NXP Semiconductors Reports Fourth Quarter and Full-year 2018 Results

EINDHOVEN, The Netherlands, Feb. 06, 2019 (GLOBE NEWSWIRE) -- NXP Semiconductors N.V. (NASDAQ: NXPI) today reported financial results for the fourth quarter and full year 2018, ended December 31, 2018.

“NXP delivered greater than 5 percent growth in Auto and Secure Connected Devices, resulting in total revenue of $9.41 billion, an increase of 2 percent year-on-year. Our teams continue to be fully focused on driving our long-term strategy, with a very strong pipeline of innovative solutions and excellent customer traction. However, demand has weakened for the first quarter, primarily in the automotive and industrial end-markets in China.” said Richard Clemmer, NXP Chief Executive Officer.

Key Highlights

Fourth-quarter revenue was $2.4 billion, down 2 percent year-on-year;
Fourth-quarter GAAP gross margin was 51.7 percent, and GAAP operating margin was 9.3 percent;
Fourth-quarter non-GAAP gross margin was 53.1 percent, and non-GAAP operating margin was 30.4 percent;
Full-year cash flow from operations was $4.37 billion, with net capex investments of $610 million, resulting in non-GAAP free cash flow of $3.76 billion;
In 2018 NXP returned $5.08 billion to shareholders through previously announced share repurchases and dividend payments, reducing our diluted share count by 15 percent or 52 million shares.

Summary of Reported Fourth Quarter and Full-year 2018 ($ millions, unaudited) ⁽¹⁾

	Q4 2018			Q3 2018			Q4 2017			Q - Q		Y - Y		2018			2017			Y - Y
Automotive	$	960		$	990		$	970		-3	%	-1	%	$	3,953		$	3,762		5	%
Secure Connected Devices (SCD)	$	729		$	717		$	745		2	%	-2	%	$	2,723		$	2,587		5	%
Secure Interface and Infrastructure (SI&I)	$	487		$	511		$	497		-5	%	-2	%	$	1,792		$	1,873		-4	%
Secure Identification Solutions (SIS)	$	136		$	133		$	136		2	%	0	%	$	554		$	523		6	%
High Performance Mixed Signal (HPMS)	$	2,312		$	2,351		$	2,348		-2	%	-2	%	$	9,022		$	8,745		3	%
Standard Products (STDP)	$	-		$	-		$	-						$	-		$	118		NM
Product Revenue	$	2,312		$	2,351		$	2,348		-2	%	-2	%	$	9,022		$	8,863		2	%
Corporate and Other	$	91		$	94		$	108		-3	%	-16	%	$	385		$	393		-2	%
Total Revenue(i)	$	2,403		$	2,445		$	2,456		-2	%	-2	%	$	9,407		$	9,256		2	%
GAAP Gross Profit	$	1,243		$	1,256		$	1,242		-1	%	0	%	$	4,851		$	4,619		5	%
Gross Profit Adjustments (ii)	$	(32	)	$	(39	)	$	(89	)					$	(129	)	$	(306	)
Non-GAAP Gross Profit	$	1,275		$	1,295		$	1,331		-2	%	-4	%	$	4,980		$	4,925		1	%
GAAP Gross Margin		51.7	%		51.4	%		50.6	%						51.6	%		49.9	%
Non-GAAP Gross Margin		53.1	%		53.0	%		54.2	%						52.9	%		53.2	%
GAAP Operating Income / (Loss)	$	224		$	2,211		$	210		-90	%	7	%	$	2,710		$	2,102		29	%
Operating Income Adjustments (ii)		(507	)		1,478			(553	)						11			(620	)
Non-GAAP Operating Income	$	731		$	733		$	763		0	%	-4	%	$	2,699		$	2,722		-1	%
GAAP Operating Margin		9.3	%		90.4	%		8.6	%						28.8	%		22.7	%
Non-GAAP Operating Margin		30.4	%		30.0	%		31.1	%						28.7	%		29.4	%

Additional Information
DIO		102			100			99		2		3
DPO		80			74			92		6		(12	)
DSO		30			32			33		(2	)	(3	)
Cash Conversion Cycle		52			58			40		(6	)	12
Channel Inventory (months)		2.4			2.4			2.3		-		0.1
Financial Leverage (iii)		1.4x			1.4x			1.0x		-		0.4x

