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NXP Semiconductors Reports Second Quarter 2018 Results

Announces $5 Billion Share Repurchase Authorization and Termination of Qualcomm and NXP Purchase Agreement

  
 Q2 2018
Revenue$2.290 billion
GAAP Gross margin51.5%
GAAP Operating margin6.0%
  
Non-GAAP Gross margin52.8%
Non-GAAP Operating margin27.0%
  

EINDHOVEN, The Netherlands, July 26, 2018 (GLOBE NEWSWIRE) -- NXP Semiconductors N.V. (NASDAQ:NXPI) today reported financial results for the second quarter 2018 ended July 1, 2018.  The company also confirmed it will hold its second quarter 2018 earnings call at 8:00am EDT on July 26, 2018.

NXP delivered second quarter revenue of $2.29 billion, an increase of 4 percent year on year, and an increase of 1 percent as compared to the prior quarter. HPMS segment revenue was $2.19 billion, an increase of 5 percent year on year, and an increase of 1 percent on a sequential basis.

Within the Automotive group, second quarter revenue was $1,008 million, up 7 percent year on year, with auto MCU, advanced analog and infotainment all contributing to the year on year growth. Within the Secure Connected Devices group, second quarter revenue was $644 million, up 10 percent year on year driven by demand for general purpose, multi-market MCUs, high performance application processors, and the continued year on year growth of mobile transaction products, offset with declines in mobile audio. In the Secure Interface and Infrastructure group, second quarter revenue was $398 million, down 9 percent year on year due to declines within the Digital Networking and RF-based product groups, with annual growth in Interface and Power products partially offsetting declines. During the second quarter, the U.S. Commerce Department ban on product shipments to ZTE negatively impacted the sale of RF Power and Digital Networking products. Lastly, in Secure Identification Solutions group, second quarter revenue was $143 million, up 7 percent year on year due to growth in the mobility and retail market.

NXP has received today notice from Qualcomm Incorporated that Qualcomm has terminated, effective immediately, the purchase agreement between NXP and an affiliate of Qualcomm following the inability to obtain the required approval for the transaction from the State Administration for Market Regulation (SAMR) of the People’s Republic of China prior to the end date stipulated by the parties under the purchase agreement. Qualcomm has notified NXP that it will pay the $2 billion in termination compensation by 9:00 am, New York City time, on July 26, 2018.

“While it is unfortunate that the semiconductor powerhouse that would have resulted from the transaction with Qualcomm could not close after 21 months of diligent efforts by the team, we are confident in our future as an independent market leader and will continue to focus our efforts to drive our long-term strategy in our leadership markets of automotive and secure IoT solutions. Our strategic preparation has us more convinced about the opportunity from our key focus areas, which we will share more about at our upcoming Analyst Day in New York City,” said Richard Clemmer, NXP’s President and Chief Executive Officer

“Consistent with our historic policy of returning excess cash to shareholders, the NXP Board of Directors has authorized a $5 billion share repurchase program based on the significant strength of the NXP capital structure, and its confidence in the company’s ability to drive long-term growth and strong cash flow,” said Clemmer.   

“In the second quarter, our GAAP operating margin was 6.0 percent, an increase from the 2.3 percent reported in the second quarter of 2017 due to better fall-through on higher revenue as well as lower expenses related to purchase price accounting.  Our second quarter non-GAAP operating margin was 27.0 percent, a decline of 140-basis points as compared to 28.4 percent reported in the second quarter of 2017, primarily due to increased investments in new product development. On a sequential basis, our second quarter GAAP operating margin declined 10-basis points from the 6.1 percent reported in the first quarter of 2018, and our non-GAAP operating margin declined 20-basis points due to lower fall through and continued investments in new products. And finally, we repaid $1.25 billion of our long-term debt during the quarter, resulting in a total long-term debt balance of $5.34 billion. Due to the improved net debt position and positive cash flow generation, our overall financial leverage was reduced to 0.74x,” said Peter Kelly, NXP Chief Financial Officer.

