nxpi-20221002

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended October 2, 2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission File Number: 001-34841

NXP Semiconductors N.V.

(Exact name of registrant as specified in its charter)


Netherlands						98-1144352
(State or other jurisdiction of incorporation or organization)						(I.R.S. employer identification number)

60 High Tech Campus						5656 AG
Eindhoven
Netherlands
(Address of principal executive offices)						(Zip code)


	+31	40	2729999
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common shares, EUR 0.20 par value	NXPI	The Nasdaq Global Select Market

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

As of October 28, 2022, there were 259,134,862 shares of our common stock, €0.20 par value per share, issued and outstanding.

NXP Semiconductors N.V.

Form 10-Q

For the Fiscal Quarter Ended October 2, 2022

TABLE OF CONTENTS


		Page
Part I
Item 1.	Financial Statements	1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	24
Item 4.	Controls and Procedures	25

Part II
Item 1.	Legal Proceedings	25
Item 1A.	Risk Factors	26
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	26
Item 5.	Other Information	26
Item 6.	Exhibits	27

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

($ in millions, unless otherwise stated)


	For the three months ended		For the nine months ended
	October 2, 2022	October 3, 2021	October 2, 2022	October 3, 2021
Revenue	3,445	2,861	9,893	8,024
Cost of revenue	(1,478)	(1,278)	(4,267)	(3,664)
Gross profit	1,967	1,583	5,626	4,360
Research and development	(548)	(492)	(1,608)	(1,429)
Selling, general and administrative	(289)	(243)	(805)	(699)
Amortization of acquisition-related intangible assets	(131)	(137)	(400)	(456)
Total operating expenses	(968)	(872)	(2,813)	(2,584)
Other income (expense)	2	—	4	—
Operating income (loss)	1,001	711	2,817	1,776
Financial income (expense):
Extinguishment of debt	—	—	(18)	—
Other financial income (expense)	(98)	(93)	(313)	(280)
Income (loss) before income taxes	903	618	2,486	1,496
Benefit (provision) for income taxes	(149)	(95)	(392)	(200)
Results relating to equity-accounted investees	(4)	3	5	—
Net income (loss)	750	526	2,099	1,296
Less: Net income (loss) attributable to non-controlling interests	12	7	34	27
Net income (loss) attributable to stockholders	738	519	2,065	1,269

Earnings per share data:
Net income (loss) per common share attributable to stockholders in $
Basic	2.81	1.95	7.86	4.66
Diluted	2.79	1.91	7.80	4.57

Weighted average number of shares of common stock outstanding during the period (in thousands):
Basic	262,180	266,557	262,620	272,314
Diluted	264,705	271,359	264,838	277,886

See accompanying notes to the Condensed Consolidated Financial Statements

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

($ in millions, unless otherwise stated)


	For the three months ended		For the nine months ended
	October 2, 2022	October 3, 2021	October 2, 2022	October 3, 2021
Net income (loss)	750	526	2,099	1,296
Other comprehensive income (loss), net of tax:
Change in fair value cash flow hedges	(13)	(2)	(25)	(16)
Change in foreign currency translation adjustment	(78)	(23)	(165)	(56)
Change in net actuarial gain (loss)	1	—	—	—

Total other comprehensive income (loss)	(90)	(25)	(190)	(72)
Total comprehensive income (loss)	660	501	1,909	1,224
Less: Comprehensive income (loss) attributable to non-controlling interests	12	7	34	27
Total comprehensive income (loss) attributable to stockholders	648	494	1,875	1,197

See accompanying notes to the Condensed Consolidated Financial Statements

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

($ in millions, unless otherwise stated)


		October 2, 2022	December 31, 2021
ASSETS
Current assets:
	Cash and cash equivalents	3,759	2,830
	Accounts receivable, net	1,012	923

	Inventories, net	1,581	1,189
	Other current assets	351	286
Total current assets		6,703	5,228
Non-current assets:
	Other non-current assets	1,940	1,346
	Property, plant and equipment, net of accumulated depreciation of $5,055 and $4,676	2,971	2,635
	Identified intangible assets, net of accumulated amortization of $2,729 and $3,021	1,417	1,694
	Goodwill	9,909	9,961
	Total non-current assets	16,237	15,636
Total assets		22,940	20,864

