Share-based Compensation

12 Months Ended

Dec. 31, 2023

Share-Based Payment Arrangement [Abstract]

Share-based compensation expense is included in the following line items in our consolidated statement of operations:


	2023	2022	2021
Cost of revenue	54	47	45
Research and development	211	183	165
Selling, general and administrative	146	134	143
	411	364	353

The income tax (expense) benefit recognized in net income related to share-based compensation expenses was $36 million (includes $9 million of excess tax benefits), $26 million (includes $4 million of excess tax benefits) and $54 million (includes $32 million of excess tax benefits) for the years ended December 31, 2023, 2022 and 2021, respectively.

Long Term Incentive Plan (LTIP)

The LTIP was introduced in 2010 and is a broad-based long-term retention program to attract, retain and motivate talented employees as well as align stockholder and employee interests. The LTIP provides share-based compensation (“awards”) to both our eligible employees and non-employee directors. Awards that may be granted include performance shares, stock options and restricted shares. Awards granted generally will become fully vested upon a termination event occurring within one year following a change in control, as defined. A termination event is defined as either termination of employment or services other than for cause or constructive termination resulting from a significant reduction in either the nature or scope of duties and responsibilities, a reduction in compensation or a required relocation. The number of shares authorized and available for awards at December 31, 2023 was 18.0 million.

A charge of $398 million was recorded in 2023 for the LTIP (2022: $353 million; 2021: $331 million).

A summary of the activity for our LTIP’s during 2023 is presented below.

Stock options

At December 31, 2023, there were no (2022: none) unrecognized compensation cost related to non-vested stock options.


	Stock options	Weighted average exercise price in USD	Weighted average remaining contractual term	Aggregate intrinsic value
Outstanding at January 1, 2023	346,202	66.72
Granted	—	—
Exercised	90,623	55.49
Forfeited	—	—
Outstanding at December 31, 2023	255,579	70.71	1.5	41
Exercisable at December 31, 2023	255,579	70.71	1.5	41

No options were granted in 2023, 2022 and 2021.

The intrinsic value of the exercised options was $13 million (2022: $15 million; 2021: $27 million), whereas the amount received by NXP was $5 million (2022: $3 million; 2021: $10 million). The tax benefit realized from stock options exercised during fiscal 2023, 2022, and 2021 was $36 million, $24 million, and $58 million, respectively.

Performance share units

Market performance conditions

The Company grants PSU awards to certain executives of the Company with a performance measure of Relative Total Shareholder Return (“Relative TSR”). Each PSU, which generally cliff vests on the third anniversary of the date of grant, entitles the grant recipient to receive from 0 to 2 common shares for each of the target units awarded based on the Relative TSR of the Company's share price as compared to a set of peer companies.

The fair value of the PSUs is calculated using a Monte Carlo valuation model, utilizing assumptions underlying the Black-Scholes methodology:


PSU grant assumptions	2023	2022	2021
Expected life (years)	3	3	3
Risk-free interest rate	4.59%	4.48%	0.78%
Dividend yield	2.2%	1.6%	1.1%
NXP share price volatility	39%	48%	46%
Initial TSR	(0.2)%	3.4%	6.5%


	Shares	Weighted average grant date fair value in USD
Outstanding at January 1, 2023	861,922	200.06
Granted	340,757	214.02
Performance based adjustment 1)	193,678	167.81
Vested	456,547	167.81
Forfeited	39,642	203.64
Outstanding at December 31, 2023	900,168	214.60
1) The amount shown represents performance adjustments for performance-based awards granted on October 27, 2020. These units vested at 173.68% during 2023 based on the achievement of Relative TSR performance conditions.

In 2023, the weighted average grant date fair value of performance share units granted was $214.02 (2022: $188.70; 2021: $257.18).

In 2023, the fair value of the performance share units at the time of vesting was $83 million (2022: $42 million; 2021: $395 million).

At December 31, 2023, there was a total of $109 million (2022: $100 million; 2021: $90 million) of unrecognized compensation cost related to non-vested performance share units. This cost is expected to be recognized over a weighted-average period of 2.0 years (2022: 1.9 years; 2021: 1.7 years).

Restricted share units


	Shares	Weighted average grant date fair value in USD
Outstanding at January 1, 2023	4,779,274	157.36
Granted	2,482,405	178.69
Vested	2,234,706	154.74
Forfeited	165,457	160.11
Outstanding at December 31, 2023	4,861,516	169.36

The weighted average grant date fair value of restricted share units granted in 2023 was $178.69 (2022: $147.73; 2021: $201.68). The fair value of the restricted share units at the time of vesting was $372 million (2022: $319 million; 2021: $533 million).

At December 31, 2023, there was a total of $685 million (2022: $621 million; 2021: $546 million) of unrecognized compensation cost related to non-vested restricted share units. This cost is expected to be recognized over a weighted-average period of 1.6 years (2022: 1.6 years; 2021: 1.6 years).