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EINDHOVEN, The Netherlands, Oct. 26, 2020 (GLOBE NEWSWIRE) — NXP Semiconductors N.V. (NASDAQ: NXPI) today reported financial results for the third quarter 2020, ended September 27, 2020.

“Consistent with our pre-announcement on October 8, our third quarter results were significantly better than our original guidance, reflecting a strong rebound in demand across nearly all of our focus end markets. NXP delivered third quarter revenue of $2.27 billion, flat versus the year ago period, but up 25 percent on a sequential basis, and about 13 percent better than the mid-point of our guidance. Because of the higher revenue and good margin fall through, we delivered strong operating profit significantly above our guidance,” said Kurt Sievers, NXP President and Chief Executive Officer. “More importantly, the momentum which began during the third quarter is continuing into the fourth quarter of 2020. Within our strategic end markets of Automotive, Industrial & IoT and Mobile the improving trends are due to a combination of a rebound in our core business, as well as solid contribution from the ramp of new products. The recovering markets along with our strong product portfolio and customer engagements make us confident to continue to deliver robust growth in 2021.”  

Key Highlights

  • Third-quarter revenue was $2.3 billion, up 0.1 percent year-on-year;
  • Third-quarter GAAP gross margin was 48.1 percent, and GAAP operating margin was 1.4 percent;
  • Third-quarter non-GAAP gross margin was 50.1 percent, and non-GAAP operating margin was 25.8 percent;
  • Third-quarter cash flow from operations was $527 million, with net capex investments of $68 million, resulting in non-GAAP free cash flow of $459 million;
  • On August 27, 2020, the NXP Board of Directors approved the payment of an interim dividend for the third quarter 2020 of $0.375 per ordinary share;
  • In the third quarter of 2020 NXP returned $117 million to shareholders, primarily through previously announced dividend payments;
  • On September 28, 2020, subsequent to the close of NXP’s third quarter, the company fully redeemed the $400 million of outstanding principal of the 4.625% Senior Notes due 2022 and the $1.35 billion of outstanding principal of the 4.125% Senior Notes due 2021. The total amount of these redemptions, $1.83 billion, were paid from available cash on balance sheet.

Summary of Reported Third Quarter 2020 ($ millions, unaudited) (1)

  Q3 2020 Q2 2020 Q3 2019 Q – Q Y – Y
Total Revenue $ 2,267      $ 1,817      $ 2,265      25 % %
GAAP Gross Profit $ 1,090      $ 860      $ 1,186      27 % -8 %
Gross Profit Adjustments (i) $ (45 )   $ (32 )   $ (30 )      
Non-GAAP Gross Profit $ 1,135      $ 892      $ 1,216      27 % -7 %
GAAP Gross Margin 48.1 %   47.3 %   52.4 %      
Non-GAAP Gross Margin 50.1 %   49.1 %   53.7 %      
GAAP Operating Income / (Loss) $ 32      $ (145 )   $ 233      122 % -86 %
Operating Income Adjustments (i) $ (554 )   $ (521 )   $ (454 )      
Non-GAAP Operating Income $ 586      $ 376      $ 687      56 % -15 %
GAAP Operating Margin 1.4 %   (8.0 )%   10.3 %      
Non-GAAP Operating Margin 25.8 %   20.7 %   30.3 %      

Additional information                          
Automotive $ 964   $ 674   $ 1,048   43 % -8 %
Industrial & IoT $ 514   $ 435   $ 426   18 % 21 %
Mobile $ 337   $ 255   $ 321   32 % 5 %
Comm. Infra. & Other $ 452   $ 453   $ 470   % -4 %
DIO   84     120     98          
DPO   55     71     74          
DSO   30     24     32          
Cash Conversion Cycle   59     73     56          
Channel Inventory (months)   2.4     2.4     2.3          
Financial Leverage (ii)   2.1x     2.2x     1.6x          

1. Additional Information for the Third Quarter 2020:
  i.   For an explanation of GAAP to non-GAAP adjustments, please see “Non-GAAP Financial Measures”.
  ii.  Financial leverage is defined as net debt divided by trailing twelve months adjusted EBITDA.
During the third quarter of 2020, NXP repurchased 0.1 million shares for a total cost of $12 million and paid cash dividends of $105 million.
Weighted average number of diluted shares for the three-month period ended September 27, 2020 was 279.5 million and as the company reported a net loss, it excludes the incremental impact of dilutive potential common shares of 4.9 million shares.
Net cash paid for income taxes related to on-going operations was $(29) million. Net cash paid for income taxes not related to on-going operations resulted in additional cash payments of $(10) million.

