NXPI - Earnings call transcript Q2 2020

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Operator

Good morning ladies and gentlemen, thank you for standing by, and welcome to the Q2 2020 NXP Semiconductors’ Earnings Conference Call. [Operator Instructions] As a reminder this conference is being recorded. I would now like to turn the conference over to Mr. Jeff Palmer. Thank you, please go ahead, sir.

Jeff Palmer

Jerome. you, Thank good morning, And afternoon good everyone. you healthy. hope safe and all We are quarter NXP call. the to XXXX Semiconductors Welcome second earnings With me on CEO and the call today and Kelly, Kurt Peter our CFO. President; Sievers, NXP's be is recorded corporate today replay call The website. and will from available being our for will that involve include could uncertainties risks from materially statements to results NXP's differ forward-looking management's call and that The cause current expectations. of on business, include, but in operate, statements expectations specific continued products for impact quarter results to, the markets are regarding our the and financial on impact limited uncertainties of XXXX. the not and which pandemic risks the the new These end sale our macroeconomic COVID-XX and third the the we for of existing publicly statements. any reminded forward-looking obligation be Please NXP update undertakes that no or to revise

disclosure refer For on press release. please forward-looking our statements, to a full

Pursuant financial the financial to most earnings will events discrete be management primarily we is in to XXXX on and Additionally, underlying quarter the has will refer Form non-GAAP NXP's in to release, which website core Investor Relations Regulation on directly are driven consider by measures, performance. provided reconciliations does to to related G, nxp.com. GAAP of the at not NXP that comparable non-GAAP NXP's which SEC second furnished press our be available measures X-K section to directly the measures operating

over call Kurt. turn to I'd the to Now like

Kurt Sievers

appreciate you call Jeff good afternoon the and We morning joining much very really good Thanks or today. everyone.

Now let our me to turn results.

than Our the of was guidance. QX midpoint revenue modestly our better original

shutdowns by COVID-XX factory our was of customers. impacted business significantly the Automotive Our caused

of in trends, anticipated experience our So and better than we other markets. end growth all sequential did

in improve positive the the and our out by encouraged sequentially. distribution sales China channel are we of trends experienced did We

operating guidance. operating of revenue revenue of was above of billion, above because margin profitability. experienced gross tight And expenses guidance in sales delivered XX.X%, We Non-GAAP range. expected the slightly a channel combined midpoint NXP resulted mix. did the distribution with million our XXX midpoint about a margin of deliver of We all sales. points proportion than higher our original of of positive basis better higher with together, better this product control $XX Taken $X.XX operating

In $XXX $XXX our down sequentially. Now million the turning XX% focused versus XX% the million, the lastly, us up markets. XX% audio versus the ago impacted revenue million, trends down revenue please by was was mobile, ago revenue was year-on-year X% versus ago note the mobile and year-on-year up period showing up was specific comparison year the XX% down in up end sale IoT, in $XXX other infrastructure XX% and XX% sequentially. and business. In period period, and decline. $XXX automotive, sequentially. was revenue of communication year to the million year and industrial And In And X% and sequential voice

before Now, like expectations, QX our I’m of I'd comments. turning few a to specifics important to the make

normal. guidance revenue range wider again is for than Our QX

specific the see our furthermore, crossover markets. our drivers, However, radar, we year. just ongoing connectivity, positive the is NXP attraction setup is few. an to we second a secure stabilization do And thanks into half customer including gradually our heading believe the end more And of this ultra-widebands, name processes, with to of automotive wireless

is fluid shape of a the or make a regarding statement the However, pandemic. view the at the want demand It continue as broader same COVID-XX our specifics return to too to given time, the the to of we early recovery. to as normalize balance we enthusiasm complete environment demand broad

those supply. customers shipments we to of running As and Europe, to maintain to the of at the of in certainly aspects about course Therefore in $XXX of is pre-pandemic focus we Japan quarter. distributors our months an ultimate directly the below the during our especially channel automotive still at America, view several held on target This are products, action end million of example past of levels. light, our best of back business, production stringent OEM inventory North exactly can continue customers of X.X distributor discipline which inventory channel And includes control. that our we to

mobile range and perspective the XX% digits down we an business. to our At and Automotive QX communication we and QX the be be other versus at is midpoint, that is of and finally, the up down excess QX significantly Additionally, versus about anticipate teens about upper expected expected audio businesses. versus increase IoT XX% And expected teens Mobile the infrastructure billion a low XX% expected to QX mid QX in the the the XXXX continue is is to versus levels, expected trends voice run basis, be inventory. range to being versus the trends our be XXXX, revenue QX teens QX versus versus below down range And up to And the teens internal sequential is to normal from with $X quarter. in operating factories XXXX. of about XXXX. avoiding impacted XXXX. down down sale range building be midpoint single prior versus this guiding sequential represents and low XXXX. is QX at up preamble, are XXXX. QX a up versus On the XX% low in QX range in in to XXXX. Again, expected range in we be XXXX the versus and the about year-on-year following in are the mid XX% Industrial by

