NXP Semiconductors Reports Third Quarter 2018 Results

NXP Semiconductors N.V. reported financial results for the third quarter 2018 ended Sept. 30, 2018.
 
“NXP delivered strong results for the third quarter of 2018, with revenue at $2.45 billion, an increase of 2% year-on-year, an increase of 7% versus the prior quarter and $20 million above the mid-point of our guidance. HPMS segment revenue was $2.35 billion, an increase of 3% year-on-year, and an increase of 7% from the prior quarter,” said Richard Clemmer, NXP CEO.
 
“Within Automotive, third quarter revenue was $990 million, up 4% year-on-year, with advanced analog and infotainment primarily contributing to the year-on-year growth, while reduced pulls of automotive MCUs from tier-one customers impacted the overall year-on-year growth. Within Secure Connected Devices, third quarter revenue was $717 million, up 1% year-on-year driven by the continued demand for general purpose, multi-market MCUs, which were up high single digits, offset by a significant decline in demand for mobile transaction solutions after a strong new customer ramp during 2017. In Secure Interface and Infrastructure, third quarter revenue was $511 million, up 5% year-on-year due to early 5G network trials with North American carriers. Lastly, in Secure Identification Solutions, third quarter revenue was $133 million, down 4% year-on-year due to lower demand for bank card products.
 
“During the third quarter, we announced that we are in the process of simplifying our organizational structure, and promoted Kurt Sievers to President. Over Kurt’s tenure with NXP, he has successfully driven the NXP automotive business to become the industry leading automotive semiconductor supplier,” said Clemmer.
 
“In the third quarter, our GAAP operating margin was 90.4%, as result of the receipt of the $2 billion termination fee associated with the failed Qualcomm transaction, and continued operational performance” said Peter Kelly, NXP CFO.
 
“Our third quarter non-GAAP operating margin was 30.0%, a decline of 80 basis points as compared to 30.8% reported in the third quarter of 2017, as result of product mix and increased R&D investments between the year-on-year periods. On a sequential basis, our non-GAAP operating margin increased 300-basis points due to higher revenue, lower than anticipated incentive accruals and improved operating expense control during the third quarter.”
                                                                         
Total gross debt was $6.36 billion, up from the $5.34 billion at the end of the second quarter of 2018, and down from the $6.56 billion at the end of the third quarter of 2017.
 
Trailing 12 months, adjusted EBITDA was $3.18 billion, flat sequentially, and an increase from $3.12 billion at the end of the third quarter of 2017. Financial leverage, defined as net debt divided by trailing twelve months adjusted EBITDA was 1.39x, an increase from 0.74x at the end of the second quarter of 2018, and from 1.12x reported at the end of the third quarter of 2017.
 
Cash flow from operations was $2.62 billion, an increase from the $403 million at the end of the second quarter of 2018, and from the $643 million at the end of the third quarter of 2017 due to the receipt during the quarter of the $2.0 billion termination fee from Qualcomm, and cash generated from ongoing operations.