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NXP Semiconductors (NXPI)

Participants
Jeff Palmer NXP Semiconductors NV
Richard Lynn Clemmer NXP Semiconductors NV
Peter Kelly NXP Semiconductors NV
John William Pitzer Credit Suisse Securities (NYSE:USA) LLC
Stacy Aaron Rasgon Sanford C. Bernstein & Co. LLC
Vivek Arya Merrill Lynch, Pierce, Fenner & Smith, Inc.
William Stein SunTrust Robinson Humphrey, Inc.
Matthew D. Ramsay Cowen & Co. LLC
Ross C. Seymore Deutsche Bank Securities, Inc.
Craig M. Hettenbach Morgan Stanley & Co. LLC
Harlan Sur JPMorgan Securities LLC
Toshiya Hari Goldman Sachs & Co. LLC
C. J. Muse Evercore Group LLC
Christopher Brett Danely Citigroup Global Markets, Inc.
Tore Egil Svanberg Stifel, Nicolaus & Co., Inc.
Call transcript
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Operator

Good day, ladies and gentlemen, and welcome to the Q3 2018 NXP Semiconductors Earnings Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time.

As a reminder, this conference is being recorded. I would now like to introduce your host for today's conference, Jeff Palmer, VP of Investor Relations. begin. may you Sir,

Jeff Palmer

Kelly, good XXXX Welcome on earnings Rick and today and Semiconductors the the third is Peter CEO; our quarter call. Clemmer, CFO. morning, Amani, to everyone. NXP call our Thanks, With me

our at If earnings quarter nxp.com. found our press copy the under be XXXX company can third website you've it Investor a not at obtained of release, Relations section

to on earnings of will have from posted being our you financials summary our and we website, is supplemental corporate Investor our modeling Additionally, a be your document presentation, a historical call replay efforts. assist in Relations website. available This for and recorded

end current will are impact for any XXXX. uncertainties markets forward-looking products, NXP's no operate, on expectations differ statements cause existing we NXP publicly limited expectations. call that involve that revise and management's our to, macroeconomic for obligation to include sale uncertainties include, fourth statements. and These that new today not regarding undertakes to risks the but could the or risks the of in be and reminded which the update results financial forward-looking Our from quarter results and specific Please statements of materially

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

on GAAP press in the turn website of that NXP's SEC stock-based in Investor Pursuant now will call the furnished release, section. our Form to impairment, directly related be during most provided Relations Additionally, the restructuring, of third has directly and primarily our financial to merger non-GAAP operating NXP to available does underlying Rick. be to non-GAAP which XXXX by to and reconciliations measures X-K call price G, on related Like core performance. not driven that certain purchase management financial charges be the compensation, make measures other accounting, NXP's the which reference are over today, quarter to discrete to we consider will to measures impact exclude events costs, comparable the Regulation

Richard Lynn Clemmer

to growth call everyone better welcome buyback our under returned we and also third and We revenue results our initiated cash of Jeff, quarter Overall, $X our guidance. share as billion today. now and our yesterday, the our conference dividend. resumed than Thanks, just to our have program was good $X.XX were and a in per owners,

fourth reflects top quarter for line the wider to outlook normal due Our revenue than a cloudy demand range environment.

analyst expectations combined result revenue Our line are should operating gains and improved expense in top earnings content expectations. with above control count, by which, lower share driven

of WLTP Before few like turn seeing and books. trends customers third significant we market in the in and is the partners are angst the unique any macroeconomic and slowdown car can sales bottlenecks reflected the amount due lower us, we'd our in primarily speak semiconductor in What seen insight We realize there's the what a is in We in environment. next the business. into to the couple in modest discuss testing details what our quarters have only order investor have the do chain are a automotive market. to of we about quarter, to comments We a telling our not supply we make on China. of Europe

the trade in in As of heightened of weakness China weakening market, the orders by pertains the our and shifting rates any landscape on be clear, placing To sense we slight MCU tariffs. typical order experienced it uncertain global the sequential reflects we to given a the seen caution believe we've have is and in industrial customers with chain. which distribution It right are not investments clear right In any excess uncertain, our is aligned is environment any customer NXP in cancellations development we backlog to leading us feel indicators supply is the program which making the okay inventory unusual are the and we there or cancellations. engagements. that product customer customer not also summary, demand while through including

will as Day. achieve strategic that presented successfully and our recent Taken financial Analyst goals our together, we at confident are we

quarter, at was the of looking $X.XX X% increase Now specifics of the an total third revenue year-over-year. billion,

up MCUs X HPMS X% year-on-year growth analog we was impacted revenue with quarter had segment to the $X.XX customers the radar of overall was Our experiencing. On an segment $XXX advanced growth, third reduced up revenue pulls perspective, and from billion, operating year-on-year. Tier contributing Automotive automotive year-on-year, year-on-year been million, while X%

family million, year-on-year SCD, during general the XXXX. design driven continued by year purpose in third mobile win in multi-market SXX Secure management Looking ramp of previous which forward, $XXX just new strategic solutions somewhat were momentum by quarter next-generation strong MCUs, design demand be radar high-single to like MCUs, up X% Connected for and areas explosive. up or demand was decline for strong is revenue Devices, momentum automotive due our battery to transceivers The a win the continues systems. a customer offset significant digits, transaction Within

with new processor, see and customer interest the and portfolio. RTXXX win We application very is i.MX processor our to recently crossover momentum continued design We strong. solid MCU announced the

and this innovate NFC is ramping on We volume year. continue high transaction to phones new new our area integrated mobile radio the single-chip element into with embedded in secure which

to trial carriers. industrial smart million, year-on-year cameras, Secure third out controllers. XG deployments into IoT, security American in SI&I, also like activity thought security customer & gateways for due cloud We was video the X% We devices network is $XXX mobile end home node of security which strong PLC providing extended family at space. Infrastructure, revenue early security aimed or North In see new and the IoT leadership connected Interface up our quarter with our AXX

both high Our customers view and macro as XG applications, base wave last amplifiers millimeter with applications. content We the products the NXP technologies opportunity. for as and spanning a massive RF broadest portfolio share power of stations, gain infrastructure GaN having LDMOS and mile see for for traditional MIMO

down quarter million, to demand $XXX or Lastly, bank due lower Identification revenue X% products. was SIS, for card year-on-year third in Secure Solutions,

