Press Release

NXP Semiconductors Reports First Quarter 2019 Results

EINDHOVEN, The Netherlands, April 29, 2019 (GLOBE NEWSWIRE) -- NXP Semiconductors N.V. (NASDAQ: NXPI) today reported financial results for the first quarter of 2019, ended March 31, 2019.

“NXP delivered revenue of $2.1 billion during the first quarter, just above our guidance. Due to a richer mix of sales and good expense control, we successfully delivered improved profitability toward the higher end of our guidance range. Additionally, during the quarter we returned $788 million to our shareholders consistent with our long-term capital return policy. Looking forward, our second quarter guidance reflects the successful design win momentum and traction we have achieved with our customers. We continue to believe the demand environment in the second half of 2019 should improve versus the first half, but the macro-economic environment is still uncertain, especially in China.” said Richard Clemmer, NXP Chief Executive Officer.

First-quarter Key Highlights

  • Revenue was $2.1 billion, down 8 percent year-on-year;
  • GAAP gross margin was 51.2 percent, and GAAP operating margin was 2.6 percent;
  • Non-GAAP gross margin was 52.7 percent, and non-GAAP operating margin was 26.7 percent;
  • Cash flow from operations was $296 million, with net capex investments of $144 million, resulting in non-GAAP free cash flow of $152 million;

Summary of Reported First Quarter 2019 ($ millions, unaudited) (1)

                         
                         
      Q1 2019   Q4 2018   Q1 2018   Q - Q   Y - Y  
  Total Revenue   $    2,094     $    2,403     $    2,269       -13 %     -8 %  
  GAAP Gross Profit   $    1,072     $    1,243     $    1,172       -14 %     -9 %  
  Gross Profit Adjustments (i)   $   (32 )   $   (32 )   $   (28 )          
  Non-GAAP Gross Profit   $    1,104     $    1,275     $    1,200       -13 %     -8 %  
  GAAP Gross Margin     51.2 %     51.7 %     51.7 %          
  Non-GAAP Gross Margin     52.7 %     53.1 %     52.9 %          
  GAAP Operating Income / (Loss)   $    54     $    224     $    138       -76 %     -61 %  
  Operating Income Adjustments (i)       (505 )       (507 )       (479 )          
  Non-GAAP Operating Income   $    559     $    731     $    617       -24 %     -9 %  
  GAAP Operating Margin     2.6 %     9.3 %     6.1 %          
  Non-GAAP Operating Margin     26.7 %     30.4 %     27.2 %          
                         
  Additional Information                      
  Automotive   $   1,036     $   1,112     $   1,131       -7 %     -8 %  
  Industrial & IoT   $   368     $   435     $   426       -15 %     -14 %  
  Mobile   $   241     $   344     $   266       -30 %     -9 %  
  Comm. Infra. & Other   $   449     $   483     $   407       -7 %     10 %  
  Manufacturing Services ("MSA")   $   -     $   29     $   39       NM       NM    
  DIO     113       102       106       11       7    
  DPO     74       80       83       (6)       (9)    
  DSO     35       30       32       5       3    
  Cash Conversion Cycle     74       52       55       22       19    
  Channel Inventory (months)     2.4       2.4       2.4       -       -    
  Financial Leverage (ii)     1.7x       1.4x       0.8x       0.3x       0.9x    
                         


  1. Additional Information for the First Quarter 2019:
     
    1. For an explanation of GAAP to non-GAAP adjustments, please see “Non-GAAP Financial Measures” on page 2 of this release.
    2. Financial leverage, is defined as net debt divided by trailing twelve months adjusted EBITDA.
  • During the first quarter of 2019 NXP repurchased 8.5 million shares for a total cost of $715 million.
  • Weighted average number of diluted shares for the three month period ended March 31, 2019 was 287.2 million and as the company reported a net loss, it excludes the incremental impact of dilutive potential common shares of 1.6 million shares.
  • Cash paid for income taxes related to on-going operations was $17 million. Items not related to on-going operations resulted in additional cash payments of $192 million, which was mainly due to the termination fee associated with the terminated Qualcomm transaction, offset by a benefit associated with the divestment of the Standard Products business.

