NXP Semiconductors N.V. - loftuspeakblog.files.wordpress.com · 07 December 2015 NXP Semiconductors N.V. (NXPI) 2 Investment Highlights Reinstating with an Outperform and $120 PT

DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES, ANALYST CERTIFICATIONS, AND THE STATUS OF NON-US ANALYSTS. US Disclosure: Credit Suisse does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.

07 December 2015

Americas/United States

Equity Research

Semiconductor Devices

NXP Semiconductors N.V.

(NXPI) REINSTATEMENT

More Diverse, Higher Quality, Levered Growth

■ Bottom Line: We reinstate NXPI Outperform with a 12-month PT of $120. While Rev growth is likely to moderate post-FSL, we still see a LT CAGR of 7-9% vs SIA of 5%. More importantly, premium growth will be MORE DIVERSE, HIGHER QUALITY and LEVERED which should drive MULTIPLE EXPANSION. We see LT EPS of $9-10 driven by: (1) Rev Outgrowth, (2) Merger Synergies, (3) OpM Expansion, (4) Deleveraging, and (5) Buybacks. In addition, NXPI is well exposed to key structural themes: Data Growth, I/A/I Content, IoT, and Security. Our CY16 EPS w/SBC of $5.17 significantly under-represents earnings power as NXPI cyclically recovers and realizes merger synergies. NTM EPS w/SBC starting in C3Q16 is $6.15 (+30% y/y) and CY17 EPS w/SBC is $7.18 (+40% y/y). Our PT of $120 represents a “full” multiple on CY16 EPS, an inline multiple on C3Q16 NTM EPS, and a discounted multiple on CY17 EPS and LT EPS potential of $9-10.

Exhibit 1: Long-Term EPS Potential of $10

$4.97

$1.18

$1.29

$1.63

$0.74 $0.20

$10.00

$4

$5

$6

$7

$8

$9

$10

$11

EPS

($)

Core CY16 FSL w/ Synergies Rev Growth Op. Leverage (33%) Stock Buyback Deleverage

Source: Company data, Credit Suisse estimates

Share price performance

68

78

88

98

108

Dec-14 Mar-15 Jun-15 Sep-15

Daily Dec 08, 2014 - Dec 04, 2015, 12/08/14 = US$76.11

Price Indexed S&P 500 INDEX

On 12/04/15 the S&P 500 INDEX closed at 2091.69

Quarterly EPS Q1 Q2 Q3 Q4 2014A 0.98 1.09 1.35 1.35 2015E 1.35 1.44 1.57 1.10 2016E 1.20 1.46 1.60 1.50

Financial and valuation metrics

Year 12/14A 12/15E 12/16E 12/17E EPS (CS adj.) (US$) 4.76 5.42 5.77 7.80 Prev. EPS (US$) — — — — P/E (x) 19.0 16.7 15.7 11.6 P/E rel. (%) 106.3 93.8 94.8 78.9 Revenue (US$ m) 5,647.0 6,065.0 9,899.7 10,541.1 EBITDA (US$ m) 1,519.0 1,746.2 2,904.1 3,518.7 OCFPS (US$) 6.46 4.24 7.80 9.88 P/OCF (x) 11.8 21.3 11.6 9.2 EV/EBITDA (current) 16.8 17.6 9.5 7.3 Net debt (US$ m) 2,814 7,896 4,781 2,847 ROIC (%) 34.73 32.29 53.34 60.66

Number of shares (m) 251.75 IC (current, US$ m) 3,615.00 BV/share (Next Qtr., US$) — EV/IC (x) — Net debt (Next Qtr., US$ m) — Dividend (current, US$) — Net debt/tot eq (Next Qtr., %) — Dividend yield (%) —

Source: Company data, Credit Suisse estimates.

Rating OUTPERFORM* Price (04 Dec 15, US$) 90.45 Target price (US$) 120.00¹ 52-week price range 112.25 - 72.13 Market cap. (US$ m) 22,770.92 Enterprise value (US$ m) 30,666.43

*Stock ratings are relative to the coverage universe in each

analyst's or each team's respective sector.

¹Target price is for 12 months.

Research Analysts

John W. Pitzer

212 538 4610

[email protected]

Charles Kazarian

212 538 4160

[email protected]

William Miller

212 325 6964

[email protected]

Steven Jozkowski

212 325 2000

[email protected]

Nickie Yue

212 538 8467

[email protected]

This document is being provided for the exclusive use of ASIA 8IP at EIGHT INVESTMENT PARTNERS PTY LTD.

07 December 2015


(NXPI) 2

Investment Highlights Reinstating with an Outperform and $120 PT. We reinstate coverage of NXPI post the

FSL merger with an Outperform rating and a 12-month PT of $120. While NXPI’s Rev

growth is likely to moderate post-FSL, we still forecast a PREMIUM Rev CAGR of 7-9%,

significantly above SIA of 5%. More importantly, we believe the new growth profile will be

recognized by investors as MORE DIVERSE, HIGHER QUALITY and MORE LEVERED

which should, in turn, drive MULTIPLE EXPANSION. We see a LT EPS of $9-10 driven

by: (1) Rev Outgrowth, (2) Merger Synergies, (3) OpM Expansion, (4) Deleveraging, and

(5) Buybacks. In addition, NXPI is well exposed to key structural themes: Data Growth,

I/A/I Content Increases, IoT, and Security which could add 100-300 bps of additional

growth to our LT CAGR.

Back to the Future, 1000 bps OpM Leverage. At its IPO in 2010 NXPI was viewed as a

levered EPS story – GM and OpM expansion coupled with balance sheet deleveraging

was likely to drive outsized EPS growth somewhat independent of Rev. In 2012, as

margins began to approach target and leverage was more sensible, NXPI morphed more

into a topline story especially given success with Mobile Payments and AAPL. With the

completion of the FSL merger we believe NXPI can be both leverage and growth,

providing an extremely compelling investment vehicle especially given the lack of upside

to target models for most peers.

Estimates Show Significant Quarterly Growth. Specifically, our CY16 EPS w/SBC of

$5.17 significantly under-represents earnings power as NXPI cyclically recovers and more

importantly realizes merger synergies. NTM EPS w/SBC starting in C3Q16 is $6.15 (+30%

y/y) and CY17 EPS w/SBC is $7.18 (+40% y/y). Despite the prospect for better than

average top and bottom line growth, NXPI is currently trading at a 10-15% discount to

peers on P/E albeit more in-line on EV/EBITDA. Our PT of $120 represents a “full” multiple

on CY16 EPS, an in-line multiple on 3Q16 NTM EPS, and a discounted multiple on both

CY17 EPS and Our LT EPS of $9-10.

Exhibit 2: Despite Significant Outgrowth… Exhibit 3: …NXPI Has Always Traded at a Discount

0.8x

1.0x

1.2x

1.4x

1.6x

1.8x

Sep

-10

De

c-1

0

Mar

-11

Jun

-11

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-11

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c-1

1

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c-1

4

Mar

-15

Jun

-15

Sep

-15

Ind

exe

d R

ev

Gro

wth

NXPI SIA

1.6% CAGR

45%

9.5% CAGR

-70%

-60%

-50%

-40%

-30%

-20%

-10%

0%

NTM

P/E

Pre

m/D

isc

(%)

Prem/Disc to Peers Median

Source: Company data, Credit Suisse estimate, SIA Source: Bloomberg, Company data, Credit Suisse estimates

Outperforming Fundamentals + Multiple Still Underappreciated. As shown in Exhibit 2

over the last 5 years NXPI has grown Rev from $3.8 bn to $6.0 bn, a 45% premium to SIA

growth representing a 9.5% CAGR well ahead of peers at just 1.6%. The Company has

always had a fairly straightforward strategy: Leverage Core IP into consequential growth

markets to drive high Relative Market Share (RMS) and Growth Rates of AT LEAST 1.5x

faster than the Served Addressable Market (SAM). In addition, there has historically been

significant leverage in the model during the same 5 year period as NXPI drove OpM from

19.9% (ex-SBC) to 29.5% and decreased leverage from >5x to <3x providing the basis to

grow annualized quarterly EPS from $2.02 to $6.28 or a 32.8% CAGR well ahead of peers

at approx. 5%. Despite the Rev and EPS outperformance and what we viewed as a well-


07 December 2015


(NXPI) 3

balanced and diversified portfolio, as shown in Exhibit 4, NXPI has always traded at a

discounted P/E multiple, as shown in Exhibit 3, albeit we should note the discount has

narrowed over time. We suspect the discounted multiple has been an overhang of THREE

INVESTOR CONCERNS:

Apple Exposure, Fighting Windmills: Although overall Rev historically has been

well balanced with 4 key Segments in HPMS and 18 sub-segments, and AAPL

has never been a 10% customer, NXPI has always been viewed more as a

“socket play” than a diversified Semiconductor company. While we disagree with

this characterization, it is fair to note that greater than 30% of outperformance in

Rev since C1Q12 has been driven by AAPL, as shown in Exhibit 5.