X.X months. Turning distribution supply, the channel performance, closely or of manage at inventory the Distribution target distribution plus about minus of of we split revenue channel in as which maintain to channel a customers to strategic our is total channel. continue We months X.X average the market to our mass our channel between month consistently X.X XX%, customers. percent continues for in months and to total fulfillment

in environment, paying the we close the Given our are staying the partners. channel, attention uncertain distribution to to close trends very

in I'd specific industrial end provides are unique multiple analysts, our our X, our and January Day After and growth there shift it other. gained mobile, revenue. we the and website of markets: be Peter, Before we making as the opportunities I end report deck greater We communications potential like market the recommend believe what sell-side we shift review size XXXX, pass this end in to to terms IoT, investors how four to to with revenue and drive on by automotive, see investors and our of Beginning that will call as report revenue Analyst to insights our the markets. all to end markets, decision addressable discussions market. announce infrastructure we

end new segment We of structure. post the the will historical focus existing market reconciliation a to operating

to Peter over like performance. a financial the of pass review to for our call Now I'd

Peter Kelly

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

material quarter, summary, already Rick the didn't from financial did automotive revenue pull softness during drivers our midpoint In extent, primarily the revenue in originally customers to our who to highlights. I'll X experience than we performance the of the overall was China, guidance, some and move covered has demand Greater in although anticipated. rate at Tier our partners As lesser better a the

was non-GAAP Our flow and operating strong. XX%, cash continues be profit to

times, below of long-term our continues sheet leverage be is balance with to a which excellent Our condition in target. ratio X.X

the million, gross was $X.XX We revenue up details to slightly generated non-GAAP $XX about mentioned earnings, the Interest $XXX XX reported operations points items. was the $XX $XX of and non-GAAP was this million, continue and lower was interest normal margin rate of million. basis expense for is in points, more down our year-on-year not million. second ongoing management. million, of profit from $X.XX the was non-GAAP operating accrual was us lower OpEx up our a The basis a XX%, before total down profit bonus profit on operating a product revenue. Focusing was margin in from a growth Total XXXX. a million bonus will cash XX XX benefit included was in to million From was were two-thirds which non-controlling the X% Stock-based from reduction rate QX, in compensation, general and taxes billion, in third were year-on-year to points of quarter a non-GAAP and $XX slightly year-on-year. fourth $XXX and returning previously due accruals above gross and operating $XX non-GAAP expenses this year-on-year reduction non-GAAP weaker $XX operating But mix. perspective, billion basis reflecting million quarter total

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

$X.XX the debt approximately total was loan increase of due end billion and billion. XX-month exited of adjusted Cash was billion. was billion of a Our $X.XX We bridge the into $X.XX QX entered trailing billion, quarter an the at net we $X.XX debt to $X facility during the with quarter. EBITDA

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

our shareholders our $XX During and quarter of returned part repurchase the to million bought share $X.X billion as program. we shares

the payment We $X.XX October was of X. per initial also share cash dividend the announced on cash and paid

buybacks of accrual Our a balance $XXX an payment for includes sheet tax made. the million we the dividend deemed on of

does P&L the payment authorities to paid to the cash this go reminder, is the a be quarter. tax in fourth As in likely not through Dutch and

days, of a XX days of was prior days the an payable of day were XX quarter. of a decline days, XX Days receivable one days was working XX, capital inventory our versus to increase Turning XXX reduction days sequentially. sequentially. metrics, And

we the conversion XX cash quarter. was was cash prior $X.XX flow of million $X.XX quarter. an termination $X billion versus flow was fee days a in of a days, in the operations as together increase from And free Cash resulting Taken billion billion. our cycle $XXX CapEx received net six

up $XX And digits Secure Interface Turning mid-single to X% Identification the expected and Solutions is billion. we expected our to at anticipate X% our sequentially. we anticipate revenue business. about be Secure the low-single down mid-single down Secure sequentially. now total midpoint sequentially; sequentially. down digits down following digits. to approximately be currently X% of is to anticipate be range be the quarter, in of to We the up Infrastructure expected Devices Auto million. down is about fourth to Corporate to for Connected Other be from be expected expectations $X.XX & low-single or trends range, is will in a revenue

or minus plus be be $X on to about are million $XX it. about repurchase expenses XX XX% XX% loan allow We million about Non-controlling non-GAAP our as operating refinancing million, interest to provide dollars dollars estimate million plus if be or we basis our plus points. like expected extending about maturities minus tax plus taken and expense about I'd Operating or million. together, $XX and to XXX an about expect And million minus be plus conditions interest to bridge or minus $XX update our margin we or million. program. debt to share margin $XXX $X considering points. non-GAAP gross will anticipate basis We cash about to be are see minus be $XX

a bought QX, at back previously As have repurchased September of previously an shares buyback. XX billion $X.X cost X million and billion. million the mentioned, we'd additional announced shares by the completed we've $X Since of XX, end

company NXP authorized the approved by at of has utilize June. the our Board buyback to remainder Additionally, the the General of Meeting shareholders in Directors

