NXP Semiconductors N.V. (NASDAQ:NXPI)

Intangible Assets and Amortization Trends

Over the five-year period, the cost of identified intangible assets remained relatively stable between 2017 and 2020, fluctuating around 9,200 to 9,400 million US dollars before sharply declining to 4,715 million US dollars in 2021. This significant decrease indicates potential disposals, impairments, or reclassifications occurring in 2021.

Accumulated amortization showed a consistent increase (in absolute terms) from -3,472 million US dollars in 2017 to -7,007 million US dollars in 2020, reflecting ongoing amortization expenses on intangible assets. However, in 2021, accumulated amortization dropped notably to -3,021 million US dollars, likely due to the reduced intangible asset base or changes in amortization policies.

Consequently, the book value of identified intangible assets steadily decreased each year, from 5,863 million US dollars in 2017 to just 1,694 million US dollars by the end of 2021, demonstrating the impact of amortization and the significant reduction in asset cost.

Intangible Asset Components

The internal research and development (IPR&D) asset base exhibited a marked decline, falling from 687 million US dollars in 2017 to 96 million US dollars in 2021. This continuous decrease may imply amortization, impairments, or completion and capitalization into other asset categories.

Marketing-related intangible assets remained stable at 81 million US dollars from 2018 onward, indicating an absence of new capitalizations or impairments in this category.

Customer-related intangible assets showed a downward trend from 1,155 million US dollars in 2017 to 852 million US dollars in 2021, reflecting gradual amortization or partial asset disposition.

Technology-based intangible assets initially increased from 7,411 million US dollars in 2017 to a peak of 8,064 million US dollars in 2020, but then experienced a sharp decline to 3,686 million US dollars in 2021. This pattern signals potential significant impairment or asset retirements in 2021.

Goodwill

Goodwill values remained largely stable, fluctuating slightly around 8,800 to 9,900 million US dollars throughout the period. There was a modest increase from 8,866 million US dollars in 2017 to a peak of 9,984 million US dollars in 2020, followed by a slight decrease to 9,961 million US dollars in 2021.

Summary of Total Intangible Assets and Goodwill

Combining identified intangible assets (book value) and goodwill, the total asset value declined from 14,729 million US dollars in 2017 to 11,655 million US dollars in 2021. The overall reduction points to a decrease in intangible asset carrying amounts, driven primarily by the lower identified intangible assets resulting from amortization and the asset base reduction in 2021.

The financial data reveals a consistent downward trend in both reported and adjusted total assets over the five-year period. Reported total assets decreased from 24,049 million US dollars at the end of 2017 to 20,864 million US dollars by the end of 2021, indicating a reduction of approximately 13.3%. Adjusted total assets, which presumably exclude goodwill, showed an even sharper decline, falling from 15,183 million US dollars in 2017 to 10,903 million US dollars in 2021, a decrease of roughly 28.2%. This suggests a substantial decline in the company's tangible or operational asset base over time.

Reported stockholders’ equity followed a similar downward trajectory, dropping from 13,527 million US dollars at the end of 2017 to 6,528 million US dollars in 2021. This decrease of about 51.7% indicates significant erosion in the company’s net worth as reported in the financial statements. In contrast, adjusted stockholders’ equity exhibited a more severe decline, beginning at 4,661 million US dollars in 2017 and turning negative from 2019 onward, reaching -3,433 million US dollars by the end of 2021. This negative adjusted equity suggests that, after removing goodwill and other adjustments, the company’s liabilities exceeded its tangible assets, pointing to potential underlying financial concerns.

Overall, the trends signify a contraction in asset size alongside deteriorating equity positions when adjustments for goodwill are considered. The increasing gap between reported and adjusted figures underscores the substantial impact of goodwill accounting on the company's financial metrics. The sustained negative adjusted equity in recent years may raise questions about the tangible asset backing available to the enterprise and could signal increased risk from an accounting or operational perspective.

Reported Total Asset Turnover

The reported total asset turnover showed a gradual increase from 0.38 in 2017 to 0.44 in 2018 and remained relatively stable at 0.44 in 2019. It slightly decreased to 0.43 in 2020 before rising to 0.53 in 2021. This indicates a general improvement in the efficiency of using assets to generate sales over the period, with a notable increase in the last year.

Adjusted Total Asset Turnover

The adjusted total asset turnover, which likely excludes goodwill impacts, demonstrated a more pronounced upward trend. Starting at 0.61 in 2017, it increased steadily to 0.74 in 2018, then further to 0.88 in 2019. It was stable at 0.87 in 2020 and rose again to 1.01 in 2021, suggesting significant improvement in asset utilization when adjustments are made.