Standard Products SOTP: Standard Products has always ranged between 20-

30% of total Rev, with a GM of 35.1% exiting C3Q15 versus HPMS of 54.0%, a

growth rate more in-line with GDP, with few product cycles consequential enough

to mute the more cyclical nature of the business. While SP has been a steady

contributor to FCF, lower profitability has been dilutive to the overall multiple.

What Have You Done for Me Lately. Of late, strong execution has minimized

incremental leverage. From the IPO until C3Q13, NXPI increased OpM from

16.7% to 22.8% (ex-SBC). However, since C4Q13 the Company has been

operating more in-line with their current LT OpM target of 23-27%, making EPS

growth more dependent on topline.

Exhibit 4: Despite a Diverse Revenue Stream… Exhibit 5: …Apple Drove the Lion's Share of Growth

0%

2%

4%

6%

8%

10%

% o

f To

tal

TTM

NX

PI R

ev

-5%

0%

5%

10%

15%

20%

25%

30%

35%

40%

% o

f To

tal 3

Y G

row

th

Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates

Exhibit 6: Too Much Low Margin SP Exhibit 7: Too Little Margin Upside from Here

20%

25%

30%

35%

40%

45%

50%

55%

60%

65%

0%

5%

10%

15%

20%

25%

30%

35%

GM

% o

f R

ev

SP % of Rev SP GM HPMS GM

10%

15%

20%

25%

30%

NX

PI O

pM

(w

/o S

BC

)

OpM (w/o SBC) Low-end of Tgt Range High-end of Tgt Range


FSL Drives the Next Chapter of Growth AND Margin Leverage. We would argue the

addition of FSL helps to allay many of the above mentioned investors’ concerns. With the


07 December 2015


(NXPI) 4

addition of FSL, NXPI increases its annual Rev from $5.7 bn to $9.9 bn or 75%. While FSL

moderates growth – the historic 5-yr CAGR with FSL would have been ~5%, which while

still a premium to SIA of 1.6%, is below core-NXPI of 9.5% – we would argue the

combined entity is still poised to outgrow the Semiconductor Industry with an expected

CAGR of 7-9% vs. SIA of 5%. More importantly, FSL adds DIVERSITY, QUALITY and

LEVERAGE to the Rev and EPS model even before discussing potential strategic benefits.

Specifically FSL adds approximately 12 more sub-segments to NXPIs Rev model, making

30 in total. FSL has 92% of its overall Rev in NON-CONSUMER end markets increasing

the percent of non-consumer from 79% to 85%. FSL significantly increases NXPI's

footprint in both Autos and MCUs taking each segment to 32% and 30% of Rev from 20%

and 21% respectively. In addition, FSL dilutes the impact of AAPL from what was 8-10% to

what we believe will be <5% of total Rev and FSL dilutes the impact of SP from what was

21% of Rev to what is now only 12% of Rev.

Leverage Comes Back to NXPI. As important to improving the quality of Rev, FSL also

provides incremental operating leverage at a time when core-NXPI was beginning to run

closer to its core LT operating target. Specifically, NXPI OpM in C3Q15 was 29.5% (ex-

SBC), 250 bps above the upper bound of its longer term target of 23-27%. FSL core OpM

in C3Q15 was 20.3%. Operating Margin in C1Q16, the first full quarter of FSL, should be

22.3% of Rev (w/SBC). While we don’t expect NXPI to update investors on the LT

Operating Model until the Analyst Day in April, simple math would suggest an OpM of

24.8% with $200 mm in annualized merger synergies and 27.8% with $500 mm in

annualized operating synergies. Our analysis suggests that the LT OpM for NXPI relative

to improved scale should be ~33% (w/ SBC) or 1,000 bps of improvement from C1Q16

levels, the most significant potential improvement in our coverage universe.

Exhibit 8: FSL Moderates Premium Growth… Exhibit 9: …But Improves Diversity and Quality

0.8x

0.9x

1.0x

1.1x

1.2x

1.3x

1.4x

1.5x

1.6x

1.7x

Sep

-10

De

c-1

0

Mar

-11

Jun

-11

Sep

-11

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c-1

1

Mar

-12

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c-1

3

Mar

-14

Jun

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Sep

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De

c-1

4

Mar

-15

Jun

-15

NXPI + FSL SIA NXPI

1.6% CAGR

9.5% CAGR 4.5% CAGR

0%

5%

10%

15%

20%

25%

30%

35%

Auto AAPL SP

% o

f N

XP

I Re

v

C3Q15 C1Q16

Down 54%

Down 45%

Up 60%

Source: Company data, Credit Suisse estimates, SIA Source: Company data, Credit Suisse estimates

Exhibit 10: FSL Drives Additional OpM… Exhibit 11: …And Significant EPS Leverage

27.3%

20.3%22.3%

27.8%

33.0%

10%

15%

20%

25%

30%

35%

Core-NXPI(C3Q15)

Core-FSL(C3Q15)

NXPI+FSL(C1Q16)

$500msynergies

LT Target

Op

M (

w/

SBC

)

$6.86

$7.62$8.00

$7.59

$5.17

$7.81

$8.52$8.96

$8.59

$7.18

$3

$4

$5

$6

$7

$8

$9

EPS

(w/

SBC

)

33% OpM $500m in Synergies CS Estimates (w/ SBC)



07 December 2015


(NXPI) 5

The Strategic Synergies with FSL Provide Significant Top-line Optionality. The

financial rationale for NXPI’s merger with FSL is fairly straightforward – a more diverse,

higher quality Rev stream with incremental operating leverage. We would argue that the

strategic rationale is perhaps equally compelling. NXPI has always had core IP in Interface,

RF, and Security. The addition of FSL provides a significantly larger and leverageable

position in Autos and MCU IP which we believe positions NXPI to capitalize on two key

structural themes in the Semiconductor Industry: (1) Semi Rev/Global GDP Inflecting

Higher, and (2) The Data Growth Paradigm.

Semi Rev/GDP Inflecting Higher: From 1997 to 2007 the Semiconductor

Industry experienced accelerating supply growth, decreasing barriers to entry and

a growing dependence on Consumer demand – giving industry participants the

means and will to lower prices to drive demand. Price elasticity was great for units

and disastrous for Rev – specifically since 2000, Semiconductor units per capita

have more than doubled, while Semiconductor Rev as a percent of GDP has

declined by 35% and is at the same level as 1994. Starting in 2007 and continuing

through today, supply growth has structurally slowed, barriers to entry are

increasing, and dependency on Consumer demand is decreasing – ASPs have

stabilized, demand is proving more inelastic than feared, and Semi Rev/GDP

appears to be at the early stages of re-accelerating. Simple mix math would

suggest that as Consumer (50% of Rev, growing at 0-3%) gives way to I/A/I (50%

of Rev, growing at 6-9%) overall industry Rev Growth should structurally improve

from 3-5% total growth to what we see as a LT CAGR of 5-7% With 80% of Rev in

non-Consumer buckets increasing to 85% including FSL we see NXPI as well-

positioned to exploit accelerating non-Consumer growth rates.

Exhibit 12: Semis Have Seen Losing Value… Exhibit 13: …Stable ASPs Driving Growth Inflection

0.0%

0.1%

0.2%

0.3%

0.4%

0.5%

0.6%

0.7%

1980

1982

198

4

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

200

8

2010

2012

2014

% o

f G

lob

al G

DP

IC Rev (ex-memory) Semi Rev

$0.35

$0.43

$0.50

$0.58

$0.65

$0.73

Sep

-95

Sep

-96

Sep

-97

Sep

-98

Sep

-99

Sep

-00

Sep

-01

Sep

-02

Sep

-03

Sep

-04

Sep

-05

Sep

-06

Sep

-07

Sep

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Sep

-09

Sep

-10

Sep

-11

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-12

Sep

-13

Sep

-14

Sep

-15

ASP

s ($

)

Semi ASPs… Source: Company data, Credit Suisse estimates, IMF, SIA Source: Company data, Credit Suisse estimates, SIA

The Data Growth Paradigm: We continue to argue that Data Growth is the most

leverageable demand curve in Technology, as it is perhaps the only demand

curve that is being under-estimated. In our view Data Growth has four

components: (1) Data Creation, (2) Data Storage, (3) Data Transmission and (4)

Data Analytics. Data Analytics is the most important, as it provides the economic

engine (i.e. as Data analytics becomes more pervasive Data inherently becomes

more valuable), which, in turn, should drive demand for more Data. More Data

Creation drives more Data Storage and Transmission and ultimately more Data

Analytics, providing a Virtuous Cycle. The most efficient mechanism by which to

collect more Data is to digitize the economy at a faster rate, hence providing the

underpinnings for accelerating silicon content. In many consumer end markets,

silicon represents ~25-30% of the total value; however, Semiconductor Rev is

only ~0.4% of Global GDP. While it is unlikely that Silicon content in the economy

will rival that of consumer electronics – there is a clear upward bias. As an

example, ten years ago Silicon content was ~$270 per Auto, and today that has


07 December 2015


(NXPI) 6

grown to ~$350 per Auto – while the percentage of the total value has remained

flat around 1%. Our analysis suggests that the influence of Data Growth could

add 100 to 300 bps to our LT CAGR in Semis, increasing our estimate from 5-7%

to 8-10%.