Guidance for the Second Quarter 2019: ($ millions) (1)

                               
       Guidance Range   
                                 
      GAAP   Reconciliation   non-GAAP  
      Low   Mid   High       Low   Mid   High  
  Total Revenue   $    2,150     $    2,200     $    2,250     $   -     $    2,150     $    2,200     $    2,250    
  Q-Q     3 %     5 %     7 %         3 %     5 %     7 %  
  Y-Y     -6 %     -4 %     -2 %         -6 %     -4 %     -2 %  
  Gross Profit   $    1,107     $    1,145     $    1,183     $   (27 )   $    1,134     $    1,172     $    1,210    
  Gross Margin     51.5 %     52.0 %     52.6 %         52.7 %     53.3 %     53.8 %  
  Operating Income (loss)   $    95     $    123     $    150     $   (494 )   $    589     $    617     $    644    
  Operating Margin     4.4 %     5.6 %     6.7 %         27.4 %     28.0 %     28.6 %  
  Financial income (expense)   $   (78 )   $   (78 )   $   (78 )   $   (14 )   $   (64 )   $   (64 )   $   (64 )  
                                 
                                 

Note (1) Additional Information:

  1. GAAP Gross Profit is expected to include Purchase Price Accounting (“PPA”) effects, ($17 million); Stock Based Compensation, ($10 million);
  2. GAAP Operating Income (loss) is expected to include PPA effects, ($378 million); Stock Based Compensation, ($86 million); Merger related costs ($10 million); Restructuring and Other Incidentals, ($20 million);
  3. GAAP Financial Income (expense) is expected to include Other financial expense ($14 million);
  4. Net cash paid for income taxes related to on-going operations is expected to be approximately ($38 million);
  5. Non-controlling interest is expected to be approximately ($6 million);
  6. Weighted average diluted share count is expected to be approximately 287 million.

NXP has based the guidance included in this release on judgments and estimates that management believes are reasonable given its assessment of historical trends and other information reasonably available as of the date of this release. Please note, the guidance included in this release consists of predictions only, and is subject to a wide range of known and unknown risks and uncertainties, many of which are beyond NXP's control.  The guidance included in this release should not be regarded as representations by NXP that the estimated results will be achieved.  Actual results may vary materially from the guidance we provide today.  In relation to the use of non-GAAP financial information see the note regarding "Non-GAAP Financial Measures" below.  For the factors, risks, and uncertainties to which judgments, estimates and forward-looking statements generally are subject see the note regarding "Forward-looking Statements."  We undertake no obligation to publicly update or revise any forward-looking statements, including the guidance set forth herein, to reflect future events or circumstances

Non-GAAP Financial Measures

In managing NXP's business on a consolidated basis, management develops an annual operating plan, which is approved by our Board of Directors, using non-GAAP financial measures. In measuring performance against this plan, management considers the actual or potential impacts on these non-GAAP financial measures from actions taken to reduce costs with the goal of increasing our gross margin and operating margin and when assessing appropriate levels of research and development efforts. In addition, management relies upon these non-GAAP financial measures when making decisions about product spending, administrative budgets, and other operating expenses. We believe that these non-GAAP financial measures, when coupled with the GAAP results and the reconciliations to corresponding GAAP financial measures, provide a more complete understanding of the Company’s results of operations and the factors and trends affecting NXP’s business. We believe that they enable investors to perform additional comparisons of our operating results, to assess our liquidity and capital position and to analyze financial performance excluding the effect of expenses unrelated to operations, certain non-cash expenses and share-based compensation expense, which may obscure trends in NXP's underlying performance.  This information also enables investors to compare financial results between periods where certain items may vary independent of business performance, and allow for greater transparency with respect to key metrics used by management. 

These non-GAAP financial measures are provided in addition to, and not as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. The presentation of these and other similar items in NXP’s non-GAAP financial results should not be interpreted as implying that these items are non-recurring, infrequent, or unusual.  Reconciliations of these non-GAAP measures to the most comparable measures calculated in accordance with GAAP are provided in the financial statements portion of this release in a schedule entitled “Financial Reconciliation of GAAP to non-GAAP Results (unaudited).” Please refer to the NXP Historic Financial Model file found on the Financial Information page of the Investor Relations section of our website at https://investors.nxp.com for additional information related to our rationale for using these non-GAAP financial measures, as well as the impact of these measures on the presentation of NXP's operations.  

