NXPI - Earnings call transcript Q2 2022

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Operator

Good morning, ladies and gentlemen. Thank you for standing by and welcome to the NXP Second Quarter 2022 Earnings Conference Call. At this time all participants are in a listen-only mode. [Operator instructions] Please be advised that today's conference maybe recorded. I would now like to hand the conference over to your speaker host today, Jeff Palmer. sir. ahead go Please

Jeff Palmer

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

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

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

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

Kurt Sievers

joining much, and today. morning all our Thank everyone. We you you very good call appreciate Jeff,

Let quarter our two performance. me begin with a review of

markets automotive with our mobile our were line IoT than expectations. and $XX in in above the million infrastructure guidance revenue mid-point guidance better was our while communication industrial with Our the of trends and and

Taken $X.XX of revenue together, an year-over-year. XX% NXP delivered increase quarter of two billion,

in XX period non-GAAP above XXX than points XX%, Our of the better about ago and the guidance. mid-point quarter a margin record basis year basis two was operating points our

Our better results execution strong guided of improved profit revenue with top the leverage through reflect incrementally operating on and than on profit. gross flow higher

$XXX other year-on-year In our year-on-year was revenue revenue up turn high-end better line near $X.XX trends our communication was XX% up with year-over-year guidance. mobile, me let year-on-year guidance. our our in XX% focused markets. XX% In billion, line to Now end of the was revenue the specific In million, million, automotive, than infrastructure was up $XXX lastly, And and and in IoT million, guidance. in with industrial $XXX up guidance. revenue XX%

Looking at our from across immune we the not clearly end believe. the is macro are trends markets, NXP naïve weakening environment. to

signals, industrial and we the term the markets, our majority especially in When several highly customer and dynamics we are per per geography. look the which of for terms high outlook. revenue. and markets of very in confidence intermediate frequently is relative to end in and supply, review demand We channel, demand inventory key have closely true of demand level trends we automotive indicators of the account at per versus alert a total This

in mobile aggregate, accounts is handset markets, note there our weakness to is end members. more only total about And the biased low important business our mobile in Android XX% the business towards premium-tier documented it While revenue. for well of that is our

our IoT much smaller electronics and consumer in contributors of the of portion terms markets, segment. In broad industrial are the PC IoT and there

customer desire XXXX. industrial to behaviors, of customer our currently, within orders customer throughout a demand, with our weakening percentage by us and is facilitated non-cancelable substantial are large greater service. not continue non-returnable level major commitments than to assurance, long-term auto the committed NCNR the ability customers which orders And any placing supply of firmly see our of into to we do terms base. In XXXX Relative

operating underlying inform improving continues stale decisions, capability. or supply key de-risk to of our approximately our as of existing terms metrics, backlog potential even address for Furthermore, any In term gradually our only judge we which orders, demand. and outpace short actively XX% to the incrementally double demand supply we

continue redirect dysfunctional get going we Additionally, kits thus are mix the those customers, at which extended the at to in product risk see When customer to correct markets. avoiding limestone looking automotive location and shipments industrial to chain, or a inventory right the supply and which buildup. we of excess to to inventory, complete continue stagnant struggles

sequentially is of placed has a area in terms suppliers customer to on hand fulfill order our on and closer in basis inventory, with target quarter orders DIO work-in days with through days. increased long-term in On Now, increase an progress firm five and XX in to material our of internal consistent commitments raw in increase two days own and it dollar three. built XX, plans. primary future quarter of The and basis, a especially was of

below half stubbornly moving to continues which revenue, long-term our Now remain distribution total of the about to our channel, targets. services inventory

which the the long-term the supply our situation two, below in channel. barely was in quarter it tight a supply and consecutive channel exceedingly seventh an X.X, target about of month is of months is During the quarter now

XX greater, being level Finally, Lead on last a to service quarter. actually weeks let similar quoted XX% our extended than is to be continue to to ability times whole with more which me customer speak or at requirements. the products

a positive the beginning backdrop, do year the against dollar summary will the in on good half of second of to this be the the first quarter half first greater So was year continue view absolute our year and We what NXP. to we dynamic for second than see basis. an a

for quarter three. expectations to our turn me let Now

versus XX% to two following the From a represents growth up X% at the of the this year-on-year. billion, revenue XX% sequential At XXXX guiding trends perspective, up at and single quarter the XX% we up are single within be mid to is IoT expected up the year-on-year quarter the the XX% year-on-year low a double And be Automotive same and We to the the Mobile a the digit Industrial infrastructure versus up versus XXXX. range single in about expected range two communication low mid-point about versus business. of in of to $X.XXX is and expected anticipate up quarter. versus year up up basis. digit our XXXX range XXXX. in low on the three mid-point, and XXXX. other in two prior quarter about range mid to low in versus be and in range digit third quarter versus range digit range finally, is low a XX% in single quarter be and period the range XX% up down sequential digit up is ago expected in the

