NXP Investor Presentation Fourth Quarter 2024 February 2025 | Public | NXP and the NXP logo are trademarks of NXP B.V. All other product or service names are the property of their respective owners. © 2024 NXP B.V. Forward Looking Statements This document includes forward-looking statements which include statements regarding NXP's business strategy, financial condition, results of operations, market data, as well as any other statements which are not historical facts. By their nature, forward-looking statem ...

Core Viewpoint - NXP Semiconductors reported a decline in both earnings and revenue for the fourth quarter of 2024, but the automotive segment showed resilience, leading to a modest positive market reaction despite overall underperformance in other segments [1][3][4]. Financial Performance - Non-GAAP earnings for Q4 2024 were $3.18 per share, exceeding the Zacks Consensus Estimate by 1.3%, but down 14.3% year over year [1]. - Total revenue for Q4 2024 was $3.11 billion, which was above the midpoint of management's guidance and beat the Zacks Consensus Estimate of $3.10 billion by 0.3%, although it represented a 9.1% decline year over year [2]. - The automotive segment generated $1.79 billion in revenue, accounting for 57.5% of total revenues, despite a 6% year-over-year decline, surpassing the consensus estimate of $1.732 billion [5]. - Revenue from the mobile segment was $396 million, down 2% year over year, missing the consensus estimate of $399 million [5]. - Communication Infrastructure & Others segment revenues were $409 million, down 10% year over year, missing the consensus estimate of $432.7 million [6]. - Industrial & IoT segment revenues were $516 million, down 22% year over year, also missing the consensus estimate of $532.7 million [6]. Profitability Metrics - Non-GAAP gross profit for Q4 2024 was $1.789 billion, down 11% year over year, with a gross margin of 57.5%, contracting by 120 basis points [7]. - Non-GAAP operating income declined 12.6% year over year to $1.07 billion, with an operating margin of 34.2%, down 140 basis points from the previous year [7]. Balance Sheet and Cash Flow - As of December 31, 2024, cash and cash equivalents totaled $3.29 billion, an increase from $3.15 billion at the end of the previous quarter [8]. - Long-term debt rose to $10.354 billion from $9.683 billion in the prior quarter [8]. - Cash flow from operations was $391 million, down 49.8% from the previous quarter, with capital expenditures of $130 million [9]. - Free cash flow generated in Q4 was $292 million, with dividend payments of $258 million and share repurchases amounting to $455 million [9]. Guidance - For Q1 2025, NXP expects revenues between $2.725 billion and $2.925 billion, indicating a year-over-year decline of 6-13% [10]. - Adjusted earnings are projected to be in the range of $2.39 to $2.79 per share, with the Zacks Consensus Estimate at $2.67 per share, reflecting a year-over-year decline of 17.6% [10].

