President, Chief Executive Officer & Executive Director at NXP Semiconductors
Thank you, Jeff, and good morning, everyone. We appreciate you joining our call today, and I can tell you, after two years, finally, I do very much look forward to a series of in-person investor meetings through the rest of this week. Now let me begin with a review of our quarter one performance. Our revenue was $36 million better than the midpoint of our guidance with automotive, industrial, IoT and mobile at or above our guidance. So trends in the communication infrastructure markets were just slightly below our expectations due to supply issues. Taken together, NXP delivered quarter one revenue of $3.14 billion, an increase of 22% year-on-year. Non-GAAP operating margin in quarter one was a strong 35.7%, 480 basis points better than the year ago period and about 70 basis points above the midpoint of our guidance. Our results reflect strong execution with good operating leverage and profit fall through on higher revenue, improved gross profit and modestly lower operating expenses. Now let me turn to the specific trends in our focus end markets. In automotive, revenue was $1.56 billion, up 27% year-on-year, in line with our guidance. In industrial and IoT, revenue was $682 million, up 19% year-on-year better than our guidance. In mobile, revenue was $401 million, up 16% year-on-year better than our guidance. Lastly, Communication Infrastructure and other was $496 million, up 18% year-on-year just modestly below guidance as a result of ongoing supply changes.
Overall, the demand in our strategic end markets continues to be robust, putting our customers requirements in excess of our improved supply capability. And in that context, let me provide some data points of what we see in our daily engagements with our customers. In the distribution channel, which services about half of our total revenue, inventory remains stubbornly below our long-term targets. During quarter one, the months of supply in the channel was 1.5 months, which is about a month below our long-term target. And it is now the sixth consecutive quarter of an exceedingly tight supply situation in the channel. Internal inventory days continue to be below our long-term target of 95 days. In quarter one, DIO increased by six days with all of the increase in support of our growth outlook for the second quarter. Lead times across the board continue to be extended, with more than 80% of all of our products being quoted at 52 weeks or greater. Essentially, we are supply constrained for all of 2022. The level of inbound supply-related customer escalations continues to be elevated across all focused end markets and regions. And lastly, let me zoom in on the trends we see in the automotive market. In the U.S., new car inventory at dealers is substantially below historic levels at 27 days versus the historic metric of 64 days.
The pace to xEV vehicle penetration globally continues to rapidly accelerate hitting 19% of global production in 2021 and is expected to hit 23% penetration in 2022 and moving to 30% next year in 2023. With xEVs having roughly two times to semiconductor content, this is another strong secular tailwind to semiconductor content growth. The Ukraine war has disrupted predominantly European Tier one suppliers and OEMs with shortages of wiring harnesses. In China, the COVID-related shutdowns are creating yet another level of significant supply uncertainty. The extended auto supply chain continues to be very lean, with reported days of inventory at the Tier ones and at the auto OEMs out of sync with each other. And lastly, based on our very frequent and detailed customer conversations across the supply chain, the Tier ones and OEMs continue to be challenged by kitting issues to complete module and vehicle assemblies. These kitting issues are not due to one semi supplier or shortage of just one common golden screw device. Against all of this dynamic backdrop, our first quarter was a very good beginning to what we view will be a positive year for NXP. In the face of the loaded customer escalations and elevated lead times, we are proactively and relentlessly working with our customers to redirect material to assure that customers get what they need, where they needed and when they needed.
And zooming out, customers have begun to much better appreciate and embrace the strategic value of semiconductors play in their long-term success both from an innovation as well as a supply perspective. Hence, as a result of our adaptability, the level of engagements with strategic customers is resulting in unprecedented levels of customer intimacy. Our engagements are unlocking new and significant long-term customer arrangements and cooperation that is closer than ever, which will enhance our relative market share over the longer term. Now let me turn to our expectations for quarter two. We are guiding revenue at $3.28 billion, up about 26% versus the second quarter of 22 within a range of up 22% to up 30% year-on-year. From a sequential perspective, this represents growth of about 4% at the midpoint versus the prior quarter. At the midpoint, we anticipate the following trends in our business: Automotive is expected to be up in the low 30% range versus quarter two, 2021 and up in the high-single digits range versus quarter one, 2022. Industrial and IoT is expected to be up in the low 20% range year-on-year and up in the low single digits range versus quarter one, 2022. Mobile is expected to be up in the low double-digit range year-on-year and down in the low single-digit range versus quarter one, 2022.
And finally, Communication Infrastructure and Other is expected to be up about 20% versus the same period a year ago and flattish on a sequential basis. Our guidance incorporates several items to be aware of. First, the year-on-year comparison of our auto business in the second quarter benefits from the easy compare versus quarter two, 2021 when we were impacted by the effects of the winter storms on our wafer manufacturing facilities in Texas. Second, our Tianjin back-end facility in China is fully running at maximum capacity. Remember, we lost about one to two weeks of output during the early part of quarter one. And lastly, our guidance does contemplate several tens of millions of dollars of potential supply and logistical disruptions due to the lockdowns occurring in China related to COVID outbreaks. Now before I pass the call to Bill, I would like to provide an update on our ESG journey, something our management team and I are personally committed to. On April 1, we published our annual corporate sustainability report, which included the achievement of several goals. On a year-over-year basis, we have reduced our normalized carbon footprint by 11% and have increased the use of renewable electricity in our facilities to 31% of our total consumption.
Additionally, we have realized an 11% normalized decrease in our water consumption and 76% increase in our recycling efforts. These are all solid and positive steps, but I believe we can and should do more. Looking forward, we have committed to achieve carbon neutrality by 2035. We have formally committed in the science-based targets initiative, and we are transitioning toward 100% renewable energy sources in our facilities. This will all be a significant task for our organization, and we are committed to providing regular updates documenting our progress. From a global employee perspective, we grew by 8% during 2021, despite a difficult talent market and women now represent 37% of our total employee population. To keep the organization focused on the sustainability journey, I am proud to announce Jennifer Wuamett, our General Counsel, has been named NXPs Chief Sustainability Officer, and she will oversee our sustainability program.
Finally, to demonstrate that we, as an organization, are all responsible to improve the impact we have in our environment, the NXP Board has approved that a portion of our employee annual incentive compensation will be tied to achieving progress towards long-term sustainability goals. Now in summary, the robust growth we have anticipated for 2022 is materializing in spite of all supply challenges. We do continue to see strong customer demand, especially our company-specific accelerated growth drivers. Overall, demand continues to outstrip increased supply and inventory across all end markets remains very lean.
And with that, I would like to pass the call over to you, Bill, for a review of our financial performance. Bill?