NXP Semiconductors N.V.

Hello, and thank you for standing by. Welcome to NXP's first quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask the question during this session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. I would now like to turn the call over to Jeff Palmer, Senior VP of Investor Relations. You may begin.

Thank you, Tawanda. Good morning, everyone. Welcome to NXP Semiconductor's first quarter earnings call. With me on the call today is Kurt Sievers, NXP's President and CEO, and Bill Betts, 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 macroeconomic 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 second quarter of 2024. NSP 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 NSP's underlying core operating performance. Pursuant to Regulation G, NSP has provided reconciliations of the non-GAAP financial measures to the most directly comparable GAAP measures in our first quarter 2024 earnings press release, which will be furnished to the SEC on Form 8K and available on NSP's website in the investor relations section. Now I'd like to turn the call over to Kurt.

Thank you, Jeff, and good morning, everyone. We appreciate you joining our call this morning. Beginning with quarter one, revenue trends in all our focus end markets were in line with the midpoint of our guidance. NXP delivered quarter one revenue of 3.13 billion, essentially flat year on year. Non-GAAP operating margin in quarter one was 34.5%, 30 basis points below the year-ago period, and 60 basis points above the midpoint of our guidance. Year-on-year performance was a result of consistent gross profit generation offset by slightly higher operating expenses as we continue to invest in our future business. From a channel perspective, we held distribution inventory at a tight 1.6-month level consistent with our guidance and well below our long term target of two and a half months of inventory in the channel. Now let me turn to the specific trends in our focus and markets. In automotive, revenue was 1.80 billion, down 1% versus the year ago period and in line with our guidance. We continue to manage an orderly process of inventory digestion with our major direct automotive tier one customers. In industrial and IoT, revenue was 574 million, up 14% versus the year-ago period, and in line with our guidance. Our performance compares favorably versus the year-ago period when the business had dropped. Since 1Q23, we have seen a steady sequential improvement in the industrial and IoT demand trends, so not yet back to the long-term levels which we would expect. In mobile, revenue was 349 million, up 34% versus the year-ago period, where, again, the business had dropped already back in 1Q23. And lastly, in communication, infrastructure, and other, revenue was 399 million, down 25% year-on-year, and in line with our guidance. Let me turn to our expectations for the second quarter 2024. We are guiding quarter two revenue to 3.125 billion, down 5% versus the second quarter of 2023, and flat sequentially. In the automotive end market, revenue trends during the first half of 2024 reflect a continued inventory digestion process at our direct tier one automotive customers compounded by a soft automotive macro environment. In the industrial and IoT end market, we had already trust in 1Q23. We see improving demand in China, in part thanks to our lean channel position, as well as thanks to incrementally healthier end demand. This is expected to be partially offset by soft end demand in Europe and the Americas. In the mobile end market, we continue to witness the expected modest cyclical recovery. And finally, within the communications infrastructure and other end markets, our resumption of sequential growth is primarily driven by secure RFID tagging. Taken together at the midpoint, we anticipate the following trends in our business during the second quarter. Automotive is expected to be down in the high single digit percent range versus quarter 2.23 and down in the mid single digit percent range versus quarter 1.24. Industrial IoT is expected to be up in the high single digit percent range for both year-on-year and versus quarter 1.24. Mobile is expected to be up in the low 20% range year-on-year and about flat versus Q1.24. And finally, communication infrastructure and other is expected to be down in the mid 20% range year on year and up in the high single digit percent range versus quarter one, 24. So in summary, we are beginning to see incrementally improving demand signals for the second half of 24 across all end markets. Hence, during quarter two, we will begin to stage slightly higher inventory in the channel to support our competitiveness for the anticipated second half growth. Therefore, our guidance assumes approximately 1.7 months of distribution channel inventory exiting quarter two. And if demand momentum continues, we will stage additional channel inventory during the second half, however, in a very controlled and targeted manner. So it is unlikely that we grow channel inventory back to our long-term target of two and a half months within this calendar year. And taken all together, the potential outcome for 2024 should be in the range of a modest annual revenue growth or decline, just consistent with our views from a quarter ago. Overall, we continue to manage what is in our control, enabling NXP to drive solid profitability and earnings in a challenging demand environment. Our first quarter results, our guidance for the second quarter, and our early views into the second half of the year underpin a cautious optimism that NSP is successfully navigating through this industry-wide cyclical downturn. And now before turning the call over to Bill, while we are very focused on managing the soft landing through the cycle, I would like to take a minute to highlight a couple of important innovation announcements which we made during the first quarter. This includes our S32 CoreRide platform for next-generation software-defined vehicles. It represents the industry's first platform to combine high-performance automotive processing, vehicle networking, and system power management, along with integrated software to address the complexity the scalability, and the cost efficiency required for the software-defined vehicle. And as part of that announcement, we also introduced our 5-nanometer S32N processor, a milestone in the expansion of our S32 processing family. Additionally, we introduced industry's first 28-nanometer RF CMOS single-chip automotive radar, which enables next-generation automotive ADAS systems This new product further expands our market leading franchise and it enables next generation highly performance coherent radar systems in a very cost effective manner. Lastly, NXP and Honeywell, who is a leader in building automation systems, signed the memorandum of understanding. This collaboration aims to help make buildings operate more intelligently by integrating NXP's neural network enabled industrial grade applications processes into Honeywell's building management systems. That agreement is another great example of how NXP will participate and potentially lead in the revolution of AI processing at the edge in industrial applications. And now I would like to pass the call over to you, Bill, for a review of our financial performance.