NXP Semiconductors (NXPI -1.93%) reported its fourth-quarter results on Feb. 3, the first quarterly report following the close of the company's acquisition of Freescale Semiconductor. NXP had guided for a steep revenue decline in the fourth quarter, driven by weak demand in all of its segments, but the addition of about one month of Freescale's revenue makes comparisons difficult. Here's what you need to know about NXP's fourth-quarter results.

Earnings rundown
NXP reported quarterly revenue of $1.6 billion, up 4.5% year over year. Because NXP's revenue includes one month of Freescale's revenue, this number is far above the average analyst estimate. It's unclear how NXP's ex-Freescale revenue compares with its previous guidance, because the company only provided revenue numbers that included Freescale's contribution.

Here's how NXP's various segments performed during the fourth quarter.


Q4 Revenue

YOY Growth


$422 million


Secure Identification Solutions

$225 million


Secure Connected Devices

$379 million


Secure Interface & Infrastructure

$280 million


Standard Products

$271 million


Source: NXP Q4 earnings report.

Again, all of these numbers include a contribution from Freescale. NXP had previously guided for all of its segments to post major revenue declines.

NXP reported non-GAAP EPS of $1.25, down from $1.35 during the prior-year period, but $0.18 higher than the average analyst estimate. On a GAAP basis, EPS came in at $3.56, up from $0.61 during the prior-year period. NXP's GAAP numbers include a gain on the company's sale of its RF Power and Bipolar businesses, making the non-GAAP results more indicative of the company's performance.

The completion of the Freescale acquisition also gives investors a first look at the company's balance sheet. Long-term debt has ballooned to $8.66 billion, more than doubling year over year, and about $9.2 billion of goodwill now sits on the balance sheet, most of which is related to the Freescale acquisition.

NXP provided guidance for the first quarter, which will fully include Freescale's revenue. NXP expects revenue to be in a range of $2.15 billion to $2.27 billion, with a non-GAAP gross margin of 49%-50%, and a non-GAAP operating margin of 22.5%-23.5%. NXP's interest expense is expected to be $95 million, up from $47 million during the prior year period, and non-GAAP EPS is expected to be in a range of $1.05 to $1.15.

A brand new company
Following the acquisition of Freescale, NXP is now the market leader in automotive, microcontroller, and security semiconductor solutions. NXP expects to achieve $200 million in cost savings during fiscal 2016, with this number eventually growing to $500 million, and NXP stated that these synergies are on track.

Going forward, NXP's automotive segment will become a larger contributor to the company's total revenue. During the first quarter, NXP expects automotive revenue to be between $790 million and $810 million, or about 36% of the total revenue. That's up from 20% during the prior-year period, driven by the addition of Freescale's automotive business. The Freescale acquisition can be viewed as a big bet on the future of the automobile, and with cars becoming more connected, and with driver assistance features becoming more prevalent, NXP is well positioned to remain a market leader.

NXP CEO Richard Clemmer is optimistic about the long-term benefits of the merger: "We believe the merger will result in significant value creation both in terms of giving us an even more competitive cost structure as well broadening the product portfolio we can offer our customers."

NXP faced a difficult macroeconomic environment during the second quarter of 2015, and these issues will likely continue into this year. NXP's goal is to outgrow the market despite the uncertain environment, and while the inclusion of Freescale's revenue in NXP's fourth quarter results makes it unclear whether the company is accomplishing that goal, investors should get a clearer picture in the coming quarters.