LIABILITIES AND EQUITY
Current liabilities:
	Accounts payable	1,534	1,252

	Restructuring liabilities-current	8	25
	Other current liabilities	1,677	1,175

Total current liabilities		3,219	2,452
Non-current liabilities:
	Long-term debt	11,162	10,572
	Restructuring liabilities	12	12
	Deferred tax liabilities	39	57
	Other non-current liabilities	1,123	1,001
Total non-current liabilities		12,336	11,642
Total liabilities		15,555	14,094
Equity:
	Non-controlling interests	279	242

	Stockholders’ equity:
	Common stock, par value €0.20 per share:	56	56
	Capital in excess of par value	13,996	13,727
	Treasury shares, at cost:
	14,130,857 shares (2021: 9,569,359 shares)	(2,765)	(1,932)
	Accumulated other comprehensive income (loss)	(142)	48
	Accumulated deficit	(4,039)	(5,371)
	Total stockholders’ equity	7,106	6,528
Total equity		7,385	6,770
Total liabilities and equity		22,940	20,864

See accompanying notes to the Condensed Consolidated Financial Statements

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

($ in millions, unless otherwise stated)


	For the nine months ended
	October 2, 2022	October 3, 2021
Cash flows from operating activities:
Net income (loss)	2,099	1,296
Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities:
Depreciation and amortization	948	952
Share-based compensation	267	265
Amortization of discount (premium) on debt, net	2	1
Amortization of debt issuance costs	5	5
Net (gain) loss on sale of assets	(2)	—
(Gain) loss on equity security, net	6	(2)
(Gain) loss on extinguishment of debt	18	—
Results relating to equity-accounted investees	(5)	—
Deferred tax expense (benefit)	(196)	6
Changes in operating assets and liabilities:
(Increase) decrease in receivables and other current assets	(165)	(214)
(Increase) decrease in inventories	(392)	(143)
Increase (decrease) in accounts payable and other liabilities	545	242
Decrease (increase) in other non-current assets	(325)	(106)
Exchange differences	(2)	(3)
Other items	16	(7)
Net cash provided by (used for) operating activities	2,819	2,292
Cash flows from investing activities:
Purchase of identified intangible assets	(122)	(99)
Capital expenditures on property, plant and equipment	(830)	(501)
Purchase of equipment leased to others	(5)	(14)
Insurance recoveries received for equipment damage	—	7
Proceeds from disposals of property, plant and equipment	2	1
Purchase of interests in businesses, net of cash acquired	(27)	(17)

Purchase of investments	(9)	(6)
Proceeds from sale of investments	12	8
Proceeds from return of equity investment	2	3
Net cash provided by (used for) investing activities	(977)	(618)
Cash flows from financing activities:
Repurchase of long-term debt	(917)	—

Proceeds from the issuance of long-term debt	1,496	2,000
Cash paid for debt issuance costs	(13)	(22)


Dividends paid to common stockholders	(594)	(412)
Proceeds from issuance of common stock through stock plans	58	60
Purchase of treasury shares and restricted stock unit withholdings	(920)	(3,265)
Other, net	(1)	(1)
Net cash provided by (used for) financing activities	(891)	(1,640)
Effect of changes in exchange rates on cash positions	(22)	(6)
Increase (decrease) in cash and cash equivalents	929	28
Cash and cash equivalents at beginning of period	2,830	2,275
Cash and cash equivalents at end of period	3,759	2,303


Supplemental disclosures to the condensed consolidated cash flows
Net cash paid during the period for:
Interest	217	216
Income taxes, net of refunds	432	250
Net gain (loss) on sale of assets:
Cash proceeds from the sale of assets	2	—
Book value of these assets	—	—
Non-cash investing activities:
Non-cash capital expenditures	176	224

See accompanying notes to the Condensed Consolidated Financial Statements

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Unaudited)

($ in millions, unless otherwise stated)