let summarize. me Now

execution. demand insights R&D and and its safety strength we current members, laser-focused to any same review we be the is liquidity best continuously NXP's financial and success Clearly, business the have when supply our weather while all we long-term with the one strategy, And will continue continue number and on all actively continuously areas team maintain what time, our while the in priority areas all possible discretionary to chosen uncertain customer will environment. can facilitating the at we on spending. control navigate assure health will a unique of an assure NXP We of that to have focus investments don't period will in to as but environment. changing and ample this of critical we to We chain subside,

our enjoy design Our connected win products leading-edge durable segments, IoT ADAS ultra and fast-growing and for new traction. as the focused edge to do very bands electrification, customer and investments in are automotive, significant engagements in all and deep very, wide continue secure such secure processing we

of to the focused on call sharply I strategy our engaged continue to financial to before committed We for and a the turn of pass are customers’ to be long-term deeply consistent of Peter execution all we And performance enabling now success. our your like our review questions. to and would

So Peter?

Peter Kelly

Thanks, today's Kurt. And everyone good call. on morning to

provided covered drivers performance for move quarter during second revenue better In quarter summary, a revenue financial and our already the third has the the in than quarter, total I'll was revenue our the little of Kurt As outlook to the highlights. planned.

IoT infrastructure Our end along significant strength. showed & Industrial with common market

suppliers revenue factory planned about market as mobile and OEMs Tier in America shipments periods. their X where Europe, automotive for closed our Our plan the Japan significantly than North and was extended we were weaker end and into

XX% sales in direct more and strength automotive, direct the proportionate versus a market. given end a in the distribution – of weakness significantly a a direct note You'll is which record through China reaching business were more higher

$XXX $X basis perspective, better operating which gross the an towards guidance. richer operating was and mixed Stock $X.XX moving in a million. lower XXX issuance got guidance. product Non down which guidance. $XX undertook down midpoint operating debt financial expenses of mix. our of quarter. and billion of So for expense. points a operating was guidance higher profit and margin, expense From Total better during ongoing $XXX we non-GAAP combined guidance included $XXX better details expense. our better than XXX in the than XX% Gross because basis was $XX $XX and was profit than of second by midpoint $X margin $X is and $XXX due million than taxes earnings, year-on-year, the and million, million midpoints above basis XXX $XX million million, margins million were than was margin non-controlling gross total million about XX.X% operating because higher the overall lower $XX Total distribution points points quarter. interests guidance compensation, new million the quarter. generated of of payroll non-GAAP XX.X% year-on-year We our basis to to on first of were down better a based was Cash revenue was non-GAAP profits non-GAAP the billion, million were because million and reported gross but operations the expected year-on-year This XXX and points basis our down year-on-year the above million, the swing $XX not non-GAAP were slightly from non-GAAP

Now and I'd in turn like to changes to our debt. the cash

debt of billion during was better the cash and $X.X $X.XX end the and position quarter our at Our the EBITDA issuance of generation and the to billion second the XX-month slightly was billion exited a cash we of billion. with about up debt quarter Net was sequentially adjusted total billion, trailing debt quarter. because $X up $X.XX ending $X.XX billion, $X.X

second quarter trailing XX-month the X.X was at XX-month times. non-GAAP And adjusted of the ratio trailing Our times. to X.X interest debt EBITDA of EBITDA adjusted end net coverage was net our

The sheet of have was a recent trenches have to green small truly seven very and phenomenal. excited who very year were year green debt and tech in a we excellent bond. and XX that million to offering issuance $XXX companies $X of million strong want response The balance have billion, was times structured successfully XX five-year a made was to continue we note, the offering. three We offering oversubscribed, number The $XXX a a liquidity. a note

we we temporarily we our the million in as leverage quarter, During cash target, paid $XXX times X dividends. noted buybacks. returns And quarter, last until our have our suspended to second

dividend. So our we maintain will quarterly

and Turning X to days declined. was working levels as XXX capital sequentially inventory metrics, days days of of revenue increase

dollar inventory basis, on was So sequentially. flat a

of We team the inventory our XX distribution down million we closely days, the channel four targets of days how of was our taken inventory. Cash proud continue sequentially, conversion is channel and quarter versus orders days increase within $XXX XX range. $XXX flow our capability $XX XX cash held prior resulting together Days in generating non-GAAP XX a very CapEx testament a were the about payable the million managed, remained metrics inventory into the days days to million, even months. was of net of our a with long-term in in XX distribution cycle business back and days receivable cash assure period. channel cash $XXX operations and and quarter. channel our days owned strong both and versus the manage to free X.X million decrease challenging of prior Well, with within flow to I'm was from flow target at

Turning to our quarter. third the for expectations

billion we $X down at about million. the navigating about the the a As midpoint, about revenue QX year-on-year, XX% we considering environment plus be anticipate while sequentially. or normal Kurt up is are minus range, mentioned, to wider $XXX uncertain XX% Again, this