In addition to providing financial information on a basis consistent with U.S. generally accepted accounting principles (“GAAP”), NXP also provides the following selected financial measures on a non-GAAP basis: (i) Gross profit, (ii) Gross margin, (iii) Research and development, (iv) Selling, general and administrative, (v) Amortization of acquisition-related intangible assets, (vi) Other income, (vii) Operating income (loss), (viii) Operating margin, (ix) Financial Income (expense), (x) adjusted net income, adjusted EBITDA and trailing 12 month adjusted EBITDA, and (xi) free cash flow and free cash flow as a percent of Revenue. The non-GAAP information excludes the amortization of acquisition related intangible assets, the purchase accounting effect on inventory and property, plant and equipment, merger related costs (including integration costs), certain items related to divestitures, share-based compensation expense, restructuring and asset impairment charges, non-cash interest expense on convertible notes, extinguishment of debt, and foreign exchange gains and losses.

Conference Call and Webcast Information

NXP will host a conference call on April 30, 2019 at 8:00 a.m. U.S. Eastern Time (2:00 p.m. Central European Time) to discuss its first quarter 2019 results and provide an outlook for the second quarter of 2019. 

Interested parties may join the conference call by dialing 1 – 888 – 603 – 7644 (within the U.S.) or 1 – 484 – 747 - 6631 (outside of the U.S.). The participant pass-code is 4776928. To listen to a webcast of the event, please visit the Investor Relations section of the NXP website at https://investors.nxp.com. The webcast will be recorded and available for replay shortly after the call concludes.

About NXP Semiconductors

NXP Semiconductors N.V. (NASDAQ: NXPI) enables secure connections and infrastructure for a smarter world, advancing solutions that make lives easier, better, and safer. As the world leader in secure connectivity solutions for embedded applications, NXP is driving innovation in the secure connected vehicle, end-to-end security & privacy, and smart connected solutions markets. Built on more than 60 years of combined experience and expertise, the company has approximately 30,000 employees in more than 30 countries and posted revenue of $9.41 billion in 2018. Find out more at www.nxp.com.

Forward-looking Statements

This document includes forward-looking statements which include statements regarding NXP’s business strategy, financial condition, results of operations, and market data, as well as any other statements which are not historical facts.  By their nature, forward-looking statements are subject to numerous factors, risks and uncertainties that could cause actual outcomes and results to be materially different from those projected.  These factors, risks and uncertainties include the following: market demand and semiconductor industry conditions; the ability to successfully introduce new technologies and products; the end-market demand for the goods into which NXP’s products are incorporated; the ability to generate sufficient cash, raise sufficient capital or refinance corporate debt at or before maturity; the ability to meet the combination of corporate debt service, research and development and capital investment requirements; the ability to accurately estimate demand and match manufacturing production capacity accordingly or obtain supplies from third-party producers; the access to production capacity from third-party outsourcing partners; any events that might affect third-party business partners or NXP’s relationship with them;  the ability to secure adequate and timely supply of equipment and materials from suppliers; the ability to avoid operational problems and product defects and, if such issues were to arise, to correct them quickly; the ability to form strategic partnerships and joint ventures and to successfully cooperate with alliance partners; the ability to win competitive bid selection processes to develop products for use in customers’ equipment and products; the ability to achieve targeted efficiencies and cost savings;  the ability to successfully hire and retain key management and senior product architects; and, the ability to maintain good relationships with our suppliers.  In addition, this document contains information concerning the semiconductor industry and NXP’s business generally, which is forward-looking in nature and is based on a variety of assumptions regarding the ways in which the semiconductor industry, NXP’s markets and product areas may develop.  NXP has based these assumptions on information currently available, if any one or more of these assumptions turn out to be incorrect, actual results may differ from those predicted.  While NXP does not know what impact any such differences may have on its business, if there are such differences, its future results of operations and its financial condition could be materially adversely affected.  Readers are cautioned not to place undue reliance on these forward-looking statements, which speak to results only as of the date the statements were made.  Except for any ongoing obligation to disclose material information as required by the United States federal securities laws, NXP does not have any intention or obligation to publicly update or revise any forward-looking statements after we distribute this document, whether to reflect any future events or circumstances or otherwise.  For a discussion of potential risks and uncertainties, please refer to the risk factors listed in our SEC filings. Copies of our SEC filings are available on our Investor Relations website, https://investors.nxp.com or from the SEC website, www.sec.gov