Summary of Reported Second Quarter 2018 ($ millions, unaudited) 

            
  Q2 2018 Q1 2018 Q2 2017   Q - Q Y - Y 
 Product Revenue$2,193  $2,166  $2,098          1%          5% 
 Corporate & Other$97  $103  $104   -6%  -7% 
 Total Revenue$   2,290   $   2,269   $   2,202    1%  4% 
 GAAP Gross Profit$   1,180   $   1,172   $   1,083    1%  9% 
 Gross Profit Adjustments (1)$(30) $(28) $(84)     
 Non-GAAP Gross Profit$   1,210   $   1,200   $   1,167    1%  4% 
 GAAP Gross Margin 51.5%  51.7%  49.2%     
 Non-GAAP Gross Margin 52.8%  52.9%  53.0%     
 GAAP Operating Income / (Loss)$   137   $   138   $   50    -1%  174% 
 Operating Income Adjustments (1) (481)  (479)  (575)     
 Non-GAAP Operating Income$   618   $   617   $   625    0%  -1% 
 GAAP Operating Margin 6.0%  6.1%  2.3%     
 Non-GAAP Operating Margin 27.0%  27.2%  28.4%     
            

(1) For an explanation of GAAP to non-GAAP adjustments, please see “Non-GAAP Financial Measures” on page 4 of this release.

Additional Information for the Second Quarter 2018:

Supplemental Information  for the Second Quarter 2018 ($ millions, unaudited)

            
  Q2 2018 Q1 2018 Q2 2017 Q-Q Y-Y 
 Automotive$1,008 $995 $938        1%         7% 
 Secure Identification Solutions (SIS)$143 $142 $134  1%  7% 
 Secure Connected Devices (SCD)$644 $633 $588  2%  10% 
 Secure Interface & Infrastructure (SI&I)$  398 $  396 $  438  1%  -9% 
 High Performance Mixed Signal (HPMS)$2,193 $2,166 $2,098  1%  5% 
 Corporate & Other$  97 $  103 $  104  -6%  -7% 
 Total Revenue$   2,290  $   2,269  $   2,202   1%  4% 
            


Guidance for the Third Quarter 2018: ($ millions) (1)     

   Guidance Range  
                
  GAAP Reconciliationnon-GAAP 
  Low Mid High   Low Mid High 
Product Revenue$   2,255   $   2,330   $   2,405   $  -    $   2,255     $   2,330     $   2,405   
Q-Q  3%  6%  10%      3%  6%  10% 
Other Revenue$  95    $  95    $  95  $  -  $  95  $  95  $  95  
Total Revenue$   2,350   $   2,425   $   2,500   $  -  $   2,350   $   2,425   $   2,500   
Q-Q  3%  6%  9%    3%  6%  9% 
Gross Profit$   1,213   $   1,265   $   1,318   $  (28) $   1,241   $   1,293   $   1,346   
Gross Margin 51.6%  52.2%  52.7%    52.8%  53.3%  53.8% 
Operating Income (loss)$   136  $   171   $   208   $  (534) $   670   $   705   $   742   
Operating Margin 5.8%  7.1%  8.3%    28.5%  29.1%  29.7% 
Financial income (expense)$  (46) $  (46) $  (46) $  (14) $  (32) $  (32) $  (32) 
                

 

Note (1) Additional Information:

  1. GAAP Gross Profit includes Purchase Price Accounting (“PPA”) effects, ($20 million); Stock Based Compensation, ($8 million);
  2. GAAP Operating Profit includes PPA effects, ($389 million); Stock Based Compensation, ($71 million); Merger related costs ($73 million); Other Incidentals, ($1 million);
  3. GAAP Financial Income (expense) includes Other financial expense ($14 million);
  4. Net cash paid for income taxes is expected to be approximately ($37 million);
  5. Non-controlling interest is expected to be approximately ($13 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 www.nxp.com/investor 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) EBITDA, 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, changes in the fair value of the warrant liability prior to January 1, 2016 and foreign exchange gains and losses.

Conference Call and Webcast Information

NXP will host a conference call on July 26, 2016 at 8:00 a.m. U.S. Eastern Time (2:00 p.m. Central European Time) to discuss its second quarter 2018 results and provide an outlook for the third quarter of 2018. 