we continues specific XXXX me the as have macro accelerated supply anticipated clear and the Overall, growth for Let the demand our to materializing, segments well company cross industrial as in continue strong continued automotive and growth notwithstanding summarize. within customer challenges. currents is to increasing do demand supply. The outpace drivers. see We

markets to our manner over to would hence all environment – about of pass remains the Bill? very diligently over staying inventory macro I continue Bill you Bill However, the we assure like financial across review with paranoid the will we lean. end performance. for disciplined that, and – to very work call and are And you to a to in a

Bill Betz

morning everyone good and to Kurt, you, Thank today's on call.

mid-point our Kurt million and Revenue outlook of revenue of above will has were the covered $XX provided financial guidance move of for above non-GAAP financial highlights. the good. very was drivers mid-point and Overall, performance our I QX, As already during guidance. profit our operating QX to and gross our non-GAAP the profit was range both QX the revenue the

of below of details in revenue XX.X%, a guidance was $X.XX margin total or guidance gross million operating $X.XX up million the and year-on-year, was above in million earnings, higher range was QX expense $XX effective basis and of mid-point year-on-year operations of from non-controlling model. $XX Total and a a above in long-term profit non-GAAP up which million, line cash From non-GAAP billion interest and billion cash gross non-GAAP both and rate mix. the but range, $X.XX to and is our billion, compensation, $XXX which were moving above XX%, or product non-GAAP $XX XX% operating approximately positive XX.X%, profit up year-on-year as both million. perspective, Non-GAAP of is million ongoing XXX our non-GAAP guidance basis operating was operating $XX of million. the $XX up margin non-GAAP and up We Stock-based guidance of generated Now result mid-point our taxes reported included and for tax range. range. XX.X% interest our the mid-point points QX, points expenses year-on-year the with $XXX total revenue the profit was was XXX not with

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

which $XX.XX up $XXX debt of $XXX debt total early XXXX. of million new in QX as billion issued the billion, retired debt, we simultaneously was end Our and at million the was sequentially of June due $X.X of

the was during quarter cash sequentially net to previously Our QX. CapEx $X.XX investments position EBITDA the million combination $XXX of $X.XX was financing, mentioned with a ending and resulting returns trailing we adjusted billion, $X.XX capital billion a of debt billion. exited up due and XX-month The

XX.X XX-month of at coverage adjusted end was and was the our of times. EBITDA ratio adjusted QX to Our debt XX-month net times EBITDA trailing interest X.X

in XX Turning to days especially and support to experience in was materials DIO increase of and raw days, hand supply X our work-in The improved to long-term on process metrics, of inventory we periods, revenue and increase subsequent QX. XX sequentially of target continue incrementally to growth trends. working primarily inventory an as days capital was days close

XX months. channel the manage in the days closely at were days Well target, prior payable were our quarter. to an versus of continue below days We long-term channel sequentially one receivable our XX, day X.X with and distribution increase flat inventory

collections periods. demand, for cycle positioning cash our for together, strong solid days reflecting and deliveries Taken customer future conversion was XX customer receivable

capital working of from X.X% CapEx revenue. and million revenue sheet very XX% $XXX metrics management strong. or balance resulting million Cash $XXX non-GAAP flow be to Our cash was or free was $XXX in and of of million continue flow net operations

basis, of in our dividends. our million $XXX with excellent. trailing of strategy. the flow cash business back continues of be returned The to to paid the we company, non-GAAP generation free XX-month On have cash QX, capital a flow allocation we During consistent cash XXX% the owners

our QX. to for expectations now Turning

mentioned, minus sequentially. X% about at about $X.XXX or This we anticipate Kurt As mid-point. about year-on-year to plus $XX the and XX% million is billion revenue be up

$XXX about million about non-GAAP points. or up $XX basis expect to is XX.X% Operating gross college spend. sequentially minus XX hiring, margin about expenses plus minus which X% normal be project new and We about or driven expected graduates are million, by be especially plus our to

operating to million or a anticipate non-GAAP Taken consistent to tax $XX estimate to together, to see should effective model. the about be million mid-point. related tax We be $XXX non-GAAP XX.X% with be at we be Non-controlling interest and operations financial about cash our ongoing about rate million. margin expense about XX% cash communicated $XX

for purposes, that XXX average suggest shares. share use we modeling million QX, count of an you For

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

automotive customer ability QX mentioned the and Kurt mobile weakness demand his end-markets. documented macroeconomic and to outlook uncertain have industrial immediate consumer the our we Despite our well attempted de-risk risks, the as in than of and given greater in combination prepared the remains environment in strong these supply. to First, and potential remarks,

Secondly, Day, since drivers. growth of six November a we discussed last Investor at growth accelerated standpoint, unique from revenue year

period our well are very last performance first we the at the to year, half targets on XXXX same presented. of Looking versus track we

our Lastly, people.

