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Embedded-semiconductor specialist NXP Semiconductors (NASDAQ: NXPI) 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?
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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.
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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.
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NXP produced $152 million of free cash flow in the first quarter, 73% below the $561 million seen in the year-ago period.
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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.
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: