NXP Semiconductors Q4 2023 Earnings Report

NXP Semiconductors EPS Results

• Actual EPS: $3.37
• Consensus EPS: $3.33
• Beat/Miss: Beat by +$0.04
• One Year Ago EPS: N/A

NXP Semiconductors Revenue Results

• Actual Revenue: $3.42 billion
• Expected Revenue: $3.40 billion
• Beat/Miss: Beat by +$26.63 million
• YoY Revenue Growth: N/A

NXP Semiconductors Announcement Details

• Quarter: Q4 2023
• Date: 2/5/2024
• Time: N/A
• Conference Call Date: Tuesday, February 6, 2024
• Conference Call Time: 8:00AM ET

NXP Semiconductors (NASDAQ:NXPI) is a global semiconductor company headquartered in Eindhoven, the Netherlands. The company develops and supplies secure connectivity and processing solutions for automotive, industrial and Internet of Things (IoT), mobile, and communication infrastructure applications.

Its product portfolio includes microcontrollers and application processors, automotive networking and processing chips, analog and power-management devices, radio-frequency and wireless connectivity products, sensors, and embedded security solutions. NXP’s technologies are used in vehicle electrification and advanced driver-assistance systems, in-vehicle networking, industrial automation, smart-home equipment, mobile devices, and communications infrastructure.

NXP serves customers worldwide through operations and sales activities across North America, Europe, Asia, and other international markets. The company was created in 2006 when it was separated from Philips and became an independent semiconductor business. In 2015, NXP completed its acquisition of Freescale Semiconductor, expanding its capabilities in automotive, embedded processing, and networking technologies.

NXP Semiconductors Q4 2023 Earnings Call Transcript

Key Takeaways

• NXP’s Q4 revenue of SEK 3.42 billion came in SEK 22 million above the midpoint of guidance, with a non-GAAP operating margin of 35.6%—20 bps above guidance—and channel inventories maintained at a tight 1.5 months.
• Full-year 2023 generated SEK 2.69 billion of non-GAAP free cash flow (20% of revenue), and the company returned 77% of that FCF to shareholders through $1.05 billion in buybacks and $1.01 billion in dividends.
• In Q4, Industrial & IoT revenue rebounded 9% year-over-year and mobile was flat, both in line or above guidance, reflecting recovery after earlier inventory digestion in their respective end markets.
• Q1 2024 guidance calls for SEK 3.125 billion in revenue—flat year-over-year but down 9% sequentially—driven by mixed segment trends including low-digit declines in automotive and a mid-20% drop in communications infrastructure.
• For full-year 2024, NXP expects first-half declines versus last year due to ongoing inventory normalization, with a rebound in H2 leading to a modest annual growth or slight decline in revenue.

Presentation

[Operator]

Good day, and welcome to the NXP 4Q 2023 Earnings Conference Call. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session, and instructions will be given at that time. As a reminder, this call is being recorded. I would like to turn the call over to Jeff Palmer, Senior Vice President of Investor Relations. You may begin.

[Jeff Palmer, Senior Vice President of Investor Relations at NXP Semiconductors]

Thank you, Michelle, and good morning, everyone. Welcome to NXP Semiconductors fourth quarter earnings call. With me on the call today is Kurt Sievers, NXP's President and CEO, and Bill Betz, our CFO. The call today is being recorded and will be available for replay from our corporate website. Today's call will include forward-looking statements that involve risks and uncertainties that could cause NXP's results to differ materially from management's current expectations. These risks and uncertainties include, but are not limited to, statements regarding the macro impact on the specific end markets in which we operate, the sale of new and existing products, and our expectations for financial results for the first quarter of 2024. Please be reminded that NXP undertakes no obligation to revise or update publicly any forward-looking statements. For a full disclosure on forward-looking statements, please refer to our press release.

[Jeff Palmer, Senior Vice President of Investor Relations at NXP Semiconductors]

Additionally, we will refer to certain non-GAAP financial measures, which are driven primarily by discrete events that management does not consider to be directly related to NXP's underlying core operating performance. Pursuant to Regulation G, NXP has provided reconciliations of the non-GAAP financial measures to the most directly comparable GAAP measures in our fourth quarter 2023 earnings press release, which will be furnished to the SEC on Form 8-K and available on NXP's website in the Investor Relations section. Now I'd like to turn it over to Kurt.

[Kurt Sievers, President and CEO at NXP Semiconductors]

Thank you, Jeff, and good morning, everyone. We really appreciate you joining our call this morning. I will review both our Quarter 4 and our full-year 2023 performance, and then discuss our guidance for Quarter 1. Beginning with Quarter 4, our revenue was $22 million, better than the midpoint of our guidance, with the trends in the mobile market performing better than our expectations, with automotive and Industrial IoT performance in line with our guidance, and communication infrastructure slightly below our expectations. Taken together, NXP delivered Quarter 4 revenue of $3.42 billion, an increase of 3% year-on-year. Non-GAAP operating margin in Quarter 4 was 35.6%, 90 basis points below the year ago period, and about 20 basis points above the midpoint of our guidance.

[Kurt Sievers, President and CEO at NXP Semiconductors]

The year-over-year performance was a result of solid gross profit growth, offset by higher operating expenses as we continue to invest in new product development. From a channel perspective, we maintained distribution inventory at a tight 1.5 months level, well below our long-term target of 2.5 months. In addition, we continued to partner with our direct customers on the normalization of their on-hand inventory. For the full year, revenue was $13.28 billion, an increase of about 1% year-over-year. Passing the revenue growth, we increased our pricing by approximately 8% in 2023, offsetting our higher input costs to maintain our gross profit percentage. At the same time, our unit volumes were down by approximately 7% through 2023.

[Kurt Sievers, President and CEO at NXP Semiconductors]

We believe this underpins our view that we have intentionally undershipped fundamental end demands in order to limit inventory build in the channel and at our direct customers. Full year non-GAAP operating margin was 35.1%, 120 basis point compression versus the year ago period, as a result of the improved gross profit performance, offset by increased operating expenses, primarily in product and system innovation investments. Now, let me turn to the specific full year 2023 trends in our focus end markets. In automotive, full year revenue was $7.48 billion, up 9% year-on-year, which is a reflection of higher pricing, strong company-specific growth drivers, offset by lower shipment volumes. For Quarter 4, automotive revenue was $1.89 billion, up 5% versus the year ago period, and in line with our guidance.

[Kurt Sievers, President and CEO at NXP Semiconductors]

Turning to Industrial and IoT, full-year revenue was $2.35 billion, down 13% year-on-year, a reflection of our tight channel management in a cyclically weak end market, offsetting price increases. We saw the trough for the Industrial and IoT business back in Quarter 1, 2023. For Quarter 4, Industrial and IoT revenue was $662 million, up 9% versus the year-ago period, and in line with our guidance. In Mobile, full-year revenue was $1.33 billion, down 17% year-on-year because of weak trends and inventory digestion in the handset marketplace. For Quarter 4, Mobile revenue was $406 million, flat versus the year-ago period, and better than our guidance. Finally, in communication infrastructure and other, full-year revenue was $2.11 billion, up 5% year-on-year....

[Kurt Sievers, President and CEO at NXP Semiconductors]

The year-on-year growth was due to a combination of increased sales of secure card and tagging solutions, higher pricing, and last-time buys of select legacy network processor solutions. That was offset by declines of RF power products for the cellular base station market. For quarter four, revenue was $455 million, down 8% year-on-year and below our guidance. Now, like every year, I would like to provide the annual progress update on our six accelerated growth drivers, which we highlighted during our Analyst Day in November 2021. Starting with automotive, the accelerated growth drivers are Radar, electrification, and our S32 processor family for the software-defined vehicle. Looking at our performance in 2023, both the S32 processor family and our electrification solutions are tracking ahead of plan.

[Kurt Sievers, President and CEO at NXP Semiconductors]

Revenue from Radar is tracking below plan, as we took strong actions to limit shipments to customers who are digesting inventory. Taken together, the automotive's accelerated growth drivers in aggregate are tracking above plan. The underlying core auto business grew in line with our longer-term expectations. Within industrial and IoT, we are tracking below our expected growth range. We believe the underperformance is a reflection of significant cyclical end market weakness and of our disciplined approach to managing the distribution channel. So remember, we serve approximately 80% of the industrial and IoT end markets through our distribution channel to efficiently address the needs of tens of thousands of smaller customers, the majority of whom are in the Asia Pacific and the Greater China region.

[Kurt Sievers, President and CEO at NXP Semiconductors]

Within mobile, we are below our expected revenue growth range for the Ultra-Wideband accelerated growth driver due to the well-documented weakness in the Android handset market. However, Ultra-Wideband traction in the automotive market, which is the first well-defined use case for Ultra-Wideband, is progressing very well. 18 out of 20 automotive platforms have been awarded to NXP, and another 15 platforms are evaluating NXP solutions as we speak. And at this point in time, the Ultra-Wideband revenue stream is being driven by about 7 automotive platforms and a few premier handset OEMs. Finally, for RF power amplifiers within communications infrastructure, we are below our expected revenue growth range. The challenge we faced was the combination of weaker base station deployments globally in 2023, and the faster-than-expected OEM transition to Gallium Nitride from LDMOS technology.

[Kurt Sievers, President and CEO at NXP Semiconductors]

However, the underlying core portion of communications infrastructure performed very well in 2023 as a result of serving pent-up demand for various secure cards and tagging solutions, including RFID for intelligent labels. Taken together, we are ahead of plan for the communications infrastructure segment. Now let me turn to our expectation for Quarter 1 2024. We are guiding Quarter 1 revenue to $3.125 billion, about flat versus the first quarter of 2023. From a sequential perspective, this represents a deceleration of about 9% at the midpoint versus the prior quarter, which is consistent with our original outlook for Quarter 1 to be down in the mid- to high-single-digit range.

[Kurt Sievers, President and CEO at NXP Semiconductors]

Our tempered outlook for Quarter 1 reflects typical seasonality, compounded by our continued desire to enable the normalization of on-hand inventories at our direct customers, and we will continue to hold channel inventory in a tight range. Regarding pricing, we see improving input costs trend versus previous years, which allow us to assume flat pricing for 2024. So at the midpoint, we anticipate the following trends in our business during Quarter 1: Automotive is expected to be down in the low single-digit % range versus Quarter 1 2023, and down in the mid-single-digit % range versus Quarter 4 2023. Industrial and IoT is expected to be up in the mid-teens % range year-on-year, and down in the low double-digit % range versus Quarter 4 2023.

[Kurt Sievers, President and CEO at NXP Semiconductors]

Mobile is expected to be up in the low-30% range year-on-year, and down in the mid-teens% range versus Quarter Four 2023. Finally, Communication Infrastructure and Other is expected to be down in the mid-20% range year-on-year, and down in the low double-digit% range versus Quarter Four 2023. In review, during 2023, thanks to our company's specific end market exposure, we experienced the variations of the semiconductor cycle at distinctly different points of time for the various parts of our portfolio. On the one hand, full-year revenue performance in our more consumer-oriented segments of industrial and IoT and mobile was underwhelming. However, following our tight channel management, these businesses tracked already back in Quarter One 2023, after experiencing a dramatic post-COVID reset.

[Kurt Sievers, President and CEO at NXP Semiconductors]

Ever since, we have seen a gradual improvement, and we do think these growth trends should continue throughout 2024. On the other hand, within automotive and core industrial, we experienced solid trends in the early part of 2023, but have entered a multi-quarter inventory correction phase with our direct customers starting in the second quarter of 2023. This should continue through the first half of 2024. In the second half of 2024, we expect also in the automotive and core industrial segments to ship to end demand and resume growth. Regarding our communication infrastructure and other business, we expect 2024 revenue to decline over 2023, consistent with our prior view we shared on the Q3 earnings call. So as we look ahead to 2024, we do think the macro has deteriorated from our view 90 days ago.

[Kurt Sievers, President and CEO at NXP Semiconductors]

We now expect the first half of 2024 will decline versus the first half of 2023, due to longer than anticipated inventory digestion at our direct automotive customers. However, we expect our company revenue in the second half of 2024 will grow over the first half of 2024, as we believe we will be shipping again to end demand by then. Overall, we have and will continue to manage everything in our control to navigate a soft landing for our business. As such, we have kept a very tight handle on our distribution channel, and we are supporting our direct customers to facilitate inventory digestion as appropriate. This enables us to take advantage of the cyclical improvement as soon as it materializes per segment.

[Kurt Sievers, President and CEO at NXP Semiconductors]

Based on everything I have said, the potential outcome for 2024 should be in the range of a modest annual revenue growth or decline. Now I would like to pass the call to you, Bill, for a review of our financial performance.

[Bill Betz, EVP and CFO 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 Q4 and provided our revenue outlook for Q1, I will move to the financial highlights. Overall, our Q4 financial performance was good. Revenue was slightly above the midpoint of our guidance range, and non-GAAP gross profit was above the midpoint of our guidance range, driven by a higher mix from sales into distribution channel, even as months of supply in the channel remained flat at 1.5 months, or about 6 weeks. I will first provide full year highlights and then move to the Q4 results. Full year revenue for 2023 was $13.28 billion, or up 1% year-on-year.

[Bill Betz, EVP and CFO at NXP Semiconductors]

We generate $7.76 billion in non-GAAP gross profit and reported a non-GAAP gross margin of 58.5%, up sixty basis points year-on-year. Total non-GAAP operating expenses were $3.09 billion or 23.3% of revenue, slightly above our long-term financial model as we continue to invest in our strategy, supporting long-term profitable growth. Total non-GAAP operating profit was $4.66 billion, down 3% year-on-year. This reflects a non-GAAP operating margin of 35.1%, down one hundred and twenty basis points year-on-year, and in line with our current long-term financial model. Non-GAAP interest expense was $283 million. Taxes related to ongoing operations were $693 million, or a 15.8% non-GAAP effective tax rate.

[Bill Betz, EVP and CFO at NXP Semiconductors]

Non-controlling interests were $25 million, and stock-based compensation, which is not included in our Non-GAAP earnings, was $411 million. Turning to full year cash flow performance, we generated $3.51 billion in cash flow from operations and invested $826 million in net CapEx, or 6% of revenue. Taken together, this resulted in $2.69 billion of Non-GAAP free cash flow or 20% of revenue. During 2023, we repurchased 5.46 million shares for $1.05 billion, and paid cash dividends of $1.01 billion, or 29% of cash flow from operations. In total, we returned $2.06 billion to our owners, which was 77% of the total Non-GAAP free cash flow generated during the year. Now, moving to the details of Q4.

[Bill Betz, EVP and CFO at NXP Semiconductors]

Total revenue was $3.42 billion, up 3% year-on-year, modestly above the midpoint of our guidance range. We generate $2.01 billion in non-GAAP gross profit and reported a non-GAAP gross margin of 58.7%, up 70 basis points year-on-year and 20 basis points above the midpoint of our guidance range, driven primarily by mix. Total non-GAAP operating expenses were $791 million or 23.1% of revenue, up $78 million year-on-year, though down $12 million from Q3 and within our guidance range. From a total operating profit perspective, non-GAAP operating profit was $1.22 billion, and non-GAAP operating margin was 35.6%, down 90 basis points year-on-year above the midpoint of our guidance range.

[Bill Betz, EVP and CFO at NXP Semiconductors]

Non-GAAP interest expense was $69 million, with taxes for ongoing operations were $178 million, or a 15.5% non-GAAP effective tax rate. Non-controlling interest was $6 million, and stock-based compensation, which is not included in our non-GAAP earnings, was $107 million. Now, I would like to turn to the changes in our cash and debt. Our total debt at the end of Q4 was $11.17 billion, essentially flat sequentially. Our ending cash balance, including short-term deposits, was $4.27 billion, up $229 million sequentially, due to the cumulative effect of capital returns, CapEx investments, and cash generation during Q4. The resulting net debt was $6.9 billion, and we exited the quarter with a trailing twelve-month adjusted EBITDA of $5.41 billion.

[Bill Betz, EVP and CFO at NXP Semiconductors]

Our ratio of net debt to trailing twelve-month adjusted EBITDA at the end of Q4 was 1.3x, and our twelve-month adjusted EBITDA interest coverage ratio was 21.6x. During Q4, we paid $261 million in cash dividends, and we repurchased $434 million of our shares. Turning to working capital metrics. Days of inventory was 132 days, a decrease of 2 days sequentially, while we maintained distribution channel inventory at 1.5 months or about six weeks. As we have highlighted throughout the previous year, given the uncertain demand environment, we continue to make the intentional choice to limit inventory in the channel while keeping inventory on our balance sheet to enable greater flexibility to redirect product as needed.

[Bill Betz, EVP and CFO at NXP Semiconductors]

Days receivable were 24 days, down 1 day sequentially, and days payable were 72 days, an increase of 12 days versus the prior quarter, due to increased external material sourcing. Taken together, our cash conversion cycle was 84 days and an improvement of 15 days versus the prior quarter. Cash flow from operations was $1.14 billion, and net CapEx was $175 million, resulting in non-GAAP free cash flow of $962 million or 28% of revenue. Turning now to our expectations for the first quarter. As Kurt mentioned, we anticipate Q1 revenue to be $3.125 billion ± about $100 million. At the midpoint, this is flat year-over-year and down 9% sequentially.

[Bill Betz, EVP and CFO at NXP Semiconductors]

We expect non-GAAP gross margin to be about 58% ±50 basis points, driven primarily related to lower distribution sales as we maintain our months of sales in the channel at 1.6 or below. Operating expenses are expected to be about $755 million ±$10 million. Taken together, we see non-GAAP operating margin to be 33.9% at the midpoint. We estimate non-GAAP financial expense to be about $66 million. We anticipate the non-GAAP tax rate to be 16.9% of profit before tax. Non-controlling interest and other will be about $3 million. For Q1, we suggest for modeling purposes, you use an average share count of 259 million shares.

[Bill Betz, EVP and CFO at NXP Semiconductors]

We expect stock-based compensation, which is not included in our non-GAAP guidance, to be $127 million, higher than normal, driven by our restructuring activities taken in Q4 as we continue to refine the portfolio. For capital expenditures, we expect to be around 7%. Taken together at the midpoint, this implies a non-GAAP earnings per share of $3.17. For full year 2024 modeling purposes, we expect non-GAAP gross margin to be around the high end of our long-term model of ±50 basis points. We expect operating expenses to stay within our long-term model and fluctuate by quarter, driven by annualized merits occurring in the second quarter and variable compensation movements pending actual performance. We suggest for non-GAAP tax rate, use a range between 16.4%-17.4%.

[Bill Betz, EVP and CFO at NXP Semiconductors]

For stock-based compensation, we suggest to use $480 million, where Q1 is the peak for the year. For non-controlling interest, we suggest to use $25 million. For capital expenditures, we expect to stay within the long-term model of 6%-8% of sales... In closing, looking ahead into 2024, I'd like to highlight a few focus areas for NXP. First, from a performance standpoint, we will continue to navigate a soft landing through a challenging and cyclical demand environment. Therefore, we will continue to be disciplined to manage what is in our control and stay within our long-term financial model. Second, operationally, the Q1 guidance assumes internal factory utilization will continue to be in the low- to mid-70s range, a level we expect to hold until internal inventory normalizes.

[Bill Betz, EVP and CFO at NXP Semiconductors]

Lastly, we will retire the $1 billion 2024 debt tranche when it comes due on March 1 with cash on hand. Finally, there is no change to our capital allocation strategy, where we will continue to return all excess free cash flow back to our owners. In addition, since the beginning of Q1 2024, we repurchased $116 million worth of shares under our existing 10b5-1 program. Overall, we will remain active, repurchasing our shares. I'd like to now turn it back to the operator for questions.

[Operator]

Thank you. If you'd like to ask a question, please press star one, one. If your question hasn't answered and you'd like to remove yourself from the queue, please press star one, one again. Our first question comes from Ross Seymore with Deutsche Bank. Your line is open.

[Ross Seymore, Managing Director and Senior Equity Analyst at Deutsche Bank]

Hey, guys. Thanks for letting me ask a question. First, on the inventory management in general, Kurt, it sounded a lot like you've done a great job on the channel side, but the OEM side has gotten a little bit into the excess category. Can you just talk about, I guess, on the channel side, do you have any plans for that $500 million coming into the plan in 2024, if that's still the number? And on the OEM side, when do you think that normalizes throughout the year?

[Kurt Sievers, President and CEO at NXP Semiconductors]

Yeah. Hey, thanks, Ross. Good morning. Indeed, I think the color you put on this is what I would concur with. On the channel side, we feel safe and very much under control relative to the inventory. Let me put it that way, for quarter one, we have absolutely no intention to go beyond the 1.6 range. It will hover between 1.5 and 1.6. I think we had 1.5 the past two quarters. So consider for Q1, maybe a 1.6, but that's not an increase, it's more the precision we can hold that. So no intention to increase channel inventory really in the first quarter.

[Kurt Sievers, President and CEO at NXP Semiconductors]

For the rest of the year, Ross, it isn't much different to how we've put this the past couple of quarters. We will only start to replenish when we see sufficient momentum in the market to justify that. So, that means there is neither a guarantee that by the end of the year we hit the 2.5, inventory, which is our long-term target, nor will we do any fast or, or hectic steps here. So we will possibly start, because I do assume, and we come back to this later in the call, we do expect that there is some market recovery in the second half of the year. So that makes it more likely that we will start to trust, to replenish the channel by then.

[Kurt Sievers, President and CEO at NXP Semiconductors]

But again, it's really something which is a function of the market environment. We, the size of it, is indeed the $500 million, which we had discussed before, but again, that is not necesSAARily a part of our considerations for the annual revenue movement. Now, the inventory or the excess inventory at direct customers, indeed, I think we started to try and correct that one back in the second quarter of last year. I think that was the first time I also talked on the earnings call, that we did see a few automotive Tier 1 customers, where the majority of that is sitting with having excess inventory. And the fact that we knew by them already, Ross, is thanks to our NCNR system.

[Kurt Sievers, President and CEO at NXP Semiconductors]

And we discussed about these NCNR orders, which, by the way, in our case, are different to the construct which some of our peers have been using. Ours were annual. Annual means tied to the calendar year. So to be very explicit, we currently have no more NCNR orders. So all of that was running out at the end of the calendar year, 2023. But those NCNR orders, in hindsight, were very good because they let customers call us up and say, "We see a problem, we see building inventory." And since that second quarter of last year, we've been busy to try and normalize this in a reasonable cadence, which is also good for our financials.

[Kurt Sievers, President and CEO at NXP Semiconductors]

Coming back to your question, yes, we think we will still be busy with that through the middle of this year. Mainly, and I would say almost exclusively in automotive. So that is something which we only have in automotive. By the middle of this year, that should be behind us, and then we should move from under shipping end demand with direct customers in the automotive to shipping to end demand again in the second half.

[Ross Seymore, Managing Director and Senior Equity Analyst at Deutsche Bank]

Thanks for that color. I guess as my second question, focusing on the auto side, it was helpful to hear that about the six growth drivers overall, but in automotive, the radar below plan, EV above and S32 above. Can you just talk about what your expectations are for those growth drivers in fiscal 2024?

[Kurt Sievers, President and CEO at NXP Semiconductors]

Well, in principle, I would say if there was no excess inventory and we would be in a normal world, Ross, we stick to our 9%-14% long-term growth, which includes then the set performance of those growth drivers, which we specified back in the Analyst Day in November 2021. So they are just moving around a little, and that's why we transparently gave the color for this past year, pending on the speed of inventory control. And I think you might have noticed that I did say that Radar was actually not performing to target. The reason here is really that Radar has a relatively concentrated customer base. It's almost, it's just direct customers.

[Kurt Sievers, President and CEO at NXP Semiconductors]

Where the inventory control was much easier to exercise because it's a very specified product range with a very non-fragmented customer base, where it was easier to get a handle on the inventory control. So I dare to say inventory control in radar is already completely behind us, which will make 2024 obviously a much better year. So but on the longer term, on the three-year horizon, Ross, just assume they all come to the targets which we specified back in November 2021.

[Ross Seymore, Managing Director and Senior Equity Analyst at Deutsche Bank]

Thank you.

[Operator]

Thank you. Our next question comes from Vivek Arya with Bank of America. Your line is open.

[Vivek Arya, Managing Director and Senior Equity Research Analyst at Bank of America Securities]

Thanks for taking my question. Kurt, last quarter, you were good enough to kinda give us a little bit of color one quarter ahead, and I was hoping you could share your thoughts on how you see, Q2, you know, just generically shaping up, you know, flat up, down sequentially. And then when I take your, commentary about the full year, I think you mentioned sort of flattish growth overall. That still suggests, you know, kinda double-digit growth in, in the back half. So I, I realize visibility is limited and, and so forth, but, any other, market color that, you can share that gives you the confidence about that sort of double-digit, growth in the back half would be, very useful.

[Kurt Sievers, President and CEO at NXP Semiconductors]

So, good morning, Vivek. Yeah, apparently, I was a good man last time, relative to the next quarter. I think you just reiterated the pieces which we gave you, but I'm happy to give you a bit more color around those. So, we really see the different parts of our segments of our revenue being dependent on the cycle they are exposed to. So all the consumer-oriented businesses, and that's the IoT part of industrial IoT and mobile, we think we left the trough way behind us in the first quarter of last year, and other than some seasonal fluctuations, they will continue to grow throughout the calendar year 2024.

[Kurt Sievers, President and CEO at NXP Semiconductors]

Which has to do that, a large part of that is anyway supplied through the channel, so we are not suffering from excess inventory digestion. So we are, we are pretty positive that, that, that part of the company will grow. At the same time, I reiterate what I said last time: the comms, infra, and other business will decline from a year-over-year perspective. So 2024 revenue for comms, infra, and other will be down versus the calendar year 2023. I think we discussed at length the, the bits and pieces in there, why that is.

[Kurt Sievers, President and CEO at NXP Semiconductors]

And then you come to the block of automotive and core industrial, where indeed there is something between first half and second half, which has to do with the inventory digestion at the direct customers in automotive, which I just discussed with the question of Ross a minute ago. Where we do believe the turning point is somewhere around the middle of the year, where that over inventory, which is still sitting there, is being digested. If you put all of these pieces together, Vivek, then obviously half two is gonna be bigger than half one. Obviously, half one of this year, of 2024, is gonna be down against the half one of last year. And that puts it somewhere in this flat plus minus range for the full year indeed.

[Kurt Sievers, President and CEO at NXP Semiconductors]

So the confidence really comes from the view which we have on the inventory digestion on the automotive and core industrial side. At the end, at this very same time, the continued gradual improvement in the consumer-oriented businesses, where, given our tight channel management, we have no excess inventory. This is really where it comes from.

[Vivek Arya, Managing Director and Senior Equity Research Analyst at Bank of America Securities]

All right. Thank you, Kurt. And for my follow-up, you know, your industrial and IoT trends are in big contrast to your peers. So I get, you know, what you did, right? You were early to spot it. You were undergrowing in the first half of last year, and now you're doing much, much better now. But how long can you maintain such a contrast with your peers, right, who are seeing these kind of 20, 30, 40% declines in their industrial and IoT businesses? Is it not apples to apples comparison? You know, when do you think that there is somewhat of a convergence between what your peers are reporting in terms of their industrial correction versus the strength that NXP is seeing right now?

[Kurt Sievers, President and CEO at NXP Semiconductors]

Look, look, Vivek, I, I, of course, don't know and cannot judge what exactly they do. But conceptually, the contrast will be alive as long as they need to digest their over-inventory in the channel. That, that's very simple. We don't have that because we never build it. It - we actually, back in the second quarter of 2022, mind you, second quarter of 2022, that's almost two years ago, we started to control the channel and keep it at the 1.6 and 1.5 months level. We - even with that, we trusted them in the first quarter of 2023, so we even went down from this, and since then, we kept it, we kept it very steady.

[Kurt Sievers, President and CEO at NXP Semiconductors]

In the meantime, some of our peers kept shipping hard, and they just need to correct this, and that contrast will disappear the moment that overshipment they have done there is actually behind them. I mean, maybe another number, Vivek, which puts this in perspective, and we gave you that transparency very intentionally. Last year, NXP as a company did grow 1% in revenue. I also told you that our pricing last year was up by 8%. So that gives you a feel that we had a pretty significant volume decline last year from a supply perspective. So plus 1% revenue, plus 8% price gives you a 7% volume decline, which is clearly under shipping, we think, against end demand, but certainly against peers.

[Kurt Sievers, President and CEO at NXP Semiconductors]

I mean, if you just take the same numbers from peers, then many of them who are now having a bit more of a hard time, they just shipped harder through the first, at least the first three quarters of last year. So under the curve, in the end, it's gonna be the same thing. It's a matter of when did you ship and when do you need to reduce shipments. So that's, that's my answer. I don't think other than that, there is a, it's a fundamental difference, Vivek. So I don't want to claim we have a much better industrial business. I think we just had a more disciplined handle on it earlier.

[Vivek Arya, Managing Director and Senior Equity Research Analyst at Bank of America Securities]

Understood. Thank you, Kurt.

[Operator]

Thank you. Our next question comes from Stacy Rasgon with Bernstein Research. Your line is open.

[Jeff Palmer, Senior Vice President of Investor Relations at NXP Semiconductors]

Stacy, are you there?

[Operator]

Stacy, your line is open.

[Jeff Palmer, Senior Vice President of Investor Relations at NXP Semiconductors]

Operator, why don't we go to the next caller, and we'll circle around with Stacy.

[Stacy Rasgon, Managing Director and Senior Analyst at Bernstein Research]

Can you? Hello?

[Kurt Sievers, President and CEO at NXP Semiconductors]

Oh, I can hear you, Stacy. Good morning.

[Stacy Rasgon, Managing Director and Senior Analyst at Bernstein Research]

Yeah, that was... I don't know what was going on there. Thanks for taking my questions. I had a question on the IoT trend. So it's, it, it obviously bottomed in Q1 last year. I was wondering if you could parse out the recovery trends between the consumer piece and the core industrial. So we all know consumer is getting a little better. Has the increase off the trough from a year ago been all consumer, or has the general purpose IoT piece started to recover as well? Like, what are those trends across those two pieces?

[Kurt Sievers, President and CEO at NXP Semiconductors]

Yeah. Thanks, Stacy. That's a fair question because indeed, the two are trending differently. I'd say the IoT piece, which, by the way, is about 40% of that segment, has indeed gradually improved since that trough in quarter one of last calendar year. Gradual means it's getting better and better and better, but it's still below the levels it had before the peak. So it's way not there, where it used to be, while it is gradually improving. In our case, and I think we revealed that before, a very good portion of that is in China. So think about it as a largely distribution and largely China-oriented IoT business.

[Kurt Sievers, President and CEO at NXP Semiconductors]

But yes, so the trend, starting from the bottom of Q1 last year, gradually improving, and that's what we continue—what we see to continue through the rest of this calendar year. The core industrial part, indeed, has taken a somewhat different shape. Think about it more like automotive, which is now suffering a bit more from over-inventory, not much end-market weakness. So I would say core industrial, relatively speaking, is in a somewhat less good shape still, which is just phase shifted to the IoT portion. So think about core industrial a bit more similar to what we see in automotive.

[Stacy Rasgon, Managing Director and Senior Analyst at Bernstein Research]

Got it. Thank you. My follow-up, I wanted to ask about lead times. Have they normalized to pre-COVID levels, and is that part of what's enabling you to keep pricing flat? Do you have just, like, better control of pricing because you have better control of lead times? You've got a lot of competitors that are talking about pricing starting to come down now.