     
For further information, please contact:    
     
Investors:   Media:
Jeff Palmer   Jacey Zuniga 
jeff.palmer@nxp.com    jacey.zuniga@nxp.com
+1 408 518 5411   +1 512 895 7398
     


                 
  NXP Semiconductors              
  Table 1: Condensed consolidated statement of operations (unaudited)          
                 
                 
                 
  ($ in millions except share data)   Three Months Ended  
      March 31, 2019   December 31, 2018   April 1, 2018  
                 
  Revenue   $    2,094     $    2,403     $    2,269    
  Cost of revenue       (1,022 )       (1,160 )       (1,097 )  
  Gross profit       1,072         1,243         1,172    
                 
  Research and development       (415 )       (403 )       (426 )  
  Selling, general and administrative       (248 )       (251 )       (248 )  
  Amortization of acquisition-related intangible assets       (357 )       (364 )       (360 )  
  Total operating expenses       (1,020 )       (1,018 )       (1,034 )  
                 
  Other income (expense)       2         (1 )       -    
  Operating income (loss)       54         224         138    
                 
  Financial income (expense):              
  Extinguishment of debt       -         -         -    
  Other financial income (expense)       (83 )       (77 )       (68 )  
  Income (loss) before taxes       (29 )       147         70    
                 
  Benefit (provision) for income taxes       9         141         (2 )  
  Results relating to equity-accounted investees       4         1         2    
  Net income (loss)       (16 )       289         70    
  Less: Net income (loss) attributable to non-controlling interests       5         13         12    
  Net income (loss) attributable to stockholders       (21 )       276         58    
                 
  Earnings per share data:               
  Net income (loss) per common share attributable to stockholders in $:          
  Basic   $   (0.07 )   $   0.94     $   0.17    
  Diluted   $   (0.07 )   $   0.94     $   0.17    
                 
  Weighted average number of shares of common stock outstanding during the period (in thousands):      
  Basic     287,227       293,170       343,661    
  Diluted     287,227       294,947       346,899    
                 
                 


                 
  NXP Semiconductors              
  Table 2: Condensed consolidated balance sheet (unaudited)              
                 
                 
  ($ in millions)   As of  
      March 31, 2019   December 31, 2018   April 1, 2018  
                 
  Current assets:              
  Cash and cash equivalents   $   2,192   $   2,789   $   3,983  
  Accounts receivable, net       800       792       791  
  Inventories, net       1,241       1,279       1,251  
  Other current assets       387       365       536  
  Total current assets       4,620       5,225       6,561  
                 
  Non-current assets:              
  Other non-current assets       699       545       888  
  Property, plant and equipment, net       2,407       2,436       2,307  
  Identified intangible assets, net       4,094       4,467       5,494  
  Goodwill       8,852       8,857       8,877  
  Total non-current assets       16,052       16,305       17,566  
                 
  Total assets       20,672       21,530       24,127  
                 
  Current liabilities:              
  Accounts payable       815       999       984  
  Restructuring liabilities-current       66       60       67  
  Other current liabilities       1,264       1,219       865  
  Short-term debt       1,117       1,107       1,249  
  Total current liabilities       3,262       3,385       3,165  
                 
  Non-current liabilities:              
  Long-term debt       6,223       6,247       5,329  
  Restructuring liabilities       4       5       15  
  Deferred tax liabilities       390       450       650  
  Other non-current liabilities       862       753       1,078  
  Total non-current liabilities       7,479       7,455       7,072  
                 
