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 – 18.46% × 16,745 = -965
Analysis of economic profit from 2017 to 2021 reveals a consistent failure to generate positive economic value added, as economic profit remained negative throughout the entire period. The net operating profit after taxes was consistently insufficient to cover the capital charges associated with the invested capital base, indicating that the entity did not create value above its cost of capital during this timeframe.
- Net Operating Profit After Taxes (NOPAT) Performance
- A highly volatile trend is observed in NOPAT, which increased from 1,630 million USD in 2017 to 2,196 million USD in 2018. This was followed by a severe contraction, with values dropping to 303 million USD in 2019 and reaching a period low of 40 million USD in 2020. A significant recovery occurred in 2021, with NOPAT returning to 2,126 million USD.
- Capital Structure and Cost of Capital
- The cost of capital remained relatively stable, fluctuating within a narrow range between 17.91% and 19.19% over the five-year period. Invested capital showed a general downward trajectory from 20,519 million USD in 2017 to 16,335 million USD in 2020, before experiencing a slight increase to 16,745 million USD in 2021.
- Economic Profit Dynamics
- Economic profit closely mirrored the fluctuations in NOPAT. While the economic loss improved to 1,028 million USD in 2018, it deteriorated sharply in 2019 and 2020, peaking at a loss of 3,094 million USD. The resurgence of operating profit in 2021 resulted in a substantial reduction of the economic deficit to 965 million USD, representing the strongest relative performance within the analyzed period, although the value remained negative.
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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 performance between 2017 and 2021 is characterized by significant volatility in both Net Operating Profit After Taxes (NOPAT) and net income attributable to stockholders, marked by a severe contraction in the middle of the period followed by a robust recovery.
- NOPAT Trajectory
- Net Operating Profit After Taxes exhibited an initial increase from 1,630 million US$ in 2017 to 2,196 million US$ in 2018. This growth was followed by a precipitous decline, with values falling to 303 million US$ in 2019 and reaching a nadir of 40 million US$ in 2020. A sharp reversal occurred in 2021, as NOPAT climbed back to 2,126 million US$, effectively restoring operating profitability to levels seen in 2018.
- Net Income Correlation
- Net income attributable to stockholders mirrored the trend of NOPAT with high correlation. After maintaining stability between 2017 and 2018, net income plummeted to 243 million US$ in 2019 and 52 million US$ in 2020. By 2021, net income recovered to 1,871 million US$, indicating a systemic restoration of profitability across both operating and net dimensions.
- Operating Profitability versus Net Earnings
- Analysis of the relationship between NOPAT and net income reveals shifting dynamics. In 2017, net income was higher than NOPAT, suggesting the presence of non-operating gains or favorable financing effects. Conversely, in 2021, NOPAT exceeded net income, which indicates that non-operating expenses or taxes had a more significant impact on the final earnings than in the earlier period.
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Cash Operating Taxes
NXP Semiconductors N.V., cash operating taxes calculation
US$ 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 analysis of tax-related outflows between 2017 and 2021 reveals a significant divergence between accrual-based income tax expenses and actual cash operating taxes.
- Cash Operating Tax Trends
- Cash operating taxes exhibited a fluctuating but generally stable range over the five-year period. Outflows peaked at 445 million USD in 2018 before experiencing a notable decline to a period low of 275 million USD in 2019. Subsequently, a recovery trend is observed, with payments increasing to 355 million USD in 2020 and reaching 384 million USD by the end of 2021.
- Income Tax Expense Volatility
- The reported income tax expense demonstrated extreme volatility compared to cash outflows. Significant tax benefits were recorded in 2017 (-483 million USD) and 2020 (-83 million USD). These were interspersed with positive expenses in 2018 (176 million USD) and 2019 (20 million USD), culminating in a peak expense of 272 million USD in 2021.
- Accrual and Cash Divergence
- A consistent discrepancy is observed where cash operating taxes remained positive throughout the entire duration, regardless of whether the income tax expense was reported as a benefit or a cost. This suggests that non-cash tax adjustments, such as deferred tax assets or liabilities, heavily influenced the reported income tax expense, while the actual liquidity impact remained a steady operational requirement.
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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.
An analysis of the financial position between December 31, 2017, and December 31, 2021, reveals a significant shift in the composition of the capital base. Total invested capital experienced 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 seeing a slight recovery to 16,745 million USD by the end of 2021.
- Total Reported Debt and Leases
- A consistent upward trend is observed in debt levels throughout the five-year period. Debt rose steadily from 6,683 million USD in 2017 to 7,846 million USD in 2020. A substantial acceleration occurred in 2021, where debt increased to 10,809 million USD, representing a growth of approximately 37.7% in a single fiscal year.
- Stockholders’ Equity
- A continuous and marked decline in stockholders' equity is evident. The balance decreased from 13,527 million USD in 2017 to 6,528 million USD in 2021. This sustained reduction suggests a systematic return of capital to shareholders or an accounting impact that has significantly reduced the equity base over time.
- Invested Capital Dynamics
- The movement in total invested capital reflects a tension between rising liabilities and falling equity. From 2017 to 2020, the reduction in stockholders' equity outweighed the increase in debt, leading to a contraction of the overall capital base. However, in 2021, the sharp increase in total reported debt and leases offset the continued decline in equity, resulting in the first year-over-year increase in invested capital since 2017.
The overall transition indicates a fundamental change in the financing strategy, characterized by a shift from an equity-heavy capital structure toward an increased reliance on debt to maintain the level of invested capital.
