Economic Value Added (EVA)
EVA is registered trademark of Stern Stewart.
Economic value added or economic profit is the difference between revenues and costs,where costs include not only expenses, but also cost of capital.
Economic Profit
NXP Semiconductors N.V., economic profit calculation
US$ in millions
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 20-F (reporting date: 2018-12-31), 20-F (reporting date: 2017-12-31).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2021 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 2,126 – 18.49% × 16,745 = -970
An analysis of economic profit from 2017 to 2021 reveals a persistent failure to generate value above the required cost of capital. Economic profit remained negative throughout the entire five-year period, indicating that the operational returns were insufficient to cover the imputed cost of the capital employed.
- Net Operating Profit After Taxes (NOPAT) Volatility
- NOPAT exhibited extreme fluctuations over the period. Following an initial increase to 2,196 million USD in 2018, a severe contraction occurred in 2019 and 2020, with profits dropping to 303 million USD and 40 million USD, respectively. A significant recovery was observed in 2021, as NOPAT rose back to 2,126 million USD.
- Capital Structure and Cost of Capital
- Invested capital followed a general downward trajectory for the majority of the period, decreasing from 20,519 million USD in 2017 to a low of 16,335 million USD in 2020, before experiencing a slight uptick to 16,745 million USD in 2021. The cost of capital remained relatively stable and high, fluctuating within a tight range between 17.94% and 19.22%.
- Economic Profit Trajectory
- The economic profit trend closely mirrored the volatility of NOPAT. The deficit narrowed in 2018 to -1,034 million USD but widened sharply during the 2019-2020 downturn, reaching its lowest point at -3,100 million USD. By 2021, the improvement in operational profitability led to a substantial reduction in the economic loss, resulting in a deficit of -970 million USD, the lowest recorded in the five-year sequence.
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Net Operating Profit after Taxes (NOPAT)
NXP Semiconductors N.V., NOPAT calculation
US$ in millions
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 20-F (reporting date: 2018-12-31), 20-F (reporting date: 2017-12-31).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in allowance for credit loss.
3 Addition of increase (decrease) in restructuring liabilities.
4 Addition of increase (decrease) in equity equivalents to net income attributable to stockholders.
5 2021 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 237 × 2.00% = 5
6 2021 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 374 × 25.00% = 93
7 Addition of after taxes interest expense to net income attributable to stockholders.
8 2021 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 4 × 25.00% = 1
9 Elimination of after taxes investment income.
The financial data reveals notable fluctuations in both net income attributable to stockholders and net operating profit after taxes (NOPAT) over the five-year period.
- Net Income Attributable to Stockholders
- From 2017 to 2018, net income remained relatively stable, showing a slight decline from 2215 million US dollars to 2208 million US dollars. In 2019, a significant drop occurred, with net income decreasing sharply to 243 million US dollars. This downward trend continued into 2020, reaching a low of 52 million US dollars. However, in 2021, there was a strong recovery, with net income rising substantially to 1871 million US dollars, approaching earlier peak levels.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT showed a somewhat parallel trend to net income. It increased from 1630 million US dollars in 2017 to 2196 million US dollars in 2018. In 2019, NOPAT declined considerably to 303 million US dollars and further dropped to 40 million US dollars in 2020, highlighting a period of operational challenges. A notable rebound occurred in 2021, with NOPAT climbing to 2126 million US dollars, indicating significant operational improvement.
Overall, the data indicates a period of stability in the initial years, followed by a marked deterioration in financial performance in 2019 and 2020. The pronounced recovery in 2021 for both net income and NOPAT suggests a recovery phase, possibly driven by operational enhancements or favorable market conditions. The volatility observed could be indicative of external disruptions or internal restructuring efforts during the observed timeframe.
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Cash Operating Taxes
NXP Semiconductors N.V., cash operating taxes calculation
US$ in millions
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 20-F (reporting date: 2018-12-31), 20-F (reporting date: 2017-12-31).