million authorization So have to we XX additional back now shares. an the buy

purposes, was average we an XX, As would count fourth quarter the share of modeling that you for of XXX for million share September million our XXX count suggest shares. use and

in housekeeping Finally, to I'd to follow-up I have several the like issues address Day. Analyst

three coming Although comfortable firmly of Rick can by and to X.X annual believe and the in with somewhat X% murky, to as described, we rate we be outgrow growth continue predict, difficult years times to compound remain our revenue three-year growth. X% markets the market

repeal run Secondly, deemed it minimize so our return to excess we government will of expect not to level payments. shareholders will tax Disappointingly, all cash through continue the buybacks, X to times. Dutch consider and on we'll buybacks looks alternatives leverage like now the dividend these to dividends and

we've gave to not are margins the to the we XX% in cash I mentioned been of prior update be, products and gross as sale which our occurred to have like estimate also clearly and Fifth we quarter Thirdly, previously, of standard them Day. the and we be plan exiting at and we XXXX you breakup income tax want the for period Analyst to payments with this in in related Qualcomm XXXX, you be revised finally, the periods $XX XXXX I'd the where fourth of view point million cash described $XX on at but a million X% improved occurred. recorded basis Fourth, Analyst incidental effective as in our to the provisions in in have cash be currently they and cash time, X%, will in and for XX% pay respectively the of We fee, XXXX. the XXXX will an these taxes believe both for incidental XXXX. taxes Day. At rate

the for to back it questions. turn to like I'd that, operator your with So

Operator

Thank you.

with John Credit first Suisse. comes Our Pitzer from question

us the carrier now of XG. - solid Thanks Rick, it – bit is for morning, questions. Congratulations deployment give single just kind (USA) lot as letting XG question wondering if asking you my pickup Suisse I'm to opportunity attributed see little a think is me first you was open. early detail Pitzer backdrop. you given Credit the LLC U.S. quarter you what of the SI&I. Yeah. on prepared in the comments, SIS could SI&I. in the It William nice more your a and Good is mentioned on Securities I'm line sorry on to just a Your macro John guys. results on

and content You around talked some in try for numbers both story. share you Can us? being put a to it about that

Richard Lynn Clemmer

last little bit MIMO talked kind at a stage. talk we John, massive since deployment to for Analyst it Yeah. the size about of a opportunity It's the premature early trial the to be to And in on opportunities. I area about in believe actual pretty the the Day, of deployments it's we what think there's clearly And little mile. unique in think able a be that. the some place opportunity to was take QX taking clearly, what saw an some of and that us really for to technology we But we

with SI&I of a our on the don't shallow area it's combination upside showed are a in sustainable quarter, some legacy as know, that you and expectations our things. years the that PowerPC DN the But three the network over pretty actually current processors As for of product because plan roll-off basis. the on next we Actually, clearly well. in side,

MTU I of the we'll see of see, a not but ahead fairly to we opportunity think with think in we we'll some upside an attach opportunity that associated could I through for XG with SI&I the get sell combination that on that. But – our our be relative we'll interface itself, along ourselves portfolio. it's products

Pitzer deployed follow-up wins. the my Credit expectations December your of - quarter. get trying good How to I we do color we're is sure your talk about segments you and you is? the see, you expectation gave helpful. William XG for that how be think in sell-through? distribution when inventories through and technology John you guys, channel do quarter? we us (USA) or sell-in LLC December take actually see for Then, the I win product missed might be That's design be progressing your engagements in have Securities advantage significantly, this, but by it. QX to is then guys And the Do able we'll did expect to we below Suisse what

Richard Lynn Clemmer

actively being distribution think at same X.X right last the quarter. manage as this QX. environment as actively pretty engaged John, We in we that specifically that, think we were inventory's went changed we in and distribution the thing had months. sure through level quarter, inventory good the the we of Well our shape we'll We in do

overextended. through some aligned clearly with the Helpful. opportunities, of picture. cloudy of period place advantage And much sure okay and trade but where be to but that place. that inventory to we and I going level Pitzer to think it's it'll their don't tariffs customers be And they very be purchase get we're war LLC partners being inventory I in William our have good. John Production Thank in be sure to us backlog continues their in still cautious we go the Credit you. be most to time. require Securities rates very of to be for to the think distribution have the economy sure over well continue (USA) a our take market don't concern too have right inventory Suisse commitments - they're in The areas,

Operator

Research. comes Thank you. Stacy from our question Bernstein next And with Rasgon

Your line is now open.

Stacy Aaron Rasgon

for Had know Came quarter, question was a in product have on would maybe you just first questions. light. guys. a mix, said I little had the Hi, very quarter; the but guide gross that light margins, taking might helped. a in higher hair which have Thanks Interfaces the I looks weaker strong. thought my have margin. a would in Secure

you maybe other anything could mix; you drivers the starting where should as kind may give margins pricing today? – impacting from of that exiting utilization, if of towards us given we're else view XX% be like that. XXXX, And product what any then the So trajectory look that on further work beyond gross around

Peter Kelly

light, Good Stacy. Yeah, $X speak which on, to is you. Hey, $X.X billion... we don't to I XX points million were basis know,

Stacy Aaron Rasgon

just a hair. Yeah, yeah. Yeah,

Peter Kelly

specific lots Certainly thing. be all your things volume, minuses sorts on. have pluses that of there one moving I and minuses, on. over have But big going to your no yields, mean, you crazy control much We have of lots of of There's I don't that things so, Yeah, your was there. kind go honest, mix it. just or pluses

Stacy Aaron Rasgon

QX? QX, asking about more guide; I'm the I guidance about you guess for

Peter Kelly

we'd ending next said XX% year. be Just again, at we

yeah, go be mix like QX QX, the better, there's and of volumes Stacy. but sorts from go into it looks a we that As all a bit down on, could things bit,

a bridge XX% linear guiding by can't terms from of kind track. year, be you to this how we of of we're a I won't it give simple quarter. XXXX And really a QX next to So progress point, not And in QX. kind at

Stacy Aaron Rasgon

you. Thank it. That's Got helpful.

payments around you I know follow-up, in bonus you'd said my reduce For OpEx, QX.