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 6418979. 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 over 30,000 employees in more than 30 countries and posted revenue of $9.26 billion in 2017. 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; possibility of adverse impacts resulting from the termination of the purchase agreement with Qualcomm; the inability to realize the anticipated benefits of the proposed transaction; the disruption from the termination of the proposed transaction making it more difficult to maintain business and operational relationships; the diversion of management’s or employees’ attention from ongoing business operations as a result of the termination of the proposed transaction; the failure to receive, or a delay in receiving, the anticipated $2 billion in termination compensation; the ability to successfully execute NXP’s share repurchase program, which may be suspended or discontinued at any time; 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

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 Semiconductors      
Table 1: Condensed consolidated statement of operations (unaudited)    
       
       
($ in millions except share data) Three Months Ended
  July 1, 2018 April 1, 2018 July 2, 2017
       
Revenue $   2,290   $   2,269   $   2,202  
Cost of revenue    (1,110)    (1,097)    (1,119)
Gross profit    1,180      1,172      1,083  
Research and development    (438)    (426)    (381)
Selling, general and administrative    (242)    (248)    (263)
Amortization of acquisition-related intangible assets    (363)    (360)    (373)
Total operating expenses    (1,043)    (1,034)    (1,017)
Other income (expense)    -     -     (16)
Operating income (loss)    137      138      50  
       
Financial income (expense):      
Extinguishment of debt    (26)    -     - 
Other financial income (expense)    (45)    (68)    (75)
Income (loss) before taxes    66      70      (25)
       
Benefit (provision) for income taxes    (4)    (2)    54 
Results relating to equity-accounted investees    4     2     34 
Net income (loss)    66     70     63 
Less: Net income (loss) attributable to non-controlling interests    12     12     14 
Net income (loss) attributable to stockholders    54      58      49  
       
Earnings per share data:       
Net income (loss) per common share attributable to stockholders in $:    
Basic $  0.16  $  0.17  $  0.15 
Diluted $  0.16  $  0.17  $  0.14 
       
Weighted average number of shares of common stock outstanding during the period (in thousands):  
Basic  344,120   343,661   337,537 
Diluted  347,027   346,899   344,983 
       
       


      
      
NXP Semiconductors     
Table 2: Condensed consolidated balance sheet (unaudited)     
      
      
($ in millions)As of
 July 1, 2018 April 1, 2018 July 2, 2017
      
Current assets:     
Cash and cash equivalents$  2,981 $  3,983 $  2,642
Accounts receivable, net   790    791    915
Inventories, net   1,326    1,251    1,178
Other current assets   414    536    336
Total current assets   5,511     6,561     5,071
      
Non-current assets:     
Other non-current assets   793    888    785
Property, plant and equipment, net   2,352    2,307    2,306
Identified intangible assets, net   5,127    5,494    6,590
Goodwill   8,861    8,877    8,876
Total non-current assets   17,133     17,566     18,557
      
Total assets   22,644     24,127     23,628
      
Current liabilities:     
Accounts payable   1,072    984    1,068
Restructuring liabilities-current   64    67    87
Accrued liabilities   712    865    801
Short-term debt   2    1,249    758
Total current liabilities   1,850     3,165     2,714
      
Non-current liabilities:     
Long-term debt   5,341    5,329    5,790
Restructuring liabilities   9    15    18
Deferred tax liabilities   579    650    1,379
Other non-current liabilities   976    1,078    895
Total non-current liabilities   6,905     7,072     8,082
      
Non-controlling interests   159    201    248
Stockholders’ equity   13,730    13,689    12,584
Total equity   13,889     13,890     12,832
Total liabilities and equity   22,644     24,127     23,628
      
      


      
      
NXP Semiconductors     
Table 3: Condensed consolidated statement of cash flows (unaudited)    
      
      
($ in millions)Three Months Ended
 July 1, 2018 April 1, 2018 July 2, 2017
      
Cash Flows from operating activities     
Net income (loss) $   66   $   70   $   63  
Adjustments to reconcile net income (loss):     
Depreciation and amortization   496     491     560 
Stock-based compensation   69     69     67 
Amortization of discount on debt   11     10     10 
Amortization of debt issuance costs   2     3     3 
Net gain on sale of assets   -     -     (14)
Loss on extinguishment of debt   26     -     - 
Results relating to equity accounted investees   1     (2)    (3)
Changes in deferred taxes   (67)    (42)    (120)
Changes in operating assets and liabilities:     
(Increase) decrease in receivables and other current assets   86     81     49 
(Increase) decrease in inventories   (76)    (36)    (37)
Increase (decrease) in accounts payable and accrued liabilities   (225)    (26)    (137)
Decrease (Increase) in other non-current assets   10     -     (2)
Exchange differences   (5)    5     5 
Other items   9     (3)    (3)
Net cash provided by (used for) operating activities   403      620      441  
      
