a large US hyperscaler, securing the majority share in their PSU and BBU. We are expanding our portfolio of power solutions using a combination of FETs and power management ICs to address the intermediate bus conversion and V-core branch of the power tree. With the launch of our TRAO platform last November, we introduced our expanding portfolio, including voltage translators, LDOs, ultra-low power analog front ends, ultrasonic sensors, multi-phase controllers for client, and single-pair Ethernet controllers for automotive zonal architecture applications. Advancements through the Treo platform are enabling us to accelerate development and deliver innovative solutions to our customers across automotive, medical, industrial, and AI data center markets at accretive margins. We have already recognized the first production revenue from the Treo platform and are well on our way to doubling the number of products available year over year as we build the franchise towards delivering on our $1 billion commitment by 2030. As we look ahead, While the semiconductor industry is navigating complex macroeconomic factors, there is an increasing need for semiconductors to improve power efficiency and sensing capabilities in rapidly evolving sectors like AI data centers, automotive and industrial. Through this downturn, we have maintained our strategic direction and we have continued to deliver value to our customer base on the performance of our technology. We are focused on operational excellence and are well positioned for recovery with gross margin expansion as we continue to realize the benefit of our Fab Right initiatives. Let me now turn it over to Thad to give you more detail on our result and approach going into the second quarter of 2025.