Peter Kelly

Yes.

Stacy Aaron Rasgon

into new I with come carries and back then that the QX, guess year. those And

I raises and everything think happen that have you typically in there. usually

I how should QX.... So think into seasonality guess about we OpEx

Peter Kelly

Yeah.

Stacy Aaron Rasgon

suppressed of off a coming maybe QX guess I what would be ... base?

Peter Kelly

way The million bonus we a QX $XX lower QX, $XX was million expect that, cuts simple maintain. to kind other roughly $XX it about two-thirds from million I to real think of is were level at and and of was we which made we'd the

in of perform it's increase So and for see our next so as million. we get as bonus. then bonus. out line to with we And the going the then QX, we Well, revenue. OpEx least by that paid $XX increase assuming nut, big the speak, at million you revenue is go to But the our would $XX grows, year

Stacy Aaron Rasgon

it. into into model Got think the drift you you year next like grow like you it? of as But kind

Peter Kelly

Sorry. Say that again?

Stacy Aaron Rasgon

sorry. I'm

you're You that heavy have right now. running model on OpEx an

you kind into drift of you You think year grow? the model next as

Peter Kelly

stay R&D, we and on XX% Oh yeah, what'd – I'll say, in the ...

Richard Lynn Clemmer

SG&A. X%

Peter Kelly

– SG&A, worst X% be will that ... Yeah. case. ultimately in the the

Richard Lynn Clemmer

it, that's Stacy. the think right Yeah, I think about to way

get cloudy with period, back As we through strengthen see to the revenue levels we'll OpEx. about that get associated talked we've the this and

Stacy Aaron Rasgon

guys. you, Thank it. Got

Peter Kelly

Thanks.

Richard Lynn Clemmer

Stacy. Thanks,

Operator

you. Thank

America question Bank Our of Arya Vivek Merrill with next from Lynch. comes

open. now is line Your

Vivek Arya

taking my Thanks question. for

I preview the and structure. outlook I kind might get agree, to roughly of how think that sales be a it QX trends. a you a QX will useful importantly sense possible I and aligns your have thing the Is mentioned new structure? reporting see very think, Rick, with new then a perhaps get to that of you

Richard Lynn Clemmer

that the bridge orderly of We that start at and of to give the want the mid-stream to you back would year in bridge fashion come at an can't the provide implementation. kind change it and that time we do to We'll details. we and in do a back

Vivek Arya

mid-single deceleration, when at rates look are that's so peers more some kind Rick, digit, seeing you that Is MCU decent I slower is have the Automotive. not think this A this But the of at in when business. I the in of deceleration, to QX, had you at QX, look, I for come growth the and business, of your mentioned units? QX, I my This look are lot follow-up, of pretty I deceleration. Because growth see. I they of your peers the unexpected. Then when more seeing understand Automotive pull content? down still your some

business Automotive So how are you feeling overall? about the

Richard Lynn Clemmer

uncertainty Yeah, well their fear, customers well. this it, think performing is had from And about I of There if economic was they they as growth inventory side had the think build on Actually, pulls inventory. what and short-lived. as seeing, vendor-managed went they rate volume pulls that again, on our issue by doubt Automotive as we just in through end happened whatsoever. that's and created the look the the kind reduced you radar analog quarter. was It business on was remember, we What their content the no in OEM relatively that as that reduced plans the is based solutions. We quite of environment. at – towards strong actual were our major was customers

they So production. get as it into goes – we only actually

the confirmation of kind in quarter. came of end at So that the getting of the

Jeff Palmer

would tailwind the definitely the Automotive business Day, Analyst Jeff. I over next add, the just is this noted several Vivek, And content as at the we years. to is

and Clearly, to don't flow Automotive business. see key never but with we any story to was driver the our issues global So ebb have that content we to whatsoever. SAAR, growth the overall

Richard Lynn Clemmer

is that years. a ramp-up next to drive the and that few the more little safer talked growth in largest real space in when is our The to us car being the Automotive, near-term quite And our we going opportunity it to give about new driving a semiconductor automotive actual peers, you clearly really tailwind the provide see the micro associated with linked applications the unique versus the gets But see production. we supplier market. into to help mix over

Vivek Arya

Okay. Thank you.

Operator

Thank you.

Stein from question next SunTrust. comes with Our William

open. now is line Your

William Stein

question. Great. Thanks taking my for

a design in the to couple on in think comment Rick, mix about the I talked Analyst Automotive. wins can past, the been wondering I'm growth could for There's if and wins, a design Obviously, you've have in you that explosive not you've also Thank a a at Day about Any, technologies as been quarter. talking for but radar's BMS. First, you the highlight us? new you And talked specific that while. technologies? then something about in more of VXX. opportunity you. necessarily I follow-up.

Richard Lynn Clemmer

Yeah, well. SXX I It's it's radar, battery you platform. it systems, management think said and it's new also our

is to the unique years. as management over Tier design our SXX of to in we next Now behind most and of and with here Xs very implementation to rapid on But continue make safer all to contribute platform battery able major customers, lead one growth out the it radar that so wins getting a to growth really the in didn't couple drive recent radar where the the that systems, see at many actually we're the explosive opportunity in at as we're a on driving we being designed see rate quarter.