Exhibit 14: Data Growth – A Self-Perpetuating Dynamic Exhibit 15: Low Semi Silicon Content in Global Economy

Data Center, Servers and Big Data

Applications

Data

Analytics

Consumer Electronics

Internet of Things

Data

Creation

HDD

Wireline Infrastructure

Wireless Infrastructure

Data

Transmission

DRAM

NAND

Data

Storage

HDD

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

Semi RevToday

Semi Rev @$500bn

Semi Rev @$600bn

Steel Oil

% o

f G

DP

% of GDP

~8% CAGR to 2020

~12% CAGR to 2020

Source: Company data, Credit Suisse estimates, Gartner Source: Company data, Credit Suisse estimates, Gartner

Leverageable IP with IoT Optionality – While we resist heavily the temptation to lean too

heavily on buzz words (seems like lazy analysis most of the time), we remain more

optimistic than most on IoT with an important caveat: IoT will not happen in a vacuum; it is

an important element to our Data Growth Paradigm. We see NXPI as well positioned to

exploit the IoT trend. With core IP in low power RF, Security, and MCUs, NXPI is well

positioned to help build out the edge of the IoT network. Importantly, our analysis suggests

that adding connectivity and security to an MCU could increase the ASPs by 50-100%. As

indicated in Exhibit 16, from 2005 to 2015 MCUs grew at a 2.5% CAGR – assuming 10%

incremental penetration each year with a 75% improvement in ASPs would have

increased the 10-year CAGR to 8.2%. We continue to argue that IoT could add 100-300

bps of incremental growth to our long-term Semiconductor CAGR of 5-7%. Relative to

both our NT and LT forecast for NXPI we have not incorporated any impact from IoT (i.e. it

is all upside).

Exhibit 16: MCU Sensitivity Analysis Exhibit 17: MCU Silicon TAM

5.0% 6.0% 7.0% 8.0% 9.0% 10.0%

50% 4.7% 5.2% 5.5% 5.9% 6.3% 6.6%

60% 5.1% 5.6% 6.1% 6.5% 6.9% 7.3%

70% 5.5% 6.0% 6.5% 7.0% 7.5% 7.9%

80% 5.9% 6.5% 7.0% 7.5% 8.0% 8.5%

90% 6.2% 6.8% 7.4% 8.0% 8.5% 9.1%

100% 6.6% 7.2% 7.9% 8.5% 9.0% 9.6%

Incremental Penetration of IoT in MCUs

ASP

Incr

ease

MPUs

(~600m units,

~$26 ASP)

Embedded

32+ bit MCU

(~2bn units, ~$1 ASP)

Embedded

<32 bit MCU

(~10bn units, ~$1 ASP)

Pro

ce

ssin

g S

ilic

on

TA

M: >

$2

7b

nNXPI’s

TAM:

$12bn

Source: Company data, Credit Suisse estimates, SIA Source: Company data, Credit Suisse estimates, INTC

LT EPS Potential of $9-10. We are currently estimating CY16 and CY17 EPS (w/SBC) of

$5.17 and $7.18, respectively, albeit we see LT EPS Potential including SBC of between

$9-10 on an annualized basis by C2H18. Our LT EPS potential is driven by the following

assumptions: (1) Rev growth of high-single digit, (2) annualized merger synergies of

$500m by C4Q17 with 20% from COGS and 80% from OpEx, (3) OpM of 33% inclusive of


07 December 2015


(NXPI) 7

$500m annualized merger synergies, (4) a reduction in interest expense from $105m in

C1Q16 to $87m based on the potential to refinance FSL debt at a blended interest rate of

3.4% (in-line with Core NXPI) or refinance FSL debt at a blended rate of 3.8% while

reducing net debt as cash balances grow and/or the company retires debt and (5) a

reduction in share count from 358m in C1Q16 to 332m as the company executes on

buybacks. Our LT EPS potential does not include the following: (1) potential upside to LT

CAGR driven by key structural themes like Data Growth, I/A/I Content Growth, IoT and

Security, (2) potential for further cost synergies in the merger – note the Company

highlighted recently at the CS 19th Annual TMT Conference on Dec 1st that the $500m in

cost synergies have been “well identified” implying room for upside and (3) potential

additional accretive M&A.

Exhibit 18: Bridge to $10 of EPS Exhibit 19: Sufficient R&D Even at 33% OpM

$4.97

$1.18

$1.29

$1.63

$0.74 $0.20

$10.00

$4

$5

$6

$7

$8

$9

$10

$11

EPS

($)

Core CY16 FSL w/ Synergies Rev Growth

Op. Leverage (33%) Stock Buyback Deleverage

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

R&

D (

$m

)

C3Q15 Annualized R&D ($m)

Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates, Gartner

Our Estimates for C4Q15, C1Q16, CY16 and CY17.

Our Model Is Conservative Even with Hockey Sticks: NXPI will not be providing a

financial update post the close of the FSL merger – rather the company will provide

C1Q16 guidance when they report C4Q15 in January 2016 and then provide a more

detailed longer term model at a scheduled Analyst Day in April of 2016. The lack of

guidance, in combination with the usual “messiness” of numbers immediately following any

acquisition, is likely to heighten uncertainty around NT Street Models. We have provided a

detailed list of our assumptions in our model to help increase transparency but would

remind investors that any NT model confusion by the Street is an asset not a liability, an

opportunity not a risk. Specifically we would continue to focus investor attention to the

considerable leverage especially in 2H16 and beyond as the Company recovers cyclically

and begins to realize merger synergies, for example: (1) CY16 EPS is $5.17 (w/SBC) but

2HCY16 EPS is 19.0% greater than first half, (2) 2HCY16 annualized run-rate EPS of

$5.62 (w/SBC) is 9% greater than CY16 EPS, (3) NTM EPS beginning in C3Q16 of $6.15

(w/SBC) is 19.1% greater than CY16 EPS and (5) CY17 EPS of $7.18 (w/SBC) is 39.0%

greater than CY16 EPS.


07 December 2015


(NXPI) 8

Exhibit 20: NXPI's NTM EPS +53% (C4Q15-C1Q17) Exhibit 21: NXPI's Annualized EPS +78% (C1Q16-C4Q17)

$4.0

$4.5

$5.0

$5.5

$6.0

$6.5

$7.0

$7.5

C4Q15E C1Q16E C2Q16E C3Q16E C4Q16E C1Q17E

EPS

(w/S

BC

)

$3

$4

$5

$6

$7

$8

C1Q16E C2Q16E C3Q16E C4Q16E C1Q17E C2Q17E C3Q17E C4Q17E

EPS

(w/S

BC

)


C4Q15 Model Assumes Linearity Around Already Given Guidance – We are

modeling combined C4Q15 Rev of $1.57 bn – which is the sum of the midpoint of

NXPI C4Q guidance of $1.29 bn (down 15% q/q) and ~29% of the midpoint of

FSL C4Q guidance of $975 mm (down 15% q/q). The percentage of FSL C4Q

guidance is equal to the ten-year average that the December month has

represented as a percent of total C4Q SIA Rev excluding Memory (35%)

multiplied by the percentage of the December month NXPI owns the FSL asset

(81%). Our share count estimate of 273.7 mm assumes 73% of NXPI’s C3Q

share count plus 27% of total combined share count of NXPI+FSL of 358 mm. We

assume no synergies between the merged companies in C4Q15 but would

remind investors that NXPI has guided to $200 mm of annualized savings within

the first year of the merger with $500 mm in annualized savings over-time. Our

assumptions yields an EPS of $0.90.

Exhibit 22: Summary of C4Q15 Assumptions Exhibit 23: Summary of C4Q15 Assumptions (cont.)