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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 | × | 22.06% | = | 17.94% | ||
| 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 | 18.46% | ||||||||||
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 | × | 22.06% | = | 18.72% | ||
| 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 | 19.19% | ||||||||||
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 | × | 22.06% | = | 17.59% | ||
| 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 | 18.26% | ||||||||||
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 | × | 22.06% | = | 17.26% | ||
| 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 | 17.91% | ||||||||||
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 | × | 22.06% | = | 18.68% | ||
| 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 | 19.11% | ||||||||||
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 | (965) | (3,094) | (2,792) | (1,028) | (2,291) | |
| Invested capital2 | 16,745) | 16,335) | 16,952) | 18,006) | 20,519) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | -5.76% | -18.94% | -16.47% | -5.71% | -11.16% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Advanced Micro Devices Inc. | 27.84% | — | — | — | — | |
| Analog Devices Inc. | -14.69% | -9.63% | — | — | — | |
| Applied Materials Inc. | 18.63% | 6.98% | — | — | — | |
| Broadcom Inc. | -5.66% | -10.88% | — | — | — | |
| Intel Corp. | 3.44% | — | — | — | — | |
| KLA Corp. | 10.91% | — | — | — | — | |
| Lam Research Corp. | 12.51% | — | — | — | — | |
| Marvell Technology Inc. | -26.81% | — | — | — | — | |
| Micron Technology Inc. | -15.51% | — | — | — | — | |
| NVIDIA Corp. | 6.34% | — | — | — | — | |
| Qualcomm Inc. | 23.99% | 9.06% | — | — | — | |
| 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 × -965 ÷ 16,745 = -5.76%
4 Click competitor name to see calculations.
An analysis of the economic value added metrics from 2017 to 2021 reveals that the organization consistently operated with a negative economic profit, indicating that returns on invested capital did not exceed the cost of capital during this period. While the figures remained in negative territory, a significant recovery is evident in the final year of the sequence.
- Economic Profit Trends
- Economic profit exhibited high volatility, starting at negative 2,291 million USD in 2017 and improving to negative 1,028 million USD in 2018. This was followed by a sharp deterioration over the next two years, reaching a peak deficit of 3,094 million USD in 2020. However, 2021 marked a substantial recovery, with the deficit narrowing to 965 million USD, the lowest negative value in the five-year period.
- Invested Capital Dynamics
- A general contraction in invested capital was observed between 2017 and 2020, decreasing from 20,519 million USD to 16,335 million USD. This downward trend suggests a reduction in the capital base or an optimization of assets. This trajectory reversed slightly in 2021, with invested capital increasing to 16,745 million USD.
- Economic Spread Ratio Analysis
- The economic spread ratio closely mirrored the fluctuations in economic profit, reflecting the efficiency of capital utilization relative to the cost of capital. The ratio improved from negative 11.16% in 2017 to negative 5.71% in 2018, before declining steeply to negative 16.47% in 2019 and negative 18.94% in 2020. By 2021, the ratio returned to negative 5.76%, nearly aligning with the 2018 levels and indicating a significant reduction in the gap between the return on capital and the required rate of return.
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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 | (965) | (3,094) | (2,792) | (1,028) | (2,291) | |
| Revenue | 11,063) | 8,612) | 8,877) | 9,407) | 9,256) | |
| Performance Ratio | ||||||
| Economic profit margin2 | -8.72% | -35.93% | -31.45% | -10.93% | -24.75% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Advanced Micro Devices Inc. | 10.49% | — | — | — | — | |
| Analog Devices Inc. | -94.37% | -31.30% | — | — | — | |
| Applied Materials Inc. | 11.89% | 5.31% | — | — | — | |
| Broadcom Inc. | -13.34% | -30.05% | — | — | — | |
| Intel Corp. | 3.85% | — | — | — | — | |
| KLA Corp. | 10.75% | — | — | — | — | |
| Lam Research Corp. | 10.09% | — | — | — | — | |
| Marvell Technology Inc. | -82.30% | — | — | — | — | |
| Micron Technology Inc. | -25.63% | — | — | — | — | |
| NVIDIA Corp. | 4.95% | — | — | — | — | |
| Qualcomm Inc. | 14.45% | 6.83% | — | — | — | |
| 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 × -965 ÷ 11,063 = -8.72%
3 Click competitor name to see calculations.
The financial performance between 2017 and 2021 is characterized by a consistent inability to generate positive economic profit, although a notable recovery in efficiency occurred in the final year of the analyzed period.
- Economic Profit Trends
- Economic profit remained negative throughout the five-year duration, indicating that the return on capital did not exceed the cost of capital. The values fluctuated significantly, reaching a peak deficit of -3,094 million in 2020 before recovering to -965 million in 2021. This suggests a period of heightened capital inefficiency between 2019 and 2020 followed by a sharp corrective trend.
- Revenue Trajectory
- Revenue demonstrated relative stability from 2017 to 2020, experiencing a slight contraction from 9,407 million in 2018 to 8,612 million in 2020. However, a substantial increase was recorded in 2021, with revenue rising to 11,063 million, marking the highest volume of sales in the observed timeframe.
- Economic Profit Margin Analysis
- The economic profit margin remained negative across all reported years, exhibiting a volatile pattern. After an initial improvement from -24.75% in 2017 to -10.93% in 2018, the margin deteriorated sharply, reaching its lowest point of -35.93% in 2020. A significant reversal occurred in 2021, where the margin improved to -8.72%. This improvement suggests that the increase in revenue in 2021 contributed to a reduction in the relative economic loss, bringing the company closer to achieving a positive economic value added.
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