Cash flows from investing activities:     
Purchase of identified intangible assets   (10)    (18)    (16)
Capital expenditures on property, plant and equipment   (129)    (156)    (96)
Purchase of interests in businesses, net of cash acquired   (18)    -     - 
Proceeds from sale of interests in businesses, net of cash divested   32     -     54 
Purchase of available-for-sale securities   (7)    -     - 
Net cash provided by (used for) investing activities   (132)    (174)    (58)
      
Cash flows from financing activities:     
Repurchase of long-term debt   (1,273)    -     - 
Principal payments on long-term debt   (1)    -     (4)
Cash proceeds from exercise of stock options   10     20     32 
Purchase of treasury shares   (2)    (30)    (10)
Net cash provided by (used for) financing activities   (1,266)    (10)    18  
      
Effect of changes in exchange rates on cash positions   (7)    -     3 
Increase (decrease) in cash and cash equivalents   (1,002)    436      404  
Cash and cash equivalents at beginning of period   3,983      3,547      2,238  
Cash and cash equivalents at end of period   2,981      3,983      2,642  
      
      
Net cash paid during the period for:     
Interest 75   21   84 
Income taxes 3   44   119 
Non-cash adjustment related to the adoption of ASC 606:     
Receivables and other current assets   -     (36)    - 
Inventories   -     22     - 
      


      
      
NXP Semiconductors     
Table 4: Reconciliation of GAAP to non-GAAP Segment Results (unaudited)    
      
      
($ in millions)Three Months Ended
 July 1, 2018 April 1, 2018 July 2, 2017
      
High Performance Mixed Signal (HPMS)   2,193     2,166     2,098 
Corporate and Other   97     103     104 
Total Revenue$   2,290   $   2,269   $   2,202  
      
      
      
HPMS Revenue$   2,193   $   2,166   $   2,098  
Percent of Total Revenue 95.8%  95.5%  95.3%
HPMS segment GAAP gross profit   1,173      1,161      1,066  
PPA effects   (19)    (18)    (74)
Stock based compensation   (8)    (9)    (8)
Merger-related costs   (1)    -     - 
HPMS segment non-GAAP gross profit$   1,201   $   1,188   $   1,148  
      
HPMS segment GAAP gross margin 53.5%  53.6%  50.8%
HPMS segment non-GAAP gross margin 54.8%  54.8%  54.7%
      
HPMS segment GAAP operating profit   160      161      94  
PPA effects   (383)    (381)    (453)
Stock based compensation   (68)    (69)    (67)
Merger-related costs   (7)    (3)    (2)
HPMS segment non-GAAP operating profit$   618   $   614   $   616  
      
HPMS segment GAAP operating margin 7.3%  7.4%  4.5%
HPMS segment non-GAAP operating margin 28.2%  28.3%  29.4%
      
      
Corporate and Other Revenue$   97   $   103   $   104  
Percent of Total Revenue 4.2%  4.5%  4.7%
Corporate and Other segment GAAP gross profit   7      11      17  
PPA effects   (1)    (1)    (2)
Restructuring   -     -     (1)
Stock based compensation   -     -     1 
Merger-related costs   (1)    -     - 
Corporate and Other segment non-GAAP gross profit$   9   $   12   $   19  
      
Corporate and Other segment GAAP gross margin 7.2%  10.7%  16.3%
Corporate and Other segment non-GAAP gross margin 9.3%  11.7%  18.3%
      
Corporate and Other segment GAAP operating profit   (23)    (23)    (44)
PPA effects   (1)    (1)    (2)
Restructuring    1     (1)    (2)
Stock based compensation   (1)    -     - 
Merger-related costs   (18)    (23)    (33)
Other incidentals   (4)    (1)    (16)
Corporate and Other segment non-GAAP operating profit$   -   $   3   $   9  
      