William Stein

Great. of XXXX growth a revenue what biggest leverage being the up don't Thank besides still goals done into the the you that's the to operating would I'm margins three-year your would And this be X, drivers meet winds year, that let's analysis company down follow-up to as if again. even has And you. say to from you'd see, say sort wondering if let's in But growth the you relates any sensitivity and as of view. revenue targets? the understanding able to range leverage get any of or be sort (XX:XX)? just comment flat

Peter Kelly

our Yeah, is good of question, Will. fixed. About COGS XX%

a not mean, but do science, I the idea. on volume. gives can you you So math it's that good

for was volume cost if an do see and it yield gross lot to the at just margin, fixed a need about with they more all I yeah, pricing. think next the issue we'd manufacturing downturn are ever improvement, through range. making now revenue cost, the right things as we right. gross are Day a year the to teams directionally so reduction have significant It's doing the the marketing suppliers sure because Analyst things the But they're at did some be our in and absolute margin of flexibility on We our to think not to has sure with flat, on making teams on real revenue able bridges XX% doing us the past. into than drops be we in get unbelievable I went much

Richard Lynn Clemmer

know, just add You going one was when Auto, the testing to go was thing part volume, related should question the on that and the slowed of implementation. Europe that about on MCU and WLTP I was the asked back in had the

that was that QX clearly results ago. a I about in more been a minutes in our So specific factor few just should've

William Stein

congrats and Thanks, Helps. again.

Richard Lynn Clemmer

you. Thank

Peter Kelly

Will. Thanks,

Operator

Thank you.

Our next comes with question Ramsay from Matt Cowen.

Your line is now open.

Matthew D. Ramsay

about investments asked OpEx, the time, that of and business. but one But year. investors guys where a is you getting of very Stacy to model a high think Thank in from I next you in an guess could around earlier specifically you often bigger into level. questions focused step much, me I have on the investments it is questions guys. pushback is OpEx back maybe think period I well, Auto to a I did most some percentage is that under you you period get to on actually in the to XX-month, And particularly that we that talk little I basis and And didn't, your of back basis on just could the revenue. it come absolute the is might Qualcomm just and going a I of actually the spending – under-invest occurs managed a revenue? And that at bit want go-forward you. about XX-month the maybe umbrella the picture deal. a around that occurs And core so maybe of franchises guess go-forward you about during R&D Thank as up can basis during made in business quite you the been me talk

Richard Lynn Clemmer

Yeah.

The artificial family will actually apps to we've unique investing well. industrial ability address the very control and in crossover in back position ability will period drive complete as some of while that that through compounded time, that a the take an In off sets we think position of key time, learning where I for to fit really a drive made of in the and think on gentle making the that we our within solidify platform early to we've IoT help based to but we The Automotive, intelligence now competitors solutions competitor to positions and as that XX little been same we what solidify addition, R&D, invest position I to XX-month growth to growth. in beginning it. and key benefit didn't to our ability continue continue nanometer FinFET rate are we us and battery platforms the and in that the radar, introduce well we the that In is at has kind unique in space, to our processor areas a investment in implementation see and nanometer, be some we in of us. R&D XX% were of in get to more SXX unique quite i.MX the XX able a machine to our are specifically were to take we went cutting now, a no investment drive. and if was And management anything, in were. the are think drive well investments budget the micro opportunity invested through position ability very IoT, key in increasing us other opportunities up areas in the our

to addition single-chip element we radio. NFC In in the that, secure implemented

lack done. investments So, of no there's I think we've that

We have kind made investments. the of right

In in addition have Automotive, and we've to quite and position I leadership Auto. investing well to about we space the that what our in networking talked domain the had in our Ethernet we opportunity see will position in us that platforms continue to also in-vehicle that been controller strengthen car

of period that's time. the There there. been been So, been of that done during have opportunities no XX-month lack We've investment is investing.

fact, basis sure set invested than anything probably be everything were to to try if if we've a would we forward. more that up on we go-alone move to was In have

wasn't from of of don't forward. But So, I to going comfortable cloud anything question XX% really by lack that edge rest we the to see, the what areas to reason disruption uniquely least in bringing going the the there in a that us and very assured – growth the security the compounded IoT can forward. providing feel of to at outgrowing position tell you we really are forward and support still and of X% with think market and investment feel band that kind capability create puts going investors opportunity X% the Ultralight and comfortable rate why the you

Matthew D. Ramsay

relaying I've thanks view. consistent my Rick with I'm gotten. and No, for just some that's pushback that that

Just as a follow-up...

Richard Lynn Clemmer

Keep telling them.

Matthew D. Ramsay

enough. Fair

seasonally down into Just probably what's Thanks have calibrating some QX, there's QX. about quick there, right follow-up a that'd think guys. QX? into you be just into SI&I If trajectory talked helpful. add expectation anything sort about given you've good we and a should the QX, could that on of fairly it in so upside How we

Richard Lynn Clemmer

abnormal really about we we when and more that be some Yeah, early give say. give I do bit talk that But guidance. come a too don't little think And see that will implementation, guidance but XG it's QX our you may QX. things we'll associated for with to back we

Jeff Palmer

Operator?

Operator

Thank you.

Our next comes with Ross Seymore the question Deutsche from Bank.

now open. Your line is

Ross C. Seymore

cost return. cash focus on a business. to guys. especially Hi, me SCD letting and and for of Thanks question the Wanted part the congrats, ask on

just broad-based controllers, concerns things. general inventory the of of and to those limited in Some kind also analog of broad-based aren't markets Auto, purpose but people sorts have

that what it guiding given that the in you're in seeing sequentially fourth quarter. business, especially you're wondered up I So

Richard Lynn Clemmer

thing you mix Well, about is the SCD of interesting know it's a products.