The financial data for income tax expense (benefit) and cash operating taxes over the five-year period reveals notable fluctuations and trends.
- Income Tax Expense (Benefit)
- The income tax expense (benefit) displays significant variability. Starting with a benefit of $483 million in 2017, the company experienced a positive tax expense of $176 million in 2018, followed by a smaller expense of $20 million in 2019. In 2020, the tax expense reverted to a benefit of $83 million, before increasing sharply to an expense of $272 million in 2021. This volatility indicates fluctuations in taxable income or changes in tax strategies and could reflect variations in profitability or one-time tax adjustments across the years.
- Cash Operating Taxes
- Cash operating taxes show a relatively stable trend from 2017 to 2021, with values ranging from $275 million to $445 million. There was an increase from $386 million in 2017 to a peak of $445 million in 2018, followed by a decline to $275 million in 2019. The tax paid then rose again to $355 million in 2020 and $384 million in 2021. This pattern suggests that while the accounting income tax expense experienced fluctuations, the actual cash taxes paid remained consistently substantial, with some variability potentially influenced by operational results or tax payment timing.
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Invested Capital
NXP Semiconductors N.V., invested capital calculation (financing approach)
US$ in millions
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 20-F (reporting date: 2018-12-31), 20-F (reporting date: 2017-12-31).
1 Addition of capitalized operating leases.
2 Elimination of deferred taxes from assets and liabilities. See details »
3 Addition of allowance for doubtful accounts receivable.
4 Addition of restructuring liabilities.
5 Addition of equity equivalents to stockholders’ equity.
6 Removal of accumulated other comprehensive income.
7 Subtraction of prepayments and construction in progress.
8 Subtraction of marketable equity securities.
- Total reported debt & leases
- There is a noticeable upward trend in total reported debt and leases from 2017 to 2021. The figure increased steadily from $6,683 million in 2017 to $7,846 million in 2020, followed by a significant jump to $10,809 million in 2021. This represents a substantial rise in the company's leverage, particularly in the last reported year.
- Stockholders’ equity
- Stockholders’ equity shows a consistent decline over the five-year period. Starting at $13,527 million in 2017, equity decreased each year, reaching $6,528 million in 2021. This reduction suggests a diminishing net asset base, possibly impacted by accumulated losses, dividends, or repurchases, which may be cause for deeper examination into retained earnings and other equity changes.
- Invested capital
- Invested capital decreased from $20,519 million in 2017 to $16,335 million in 2020, indicating a reduction in the company’s total funds invested in operations. However, 2021 saw a slight increase to $16,745 million, which could reflect either asset acquisition or other forms of reinvestment. Despite the modest recovery, the overall trend indicates contraction in invested capital over the period analyzed.
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Cost of Capital
NXP Semiconductors N.V., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 50,255) | 50,255) | ÷ | 61,792) | = | 0.81 | 0.81 | × | 22.10% | = | 17.97% | ||
| Current and non-current debt3 | 11,300) | 11,300) | ÷ | 61,792) | = | 0.18 | 0.18 | × | 3.72% × (1 – 25.00%) | = | 0.51% | ||
| Operating lease liability4 | 237) | 237) | ÷ | 61,792) | = | 0.00 | 0.00 | × | 2.00% × (1 – 25.00%) | = | 0.01% | ||
| Total: | 61,792) | 1.00 | 18.49% | ||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in millions
2 Equity. See details »
3 Current and non-current debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 49,452) | 49,452) | ÷ | 58,289) | = | 0.85 | 0.85 | × | 22.10% | = | 18.75% | ||
| Current and non-current debt3 | 8,600) | 8,600) | ÷ | 58,289) | = | 0.15 | 0.15 | × | 4.17% × (1 – 25.00%) | = | 0.46% | ||
| Operating lease liability4 | 237) | 237) | ÷ | 58,289) | = | 0.00 | 0.00 | × | 3.00% × (1 – 25.00%) | = | 0.01% | ||
| Total: | 58,289) | 1.00 | 19.22% | ||||||||||
Based on: 10-K (reporting date: 2020-12-31).