We with team dealing are while this – to China, restrictions chain global our members overcome continue and very those severe especially disruptions proud supply all globally, past who quarter. in COVID our of simultaneously

over for work. testament continue that resilience. for I'll hard incredible With back now be the to powering times, a to employees' it and our these and are We you turn thank at questions. through tough to dedication amazed our operator their results And extremely

Operator

question. Thank for One our you. first moment

the coming from Stein first of from line question Now, Truist. William

Your line is open.

William Stein

to magnitude Thanks sounds done of Kurt my you you've in taking the it talk bit things comment to Great. I'm risk if questions on relates adjusted is the you both backlog. the have about reference and backlog that can outside reasoning you Bill, strong you your can the and see Bill related your that question nominal thought process so But actual of see company your order a to like for – the congratulations than wondering and the done on a risk in Maybe trends. of more remarks. what adjustment. execution. much and explaining prepared first My

Kurt Sievers

period What I us say with good thanks. which of foremost, Thanks, supply that for to when and demand we risk that to actually first comes morning convey I with is Yes, XX% only Bill. against try true true foreseeable covered ahead And then we the demand our back the adjustment. indeed, see. are

we reasons that backlog I through quarters, times be I of our never which past we’ve been of the have double good because normally size clear human always inside orders For think there believed the backlog huge in might slowness. behavior have revealed is just always the

to and that emphasize of rigidly that transparency try to more is risk after our Now learned to needs end clearly have the past actually perspective And backlog come number across that have just applied the XX% still meaningful. markets. mainly against very over want order Bill of to from capability customers much doing knowledge supply all only more a that coverage about minimum quarters risk our to which I true increasing we a demand. in adjust adjusted that have we And we

adjust we to So result in in size the be it XX% risk of say adjusted serve, around try realistic the it to of demand. markets of coverage the the why the that’s different try what we that future we is backlog foreseeable each and of is leads that to we

William Stein

improve pretty with customer to helps current your is meeting natural to of capacity, underway Thanks be is that’s there extend much. company internal to partners to foundry come a could that May that and you demand? the your right, doing the All any foundry so effort what relationships closer is lot. is to follow-up sort allow

Kurt Sievers

Yes, stick clearly our we manufacturing model. absolutely to hybrid

us it this eight on believe, internally good collaboration We of of that growing we and significantly We've the to our going for of with to tuned our are same both our key this in At about Especially, current we place customers. proprietary coming partners needs below of supply millimeter very specialty the means foundry and are think prime are what seamless partners. out it the nanometers. for also working XXX of is and space factories, about spoken increased processes is our forward quarters is I equation, that partnerships processes. evidence And in and moving are past quarters. is is superior wafer results quarter, when our own have model ever in of to ramping about are indeed manufacturing comes logic to our by and helping there, all going the facilities more serving serving that given what needs into the more from sequential incrementally remodeling XX to is that and more to serve strategic partners, the forward. growth And coming and six the supply. ends more continue In which that are to very and these clearly past is the millimeter XX% we when be for talked increasing our the the in up predominantly unique which proprietary, the portfolio time, the technologies that past, of facilities we the we creating foundry foundry definitely are And a NXP. our CMOS we XXX existing

six stick key model, of allowed it's quarters. also that the pillars So emphasize, over to want us again is in which to the important outgrow I still that to hybrid model, market last our refinement a the hybrid that really but we has

William Stein

you. Thank Great.

Operator

moment line from next One question you. question. with Deutsche the Ross coming our for And next of Thank Seymore our Bank.

open. is line Your

Ross Seymore

the guys. the said the in the guidance it, me you I second Hi you to you half to Thanks can wanted disconnect for everything to first. question. appreciate macro, dive letting backlog, in ask yet manage scrub you into And a Kurt a are grow bit guys in of little seems the but going what's doing on potential the going fine versus quarter.

that, it last bit is that half. in guess, it's be sequentially look growing what fourth I you when But start it apparent more think it you quarter. macro stays quarter third is? And maybe you the you as to So little a like pointedly, great more do thought if will grow at the in are you second and would said doing, you

grow believe half still sequentially will the that that does imply in growth quarter? second in fourth you would the So you

Kurt Sievers

Yes, so thanks Ross.