And a on the year-over-year in of micros so, opportunity orders we performance mobile that while And rate, because had a as mass decline, combined still and market we but year. the we're factor rate, placing about the somewhat being the a basis the mass are seeing on our customers strong for a position their i.MX well impact has in the we slow general see the the growth very and we've family. growth micros. purpose on see slowing early and levels relative Clearly wallet China, the market, the in an inventory not implementation growth that sequential had with that slowing actually in FUD diligent talked our to where being as of

the probably the think majority for three-fourths as distribution opportunity's of us clear be to around through working continue I So that business, goes the majority still We there. still of channel. it our that partners with of business, distribution

it to be to So that that in get we IoT as our we opportunity. real, to closely that it's is to work the that the opportunities to fulfill sure distribution we But in technology be be out where ability and IoT able the customers business the can with see implemented. partners important really making that the drive really cloud supports critical utilization really

with as out a they're a really reluctant or relative what's is, and term even fear, that in factors doubt, the I tariffs amount still one creating trade so, the to of people war designs think figure the opportunities to on in of have, near and marketplace. and the more And going really orders little the that's is and we'll being overall tempering those significant with uncertainty FUD, placing trying

Ross C. Seymore

things. WLTP wanted things. back follow-up, my sure the I go you for mentioned side side. And then couple to the a side of FUD Great. just The Auto for Rick, to and

macro the realize do in impact with it's that of for one transitional for you be when difficult would the of nonetheless that side, way a but a system? kind view project. its the For I the But Might seems like is you that do big side latter to latter standards. former that guys change And for in lull testing issue NXP? think the Europe. equation, that abate might you headwind one, How transitional through working a it

Richard Lynn Clemmer

are period I period. prolonged Well, going closely address that our that think a get relatively I to that's to through a to so be that try of time. don't working they'll short think over customers

the work basis think it'll is then supply think through through more a be we factor I here their continue it'll ongoing And actual sales. on to dependent to going The I they relatively that that have chain kind will here near-term go impression car fairly it's soon. normal pools. it back of a be interesting And when or the sales at as people in the down talk to thing four But sales get China. go September, if China, the actually they cars years, of and reduced is look the five lowest previous August the actual interesting about the at always July over in thing you and look is were back if year, actually while And month from were in sales they sequentially. quickly. you car increasing last

ago And they part a structure. think see And But back government. it's actually years sales depend Chinese so what to of tax going sales, WLTP with happens track issue. happened that on on only the quickly in a there very car specifically, and got the the two-quarter was changed or one- we'll car When take where time first place. think China on I few the this it's decline with in we

Ross C. Seymore

you. Great. Thank

Operator

you. Thank

comes question Craig from Stanley. next Our Morgan with Hettenbach

open. now Your line is

Craig M. Hettenbach

Rick, a Yes, thank like you. XG positive development. looks

initial the of North some activity. noted You America

the kind As look ramps you XXXX, into and just into the XG business? thinking of can have you about you're how discuss additional visibility you

Richard Lynn Clemmer

depend those how mass I don't last Well, some on, going expensive, with which know these I doing see it. that of on gets to implementations, market FPGAs to going think those early they're with extremely so it's associated really mile deployed. I are

able drive that's they associated can think me And I commercial with that it's XG. that the to yet. get quite solution to not deployment have manner a clear in to they be to place So taking cost-effective a

it's because was little cost they being have effective think for basis. get significant a to before ramp a we'll commercial cautious the opportunity in clearly implementation see QX. on XXXX us more a I volumes on we an begin think positive So actually to We're that to a the implementation in

Craig M. Hettenbach

Got kind until a talk follow-up the a talked were the the about couple and companies of it. And orders September. quarter things as how October? you Can have downtick of linearity regarding just of how about in month of in progress, then a kind overall and environment, just up kind

Richard Lynn Clemmer

lion's the businesses depends on our the Automotive the Clearly, it vendor is separate. So, Each of is on one share business. inventory. managed business of

point to it's continuing to September. of it steady a we August. see positive anything see the while I year-over-year. August we more see be of bit on basis, So began that quite year. and of we as rate September, growth The we weaken of to through In environment little go still the continued in kind don't the able down at the to out not first getting that status sequential Europe I where really we down associated in And slowing months a kind all. think continues with on anything or quo, went to growth from those slow. weaken were as to half cloudy, But don't Again, we significantly although still back the confirm growth of well important saw month pulls was think really as a vacation well, kind so was vacation

Operator

you. Thank

Our question next from comes Harlan Sur with JPMorgan.

is line Your open. now

Harlan Sur

quarterly and job Morning. question, the great on execution. for taking my Thank you

in was was was This China. at overall X% performance. Just kind was so of mean, only QX, think I purpose up data. it high-single looking some which which even the up MCU digits, back general this trend it with multi-market MCU is on segment X% good the in weaker the the bucked really – about SIA the demand to I of trends of

that if within to but position of Obviously, outperformed guys, for what kind purpose it looks strong just could the understand get And you drive Rick, above-market your to MCU a geographies the business. year-over-year. you I'd XX-bit data, leadership like also love us for So thoughts. that's applications help your are or the SIA helping demand are general

