Executive Vice President and Chief Financial Officer at NXP Semiconductors
Thank you, Kurt, and good morning to everyone on today's call. As Kurt has already covered the drivers of the revenue during Q3 and provided our revenue outlook for Q4, I will move to the financial highlights. Overall, our Q3 financial performance was very good. Revenue was $20 million above the midpoint of our guidance range. And both non-GAAP gross profit and non-GAAP operating profit were above the midpoint of our guidance.
Now moving to the details of Q3. Total revenue was $3.45 billion, up 20% year-on-year, notwithstanding weakness in the consumer-centric portion of the Industrial and IoT segment. We generated $1.99 billion in non-GAAP gross profit and reported a non-GAAP gross margin of 58%, up 150 basis points year-on-year and both above the midpoint of guidance range as a result of higher factory utilization and higher sales volume. Total non-GAAP operating expenses were $730 million or 21.2%, up $73 million year-on-year and up $6 million from Q2, better than our guidance range and below our long-term model.
From a total operating profit perspective, non-GAAP operating profit was $1.27 billion, and non-GAAP operating margin was 36.9%, up 340 basis points year-on-year and both above the midpoint of the guidance range. Non-GAAP interest expense was $91 million with cash taxes for ongoing operations of $160 million or 13.6% effective cash tax rate. And noncontrolling interest was about $12 million. Stock-based compensation, which is not included in our non-GAAP earnings was $89 million.
Now I would like to turn to the changes in our cash and debt. Our total debt at the end of Q3 was $11.16 billion, flat sequentially. Our ending cash position was $3.76 billion, up $214 million sequentially thanks to improved operating performance. The resulting net debt was $7.40 billion. And we exited the quarter with a trailing 12-month adjusted EBITDA of $5.3 billion. Our ratio of net debt to trailing 12-month adjusted EBITDA at the end of Q3 was 1.4 times, and our 12-month adjusted EBITDA interest coverage was 13.8 times.
Turning to working capital metrics. Days of inventory was 99 days, an increase of five days sequentially as we continue to experience incrementally improved supply trends. The increase in on-hand inventory was evenly split between raw materials and work in process to support revenue growth in subsequent periods and an increase in finished goods due to the noted weakness in the Android mobile market and the consumer-centric portion of Industrial and IoT.
As Kurt mentioned, we continue to tightly manage our channel inventory. Inventory in the channel was 1.6 months and continues to be well below our long-term target. Days receivable were 27 days, flat sequentially. And days payable were 96, an increase of two days versus the prior quarter. Taken together, our cash conversion cycle was 30 days. Our working capital management, balance sheet and channel metrics continue to be very strong and well-managed.
Cash flow from operations was $1.14 billion, and net capex was $281 million or 8.2% of revenue, resulting in a non-GAAP free cash flow of $863 million or 25% of revenue. During Q3, we paid $223 million in cash dividends, and we repurchased $400 million of NXP shares. In addition, since the beginning of Q4 through October 28, we purchased an additional $260 million of shares under established 10b5-1 program. On a trailing 12-month basis through the end of Q3, we have returned 98% of our non-GAAP free cash flow back to the owners of the company, consistent with our capital allocation strategy. The cash flow generation of the business continues to be excellent.
Now turning to our expectations for Q4. As Kurt mentioned, we anticipate revenue to be about $3.3 billion, plus or minus about $100 million. At the midpoint, this is up 9% year-on-year and down 4% sequentially. We expect non-GAAP gross margin to be about 57.8%, plus or minus 50 basis points. Operating expenses are expected to be around $720 million, plus or minus about $10 million, which is down about 1% sequentially driven by lower incentive compensation and discretionary spending. Taken together, we see non-GAAP operating margin to be 36% at the midpoint.
We estimate non-GAAP financial expense to be about $81 million driven by higher interest income. And we anticipate cash tax related to ongoing operations to be about $140 million or about a 13% effective cash tax rate, which is below our communicated model, leading to a full year effective tax rate of 13%. Noncontrolling interest should be about $12 million. And for Q4, we suggest for modeling purposes, you use an average share count of 262 million shares. For capex, we suggest you use 8%, bringing total year capex to 8% versus our prior expectations of 10% due to delays in equipment deliveries.
Finally, I have an update to our reported financials, beginning with our guidance for Q1 2023. We will begin to apply an estimated annual tax rate to our GAAP and, thus, our non-GAAP profit before tax. This change will enable NXP to report a non-GAAP earnings per share on a go-forward basis, consistent with SEC guidelines. Given current tax legislation, we believe our new effective estimated tax rate will be consistent with our long-term cash tax rate of 18%, as provided at our Analyst Day in November of 2021.
Overall, despite the uncertain macroeconomic conditions which are impacting some of our more consumer-oriented markets, as Kurt mentioned, we will navigate what is in our control, such as channel inventory and discretionary spending. Furthermore, over the foreseeable future, we will continue to operate within our long-term financial model.
Thank you, and we now can turn the call back over to the operator for questions.