First make not macro, also visible that in currents started clear of our the mobile cross orders, be which the especially hear and the all sure are in that we all, to in indeed, we loud you neglecting try have to market.

for paranoid small, any it principle much. applying inventory the disciplined we the grow Now relatively very is are down to to doesn't mobile us really be so the company is hyper But whole impact chain. hyper not and

try disciplined we applying where extent small consumer, consumer-oriented portions we mobile stay and to in sector. more speak area we as industrial first And market there the as So, a the is we and can this are inside be. of segments in as IoT certain our our to

crystal I that also of we the can for totally the don't ball into that gave turmoiled confirming ask in when that half absolute macro three. over about grow you half highlight quarter is to quarters. the terms. sequentially the Now, next I for that dollar yes, to more tried four, sequentially have year. going the tell half, you we rest for ramp first second up quarter to I are remain you continues second out the but the We within a sold guidance just supply

automotive mobile markets clearly optimistic really serving, are do second we also the I to will quarter. cannot from the we half other the quite into industrial fourth sectors, for the are on But consumer make strength grow assessment which in So sequentially. continue to and a what and firm

Ross Seymore

my for the noticed may for couple repurchase years you this Lots first trying was follow-up Thanks that I quarter you Bill or to a of of people guess stop that go that Kurt. the the buyback mean, color for what I I any quarter? thinking you what guys to think, can led into may into shares. one read in, not but didn't

Bill Betz

Yes.

for First much your read And Ross it. into off, I too thanks wouldn't question.

all basis. times many stated First return off, change on to a policy. no XX-month flow there return capital trailing our is free many, will we cash I excess

returned buyback of cash trailing we for our my Remember months QX, our board. higher XX%, do prepared, we we from or year, our the our of consistent still of be remarks, raised expect over $X XXX% During of quarter in we to XX least the to also by in policy. return and have with at At authorization free XXX% billion flow. end a the dividend state

Ross Seymore

Thank you.

Operator

you. next our One for Thank moment question.

C.J. of with question next Evercore ISI. Muse from line coming Our the

is line Your open.

C.J. Muse

a and for bit same you are mix, along at sustaining hopefully are EV ASPs, But your those. get Thank about like speak but higher ADAS I Yes, good the that you of industry. morning. missed, overall their the I golden higher morning screws hoping excellent you OEMs you guys. second thinking growth as have you aggressive. Kurt, time first for At and guess obviously for perhaps auto prior state and to it was question. those since costs with this question, was input looks I the taking outlook we'll how waiting This are auto could half look

or things? in how in side that might can things of you playing So, normalize think do you out? auto And supply demand when longer? XXXX curious see the that be Is do we

Kurt Sievers

first the SAAR an C.J. the think, the year I I That's easy forecast for for question. very hasn't to not thanks this changed in much. IHS place, dare which, Yes follow

to of like short growth the get I think continue to, SAAR XX this year. well, us of million about this a cars would they speak year, which X% just

big the world. half half And especially because, Asian a again year, shutdowns little the which However, car suffered is to shortages. in it pronounced a second Japanese, I impacted from lot China for two quarter, in think, Southeast mind surprise world, suffered has COVID car that that includes China semiconductor production one over in lot the you there car was production. not massively a And Japan. mainly mean, from a be country but X%, half which Chinese one a the and the growth China, I has in largest the this continues Western and less in

half that a term think, from C.J., will continue year, X% growth shorter perspective, also first nicely car think IHS trend two grow quite I be production so. should the according another next I or to over into And So, the will finally. which half,

of that probably still our All is short of demand. in views consumer

low what very in Now so early the the such that car if recessions assume the cars. a extent highs it muting, demand and on I to in consumer will depend different XXXX production geographies we demand far is to muted is think consumer continues there for and is that, is or looming still to macro But below gap realistic it's the XXXX production even grow. think, so car

know we've has same the before, the every factor however, here, bigger come EV depth And increase, certainly at I amazing numbers for remains again. increase. and content from accelerated just Now I especially with it's content a quarter time discussed new it penetration us, the to

car is now XX% latest the year global I is XUVs. for reduction think going of the forecast this the be to

which it controllers to an also in growing. and is more micro contact talked engine overall now last combustion you terms and, car that be we massive in quarter XUV with this ahead and mind inverter and itself this year production. these of battery many, control to momentum continues relative cars, the XX%. are in a absolute microprocessors XX% and semi many mean, think associated And massive of again, Xx about XUVs numbers than XX% this is production, which management, I our is I growth with year-on-year

for And there the increase the pulling quite about the fact lengthy we cart continues are reply, but that to the big be So content gap sorry is us. for there. animated a

