NXP Semiconductors Reports First Quarter 2019 Results
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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

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.

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 
Email Contact   Email Contact
+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%  
          
          

 

 

 

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