Richard Lynn Clemmer

of things we year check we were in back in on that at I times was Harlan, basis. brought our one talking so unacceptable and the lead we're QX, Yeah, XX-week a we in us Early that benefit customers, key think the lead for were Kinetis. was just for current XX-week down of our kind time the the out lead at XX-week, about times, in which

little well. as with obviously transition, customers it that as creates confusion So your transition, a through distribution you go that

we based talked clearly, gained on would have. we QX. in of on But in kind gone through have the strong results we've that QX the about, based that So you portfolio share

point out played think out, for on you really marketplace, general well ARM. We're focused I XX-bit not As kind us. we're of that X-bit focused on and

to it. as crossover the low LPC with on We on announced the a i.MX from the technology the broadest the Kinetis end and processor of product but i.MX associated as have place and at recently in on the cost micro the with first apps well continue we that platform implementation just in the high-performance the

how the use So we think see I continue the talk really our to portfolio about customers for cloud we've like disruption opportunity to best portfolio, people the IoT. implement can to got that as feel they broadest trying the

in bringing years, of everybody's that been talking the was computing portfolio clarity really able about For grow position continue and hard our And that maintain QX, is being to was think advantage hands the we it real. the you last the of a I secure, around to give get going did and clearly, edge share at I take to few edge now and I But think talked word emphasize that. to IoT gain hope to to see forward with it. what computing on the to the through in we and be secure, what but able the about, your results based the to be cloud

Harlan Sur

utilizations How good trends, is QX. the team performance XX% in in there. Manufacturing utilization Yeah, QX? positioning

Richard Lynn Clemmer

interesting that ago the is that the as take a much on about of can't out utilization. think years as you thing to I used you couple

our through of the and as of well we some internally capacity One be unique able going meet limited side associated requirements of business. our the individual to that factories our our we're our some of things radar in is have our as some others, analog Automotive requirements have is with ramp-up to

on not utilization expanded itself. on that's as little I that, significant capacity So implement we the factor the creates that bit a a as that of think

continue We well. external grow as to our support

... So of over I think little today kind a we're

Peter Kelly

Just over XX% external. that's

Richard Lynn Clemmer

a to Yeah, little a about specifically tempering in transition through trying utilization as we that in be capacity utilization, over well we'll much capacity, capacity, little analog analog I through as go But as as our quarterly that's expand basis. up now right radar our can take think bit auto on of go you bring external. unique don't to of the And XX% capacity. the that to some of able a

Peter Kelly

in same the was be QX overall, about as it in Yeah, QX. it'll

Harlan Sur

right. All

Peter Kelly

if So as some have the factory. kind days. is then what Rick (XX:XX) said, you through only, And do a of indicator by of it at internal and these it's numbers it, XX.X% our useless COGS look goes to you

cost. indicator, on but it's And it's terms kind of so as kind not useful in understand going what's an you the interesting of of very in helping

Harlan Sur

Yeah. for insights. the Thanks

Richard Lynn Clemmer

Yeah, thanks, Harlan.

Operator

you. Thank

next Our from Sachs. question comes Toshiya Hari Goldman with

is Your open. line now

Toshiya Hari

a win momentum I you on question Thank so had talked about much. you talked XXXX. with Automotive the in going Yeah. design into radar. SXX Rick, about you MCUs your family;

kind but into perspective, see BMS going XXXX? know do early, growth I a from talked You content well. you momentum it's as about how of

Richard Lynn Clemmer

is a about in that. talk we three-year with think clear implementation the be I What associated will time, indication period XXXX over of and

world, of very at the level required the domain nicely look we think continue increase for we'll high-single see developing and through China, higher our production, But of but different of companies a overall which through architecture the to leadership production X% about The the in ADAS middle to and of to Kurt family us a even digit actual able driving in that the implementation data the capability to process very implementation solution. car SXX think X be around – of X radar to implementation of content specifically into. speed with to of is the for we'll a in well, Day the which some at the able grow continue for fits a to significant in the our position to kind radar solid Ethernet see we as ability product car growth maintain with cars. implementation, talked in which the opportunity we're Southeast that's changed level position car went the or and controllers without car, much the to in at be car we it really the As and that, of Asia Analyst X% it, class still even with growth mid

first So that and comfortable our Automotive the look as place to I three-year with we the take talked of the forward about year expand in feel position Analyst that'll basis very to in at think we it and XXXX continuing Day.

Toshiya Hari

XXXX to So come is in the it within range rate you growth to as the assume in X% fair XX% that of well?

Jeff Palmer

guide going XXXX. to we're think don't I Toshiya. No,

by the XX% XXXX Automotive a different I but laid for think the not we're target as in out, to to fire have we for Rick irons our driven specifically. businesses, laid we out all the three-year business, guide going X%

Toshiya Hari

you follow-up to and to enough. In And gross if environment as if that can that the Fair still XX% I case, confirm. margin Okay. still on then some just drivers? year margins, again revenue wanted so, were you. gross hit Thank in you flattish are a of confident, Peter, XXXX, the what quick for be target be a exiting would the

Peter Kelly

kind Yes. is even because described the all flat, the drive in and cost And if same drivers changes see manage it's about of we you'll I Analyst our how reduction reality our pricing. in exactly and it's Day, the mix

Richard Lynn Clemmer

that to think you be realistic. I got But

significantly the to in With economic environment. to the we the year think based for on flat be hard the unless we it be environment weaken economic would were economic general environment see, something

the looking going associated about industry this going that, drive quarter robust after what's be with of Clearly, this you two going far while on associated environment the I too cloudy to not economic or think future still gain we're careful uncertainty through is so as is through we with marketplace. period, to content get semiconductor So, long the got place. in the in

Toshiya Hari

Thank much. you so

Richard Lynn Clemmer

you. Thank

Operator

Thank you.