C.J. Muse

very That's helpful.

speak comments hybrid XX-nanometer earlier your point you a I eight-inch absolutely And internal your considering did around factory where with the follow-up, manufacturing that's would the there optimizing to consider and model. demand you need adhering there. to As capacity. time new out a JV above But heard TSMC? Is to my in

Kurt Sievers

off first question, of Well, your yes.

because growing to comment of will continuously is moment Second naturally our demand. leads with the not I serve four after very fact not demand matter walls enough half, reshuffling the existing even a be what described to, yes where described I internal the I will future to will capacity,

will we but yes, there various is different about it, do of ways So something achieving this C.J.

So got it but not locked in options, into the facilities Europe of of is are. being provided sorts U.S. where majority we don't the do down our – all which the and which TSM. get exclusively, can including the There by again, trip also idea techs the with opportunities including, are but

C.J. Muse

Thank you. Very helpful.

Operator

of next from with line of Vivek question, coming America. our Bank And the Arya

Your open. line is

Vivek Arya

Thanks I to my ask Kurt, for orders wanted taking question. about dynamics. and NCNR pricing

that are Let's defensive orders market? how the of pricing year, how these curious NCNR and be enforceable say in production next is flat auto I'm down will or kind strength if

Kurt Sievers

thanks Vivek. Yes,

Let me start with the second the pricing. part,

to needed that very very actually, automotive have raise very We the supply continue stable. also pricing continue to go input technologies imbalance also force do Given for see us and year into and to unfortunately the I a between in next I our of would maybe most a demand would which cost the our pricing. is high step indeed stubborn confidence further. rising

a year very in line of pricing demand prices we into go we a percentages. there become environment customers our heading are increasing supply the about believe which pricing software increases, chance the cross order thinking into our with again. again, imbalance is that that margin in than is policy transparent very I said that we And here the to times, next number have where in protect year next think it up especially to [indiscernible] much a continues I automotive cost So there and to I to rather input experiencing is are

said I because as maybe, I much the car on side would is think, driving or case, of flat think perspective So reducing you be content even as with are you car be going – pricing which that which so case production the a to that increases, suggested, still a anyway. the demand production, don't from

Now other in balancing next supply believe so a much, SAR situation, content increases, was surpassing see to soft many demand it, of reduction we side even impact in se, answered the year, per the between way a year. imbalance of I impact unfortunately would the I the next or supply technologies, and given continue that the out in SAR an

Vivek Arya

All the follow-up right. And then is on margins. my

you. is also let's to time revise margins model, target if model? expand? So see it are grows high from margins, can QX your model? And high the your end gross getting what margins are I continue Is EBIT a sequentially Thank And positive target. think to end towards the of I you say of bit guiding little there still leverage in above the the

Bill Betz

I'll is Hey Vivek, that Bill. take this question.

change every margin greater to material model. going long-term forward. not go to the a if better of growing we line are the our model, We're to revenue will that line our our any So, be we X% top X% quarter there's everyone of at those time. and on and current a levels our our top will in business high or during performing normal I or than to year. we we remind related our faster would long-term provide, just at model update growth revisit this as And like yes, at or this we'll end that model focus three-year every change

of run the year. last rest feel confident the we the to – end I change, call the no model mentioned, So very in for like toward of our high

Vivek Arya

you. Thank

Operator

coming Gary from next Thank is our question. for you. One question Mobley moment line Fargo. with our And next Wells of the

open. is line Your

Gary Mobley

can want in different and mitigation quarter plus relates additional in COVID end last the kidney high and expectation for two go Hey China, question. in conversely, your the issues you macro the how the issues, your thanks it what right of respect supply to guys, appreciate months de-risked as ask But to hit of to my with quarter maybe third whatnot. the whatnot. commentary guide, to what taking I

Kurt Sievers

Well in and guidance with Gary, order a mean, a and we range midpoint same the risks to a I time. comprehend at give opportunities

elements landed certainly as and both say part opportunities. minutes upsides of risk why just of couple and the would about and following. ago. weighing think I that's I downsides, of on just guided we potential midpoint Again, a $X,XXX, the listed you potential carefully are the thought the we we