Guidance for the Fourth Quarter 2020: ($ millions) (1)

                                Guidance Range                             
  GAAP   Reconciliation   non-GAAP
  Low   Mid   High           Low   Mid   High
Total Revenue $ 2,375        $ 2,450        $ 2,525                $ 2,375        $ 2,450        $ 2,525     
Q-Q 5   %   8   %   11   %           5   %   8   %   11   %
Y-Y 3   %   6   %   10   %           3   %   6   %   10   %
Gross Profit $ 1,209        $ 1,255        $ 1,303        $ (36 )   $ 1,245        $ 1,291        $ 1,339     
Gross Margin 50.9   %   51.2   %   51.6   %           52.4   %   52.7   %   53.0   %
Operating Income (loss) $ 425        $ 461        $ 499        $ (267 )   $ 692        $ 728        $ 766     
Operating Margin 17.9   %   18.8   %   19.8   %           29.1   %   29.7   %   30.3   %
Financial Income (expense) $ (146 )     $ (146 )     $ (146 )     $ (62 )   $ (84 )     $ (84 )     $ (84 )  

Note (1) Additional Information:

  1. GAAP Gross Profit is expected to include Purchase Price Accounting (“PPA”) effects, $(20) million; Stock Based Compensation, $(12) million; Other Incidentals, $(4) million;
  2. GAAP Operating Income (loss) is expected to include PPA effects, $(170) million; Stock Based Compensation, $(87) million; Restructuring and Other Incidentals, $(10) million;
  3. GAAP Financial Income (expense) is expected to include Other financial expense $(62) million;
  4. Net cash paid for income taxes related to on-going operations is expected to be approximately $(36) million;
  5. Non-controlling interest is expected to be approximately $(9) million;
  6. Weighted average diluted share count is expected to be approximately 286 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
The company will host a conference call with the financial community on Tuesday, October 27, 2020 at 8:00 a.m. U.S. Eastern Daylight Time (EDT) to review the third quarter 2020 results in detail. Interested parties may join the scheduled conference call by dialing the following numbers:

Within the U.S.: 1 – 888 – 603 – 7644
Outside the U.S.: 1 – 484 – 747 – 6631
Passcode: 6084337

The call will be webcast and can be accessed from the NXP Investor Relations website https://investors.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 secure connections 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 automotive, industrial & IoT, mobile, and communication infrastructure markets. Built on more than 60 years of combined experience and expertise, the company has approximately 29,000 employees in more than 30 countries and posted revenue of $8.88 billion in 2019. 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: the duration and spread of the COVID-19 outbreak, its severity, the actions to contain the virus or treat its impact, and how quickly and to what extent normal economic and operating conditions can resume; market demand and semiconductor industry conditions; the ability to successfully introduce new technologies and products; the demand for the goods into which NXP’s products are incorporated; 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 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; the ability to accurately estimate demand and match manufacturing production capacity accordingly or obtain supplies from third-party producers; the potential impact of the outbreak of COVID-19 on NXP’s business, operations, results of operations, financial condition, workforce or the operations or decisions of customers, suppliers or business customers; the access to production capacity from third-party outsourcing partners and any events that might affect their business or NXP’s relationship with them including the outbreak of COVID-19 or the requirements to suspend activities with customers or suppliers because of changing import and export regulations; 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; the ability to develop products for use in customers’ equipment and products; the ability to successfully hire and retain key management and senior product engineers; 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
[email protected]
+1 408 518 5411
Media:
Jacey Zuniga
 [email protected]
+1 512 895 7398

NXP-CORP

   
   
NXP Semiconductors
Table 1: Condensed consolidated statement of operations (unaudited)
($ in millions except share data) Three months ended
  September 27,
2020
  June 28, 2020   September 29,
2019
           
Revenue $ 2,267      $ 1,817      $ 2,265   
Cost of revenue (1,177 )   (957 )   (1,079 )
Gross profit 1,090      860      1,186   
Research and development (438 )   (402 )   (396 )
Selling, general and administrative (203 )   (222 )   (221 )
Amortization of acquisition-related intangible assets (418 )   (380 )   (358 )
Total operating expenses (1,059 )   (1,004 )   (975 )
Other income (expense) 1     (1 )   22  
Operating income (loss) 32      (145 )   233   
Financial income (expense):          
Extinguishment of debt         (1 )
Other financial income (expense) (106 )   (96 )   (84 )
Income (loss) before income taxes (74 )   (241 )   148   
Benefit (provision) for income taxes 57     33     (28 )
Results relating to equity-accounted investees (1 )   (1 )   (1 )
Net income (loss) (18 )   (209 )   119   
Less: Net income (loss) attributable to non-controlling interests 4     5     10  
Net income (loss) attributable to stockholders (22 )   (214 )   109   
           
