NXP Semiconductors N.V.

Good day, and thank you for standing by. Welcome to NXP 2Q21 Earnings Conference Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. If you would like to be advised of these calls being recorded, to ask questions during the session, you will have to press star 1 on your telephone. If you require any further assistance, please press star 0. I would like to hand the conference over to speaking today, Mr. Jeff Palmer, Senior Vice President of Investor Relations. Please go ahead, sir.

Thank you, Crystal, and good morning, everyone. Welcome to the NSP Semiconductor Second Quarter 2021 Earnings Call. With me on the call today is Kurt Sievers, NSP's President and CEO, and Peter Kelly, 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 can 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 continued impact of the COVID-19 pandemic on our business, the macroeconomic impact on specific end markets in which we operate, the sale of new and existing products, and our expectations for the financial results for the third quarter of 2021. 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. 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 Q2 earnings press release, which will be furnished to the SEC on Form 8K and available on NXP's website in the investor relations section at nxp.com. Before we start the call today, I'd like to highlight our upcoming 2021 Analyst Day. At this time, we are planning on hosting an in-person event in New York City on Thursday, November 11, 2021. We will open up an online registration site over the next week, and we would suggest interested parties to pre-register as space will be limited this cycle. I would like to now turn the call over to Kurt.

Yeah, thank you very much, Jeff, and good morning, everyone. We really appreciate you joining our call today. I will review our quarter two results, and I will discuss our guidance for quarter three. Furthermore, I will provide an updated perspective on how we view the current demand environment. Let me start with quarter two. Overall, our results were better than the midpoint of our guidance with the contribution from the communication infrastructure and market stronger than planned and above the high end of our guidance. At the same time, the trends in the auto Industrial and mobile markets were all slightly above the midpoint of our guidance. Taken together, NXP delivered quarter two revenue of $2.6 billion, an increase of 43% year-on-year, and $26 million above the midpoint of our guidance range. These are very good results given the constrained supply position we knew we would face entering the quarter. Our non-GAAP operating margin in quarter two was a strong 32%, 1130 basis points better than the year ago period and 70 basis points above the midpoint of our guidance. Our stronger operating profit performance was driven by a richer product mix. Now, let me turn to the specific trends in our focus and markets. In automotive, quarter two revenue was 1.26 billion up 87% versus the year ago periods and slightly above the midpoint of our guidance in industrial and IOT quarter two revenue was 571 million up 31% versus the year ago periods and slightly above the midpoint of our guidance in mobile. Quarter 2 revenue was $347 million, up 36% versus the year-ago period, and slightly above the midpoint of our guidance. And lastly, in communication infrastructure and other, Quarter 2 revenue was $416 million, down 8% year-on-year, however, about $21 million better than our guidance. With this, let me move to our outlook. We are guiding the midpoint of quarter three revenue to $2.85 billion, up 26% versus the third quarter of 2020, within a range of up 22% to up 29% year on year. From a sequential perspective, this is up 10% at the midpoint versus the prior quarter. At the midpoint of this range, we anticipate the following trends in our business. Automotive is expected to be up in the low 50% range versus quarter three 2020, and up in the mid teens range versus quarter two 21. Industrial and IoT is expected to be up in the high teens percent range year on year, and up in the mid single digit range versus quarter two 21. Mobile is expected to be down in the low single-digit range year-on-year and down in the mid-single-digit range versus quarter to 21. And finally, communication infrastructure and other is expected to be up in the low single-digit range versus the same period a year ago and up about 10% on a sequential basis. At this point, let me give you an update on NXP's current demand position. As I shared with you on our last earnings call, we had anticipated product supply to be a challenge in quarter two, and this is indeed what we experienced. With the continuation of robust demand, we expect supply to be a challenge for the foreseeable future. We do continue to work very closely with our customers on a day-to-day basis to accommodate their most pressing short-term requirements. During quarter two, based on the orders and all of the various actions we took over the last six to nine months, we began to see wafer supply from our foundry partners and internal fabs improve. We do anticipate continued increase of wafer supply during quarter three and beyond, which will support our revenue growth in subsequent course. However, with customer demand outstripping current supply, a situation that we see across all our end markets, we are working diligently to secure additional supply to achieve a healthy balance of demand versus supply. A significant number of our customers are also taking action by placing non-cancelable and non-returnable orders for the medium term. Furthermore, based on customer discussions and also based on our own analysis, we do not believe there is excess inventory of NXP components along the extended supply chain. Additionally, we continue to make significant investments as a direct result of the very detailed conversations and associated commitments concerning long-term demand across our customer base, especially within the automotive and industrial end markets. These investments include long-term contractual commitments to our front-end foundry partners in order to assure supply, as well as making investments to expand our internal front-end capacity and our internal back-end test and assembly capabilities so as to avoid potential bottlenecks as wafer supply materializes. Notwithstanding this challenging supply environment, our results and guidance clearly validate the excellent underlying long-term growth, profitability, and cash generating capability of our business. We continue to see our company-specific key revenue growth drivers in our strategic end markets unfold as we have long anticipated. These drivers include our 77 gigahertz radar systems, our e-cockpit solutions, the domain and zonal processes, and electrification products, including our battery management systems, all in the automotive market. And within the broad-based industrial and IoT market, our significant and focused investments to enable complete, secure, connected edge processing solutions are being very well validated by strong customer design win awards. And these are just a few of the opportunities we have shared with you at our product teach-ins. All of them will continue to contribute to our future growth. Viber will not provide specific guidance beyond the current quarter. We do anticipate quarter four revenue will be greater than quarter three on an absolute basis. And we are highly confident that 2021 marks just the beginning of a longer-term upcycle for NXP within our strategic end markets. In summary, we are very encouraged by the continued and consistent rapid rebound in demand across our end markets. Our employees are highly engaged to drive our success. We have a robust pipeline of new and innovative products. And the customer response, engagement, and design win momentum all underpin our optimism about the future potential of NXP. Before concluding my prepared remarks, I would like to speak to the impact the COVID-19 pandemic continues to have on NXP. The pandemic remains active with spikes that continue to plague multiple regions where we have operations, namely India in the second quarter and Southeast Asia most recently. We continue to remain very vigilant in forcing our safety protocols across all of our global sites. We have initiated successful vaccination drives in several countries for our team members and their families. However, the highly contagious Delta variant has required that we revert to a complete work from home situation in several of our locations. I am extremely proud of all our employees for their dedication, and for their resilience during this very challenging period. I would like to especially commend our manufacturing operations and customer-facing teams for their relentless focus and energy on assuring our customer success. It is their dedication and their hard work in the face of the pandemic and the very challenging supply environment at the same time which truly make a difference. Now I would like to pass the call over to you, Peter, for a review of our financial performance. Peter.