CS Estimates C4Q15 Notes

NXPI Rev $1,294 <--- Mid-point of NXPI C4Q Guidance

+ FSL Rev $277 <--- Guide * 35% (% of qtr) * 81% (% of Dec)

Revenue ($m) $1,570

NXPI GP $634 <--- Mid-point of NXPI C4Q Guidance

+ FSL GP $123 <--- Guide * 35% (% of qtr) * 81% (% of Dec)

Gross Profit ($m) $757

% of Rev 48.2%

NXPI OpEx $341 <--- Mid-point of NXPI C4Q Guidance

+ FSL OpEx $77 <--- CS Est. * 35% (% of qtr) * 81% (% of Dec)

Operating Inc ($m) $339

% of Rev 21.6%


NXPI Int Exp -$44 <--- Flat q/q

+ FSL Int Exp -$22 <--- CS Est. * 35% (% of qtr) * 81% (% of Dec)

EBT ($m) $272

% of Rev 17.3%

Tax Rate 2.90% <--- Assumption for combined tax rate

NCI -$18 <--- In-line with C3Q15

Net Income ($m) $247

% of Rev 15.7%

Sharecount 274 <--- 73% of NXPI’s C3Q S/O + 27% of NXPI+FSL

EPS (w/ SBC) $0.90


C1Q16 Model Assumes Modestly Above Seasonal NXPI and Seasonal FSL –

We are modeling combined C1Q16 Rev of $2.29 bn, a 46% q/q increase. We are

modeling core NXPI Rev of $1.29 bn approximately flat q/q and ABOVE seasonal

growth of down 2.8% owing mainly to easy compares, specifically C4Q15 Rev is

guided to decline 15% q/q WELL BELOW normal seasonal of down 3.8%. We

would also note that should the inventory correction be contained to C4Q15 our

analysis would suggest NXPI core could grow as much as 3-5% q/q in C1Q16.

We are modeling core FSL Rev of $999 mm an increase of 2.4% q/q and INLINE

with normal seasonal despite easy compares from C4Q15 as core FSL Rev is

being guided to decline 15% q/q vs seasonal of down 5.2%. We are modeling $15

mm in synergies for the quarter or an annualized run-rate of $60 mm. Our share

count is 358.2 mm. Our assumptions yield an EPS of $1.05 (w/SBC) or

approximately $0.04 of accretion in C1Q16.


07 December 2015


(NXPI) 9

Exhibit 24: Summary of C1Q16 Assumptions Exhibit 25: Summary of C1Q16 Assumptions (cont.)


NXPI Rev $1,294 <--- Flat q/q (vs. seasonal of -2.8% q/q)

+ FSL Rev $999 <--- +2.4% q/q (vs. seasonal of +2.4% q/q)

Revenue ($m) $2,292

NXPI/FSL GP $1,096

+ Synergies $3 <--- 20% of total synergies

Gross Profit ($m) $1,099

% of Rev 48.0%

NXPI/FSL OpEx $600

- Synergies -$12 <--- 80% of total synergies

Operating Inc ($m) $511

% of Rev 22.3%


NXPI Int Exp -$105 <--- ~4.0% interest w/ ~$11bn of debt

EBT ($m) $406

% of Rev 17.7%

Tax Rate 2.90%

NCI -$18

Net Income ($m) $376

% of Rev 16.4%

Sharecount 358 <--- NXPI S/O + 115m shares issued

EPS (w/ SBC) $1.05


CY16 Model Assumes Y/Y Rev Declines for Both NXPI and FSL. We are

modeling combined CY16 Rev of $9.9 bn, a 63.2% y/y increase. We are modeling

core NXPI Rev of $5.7 bn or a decline of 2.2% y/y based on above seasonal

growth in C1Q by 280 bps and C2Q by 200 bps, followed by seasonal growth in

2H16. We are modeling core FSL Rev of $4.24 bn or a decline of 5.0% y/y based

on seasonal growth in C1Q16, and ABOVE seasonal growth the following 3

quarters by an accumulative 320 bps. We are modeling CY16 merger synergies

of $145 mm with an annualized C4Q16 run-rate of $240 mm – note NXPI guided

to $200 mm in annualized merger synergies in the first 12 months post the merger

with $500 mm in annualized savings over time. At the 19th Annual Credit Suisse

TMT Conference Dec 1-3, Management noted that the $500 mm target was

already well identified with implied upside potential. Our share count is 358.2 mm

as we assume no share repurchases as the Company focuses on driving the

leverage ratio for 2.5 times at deal close to target of 2.0 times. Our assumptions

yield CY16 EPS of $5.17 (w/SBC) or approximately $0.39 of accretion in CY16.

Exhibit 26: Summary of CY16 Assumptions Exhibit 27: Summary of CY16 Assumptions (cont.)

CS Estimates CY16 Notes

NXPI Rev $5,662 <--- -2.2% y/y

+ FSL Rev $4,238 <--- -5.0% y/y

Revenue ($m) $9,900

NXPI/FSL GP $4,771

+ Synergies $29 <--- 20% of CY16 synergies


% of Rev 48.5%

NXPI/FSL OpEx $2,516

- Synergies -$116 <--- 80% of CY16 synergies

Operating Inc ($m) $2,400

% of Rev 24.2%


NXPI Int Exp -$420

EBT ($m) $1,980

% of Rev 20.0%

Tax Rate 2.90%

NCI -$72

Net Income ($m) $1,851

% of Rev 18.7%

Sharecount 358

EPS (w/ SBC) $5.17


CY17 Model Assumes Seasonal Growth and No Upside to Merger Synergies.

We are modeling combined CY17 Rev of $10.5 bn, a 6.5% y/y increase. We are

modeling Core NXPI Rev of $6.1 bn or an increase of 6.9% based upon seasonal

sequential growth from C1Q17 thru C4Q17. We are modeling core FSL Rev of

$4.5 bn, or an increase of 5.9% y/y based upon seasonal sequential growth from

C1Q17 thru C4Q17. We are modeling CY17 merger synergies of $400 mm with

an annualized C4Q17 run-rate of $500 mm – in line with NXPI’s longer term

guidance. Our share count is 350.7 mm and assumes the companies retires

approximately 8m shares vs an average yearly buyback rate of 13m shares over

the last three years. Our assumptions yield CY17 EPS of $7.18 (w/SBC) or

approximately $1.23 of accretion.


07 December 2015


(NXPI) 10

Exhibit 28: Summary of CY17 Assumptions Exhibit 29: Summary of CY17 Assumptions (cont.)


NXPI Rev $6,055 <--- +6.9% y/y

+ FSL Rev $4,486 <--- +5.9% y/y

Revenue ($m) $10,541

NXPI/FSL GP $5,180

+ Synergies $80 <--- 20% of CY17 synergies


% of Rev 49.9%

NXPI/FSL OpEx $2,565

- Synergies -$320 <--- 80% of CY17 synergies

Operating Inc ($m) $3,015

% of Rev 28.6%


NXPI Int Exp -$346 <--- Refinance FSL Debt and/or De-lever

EBT ($m) $2,669

% of Rev 25.3%

Tax Rate 2.90%

NCI -$72

Net Income ($m) $2,519

% of Rev 23.9%

Sharecount 351 <--- Buyback ~2.0% of float

EPS (w/ SBC) $7.18


Valuation Leaves Room for Upside. NXPI currently trades at a CY16 P/S, P/E (w/ SBC),

and P/FCF of 3.3x, 17.5x and 14.2x vs. its peer group (TXN, ADI, LLTC, MXIM, SLAB,

ISIL, MCHP, STM and IFX) of 4.0x, 19.7x and 18.0x, or a 18%, 11%, and 21% discount,

respectively – despite NXPI growing EPS (+204% vs. +25%), Sales (+44% vs. +16%), and

FCF (+201% vs. +29%) at a premium to its peer group over the past four years (since

C3Q11). While NXPI currently trades at a premium or closer to in-line on an EV/S,

EV/EBITDA, and EV/FCF basis, there is a 600-700 bps reduction in NXPI's relative

premium when using net cash exiting CY16. Our $120 TP represents an in-line multiple to

peers on NXPI’s NTM EPS starting in C3Q16, which we believe is justified based on

expected cyclical tailwinds from a low C4Q15 base and an evolving understanding of

NXPI’s diverse Rev stream and sustainable competitive position as evidenced by high

Relative Market Share (RMS).

Exhibit 30: NXPI's Outperformance Since C3Q11 Exhibit 31: NXPI's Relative Valuation

-25%

25%

75%

125%

175%

225%

RevenueGrowth

OpInc Growth EPS Growth EBITDAGrowth

FCF Growth

NXPI Outperformance Relative to Peers

NXPI Peers

-21.2%-17.8%

-11.2% -10.3%

0.7%

5.7%

15.8%

-30%

-20%

-10%

0%

10%

20%

Pre

m/D

isc

to P

eer

Gro

up

Source: Company data, Credit Suisse estimates, Bloomberg Source: Company data, Credit Suisse estimates, Bloomberg

While we expect NXPI to continue to outgrow peers and see significant OpM upside to

what we believe is an achievable LT target of ~33% (w/ SBC), NXPI's valuation is currently

reflective of both Consumer exposure (~20% of Rev) and their largest customer (~9% of

Rev). Our analysis suggests there is a negative correlation between the P/E multiple and

both Consumer exposure and the largest customer as a percent of Rev. Given that the

FSL merger will reduce NXPI's Consumer Rev from ~20% to ~10% and reduce their

largest customer from ~9% to ~6%, we believe NXPI's valuation should expand to reflect

the more diversified, higher quality earnings.

