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, 2024, and the Financial Statements and the related Notes that appear elsewhere in this document.

Overview

Quarter in Focus

•Revenue was $2.8 billion, down 9.3% year-on-year;

•GAAP gross margin was 55.0%, and GAAP operating margin was 25.5%;

•Non-GAAP gross margin was 56.1%, and non-GAAP operating margin was 31.9%;

•Cash flow from operations was $565 million, with net capital expenditures on property, plant and equipment of $138 million, resulting in non-GAAP free cash flow of $427 million;

•During the first quarter of 2025, NXP returned capital to shareholders with the payment of $258 million in cash dividends and the repurchase of $303 million of its common shares, for a total capital return of $561 million.

On January 7, 2025, NXP entered into a definitive agreement to acquire TTTech Auto for $625 million in cash. Subject to customary closing conditions, including regulatory approvals, the transaction is expected to close in the second half of 2025 with a possibility for an accelerated closing timeline.

On February 10, 2025, NXP entered into a definitive agreement to acquire Kinara, Inc. for $307 million in cash. Subject to customary closing conditions, including regulatory approvals, the transaction is expected to close in the first half of 2025.

Sequential Results

Q1 2025 compared to Q4 2024

Revenue for the three months ended March 30, 2025 was $2,835 million compared to $3,111 million for the three months ended December 31, 2024, a decrease of $276 million or 8.9% quarter-on-quarter, in line with management's expectations. Within our end markets, the Automotive end market decreased $116 million or 6.5%, the Communication Infrastructure & Other end market decreased $94 million or 23.0%, the Mobile end market decreased $58 million or 14.6%, and the Industrial & IoT end market decreased $8 million or 1.6%.

When aggregating all end markets together and reviewing sales channel performance, revenues through NXP's third party distribution partners was $1,524 million, a decrease of $239 million or 13.6% compared to the previous period. Revenues through NXP's third party direct OEM and EMS customers was $1,284 million, a decrease of $37 million or 2.8% versus the previous period.

From a geographic perspective, revenue increased quarter-on-quarter in the EMEA region by 10.7% and in the Americas region by 2.2%, while revenue decreased in the China region by 16.7% and in the Asia Pacific region by 15.8%.

Our gross profit percentage for the three months ended March 30, 2025 of 55.0% increased compared with 53.9% for the three months ended December 31, 2024.

Operating income for the three months ended March 30, 2025 was $723 million compared to $675 million for the three months ended December 31, 2024, an increase of $48 million or 7.1%. Lower restructuring cost was the main driver for the sequential increase.