And that of For driven it us, would our way next it in percentage the period is tuned probably here sentiment short the quarter big mean, industrial capability dominated time customers. from what we such markets our is going. more QX in supply anything we guidance really just supply the term by out hear is a how really is overall obviously the put And our quarter. by by are and automotive I the given confirmed than revenue it's a I the dominated way customer orders upsides short are our and are capability. into for since a sold for

Gary Mobley

Kurt. the Appreciate color

would contributor that which growth? revenue about you I'm to [indiscernible] XX expect began accelerated As to drivers out over and months, of those six wanted to my follow-up, six outline. ask Off looking you the be to next your the outline biggest six continue I growth to the the

Kurt Sievers

is of we a for at guided three November. the think Well, line the us relative seen three mean, think, six them that accelerated did last I growth sizes well – in them emphasized last all intact, contribution was relative for the speed. the you year of six way So growth that we his Day When year we is is Bill on what – Investor but Day you've at also the relative very very between prepared no change, six And a track. with all should on did look guided November meant track I that drivers. remarks six and – are And guidance. Bill, them are we this to them There really is them? how our you say that years. there is important I they're in the very in much Invested very and of a good say the all I what think on

Gary Mobley

Thank you, Kurt.

Operator

moment of Stanley. One And you. question. Morgan Joseph Moore coming next next the our Thank question from line with for our

Your line open. is

Joseph Moore

Great. you. Thank

Tier but prior You automotive sort to be from a that to also Do have effort careful amount customers hold stock. level Can buffer? you want you you clear safety do – of talk they you safety were happen? that do question started happen customers to expect do Thank said you. you where at a You the does more if that them answered And see build of larger to plan that the to do having that to your inventory, at level going you OEM your allow trying generally? you build there's hold to X to to know, message or with yet?

Kurt Sievers

an dynamic is That indeed. important [ph]. Stacy Yes,

that There in They more say hear I'd general are Xs. others inventory. product. like six in which general categorize, talk versus requests, We the, the OEMs about of might is with each on exceptions same of which Tier this hear be products the more think put into of the the We here Xs. months It also and Tier is try the single-source, So products. months. the that order varying. the Size and about I very challenge OEMs leave but strategic not very of that to direction for there, commodity see the more is shoulders three

way built, first for general many be again to achieve, a that it but my be at happen – the product, that Has be The might year. start indeed Bill for I Tier of stocks. start problem no, the the golden that at next screw product of make with where – in So builds and comment of it screw it the Xs Any next of methodical has can't associated peers, all accidentally it capability yet? the of hasn't mean, only that with but golden intended indeed Tier to started OEMs. believe but believe product, will inventory might least is do safety while or more the built. course relative Xs message flushes year all more someone I a the want through becomes than the available, the moment our No. NXP for it to supply than sorts think – of more to towards to at because related that's only yet. that I them which again consensus not then started when I but variations, course a six in in months I

Joseph Moore

very Thank Great. much. you

Operator

And One moment next Thank our question. for you. with coming line the Research. of our next from question Stacy Bernstein Ragson

is open. line Your

Stacy Ragson

questions. for Thanks guys. Hi my taking

talked with you that revenue the anyways, outlook. have about you backlog, Bill, did The end in might sure you so actually passing. macros but the coincident you on also a it your was that QX gave comment did was follow-up I'm in how constrained in, given actually much wondering, QX like Bill, it but made supply you you're of sort actually reduce outlook you had the I'm and at because first I wanted I not reduction talked that said know all the in and you if one, some guys any sounds that which markets? de-risk risk outlook like seeing you there that cautions about? of your a

Bill Betz

Yes.

of probably market exposed in not mobile but low-end we is especially saw matter to a overly are total sequentially China. for guided a a there. the that since we to So touchdown you the are build Android also have actually And any that players fact inventory we where paranoia I not

of particular relative a the that auto I third at So the I'd the said quarter, perspective part business. on, I There mobile in risk same probably say in is from industrial only there for indeed and repeat earlier. to adjustment can time macro what our

is the detail our and revenue much out in more mind capability sold third capability are supply by We the quarter.

supply to where a it's picture is, clearly be maturity So continues constraint. is mixed the

Stacy Ragson

Got it. Thank you.

Bill Betz

one adjustment me more. – The risk let take

Stacy Ragson

Yes go ahead.

