NXP Semiconductors N.V.

Good day and thank you for standing by. Welcome to the NXP fourth 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 a question during the session, you will need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Jeff Palmer, Senior Vice President of Investor Relations. Please go ahead.

Thank you, Daniel, and good morning, everyone. Welcome to NXP Semiconductor's fourth 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 a specific end market in which we operate, the sale of new and existing products, and our expectations for financial results for the first quarter of 2025. NXP undertakes no obligation to revise or update publicly any forward-looking statements. For full disclosure for forward-looking statements, please refer to our press notes. 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 2024 earnings press release, which will be furnished to the SEC on Form 8K and is available on NXP's website in the investor relations section at nxp.com. Now I'd like to turn the call over to Perry.

Thank you, Jeff, and good morning, everyone. We really appreciate you joining our call today. I will review both our quarter four and our full year 2024 performance, and then I will discuss our guidance for quarter one. Beginning with quarter four, our revenue was 11 million better than the midpoint of our guidance. The revenue trends in our end markets were slightly above in automotive, inline and mobile, slightly below in industrial and IoT, while communication infrastructure and other missed our expectations. So taken together, NXP delivered quarter four revenue of 3.11 billion, a decrease of 9% year-on-year. The non-GAAP operating margin in quarter four was 34.2%, 140 basis points below the year-ago period, and about 10 basis points above the midpoint of our guidance. Year-on-year performance was the result of the lower revenue and the related gross profit fall-through partially offset by lower operating expenses. From a general perspective, we kept distribution inventory flat at eight weeks, below our long-term target of 11 weeks. From a direct sales perspective, we supported Western Tier 1 automotive customers with their continued digestion of on-hand inventory in a cloudy auto demand environment. For the full calendar year 2024, Revenue was 12.61 billion, a decrease of 5% year-on-year. Full-year non-GAAP operating margin was 34.6%, a 50 basis point compression versus the year-ago period, due to lower revenue and the related gross profit fall-through, partially offset by lower operating expenses. While the second half of 2024 did not play out as we had originally expected, we rigorously focused on what is under our own control to minimize the impact on our financial performance. And now let me turn to the specific full year 2024 trends in our focus and markets. In automotive, full year revenue was 7.15 billion, down 4% year on year, primarily a reflection of declining automotive production in Europe and Japan, exacerbated by inventory digestion at Western Tier 1 customers in an uncertain automotive demand environment. Against this backdrop, we experienced company-specific growth in our accelerated growth drivers, S32 for the software-defined vehicle, automotive connectivity, radar, and electrification. For quarter four, automotive revenue was $1.79 billion, down 6% versus the year-ago period, and near the high end of our guidance. Turning to industrial and IoT, full year revenue was 2.27 billion, down 3% year on year, a reflection of ongoing weakness in end demand and tight control of distribution channel inventories. For quarter four, industrial and IoT revenue was 516 million, down 22% versus the year-ago period, and slightly below our guidance. In mobile, full-year revenue was $1.49 billion, up 13% year-on-year, thanks to easy compares in the first half of 2023. For Q4, mobile revenue was $396 million, down about 2% versus the year-ago period, and in line with our guidance. In communication infrastructure and other, full-year revenue was 1.69 billion, down 20% year-on-year. The year-on-year decline was due to lower sales across the entire portfolio. For quarter four, revenue was 409 million, down 10% year-on-year, and below our guidance. Now I will turn to our expectations for quarter one, 2025. We are guiding quarter one revenue to $2.825 billion, down 10% versus the first quarter of 2024 and down 9% sequentially. From a sequential perspective, this is consistent with our original outlook for quarter one to be seasonally down in the high single digit range. At the midpoint, we expect the following trends in our business during quarter one. Automotive is expected to be down in the mid-single-digit percent range versus both quarter one 2024 and quarter four 2024. Industrial and IoT is expected to be down in the low double-digit percent range year-on-year and about flexed versus quarter four 2024. Mobile is expected to be down in the high single-digit range year-on-year and down in the high teams percent range versus quarter four 2024. Finally, communication infrastructure and