NXP Semiconductors Reports First Quarter 2016 Results

EINDHOVEN, The Netherlands, April 25, 2016 (GLOBE NEWSWIRE) -- NXP Semiconductors N.V. (NASDAQ:NXPI) today reported financial results for the first quarter 2016, ended April 3, 2016, and provided guidance for the second quarter of 2016. 

“NXP finished the first quarter of 2016 with strong performance and the merger of NXP and Freescale is proceeding smoothly.  I am pleased that we achieved our objectives in the first 90 days, and we are on track to achieve our cost synergy targets as laid out at the time of the merger announcement.  Our major accomplishments include the integration of our customer facing teams, clear alignment within our internal product development groups, and very positive progress on the integration of our operations and supply organizations.  Customer response to the merger continues to be outstanding,” said Richard Clemmer, NXP Chief Executive Officer.

“Looking at our reported results for the first quarter of 2016, revenue was $2.22 billion, an increase of 52 percent year-on-year, and an increase of 38 percent versus the prior quarter.  HPMS segment revenue was $1.9 billion, an increase of 73 percent year-on-year, and an increase of 46 percent from the prior quarter.  Standard Product segment revenue was $274 million, a decrease of 15 percent year-on-year and an increase of one percent from the prior quarter.  Our GAAP diluted net loss per share was ($1.16), primarily due to merger related accounting, and our non-GAAP diluted earnings per share of $1.14 was near the high end of our guidance, as a result of positive product mix and our driving early merger-related operational successes.  During the quarter we repaid $200 million of debt and we returned cash to shareholders by taking advantage of what we believe was dislocation in the equity markets relative to our share price, by repurchasing $298 million or approximately 4.1 million shares of our stock.

“On a comparable basis, taking into account previous product line divestures, our year on year revenue trends reflect the semiconductor industry weakness that accelerated throughout the second half of 2015, and affected both NXP and Freescale.  On a comparable basis, revenue was down approximately 11 percent year on year.  We believe we have begun to see incremental positive trends in a number of our businesses, with comparable sequential revenue up approximately two percent into the first quarter.  While we anticipate many of the headwinds experienced in the second half of 2015 should begin to generally subside in the coming quarters, the overall demand environment currently continues to be subdued.

“In summary, I am very pleased with the significant progress we have made. The integration of the two companies is on track to provide our customers with more complete leadership solutions, and achieve our stated goals. We are even more excited about the long-term potential of the new NXP.  I continue to be extremely proud of all our employees, and want to thank them for their intense focus, unrelenting hard work and positive mindset.  We are creating a company which is superbly positioned in our target markets,” said Clemmer.

Summary of Reported First Quarter 2016 Results ($ millions, except diluted EPS, unaudited)

Please see “Non-GAAP Financial Measures” below.

Additional Information for the First Quarter 2016:

• On March 9, 2016 NXP redeemed an aggregate principal amount of $200 million of its $500 million outstanding 3.5 percent senior notes due 2016.
• During the first quarter of 2016, NXP repurchased approximately 4.1 million shares for a total cost of approximately $298 million.
• During the first quarter of 2016, SSMC, NXP’s consolidated joint-venture wafer fab with TSMC, reported first quarter 2016 operating income of $27 million, EBITDA of $42 million and a closing cash balance of $528 million.
• During the first quarter of 2016, utilization in the combined NXP wafer-fabs averaged 90 percent.

Supplemental Information ($ millions, unaudited) ^{(1, 2, 3, 4)}

Note: 

1. As a result of the Freescale Semiconductor (“Freescale”) Merger, NXP has included previously reported Freescale product group revenue into its various existing High Performance Mixed Signal (HPMS) and Standard Products (STDP) segments. As of the fourth quarter 2015, the NXP HPMS business lines include the following (1) Automotive, which includes revenue from Freescale’s Automotive MCU and Analog & Sensor product groups; (2) Secure Connected Devices, which includes revenue from Freescale’s Microcontroller product group; and (3) Secure Interface & Infrastructure, previously known as Secure Interface & Power which includes revenue from Freescale’s Digital Networking and RF product groups.  Additionally, certain portions of Freescale’s Analog & Sensor product group and Other revenue is apportioned to various NXP business lines consistent with NXPs prior product and revenue classification approach, this included product-functionality alignment as well as intellectual property (IP) sales and licensing revenue. 
   