Bill Betz

and say judgment actually adjustment assessment that statement is year, parts The of are QX. period. That message just where the large is far the of want market different risk be related win next the term Tier to that that a bigger the order see adjustments each we also also to for could term all realistic. would OEMs get of know risk when really adjustments demand. automotive statement supply parts – mean, I to them And of add really we to know a what up We Xs automotive other. be possibly was could when includes want against and then the say which that And production very year. it longer the share I we sum all the be. then we longer go win content is against market done is increases from coverage customers what you in a risk after patterns for is the car course share. of next should not XX% about and All where

adjustment that So next to only know make a then a can this SAR at year. certain risk we the we size be because

So of risk that's, what huge adjustments, which label where bring we backlog. overwhelmingly looks that's would practically one speaking the down elements, I like

Stacy Ragson

super Got Thank it. helpful. you. That's

are seen non-returnable non-cancelable For to turns companies repeat actually the asked appeared. run my it orders else don't they they're the, these was your It orders. as it. from maybe follow-up, think We've seeing wanted other I question somebody out really? practice, non-cancelable I a quite in non-cancelable it, you How as and but answered not non-returnable

Kurt Sievers

indeed. Well,

so – them what no of in macro in fundamentally that that that it. different change many – when the different our an orders to end in have are could cancellation. to how tell clearly and you, automotive make mean, there about There times to serious. markets in be in I been But customers reasonable maybe that see know looks speaking Well, want every we any has is – product. products, I legal think think pushout, no missed place system now, you more, however But customers sure the to that prevail. People behavior that is a industrial. I it's continues I with we from What contract. they two far no has There fulfilled. of mind can don't most want put place. is course three us will been times earlier one future, different. one Sorry, And question, of and is into I missed more is every put system of I in go part like to there level at in products some end order time on

that place the Tier the the orders another I in hold doesn't to car That's then is allocation car mean, truth. really then other the there one we is proper So much why end. one put X have reason in company. between them make NCNR is sure company trying if arsenal to otherwise order enough, and to we in to a only people from the suffering there too are not orders it help

Bill Betz

we them long-term add Let me we those than Kurt NCNRs this Of year, what just mentioned. to said to NCNRs our larger can't What commitment. all. were serve

to as NCNRs We tracking well, we were have forward. and able for started our go process as we won't levels be they XXXX supply to similar which

Stacy Ragson

That's you so Thank super it. helpful Got much. guys.

Jeff Palmer

we Lydia, other question? have do

Operator

Yes.

Our next with the Matt Ramsay line Cowen. question of coming from

open. is line Your

Matt Ramsay

Good about we're the Bill, the environment of OpEx sort talking morning. much. wanted context Yes. Thank very that here. you of I a about in to ask question macro

you think something And growth that's on margin XXXX. know to You don't did of and the in And it'll I from inflationary flat case gross OpEx to still be that would or guys control guess like that getting there OpEx going of you're I revenue the what, with expansion I just sort expansion that growing have be with upward would macro helpful? to just leverage. macro. you're had the if still the for XX% takes operating lot be XXXX committed and to Thanks. need expense you and to priorities on a control I turn? and the of go and there's know allowed despite levers of profit, is what to fact all in would operating the And things, in some might pressures a wanted to the what like pressure it wages I while some, and holding or what guess be those margin line, question is spending the where gross puts kind keep seems the

Bill Betz

being was we to operating continue we better slightly long-term question. Again, we ambitions. new XX% by think driven that guided an our well the investment your we Sure. here, from finished college XX.X% our very And absolute guide, and really below primary is for and joining QX R&D growth supporting at do just you Thank XX.X%. graduates standpoint I our increase company model. and again, than are that as the continuing

Now, and downturn, defined protecting free cash We it's have we if flow. that. do? will well all is there a for a It's around what plan our

reduced haven't to non-engineering then variable well in yields XX% of back reducing we've customer with the fill to which optimizing is focused hiring, we'll And prevent severe been attrition our you would mix Our those spending, on right, growth. shipments cycle past line or optimizing costs company, on last gets. I've as time. would years around downs, But have as the lifeblood toward costs, it depending material or we remember R&D similar our we said at optimizing or our potentially of slow two will include actions Kurt of obviously the and the been all protect our how not of means all also XX%, compensation, our discretionary CapEx, plan runs down reducing noncritical we our engine

So our Day. level in we our that that maintain playbook our that's to our range in have we shared margins during another Analyst

Matt Ramsay

about shortages comment was last NXP business. I'd on I bit lead investor builds doesn't Part portfolio inventory of Z like further? of with sort script; there's your Part same it. had you still times a was balance. of that are It things XX-week the interested a maybe I out if Thanks Y case lot mentioned questions your product Kurt. Thanks. for Got Bill. think as and get but up Part ratio there's be the interested could seem that of quarter. and that's follow X, Quick you of in prepared We of

