GlobeNewswire Inc | Oct 26, 2020 05:00PM EDT

October 26, 2020

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 - YTotal 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 / $ 32 $ (145 ) $ 233 122 % -86 %(Loss)Operating Income Adjustments $ (554 ) $ (521 ) $ (454 ) ^(i)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 HighTotal 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 $ 425 $ 461 $ 499 $ (267 ) $ 692 $ 728 $ 766 (loss)Operating Margin 17.9 % 18.8 % 19.8 % 29.1 % 29.7 % 30.3 %Financial Income $ (146 ) $ (146 ) $ (146 ) $ (62 ) $ (84 ) $ (84 ) $ (84 ) (expense)

Note (1) Additional Information:

-- GAAP Gross Profit is expected to include Purchase Price Accounting (PPA) effects, $(20) million; Stock Based Compensation, $(12) million; Other Incidentals, $(4) million; -- GAAP Operating Income (loss) is expected to include PPA effects, $(170) million; Stock Based Compensation, $(87) million; Restructuring and Other Incidentals, $(10) million; -- GAAP Financial Income (expense) is expected to include Other financial expense $(62) million; -- Net cash paid for income taxes related to on-going operations is expected to be approximately $(36) million; -- Non-controlling interest is expected to be approximately $(9) million; -- 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 thesenon-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 Companys results of operations and the factors and trends affecting NXPs 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 NXPs 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 InformationThe 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 - 7644Outside the U.S.: 1 - 484 - 747 - 6631Passcode: 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 NXPs 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 NXPs 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 NXPs 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 NXPs 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: Media:Jeff Palmer Jacey Zunigajeff.palmer@nxp.com jacey.zuniga@nxp.com+1 408 518 5411 +1 512 895 7398

NXP-CORP

NXP SemiconductorsTable 1: Condensed consolidated statement of operations (unaudited)($ in millions except share data) Three months ended September June 28, September 27, 2020 29, 2020 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 (418 ) (380 ) (358 )intangible assetsTotal 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 (1 ) (1 ) (1 )investeesNet income (loss) (18 ) (209 ) 119 Less: Net income (loss) attributable to 4 5 10 non-controlling interestsNet income (loss) attributable to (22 ) (214 ) 109 stockholders 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 averagenumber of shares of common stock outstandingduring the period(in thousands):Basic 279,467 279,142 279,074 Diluted 279,467 279,142 283,518

NXP SemiconductorsTable 2: Condensed consolidated balance sheet (unaudited) ($ in millions) As of September June 28, September 29, 27, 2020 2019 2020ASSETS 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, 2,255 2,312 2,401 net 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 SemiconductorsTable 3: Condensed consolidated statement of cash flows (unaudited)($ in millions) Three months ended September June 28, September 27, 2020 29, 2020 2019Cash flows from operating activities: Net income (loss) $ (18 ) $ (209 ) $ 119 Adjustments to reconcile net income (loss) tonet 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, ? (1 ) 12 netAmortization 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 (252 ) 224 (17 )current assets(Increase) decrease in inventories 164 ? 13 Increase (decrease) in accounts payable and 82 (160 ) 43 other liabilities(Increase) decrease in other non-current (9 ) (11 ) 30 assetsExchange differences 5 5 (1 )Other items (2 ) (5 ) (4 )Net cash provided by (used for) operating 527 414 746 activities Cash flows from investing activities: Purchase of identified intangible assets (22 ) (28 ) (21 )Capital expenditures on property, plant and (70 ) (75 ) (138 )equipmentProceeds from the disposals of property, plant 2 1 23 and equipmentPurchase of interests in businesses, net of ? (11 ) ? cash acquiredPurchase of investments (15 ) ? (2 )Net cash provided by (used for) investing (105 ) (113 ) (138 )activities Cash flows from financing activities: Payment of bond hedge derivatives - ? ? (1 )convertible optionRepurchase 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 27 8 33 stock plansPurchase of treasury shares and restricted (12 ) (3 ) (9 )stock unit withholdingsNet cash provided by (used for) financing (124 ) 1,885 (95 )activities Effect of changes in exchange rates on cash 2 1 (6 )positionsIncrease (decrease) in cash and cash 300 2,187 507 equivalentsCash and cash equivalents at beginning of 3,266 1,079 3,030 periodCash 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 SemiconductorsTable 4: Financial Reconciliation of GAAP to non-GAAP Results (unaudited)

($ in millions) Three months ended September June 28, September 27, 2020 29, 2020 2019Revenue $ 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 $ (203 ) $ (222 ) $ (221 ) administrativePPA 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 $ (163 ) $ (159 ) $ (170 ) administrativeGAAP amortization ofacquisition-related intangible $ (418 ) $ (380 ) $ (358 ) assetsPPA effects (418 ) (380 ) (358 ) Non-GAAP amortization ofacquisition-related intangible $ ? $ ? $ ? assetsGAAP 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 ? ? (12 ) convertible notesForeign exchange gain (loss) (3 ) (2 ) (2 ) Gain (loss) on extinguishment of ? ? (1 ) long-term debtOther financial expense (3 ) (2 ) (4 ) Non-GAAP Financial income (expense) $ (100 ) $ (92 ) $ (66 )

NXP SemiconductorsTable 5: Adjusted EBITDA and Free Cash Flow (unaudited)($ in millions) Three months ended September June 28, September 27, 2020 29, 2020 2019Net income (loss) $ (18 ) $ (209 ) $ 119 Reconciling items to adjusted net incomeFinancial (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 1 1 1 investeesRestructuring 21 8 (1 ) Stock based costs 83 105 84 Merger-related costs 1 3 6 Other incidental items ^1) 2 3 (17 ) Adjusted EBITDA $ 728 $ 517 $ 822 Trailing twelve month adjusted $ 2,708 $ 2,802 $ 3,126 EBITDA ^1) Excluding amortization related to:? other incidental items $ 6 $ ? $ ? ($ in millions) Three months ended September June 28, September 27, 2020 29, 2020 2019Net cash provided by (used for) $ 527 $ 414 $ 746 operating activitiesNet capital expenditures on (68 ) (74 ) (115 ) property, plant and equipmentNon-GAAP free cash flow $ 459 $ 340 $ 631 Non-GAAP free cash flow as percent 20 % 19 % 28 %of Revenue