NXP Semiconductors Reports Third Quarter 2022 Results

Summary of Reported Third Quarter 2022 ($ millions, unaudited) (1) Q3 2022Q2 2022Q3 2021Q - QY - YTotal Revenue$3,445 $3,312 $2,861 4%20%GAAP Gross Profit$1,967 $1,882 $1,583 5%24%Gross Profit Adjustments(i)$(32)$(33)$(34) Non-GAAP Gross Profit$1,999 $1,915 $1,617 4%24%GAAP Gross Margin 57.1% 56.8% 55.3% Non-GAAP Gross Margin 58.0% 57.8% 56.5% GAAP Operating Income / (Loss)$1,001 $943 $711 6%41%Operating Income Adjustments(i)$(270)$(250)$(248) Non-GAAP Operating Income$1,271 $1,193 $959 7%33%GAAP Operating Margin 29.1% 28.5% 24.9% Non-GAAP Operating Margin 36.9% 36.0% 33.5% Additional information Q3 2022Q2 2022Q3 2021Q - QY - YAutomotive$1,804$1,713$1,4555%24%Industrial & IoT$713$713$607—%17%Mobile$410$388$3456%19%Comm. Infra. & Other$518$498$4544%14%DIO 99 94 85 DPO 96 94 83 DSO 27 27 31 Cash Conversion Cycle 30 27 33 Channel Inventory (months) 1.6 1.6 1.6 Financial Leverage(ii)1.4x1.5x1.9x  

Guidance for the Fourth Quarter 2022: ($ millions) (1) Guidance Range GAAP Reconciliation non-GAAP Low Mid High Low Mid HighTotal Revenue$3,200 $3,300 $3,400 $3,200 $3,300 $3,400Q-Q-7% -4% -1% -7% -4% -1%Y-Y5% 9% 12% 5% 9% 12%Gross Profit$1,802 $1,876 $1,950 $(32) $1,834 $1,908 $1,982Gross Margin56.3% 56.8% 57.4% 57.3% 57.8% 58.3%Operating Income (loss)$894 $958 $1,022 $(230) $1,124 $1,188 $1,252Operating Margin27.9% 29.0% 30.1% 35.1% 36.0% 36.8%Financial Income (expense)$(84) $(84) $(84) $(3) $(81) $(81) $(81)

Note (1) Additional Information:

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, that are not in accordance with, nor an alternative to, U.S. generally accepted accounting principles (“GAAP”). 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 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
The company will host a conference call with the financial community on Tuesday, November 1, 2022 at 8:00 a.m. U.S. Eastern Daylight Time (EDT) to review the third quarter 2022 results in detail.

Interested parties may preregister to obtain a user-specific access code for the call here.

The call will be webcast and can be accessed from the NXP Investor Relations website at www.nxp.com. A replay of the call will be available on the NXP Investor Relations website within 24 hours of the actual call.

About NXP Semiconductors

NXP Semiconductors N.V. (NASDAQ: NXPI) enables a smarter, safer and more sustainable world through innovation. As a world leader in secure connectivity solutions for embedded applications, NXP is pushing boundaries in the automotive, industrial & IoT, mobile, and communication infrastructure markets. Built on more than 60 years of combined experience and expertise, the company has approximately 31,000 employees in more than 30 countries and posted revenue of $11.06 billion in 2021. 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, the expected material weakness in our internal control over financial reporting, including the timeline to remediate the expected material weakness, 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; our ability to successfully introduce new technologies and products; the demand for the goods into which NXP’s products are incorporated; potential impacts of the COVID-19 pandemic; trade disputes between the U.S. and China, potential increase of barriers to international trade and resulting disruptions to NXP's established supply chains; the impact of government actions and regulations, including restrictions on the export of US-regulated products and technology; the ability to generate sufficient cash, raise sufficient capital or refinance corporate debt at or before maturity to meet both NXP's debt service and research and development and capital investment requirements; our ability to accurately estimate demand and match our production capacity accordingly or obtain supplies from third-party producers to meet demand; our access to production capacity from third-party outsourcing partners, and any events that might affect their business or NXP’s relationship with them; our ability to secure adequate and timely supply of equipment and materials from suppliers; our ability to avoid operational problems and product defects and, if such issues were to arise, to correct them quickly; our ability to form strategic partnerships and joint ventures and to successfully cooperate with our alliance partners; our ability to win competitive bid selection processes; our ability to develop products for use in customers’ equipment and products; the ability to successfully hire and retain key management and senior product engineers; the invasion of Ukraine by Russia and resulting regional instability, sanctions and any other retaliatory measures taken against Russia, which could adversely impact the global supply chain, disrupt our operations or negatively impact the demand for our products in our primary end markets; and, the ability to maintain good relationships with NXP's suppliers. In addition, this document contains information concerning the semiconductor industry and NXP’s market and 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 and NXP's market and business segments 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. There can be no assurances that a pandemic, epidemic or outbreak of a contagious diseases, such as COVID-19, will not have a material and adverse impact on our business, operating results and financial condition in the future. 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:
Jeff Palmer
jeff.palmer@nxp.com
+1 408 518 5411 Media:
Jacey Zuniga
jacey.zuniga@nxp.com
+1 512 895 7398
   