[Kurt Sievers, President and CEO at NXP Semiconductors]

So first part of the question, Stacy, absolute, yes, lead times are just normal. I mean, forget about supply constraints, we have normal lead times, back to the pre-COVID times. Which helps a lot also relative to visibility, because all of the double ordering and all of the need for NCNRs and all of these things, just consider them behind us, more back to normal from that perspective. There is no real correlation of that to pricing, Stacy. The pricing, which I quoted to be about flat for this year, from our end, is mainly a function of the input cost. We've been living in that world of sharply rising input costs over the past three years, and now it looks more normal.

[Kurt Sievers, President and CEO at NXP Semiconductors]

So any view and handle which we have on the input costs for this year is around zero, I would say. And that's also why we put that forward as the pricing for 2024, and we found acceptance and buy-in for that with our customers, Stacy. That's not... It's not really correlated with lead times. I understand your question, if we had more of a commodity portfolio. Since we don't have that, that correlation doesn't really exist.

[Stacy Rasgon, Managing Director and Senior Analyst at Bernstein Research]

Got it. That's helpful. Thank you, guys.

[Operator]

Thank you. Our next question comes from Gary Mobley with Wells Fargo Securities. Your line is open.

[Gary Mobley, Senior Equity Analyst at Wells Fargo Securities]

Hey, guys. Thanks for taking my question. Kurt, you called out some better-than-expected revenue on the mobile side, and you appear to be poised for some pretty significant year-over-year growth in mobile in the first half of fiscal year 2024. Is that a function of the Android market being less bad? Is it largely a function of maybe some traction in Ultra-Wideband, or is it a function of content gains at your largest mobile customer?

[Kurt Sievers, President and CEO at NXP Semiconductors]

... So Gary, in full transparency, most of all, it's a function of the weak compares of last year. I just have to pull it out. I mean, if you look at our Q1 of last year, it was horrendously low, as a function of everything I explained in the last ten minutes. So very, very clearly, mainly a function of weak compares. However, you mentioned at least one other thing, which is certainly the case. We clearly see that the Android inventory digestion is completely behind us. I would almost claim already in Q4, it was largely behind us. So in Android, we are shipping to end demand, and you could also be somewhat hopeful about the Android market development going forward. So that's certainly a case.

[Kurt Sievers, President and CEO at NXP Semiconductors]

And our premium handset customer is also in, I would say, in a decent shape relative to volume development. But that's it. So again, it is very much a function of us trying to get as quickly as possible to true end demand and not suffering from excess inventory. I mean, that's a good example of where that also helps you then on the other side of the equation, to quickly come back into growth.

[Gary Mobley, Senior Equity Analyst at Wells Fargo Securities]

Thank you for that, Kurt. And Bill, you seem to be calling out 58% gross margin for fiscal year 2024, which is down only 50 basis points from the prior year. And that, and that's quite commendable, considering, you know, what's going on in the industry and whatnot. And it seems like you have a lot of gross margin headwinds, from utilization to mix headwinds and whatnot. Maybe if you can give us some additional color in terms of the offsets to those headwinds and what's allowing for this gross margin resiliency?

[Bill Betz, EVP and CFO at NXP Semiconductors]

Sure. Let me just use Q4 as an example, and Q1, and then talk about some more of those levers, both tailwinds and headwinds. So in Q4, we did slightly better, as you know, 20 basis points, and really that was driven by that distribution mix. It represented 61% of our sales, up from 57% in Q3. Now in Q1, we're guiding down 70 basis points, primarily driven, again, by this lower distribution mix and lower, slightly lower fall through on the sales. And because what we're doing there is we're seasonally adjusting distribution sales, so that will be down, but still probably better than a year ago from a mix standpoint. If you remember, distribution sales was about 49% in Q1, and I think we'll be a bit better than that, which is then offsetting the underutilization.

[Bill Betz, EVP and CFO at NXP Semiconductors]

If you recall, Q1 from a year ago, we were running in the low 80s, and now we're running in the low 70s. So you got some moving parts from a year-over-year compare, but from a quarter-over-quarter compare, it's really driven by the mix. Now, talking about tailwinds and headwinds, you're right. Clearly, if we go below our current utilization levels of the low 70s, that becomes a headwind for us. We know that, we're managing it to this level, and you can see for the last three quarters, we've been running our internal factories, which represent 40% of our internal source wafers. Another, obviously, headwind is obviously you have lower revenues, you have lower fall through over your fixed cost structure.

[Bill Betz, EVP and CFO at NXP Semiconductors]

You know, if we do see lower pricing, again, we're so far, we see that we're able to keep this stable and flat from a year-over-year comparison standpoint. But again, if we do have lower pricing, it's our job to offset that with lower costs and productivity gains. Again, obviously, this is more longer term. The delay of any new product introductions could cause an impact from this quarter or that quarter based on timing. But the tailwinds we have, again, is higher revenues, if you think about them over the 30% fixed cost structure we have. So that falls through. If we replenish our channel back to normal levels, again, Kurt talked about that $500 million. It's a richer mix, and when we decide to do that, that becomes a tailwind. And then utilization.

[Bill Betz, EVP and CFO at NXP Semiconductors]

If we improve our 70% utilization internally, going back to more something in the mid-80s, that's a tailwind. Another one is something that we talked about: we plan to expand our distribution reach and mass market customers. We don't think we're doing as good as a job like some of our peers, so that's something that we're gonna focus on and do better at and, and reach more customers. And clearly, we're gonna continue to execute on our productivity gains, and most importantly, longer term is to ramp up our new product introductions, which are accretive to the corporate gross margins today.

[Bill Betz, EVP and CFO at NXP Semiconductors]

So all in all, I think, you know, it's, it's how you manage the tailwinds and the headwinds quarter in and quarter out, and we're gonna do our best to maintain near the high end of the model, as what I said, at these type of revenue levels.

[Gary Mobley, Senior Equity Analyst at Wells Fargo Securities]

Helpful. Thanks, Bill.

[Bill Betz, EVP and CFO at NXP Semiconductors]

Thank you.

[Operator]

Thank you. Our next question comes from François-Xavier Bouvignies with UBS. Your line is open.