1 US$ in millions
2 Equity. See details »
3 Current and non-current debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 32,071) | 32,071) | ÷ | 40,231) | = | 0.80 | 0.80 | × | 22.10% | = | 17.62% | ||
| Current and non-current debt3 | 7,922) | 7,922) | ÷ | 40,231) | = | 0.20 | 0.20 | × | 4.46% × (1 – 25.00%) | = | 0.66% | ||
| Operating lease liability4 | 238) | 238) | ÷ | 40,231) | = | 0.01 | 0.01 | × | 3.10% × (1 – 25.00%) | = | 0.01% | ||
| Total: | 40,231) | 1.00 | 18.29% | ||||||||||
Based on: 10-K (reporting date: 2019-12-31).
1 US$ in millions
2 Equity. See details »
3 Current and non-current debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 27,595) | 27,595) | ÷ | 35,279) | = | 0.78 | 0.78 | × | 22.10% | = | 17.29% | ||
| Current and non-current debt3 | 7,545) | 7,545) | ÷ | 35,279) | = | 0.21 | 0.21 | × | 3.97% × (1 – 25.00%) | = | 0.64% | ||
| Operating lease liability4 | 138) | 138) | ÷ | 35,279) | = | 0.00 | 0.00 | × | 3.97% × (1 – 25.00%) | = | 0.01% | ||
| Total: | 35,279) | 1.00 | 17.94% | ||||||||||
Based on: 20-F (reporting date: 2018-12-31).
1 US$ in millions
2 Equity. See details »
3 Current and non-current debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 39,738) | 39,738) | ÷ | 46,937) | = | 0.85 | 0.85 | × | 22.10% | = | 18.71% | ||
| Current and non-current debt3 | 7,081) | 7,081) | ÷ | 46,937) | = | 0.15 | 0.15 | × | 3.72% × (1 – 25.00%) | = | 0.42% | ||
| Operating lease liability4 | 118) | 118) | ÷ | 46,937) | = | 0.00 | 0.00 | × | 3.72% × (1 – 25.00%) | = | 0.01% | ||
| Total: | 46,937) | 1.00 | 19.14% | ||||||||||
Based on: 20-F (reporting date: 2017-12-31).
1 US$ in millions
2 Equity. See details »
3 Current and non-current debt. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
NXP Semiconductors N.V., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | (970) | (3,100) | (2,797) | (1,034) | (2,298) | |
| Invested capital2 | 16,745) | 16,335) | 16,952) | 18,006) | 20,519) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | -5.79% | -18.97% | -16.50% | -5.74% | -11.20% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Advanced Micro Devices Inc. | 27.74% | — | — | — | — | |
| Analog Devices Inc. | -14.69% | -9.63% | — | — | — | |
| Applied Materials Inc. | 18.58% | 6.93% | — | — | — | |
| Broadcom Inc. | -5.68% | -10.90% | — | — | — | |
| Intel Corp. | 3.40% | — | — | — | — | |
| KLA Corp. | 10.88% | — | — | — | — | |
| Lam Research Corp. | 12.45% | — | — | — | — | |
| Marvell Technology Inc. | -26.87% | — | — | — | — | |
| Micron Technology Inc. | -6.71% | -12.14% | — | — | — | |
| NVIDIA Corp. | 6.26% | — | — | — | — | |
| Qualcomm Inc. | 23.96% | 9.03% | — | — | — | |
| Texas Instruments Inc. | 31.53% | — | — | — | — | |
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 20-F (reporting date: 2018-12-31), 20-F (reporting date: 2017-12-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2021 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × -970 ÷ 16,745 = -5.79%
4 Click competitor name to see calculations.
The overall financial performance regarding economic value added indicates a period of persistent value destruction between 2017 and 2021. Throughout the five-year duration, economic profit remained negative, suggesting that the operating returns were insufficient to cover the cost of the capital employed.