Additional Information for the Fourth Quarter and Full-year 2018:
1. Beginning January 1, 2019, NXP will begin to provide supplemental revenue information by end-market, defined as Automotive; Industrial and IoT; Mobile; Communication Infrastructure and Other. Additionally, NXP will report the net profit - revenue less costs and expenses - associated with its manufacturing service agreements related to previously divested assets in Other Income and Expense. To help investors better understand this supplemental information NXP provided the current and comparable period revenue in both the existing format and the new end market on its investor relations website at www.nxp.com/investor.
2. For an explanation of GAAP to non-GAAP adjustments, please see “Non-GAAP Financial Measures” on page 2 of this release.
3. Financial leverage, is defined as net debt divided by trailing twelve months adjusted EBITDA.

During the fourth quarter of 2018 NXP repurchased 5 million shares for a total cost of $393 million.
Weighted average number of diluted shares for the three-month period ended December 31, 2018 was 295 million, a reduction of 52 million shares as compared to the fourth quarter of 2017.
Cash paid for income taxes related to on-going operations was $29 million. Items not related to on-going operations resulted in additional cash payments of $32 million, which was mainly due to the divestment of the Standard Products business.

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

	Guidance Range

	GAAP									Reconciliation			non-GAAP
	Low			Mid			High						Low			Mid			High
Total Revenue	$	2,020		$	2,090		$	2,160		$	-		$	2,020		$	2,090		$	2,160
Q-Q		-16	%		-13	%		-10	%					-16	%		-13	%		-10	%
Y-Y		-11	%		-8	%		-5	%					-11	%		-8	%		-5	%
Gross Profit	$	1,010		$	1,060		$	1,112		$	(33	)	$	1,043		$	1,093		$	1,145
Gross Margin		50.0	%		50.7	%		51.5	%					51.6	%		52.3	%		53.0	%
Operating Income (loss)	$	6		$	44		$	84		$	(499	)	$	505		$	543		$	583
Operating Margin		0.3	%		2.1	%		3.9	%					25.0	%		26.0	%		27.0	%
Financial income (expense)	$	(76	)	$	(76	)	$	(76	)	$	(14	)	$	(62	)	$	(62	)	$	(62	)

Note (1) Additional Information:

GAAP Gross Profit is expected to include Purchase Price Accounting (“PPA”) effects, ($16 million); Stock Based Compensation, ($11 million); Restructuring and Other Incidentals, ($6 million);
GAAP Operating Income (loss) is expected to include PPA effects, ($380 million); Stock Based Compensation, ($86 million); Merger related costs ($3 million); Restructuring and Other Incidentals, ($30 million);
GAAP Financial Income (expense) is expected to include Other financial expense ($14 million);
Net cash paid for income taxes related to on-going operations is expected to be approximately ($24 million);
Non-controlling interest is expected to be approximately ($7 million);
Weighted average diluted share count is expected to be approximately 290 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 www.nxp.com/investor 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 February 7, 2019 at 8:00 a.m. U.S. Eastern Time (2:00 p.m. Central European Time) to discuss its fourth quarter and full-year 2018 results and provide an outlook for the first 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 1899219. To listen to a webcast of the event, please visit the Investor Relations section of the NXP website at www.nxp.com/investor. 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 and 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 successfully establish a brand identity; 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 segments 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 market segments 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 market 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, www.nxp.com/investor 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									Full Year
	Dec. 31, 2018			Sept. 30, 2018			Dec. 31, 2017				2018			2017
Revenue	$	2,403		$	2,445		$	2,456		$	9,407		$	9,256
Cost of revenue		(1,160	)		(1,189	)		(1,214	)		(4,556	)		(4,637	)
Gross profit		1,243			1,256			1,242			4,851			4,619
Research and development		(403	)		(433	)		(414	)		(1,700	)		(1,554	)
Selling, general and administrative		(251	)		(252	)		(269	)		(993	)		(1,090	)
Amortization of acquisition-related intangible assets		(364	)		(362	)		(347	)		(1,449	)		(1,448	)
Total operating expenses		(1,018	)		(1,047	)		(1,030	)		(4,142	)		(4,092	)
Other income (expense)		(1	)		2,002			(2	)		2,001			1,575
Operating income (loss)		224			2,211			210			2,710			2,102
Financial income (expense):
Extinguishment of debt		-			-			-			(26	)		(41	)
Other financial income (expense)		(77	)		(119	)		(79	)		(309	)		(325	)
Income (loss) before taxes		147			2,092			131			2,375			1,736
Benefit (provision) for income taxes		141			(311	)		629			(176	)		483
Results relating to equity-accounted investees		1			52			8			59			53
Net income (loss)		289			1,833			768			2,258			2,272
Less: Net income (loss) attributable to non-controlling interests		13			13			15			50			57
Net income (loss) attributable to stockholders		276			1,820			753			2,208			2,215
Earnings per share data:
Net income (loss) per common share attributable to stockholders in $:
Basic	$	0.94		$	5.64		$	2.20		$	6.78		$	6.54
Diluted	$	0.94		$	5.60		$	2.17		$	6.72		$	6.41
Weighted average number of shares of common stock outstanding during the period (in thousands):
Basic		293,170			322,533			342,088			325,781			338,646
Diluted		294,947			325,267			347,176			328,606			345,802
Cash dividends declared per share	$	0.25		$	0.25			-		$	0.50			-