$XXX about non-GAAP tax estimate be be about ongoing We be be Non-controlling margin points. anticipate XXX We gross plus operating plus be $XX million, are $XX basis about to operations Operating or million. points. minus plus XX% be million. financial minus about expense non-GAAP to million margin taken about to cash or about million together see we to non-GAAP minus and or expected expect XXX will XX% interest about $X about to to related $XX expenses basis and

have a closing to Finally, I'd few I comments make. like

of product QX our we some offset less as gross our guidance see secondly, remains utilization mix, will in is additional margin revenue from factory the We with the levels. but compared very QX. on Our be which volume, low to of benefit XX% a robust QX, than this affects inventory sequentially. for And manage flat as QX by continued

we accelerates, at to the we global of our margin itself revenue target quarterly economy $X.X cannot starts the why XX% gross and no reason billion As revenue see level. correct our hit

well actions it's of include controls, including merit a expense, cuts But terms for increases the organization. to reflecting normal. The guidance more number would as revenue and of and elimination assume Xpress to In SG&A. on the about to XXX incentives imposed normal be reflect annual expenses When things the R&D and stringent on effective right expect a our the level not a of salary in operating operating quarter, these although is term, Clearly, controls hiring constrained we've expense X% taken executives. and the the normal replacements do freeze, depending are seasonal more they're model a sustainable returns should new of in OpEx level, of our long-term the we to influences. not XXXX in medium XX% a $XXX short our term, you million as

we proactively Lastly, levels. our are inventory driving internal down

target is impact days third all long-term aim level Our achieve to will XXX-day the clearly quarter. This XX about and factory utilization. exiting

period extremely to is But strategy right difficult of our the right to would in the our the right to difficult. are for and long and over very for all I to products right these Kurt times the and the commitment for Finally, thing continue current colleagues unprecedented. run like It's The NXP the NXP around customers. is thank win. has markets doing the world has

to turn to like Operator? questions. our Hello? Now I'd

Operator

from [Operator John question Instructions] comes line Credit Pitzer first with of the Your Suisse.

ask You question? may now your

John Pitzer

September specific the guiding the coming calendar ask for, look business Thanks as of growth lot on guess, the in the when what, I understanding you're the solid growth that given me you the the question for guess your quarter, IoT. kind the of I the look quarter, a business? industrial guys. is there's that challenging you from auto And to areas the taking similar is just of that the more versus the And a in parts company quarter. try you're to of Great in on questions. auto sequential mature June of environment. this at Marvell a get Congratulations the as let to the third it your I'm running stronger distribution drivers. Yes, asset curious that getting want in growth and what extent of you better preamble, Kurt, to what sustain kind expect I to at benefit extent through results, companies channel? we mentioned

Kurt Sievers

Yes. Thanks, John. Good morning.

good with like really here. First looks that is of let me auto and it IoT was but for up up both industrial all indeed stop that mix we moving questions, And maybe of all indeed holds of a lot for the because moving QX now saying, company-specific from a and trough, the are very I release it press the The by Marvell, also also IoT the clearly, market. way, IoT, fixed we and – which auto in did we April obviously helping. in in both is segments, in launched In from the recovery a and industrial of and WiFi think industrial this. is and a portfolio actually very, on growth

microcontroller We successfully integrated development portfolio into software and for processor kits, now it have our makes applications also which customers. easy the WiFi really

do So yes, combination. early from traction see that we

So sector, Clearly, very in which IoT it China. IOT. is continued is industrial the strong industrial in a growth nice has another factor

continues from IoT So has perspective. the QX industrial good in and largely footprint growth carried that been a And also in QX. Chinese into

nicely the the to the create OEMs U.S. And different. really In from specifically call, these we that little we had in make Now shutdowns, in since Europe last clearly, auto, in are we explained was as bit a auto, wanted we sure wouldn't too direct returning. QX at But abnormal factory completely at to things but and much has inventory that's excess distribution, more the just anticipated, the we only is now decreased And customers, excess also customers. our than any this reason want building. not didn't we at but why have inventory would follow actually business the

auto is So indeed mix pretty actually getting production. good OEMs and into Tier it we between a to in back see momentum QX. Xs And

the world the production of be pandemic So that should of by we QX, end to in period. pre back levels assume the automotive across XX%

return again taking gets are also design steam new our and which QX. cluster through a that wins, just RADAR pretty But with business that's solid traction. it's So

John Pitzer

a helpful. That's the quick Peter, just follow-up then margin And on for as gross line.

mentioned You're just of utilization you or growth us, QX? QX make you're as a the calendar I'm for what of quarter. keep good also cap to remind in into guiding quarter, this means shipped then inventory on most third sequential made you what to last for build. that trying And quarter but you kind curious

going a benefit about that gross show how think So is as up margin? utilization Or do really QX get QX, in QX in we gross you if impact, the to margin?