Earnings per share data:          
Net income (loss) per common share attributable to stockholders in $
Basic $ (0.08 )   $ (0.77 )   $ 0.39  
Diluted $ (0.08 )   $ (0.77 )   $ 0.38  
           
Weighted average number of shares of common stock outstanding during the period (in thousands):
Basic 279,467     279,142     279,074  
Diluted 279,467     279,142     283,518  
           

NXP Semiconductors
Table 2: Condensed consolidated balance sheet (unaudited)
  ($ in millions) As of
    September 27,
2020
  June 28, 2020   September 29,
2019
ASSETS          
Current assets:          
  Cash and cash equivalents $ 3,566      $ 3,266      3,537   
  Accounts receivable, net 755      481      786   
  Assets held for sale —      —      61   
  Inventories, net 1,064      1,228      1,134   
  Other current assets 219      240      426   
Total current assets 5,604      5,215      5,944   
             
Non-current assets:          
  Other non-current assets 924      760      712   
  Property, plant and equipment, net 2,255      2,312      2,401   
  Identified intangible assets, net 2,380      2,824      3,406   
  Goodwill 9,959      9,946      8,791   
Total non-current assets 15,518      15,842      15,310   
             
Total assets 21,122      21,057      21,254   
             
LIABILITIES AND EQUITY          
Current liabilities:          
  Accounts payable 697      729      862   
  Restructuring liabilities-current 25      25      41   
  Other current liabilities 940      889      1,081   
  Short-term debt 1,749      1,349      1,142   
Total current liabilities 3,411      2,992      3,126   
             
Non-current liabilities:          
  Long-term debt 7,607      8,004      7,363   
  Restructuring liabilities 15      —      —   
  Deferred tax liabilities 136      136      285   
  Other non-current liabilities 880      870      885   
Total non-current liabilities 8,638      9,010      8,533   
             
  Non-controlling interests 197      193      205   
  Stockholders’ equity 8,876      8,862      9,390   
Total equity 9,073      9,055      9,595   
           
Total liabilities and equity 21,122      21,057      21,254   
             

NXP Semiconductors
Table 3: Condensed consolidated statement of cash flows (unaudited)
($ in millions) Three months ended
  September 27,
2020
  June 28, 2020   September 29,
2019
Cash flows from operating activities:          
Net income (loss) $ (18 )   $ (209 )   $ 119   
Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities:          
Depreciation and amortization 589     543     517  
Stock-based compensation 83     105     84  
Amortization of discount (premium) on debt, net     (1 )   12  
Amortization of debt issuance costs 3     3     2  
Net (gain) loss on sale of assets (1 )       (21 )
(Gain) loss on extinguishment of debt         1  
Results relating to equity-accounted investees 1     1     1  
Deferred tax expense (benefit) (118 )   (81 )   (33 )
Changes in operating assets and liabilities:          
(Increase) decrease in receivables and other current assets (252 )   224     (17 )
(Increase) decrease in inventories 164         13  
Increase (decrease) in accounts payable and other liabilities 82     (160 )   43  
(Increase) decrease in other non-current assets (9 )   (11 )   30  
Exchange differences 5     5     (1 )
Other items (2 )   (5 )   (4 )
Net cash provided by (used for) operating activities 527      414      746   
           
Cash flows from investing activities:          
Purchase of identified intangible assets (22 )   (28 )   (21 )
Capital expenditures on property, plant and equipment (70 )   (75 )   (138 )
Proceeds from the disposals of property, plant and equipment 2     1     23  
Purchase of interests in businesses, net of cash acquired     (11 )    
Purchase of investments (15 )       (2 )
Net cash provided by (used for) investing activities (105 )   (113 )   (138 )
           
Cash flows from financing activities:          
Payment of bond hedge derivatives – convertible option         (1 )
Repurchase of long-term debt         (47 )
Proceeds from the issuance of long-term debt     2,000      
Cash paid for debt issuance costs     (15 )   (1 )
Dividends paid to non-controlling interests (34 )        
Dividends paid to common stockholders (105 )   (105 )   (70 )
Proceeds from issuance of common stock through stock plans 27     8     33  
Purchase of treasury shares and restricted stock unit withholdings (12 )   (3 )   (9 )
Net cash provided by (used for) financing activities (124 )   1,885      (95 )
           
Effect of changes in exchange rates on cash positions 2     1     (6 )
Increase (decrease) in cash and cash equivalents 300      2,187      507   
Cash and cash equivalents at beginning of period 3,266     1,079     3,030  
Cash and cash equivalents at end of period 3,566      3,266      3,537   
           