NXP Semiconductors
Table 2: Condensed consolidated balance sheet (unaudited)
($ in millions)	As of
	Dec. 31, 2018		Sept. 30, 2018		Dec. 31, 2017
Current assets:
Cash and cash equivalents	$	2,789	$	1,944	$	3,547
Accounts receivable, net		792		845		879
Inventories, net		1,279		1,284		1,236
Other current assets		365		330		382
Total current assets		5,225		4,403		6,044

Non-current assets:
Other non-current assets		545		632		981
Property, plant and equipment, net		2,436		2,394		2,295
Identified intangible assets, net		4,467		4,762		5,863
Goodwill		8,857		8,865		8,866
Total non-current assets		16,305		16,653		18,005

Total assets		21,530		21,056		24,049

Current liabilities:
Accounts payable		999		949		1,146
Restructuring liabilities-current		60		62		74
Accrued liabilities		1,219		1,583		747
Short-term debt		1,107		1,002		751
Total current liabilities		3,385		3,596		2,718
Non-current liabilities:
Long-term debt		6,247		5,354		5,814
Restructuring liabilities		5		9		15
Deferred tax liabilities		450		502		701
Other non-current liabilities		753		790		1,085
Total non-current liabilities		7,455		6,655		7,615
Non-controlling interests		185		172		189
Stockholders’ equity		10,505		10,633		13,527
Total equity		10,690		10,805		13,716
Total liabilities and equity		21,530		21,056		24,049

NXP Semiconductors
Table 3: Condensed consolidated statement of cash flows (unaudited)
($ in millions)	Three Months Ended									Full Year
	Dec. 31, 2018			Sept. 30, 2018			Dec. 31, 2017				2018			2017
Cash Flows from operating activities
Net income (loss)	$	289		$	1,833		$	768		$	2,258		$	2,272
Adjustments to reconcile net income (loss):
Depreciation and amortization		503			497			542			1,987			2,173
Stock-based compensation		93			83			78			314			281
Amortization of discount on debt		11			10			10			42			40
Amortization of debt issuance costs		3			2			3			10			12
Net gain on sale of assets		-			-			(4	)		-			(1,615	)
Loss on extinguishment of debt		-			-			-			26			41
Results relating to equity accounted investees		(1	)		(52	)		(8	)		(54	)		(22	)
Changes in deferred taxes		(52	)		(50	)		(593	)		(211	)		(797	)
Changes in operating assets and liabilities:
(Increase) decrease in receivables and other current assets		51			(31	)		(25	)		187			31
(Increase) decrease in inventories		5			42			(31	)		(65	)		(120	)
Increase (decrease) in accounts payable and accrued liabilities		(188	)		310			82			(129	)		225
Decrease (Increase) in other non-current assets		4			(36	)		(92	)		(22	)		(100	)
Exchange differences		13			1			5			14			30
Other items		-			6			3			12			(4	)
Net cash provided by (used for) operating activities		731			2,615			738			4,369			2,447