While the majority of NXPI's peers operate relatively close to their target model, NXPI has

a significant amount of upside potential remaining, which we believe will be steadily

realized over the next several years as the FSL synergies continue to accelerate to

~$500mm per year (vs. our estimate of ~$240m annualized exiting CY16). As such, while


07 December 2015


(NXPI) 11

NXPI currently has an OpM ~400-500 bps below peers, we model this gap narrowing each

year and approaching parity by CY18.

Exhibit 32: Upside to GM Target Exhibit 33: Upside to OpM Target

0%

1%

2%

3%

4%

NXPI MCHP MXIM STM SLAB ISIL ADI

Up

sid

e to

GM

Tar

get

(%)

0%

2%

4%

6%

8%

10%

NXPI STM MXIM SLAB MCHP ISIL ADI

Up

sid

e to

Op

M T

arge

t (%

)


For our DCF valuation, we assume NXPI’s Rev grows at an 8% CAGR through 2018. Over

the long term, we model a steady state of 4.5% Rev growth. We forecast ~290 bps of GM

improvement from 2015-18, and ~850 bps of OpM improvement from 2015-2018. We

estimate that NXPI can generate 21% free cash flow as percent of 2016 sales, improving

to 30% by 2018. Our terminal year free cash flow assumes 4.5% perpetuity growth rate

and 9.9% WACC, implying the present value of free cash flows is $49.7bn. Based on our

estimate of $7.9bn net debt and 358 million shares, we estimate an equity value of $41.8

billion and a per-share value of ~$117, which is a ~29% premium to current levels.

Exhibit 34: DCF Valuation Summary Exhibit 35: DCF Assumptions

DCF Valuation Summary

Total Present Value $49,648.5

Net Debt $7,895.5

Equity Value $41,753.0

Number of Shares 358

Value per Share $116.6

Vs. Current Sh. Price 28.9%

Current Share Price $90.45

Assumptions

Terminal FCF grow th rate 4.5%

Risk free rate (US 10 yr) 3.0%

Equity risk premium 8.0%

Beta (from Bloomberg) 1.24

Cost of equity 12.9%

Tax rate 13.0%

Pre-tax cost of debt 6.3%

After-tax cost of debt 5.5%

Normalized % equity 60.0%

Normalized % debt 40.0%

WACC 9.9%

Source: Company data, CS estimates, Bloomberg Source: Bloomberg, Credit Suisse estimates

Exhibit 36: Peer Comps Valuation 12/04/15 P/S EV/S P/EBITDA EV/EBITDA P/E (w/ SBC) P/FCF EV/FCF

Ticker CS Rating Price NTM CY2016 NTM CY2016 NTM CY2016 NTM CY2016 NTM CY2016 NTM CY2016 NTM CY2016

Peers

NXPI OP $90.45 3.6x 3.3x 4.4x 4.0x 12.6x 11.2x 15.3x 13.5x 19.2x 17.5x 21.5x 14.2x 26.1x 17.2x

NXPI (using CS TP) OP $120.00 4.8x 4.3x 5.6x 5.0x 16.7x 14.8x 19.4x 17.2x 25.5x 23.2x 28.5x 18.8x 33.1x 21.8x

TXN N $58.88 4.5x 4.5x 4.6x 4.6x 11.1x 11.0x 11.3x 11.3x 19.2x 19.1x 16.8x 16.8x 17.2x 17.2x

ADI OP $59.21 5.1x 5.0x 4.5x 4.4x 13.0x 12.7x 11.5x 11.3x 17.6x 17.3x 17.5x 17.2x 15.5x 15.2x

LLTC N $45.69 7.5x 7.4x 6.6x 6.6x 15.3x 15.1x 13.5x 13.4x 20.1x 19.6x 18.7x 18.7x 16.6x 16.5x

MXIM N $38.15 4.8x 4.7x 4.5x 4.4x 12.0x 11.6x 11.3x 11.0x 20.3x 19.4x 15.7x 14.4x 14.9x 13.6x

SLAB -- $54.31 3.3x 3.3x 3.1x 3.1x 16.5x 16.4x 15.3x 15.2x 24.1x 24.0x 24.1x 24.2x 22.3x 22.4x

ISIL N $14.22 3.5x 3.5x 3.1x 3.0x 19.4x 18.9x 17.1x 16.6x 22.0x 21.9x 16.8x 16.2x 14.8x 14.3x

STM UP $7.32 0.9x 0.9x 0.9x 0.9x 6.5x 6.4x 6.1x 6.0x 22.9x 22.1x 15.9x 16.0x 15.0x 15.1x

IFX OP $15.16 2.4x 2.4x 2.3x 2.4x 9.1x 9.1x 9.0x 8.9x 17.9x 17.3x 21.0x 21.5x 20.7x 21.2x

MCHP OP $47.37 4.1x 4.1x 4.4x 4.4x 10.4x 10.7x 11.1x 11.5x 17.1x 16.8x 17.1x 17.0x 18.3x 18.2x

Average (ex-NXPI) 4.0x 4.0x 3.8x 3.8x 12.6x 12.4x 11.8x 11.7x 20.1x 19.7x 18.2x 18.0x 17.3x 17.1x

Median (ex-NXPI) 4.1x 4.1x 4.4x 4.4x 12.0x 11.6x 11.3x 11.3x 20.1x 19.4x 17.1x 17.0x 16.6x 16.5x Source: Company data, Credit Suisse estimates, Bloomberg


07 December 2015


(NXPI) 12

Tactical Investment Risks

Weak Guidance vs. Peers: NXPI and FSL guided C4Q Rev down 15.0% q/q and 12.9%

q/q, well BELOW seasonal of down 3.8% q/q and 5.2% q/q, respectively. In aggregate,

NXPI's peer group guided C4Q Rev down 6.7% q/q vs. average seasonal of down 4.2%

q/q. Further, the delta relative to seasonal for NXPI and FSL of (1,130 bps and 780 bps

below, respectively) is well BELOW its peer group average of ~220 bps below.

Exhibit 37: Summary of Peer Group C4Q Guidance Exhibit 38: Peer Group Guidance vs. Seasonal

C3Q15 C4Q15

Ticker Reported Guidance Q/Q Seasonal Y/Y

NXPI $1,522 $1,294 -15.0% -3.8% -15.8%

FSL $1,120 $975 -12.9% -5.2% -11.6%

STM $1,764 $1,658 -6.0% -0.2% -9.3%

TXN $3,429 $3,200 -6.7% -6.6% -2.1%

IFX $1,784 $1,677 -6.0% -7.6% 15.2%

ADI $979 $830 -15.2% -7.4% 7.5%

MXIM $563 $505 -10.2% -2.1% -10.9%

MCHP $559 $552 -1.4% -2.1% 2.9%

LLTC $342 $347 1.5% -5.0% -1.6%

SLAB $156 $159 1.5% 2.0% -2.1%

ISIL $128 $127 -1.1% -9.2% -3.2%

Total $12,346 $11,323 -8.3% -4.3% -3.3%

ex-NXPI/FSL $9,704 $9,054 -6.7% -4.2% -0.2%

-11.3%

-8.1% -7.8% -7.8%-5.8%

-0.5% -0.1%

0.7% 1.6%

6.5%8.1%

-15%

-10%

-5%

0%

5%

10%

Rev

Gu

ide

vs. S

easo

nal

Rev Guide vs. Seasonal Average

Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates, Reuters

Consensus Long: NXPI is clearly a consensus long – by the numbers, 87% of analysts

have a Buy rating, 9% have a Hold and 4% have a Sell – this compares to the Company's

historical averages of 81%, 17% and 2%, respectively, since 2011. We would also

highlight that NXPI's peer group average Buy rating as a % of total is currently ~48%.

Importantly, we do not even think the bulls are under-estimating the Company's earnings

power.

Exhibit 39: NXPI Analyst Ratings Over Time Exhibit 40: NXPI Analyst Ratings vs. Peer Group

50%

60%

70%

80%

90%

100%

Feb

-11

Ap

r-1

1

Jul-

11

Oct

-11

Jan

-12

Mar

-12

Jun

-12

Sep

-12

Dec

-12

Feb

-13

May

-13

Au

g-1

3

No

v-1

3

Jan

-14

Ap

r-1

4

Jul-

14

Oct

-14

Jan

-15

Mar

-15

Jun

-15

Sep

-15

Dec

-15

Buy Hold Sell

87.0%

60.0% 58.1%51.4%

46.7% 44.4% 41.7%

32.4%

13.0%

0%

20%

40%

60%

80%

100%

NXPI ISIL ADI IFX MCHP MXIM SLAB TXN STM

Bu

y R

atin

gs %

of

Tota

l

Buy Rating as a % of Total Ratings

Source: Bloomerg, Company data, Credit Suisse estimates Source: Bloomberg, Company data, Credit Suisse estimates

Strong Rebound Since C3Q Earnings: We would highlight that NXPI's stock has already

had a big run – remember the Company gave poor C4Q guidance relative to both its peers

and historical trends – subsequently, the stock price dropped to $73 and has already

recovered to $90.