- Economic Profit Trends
- Economic profit exhibited significant volatility, starting at -2,298 million USD in 2017. A temporary improvement occurred in 2018, followed by a sharp decline that reached a nadir of -3,100 million USD in 2020. A substantial recovery was observed in 2021, with the deficit narrowing to -970 million USD, the lowest negative value recorded during the period.
- Invested Capital Dynamics
- A general downward trend in invested capital was observed from 2017 through 2020, with values decreasing from 20,519 million USD to 16,335 million USD. This contraction reversed slightly in 2021, as invested capital increased to 16,745 million USD.
- Economic Spread Ratio Analysis
- The economic spread ratio remained negative throughout the analyzed timeframe, fluctuating in alignment with the movements in economic profit. The ratio improved from -11.20% in 2017 to -5.74% in 2018, before deteriorating to its lowest point of -18.97% in 2020. By the end of 2021, the ratio improved to -5.79%, indicating a narrowing of the gap between the actual return on capital and the required cost of capital.
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Economic Profit Margin
NXP Semiconductors N.V., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | (970) | (3,100) | (2,797) | (1,034) | (2,298) | |
| Revenue | 11,063) | 8,612) | 8,877) | 9,407) | 9,256) | |
| Performance Ratio | ||||||
| Economic profit margin2 | -8.77% | -35.99% | -31.51% | -10.99% | -24.82% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Advanced Micro Devices Inc. | 10.46% | — | — | — | — | |
| Analog Devices Inc. | -94.41% | -31.31% | — | — | — | |
| Applied Materials Inc. | 11.85% | 5.27% | — | — | — | |
| Broadcom Inc. | -13.37% | -30.08% | — | — | — | |
| Intel Corp. | 3.81% | — | — | — | — | |
| KLA Corp. | 10.72% | — | — | — | — | |
| Lam Research Corp. | 10.04% | — | — | — | — | |
| Marvell Technology Inc. | -82.48% | — | — | — | — | |
| Micron Technology Inc. | -11.22% | -23.96% | — | — | — | |
| NVIDIA Corp. | 4.89% | — | — | — | — | |
| Qualcomm Inc. | 14.43% | 6.82% | — | — | — | |
| Texas Instruments Inc. | 28.21% | — | — | — | — | |
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 20-F (reporting date: 2018-12-31), 20-F (reporting date: 2017-12-31).
1 Economic profit. See details »
2 2021 Calculation
Economic profit margin = 100 × Economic profit ÷ Revenue
= 100 × -970 ÷ 11,063 = -8.77%
3 Click competitor name to see calculations.
Between 2017 and 2021, the company consistently reported negative economic profit, indicating that the returns generated were insufficient to cover the cost of capital employed. Despite this persistent deficit, a notable trend of recovery is evident in the final year of the period analyzed.
- Economic Profit Trends
- The economic profit exhibited significant volatility, starting at -US$ 2,298 million in 2017. While an improvement occurred in 2018, with the loss narrowing to -US$ 1,034 million, the deficit widened again in 2019 and 2020, reaching a peak loss of -US$ 3,100 million. However, 2021 showed a substantial recovery, with the loss narrowing to -US$ 970 million, the lowest deficit recorded in the five-year period.
- Revenue Performance
- Revenue remained relatively stable between 2017 and 2020, fluctuating within a range of US$ 8,612 million to US$ 9,407 million. A significant surge occurred in 2021, with revenue increasing to US$ 11,063 million. This growth in top-line performance coincides with the marked reduction in economic loss for that year, suggesting that increased scale contributed to improved economic performance.
- Economic Profit Margin Analysis
- The economic profit margin mirrored the volatility of the absolute economic profit, moving from -24.82% in 2017 to a trough of -35.99% in 2020. The subsequent shift to -8.77% in 2021 represents a significant improvement in value creation efficiency, indicating a narrowing gap between the operational returns and the required cost of capital.
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