Peter Kelly

there. Several Okay. questions

is all, – QX. lower than QX of basis average, about first points about utilization So on in XXX

that impact. days, to XXX XXX don't clearly, to days of has about take I to out an So of it's trying from I'm I about, million $XX system. go think know, inventory the

from that We of little have XX%, maybe – But rule do now. down its control. by one it I a under have inventory when it months So to do a is think, We rule is factory, because accelerate fixed less. trailing reasons the we're running inshipping utilization I so complicated accounting – six – little the right do this XX%, cost we about bit utilization – is sorry, about, it's below is utilization when this we and bit and utilization. keep

the more from it and doesn't goes hand, to on through We'd up we'll bit be level, And to accelerated in more you is So an you benefit. to able forward if inventory. QX on, it that starts write-down both XX% carry other utilization QX don't and even into of see which probably to some little as assuming fixed and costs get okay the QX a inventory. But fixed come the cost won't. small put expect time suffer

the a but of So because next hit, environment, the the quarter. is take most take typically, all low, not the you current utilization of utilization so impacts it, current quarter. But in in current in you quarter it

Operator

of comes Your Bank line Securities. America Vivek the Arya question with of from next

now may question. your ask You

Vivek Arya

segment. on one my for taking auto Thanks question. just Kurt, follow-up the

out look XX%, production the sales trend. said $XXX But look QX, of you off of levels to I end the unit peak. I the will your at up I think million if When the content visibility say is when given recovery at understand the double IHS business, of from the But it's these that back next coincident. double how year, up tough. up things all mentioned you curious, normal low. Because understand at But will we they at the – units this so be at And far I digit. being automotive of its what believe, you seen to digits, conceptually and that forecasts can look some XX% And know think are guidance, about looking this orders your you I'm not play auto perhaps have year? that I are here? prior does their I I trend they year, do always for be at are

Kurt Sievers

I all Yes. quarters, so first and pretty comment the two of all, me, Vivek, the past quarter. the actually current check. in would That let to is say, much quarters next

to year-on-year, in XX%. car according was IHS, QX So down the production

Our down XX%. was was car X%. production only down at business year-on-year, were XX%. as down to In according just We IHS QX, around

So first we've been in these two better doing really quarters. a lot

much, gains I building think think be indeed is will has of the should second inventory why I the all not which QX Now again, that reasonable such the I come totally revenues. end claim this half. mid we which production some through this in that our XX% – don't at in balance car with a is is hit QX, been first something, latest market end in they've down too is like always, but half, or part the share of But actually

well, the ahead well about the fact think we've actually of in you car QX QX, that production. grown If and

a bit little picture, more Now Vivek. bigger

X% this definitely be think holds, by outgrow X% that algorithm, pandemic. stands. of auto to the through and of first times We the also that the of ahead that target about, SAR. out X.X all, pandemic So And our to believe yes, we've semiconductor like market which also should absolutely spoken I

car next something growing Now business. then there's year to with I be think, or in of do. exactly like, what the yes, don't I Vivek, our ahead algorithm, actually, going nicely XX% growth. know production this we And IHS is the should think I XX%

platform haven't year So haven't I or it quarter, two, lot delays I – a really I of massive seen a doesn't by year or over something. stands. And absolutely work the but also it or mean

wins and all-in So time. in new I we believe growth are on areas have the our also come tax

year. So automotive portion when optimism I have, second think about into this certainly the of say, for a I half next going then year, of but relatively solid

Vivek Arya

I helpful. of largest after infrastructure it. business comms profitable effect growth the mentioned more Got imagine with when you most think then, autos. going Day, QX. was curious, that is the Very be XG? and back business, And for to prospects profitable modest about one And to my which or why is kind I to this Peter, – the think, how follow-up, now second versus Kurt, Analyst I I you recall growth your I interestingly a perhaps others. your more leverage mix do I'm think of Because into about segment think supposed prospects your

how those you leverage we are about to the When think So you Because benefits? global XG. deployment see start XG? of will do to strong very seeing

So to about because infrastructure comms you. Thank now contributor you important just for an and it's obviously talk margins? large such gross just us your to segment a

Kurt Sievers

and So large others, relative I but a really It's this it's the size in segment, the abnormal period. quarter. every obviously, certainly to mean important

– not a quarter everything fair. key the is anyhow, So XG But is clearly deployment QX to factor. of mean it's be I revenue's certainly But going shiny, from a wasn't forward, a kind normal Vivek, perspective.