Corporate and Other segment GAAP operating margin -23.7%  -22.3%  -42.3%
Corporate and Other segment non-GAAP operating margin 0.0%  2.9%  8.7%
      
      


       
NXP Semiconductors      
Table 5: Financial Reconciliation of GAAP to non-GAAP Results (unaudited)    
       
       
($ in millions except share data) Three Months Ended
  July 1, 2018 April 1, 2018 July 2, 2017
       
Revenue $   2,290   $   2,269   $   2,202  
GAAP Gross profit $   1,180   $   1,172   $   1,083  
PPA effects    (20)    (19)    (76)
Restructuring    -     -     (1)
Stock Based Compensation    (8)    (9)    (7)
Merger-related costs    (2)    -     - 
Non-GAAP Gross profit $   1,210   $   1,200   $   1,167  
       
GAAP Gross margin  51.5%  51.7%  49.2%
Non-GAAP Gross margin  52.8%  52.9%  53.0%
GAAP Research and development $  (438) $  (426) $  (381)
Stock based compensation    (32)    (31)    (28)
Merger-related costs    (2)    (1)    - 
Non-GAAP Research and development $  (404) $  (394) $  (353)
GAAP Selling, general and administrative $  (242) $  (248) $  (263)
PPA effects    (1)    (3)    (6)
Restructuring    -     (1)    (1)
Stock based compensation    (29)    (29)    (32)
Merger-related costs    (21)    (25)    (35)
Other incidentals    (4)    -     (1)
Non-GAAP Selling, general and administrative $  (187) $  (190) $  (188)
GAAP amortization of acquisition-related intangible assets $  (363) $  (360) $  (373)
PPA effects    (363)    (360)    (373)
Non-GAAP amortization of acquisition-related intangible assets$  -   $  -   $  -  
GAAP Other income (expense) $  -  $  -  $  (16)
Restructuring    1     -     - 
Other incidentals    -     (1)    (15)
Non-GAAP Other income (expense) $  (1) $  1  $  (1)
       
GAAP Operating income (loss) $   137   $   138   $   50  
PPA effects    (384)    (382)    (455)
Restructuring    1     (1)    (2)
Stock based compensation    (69)    (69)    (67)
Merger-related costs    (25)    (26)    (35)
Other incidentals    (4)    (1)    (16)
Non-GAAP Operating income (loss) $   618   $   617   $   625  
       
GAAP Operating margin  6.0%  6.1%  2.3%
Non-GAAP Operating margin  27.0%  27.2%  28.4%
GAAP Financial income (expense) $  (71) $  (68) $  (75)
Non-cash interest expense on convertible notes    (11)    (11)    (10)
Foreign exchange gain (loss)    -     (3)    (3)
Extinguishment on debt    (26)    -     - 
Other financial expense    (3)    (3)    (3)
Non-GAAP Financial income (expense) $   (31) $   (51) $   (59)
       
       


      
NXP Semiconductors     
Table 6: Adjusted EBITDA and Free Cash Flow (unaudited)     
      
      
      
($ in millions)Three Months Ended
 July 1, 2018 April 1, 2018 July 2, 2017
Net Income (loss)$   66   $   70   $   63  
      
Reconciling items to EBITDA     
Financial (income) expense   71     68     75 
(Benefit) provision for income taxes   4     2     (54)
Depreciation   119     116     155 
Amortization   377     375     405 
EBITDA$   637   $   631   $   644  
      
Reconciling items to adjusted EBITDA     
Results of equity-accounted investees   (4)    (2)    (34)
Restructuring   (1)    1     2 
Stock based compensation   69     69     67 
Merger-related costs   25     26     35 
Other incidental items   4     1     16 
Adjusted EBITDA$   730   $   726   $   730  
Trailing twelve month adjusted EBITDA$   3,176   $   3,176   $   3,070  
      
      
      
      
      
($ in millions)Three Months Ended
 July 1, 2018 April 1, 2018 July 2, 2017
      
Net cash provided by (used for) operating activities $   403   $   620   $   441  
Net capital expenditures on property, plant and equipment   (129)    (156)    (96)
Non-GAAP free cash flow$   274   $   464   $   345  
Non-GAAP free cash flow as a percent of Revenue 12%  21%  16%
      
      

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