Cash flows from investing activities:
Purchase of identified intangible assets		(4	)		(18	)		(10	)		(50	)		(66	)
Capital expenditures on property, plant and equipment		(170	)		(156	)		(133	)		(611	)		(552	)
Proceeds from disposals of property, plant and equipment		-			1			1			1			2
Purchase of interests in businesses, net of cash acquired		-			-			-			(18	)		-
Proceeds from sale of interests in businesses, net of cash divested		-			127			-			159			2,682
Purchase of available-for-sale securities		(2	)		-			-			(9	)		-
Proceeds from the sale of securities		2			-			-			2			-
Proceeds from return of equity investment		-			4			-			4			-
Other		-			-			7			-			6
Net cash provided by (used for) investing activities		(174	)		(42	)		(135	)		(522	)		2,072

Cash flows from financing activities:
Repayment of Bridge loan		(1,000	)		-			-			(1,000	)		-
Proceeds from Bridge loan		-			1,000			-			1,000			-
Repurchase of long-term debt		-			-			-			(1,273	)		(2,728	)
Principal payments on long-term debt		-			-			(4	)		(1	)		(16	)
Proceeds from the issuance of long-term debt		1,997			-			-			1,997			-
Cash paid for debt issuance costs		(12	)		(11	)		-			(23	)		-
Cash paid for terminated acquisition adjustment event		(60	)		-			-			(60	)		-
Dividends paid to non-controlling interests		-			(54	)		-			(54	)		(89	)
Dividends paid to common stockholders		(74	)		-			-			(74	)		-
Cash proceeds from exercise of stock options		3			6			129			39			233
Purchase of treasury shares and restricted stock unit withholdings		(424	)		(4,550	)		(248	)		(5,006	)		(286	)
Cash paid on behalf of shareholders for tax on repurchased shares		(142	)		-			-			(142	)		-
Net cash provided by (used for) financing activities		288			(3,609	)		(123	)		(4,597	)		(2,886	)

Effect of changes in exchange rates on cash positions		-			(1	)		2			(8	)		20
Increase (decrease) in cash and cash equivalents		845			(1,037	)		482			(758	)		1,653
Cash and cash equivalents at beginning of period		1,944			2,981			3,065			3,547			1,894
Cash and cash equivalents at end of period		2,789			1,944			3,547			2,789			3,547

Net cash paid during the period for:
Interest		74			7			81			177			245
Income taxes		61			80			67			188			356
Non-cash adjustment related to the adoption of ASC 606:
Receivables and other current assets		-			-			-			(36	)		-
Inventories		-			-			-			22			-

NXP Semiconductors
Table 4: Reconciliation of GAAP to non-GAAP Segment Results (unaudited)
($ in millions)	Three Months Ended									Full Year
	Dec. 31, 2018			Sept. 30, 2018			Dec. 31, 2017				2018			2017

High Performance Mixed Signal (HPMS)		2,312			2,351			2,348			9,022			8,745
Standard Products		-			-			-			-			118
Corporate and Other		91			94			108			385			393
Total Revenue	$	2,403		$	2,445		$	2,456		$	9,407		$	9,256


HPMS Revenue	$	2,312		$	2,351		$	2,348		$	9,022		$	8,745
Percent of Total Revenue		96.2	%		96.2	%		95.6	%		95.9	%		94.5	%
HPMS segment GAAP gross profit		1,234			1,254			1,228			4,822			4,527
PPA effects		(18	)		(19	)		(78	)		(74	)		(268	)
Stock based compensation		(12	)		(10	)		(10	)		(39	)		(33	)
Merger-related costs		(1	)		(1	)		-			(3	)		(1	)
HPMS segment non-GAAP gross profit	$	1,265		$	1,284		$	1,316		$	4,938		$	4,829
HPMS segment GAAP gross margin		53.4	%		53.3	%		52.3	%		53.4	%		51.8	%
HPMS segment non-GAAP gross margin		54.7	%		54.6	%		56.0	%		54.7	%		55.2	%
HPMS segment GAAP operating profit		246			240			246			807			656
PPA effects		(384	)		(383	)		(430	)		(1,531	)		(1,737	)
Restructuring		-			(4	)		-			(4	)		9
Stock based compensation		(93	)		(82	)		(77	)		(312	)		(278	)
Merger-related costs		(7	)		(23	)		(3	)		(40	)		(10	)
HPMS segment non-GAAP operating profit	$	730		$	732		$	756		$	2,694		$	2,672
HPMS segment GAAP operating margin		10.6	%		10.2	%		10.5	%		8.9	%		7.5	%
HPMS segment non-GAAP operating margin		31.6	%		31.1	%		32.2	%		29.9	%		30.6	%
Standard Products Revenue													$	118
Percent of Total Revenue														1.3	%
Standard Products segment GAAP gross profit														45
Stock based compensation														(1	)
Merger-related costs														4
Standard Products segment non-GAAP gross profit													$	42
Standard Products segment GAAP gross margin														38.1	%
Stamdard Products segment non-GAAP gross margin														35.6	%
Standard Products segment GAAP operating profit														31
Stock based compensation														(2	)
Merger-related costs														4
Standard Products segment non-GAAP operating profit													$	29
Standard Products segment GAAP operating margin														26.3	%
Standard Products segment non-GAAP operating margin														24.6	%