other is expected to be down in the mid 20% range versus quarter one 2024 and down in the upper 20% range versus quarter four 2024. Zooming out, as we enter 2025, we continue to see weakness in Europe. The Americas appear to be bouncing off the bottom and China has implemented several incentive programs. All of this correlates with the reported manufacturing PMI being around 50, with China and the US slightly above, and Europe and Japan below. Against this backdrop, we continue to have poor forward visibility and we are experiencing relatively high-turns business, reflective of our short order lead times. On the customer front, we have completed the majority of our annual price negotiations for calendar year 2025, and we continue to be confident in low single-digit price erosion year over year, consistent with our prior commentary. When it comes to inventory in the market, our quarter one guidance contemplates decreasing inventory dollars in both the direct and the distribution channels, reflecting undershipment against true end demand. We expect distribution channel inventory to be eight to nine weeks below our long-term target of 11 weeks. Now, before turning to your questions, I would like to review two strategic acquisitions which we announced over the last 90 days. Both are vital building blocks to accelerate and expand NXP's CoreRight vision for next-generation software-defined vehicle platforms. Our CoreRight platform comprises a complete suite of secure hardware and software solutions, including processes, connectivity, functional safety and power management, as we had laid out in our investor day in November. So first, in mid-December, we announced our intention to acquire Aviva Links for $243 million. Aviva is a five-year-old Silicon Valley startup whose founders have a proven track record in the multi-gigabit Ethernet market. The company is focused on multi-gigabit automotive connectivity technology based on the ASA MLE standard, which is ideally suited for asymmetric point-to-point connectivity of ADAS sensors and IVI display applications. Asymmetrical ASA links are cost and performance optimized for one-way data traffic typical for ADAS and IVI applications, whereas Ethernet is optimized for two-way data traffic going in both directions at the same speed. This addition is fully complementary with NXP's market-leading positions in automotive networking processes, gateways, and broad in-vehicle networking solutions. Aviva is an innovation leader in open standards-based asymmetrical ASA service with the first to market best-in-class 16-nanometer quad-port, 16-gigabit-per-second uplink product. The company is pre-revenue and has received design awards from OEMs and Tier 1 customers, aiming to replace proprietary solutions. We expect Aviva to enhance and complement our broad automotive networking business beginning in 2027. With this, we are capturing a growing application area we had not taken part in by a standards-based solution. This acquisition reinforces our company-specific automotive connectivity accelerated growth driver. And secondly, in early January, we announced our intention to acquire TT Tech Auto for 625 million, a division of TT Tech, a privately held software company based in Austria. TT Tech Auto has extensive knowledge and expertise in the automotive market, especially in the domain of vehicle safety and real-time integration. Its software product called MotionWise is focused on safety and deterministic real-time performance, key attributes of the software-defined vehicle. MotionWise bridges the silicon hardware layer to the operating system layer, enabling deterministic and safe management of the application software layer. MotionWise is already deployed in over 4 million vehicles, with a pipeline of awarded projects which will enable another 7 million vehicles. The combination of NXP SquareRite NTT Tech Autos Motionwise will reduce our customers' integration efforts, enabling software reuse and delivering optimal system performance. The combined expertise of NXP and NTT Tech Auto will allow to drive faster time to market and lower cost solution in direct collaboration with automotive OEMs. Taken together, these acquisitions enhance our long-term competitive position in the automotive end market. We expect the regulatory approvals should be complete by the end of quarter 325. These transactions are consistent with our long-term strategic efforts and will begin to contribute revenue within the brief period after close. However, they will not have a material impact on the financial model we recently shared at our investor day in November. By 2028 and beyond, these assets will be accretive to our current financial model and will help bootstrap and accelerate our capabilities in specific functional areas. I am very excited about how they will help NXP to offer complete system-level solutions for tomorrow's automotive markets. We do look forward to welcoming the talented teams to NXP. And with that, I would like to pass the call over to you, Bill, for a review of our financial performance.