Embedded-semiconductor specialist NXP Semiconductors (NXPI 4.18%) reported first-quarter results late Monday evening. The company delivered both revenue and operating profit above the midpoints of management's guidance ranges, despite undeniable downtrends across the board.
NXP Semiconductors' first-quarter results: The raw numbers
|
Metric |
Q1 2019 |
Q1 2018 |
Year-Over-Year Change |
|---|---|---|---|
|
Revenue |
$2.10 billion |
$2.27 billion |
(8%) |
|
Net income (loss) |
($21 million) |
$276 million |
N/A |
|
GAAP earnings (loss) per share (diluted) |
($0.07) |
$0.94 |
N/A |
Data source: NXP Semiconductors.
What happened with NXP Semiconductors this quarter?
- Revenues were soft across the board. Industrial sales had the weakest showing, falling 14% year over year to $368 million. At the other end of that spectrum, automotive revenue fell 8% to $1.04 billion.
- Three months ago, management guided first-quarter sales to roughly $2.09 billion alongside operating profit of $44 million. NXP edged out the revenue target by a rounding error and delivered $54 million in GAAP operating profit.
- NXP produced $152 million of free cash flow in the first quarter, 73% below the $561 million seen in the year-ago period.
- The company bought back 8.5 million shares of its own stock during this quarter, reducing the share count by 3% at a total cost of $715 million.
Image source: Getty Images.
What management had to say
The product mix in NXP's largest division -- automotive computing -- is shifting toward higher-growth target markets. On the first-quarter earnings call, CEO Rick Clemmer explained (based on a transcript by Seeking Alpha):
Thirty percent of our auto business is focused on high-growth sectors like ADAS [Advanced Driver Assistance Systems] and electrification, which has grown at nearly 40% in compounded growth rate since 2015, and which we expect to continue to grow at [a] 25% to 30% compounded growth rate as the business becomes more material in size.
The other 70% of our automotive business represents a very large and entrenched core business with hot barriers to entry. We anticipate our core business will grow at a modest premium to the overall auto semiconductor market.
Adding more color, Clemmer noted that ADAS accounts for about 10% of NXP's automotive revenue these days, but the business has grown by a compound annual rate of nearly 50% over the last four years. The company is already a leader in this space and expects to continue outgrowing the general ADAS market by about 40% for the foreseeable future.
Looking ahead
Management provided the following guidance targets for the second quarter, presented here as the midpoint of each guidance range:
- Revenue should fall roughly 4% to $2.20 billion.
- Gross profit is trending toward approximately $1.15 billion, about 3% below the year-ago result.
- GAAP operating income was guided to $70 million, a 10% year-over-year decline.
Beyond that, Clemmer sees an improving demand environment in the second half of 2019, with the caveat that macroeconomic tensions remain unpredictable around the world, especially in China.