	Outstanding number of shares (in thousands)	Common stock	Capital in excess of par value	Treasury shares at cost	Accumulated other comprehensive income (loss)	Accumulated deficit	Total stock- holders’ equity	Non- controlling interests	Total equity
Balance as of December 31, 2021	264,950	56	13,727	(1,932)	48	(5,371)	6,528	242	6,770
Net income (loss)						657	657	9	666
Other comprehensive income					(22)		(22)		(22)
Share-based compensation plans			92				92		92
Shares issued pursuant to stock awards	256			51		(23)	28		28
Treasury shares repurchased and retired	(2,653)			(552)			(552)		(552)
Dividends common stock ($0.845 per share)						(222)	(222)		(222)
Balance as of April 3, 2022	262,553	56	13,819	(2,433)	26	(4,959)	6,509	251	6,760
Net income (loss)						670	670	13	683
Other comprehensive income					(78)		(78)		(78)
Share-based compensation plans			85				85		85
Shares issued pursuant to stock awards	57			11		(11)	—		—
Treasury shares repurchased and retired	(15)			(2)			(2)		(2)

Dividends common stock ($0.845 per share)						(222)	(222)		(222)
Balance as of July 3, 2022	262,595	56	13,904	(2,424)	(52)	(4,522)	6,962	264	7,226
Net income (loss)						738	738	12	750
Other comprehensive income					(90)		(90)		(90)
Share-based compensation plans			92				92		92
Shares issued pursuant to stock awards	295			60		(30)	30		30
Treasury shares and restricted stock unit withholdings	(2,501)			(401)			(401)		(401)
Change in participation						(3)	(3)	3	—
Dividends common stock ($0.845 per share)						(222)	(222)		(222)
Balance as of October 2, 2022	260,389	56	13,996	(2,765)	(142)	(4,039)	7,106	279	7,385

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Unaudited)

($ in millions, unless otherwise stated)


	Outstanding number of shares (in thousands)	Common stock	Capital in excess of par value	Treasury shares at cost	Accumulated other comprehensive income (loss)	Accumulated deficit	Total stock- holders’ equity	Non- controlling interests	Total equity
Balance as of December 31, 2020	280,475	59	14,133	(1,037)	117	(4,328)	8,944	207	9,151
Net income (loss)						353	353	11	364
Other comprehensive income					(56)		(56)		(56)
Share-based compensation plans			91				91		91
Shares issued pursuant to stock awards	361			37		(6)	31		31
Treasury shares repurchased and retired	(5,087)			(905)			(905)		(905)
Dividends common stock ($0.5625 per share)						(155)	(155)		(155)
Balance as of April 4, 2021	275,749	59	14,224	(1,905)	61	(4,136)	8,303	218	8,521
Net income (loss)						397	397	9	406
Other comprehensive income					9		9		9
Share-based compensation plans			88				88		88
Shares issued pursuant to stock awards	64			6		(6)	—		—
Treasury shares repurchased and retired	(6,103)			(1,203)			(1,203)		(1,203)

Dividends common stock ($0.5625 per share)						(152)	(152)		(152)
Balance as of July 4, 2021	269,710	59	14,312	(3,102)	70	(3,897)	7,442	227	7,669
Net income (loss)						519	519	7	526
Other comprehensive income					(25)		(25)		(25)
Share-based compensation plans			80				80		80
Shares issued pursuant to stock awards	2,430			231		(202)	29		29
Treasury shares and restricted stock unit withholdings	(5,800)			(1,157)			(1,157)		(1,157)
Dividends common stock ($0.5625 per share)						(150)	(150)		(150)
Balance as of October 3, 2021	266,340	59	14,392	(4,028)	45	(3,730)	6,738	234	6,972

See accompanying notes to the Condensed Consolidated Financial Statements

NXP SEMICONDUCTORS N.V.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

All amounts in millions of $ unless otherwise stated

1 Basis of Presentation and Overview

We prepared our interim condensed consolidated financial statements that accompany these notes in conformity with U.S. generally accepted accounting principles, consistent in all material respects with those applied in our Annual Report on Form 10-K for the year ended December 31, 2021.

We have made estimates and judgments affecting the amounts reported in our condensed consolidated financial statements and the accompanying notes. The actual results that we experience may differ materially from our estimates. The interim financial information is unaudited, but reflects all normal adjustments that are, in our opinion, necessary to provide a fair statement of results for the interim periods presented. This interim information should be read in conjunction with the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2021.