Corporate and Other Revenue	$	91		$	94		$	108		$	385		$	393
Percent of Total Revenue		3.8	%		3.8	%		4.4	%		4.1	%		4.2	%
Corporate and Other segment GAAP gross profit		9			2			14			29			47
PPA effects		(1	)		(1	)		(1	)		(4	)		(5	)
Restructuring		-			-			-			-			(3	)
Stock based compensation		-			(1	)		-			(1	)		1
Merger-related costs		-			(7	)		-			(8	)		-
Corporate and Other segment non-GAAP gross profit	$	10		$	11		$	15		$	42		$	54
Corporate and Other segment GAAP gross margin		9.9	%		2.1	%		13.0	%		7.5	%		12.0	%
Corporate and Other segment non-GAAP gross margin		11.0	%		11.7	%		13.9	%		10.9	%		13.7	%
Corporate and Other segment GAAP operating profit		(22	)		1,971			(36	)		1,903			1,415
PPA effects		(1	)		(1	)		(1	)		(4	)		(5	)
Restructuring		(1	)		(1	)		-			(2	)		(10	)
Stock based compensation		-			(1	)		(1	)		(2	)		(1	)
Merger-related costs		(8	)		1,937			(29	)		1,888			(129	)
Other incidentals		(13	)		36			(12	)		18			1,539
Corporate and Other segment non-GAAP operating profit	$	1		$	1		$	7		$	5		$	21
Corporate and Other segment GAAP operating margin		-24.2	%		2096.8	%		-33.3	%		494.3	%		360.1	%
Corporate and Other segment non-GAAP operating margin		1.1	%		1.1	%		6.5	%		1.3	%		5.3	%

