BROOKLYN, N.Y. — NXP Semiconductors' first-quarter earnings beat projections as sales growth was better than expected in nearly all its product segments.
Revenue rose 15% from a year earlier but fell 4% from the fourth quarter to $1.25 million. Even the decline was "slightly better than the typical seasonal decline," Richard Clemmer, the Dutch company's chief executive, said in a conference call with analysts last week following the earnings release.
NXP reported net income of $110 million, or $0.43 per share, versus a net loss of $14 million, or $0.06 per share, a year earlier. Excluding items, adjusted net income for the quarter was $249 million, or $0.98 per share, compared with $186 million, or $0.72 per share, a year earlier, beating the Street's EPS estimate of $0.90-0.91 per share. The GAAP gross profit margin rose from 45% to 47%.
The overall results "were very good, with better overall product revenue, better gross margin and strong cash flow," Clemmer said.
In its high-performance mixed-signal segment, revenue grew 18% from a year earlier but fell 5% from the fourth quarter. NXP's automotive business grew 20% growth from a year earlier; that growth was driven by demand for in-vehicle networking products. Revenue in the portable and computing business grew 45% from a year earlier, which was near the high end of the firm's targets.
In its identification business, revenue growth was a less robust but still healthy 6%, which the company attributed to improved demand for infrastructure and mobile payment products. Revenue from its industrial and infrastructure line was slightly below projections but still grew 19%, while revenue performance in its standard products segment was incrementally better than expected.
"With Q1 being normally our seasonally weakest quarter in a year, we feel especially positive about the remainder of this year," Clemmer said. "We believe we can continue to monetize our company-specific opportunities, which should result in better-than-industry growth, continued improvement in profitability and robust cashflow generation."
For the second quarter, NXP is forecasting non-GAAP earnings of $1 to $1.10 per share, along with revenue of $1.3 billion to $1.35 billion (up 4-9% from the first quarter), driven by single-digit growth in all segments except portable and computing.
"We continue to be optimistic about driving [portable and computing products] into other key customers, but it won't be a significant contributor in 2014 revenue," Clemmer said.
However, within its industrial and infrastructure business, NXP is seeing strong, broad-based demand for its high-performance RF products, particularly for LTE base station applications. While lead times "remain fairly consistent," some products areas are experiencing "a significant increase in lead times," he said, though he did not elaborate.
Clemmer also expects NXP's ID business to be one of the major contributors of growth in 2015 as rollouts of EMV equipment (a payment consortium formed by Europay, MasterCard, and Visa also referred to as Chip&Pin), accelerate in the US and China in the second half of this year. Specifically, NXP's embedded chips are designed into EMV authentication systems, which make credit card and debit transactions more secure.
According to Vijay Rakesh, an analyst at Sterne, Agee & Leach Inc. in Birmingham, Ala., NXP stands to benefit from a major move by Target, which announced that it would begin to implement EMV chip card technology early next year, as well from the momentum building in the US and China for contactless EMV and dual-face POS terminals. NXP also has a strong position in mobile payment applications as more smartphones are designed with its NFC chips, he said.