NXP Semiconductors NV

Management’s Discussion and Analysis (MD&A) should be read in conjunction with our consolidated financial statements and notes and the MD&A in our Annual Report on Form 10-K for the year ended December 31, 2023, and the financial statements and the related notes that appear elsewhere in this document.

Overview

Quarter in Focus

•Revenue was $3.1 billion, up 0.2 percent year-on-year;

•GAAP gross margin was 57.0 percent, and GAAP operating margin was 27.4 percent;

•Non-GAAP gross margin was 58.2 percent, and non-GAAP operating margin was 34.5 percent;

•Cash flow from operations was $851 million, with net capital expenditures on property, plant and equipment of $224 million, resulting in non-GAAP free cash flow of $627 million;

•During the first quarter of 2024, NXP returned capital to shareholders with the payment of $261 million in cash dividends and the repurchase of $303 million of its common shares, for a total capital return of $564 million;

•On March 1, 2024, we fully retired at maturity our $1 billion aggregate principal amount of outstanding 4.875% senior unsecured notes using available cash on balance sheet;

•We published our annual Corporate Sustainability Report, reinforcing our commitment toward transparency and sustainable business practices;

Sequential Results

Q1 2024 compared to Q4 2023

Revenue for the three months ended March 31, 2024 was $3,126 million compared to $3,422 million for the three months ended December 31, 2023, a decrease of $296 million or 8.6% quarter-on-quarter, in line with management's expectations and spread across all end markets. Our Automotive end market decreased $95 million or 5.0%, the Industrial IoT end market decreased $88 million or 13.3%, the Mobile end market decreased $57 million or 14.0%, and our Communications Infrastructure & Other end market decreased $56 million or 12.3%.

When aggregating all end markets together and reviewing sales channel performance, revenues through NXP's third party distribution partners was $1,739 million, a decrease of $339 million or 16.3% compared to the previous period. Revenues through NXP's third party direct OEM and EMS customers was $1,355 million, an increase of $45 million or 3.4% versus the previous period.

From a geographic perspective, revenue decreased across the China and Americas regions, with increases in revenues in the EMEA and the Asia Pacific regions.

Our gross profit percentage for the three months ended March 31, 2024 of 57.0% was relatively consistent compared with 56.6% for the three months ended December 31, 2023.

Operating income for the three months ended March 31, 2024 was $856 million compared to $907 million for the three months ended December 31, 2023, a decrease of $51 million or 5.6%. Lower revenue drove the sequential decrease.