NXP-CORP

NXP Semiconductors
Table 1: Condensed consolidated statement of operations (unaudited)($ in millions except share data)Three months ended October 2, 2022 July 3, 2022 October 3, 2021 Revenue$3,445 $3,312 $2,861 Cost of revenue (1,478) (1,430) (1,278)Gross profit 1,967 1,882 1,583 Research and development (548) (542) (492)Selling, general and administrative (289) (265) (243)Amortization of acquisition-related intangible assets (131) (134) (137)Total operating expenses (968) (941) (872)Other income (expense) 2 2 — Operating income (loss) 1,001 943 711 Financial income (expense): Extinguishment of debt — (18) — Other financial income (expense) (98) (110) (93)Income (loss) before income taxes 903 815 618 Benefit (provision) for income taxes (149) (129) (95)Results relating to equity-accounted investees (4) (3) 3 Net income (loss) 750 683 526 Less: Net income (loss) attributable to non-controlling interests 12 13 7 Net income (loss) attributable to stockholders 738 670 519 Earnings per share data: Net income (loss) per common share attributable to stockholders in $Basic$2.81 $2.55 $1.95 Diluted$2.79 $2.53 $1.91 Weighted average number of shares of common stock outstanding during the period (in thousands):Basic 262,180 262,579 266,557 Diluted 264,705 264,692 271,359       

NXP Semiconductors
Table 2: Condensed consolidated balance sheet (unaudited) ($ in millions)As of October 2, 2022 July 3, 2022 October 3, 2021ASSETS Current assets: Cash and cash equivalents$3,759 $3,545 $2,303 Accounts receivable, net 1,012 996 979 Inventories, net 1,581 1,462 1,173 Other current assets 351 317 266Total current assets 6,703 6,320 4,721 Non-current assets: Other non-current assets 1,940 1,848 1,070 Property, plant and equipment, net 2,971 2,914 2,510 Identified intangible assets, net 1,417 1,527 1,741 Goodwill 9,909 9,930 9,968Total non-current assets 16,237 16,219 15,289 Total assets 22,940 22,539 20,010 LIABILITIES AND EQUITY Current liabilities: Accounts payable 1,534 1,462 1,140 Restructuring liabilities-current 8 12 30 Other current liabilities 1,677 1,467 1,269 Short-term debt — — 999Total current liabilities 3,219 2,941 3,438 Non-current liabilities: Long-term debt 11,162 11,160 8,594 Restructuring liabilities 12 12 13 Deferred tax liabilities 39 41 84 Other non-current liabilities 1,123 1,159 909Total non-current liabilities 12,336 12,372 9,600 Non-controlling interests 279 264 234 Stockholders’ equity 7,106 6,962 6,738Total equity 7,385 7,226 6,972 Total liabilities and equity 22,940 22,539 20,010       

NXP Semiconductors
Table 3: Condensed consolidated statement of cash flows (unaudited)($ in millions)Three months ended October 2, 2022 July 3, 2022 October 3, 2021Cash flows from operating activities: Net income (loss)$750 $683 $526 Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities: Depreciation and amortization 321 317 306 Stock-based compensation 89 89 81 Amortization of discount (premium) on debt, net 1 — — Amortization of debt issuance costs 2 1 2 Net (gain) loss on sale of assets (1) — — (Gain) loss on extinguishment of debt — 18 — Results relating to equity-accounted investees 4 3 (3)(Gain) loss on equity securities, net 2 8 (4)Deferred tax expense (benefit) (98) (65) (6)Changes in operating assets and liabilities: (Increase) decrease in receivables and other current assets (54) (50) 16 (Increase) decrease in inventories (119) (151) (57)Increase (decrease) in accounts payable and other liabilities 275 4 118 (Increase) decrease in other non-current assets (37) (41) (46)Exchange differences 1 (3) (3)Other items 8 6 (6)Net cash provided by (used for) operating activities 1,144 819 924 Cash flows from investing activities: Purchase of identified intangible assets (50) (29) (27)Capital expenditures on property, plant and equipment (282) (268) (201)Purchase of equipment leased to others — — (14)Insurance recoveries received for equipment damage — — 7 Proceeds from the disposals of property, plant and equipment 1 — 1 Purchase of interests in businesses, net of cash acquired (22) (1) (16)Purchase of investments (7) (2) — Proceeds from the sale of investments — 12 — Proceeds from return of equity investments — — 2 Net cash provided by (used for) investing activities (360) (288) (248) Cash flows from financing activities: Repurchase of long-term debt — (917) — Proceeds from the issuance of long-term debt — 1,496 — Cash paid for debt issuance costs — (12) — Dividends paid to common stockholders (223) (222) (152)Proceeds from issuance of common stock through stock plans 30 — 29 Purchase of treasury shares and restricted stock unit withholdings (366)1) (2) (1,157)Other, net — (1) — Net cash provided by (used for) financing activities (559) 342 (1,280) Effect of changes in exchange rates on cash positions (11) (11) (3)Increase (decrease) in cash and cash equivalents 214 862 (607)Cash and cash equivalents at beginning of period 3,545 2,683 2,910 Cash and cash equivalents at end of period 3,759 3,545 2,303 Net cash paid during the period for: Interest 39 133 56 Income taxes, net of refunds 160 150 89 Net gain (loss) on sale of assets: Cash proceeds from the sale of assets 1 — — Book value of these assets — — — Non-cash investing activities: Non-cash capital expenditures 176 243 224 

1) Represents cash paid during the quarter, excluding $34 million unsettled repurchase transactions with a trade date plus two days settlement.

NXP Semiconductors
Table 4: Financial Reconciliation of GAAP to non-GAAP Results (unaudited)($ in millions)Three months ended October 2, 2022 July 3, 2022 October 3, 2021Revenue$3,445 $3,312 $2,861 GAAP Gross Profit$1,967 $1,882 $1,583 PPA Effects (15) (14) (20)Restructuring — 3 — Stock Based Compensation (12) (12) (10)Other incidentals (5) (10) (4)Non-GAAP Gross Profit$1,999 $1,915 $1,617 GAAP Gross margin 57.1% 56.8% 55.3%Non-GAAP Gross margin 58.0% 57.8% 56.5%GAAP Research and development$(548) $(542) $(492)Restructuring — 1 — Stock based compensation (45) (45) (40)Other incidentals (1) (3) (2)Non-GAAP Research and development$(502) $(495) $(450)GAAP Selling, general and administrative$(289) $(265) $(243)PPA effects (2) (1) (2)Stock based compensation (32) (32) (31)Other incidentals (27) (3) (3)Non-GAAP Selling, general and administrative$(228) $(229) $(207)GAAP amortization of acquisition-related intangible assets$(131) $(134) $(137)PPA effects (131) (134) (137)Non-GAAP amortization of acquisition-related intangible assets$— $— $— GAAP Other income (expense)$2 $2 $— Non-GAAP Other income (expense)$2 $2 $(1)GAAP Operating income (loss)$1,001 $943 $711 PPA effects (148) (149) (159)Restructuring — 4 — Stock based compensation (89) (89) (81)Other incidentals (33) (16) (8)Non-GAAP Operating income (loss)$1,271 $1,193 $959 GAAP Operating margin 29.1% 28.5% 24.9%Non-GAAP Operating margin 36.9% 36.0% 33.5%GAAP Financial income (expense)$(98) $(128) $(93)Foreign exchange gain (loss) (2) (2) 1 Gain (loss) on extinguishment of long-term debt — (18) — Other financial income (expense) (5) (11) — Non-GAAP Financial income (expense)$(91) $(97) $(94)      

NXP Semiconductors
Table 5: Adjusted EBITDA and Free Cash Flow (unaudited)($ in millions)Three months ended October 2, 2022 July 3, 2022 October 3, 2021Net income (loss)$750 $683 $526 Reconciling items to adjusted net income Financial (income) expense 98 128 93 (Benefit) provision for income taxes 149 129 95 Depreciation 156 149 139 Amortization 165 168 167 Adjusted net income$1,318 $1,257 $1,020 Reconciling items to adjusted EBITDA Results of equity-accounted investees 4 3 (3)Restructuring — (4) — Stock based costs 89 89 81 Other incidental items 33 16 8 Adjusted EBITDA$1,444 $1,361 $1,106 Trailing twelve month adjusted EBITDA$5,299 $4,961 $3,924 ($ in millions)Three months ended October 2, 2022 July 3, 2022 October 3, 2021Net cash provided by (used for) operating activities$1,144 $819 $924 Net capital expenditures on property, plant and equipment (281) (268) (200)Non-GAAP free cash flow$863 $551 $724 Trailing twelve month non-GAAP free cash flow$2,510 $2,371 $2,718 Trailing twelve month non-GAAP free cash flow as percent of Revenue 19% 19% 26%