  Non-controlling interests       190       185       201  
  Stockholders’ equity       9,741       10,505       13,689  
  Total equity       9,931       10,690       13,890  
                 
  Total liabilities and equity       20,672       21,530       24,127  
                 
                 


                 
  NXP Semiconductors              
  Table 3: Condensed consolidated statement of cash flows (unaudited)          
                 
                 
                 
  ($ in millions)   Three Months Ended  
      March 31, 2019   December 31, 2018   April 1, 2018  
                 
  Cash Flows from operating activities              
  Net income (loss)    $    (16 )   $    289     $    70    
  Adjustments to reconcile net income (loss):              
  Depreciation and amortization       502         503         491    
  Stock-based compensation       86         93         69    
  Amortization of discount on debt       11         11         10    
  Amortization of debt issuance costs       3         3         3    
  Results relating to equity accounted investees       (4 )       (1 )       (2 )  
  Changes in deferred taxes       (63 )       (52 )       (42 )  
  Changes in operating assets and liabilities:              
  (Increase) decrease in receivables and other current assets       (42 )       51         81    
  (Increase) decrease in inventories       38         5         (36 )  
  Increase (decrease) in accounts payable and other liabilities       (250 )       (188 )       (26 )  
  Decrease (Increase) in other non-current assets       20         4         -    
  Exchange differences       6         13         5    
  Other items       5         -         (3 )  
  Net cash provided by (used for) operating activities       296         731         620    
                 
  Cash flows from investing activities:              
  Purchase of identified intangible assets       (28 )       (4 )       (18 )  
  Capital expenditures on property, plant and equipment       (144 )       (170 )       (156 )  
  Proceeds from sale of interests in businesses, net of cash divested       37         -         -    
  Purchase of available-for-sale securities       (2 )       (2 )       -    
  Proceeds from the sale of securities       1         2         -    
  Other       -         -         -    
  Net cash provided by (used for) investing activities       (136 )       (174 )       (174 )  
                 
  Cash flows from financing activities:              
  Repayment of Bridge Loan       -         (1,000 )       -    
  Proceeds from the issuance of long-term debt       -         1,997         -    
  Cash paid for debt issuance costs       -         (12 )       -    
  Cash paid for terminated acquisition adjustment event       -         (60 )       -    
  Dividends paid to common stockholders       (73 )       (74 )       -    
  Proceeds from issuance of common stock through stock plans     32         3         20    
  Purchase of treasury shares       (715 )       (424 )       (30 )  
  Cash paid on behalf of shareholders for tax on repurchased shares       -         (142 )       -    
  Net cash provided by (used for) financing activities       (756 )       288         (10 )  
                 
  Effect of changes in exchange rates on cash positions       (1 )       -         -    
  Increase (decrease) in cash and cash equivalents       (597 )       845         436    
  Cash and cash equivalents at beginning of period       2,789         1,944         3,547    
  Cash and cash equivalents at end of period       2,192         2,789         3,983    
                 
                 
                 
  Net cash paid during the period for:              
  Interest     25       74       21    
  Income taxes     209       61       44    
  Non-cash adjustment related to the adoption of ASC 606:              
  Receivables and other current assets       -         -         (36 )  
  Inventories       -         -         22    
                 


                 
  NXP Semiconductors              
  Table 4: Financial Reconciliation of GAAP to non-GAAP Results (unaudited)          
                 
                 
                 
  ($ in millions except share data)   Three Months Ended  
      March 31, 2019   December 31, 2018   April 1, 2018  
                 
  Revenue   $    2,094     $    2,403     $    2,269    
                 
  GAAP Gross profit   $    1,072     $    1,243     $    1,172    
  PPA effects       (17 )       (19 )       (19 )  
  Restructuring       (4 )       -         -    
  Stock Based Compensation       (10 )       (12 )       (9 )  
  Merger-related costs       (1 )       (1 )       -    
  Non-GAAP Gross profit   $    1,104     $    1,275     $    1,200    
                 