[François-Xavier Bouvignies, Executive Director of Equity Research at UBS]

Thank you very much. I have to maybe follow up to the previous question. The first one is on automotive. I mean, you mentioned that you are basically managing the channel and the shipping at the moment with a more clear picture in the second half of the year, if I have to summarize. Can you quantify maybe how much do you undership the demand, you know, maybe in the last two quarters? Because when I look at your auto revenues, it was up, you know, 1%, year-over-year. The production of cars was obviously much higher. I was wondering if you had any intelligence of how much you are undershipping, you know, the automotive right now, which basically would go into your way of a soft, you know, down cycle.

[François-Xavier Bouvignies, Executive Director of Equity Research at UBS]

I was wondering if you have any quantification on that, would be very helpful.

[Kurt Sievers, President and CEO at NXP Semiconductors]

Yeah. Hi, François. No exact quantification, but I guess a few pointers. It isn't useful in my view to look at one individual quarter, but I think now, since the full calendar year 2023 is behind us. You can look at the full year, where I think our auto business did grow by 9%. I also said that the company has increased pricing by 8%. So let's just assume for a minute that in auto, we did also increase price in that order of magnitude, which basically puts you almost on a zero supply increase line last year in automotive. So say zero-zero growth in automotive last year in supply and units.

[Kurt Sievers, President and CEO at NXP Semiconductors]

That goes against what I would call a super bullish automotive year last year, with, I think in the end, 9% SAAR increase to 90 million units. A rocketing increase in electric, electric cars. I think the xEV cars last year were growing by 45%, year over year. So I mean, all the good arguments, which we've discussed so often, for a lot of content increase on top of the 9% SAAR. And we shipped zero. I mean, that gives you a feel why we have a very strong view that we already significantly undershipped through all of last year. But at the same time, I mean, it's obvious we have overshipped in the time before.

[Kurt Sievers, President and CEO at NXP Semiconductors]

It's just that I believe we started very early with taking a handle on that and controlling that overshipment and throttling it back. I think through all of last year, we have undershipped in the distribution side of automotive, which is 40% of the revenue. And I'd say we started to take more stringent action in the second quarter of last year to also control the overshipments in the direct side. But that's the one which is not completely done yet. So it's very hard to quantify that, François, because you don't know what size of inventory individual Tier 1 customers want to keep on the long run. And it's also not a steady target.

[Kurt Sievers, President and CEO at NXP Semiconductors]

I mean, you know, we've discussed with them very often, and these targets, in terms of how many weeks of semiconductor inventory they want to keep, first of all, they are ranging widely between different Tier 1s. I could quote a range here between 2 weeks and 18 weeks. It, it's really all over the place, and it also changes over time. As soon as they see reason to believe that their business is gonna grow again, which means the OEM call-offs they are getting, then they want to grow their inventory again. So that's why it's a bit of a moving target, but I think for us, the synthesis is, that we believe by the middle of calendar year 2024, we have that behind us.

[François-Xavier Bouvignies, Executive Director of Equity Research at UBS]

That's a great answer, Kurt. Thank you. The second follow-up, I mean, is on the pricing. I mean, you said flattish pricing on 2024, and obviously it seems to be like better than peers. I understand the commodity part and also the input cost. If we look at the input cost, the electricity is coming down. I mean, obviously, from the peak, you have the silicon wafers coming down, you have the mature nodes at the foundry level that is coming under pressure for many, many Tier 2, Tier 3 foundries.

[François-Xavier Bouvignies, Executive Director of Equity Research at UBS]

I was just wondering, you know, if the input cost is the main tracker of your pricing, how should we think about, you know, 2025 or through the year as we see, you know, input costs is also coming under pressure, if you see what I mean?

[Kurt Sievers, President and CEO at NXP Semiconductors]

Look, a couple of things, François. First of all, I'm glad we get well through 2024. I can't get my head around 2025 yet. That's a little-

[François-Xavier Bouvignies, Executive Director of Equity Research at UBS]

Yeah.

[Kurt Sievers, President and CEO at NXP Semiconductors]

That's a little early, to be honest. Now, at the same time, I think you put good pieces together relative to input costs. The one which you didn't put up is the fact that the Tier 1 foundries are still a bit tight-lipped when it is to to cost decreases. And the biggest part of our input is Tier 1 foundries, not Tier 2 and Tier 3 foundries, because we need these Tier 1 foundries for our automotive and core industrial business. And there, unfortunately, the trends are not quite as ambitious as you mentioned them. Over time, François, I do believe, say, mid to longer term, that the industry will return to low single-digit ASP erosion year-over-year.

[Kurt Sievers, President and CEO at NXP Semiconductors]

That is what we had in the pre-COVID period, and in an application-specific business like ours, and I think it is reasonable to assume that that is also gonna happen in the mid- to longer-term future. However, this year is a transition year because the input is not yet the input cost, and the inflationary environment is just not yet at that level as it used to be in the past. And very important, and I know it's probably very clear, but I just want to reiterate it very clearly: This does not mean falling back to the levels which we had pre-COVID.

[Kurt Sievers, President and CEO at NXP Semiconductors]

What I'm saying is from the levels which we have achieved now, we possibly have then, in the mid to longer term future, this very low single digit ASP erosion per year, but we absolutely see no scenario that falls back to the levels of pre-COVID.

[François-Xavier Bouvignies, Executive Director of Equity Research at UBS]

Great. Thank you very much.

[Operator]

Thank you. Our next question comes from Christopher Danely with Citi. Your line is open.

[Christopher Danely, Managing Director and Senior Semiconductor Analyst at Citi]

Hey, thanks, guys. Just in terms of the things getting a little bit tougher over the last three months, Kurt, is there any way to tell how much of this is, I guess, worsening demand versus a little more inventory than we thought? Any, any which way or the other, on either side of that?

[Kurt Sievers, President and CEO at NXP Semiconductors]

Hey, hey, good morning, Chris. Yeah, clearly, first of all, I confirm what you say. It got worse over the last 90 days, or at least our view on what we are exposed to got worse. I would say the end demand in auto has weakened. I mean, the latest S&P data is now almost a percentage point down year-over-year in terms of SAAR. So that's a little less than it was before. The xEV penetration is a little slowing. Again, it is still up, but it is a little slowing. So these are just gradual movements to the less positive side than it than what it was 90 days ago.

[Kurt Sievers, President and CEO at NXP Semiconductors]

But I think what is probably the somewhat bigger part in here is that we just got a better handle now, what is the remaining size of the excess inventory with our Tier 1 automotive customers, which we are working down through the first half. So I cannot pass in percentage which one of the two is contributing how much, but I'd say it is in that, say, combination of automotive core industrial over-inventory and at the same time, a weakening macro.