Reported Financial Leverage

Reported financial leverage rose consistently from 1.78 in 2017 to 2.05 in 2018, 2.12 in 2019, and 2.22 in 2020. A sharp increase occurred in 2021, reaching 3.2, indicating a substantial rise in debt or other liabilities relative to equity, suggesting increased financial risk or a shift in capital structure.

Adjusted Financial Leverage

Adjusted financial leverage was considerably higher than reported figures at 3.26 in 2017 and spiked to 7.69 in 2018. Data is missing for subsequent years, preventing trend analysis; however, the sharp increase in 2018 implies material effects of goodwill on financial leverage metrics.

Reported Return on Equity (ROE)

Reported ROE exhibited volatility with an increase from 16.37% in 2017 to 21.02% in 2018, followed by a significant decline to 2.57% in 2019 and further to 0.58% in 2020. In 2021, there was a strong recovery to 28.66%. This pattern reflects fluctuating profitability and efficiency in generating returns for shareholders, with a sharp downturn in 2019-2020 and a robust rebound in 2021.

Adjusted Return on Equity (ROE)

Adjusted ROE was markedly higher at 47.52% in 2017, then surged dramatically to 133.98% in 2018, with no data available for later years. This disparity and volatility indicate that goodwill adjustments significantly influence equity returns, suggesting possible impairments or revaluations affecting the reported figures.

Reported Return on Assets (ROA)

The reported ROA increased from 9.21% in 2017 to 10.26% in 2018 but dropped steeply to 1.21% in 2019 and further to 0.26% in 2020. It recovered to 8.97% in 2021. This trend mirrors the ROE pattern, indicating challenges in asset efficiency and profitability during 2019-2020, with improvement in the final year.

Adjusted Return on Assets (ROA)

Adjusted ROA showed a similar but less extreme trend, rising from 14.59% in 2017 to 17.42% in 2018, then decreasing to 2.41% in 2019 and 0.53% in 2020, followed by a recovery to 17.16% in 2021. Adjustments seem to smooth volatility, reflecting underlying operational performance more accurately by mitigating goodwill effects.

The financial data reveals distinct trends in both reported and goodwill adjusted figures over the five-year period ending December 31, 2021.

Total Assets

Reported total assets exhibit a declining trend from 2017 to 2020, dropping from $24,049 million to $19,847 million, followed by a slight increase to $20,864 million in 2021. This suggests a contraction phase followed by a mild recovery in the company's total asset base.

Adjusted total assets, which exclude goodwill, consistently decrease from $15,183 million in 2017 to $9,863 million in 2020, then rise modestly to $10,903 million in 2021. The sharper reduction in adjusted assets compared to reported assets indicates a significant goodwill component in total assets and restructuring or impairment effects impacting tangible assets.

Total Asset Turnover

Reported total asset turnover increases gradually from 0.38 in 2017 to 0.44 in 2019 and remains relatively stable through 2020 before rising noticeably to 0.53 in 2021. This upward movement reflects improved efficiency in generating revenue from the asset base on a reported basis.

Adjusted total asset turnover shows a more pronounced improvement, rising steadily from 0.61 in 2017 to 0.88 in 2019 and maintaining near that level in 2020, followed by an increase to 1.01 in 2021. This suggests enhanced operational efficiency and better utilization of tangible assets over the years.

General Insights

The decline in total assets, especially the adjusted total assets, combined with rising adjusted asset turnover ratios, implies the company has been improving asset productivity while possibly divesting or impairing non-performing or goodwill-derived assets.

The convergence of rising asset turnover ratios with stabilizing or slightly increasing asset bases in 2021 may indicate a strategic phase of asset optimization and revenue growth potential.

Over the analyzed period, a consistent decline in reported total assets is observable from 24,049 million US dollars at the end of 2017 to 20,864 million US dollars by the end of 2021. This downward trend is mirrored in the adjusted total assets, which also decreased significantly from 15,183 million US dollars in 2017 to 10,903 million US dollars in 2021. The adjusted figures show a steeper decline, indicating substantial goodwill adjustment impacts over the timeframe.

The reported stockholders’ equity similarly exhibits a downward trajectory, reducing from 13,527 million US dollars in 2017 to 6,528 million US dollars at the end of 2021. The adjusted stockholders’ equity, however, presents a more pronounced decrease, turning negative starting in 2019 and worsening through 2021, reaching -3,433 million US dollars. This shift to negative equity after adjustments suggests significant challenges in maintaining net asset value when excluding goodwill.