  GAAP Gross margin     51.2 %     51.7 %     51.7 %  
                 
  Non-GAAP Gross margin     52.7 %     53.1 %     52.9 %  
                 
  GAAP Research and development   $   (415 )   $   (403 )   $   (426 )  
  Restructuring       (11 )       -         -    
  Stock based compensation       (35 )       (36 )       (31 )  
  Merger-related costs       (3 )       (3 )       (1 )  
  Non-GAAP Research and development   $   (366 )   $   (364 )   $   (394 )  
                 
  GAAP Selling, general and administrative   $   (248 )   $   (251 )   $   (248 )  
  PPA effects       (1 )       (2 )       (3 )  
  Restructuring       (10 )       (1 )       (1 )  
  Stock based compensation       (41 )       (45 )       (29 )  
  Merger-related costs       (9 )       (11 )       (25 )  
  Other incidentals       (6 )       (13 )       -    
  Non-GAAP Selling, general and administrative   $   (181 )   $   (179 )   $   (190 )  
                 
  GAAP amortization of acquisition-related intangible assets   $   (357 )   $   (364 )   $   (360 )  
  PPA effects       (357 )       (364 )       (360 )  
  Non-GAAP amortization of acquisition-related intangible assets $   -      $   -      $   -     
                 
  GAAP Other income (expense)   $   2     $   (1 )   $   -    
  Other incidentals       -         -         (1 )  
  Non-GAAP Other income (expense)   $   2     $   (1 )   $   1    
                 
  GAAP Operating income (loss)   $    54     $    224     $    138    
  PPA effects       (375 )       (385 )       (382 )  
  Restructuring       (25 )       (1 )       (1 )  
  Stock based compensation       (86 )       (93 )       (69 )  
  Merger-related costs       (13 )       (15 )       (26 )  
  Other incidentals       (6 )       (13 )       (1 )  
  Non-GAAP Operating income (loss)   $    559     $    731     $    617    
                 
  GAAP Operating margin     2.6 %     9.3 %     6.1 %  
                 
  Non-GAAP Operating margin     26.7 %     30.4 %     27.2 %  
                 
  GAAP Financial income (expense)   $   (83 )   $   (77 )   $   (68 )  
  Non-cash interest expense on convertible notes       (11 )       (11 )       (11 )  
  Foreign exchange gain (loss)       (7 )       (5 )       (3 )  
  Other financial expense       (4 )       (1 )       (3 )  
  Non-GAAP Financial income (expense)   $    (61 )   $    (60 )   $    (51 )  
                 
                 

 

                   
  NXP Semiconductors                
  Table 5: Adjusted EBITDA and Free Cash Flow (unaudited)                
                   
                   
                   
  ($ in millions)   Three Months Ended    
      March 31, 2019   December 31, 2018   April 1, 2018    
                   
  Net Income (loss)   $    (16 )   $    289     $    70      
                   
  Reconciling items to adjusted net income                
  Financial (income) expense       83         77         68      
  (Benefit) provision for income taxes       (9 )       (141 )       2      
  Depreciation       124         124         116      
  Amortization       378         379         375      
  Adjusted net income   $    560     $    728     $    631      
                   
  Reconciling items to adjusted EBITDA                
  Results of equity-accounted investees       (4 )       (1 )       (2 )    
  Restructuring       25         1         1      
  Stock based compensation       86         93         69      
  Merger-related costs       13         15         26      
  Other incidental items       6         13         1      
  Adjusted EBITDA   $    686     $    849     $    726      
  Trailing twelve month adjusted EBITDA   $    3,111     $    3,151     $    3,176      
                   
                   
                   
                   
                   
                   
  ($ in millions)   Three Months Ended    
      March 31, 2019   December 31, 2018   April 1, 2018    
                   
  Net cash provided by (used for) operating activities    $    296     $    731     $    620      
  Net capital expenditures on property, plant and equipment       (144 )       (170 )       (156 )    
  Non-GAAP free cash flow   $    152     $    561     $    464      
  Non-GAAP free cash flow as a percent of Revenue     7 %     23 %     21 %    
                   
                   

 

 

 

NXPJPEGLOGO.jpg

Source: NXP USA, Inc.

Published

April 29, 2019 at 8:00 PM EDT
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