07 December 2015


(NXPI) 13

Exhibit 41: NXPI Stock Has Rebounded… Exhibit 42: NXPI and Peer Price Action

$70

$80

$90

$100

$110

$120

Sto

ck P

rice

NXPI

24.1%23.9%

20.1%

10.2%8.5%

4.8% 4.1% 3.4%

0.0% -1.3%

-6.5%-10%

-5%

0%

5%

10%

15%

20%

25%

30%

IFX NXPI FSL SLAB STM ISIL TXN LLTC MCHP ADI MXIM

Pri

ce A

ctio

n

Price from 10/29 to 12/04 Average

Source: Thomson Reuters, Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates

Lack of NT Catalysts: A large element of NXPI's price recovery was driven by the

anticipation of the deal closing – now that this has occurred, there are really no near-term

catalysts. Importantly, the Company is not hosting a call to update the model post the

transaction, which means there is likely to be a wide variance in Street numbers. The next

time you will hear from them will be in January on the C4Q earnings call – and even then

we do not expect them to give any longer term model for the combined company until April

at their Analyst Day.

Exhibit 43: NXPI Events Calendar Exhibit 44: NXPI Relative Valuation on CY16

Date Event

10/28/15 C3Q15 Earnings Release

11/05/15 Announces Pricing of Senior Secured Term Loan

11/24/15 NXP and JAC Capita l Receive CFIUS Clearance

11/25/15 Receives FTC Approval for Its Merger With Freesca le

12/07/15Analyst Conference Ca l l to Provide Information About FSL

Merger



04/28/16 Analyst Day

-21.2%-17.8%

-11.2% -10.3%

0.7%

5.7%

15.8%

-30%

-20%

-10%

0%

10%

20%

Pre

m/D

isc

to P

eer

Gro

up

Source: Company data, Credit Suisse estimates Source: Thomson Reuters, Company data, Credit Suisse estimates

Not as Cheap on EV and Incl. SBC: NXPI currently trades at a CY16 P/S, P/E (w/ SBC),

P/EBITDA and P/FCF of 3.3x, 17.5x, 11.2x and 14.2x vs. its peer group of 4.0x, 19.7x,

12.4x and 18.0x – however, NXPI currently trades at a premium or closer to in-line on an

EV/S, EV/EBITDA, and EV/FCF basis. We would also note that NXPI currently trades at a

P/E of 15.7x (w/o SBC) vs. 17.5x (w/ SBC).


0

7 D

ec

em

ber 2

01

5

NX

P S

em

ico

nd

ucto

rs N

.V.

(NX

PI)

14

Exhibit 45: NXPI Historical and Projected Income Statement USD in millions, unless otherwise stated

NXP Semiconductor Mar-15 Jun-15 Sep-15 Dec-15E Mar-16E Jun-16E Sep-16E Dec-16E Mar-17E Jun-17E Sep-17E Dec-17E Dec-15E Dec-16E Dec-17E

Modified on 12/7/15 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q FY2015E FY2016E FY2017E

TOTAL SALES $1,467 $1,506 $1,522 $1,570 $2,292 $2,503 $2,609 $2,495 $2,482 $2,660 $2,760 $2,639 $6,065 $9,900 $10,541

(sequential % change) -4.6% 2.7% 1.1% 3.2% 46.0% 9.2% 4.2% -4.4% -0.5% 7.2% 3.8% -4.4%

(year-over year % change) 17.7% 11.6% 0.5% 2.1% 56.3% 66.2% 71.4% 58.9% 8.3% 6.3% 5.8% 5.8% 7.4% 63.2% 6.5%

Cost of Goods Sold $758 $775 $777 $813 $1,193 $1,293 $1,337 $1,276 $1,251 $1,334 $1,380 $1,316 $3,123 $5,100 $5,281

GROSS PROFIT $709 $731 $745 $757 $1,099 $1,210 $1,272 $1,219 $1,231 $1,326 $1,380 $1,323 $2,942 $4,800 $5,260

(% of sales) 48.3% 48.5% 48.9% 48.2% 48.0% 48.3% 48.7% 48.8% 49.6% 49.8% 50.0% 50.1% 48.5% 48.5% 49.9%

GM ex-SBC 48.5% 48.7% 49.1% 48.5% 48.2% 48.5% 48.9% 49.0% 49.8% 50.0% 50.2% 50.3% 48.7% 48.7% 50.1%

SG&A $168 $160 $155 $188 $243 $251 $255 $247 $231 $231 $233 $224 $671 $996 $919

(% of sales) 11.5% 10.6% 10.2% 12.0% 10.6% 10.0% 9.8% 9.9% 9.3% 8.7% 8.4% 8.5% 11.1% 10.1% 8.7%

Research & Development $191 $190 $179 $234 $349 $357 $361 $353 $337 $337 $339 $329 $794 $1,420 $1,342

(% of sales) 13.0% 12.6% 11.8% 14.9% 15.2% 14.3% 13.8% 14.1% 13.6% 12.7% 12.3% 12.5% 13.1% 14.3% 12.7%

Other Expense (Income) $0 ($1) ($4) ($4) ($4) ($4) ($4) ($4) ($4) ($4) ($4) ($4) ($9) ($16) ($16)

(% of sales) 0.0% -0.1% -0.3% -0.3% -0.2% -0.2% -0.2% -0.2% -0.2% -0.2% -0.1% -0.2% -0.1% -0.2% -0.2%

Total Operating Expenses $359 $349 $330 $418 $588 $604 $612 $596 $564 $564 $568 $549 $1,456 $2,400 $2,245

OPERATING INCOME $350 $382 $415 $339 $511 $606 $660 $623 $667 $762 $812 $774 $1,486 $2,400 $3,015

(% of sales) 23.9% 25.4% 27.3% 21.6% 22.3% 24.2% 25.3% 25.0% 26.9% 28.6% 29.4% 29.3% 24.5% 24.2% 28.6%

OpM ex-SBC 26.2% 27.8% 29.5% 25.0% 24.7% 26.4% 27.4% 27.1% 29.0% 30.7% 31.4% 31.4% 27.1% 26.4% 30.6%

Depreciation and Amortization $60 $62 $60 $79 $126 $126 $126 $126 $126 $126 $126 $126 $261 $504 $504

EBITDA $410 $444 $475 $417 $637 $732 $786 $749 $793 $888 $938 $900 $1,746 $2,904 $3,519

(% of sales) 27.9% 29.5% 31.2% 26.6% 27.8% 29.2% 30.1% 30.0% 31.9% 33.4% 34.0% 34.1% 28.8% 29.3% 33.4%

Financial income/(expense) ($36) ($36) ($44) ($66) ($105) ($105) ($105) ($105) ($87) ($87) ($87) ($87) ($182) ($420) ($346)

(% of sales) 2.5% 2.4% 2.9% 4.2% 4.6% 4.2% 4.0% 4.2% 3.5% 3.3% 3.1% 3.3% 3.0% 4.2% 3.3%

PRETAX INCOME $314 $346 $371 $272 $406 $501 $555 $518 $580 $675 $726 $687 $1,303 $1,980 $2,669

(% of sales) 21.4% 23.0% 24.4% 17.4% 17.7% 20.0% 21.3% 20.8% 23.4% 25.4% 26.3% 26.0% 21.5% 20.0% 25.3%

Income Tax provision / (benefit) $4 $10 $7 $8 $12 $15 $16 $15 $17 $20 $21 $20 $29 $57 $77

(tax rate) 1.3% 2.9% 1.9% 2.9% 2.9% 2.9% 2.9% 2.9% 2.9% 2.9% 2.9% 2.9% 2.2% 2.9% 2.9%

NI (w/ Options) $293 $315 $346 $247 $376 $469 $521 $485 $546 $638 $687 $649 $1,201 $1,851 $2,519

(% of sales) 20.0% 20.9% 22.7% 15.7% 16.4% 18.7% 20.0% 19.4% 22.0% 24.0% 24.9% 24.6% 19.8% 18.7% 23.9%

NET INCOME (GAAP) ($72) $336 $395 $312 $376 $469 $521 $485 $611 $703 $752 $714 $812 $1,635 $2,563

Shares 243.3 243.3 242.1 273.7 358.2 358.2 358.2 358.2 355.2 352.2 349.2 346.2 250.6 358.2 350.7

EPS (Cont. Ops. w/o Options) $1.35 $1.44 $1.57 $1.10 $1.20 $1.46 $1.60 $1.50 $1.69 $1.96 $2.12 $2.03 $5.42 $5.77 $7.80

EPS (Cont. Ops. w/ Options) $1.20 $1.29 $1.43 $0.90 $1.05 $1.31 $1.45 $1.35 $1.54 $1.81 $1.97 $1.88 $4.79 $5.17 $7.18