Muse Evercore. question with comes C. J. next from Our

now line open. is Your

C. J. Muse

Yeah. financing, Peter, your and understand going question, Good expense buyback. debt you interest I morning. Thank kind Good for taking first to trying additional afternoon. guess better the forward question. for of means

in cash of the could how in need us run the of debt incremental months? kind on that to terms notes, the coming the So, convertible think what debt potential business, top should and what you tell bridge planning the we refinancing cash you of you're and about both

Peter Kelly

to XX EBITDA. debt two want to we times so months run Okay, net trailing

a that add due cooperate, EBITDA. extent buy to would debt additional to you on the I to a two now XX we with call year That looking And could back this we're trailing that look between markets $X that thing; definitely convert. kind replace debt. mentioned to next look Same very would year. net of of very with next the replace convert, end per times we'd roughly. the then a we say very, the The months my $X year. end So, additional roughly. million-plus the subsequent quarter, in guess years, and comes an We've And bridge so that billion of bond. at

Richard Lynn Clemmer

talked replacing convert, probably as be the would price. But not current at with about a equity convert replacing Peter convert we the the

Peter Kelly

it'd equity a current Oh, yeah, away. yeah. But a mean, be I year prices, Yeah. at absolutely that's bond.

C. J. Muse

years payment. excluding the last free Got I think Qualcomm margin from you. Great. around And you're cash two I perspective, follow-up, running as guess, a flow XX% the a

So flows kind walk higher? that on? that through you margin. of imagine drive curious, working can You've drivers to Are through. other how you're I you gross right talked about there plan that

Peter Kelly

would the that To flow increase. margin cash extent yeah. increases, margin Yeah, EBIT

But is. improve EBIT will margin of because at OpEx about what be So, gross real kind margin will a capital increase will simple working level, and decline. percent our will it

margins. mean, yeah, EBIT it's So, I connected directly with

Richard Lynn Clemmer

short thing some some Analyst have opportunities a term in or generate that time. three CapEx of growth we take in of business advantage the a cash we we with near a bit is, a is of be we will plan over more the to very we above period invest feel of about one next Day the a Yeah, unique our a position the the at our the continue and huge think the talked amount is little that cash. really strong very of in little might I years invest that of But of will think flow X% about to factor processes the that for we position to good

C. J. Muse

Thanks, Rick.

Operator

you. Thank

Citigroup. with Danely Chris from comes question next Our

now line Your is open.

Christopher Brett Danely

guys. Thanks, Hey.

on year. Just I quick guess question a next

the sequential Like the we environment what environment Rick right QX So, murky basis? talked stays about down on "murky," for about If should would X% now. revenue XX% range? reasonable you a be thinking something be to conceptually

Peter Kelly

Peter mean, we're We at go QX. clearly, but you is guide I not This look can historic and guiding Kelly. don't seasonality, QX.

Richard Lynn Clemmer

it stays cloudy talked period you one a thing about Yeah, is, that that prolonged though if cannot economic environment, for the cloudy environment of robust this environment time. on I as as think the continue

to production continues, a as the to long have economic So rates in growth back get production. and steady you continue increase

So, economic that's something to the environment the for FUD don't of war. because prolonged worsen that that's tariffs the extended an of factor were we unless associated anticipate period and time with trade

if cloudy prolonged don't this don't environment time materialize, think will continue throughout So of a those year. we for next period

Christopher Brett Danely

Okay. Rick. Thanks a lot,

Richard Lynn Clemmer

Thanks.

Jeff Palmer

probably Operator, here we'll take today. then one call, we have more it wrap to and up

Operator

take You you'll one say question? more

Jeff Palmer

Yes, ma'am.

Operator

All right.

Tore with comes question Our last Svanberg from Stifel.

open. Your line now is

Tore Egil Svanberg

you in. Thank me Yes. sneaking for

business talked First trends quarters? your talk sort you lead overall the the few times for but about the about Rick, question, microcontroller of times of can lead business, you for last

Richard Lynn Clemmer

business? For the LPC

Tore Egil Svanberg

No.

for your business. in times lead So, general

You talked microcontrollers about specifically earlier.

Richard Lynn Clemmer

No. Yeah.

that the period kind that's time XX- typical general time have XX-week in we in lead of that across board. think the I of to is

in It some healthy depends anything that's time products, a in it see very on unique manufacturing that. of much So don't I than typical actual cycle different now. pretty and that right we we're but the time situation lead there's think our of

Jeff Palmer

Auto almost build kind business time revenue, locations. most the to is we lead zero which of of right, And inventory remember, which on is managed Tore, business, the you consign have of model, runs a theoretically vendor inventory since XX% to different

Tore Egil Svanberg

for as That's follow-up, have number point? a you my next CapEx a this year, do helpful. Peter, at And forecast

Peter Kelly

normal run spend the said could next X% years, but Day, up X% we Analyst our per the three we rate over year. to At is

Tore Egil Svanberg

Great. Thank you.

Peter Kelly

Tore. welcome, You're

Richard Lynn Clemmer

Thanks a lot.

to quarter see following second So period next transaction. joining work we about, we'll quiet a as the the rate we clearly, continue the growth wins period way a quarters. have, period that talked be that to But position steady able we be with our over our few that product once The that think the cloudiness, the to back the through think with of the our the business create to thanks about associated very continued support. us excites you capability after today real forward cash the much. design overall here key what way not we near-term to and look Thank and win, opportunity and value, for shareholder to the flow is this in our is your growth XX-month work Qualcomm us we through. again, prolonged cloudiness will of we'll our factors it Clearly, with economy,

Jeff Palmer

Thank everyone. you much, very

Operator

Ladies conclude for This and conference. program. gentlemen, thank today's you participating in the does

You may all disconnect. Everyone, have a day. great