Reported financial leverage, defined as the ratio of total assets to stockholders' equity, increased steadily from 1.78 in 2017 to 3.2 in 2021. This indicates rising use of debt relative to equity or shrinking equity bases. The adjusted financial leverage ratio shows an even more dramatic increase from 3.26 in 2017 to 7.69 in 2018, with no subsequent data available, pointing to heightened financial risk immediately after goodwill adjustments.

Overall, the data reveal a contraction in asset base and equity over time, with goodwill adjustments significantly affecting the valuation and resulting in negative adjusted equity in later years. The marked increase in leverage ratios, particularly on an adjusted basis, signals growing financial risk, potentially reflecting increased borrowing or impairment of asset quality as goodwill is excluded from the balance sheet.

The financial data reveals distinct trends in equity and profitability metrics over the five-year period ending in 2021. The reported stockholders’ equity consistently declined, decreasing from 13,527 million US dollars in 2017 to 6,528 million US dollars in 2021, indicating a significant reduction in the net asset base under the reported basis.

Conversely, the adjusted stockholders’ equity, which presumably accounts for goodwill impairments or other adjustments, exhibited a more volatile and negative trajectory. Starting at 4,661 million US dollars in 2017, it sharply dropped to 1,648 million in 2018, then becoming negative in 2019 (-508 million), continuing to worsen to -1,040 million in 2020 and further to -3,433 million in 2021. This trend suggests increasing goodwill or intangible asset impairments, leading to a deficit in adjusted equity.

The reported return on equity (ROE) shows variability, with an initial rise from 16.37% in 2017 to 21.02% in 2018, followed by a pronounced decline to 2.57% in 2019 and 0.58% in 2020. In 2021, there is a marked rebound to 28.66%, indicating improved profitability relative to shareholders’ equity in that year.

The adjusted ROE reveals extremely high and possibly unsustainable levels for 2017 and 2018, at 47.52% and 133.98%, respectively. No data is available for the subsequent years. These elevated figures are consistent with the comparatively lower adjusted equity values during those years, amplifying the impact of net income on adjusted ROE.

In summary, the reported equity declined steadily over the period, while adjusted equity declined sharply into negative territory, reflecting significant adjustments impacting net asset value. Reported ROE fluctuated with a notable dip in 2019 and 2020, recovering strongly in 2021, whereas adjusted ROE was very high initially but unavailable after 2018. These patterns suggest challenges related to asset valuation adjustments and fluctuating profitability performance over time.

Stockholders’ equity

Reported equity declined consistently; adjusted equity deteriorated sharply and became negative from 2019 onward.

Return on equity (ROE)

Reported ROE showed volatility, with a dip in 2019-2020 and recovery in 2021; adjusted ROE was extremely high in 2017 and 2018 but data is missing thereafter.

Overall implications

Significant goodwill or asset impairments likely impacted adjusted equity negatively, while profitability fluctuated, showing signs of recovery in the latest period reported.

Total Assets

The reported total assets showed a declining trend from 24,049 million USD in 2017 to 19,847 million USD in 2020, followed by a slight increase to 20,864 million USD in 2021. In parallel, the adjusted total assets, which exclude goodwill, consistently declined from 15,183 million USD in 2017 to 9,863 million USD in 2020, with a modest recovery to 10,903 million USD in 2021. This indicates a reduction in asset base over the period, with a sharper decrease observed in the adjusted figures, highlighting the impact of goodwill on the reported assets.

Return on Assets (ROA)

The reported ROA exhibited fluctuations during the five-year period. It started at 9.21% in 2017, increased to 10.26% in 2018, but dropped significantly to 1.21% in 2019 and further to 0.26% in 2020 before rebounding to 8.97% in 2021. The adjusted ROA, which accounts for the asset base excluding goodwill, showed a similar pattern but at higher magnitudes. It rose from 14.59% in 2017 to 17.42% in 2018, declined sharply to 2.41% in 2019 and 0.53% in 2020, then increased markedly to 17.16% in 2021. These patterns suggest significant volatility in profitability relative to assets, with a notable decline during the 2019-2020 period and a strong recovery in 2021 when both reported and adjusted ROA approached levels seen before the decline.

Insights

The overall trends show a contraction in asset base and fluctuating returns over the five years. The pronounced drops in ROA during 2019 and 2020 indicate decreased efficiency in utilizing assets to generate profits. The stronger recovery in adjusted ROA compared to reported ROA in 2021 may imply improved operating performance independent of goodwill effects. The divergence between reported and adjusted assets and ROA underscores the significance of goodwill amortization or impairment in financial outcomes. It is important to consider these adjustments when assessing the company’s asset quality and profitability trends.