EPS (GAAP) ($0.31) $1.38 $1.63 $1.14 $1.05 $1.31 $1.45 $1.35 $1.72 $2.00 $2.15 $2.06 $3.24 $4.56 $7.31



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Exhibit 46: NXPI Historical and Projected Balance Sheet USD in millions, unless otherwise stated

NXP Semiconductor Mar-15 Jun-15 Sep-15 Dec-15E Mar-16E Jun-16E Sep-16E Dec-16E Mar-17E Jun-17E Sep-17E Dec-17E Dec-15E Dec-16E Dec-17E

Modified on 12/7/15 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q FY2015E FY2016E FY2017E

ASSETS

Cash $1,355 $2,435 $2,492 $2,184 $3,208 $3,679 $4,204 $4,799 $5,130 $5,458 $5,864 $6,340 $2,184 $4,799 $6,340

Accounts receivable, net $539 $533 $611 $1,022 $1,055 $1,152 $1,201 $1,149 $1,142 $1,224 $1,270 $1,215 $1,022 $1,149 $1,215

Assets held for sale $59 $361 $356 - - -

Inventories $772 $756 $751 $1,440 $1,085 $1,134 $1,172 $1,119 $1,097 $1,170 $1,210 $1,154 $1,440 $1,119 $1,154

Other current assets $169 $172 $189 $343 $343 $343 $343 $343 $343 $343 $343 $343 $343 $343 $343

Total Current Assets $2,894 $4,257 $4,399 $4,989 $5,691 $6,307 $6,920 $7,410 $7,712 $8,195 $8,687 $9,052 $4,989 $7,410 $9,052

Investments in equity-accounted investees $73 $75 $78 $78 $78 $78 $78 $78 $78 $78 $78 $78 $78 $78 $78

Other non-current financial assets - - - - - - - - - - - - - - -

Other long-term assets $479 $462 $373 $664 $664 $664 $664 $664 $664 $664 $664 $664 $664 $664 $664

Property and equipment, net $1,107 $1,078 $1,097 $1,896 $2,014 $2,142 $2,276 $2,404 $2,531 $2,667 $2,809 $2,944 $1,896 $2,404 $2,944

Intangible assets, excluding goodwill $558 $496 $465 $434 $357 $279 $201 $124 $124 $124 $124 $124 $434 $124 $124

Goodwill $1,954 $1,825 $1,838 $1,804 $1,770 $1,736 $1,702 $1,668 $1,634 $1,600 $1,566 $1,532 $1,804 $1,668 $1,532

TOTAL ASSETS $7,065 $8,193 $8,250 $9,866 $10,574 $11,207 $11,842 $12,347 $12,743 $13,328 $13,928 $14,393 $9,866 $12,347 $14,393

LIABILITIES AND SH EQUITY

Accounts payable $755 $739 $736 $1,142 $1,065 $1,154 $1,193 $1,139 $1,116 $1,191 $1,231 $1,175 $1,142 $1,139 $1,175

Liabilities held for sale $6 $6 $8 $8 $8 $8 $8 $8 $8 $8 $8 $8 $8 $8 $8

Accrued Liabilities $532 $542 $501 $847 $847 $847 $847 $847 $847 $847 $847 $847 $847 $847 $847

Current portion of LT debt $32 $33 $532 $567 $567 $567 $567 $567 $567 $567 $567 $567 $567 $567 $567

Total Current Liabilities $1,325 $1,320 $1,777 $2,564 $2,487 $2,576 $2,615 $2,561 $2,538 $2,613 $2,653 $2,597 $2,564 $2,561 $2,597

Long-term debt $4,012 $5,014 $4,518 $9,513 $9,513 $9,513 $9,513 $9,013 $8,620 $8,620 $8,620 $8,620 $9,513 $9,013 $8,620

Other non-current liabilities $993 $958 $798 $1,181 $1,181 $1,181 $1,181 $1,181 $1,181 $1,181 $1,181 $1,181 $1,181 $1,181 $1,181

TOTAL LIABILITIES $6,330 $7,292 $7,093 $13,258 $13,181 $13,270 $13,309 $12,755 $12,339 $12,414 $12,454 $12,398 $13,258 $12,755 $12,398

Non controlling interests $280 $250 $268 $286 $304 $322 $340 $358 $376 $394 $412 $430 $286 $358 $430

TOTAL STOCKHOLDERS' EQUITY $455 $651 $889 ($3,679) ($2,911) ($2,386) ($1,808) ($766) $27 $520 $1,061 $1,565 ($3,679) ($766) $1,565

TOTAL LIABILITIES AND SH EQUITY $7,065 $8,193 $8,250 $9,866 $10,574 $11,207 $11,842 $12,347 $12,743 $13,328 $13,928 $14,393 $9,866 $12,347 $14,393

Efficiency Ratios

Asset Turns (Annualized Sales / Assets) 0.8x 0.7x 0.7x 0.6x 0.9x 0.9x 0.9x 0.8x 0.8x 0.8x 0.8x 0.7x 0.6x 0.8x 0.7x

Receivables turns (annualized) 10.9x 11.3x 10.0x 6.1x 8.7x 8.7x 8.7x 8.7x 8.7x 8.7x 8.7x 8.7x 5.9x 8.6x 8.7x

Days sales outstanding (DSO) 33.5 32.3 36.6 42.0 42.0 42.0 42.0 42.0 42.0 42.0 42.0 42.0 61.5 42.3 42.1

Inventory turnover (annualized) 3.9 4.1 4.1 2.3 4.4 4.6 4.6 4.6 4.6 4.6 4.6 4.6 2.2 4.6 4.6

Days of inventory 92.9 89.0 88.2 88.2 83.0 80.0 80.0 80.0 80.0 80.0 80.0 80.0 168.2 80.1 79.8

Payables turnover (annualized) 4.0 4.2 4.2 2.8 4.5 4.5 4.5 4.5 4.5 4.5 4.5 4.5 2.7 4.5 4.5

Days of Payables 90.9 87.0 86.4 86.4 81.4 81.4 81.4 81.4 81.4 81.4 81.4 81.4 133.5 81.5 81.2

Cash conversion cycle 35.6 34.3 38.4 43.8 43.6 40.6 40.6 40.6 40.6 40.6 40.6 40.6 96.2 40.9 40.6

Working Capital (AR + Inv - AP) $556 $550 $626 $1,319 $1,076 $1,132 $1,180 $1,128 $1,123 $1,203 $1,249 $1,194 $1,319 $1,128 $1,194

(Increase)/Decrease in working capital $16 $6 -$76 -$693 $244 -$56 -$48 $51 $6 -$81 -$45 $55 -$747 $191 -$66

Liquidity Ratios

Current ratio 2.2x 3.2x 2.5x 1.9x 2.3x 2.4x 2.6x 2.9x 3.0x 3.1x 3.3x 3.5x 1.9x 2.9x 3.5x

Quick ratio 1.4x 2.2x 1.7x 1.3x 1.7x 1.9x 2.1x 2.3x 2.5x 2.6x 2.7x 2.9x 1.3x 2.3x 2.9x

Debt / Total Capital 90% 89% 85% 157% 141% 131% 122% 109% 100% 95% 90% 85% 155% 108% 86%

Total Leverage Ratio 2.3x 2.8x 2.7x 5.3x 4.7x 4.1x 3.6x 3.1x 2.8x 2.7x 2.6x 2.5x 4.1x 4.1x 4.1x

Net Leverage Ratio 1.5x 1.4x 1.4x 2.7x 2.3x 2.1x 2.1x 1.5x 1.2x 1.1x 0.9x 0.8x 4.1x 1.0x 0.3x

Interest Coverage 9.72 10.61 9.43 5.12 4.87 5.77 6.28 5.93 7.71 8.81 9.39 8.94 8.16 5.71 8.71

Per Share Values

Book Value per common share $1.87 $2.68 $3.67 -$13.44 -$8.13 -$6.66 -$5.05 -$2.14 $0.08 $1.48 $3.04 $4.52 -$14.68 -$2.14 $4.46

Tangible Book Value per common share -$8.45 -$6.86 -$5.84 -$21.62 -$14.06 -$12.28 -$10.36 -$7.14 -$4.87 -$3.42 -$1.80 -$0.26 -$23.61 -$7.14 -$0.26

Cash per common share $5.57 $10.01 $10.29 $7.98 $8.96 $10.27 $11.74 $13.40 $14.44 $15.50 $16.79 $18.31 $8.72 $13.40 $18.08

Net Cash per common share -$11.05 -$10.74 -$10.56 -$28.85 -$19.19 -$17.87 -$16.40 -$13.35 -$11.42 -$10.59 -$9.52 -$8.22 -$31.51 -$13.35 -$8.12



07 December 2015


(NXPI) 16

Companies Mentioned (Price as of 04-Dec-2015)

Analog Devices Inc. (ADI.OQ, $59.21) Apple Inc (AAPL.OQ, $119.03) Infineon Technologies AG (IFXGn.DE, €13.94) Intersil Corp. (ISIL.OQ, $14.22) Linear Technology Corp. (LLTC.OQ, $45.69) Maxim Integrated Products (MXIM.OQ, $38.15) Microchip Technology Inc. (MCHP.OQ, $47.37) NXP Semiconductors N.V. (NXPI.OQ, $90.45, OUTPERFORM, TP $120.0) STMicroelectronics NV (STM.PA, €6.74) Silicon Laboratories Inc. (SLAB.OQ, $54.31) Texas Instruments Inc. (TXN.OQ, $58.88)

Disclosure Appendix

Important Global Disclosures

I, John W. Pitzer, certify that (1) the views expressed in this report accurately reflect my personal views about all of the subject companies and securities and (2) no part of my compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report.