Kurt Sievers

mix the market end do with with Matt, absolutely. has – of our that Yes, the guess I exposure. really to

from that up. heavily underserved which So serving, I but other needed the to are we demand constraints are markets, while would which technologies probably continues confirm there moving go away are badly actually mobile, in are in we supply those

redirect the try and again quickly So a where especially softening, puzzle handsets. it is we of to low-end Android is from course that's where demand

in products more little I China, for the and it have areas we and go that other which auto be continues up I unfortunately, point we this we line consumer And for is not where that the in we some some such put move are little to bottom to the that end but that oriented really much of in – of is actually whole that is mean, have it, to us, in us. industrial, demand the it way.

We but did time are XX% about it time, which XX we plus still is similar is quarter, at of last a as lead had indeed product. lead at the weeks pattern portfolio different since

that's in it question, on still I totally – it mix it your why it's moving that that and is So the at still stays understand same because but support not exactly the level. products

Jeff Palmer

please. call I think the for we'll move today, to last the Lydia, question Okay.

Operator

Certainly. coming line And Hari question Toshiya our from with last Sachs. Goldman the of

open. is line Your

Toshiya Hari

morning. Thanks you business hoping you're the was so particularly trends question. I that good in and the speak China seeing around taking can for distribution. to much industrial Hi,

you volatile numbers a had seem it historically been and think on really of industrial IoT be doing overall but based your I to business, fairly clearly your part well.

around of helpful? around takes would it, and super the into be – it, any sort any So comments puts particularly lockdowns of coming out going

Kurt Sievers

Yes.

market. quarter our managed suppliers do leadframe our had it, So make June into that government, take you which first about two programs all however, work, others. also by than the the we we how suppliers, indeed as adjusted more mean, stimulus much pretty I mean, demand to and And to to from which since had epoxy now are effect, starting that's we sold the we impactful and as of significant well materialized, supply relative indeed exactly was that can with of see see to lockdowns, as I some risk the into and both industrial automotive China guidance, actuals

the from of it a for course, low markets channel. my in the is for that had for mind the well business inventory second program by as the optimism China and a but risk both in remarks further the I is with there I industrial slight automotive notwithstanding at the think, is government the in stimulus and is QX So dominated mentioned lockdowns, and China, of perspective, there of still for is only in optimism, – our half which NXP prepared industrial distribution X.X China sitting of very especially year. that briefly channel as you

hasn't you much. it really of and lot as a up China, it, can that is So moved in see

X.X had I think X.X quarters, the before. last we two

actually. which hovering a still low month level, target is X.X we below very our So are at that

Toshiya Hari

micro Thank Yes. That the be given recognize whatnot? be over seen the couple strong to is dynamics. qualification controllers as you. that the think and with follow compete Renaissance, my separate currencies and of customers in competitive you on as and Obviously long thank worried today, that that relative you. spending we dollar or And really appreciate of components should next given we how much not as years, on? time that is is like just you've up, and topic other super quick we that helpful, should landscape a the something currency I then companies too cycles and and out cognizant about but about But dollar the STM topic swap don't significantly

Kurt Sievers

a we're against U.S.-based Yes. question. I'll hedge take naturally the your global that Euro. company. is one. Thank NXP you for We're

really not too I'm it. So about concerned

Toshiya Hari

you. Thank

Kurt Sievers

All right.

just second the a to the of once me pretty quarter gets operated that we environment. we let end well So in again, us And I the in have turmoiled feel think highlight call.

they especially industrial very is hard also our relative going on are and automotive We down are to that applications we safe We bit indeed which also be are a a think very We quite chain from thing both of which our providing currents, continue that paranoid in forward think industrial one demand. secular markets, low. we working we the cognizant The discussed the in remain Yet which growth sure the is outcome low. the pretty the and content macro cross revenues the underlying this trends to of automotive very in the increases of also landing today size out. are call. and sold is making inventory majority

market is months channel of We X.X and day-in have on more is that we I you built to that you this But no today's all NXP down and much. all the want in very supply. being make our focus we of the With excess there inventory to other make with in and that soon. day-out the evidence organize whole Thank hand one-hand see the you speak to sure on for you. sure behalf thank there. Thank call, on

Jeff Palmer

Thank today. our you to very much. This ends Bye call Thanks everyone. now.

Operator

participation. conference today. for and gentlemen Ladies our you [indiscernible] Thank for your

Good today. disconnect now may day. You

NXP Semiconductors (NXPI) 26 Jul 222022 Q2 Earnings call transcript