[Christopher Danely, Managing Director and Senior Semiconductor Analyst at Citi]

Great. And for my follow-up, I think, so Bill talked about disti being 49% of sales in Q1 of last year, and then 61% of sales in Q4. Did I, did I hear that right, or is that wrong?

[Bill Betz, EVP and CFO at NXP Semiconductors]

That's correct, Chris.

[Christopher Danely, Managing Director and Senior Semiconductor Analyst at Citi]

So, yeah. Okay, so my question is: your sales grew about, I guess, 10% from Q1 to Q4, and so that would mean your sales into disti grew a lot more than that. Why would that happen if the, you know, environment, like, overall, at least outside you guys, was a little more difficult?

[Bill Betz, EVP and CFO at NXP Semiconductors]

It basically is matching to the sell-through.

[Kurt Sievers, President and CEO at NXP Semiconductors]

Yeah, Chris, I think the background here is mainly that the exposure to distribution is larger in our Industrial IoT business. And that is the one where we had seen the trough already in the first quarter of last year. So that gradual improvement throughout the quarters I discussed earlier, that shows up more on the distribution side because those are the segments which had that improvement. Where in automotive, the distribution is only 40%, as I described, we have now the direct customer excess inventory digestion, and distribution is a smaller part. So I think it is just a reflection of our exposure to the different end market segments.

[Christopher Danely, Managing Director and Senior Semiconductor Analyst at Citi]

Got it. Thanks for all the color, guys.

[Bill Betz, EVP and CFO at NXP Semiconductors]

Thanks, Chris.

[Operator]

Thank you. Our next question comes from Joshua Buchalter with TD Cowen. Your line is open.

[Joshua Buchalter, Managing Director and Senior Analyst at TD Cowen]

Hey, guys. Good morning or good afternoon, depending on where you're sitting. Thanks for squeezing me in. In autos, we've heard from a few in the supply chain that there's a bit of a push-pull going on between OEMs and Tier 1s, where the OEMs want the Tier 1s to keep carrying more inventory, Tier 1s are trying to manage their working capital and carry less. I'm just curious, are you seeing that going on? Is that the Tier 1s wanting to lower their levels, is that playing into what's going on with some of the digestion you're seeing now? Thank you.

[Kurt Sievers, President and CEO at NXP Semiconductors]

Oh, Joshua, absolutely. That's, that's a, that's a horrendous fight. And that's why I said earlier, it, it is, it is really hard to call the final exact landing place for the size of inventory per Tier 1, because it is a matter of their negotiation with the, with their OEM customers. The midterm trend is that every piece of new business they are winning, OEMs are now often enforcing for the new business to hold a certain amount of inventory for specific semiconductor components. So that, that, that becomes very explicit, but it's only for new business. So think about it as something which will be layering in over the next couple of years as those new design wins are materializing.

[Kurt Sievers, President and CEO at NXP Semiconductors]

That's the way how the OEMs want to get a firm handle on the size of inventory at Tier 1s. At the moment, it's still Wild West because none of this is really contractually anchored because it's old contracts, which didn't have these articulations, which is why it is indeed all over the place, and that makes it also a bit harder to be precise.

[Joshua Buchalter, Managing Director and Senior Analyst at TD Cowen]

Thank you for that.

[Kurt Sievers, President and CEO at NXP Semiconductors]

All right. Sure.

[Joshua Buchalter, Managing Director and Senior Analyst at TD Cowen]

Uh-

[Kurt Sievers, President and CEO at NXP Semiconductors]

I think you have one more, Joshua?

[Joshua Buchalter, Managing Director and Senior Analyst at TD Cowen]

Yeah, that's okay. I was just maybe-

[Kurt Sievers, President and CEO at NXP Semiconductors]

Sure.

[Joshua Buchalter, Managing Director and Senior Analyst at TD Cowen]

Bill, I was gonna ask about the policy on repurchases. I know you mentioned it still return 100% of free cash flow, but have been running a little bit below that the last several quarters. Should we expect after you pay down the debt in March that repurchases pick up, or is it something more tied to the business environment? Thank you.

[Bill Betz, EVP and CFO at NXP Semiconductors]

Yeah, I mean, again, our capital allocation, as I stated, hasn't changed. If I just look over the last three years, we returned $8.8 billion or 113% over those three years, and you're right, the trailing 12 months, 77%, current quarter was 72%. And again, we are, we set aside some cash, as you all know, that we're gonna retire some of our debt and deleverage the company here, and we think that's a good use of our cash. And we're gonna continue being flexible on our balance sheet and doing all of the above: dividends, buybacks, debt, as well as small M&A. No changes, and we're gonna continue to do what we do.

[Joshua Buchalter, Managing Director and Senior Analyst at TD Cowen]

Thank you.

[Kurt Sievers, President and CEO at NXP Semiconductors]

Thanks, Josh.

[Operator]

Thank you.

[Kurt Sievers, President and CEO at NXP Semiconductors]

All right.

[Operator]

Thanks.

[Kurt Sievers, President and CEO at NXP Semiconductors]

Yeah, I guess that gets us to the end of the call. So, thanks everybody for joining the call this morning. Clearly, continues to be a tough environment, where NXP takes any control possible, and I dare to say we have started to take that control, especially relative to inventory built externally and inventory management internally. We started to take that control in a very disciplined manner early in the mid of 2022 for the distribution side, and starting in the second quarter of last year on the direct customer side, which we believe allows us to continue to drive a safe landing and soft landing in this tough environment. Mid and longer term, we continue to be fully focused on the automotive and industrial markets to innovate and drive profitable growth. Thank you all.

[Operator]

Thank you for your participation. This does conclude the program, and you may now disconnect. Everyone, have a great day.

Participants

Executives

• Bill Betz, EVP and CFO
• Jeff Palmer, Senior Vice President of Investor Relations
• Kurt Sievers, President and CEO

Analysts

• Christopher Danely, Managing Director and Senior Semiconductor Analyst at Citi
• François-Xavier Bouvignies, Executive Director of Equity Research at UBS
• Gary Mobley, Senior Equity Analyst at Wells Fargo Securities
• Joshua Buchalter, Managing Director and Senior Analyst at TD Cowen
• Ross Seymore, Managing Director and Senior Equity Analyst at Deutsche Bank
• Stacy Rasgon, Managing Director and Senior Analyst at Bernstein Research
• Vivek Arya, Managing Director and Senior Equity Research Analyst at Bank of America Securities