there regulations So large company, will control you the what do which customer. is big the Chinese really to is know And the carrier deployments. thing knows clearly, Chinese a of one one export this relative is that, nobody

know, being I on horizon, So a of the we as optimistic. say, have is instead the be recently, we one product, actually other to And demand. nitride that to bit, very, output base. the which higher are one powers, the you least late issue is are always overly more the mean, at is that's customer we factor across – relative on cautious where attractive working very that only which has gallium our The

expansion I had wish we So our of capacity. faster a

against the I'd opportunity. us, demand, delay the with a I'm overall, you. some little have delay So say, which bit here of But absolutely a against causes we

market position through to in bumpy. I've very, space. But a very LDMOS It for the always the nitride all across factors We germanium quoted. just that the been have strong remains bumpy. is has market the here silicon gallium It way bumpy But

Operator

comes Stacy Rasgon Your the next from question with Bernstein of line Research.

may now You ask question. your

Stacy Rasgon

for this wanted question. about in through I second your, the least of available sales feeling be end of want do said commentary half see that trends for driving my to QX taking actually that? can imply the Hi, ask if what sequentially so, I at improve with debt And the expectations off QX. growing might you Thanks some you guys. give for us year, improved markets

Kurt Sievers

growth. typically yes Stacy quarter and Clearly the Well this morning. good statement. that score a sequential only guide made next is XX% I the next And

So would not see say one is to I probably would be three. is what QX going pulling over be why And call growing reason automotive. I out, the should which most we no the is this

Stacy Rasgon

you. Thank it. Got

this lines in you've is the own actually district to industrial we're now have A For how and with in try industrial forward? lot trying but reduce wake to channel, right just with guess seeing my are relatively market been sustainable that I customers. to overbuilt versus traction of you companies know your industrial with I potential in confident wanted of been about was also also be California. cautious, to there's not some pandemic, with ask their upside try seeing the strength. audible, that. to around concerns more Maybe been maybe along strong control forecasts, those pulled I customer but to follow-up, some being your the just that what the than you are demand doing also of

Kurt Sievers

last most that remain factor and the inventory indeed, we distribution our is business is because a because the is on of we current times of a large think of lot prepared a That's quarter. part months, X.X good score believe, Stacy. this And business, controls, been we've of shipped my important sure through more spoken very, market. IoT And we remarks I a that X.X our this, that business. into in XXX relevant about – I have to a can this in the in on And going don't our is have this way And as in this probably a actually again over the very last Thanks, in especially part Yes. disciplined industry And the environment, portion inventory distribution. had actually solid Industrial in question, of of execute super we a said would months this in we million the and indeed quarter. I IoT. ship is could which make

say good on anything know can have distribution do see, enhanced, my have the, I we we direct much So that we the which isn't this. inventory, I pretty business which and through the on controls on There a handle industrial

Operator

Your the next question Stanley. Morgan with comes from line of Craig Hettenbach

question. your ask now may You

Craig Hettenbach

talk activity see you versus exposure, Kirk and breadth Yes. of on design about autos couple next smartphones? the and how the wide ultra you Can of quarters Thank kind you. just for band. your Question of

Kurt Sievers

and a much this Yes. Thanks, auto. we on we now would year kind is definitely believe And the Craig. mobile our And for signposted glad space with of are I in that wipe, me the in building in, QX. already ecosystem you year Android ultra-wideband. think which in That's is with more ramping of much. driving And a, mean, factors I flagship in in a a, way is indeed an very mobile sequential asking. have I'm growth in in I one that that across are our company, very, XXXX, neutral material we say product It's track in it's which get a started Mobile. let

planned but the revenue application a first car to and in access start mobile car perspective, automotive roll clearly year. with, going then now to outpacing to – follow from unit have access So secure we ecosystem mobile next is way secure and it's that because the Mobile the that been is out

shipping We a already traditional more are amount factor coming conventional of a or very small it's form but in ultra-wideband today, still automotive of the key. into

out auto going next races. this secure car more in a – a android car we have it's also see we'll doing now in with in access. mobile, and year of So OEMs with larger will scale But

Craig Hettenbach

Got business industrial know had follow-up I it. Thanks. lot exposure. And on just as of a the a Marvell Industrial, connectivity

just just NXP with you you're of perhaps How can of Marvell talk much industrial? So to the that business impact the the ramp some of you? of seeing to starting strength kind legacy is versus in

Kurt Sievers

you leverage me makes say, combination, let think industrial Peter or our But the difficult position more to way, things apps it two more rough difference. Jeff, and just more first – it Marvell in Because all combined way talk because you getting the we the actually our in the from about leading a connectivity; are at forward. the of so least separate going original and I really a LCUs which do to very dissect processes the more can and is business. in they Craig, becomes pull-through

Peter Kelly

that. Yes. take Kurt, I'll I guess,

I percentage kind business. know, the as of was a industrial out not a the Marvell percentage So overall single, overall every of in but say break it double-digit IoT to Craig, quite going you industrial not and of business But a very low Marvell business, will we're the high quarter. was individually QX, WiFi double-digit

out we're that going within one not break aggregate. Just market, end to Marvell but in

Operator

from line question the Your with Ross DB. of Seymore comes next

may now a ask question. You

Ross Seymore

Thanks guys.