2 Significant Accounting Policies and Recent Accounting Pronouncements

Significant Accounting Policies

For a discussion of our significant accounting policies see, “Part II – Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – “Significant Accounting Policies” of our Annual Report on Form 10-K for the year ended December 31, 2021. There have been no changes to our significant accounting policies since our Annual Report on Form 10-K for the year ended December 31, 2021.

New accounting standards not yet adopted

In September 2022, the FASB issued ASU 2022-04, Liabilities—Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations. ASU 2022-04, which require that a buyer in a supplier finance program to disclose sufficient information about the program, is effective for fiscal years beginning after December 15, 2022, with early adoption permitted. The Company is currently evaluating the implications of adoption on our Consolidated Financial Statements.

Accounting standards recently adopted

No new accounting pronouncements were issued or became effective in the period that had, or are expected to have, a material impact on our Consolidated Financial Statements.

3 Acquisitions and Divestments

2022

On July 19, 2022, we acquired PL Sense for a total consideration of $22.1 million, net of closing adjustments. There were no material divestments during the first nine months of 2022.

2021

On July 6, 2021, we acquired Retune DSP for a total consideration of $15.7 million, net of closing adjustments.

4 Supplemental Financial Information

Statement of Operations Information:

Disaggregation of revenue

The following table presents revenue disaggregated by sales channel:


	For the three months ended		For the nine months ended
	October 2, 2022	October 3, 2021	October 2, 2022	October 3, 2021
Distributors	1,876	1,631	5,385	4,617
Original Equipment Manufacturers and Electronic Manufacturing Services	1,525	1,191	4,378	3,295
Other	44	39	130	112
Total	3,445	2,861	9,893	8,024

Depreciation, amortization and impairment


	For the three months ended		For the nine months ended
	October 2, 2022	October 3, 2021	October 2, 2022	October 3, 2021
Depreciation of property, plant and equipment	156	139	447	406
Amortization of internal use software	3	1	9	5
Amortization of other identified intangible assets 1)	162	166	492	541
Total - Depreciation, amortization and impairment	321	306	948	952

1) For the nine month period ending October 3, 2021, the amount includes an impairment charge as a result of the discontinuation of an IPR&D project for an amount of $36 million.

Financial income and expense


	For the three months ended		For the nine months ended
	October 2, 2022	October 3, 2021	October 2, 2022	October 3, 2021
Interest income	21	1	29	3
Interest expense	(109)	(96)	(319)	(273)
Total interest expense, net	(88)	(95)	(290)	(270)
Extinguishment of debt	—	—	(18)	—
Foreign exchange rate results	(1)	3	2	3
Miscellaneous financing costs/income and other, net	(9)	(1)	(25)	(13)
Total other financial income/ (expense)	(10)	2	(41)	(10)
Total - Financial income and expenses	(98)	(93)	(331)	(280)

Earnings per share

The computation of earnings per share (EPS) is presented in the following table:


	For the three months ended		For the nine months ended
	October 2, 2022	October 3, 2021	October 2, 2022	October 3, 2021
Net income (loss)	750	526	2,099	1,296
Less: net income (loss) attributable to non-controlling interests	12	7	34	27
Net income (loss) attributable to stockholders	738	519	2,065	1,269

Weighted average number of shares outstanding (after deduction of treasury shares) during the year (in thousands)	262,180	266,557	262,620	272,314
Plus incremental shares from assumed conversion of:
Options 1)	275	378	297	397
Restricted Share Units, Performance Share Units and Equity Rights 2)	2,250	4,424	1,921	5,175
Dilutive potential common shares	2,525	4,802	2,218	5,572

Adjusted weighted average number of shares outstanding (after deduction of treasury shares) during the year (in thousands)	264,705	271,359	264,838	277,886

EPS attributable to stockholders in $:
Basic net income (loss)	2.81	1.95	7.86	4.66
Diluted net income (loss)	2.79	1.91	7.80	4.57

1) There were no stock options to purchase shares of NXP’s common stock that were outstanding in Q3 2022 and YTD 2022 (Q3 2021 and YTD 2021: no shares) that were anti-dilutive and were not included in the computation of diluted EPS because the exercise price was greater than the average fair market value of the common stock or the number of shares assumed to be repurchased using the proceeds of unrecognized compensation expense and exercise prices were greater than the weighted average number of shares underlying outstanding stock options.

