NXP Semiconductors N.V.

and thank you for standing by. Welcome to the NXP first quarter 2025 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 11 on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference call is being recorded. I would now like to hand the conference over to your first speaker today, Jeff Palmer, Senior Vice President of Investor Relations. Please go ahead.

Thank you, Tonya. Good morning, everyone. Welcome to NSP Semiconductor's first quarter earnings call. With me on the call today is Kurt Seavers, NSP'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 marks in which we operate, the sale of new and existing products, and our expectations for the financial results for the second quarter of 2025. NSP undertakes no obligation to revise or update publicly any forward-looking statements. For 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, NXP has provided reconciliations of the non-GAAP financial measures to the most directly comparable GAAP measures in our first quarter 2025 earnings press release, which will be furnished to the SEC on Form 8K and available on NXP's website in the investor relations section.

Now I'd like to pass the call to Kurt. Thank you, Jeff, and good morning, everyone. We appreciate you joining our call today. I will review our quarter one performance and then discuss our guidance for quarter two. Beginning with quarter one, our revenue was 10 million better than the midpoint of our guidance. The revenue trends in the mobile and communication infrastructure markets were slightly above expectations, while performance in the automotive and industrial and IoT markets were slightly below our expectations. Taken together, NXP delivered Q1 revenue of 2.84 billion, a decrease of 9% year-on-year. Non-GAAP operating margin in quarter one was 31.9%, 260 basis points below the year-ago period, and about 40 basis points above the midpoint of our guidance. Year-on-year performance was a result of the lower revenue related gross profit fall-through, partially offset by lower operating expenses. From a channel perspective, distribution inventory was in line with our guidance at 9 weeks, below our long-term target of 11 weeks. From a direct sales perspective, we continue to support Western Tier 1 Auto customers with their ongoing digestion of on-hand inventory against the backdrop of a cloudy automotive demand environment. Now let me turn to our expectations for the second quarter. We are operating in a very uncertain environment influenced by tariffs with volatile direct and indirect effects. As of today, the direct impact of the current tariffs is immaterial to our financial However, the indirect impact of current tariffs related to future end demand and supply chain remains unknown. As of now, we are not seeing any abnormal customer order pull-ins or push-outs, which could be associated with the tariffs.