Net cash paid during the period for:          
Interest 54     104     44  
Income tax 39     25     59  
Net gain (loss) on sale of assets:          
Cash proceeds from the sale of assets 2         21  
Book value of these assets (1 )       (1 )
Non-cash investing activities:          
Non-cash capital expenditures 8     (24 )   94  

NXP Semiconductors
Table 4: Financial Reconciliation of GAAP to non-GAAP Results (unaudited)
 
($ in millions) Three months ended
  September 27,
2020
  June 28, 2020   September 29,
2019
Revenue $ 2,267        $ 1,817        $ 2,265     
GAAP Gross Profit $ 1,090        $ 860        $ 1,186     
PPA Effects (22 )     (20 )     (19 )  
Restructuring (12 )           1    
Stock Based Compensation (11 )     (11 )     (11 )  
Merger-related costs       (1 )     (1 )  
Non-GAAP Gross Profit $ 1,135        $ 892        $ 1,216     
GAAP Gross margin 48.1    %   47.3    %   52.4    %
Non-GAAP Gross margin 50.1    %   49.1    %   53.7    %
GAAP Research and development $ (438 )     $ (402 )     $ (396 )  
 Restructuring (7 )     (6 )        
 Stock based compensation (39 )     (39 )     (34 )  
 Merger-related costs             (1 )  
 Other incidentals (5 )              
Non-GAAP Research and development $ (387 )     $ (357 )     $ (361 )  
GAAP Selling, general and administrative $ (203 )     $ (222 )     $ (221 )  
 PPA effects (1 )     (2 )     (5 )  
 Restructuring (2 )     (2 )        
 Stock based compensation (33 )     (55 )     (39 )  
 Merger-related costs (1 )     (2 )     (4 )  
 Other incidentals (3 )     (2 )     (3 )  
Non-GAAP Selling, general and administrative $ (163 )     $ (159 )     $ (170 )  
GAAP amortization of acquisition-related intangible assets $ (418 )     $ (380 )     $ (358 )  
 PPA effects (418 )     (380 )     (358 )  
Non-GAAP amortization of acquisition-related intangible assets $       $       $    
GAAP Other income (expense) $ 1       $ (1 )     $ 22    
 Other incidentals       (1 )     20    
Non-GAAP Other income (expense) $ 1       $       $ 2    
GAAP Operating income (loss) $ 32        $ (145 )     $ 233     
PPA effects (441 )     (402 )     (382 )  
Restructuring (21 )     (8 )     1    
Stock based compensation (83 )     (105 )     (84 )  
Merger-related costs (1 )     (3 )     (6 )  
Other incidentals (8 )     (3 )     17    
Non-GAAP Operating income (loss) $ 586        $ 376        $ 687     
GAAP Operating margin 1.4    %   (8.0 ) %   10.3    %
Non-GAAP Operating margin 25.8    %   20.7    %   30.3    %
GAAP Financial income (expense) $ (106 )     $ (96 )     $ (85 )  
Non-cash interest expense on convertible notes             (12 )  
Foreign exchange gain (loss) (3 )     (2 )     (2 )  
Gain (loss) on extinguishment of long-term debt             (1 )  
Other financial expense (3 )     (2 )     (4 )  
Non-GAAP Financial income (expense) $ (100 )     $ (92 )     $ (66 )  
           

NXP Semiconductors
Table 5: Adjusted EBITDA and Free Cash Flow (unaudited)
($ in millions) Three months ended
  September 27,
2020
  June 28, 2020   September 29,
2019
Net income (loss) $ (18 )     $ (209 )     $ 119     
Reconciling items to adjusted net income          
Financial (income) expense 106        96        85     
(Benefit) provision for income taxes (57 )     (33 )     28     
Depreciation 139        136        135     
Amortization 450        407        382     
Adjusted net income $ 620        $ 397        $ 749     
Reconciling items to adjusted EBITDA          
Results of equity-accounted investees                
Restructuring 21              (1 )  
Stock based costs 83        105        84     
Merger-related costs                
Other incidental items 1)             (17 )  
Adjusted EBITDA $ 728        $ 517        $ 822     
Trailing twelve month adjusted EBITDA $ 2,708        $ 2,802        $ 3,126     
           
1) Excluding amortization related to:          
–     other incidental items $       $ —        $ —     
           
           
           
           
($ in millions) Three months ended
  September 27,
2020
  June 28, 2020   September 29,
2019
Net cash provided by (used for) operating activities $ 527        $ 414        $ 746     
Net capital expenditures on property, plant and equipment (68 )     (74 )     (115 )  
Non-GAAP free cash flow $ 459        $ 340        $ 631     
Non-GAAP free cash flow as percent of Revenue 20    %   19    %   28    %
           

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