Financial Performance - Full-year 2024 revenue was $12.61 billion, a decrease of 5% year-on-year; fourth quarter revenue was $3.11 billion, down 9% year-on-year[1][3] - NXP reported revenue of $12.61 billion for the full year 2024, a decrease from $13.28 billion in 2023, representing a decline of approximately 5%[15] - For Q4 2024, NXP's revenue was $3.11 billion, down from $3.42 billion in Q4 2023, indicating a year-over-year decrease of about 9%[18] - Gross profit for Q4 2024 was $1.68 billion, compared to $1.94 billion in Q4 2023, reflecting a decline of approximately 13%[18] - Operating income for the full year 2024 was $3.42 billion, down from $3.66 billion in 2023, a decrease of about 7%[18] - Net income attributable to stockholders for Q4 2024 was $495 million, compared to $697 million in Q4 2023, a decline of approximately 29%[18] - Diluted earnings per share (EPS) for Q4 2024 was $1.93, down from $2.68 in Q4 2023, representing a decrease of about 28%[18] - Full-year GAAP net income for 2024 was $2,542 million, down from $2,822 million in 2023[26] - Full-year adjusted EBITDA for 2024 was $5,064 million, a decrease from $5,410 million in 2023[26] Margins and Income - Fourth quarter GAAP gross margin was 53.9%, with a GAAP operating margin of 21.7%; full-year GAAP gross margin was 56.4% and operating margin was 27.1%[3][5] - Non-GAAP diluted net income per share for the fourth quarter was $3.18, down 14% year-on-year; full-year non-GAAP diluted net income per share was $13.09, down 7% year-on-year[3][5] - Non-GAAP gross profit for Q4 2024 was $1,789 million, compared to $1,892 million in Q3 2024 and $2,010 million in Q4 2023, representing a decrease of 11% year-over-year[21] - GAAP gross margin for Q4 2024 was 53.9%, down from 57.4% in Q3 2024 and 56.6% in Q4 2023[21] - Non-GAAP operating income for Q4 2024 was $1,065 million, compared to $1,153 million in Q3 2024 and $1,219 million in Q4 2023, reflecting a decrease of 12.7% year-over-year[21] - GAAP operating income for Q4 2024 was $675 million, down from $990 million in Q3 2024 and $907 million in Q4 2023, indicating a decline of 25.6% year-over-year[21] Cash Flow and Capital Returns - Cash flow from operations for the fourth quarter was $391 million, resulting in non-GAAP free cash flow of $292 million; full-year cash flow from operations was $2,782 million, with non-GAAP free cash flow of $2,089 million[3][5] - NXP returned $713 million to shareholders in the fourth quarter, representing 244% of non-GAAP free cash flow; total capital return for the trailing twelve months was $2.4 billion, or 115% of non-GAAP free cash flow[3][5] - Net cash provided by operating activities for the full year 2024 was $2,782 million, down from $3,513 million in 2023, a decrease of 20.9%[20] - Net cash provided by operating activities for Q4 2024 was $391 million, a decrease from $1,137 million in Q4 2023[27] - Non-GAAP free cash flow for Q4 2024 was $292 million, compared to $962 million in Q4 2023[27] - Trailing twelve month non-GAAP free cash flow as a percentage of revenue was 17% for 2024, down from 20% in 2023[27] Expenses and Investments - Research and development expenses for the full year 2024 totaled $2.35 billion, slightly down from $2.42 billion in 2023[18] - NXP's operating expenses for Q4 2024 were $963 million, compared to $1.03 billion in Q4 2023, indicating a decrease of approximately 6%[18] - Capital expenditures on property, plant, and equipment for the full year 2024 amounted to $727 million, compared to $827 million in 2023, showing a decrease of 12.1%[20] - Restructuring costs for Q4 2024 were $112 million, compared to $84 million in Q4 2023[26] - Share-based compensation for the full year 2024 was $461 million, up from $411 million in 2023[26] Acquisitions and Product Development - NXP introduced the S32J family of high-performance automotive Ethernet switches on October 15, 2024, aimed at software-defined vehicle development[3][4] - NXP announced the acquisition of Aviva Links for $242.5 million to enhance its in-vehicle networking portfolio on December 17, 2024[4] - The company entered into an agreement to acquire TT Tech Auto for $625 million on January 7, 2025, to accelerate its CoreRide platform for software-defined vehicles[4] Guidance and Future Outlook - Guidance for Q1 2025 projects total revenue between $2.725 billion and $2.925 billion, reflecting a year-on-year decline of 6% to 13%[7][9] - The projected gross margin for Q1 2025 is between 54.6% and 55.7%[7] Balance Sheet and Assets - Total assets increased to $24,385 million as of December 31, 2024, compared to $23,669 million as of September 29, 2024, reflecting a growth of 3.0%[19] - Total current liabilities decreased to $3,098 million as of December 31, 2024, down from $2,992 million as of September 29, 2024, a reduction of 3.5%[19] - Stockholders' equity decreased to $9,183 million as of December 31, 2024, from $9,406 million as of September 29, 2024, a decline of 2.4%[19] - Long-term debt increased to $10,354 million as of December 31, 2024, compared to $9,683 million as of September 29, 2024, an increase of 6.9%[19] Conference Call - The company plans to host a conference call on February 4, 2025, to discuss Q4 2024 results in detail[13]

Core Insights - NXP Semiconductors reported a full-year revenue of $12.61 billion for 2024, reflecting a 5% decrease year-on-year, with fourth-quarter revenue at $3.11 billion, down 9% year-on-year, but slightly above guidance [1][2] Financial Performance - Fourth-quarter GAAP gross margin was 53.9%, with a GAAP operating margin of 21.7% and a GAAP diluted net income per share of $1.93. For the full year, GAAP gross margin was 56.4%, operating margin was 27.1%, and diluted net income per share was $9.73 [2][4] - Non-GAAP gross margin for Q4 was 57.5%, with a non-GAAP operating margin of 34.2% and a non-GAAP diluted net income per share of $3.18. For the full year, non-GAAP gross margin was 58.1%, operating margin was 34.6%, and diluted net income per share was $13.09 [2][4] - Cash flow from operations for Q4 was $391 million, with net capex investments of $99 million, resulting in non-GAAP free cash flow of $292 million. For the full year, cash flow from operations was $2,782 million, with net capex investments of $693 million, leading to non-GAAP free cash flow of $2,089 million [2][4] Capital Return and Shareholder Engagement - In Q4 2024, NXP executed a capital return policy, paying $258 million in cash dividends and repurchasing $455 million of common shares, totaling $713 million, which represented 244% of fourth-quarter non-GAAP free cash flow. Over the trailing twelve months, capital return to shareholders was $2.4 billion, or 115% of non-GAAP free cash flow [2][4] Product Development and Acquisitions - NXP introduced the S32J family of high-performance automotive Ethernet switches and network controllers in October 2024, aimed at software-defined vehicle development [2] - The company announced the adoption of its Trimension® NCJ29Dx Ultra Wide Band (UWB) product family by Audi for secure car access features [2] - NXP launched the i.MX 94 family of applications processors for industrial control and announced a wireless battery management system based on UWB connectivity [2] - NXP entered into agreements to acquire Aviva Links for $242.5 million and TT Tech Auto for $625 million, enhancing its in-vehicle networking and software-defined vehicle capabilities [2][3]