3-Year Price and Rating History for NXP Semiconductors N.V. (NXPI.OQ)

NXPI.OQ Closing Price Target Price

Date (US$) (US$) Rating

31-Jan-13 29.99 38.00 O

07-Mar-13 32.04 R

04-Apr-13 28.20 38.00 O

02-Aug-13 35.77 40.00

24-Oct-13 39.58 60.00

24-Apr-14 62.00 75.00

05-Nov-14 73.36 85.00

24-Nov-14 76.18 R

25-Nov-14 76.15 85.00 O

05-Feb-15 78.27 90.00

02-Mar-15 99.56 R

* Asterisk signifies initiation or assumption of coverage.

O U T PERFO RM

REST RICT ED

The analyst(s) responsible for preparing this research report received Compensation that is based upon various factors including Credit Suisse's total revenues, a portion of which are generated by Credit Suisse's investment banking activities

As of December 10, 2012 Analysts’ stock rating are defined as follows:

Outperform (O) : The stock’s total return is expected to outperform the relevant benchmark*over the next 12 months.

Neutral (N) : The stock’s total return is expected to be in line with the relevant benchmark* over the next 12 months.

Underperform (U) : The stock’s total return is expected to underperform the relevant benchmark* over the next 12 months.

*Relevant benchmark by region: As of 10th December 2012, Japanese ratings are based on a stock’s total return relative t o the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractiv e, Neutrals the less attractive, and Underperforms the least attractive investment opportun ities. As of 2nd October 2012, U.S. and Canadian as well as European ratings are based on a stock’s total return relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. For Latin Ame rican and non-Japan Asia stocks, ratings are based on a stock’s total return relative to the average total return of the relevant country or regional benchmark; prior to 2nd October 2012 U.S. and Canadian ratings were based on (1) a stock’s absolute total return potential to its current share price and (2) the relative attractiv eness of a stock’s total return potential within an analyst’s coverage universe. For Australian and New Zealand stocks, the expected total return (ETR) calculation includes 1 2-month rolling dividend yield. An Outperform rating is assigned where an ETR is greater than or equal to 7.5%; Underperform where an ETR less than or equal to 5%. A Neutral may be assigned where the ETR is between -5% and 15%. The overlapping rating range allows analysts to assign a rating that puts ETR in the context of associated risks. Prior to 18 May 2015, ETR ranges for Outperform and Underperform ratings did not overlap with Neutral thresholds between 15% and 7.5%, which was in operation fr om 7 July 2011.

Restricted (R) : In certain circumstances, Credit Suisse policy and/or applicable law and regulations preclude certain types of communications, including an investment recommendation, during the course of Credit Suisse's engagement in an investment banking transaction and in certain other circumstances.


07 December 2015


(NXPI) 17

Volatility Indicator [V] : A stock is defined as volatile if the stock price has moved up or down by 20% or more in a month in at least 8 of the past 24 months or the analyst expects significant volatility going forward.

Analysts’ sector weightings are distinct from analysts’ stock ratings and are based on the analyst’s expectations for the fundamentals and/or valuation of the sector* relative to the group’s historic fundamentals and/or valuation:

Overweight : The analyst’s expectation for the sector’s fundamentals and/or valuation is favorable over the next 12 months.

Market Weight : The analyst’s expectation for the sector’s fundamentals and/or valuation is neutral over the next 12 months.

Underweight : The analyst’s expectation for the sector’s fundamentals and/or valuation is cautious over the next 12 months.

*An analyst’s coverage sector consists of all companies covered by the analyst within the relevant sector. An analyst may cover multi ple sectors.

Credit Suisse's distribution of stock ratings (and banking clients) is:

Global Ratings Distribution

Rating Versus universe (%) Of which banking clients (%)

Outperform/Buy* 59% (32% banking clients)

Neutral/Hold* 28% (36% banking clients)

Underperform/Sell* 12% (25% banking clients)

Restricted 1%

*For purposes of the NYSE and NASD ratings distribution disclosure requirements, our stock ratings of Outperform, Neutral, and Underperform most closely correspond to Buy, Hold, and Sell, respectively; however, the meanings are not the same, as our stock ratings are determined on a relative basis. (Please refer to definitions above.) An investor's decision to buy or sell a security should be based on investment objectives, current holdings, and ot her individual factors.

Credit Suisse’s policy is to update research reports as it deems appropriate, based on developments with the subject company, the sector or the market that may have a material impact on the research views or opinions stated herein.

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Credit Suisse does not provide any tax advice. Any statement herein regarding any US federal tax is not intended or written to be used, and cannot be used, by any taxpayer for the purposes of avoiding any penalties.

Price Target: (12 months) for NXP Semiconductors N.V. (NXPI.OQ)

Method: Our $120 target price for NXPI is set using an in-line multiple (19.5x) to peers on C3Q16 NTM EPS ($6.15 w/ SBC), which we believe is

justified based on expected cyclical tailwinds from a low C4Q15 base and an evolving understanding of NXPI’s diverse revenue stream

and sustainable competitive position as evidenced by high Relative Market Share (RMS).

Risk: Risks to our $120 TP for NXPI are (1) below-industry revenue growth rate, (2) high debt levels in a cyclical industry (3) execution of cost synergies, and (4) loss of market share.

Please refer to the firm's disclosure website at https://rave.credit-suisse.com/disclosures for the definitions of abbreviations typically used in the target price method and risk sections.

See the Companies Mentioned section for full company names

The subject company (NXPI.OQ, AAPL.OQ, TXN.OQ, ADI.OQ, LLTC.OQ, MXIM.OQ, ISIL.OQ, IFXGn.DE, MCHP.OQ) currently is, or was during the 12-month period preceding the date of distribution of this report, a client of Credit Suisse.

Credit Suisse provided investment banking services to the subject company (NXPI.OQ, AAPL.OQ, ADI.OQ, IFXGn.DE, MCHP.OQ) within the past 12 months.

Credit Suisse provided non-investment banking services to the subject company (TXN.OQ, IFXGn.DE) within the past 12 months

Credit Suisse has managed or co-managed a public offering of securities for the subject company (AAPL.OQ, ADI.OQ, IFXGn.DE) within the past 12 months.

Credit Suisse has received investment banking related compensation from the subject company (NXPI.OQ, AAPL.OQ, ADI.OQ, IFXGn.DE, MCHP.OQ) within the past 12 months

Credit Suisse expects to receive or intends to seek investment banking related compensation from the subject company (NXPI.OQ, AAPL.OQ, TXN.OQ, ADI.OQ, LLTC.OQ, MXIM.OQ, ISIL.OQ, IFXGn.DE, MCHP.OQ) within the next 3 months.

Credit Suisse has received compensation for products and services other than investment banking services from the subject company (TXN.OQ, IFXGn.DE) within the past 12 months


07 December 2015


(NXPI) 18

As of the date of this report, Credit Suisse makes a market in the following subject companies (AAPL.OQ, TXN.OQ, LLTC.OQ, MXIM.OQ, MCHP.OQ).

Credit Suisse has a material conflict of interest with the subject company (NXPI.OQ) . Credit Suisse is acting as financial adviser to NXP Semiconductors NV (NXPI) in relation to its proposed merger with Freescale Semiconductor Ltd (FSL).

Credit Suisse has a material conflict of interest with the subject company (MCHP.OQ) . Credit Suisse is acting as financial advisor to Micrel Inc. (MCRL) in relation to its proposed sale to Microchip Technology Inc. (MCHP).

As of the date of this report, an analyst involved in the preparation of this report has the following material conflict of interest with the subject company (AAPL.OQ). A Credit Suisse analyst involved in the preparation of this report has a long position in the common stock of AAPL.

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For Credit Suisse disclosure information on other companies mentioned in this report, please visit the website at https://rave.credit-suisse.com/disclosures or call +1 (877) 291-2683.


07 December 2015


(NXPI) 19

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NXP Semiconductors N.V. - loftuspeakblog.files.wordpress.com · 07 December 2015 NXP Semiconductors N.V. (NXPI) 2 Investment Highlights Reinstating with an Outperform and $120 PT