Wanted making seemingly side some how the are the much to think is leaving ready question considering of running it. just And for good is I questions. inventory real of ask go on customers this a let inventory the look exact et into first cetera. deed your your things. strategically way the punished, are one me how some sure you opposite might competitors no about channel inventory, So, rebound, spirit higher going inventory and want you the of ask to but at And on of

your So to I to a either internally, get internally burn have I let days, to is what that bookings stop. And start we first related when once hundred million the inventory quarter to going you utilization creep and actually guess, to quarter, guess million flow XXX through. in are to hit XXX and see, will that that you will the the in that up

Kurt Sievers

Hey Ross, good morning.

deal companies. will who who of I competitors a is exact first, perspective the you catalog is model. strategic you more at more opposite, visibility into tell to This we more inventory the customer quoting, fairly specific product have associated rates. our about and because our the need don't in means and our have or take the me customers product different the really a application which case run applications They're think majority business hold specific, are good just Let we

to uptick continue or miss following will that and the bear right the about of very us we very, strategy. a we is are distribution believe number for miss by not any inventory and that X.X months not sure we So

are Now, Peter, relative QX. the facing to better over to maybe in or hundred we you

Peter Kelly

product. the than more million ship. we that than $XXX have pretty models because more months, willing by order to ship is they not they And them reason And of to X.X to type just shipping the don't we end million product start distributors to add $XXX moment, customers. the their when a little their Ross. ship we're can at let the sophisticated that, bit We'll And have the

internal the to when to In goal down to Utilization revenue XX starts increase. start inventory, go days. to increase will terms is of our

inventory, – flat flat increase. utilization revenue, to increasing Flat So on utilized revenue, see utilization be see flat. you'd start you'd flat relatively inventory, flat revenue,

all more it's about utilization pretty ship, the the straightforward. gets. the better It's we So

Ross Seymore

being level a I $X.X we margin relative the and of time? up your guess what And can OpEx assumptions, revenues, Thanks about framework XX how the et relationship there's getting to that about OpEx commentary follow-up on million have on on up might a to would your $XXX improves But on percentage revenues of the turn for that. that the or you sort I do my on that revenue extent as billion, any much to of you specific And that be. million $XXX Peter, the gross your million framework, at the side, know cetera? down the to quarterly about basis, doesn't that to visibility or kind trajectory how math

Peter Kelly

a Yes, Ross. great question that's

stronger think, before saying is one the for the XXXX we will first We is Kurt we number – what XXXX. think QX think half. will And So that than the better weakest was half second of than things be the be XXXX. revenue

investments. we're going have So to right the we we the in market. our context that making think We're within win products, right

pay term of you that plans cutting payments our So reduce actions like not and to two as taken next year. first short executive are we have eliminating incentive at salaries. reducing I investment. and And some we've rises this no least year maintainable basically sorry, And the mentioned, the into – those go

think So of of revenue in because what quarter, level completely OpEx it we do. will we but this will maybe add second afford to our first costs. But not our and the assumption can the is

see a we view there’s then although second a something maybe have huge wave we our that. think from don't QX QX, XXXX on But didn't we complete it recovery we Now V-shaped a or into is write-off. change

give is the Did you helpful? I So context? that

Operator

comes comes of next the line from Evercore. question line – with of Muse the C.J. from Your

may now your ask question. You

C.J. Muse

Yes, the for good a guess gross good taking margin Thank afternoon. side. question you question. on I my morning, follow-up

$X.X telling effectively gross billion, should incremental see margin. between $X that you're So XX% billion, us you

as you So curious progress? ratable should that be

Peter Kelly

that. other model we say is is think XXX we revenue That that margin. you $X.X points things a about of XXX There's in Do basis basis reasonable you change couple we plus have that's the a of of sort What or a we've on. of billion we don't what gives do kind of a margin, that level. the said of – points but X% go minus gives

that costs level fixed XX%. Our at are about

million maybe the dollars So know, I million, little don't quarter. math, a bit that's more you about, if do a $XXX

higher. So of lower your at costs much are fixed revenue, a level

not very do calculation relatable. low very, both certainly that’s do able directions. you to you levels, fall higher get the So to some at But throughs have be

C.J. Muse

be it delayed? utilization Or you one would the concurrent quarter be Okay. increase? And would expect with it to

Peter Kelly

question, Well okay. I it’s mean great a

XX%, – expect improvement benefit we'd of utilization won't XX% until the kind in to is – up quarter. utilization current in will in So is current benefit any us the really

go factory are you kind see we're at you You to when of real moment. carry a hard give XX%, still fixed operating once to start line costs it's a some forward. to because it's so of benefit by the we the big But you the way

C.J. Muse

about Okay, radar, follow-up, your crossover as wins, your my being of prepared helpful. some UWB. you in that that's secure encouraged remarks, by processors, wireless, And talked

what is addition conviction that half your it be what highlight would in with clearly really macro the within on driving construct to of back had the growth you well? improvements as If

Peter Kelly

then the had to probably I second it's if wireless the for half two connectivity. automotive say and radar pick I'd the Yes,

C.J. Muse

Great, thank you.