Core Viewpoint - NXP Semiconductors is expected to report a decline in both revenues and earnings for the fourth quarter of 2024, primarily due to challenges in the automobile and communication infrastructure markets [2][3][4]. Revenue Estimates - NXP anticipates fourth-quarter revenues between $3 billion and $3.2 billion, with a consensus estimate of $3.10 billion, reflecting a 9.4% year-over-year decline [2]. - The estimated revenues for the Industrial & IoT segment are projected at $532.7 million, indicating a 19.5% year-over-year decline [5]. - Automotive revenues are estimated at $1.73 billion, representing an 8.8% decline from the previous year [7]. Earnings Estimates - Non-GAAP earnings per share are expected to be between $2.93 and $3.33, with a consensus estimate of $3.14 per share, suggesting a 15.4% year-over-year decline [3]. - The company has beaten the Zacks Consensus Estimate three times in the past four quarters, with an average surprise of 1.1% [3]. Market Challenges - The performance is likely to be negatively impacted by ongoing inventory corrections at Tier 1 auto customers and a slowdown in demand from European and North American car OEMs [4]. - The communications infrastructure sector is facing challenges due to a shift in demand towards gallium nitride products and weaker base station deployments globally [6]. - Macroeconomic concerns, geopolitical tensions, and high inflation are expected to have adversely affected customers' IT spending [6]. Positive Factors - Despite the challenges, NXP's performance may benefit from an expanding portfolio and positive momentum in the Industrial & IoT sectors, particularly due to demand in China and Asia Pacific [8]. - The recent launch of the i.MX 94 family of applications processors is anticipated to have contributed positively to sales in the fourth quarter [8]. Earnings Prediction Model - The current model does not predict an earnings beat for NXP, as it has an Earnings ESP of 0.00% and a Zacks Rank of 4 (Sell) [9][10].

Financial Results Announcement - NXP Semiconductors N.V. will release its financial results for Q4 and full year 2024 on February 3, 2025, after market close [1] - A conference call for the financial community is scheduled for February 4, 2025, at 8:00 a.m. EST [1] Company Overview - NXP Semiconductors is a trusted partner in innovative solutions across automotive, industrial & IoT, mobile, and communications infrastructure markets [3] - The company reported revenue of $13.28 billion in 2023 [3] - NXP operates in over 30 countries and emphasizes a "Brighter Together" approach, combining technology with innovative people [3]

Core Insights - NXP Semiconductors N.V. has secured a €1 billion loan from the European Investment Bank (EIB) to enhance its research, development, and innovation (RDI) investments across its semiconductor solutions portfolio [1][6] - The loan carries an interest rate of approximately 4.75% and has a duration of six years, supporting RDI efforts in multiple EU Member States until 2026 [1][6] - This financing aligns with the EIB's "Strategic Tech-EU" investment program aimed at accelerating digitalization and innovation in critical technologies [2][6] Company Initiatives - NXP's RDI teams are focused on developing next-generation automotive processors, advanced automotive radar solutions, and intelligent edge technologies such as AI and secure edge identification [3][4] - The loan will bolster NXP's commitment to strengthening Europe's semiconductor ecosystem and ensuring technology leadership in the global market [4] - NXP's efforts are consistent with the EU Chips Act and other initiatives aimed at enhancing the semiconductor market in Europe [4][6] Industry Context - The EIB emphasizes the importance of semiconductors in the digital and green transitions, highlighting their critical role in various industries [2][3] - The investment will contribute to building a state-of-the-art European chip ecosystem, addressing automotive and industrial chip requirements [4][6] - Over the past decade, the EIB has provided more than €27 billion in financing for various sectors in the Netherlands, underscoring its commitment to supporting critical EU technology [5]