NXP Semiconductors
Table 5: Financial Reconciliation of GAAP to non-GAAP Results (unaudited)
($ in millions except share data)	Three Months Ended											Full Year
	Dec. 31, 2018			Sept. 30, 2018					Dec. 31, 2017				2018			2017
Revenue	$	2,403		$	2,445				$	2,456		$	9,407		$	9,256
GAAP Gross profit	$	1,243		$	1,256				$	1,242		$	4,851		$	4,619
PPA effects		(19	)		(20	)				(79	)		(78	)		(273	)
Restructuring		-			-					-			-			(3	)
Stock Based Compensation		(12	)		(11	)				(10	)		(40	)		(33	)
Merger-related costs		(1	)		(8	)				-			(11	)		(1	)
Other incidentals		-			-					-			-			4
Non-GAAP Gross profit	$	1,275		$	1,295				$	1,331		$	4,980		$	4,925
GAAP Gross margin		51.7	%		51.4	%				50.6	%		51.6	%		49.9	%
Non-GAAP Gross margin		53.1	%		53.0	%				54.2	%		52.9	%		53.2	%
GAAP Research and development	$	(403	)	$	(433	)			$	(414	)	$	(1,700	)	$	(1,554	)
Restructuring		-			-					-			-			12
Stock based compensation		(36	)		(34	)				(35	)		(133	)		(122	)
Merger-related costs		(3	)		(18	)				(1	)		(24	)		(2	)
Non-GAAP Research and development	$	(364	)	$	(381	)			$	(378	)	$	(1,543	)	$	(1,442	)
GAAP Selling, general and administrative	$	(251	)	$	(252	)			$	(269	)	$	(993	)	$	(1,090	)
PPA effects		(2	)		(2	)				(5	)		(8	)		(21	)
Restructuring		(1	)		(5	)				-			(7	)		(10	)
Stock based compensation		(45	)		(38	)				(33	)		(141	)		(126	)
Merger-related costs		(11	)		(21	)				(31	)		(78	)		(136	)
Other incidentals		(13	)		(4	)				(10	)		(21	)		(34	)
Non-GAAP Selling, general and administrative	$	(179	)	$	(182	)			$	(190	)	$	(738	)	$	(763	)
GAAP amortization of acquisition-related intangible assets	$	(364	)	$	(362	)			$	(347	)	$	(1,449	)	$	(1,448	)
PPA effects		(364	)		(362	)				(347	)		(1,449	)		(1,448	)
Non-GAAP amortization of acquisition-related intangible assets	$	-		$	-				$	-		$	-		$	-
GAAP Other income (expense)	$	(1	)	$	2,002				$	(2	)	$	2,001		$	1,575
Restructuring		-			-					-			1			-
Merger-related costs		-			1,961					-			1,961			-
Other incidentals		-			40					(2	)		39			1,573
Non-GAAP Other income (expense)	$	(1	)	$	1				$	-		$	-		$	2
GAAP Operating income (loss)	$	224		$	2,211				$	210		$	2,710		$	2,102
PPA effects		(385	)		(384	)				(431	)		(1,535	)		(1,742	)
Restructuring		(1	)		(5	)				-			(6	)		(1	)
Stock based compensation		(93	)		(83	)				(78	)		(314	)		(281	)
Merger-related costs		(15	)		1,914					(32	)		1,848			(139	)
Other incidentals		(13	)		36					(12	)		18			1,543
Non-GAAP Operating income (loss)	$	731		$	733				$	763		$	2,699		$	2,722
GAAP Operating margin		9.3	%		90.4	%				8.6	%		28.8	%		22.7	%
Non-GAAP Operating margin		30.4	%		30.0	%				31.1	%		28.7	%		29.4	%
GAAP Financial income (expense)	$	(77	)	$	(119	)			$	(79	)	$	(335	)	$	(366	)
Non-cash interest expense on convertible notes		(11	)		(11	)				(10	)		(44	)		(41	)
Foreign exchange gain (loss)		(5	)		(3	)				(3	)		(11	)		(16	)
Extinguishment on debt		-			-					-			(26	)		(41	)
Other financial expense		(1	)		(71	)	1	)		(11	)		(78	)		(22	)
Non-GAAP Financial income (expense)	$	(60	)	$	(34	)			$	(55	)	$	(176	)	$	(246	)

NXP Semiconductors
Table 6: Adjusted EBITDA and Free Cash Flow (unaudited)
($ in millions)	Three Months Ended									Full Year
	Dec. 31, 2018			Sept. 30, 2018			Dec. 31, 2017				2018			2017
Net Income (loss)	$	289		$	1,833		$	768		$	2,258		$	2,272
Reconciling items to adjusted net income
Financial (income) expense		77			119			79			335			366
(Benefit) provision for income taxes		(141	)		311			(629	)		176			(483	)
Depreciation		124			119			145			478			611
Amortization		379			378			397			1,509			1,562
Adjusted net income	$	728		$	2,760		$	760		$	4,756		$	4,328
Reconciling items to adjusted EBITDA
Results of equity-accounted investees		(1	)		(52	)		(8	)		(59	)		(53	)
Restructuring		1			5			-			6			1
Stock based compensation		93			83			78			314			281
Merger-related costs		15			(1,914	)		32			(1,848	)		139
Other incidental items¹⁾		13			(36	)		12			(18	)		(1,539	)
Adjusted EBITDA	$	849		$	846		$	874		$	3,151		$	3,157
Trailing twelve month adjusted EBITDA	$	3,151		$	3,176		$	3,157		$	3,151		$	3,157

¹⁾ Excluding depreciation property, plant and equipment and amortization of software related to:
Other incidental items		-			-			-			-			(4	)

($ in millions)	Three Months Ended									Full Year
	Dec. 31, 2018			Sept. 30, 2018			Dec. 31, 2017				2018			2017

Net cash provided by (used for) operating activities	$	731		$	2,615		$	738		$	4,369		$	2,447
Net capital expenditures on property, plant and equipment		(170	)		(155	)		(132	)		(610	)		(550	)
Non-GAAP free cash flow	$	561		$	2,460		$	606		$	3,759		$	1,897
Non-GAAP free cash flow as a percent of Revenue		23	%		101	%		25	%		40	%		21	%

NXP Semiconductors N.V.

Tags: Financial