Operator

Your next question comes from the line of William Stein with SunTrust.

You ask your may now question.

William Stein

taking good Great, my questions and morning, thanks everyone. for

a First is that an I I is more ramping in the on future. But Management of and processor, hear Systems which there's another love of also Kurt, network Automotive have of that talk the we'd can. think to think areas couple that traction you update I Battery I of there? one any And one do progress? SXXG a if already follow-up haven't then a win design highlighted, And

Kurt Sievers

Yes, that what thanks, them, mentioning doesn't the they should by don't Will. do. and by not way, Absolutely, mean do they

push Management share Battery fair track, this I it looks is very, of to all is, as electrification. the very think, the further it's that seems unfortunate So as on especially meantime, it but it actually Since in the year. to the say nicely like pandemic

would you a growing much. of very lot the given strong perspective, say leading next rate are benefiting of OEM I and different drive especially as in in, it time. with run China, the from new very, from So European a in nicely position very trains all enjoying over perspective, model just period with like customers we the a – from pandemic And very our electric looks that know, launch position that

our say to that of approach, I it deal including a ADI in the that I'd superior me micro, because as here, which it track. didn't and mention looks is one system a like by us. proposition Maxim just is matched combination on looks something was ask value all very that again as it competitor. of much the which But context, let question surprised actually So is you

So on very track. nicely

you the The is other mentioned SXXG. one

a one, So processor, horses four going we pretty basis, which out and likely maybe evidence year. next ramping mean, in which model volume customer it's and that's to there launching solution production which broader prominent period. Very are we your with or hold have which but hope on prominent I come press is FinFET-based there ramp. to three can I bit. the you a very next, the with then release is going just this a little in gateway further give announce in XX track, I is with coming in much to months, a going to the actually and one

William Stein

companies improve capital I perhaps as April follow-up timeframe, appreciate raised March, to the can And if in Peter, sort did. of that. a I get liquidity, of perhaps NXP lot a of

some that of planning debt you Some at liquidity them level run contemplating needed. perhaps sort the have and back reverted this, longer no repaid consider that of since of elevated for you. Thank liquidity are awhile? is NXP maybe to level Is to

Peter Kelly

crisis, anyway, down Yes, to billion have out debt XXXX. of $X.X be the to COVID it's irrespective would honest, taken the gone I and because pay that note. about It's

the it's So bit to But was it use it XXXX. in and always a we'll think that the time, pay down. months right it when of little for we planned the coming

So that's what we'll use it for, yes.

William Stein

Got Thank it. you.

Operator

Toshiya Your of next Sachs. with the Hari from Goldman line comes question

ask now may You your question.

Toshiya Hari

the declining fairly for are Obviously, taking business. to environment I operating thanks the units And question. double strong much wanted challenging mobile guys you with digits. morning. smartphone very a Good on ask in

opportunity very market. that'd guess, outperforming to into as from mobile to it got seeing can I speak to into to your half, and the perspective, speak what You as And do wallet quick second set you importantly ultra-wideband seem going follow-up. relates a you're I've can if more the be well. if Thank helpful And helpful. you be you. a be XXXX, that adoption would

Kurt Sievers

indeed it's It's have much system that second I in customers And the briefly into unit change half But our impacts very shipping of mentioned one we mobile content, actually also And the nicely of we leading space, the Great question. key actually which about architecture. the before. rates ultra-wideband, inside that for run two this a as a change. Indeed, third is we dollar with change rather is the Silicon drivers growing and also are with indeed, the wallet into solution. quarter going The mobile than question. attachment are rates. content Thanks Mobile for very and outgrowing. see the and we in growth believe Yes.

untra-wideband, the of se, rate the thirdly, silicon wallet part of other and So it the that are new seeing mobile in sequential the up. wallet. question. of is growth, the And which it And was a content growth, is per higher attach which the mobile your you is going of is additional

it countries attachment the those people accepted rate XX% wallet feels it giving mobile been track a little also maybe is the really where more a the So in year. contactless next us globe, to far so point, lower rates boost payments but because that mark has on anecdotally bit on to a to this yet. And much are attach pandemic in at the there the haven't

a that actually it too also bit which one early So by is by be seems helped little call to the be another seem to but the to firm, make they pandemic.

the drivers ultra content three of in mobile in silicon for going mobile, the rate wallet, thirdly, wide the solution So and attach higher up, the bands. wallet

Toshiya Hari

from you ask guys to competitive past in I the And a the probably my landscape. U.S.-China talked I Great. are tensions. a years customer any the on potentially long you. better your wanted Thank take a of time, you think, take seeing about in perspective, the engagement NXP? as NXP trade for share follow-up business. realize beneficiary for gains Kurt, have being But change I

Kurt Sievers

are we positive is business doing company, And in keeps definitely it's lever engagements. company a seen we It European a that so clearly, opener being are into very with and a door a China. as European

mean, in but it clearly design I wins positive said, you market as Yes. a So us. even fast is moving takes for time,

Operator

Your line Barclays. with Blayne next question comes Curtis from of the

may You your ask question.