Core Insights - NXP Semiconductors has acquired TTTech Auto for $625 million, enhancing its position in the automotive and industrial semiconductor sectors, particularly in software-defined vehicles (SDVs) [1][4][7] - The SDV market is projected to grow at a 48% compound annual growth rate from 2024 to 2027, potentially reaching 45% of global auto production [4] - NXP's stock has underperformed, gaining only 0.2% over the past year compared to significant gains in the broader semiconductor sector [2][3] Company Strategy - The acquisition of TTTech Auto aligns with NXP's strategy to lead in intelligent edge systems and strengthens its automotive portfolio, particularly in autonomous driving and connected vehicles [1][7][8] - TTTech Auto's MotionWise middleware platform will enhance NXP's ability to provide scalable and safe SDV architectures, improving hardware-software synergy and time-to-market for automakers [6][7] Market Position - NXP's market leadership is reinforced by the addition of TTTech Auto, which brings a team of 1,100 engineers and established relationships with major automotive OEMs [7][8] - Despite the strategic acquisition, NXP faces immediate challenges, particularly in its industrial and IoT business segments, which are expected to impact performance in the near term [9][10] Financial Outlook - The Zacks Consensus Estimate for NXP's revenue is $12.5 billion, indicating a year-over-year decline of 1.2%, while earnings are projected at $12.51 per share, reflecting a 4.1% decrease [11][12] - NXP's shares are currently rated with a Zacks Rank of 4 (Sell), suggesting caution for new investors and a recommendation for existing investors to sell [13]

Acquisition Details - NXP Semiconductors has entered into a definitive agreement to acquire TTTech Auto in an all-cash transaction valued at $625 million [1] - TTTech Auto, based in Vienna, Austria, is a leader in innovating safety-critical systems and middleware for software-defined vehicles (SDVs) [2] - The acquisition includes TTTech Auto's management team, intellectual property, assets, and approximately 1,100 engineering staff, who will join NXP's automotive team [3] Industry Transformation - The automotive industry is shifting from conventional hardware-based designs to platform-based SDVs, with the SDV market expected to reach 45% penetration of global auto production by 2027, reflecting a 48% CAGR between 2024 and 2027 [4] - Global automakers require new SDV platforms and architectures to handle the increasing complexity of software integration, scalability, and faster time to market [5] Strategic Integration - NXP introduced its NXP CoreRide platform in March 2024 to address the SDV market opportunity, featuring S32 vehicle compute, networking, and system power management [6] - TTTech Auto's MotionWise middleware platform complements NXP CoreRide, enabling automakers to reduce complexity, maximize system performance, and shorten time to market [8][10] - The combination of NXP CoreRide and TTTech Auto's MotionWise will strengthen hardware/software integration, streamline SDV development, and enhance safety-critical functions [7][8] Leadership and Vision - The acquisition aligns with NXP's strategy to become the leading provider of intelligent edge systems in automotive and Industrial IoT [10] - TTTech Auto's CEO and CTO emphasized the shared vision with NXP for SDV transformation, highlighting the potential for seamless coordination of diverse systems and innovative features [11] Company Background - NXP Semiconductors is a global leader in automotive processing and networking, with operations in over 30 countries and revenue of $13.28 billion in 2023 [13]

Core Viewpoint - NXP Semiconductors has underperformed in the semiconductor sector, with a 9% decline in shares over the past three months, contrasting with the S&P 500's return of 6.7% and the Zacks Computer and Technology sector's return of 9.8% [1][2] Financial Performance - The company's third-quarter 2024 results showed a revenue decline of 5.4% and a non-GAAP EPS decline of 7%, primarily due to weakness in the automotive market and inventory corrections [2] - For Q4 2024, NXP expects revenues of $3.1 billion, indicating a year-over-year decline of 5-9%, with a consensus estimate suggesting a 9.4% decline [14] - Non-GAAP earnings are anticipated to be $3.13 per share, reflecting a 15.4% year-over-year decline [15] - The Industrial and IoT end market is projected to decline by mid-single digits sequentially and by 20% year-over-year, while the mobile end market is expected to shrink by low single digits [16] Strategic Initiatives - NXP is focusing on portfolio expansion through innovation and acquisitions, recently announcing the acquisition of Aviva Links for $242.5 million to enhance its automotive networking solutions [3][6] - The acquisition aims to strengthen NXP's position in the growing market for advanced driver-assistance systems (ADAS) and in-vehicle infotainment (IVI) applications [4][6] - Aviva Links specializes in Automotive SerDes Alliance-compliant in-vehicle connectivity, which supports data rates up to 16 Gbps, addressing the demand for scalable and open-source networking solutions in next-generation vehicles [5][6] Market Outlook - The addressable market for ADAS and IVI asymmetrical links is projected to grow from $1 billion in 2024 to $2 billion by 2034, indicating significant growth potential for NXP [6] - NXP's partnership with ZF Friedrichshafen AG on SiC-based traction inverter solutions for electric vehicles is expected to enhance the development of energy-efficient electric vehicles [12][13] Customer Engagement - Aviva Links has secured design wins with two major automotive OEMs and is actively engaging with additional OEMs and Tier-1 suppliers, providing NXP with a competitive edge in the automotive connectivity landscape [7]