NXP Semiconductors N.V.

Hello, and thank you for standing by. Welcome to NXP Third Quarter 2025 Earnings Conference Call. At this time, all participants are on a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask the question during the 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 will now like to hand the conference over to Jeff Palmer, Senior Vice President, Investor Relations. Please go ahead, sir.

Thank you, Tawanda, and good morning, everyone. Welcome to our third quarter earnings call today. With me on the call today is Rafael Sotomayor, NXP's President and CEO, and Bill Betts, our CFO. Also on the call with us is Kurt Sievers, who will act as a special advisor to Rafael through the end of 2025. 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 fourth quarter of 2025. NXP undertakes no obligation to revise or update publicly any forward-looking statements. For a full disclosure of 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 third quarter 2025 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. Now I'd like to turn the call over to Rafael.

Thank you, Jeff, and good morning. We appreciate you joining our call today. Our overall performance during the third quarter was solid. Our revenue exceeded guidance by $23 million. We experienced sequential growth driven by broad-based improvements across all regions and end markets. We maintained good profitability and controlled operating expenses, resulting in healthy fall through. Turning to the specifics, NXP delivered third quarter revenue of $3.17 billion, a decline of 2% year-on-year and up 8% sequentially. Non-GAAP operating margin in the third quarter was about 34%, 170 basis points below the same period a year ago, and 10 basis points above the midpoint of our guidance. The lower operating margin versus the same period last year was due to lower revenue and gross profit, partially helped by flat operating expenses. Taken together, we drove non-GAAP earnings per share of $3.11, a penny better than guidance. Distribution inventory was flat at nine weeks, consistent with our guidance, while still below our long-term target of 11 weeks. From a direct sales perspective, we believe our shipments into the Tier 1 automotive supply chain has approached end demand. We estimate that aggregate inventory levels of NXP-specific products at our major Tier 1 partners are below NXP's manufacturing cycle time. We believe this reflects a continual cautious approach in the automotive supply chain due to the uncertain macro environment. Overall, during the quarter, we did not experience any material customer order pull-ins or push-outs. Now, I will turn to our expectations for the fourth quarter. Our outlook reflects the continuous strength of our company-specific road drivers and signs of a steady cyclical recovery in our automotive and industrial markets. We do not yet anticipate direct customer inventory restocking as one might expect off the bottom of a cyclical trough. From a channel perspective, our guidance assumes distribution inventory may fluctuate between 9 and 10 weeks, as we are selectively staging additional products in the channel to be competitive. We are guiding fourth quarter revenue to $3.3 billion, up 6% versus the fourth quarter of 2024, and up 4% sequentially. At the midpoint, we expect the following trends in our business during Q4. Automotive is expected to be up mid single digit versus Q4 2024 and up in the low single digit percent range versus Q3 2025. Industrial and IoT is expected to be up in the mid 20% range year on year and up 10% versus Q3 2025. Mobile is expected to be up in the mid-teens percent range year-on-year and up in the mid-single-digit range on a sequential basis. And finally, communication infrastructure and other is expected to be down in the 20% range versus Q4 2024 and flat versus Q3 2025. In summary, NXP third quarter results and guidance for the fourth quarter reflect a growing confidence and the company-specific road drivers, and that a new up cycle is beginning to materialize. This is based on several signals we track regularly. These include continually growing customer backlog placed with our distribution partners, improved order signals from our direct customers, increased short cycle orders, and a growing number of product shortages leading to customer escalations. At the same time, we do not yet see material customer restocking due to the uncertain macro environment. Now, an update on our pending acquisitions of Kinara and AvivaLinks. We have received all regulatory approvals. We have closed both AvivaLinks and Kinara. We are extremely excited about the long-term benefits these acquisitions will bring to our customer engagements and market position. As we have previously shared, in the short term, these acquisitions will have an immaterial impact to the revenue and financial model of NXP. We do believe the revenue impact will be material in 2028 and beyond. The three recent acquisitions, TT Tech Auto, Kinara, and Aviva Links, will enable NXP's vision to be the leader in intelligent edge systems in the automotive, industrial, and IoT markets. As this is my first earnings call, I would like to assure you that the strategy we laid out during our November 2024 investor day stays firmly in place. This includes our product innovation focus in our financial and capital return model. For the last six months, I've traveled globally, engaging with our customers, suppliers, and development teams. My key takeaway is that NXP's strategy is compelling. We are focused on the most important customers and top leaders. Our highly differentiated product roadmaps position as well to achieve our long-term goals. I will continue to work closely with the cross-functional leaders throughout NXP to accelerate our innovation in time to market efforts. Overall, we remain focused on discipline, investment, and portfolio enhancements to drive profitable growth while maintaining control over the factors we can influence. And now, I would like to pass the call to Bill for a review of our financial performance.