Tom O'Malley

you Curtis. of in attach entering quickly really the rates this increase is Hey O'Malley in anyone In wanted guys, competition their just Android, I for UWB. Apple market Blayne see or is ask a on any own. competition Tom on forward? or just discussion do this to there, going has

Kurt Sievers

Tom, Hi, great question.

system a deep ecosystems across ultra-wideband play. much think very, I is very of

RFIC, about this the secure actually one, is is not it about elements. combination it of RFIC as the So

the applications, hardware secure always we with it a So are and comes software. the now, together element ship all in associated which starting to

I is hurdle triangle a gives and and RFIC. which, competitors. secure for of differentiation actually elements that's That is combination us also high what hardware, believe, So the software, pretty a

not to we you where big a solution many to only such So RFIC lead. product. look have make that's it's And a perspective, deal. a to the be shipped, if over years it's big whole from this deal competitive for But probably at an

Tom O'Malley

then automotive on coming a and of the But And Obviously, the helpful. a IoT in? that benefit back your and side? in I size some following-up earlier, assume more industrial portion specifically. on question more one that's the really you just is broader Okay, of prepared that came industrial marks, where Was and called John's as out side well. it you could kind auto on or China

Kurt Sievers

for you or QX from – asking are a into for the Well guidance QX?

Tom O'Malley

be both. on think, into But you I helpful. can give would the QX Both made so you on comment, and going QX, whatever

Kurt Sievers

Okay.

Tom O'Malley

Well QX. want I

Kurt Sievers

like simply had across pandemic a a QX, China the has I on shift. it mean, – phased big because clearly Yes, the that's And board. factor was Yes.

already So China QX, recovery the the has shutdown and and for U.S. while of then QX. pandemic Europe QX pretty essentially the in the earlier seen in a have been from good impact biggest part

QX, actually broad it go you Now, if is into based. more

this really Board. the mean, So I XX% the that's not across the is quarter-on-quarter, for recovery, auto just China. example,

places see those recovery, in So from do and I are the where Europe sequential a would shutdowns in QX. the we auto say, especially perspective also starting Japan, in U.S., because in were

Tom O'Malley

lot. a Thanks

Jeff Palmer

today. time for more we Operator, question have probably one

Operator

Caso with line the from Raymond comes James. question last Your of Chris

You may your now question. ask

Chris Caso

about doing with resumption? be buyback talk and are Yes, plans the regard Good the question there some to is you thank perhaps for could criteria the what what morning. you. The would

Peter Kelly

take want You to that?

Kurt Sievers

guess you. that’s for I No

Peter Kelly

when the restart XX-month net ratio a buyback EBITDA. adjusted we debt times to to of get will trailing two We

X.X. run QX. In QX, on we X.X, So in we'll X.X a be

times. while we buybacks will So it's return to going restart the to be levels it's again. net debt our when a But before see two

Chris Caso

Thank clear. you. That's it. Got

dependent and absent back targets a Just mind made and to to inventory to get target, rates getting – follow-up your is you comments in your but timeframe utilization inflection to internally? does inventory long you at demand, when how utilization demand, with these up the in regard a this of have on do about and to production obviously getting some it take

Kurt Sievers

get XXX down trying in to QX XX. we to Well, get to

at at this assuming easy levels, XX. it's okay, revenue to to So it's get point down utilization these is pretty

Chris Caso

Right.

by of the the So end sure. year, for

Kurt Sievers

Yes, would I so, think yes.

Chris Caso

Got you. helpful. That's it. Thank

Operator

like back conference company. I the to would turn now to

Jeff Palmer

you for Great. had Not everyone if your your interest you Kurt, off like Thank to you, you'd today. Thank last sure and any we today. make time sign gentlemen. before remarks moment

Kurt Sievers

Yes, thanks Jeff.

attention for today. let So thank me your everybody

share good all our market from it moment good do the it's the OpEx which as this direct very, going feel to treat very over of that, At is done time. Thank And across think and you a time to now, we're that still an perspective, is past time, we recovery see from mix the businesses, because the QX going growth I across I was all looks you. important spend playing it indeed about means our which cautiously a of control, stay forward. regions. specific win markets, thank which factors out forward going we've perspective, like at with the for same next the this from most inventory I of period. We because same speak our us to vigilant are clearly all the very trough. but And a company under you drivers,

Peter Kelly

all. Thank you

Operator

conference. concludes your this and for participation gentlemen, have and you a day. ladies wonderful Well, today's Thank

disconnect. all may You

NXP Semiconductors (NXPI) 28 Jul 202020 Q2 Earnings call transcript