2) There were 0.3 million unvested RSUs, PSUs and equity rights that were outstanding in Q3 2022 and 0.3 million outstanding YTD 2022 (Q3 2021 and YTD 2021: no shares) that were anti-dilutive and were not included in the computation of diluted EPS because the number of shares assumed to be repurchased using the proceeds of unrecognized compensation expense were greater than the weighted average number of outstanding unvested RSUs, PSUs and equity rights or the performance goal has not been met yet.

Balance Sheet Information

Cash and cash equivalents

At October 2, 2022 and December 31, 2021, our cash balance was $3,759 million and $2,830 million, respectively, of which $215 million and $208 million was held by SSMC, our consolidated joint venture company with TSMC. Under the terms of our joint venture agreement with TSMC, a portion of this cash can be distributed by way of a dividend to us, but 38.8% of the dividend will be paid to our joint venture partner. During both first nine months of 2022 and 2021, no dividends were declared by SSMC.

Inventories

The portion of finished goods stored at customer locations under consignment amounted to $9 million as of October 2, 2022 (December 31, 2021: $12 million).

Inventories are summarized as follows:


	October 2, 2022	December 31, 2021
Raw materials	140	107
Work in process	1,133	846
Finished goods	308	236
	1,581	1,189

The amounts recorded above are net of allowance for obsolescence of $129 million as of October 2, 2022 (December 31, 2021: $120 million).

Equity Investments

At October 2, 2022 and December 31, 2021, the total carrying value of investments in equity securities is summarized as follows:


	October 2, 2022	December 31, 2021
Marketable equity securities	7	18
Non-marketable equity securities	14	19
Equity-accounted investments	81	75
	102	112

The total carrying value of investments in equity-accounted investees is summarized as follows:


	October 2, 2022			December 31, 2021
	Shareholding %		Amount	Shareholding %		Amount
SMART Growth Fund, L.P.1)	8.41	%	44	8.41	%	31
Others	—		37	—		44
			81			75
1) Previously named “Wise Road Industry Investment Fund I, L.P.”

Results related to equity-accounted investees at the end of each period were as follows:


	For the three months ended		For the nine months ended
	October 2, 2022	October 3, 2021	October 2, 2022	October 3, 2021
Company's share in income (loss)	(5)	4	3	1
Other results	1	(1)	2	(1)
	(4)	3	5	—

Other current liabilities

Other current liabilities at October 2, 2022 and December 31, 2021 consisted of the following:


	October 2, 2022	December 31, 2021
Accrued compensation and benefits	508	476
Income taxes payable	232	82
Dividend payable	221	149
Other	716	468
	1,677	1,175

Accumulated other comprehensive income (loss)

Total comprehensive income (loss) represents net income (loss) plus the results of certain equity changes not reflected in the condensed consolidated statements of operations. The after-tax components of accumulated other comprehensive income (loss) and their corresponding changes are shown below:


	Currency translation differences	Change in fair value cash flow hedges	Net actuarial gain/(losses)	Accumulated Other Comprehensive Income (loss)
As of December 31, 2021	207	—	(159)	48
Other comprehensive income (loss) before reclassifications	(165)	(53)	—	(218)
Amounts reclassified out of accumulated other comprehensive income (loss)	—	19	—	19
Tax effects	—	9	—	9
Other comprehensive income (loss)	(165)	(25)	—	(190)
As of October 2, 2022	42	(25)	(159)	(142)

Cash dividends

The following dividends were declared during the first three quarters of 2022 and 2021 under NXP’s quarterly dividend program:


	Fiscal year 2022		Fiscal year 2021
	Dividend per share	Amount	Dividend per share	Amount
First quarter	0.845	222	0.5625	155
Second quarter	0.845	222	0.5625	152
Third quarter	0.845	221	0.5625	150

The dividend declared in the third quarter (not yet paid) is classified in the condensed consolidated balance sheet in other current liabilities as of O