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iCommon shares, EUR 0.20 par value
iNXPI
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Item 2.02 Results of Operations and Financial Condition.
On October 26, 2020, NXP Semiconductors N.V. ("NXP") issued a press release regarding NXP’s financial results for its third quarter 2020. A copy of the press release
is attached as Exhibit 99.1.
The information contained in this Current Report, including the attached exhibit, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), nor shall it be deemed to be incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
Cover Page Interactive Data File (formatted as Inline XBRL).
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
NXP Semiconductors Reports Third Quarter 2020 Results
EINDHOVEN,
The Netherlands, October 26, 2020 – 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
%
1
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.
2
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 websitehttps://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,
3
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.