   
2. The preceding table sets forth our unaudited combined adjusted quarterly financial information, including estimates of segment and relative business line allocations, for the three month periods ended April 3, 2015, December 31, 2015 in addition to the as reported information for the three month period ended April 3, 2016.  This combined adjusted financial information has been derived from the audited consolidated financial statements of NXP for the years ended December 31, 2015 and the unaudited condensed consolidated financial statements of Freescale for the period ended April 3, 2015. In each case, we have excluded revenue generated in our RF Power business, which was divested in connection with the closing of the Freescale Merger on December 7, 2015, and our Bi-Polar business, which was divested on November 9, 2015 but have not otherwise made adjustments to the historical figures.  In addition, the following information does not give effect to the financial impact on our statement of operations for any other acquisitions or divestitures made by NXP or Freescale during the periods presented.
   
   The unaudited combined adjusted financial information and segment allocation in the preceding table represent NXP management’s current estimate of the combined financial information based on historical financial information of NXP and Freescale. This unaudited combined adjusted financial information has been presented for informational purposes only and is not necessarily indicative of what the combined company’s results of operations actually would have been had the Freescale Merger been completed as of the dates indicated. In addition, the unaudited combined adjusted financial information does not purport to project the future financial position or results of operations of the combined company and do not reflect synergies that might be achieved from the combined operations.
   
   The unaudited combined adjusted financial information in the preceding table has not been prepared in accordance with the requirements of Regulation S-X of the U.S. Securities Act or US GAAP. Neither the assumptions underlying the adjustments nor the resulting adjusted financial information have been audited or reviewed in accordance with any generally accepted auditing standards. The information presented should be read in conjunction with the historical consolidated financial statements of NXP and Freescale, which are filed with the SEC.
   
   
3. Combined adjusted revenue is the combined consolidated revenue of NXP and Freescale for each of the quarterly periods presented. The information excludes the divestment of previously announced business and the creation of joint-ventures.  The unaudited adjusted financial information has been prepared for comparative purposes only and does not purport to be indicative of the revenue performance that would have been achieved had the acquisition taken place at the beginning of the periods shown.  In addition, this information is not intended to be a projection of future results from the combined operations.
    
4. Combined adjusted product revenue is the combination of revenue from the High Performance Mixed Signal (HPMS) and Standard Products (STDP) segments. Percent of quarterly total amounts may not add to 100 percent due to rounding

Guidance for the Second Quarter 2016: ($ millions) ⁽¹⁾

Note (1):  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 "Use of Non-GAAP Financial Information" elsewhere in this release.  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.  Considering the uncertain magnitude and variability of the foreign exchange consequences upon "PPA effects", "restructuring costs", "other incidental items" and any interest expense or taxes in future periods, management believes that GAAP financial measures are not available for NXP without unreasonable efforts on a forward-looking basis.

Non-GAAP Financial Measures

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) Other income, (vi) Operating income (loss), (vii) Operating margin, (viii) Financial Income (expense), (ix) Cash tax expense, (x) Results relating to equity-accounted investees, (xi) Net income (loss), (xii) Net income (loss) attributable to stockholders, (xiii) Weighted average shares –diluted, (xiv) Diluted net income (loss) attributable to stockholders per share, (xv) EBITDA, adjusted EBITDA and trailing 12 month adjusted EBITDA, and (xvi) non-GAAP free cash flow. 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, process and product transfer costs, non-cash interest expense on convertible notes, extinguishment of debt, changes in the fair value of the warrant liability prior to January 1, 2016, foreign exchange gains and losses and the non-cash impact on income tax expense.  

Management does not believe that these items are reflective of the Company’s underlying performance. 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. NXP believes this non-GAAP financial information provides additional insight into the Company’s on-going performance and has therefore chosen to provide this information to investors for a more consistent basis of comparison and to help them evaluate the results of the Company’s on-going operations and enable more meaningful period to period comparisons. These non-GAAP measures are provided in addition to, and not as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. 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 relative to our Non-GAAP Financial Measures.

Conference Call and Webcast Information
NXP will host a conference call on April 26, 2016 at 8:00 a.m. U.S. Eastern Time (2:00 p.m. Central European Time) to discuss its first quarter 2016 results and provide an outlook for the second quarter of 2016. 

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 86628130.  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 & privacy and smart connected solutions markets. Built on more than 60 years of combined experience and expertise, the company has 45,000 employees in more than 35 countries and posted revenue of $6.1 billion in 2015. 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.