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NXP Semiconductors (NXPI)

Participants
Kurt Sievers President and CEO
Jeff Palmer Senior Vice President of Investor Relations
Bill Betz CFO
Ross Seymore Analyst
Vivek Arya Analyst
John Pitzer Analyst
Stacy Rasgon Analyst
William Stein Analyst
Chris Caso Analyst
Blayne Curtis Analyst
C.J. Muse Analyst
Call transcript
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Operator

Good day. Thank you for standing by. Welcome to the NXP Third Quarter 2021 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a Q&A session. Instructions]. [Operator would the I Mr. over to like now conference turn to And Palmer, Investor of Vice Jeff President Relations. Senior go Please ahead, sir.

Jeff Palmer

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

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

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

I Analyst XX, Day to of on would Before call remind XXXX. we like everyone November Thursday, start today, the our upcoming

hosting hybrid a are We event.

will City, York call Investor event website. Kurt. in for to to person After our in website attendees. be but the the New virtual I to from we the the also will turn over We post concludes, slides simulcasting like event would Relations the

Kurt Sievers

very the with thanks morning. mobile review planned were results the guidance and our QX. Industrial our as results our guidance will supply. markets improved IoT, Auto, you midpoint good joining and much, morning, Yeah, Jeff. Overall, line with the were this our everyone. our I then appreciate the QX than call better guidance. in Infrastructure We discuss And for of than Communication of time, a all stronger trends end At our the result in same QX markets,

to supply delivered we be our constrained an lower on-hand continue inventory together, to NXP a in quarter we view QX long-term we as well. of the expect year-on-year, above very increase long-term and midpoint good of three the are again the than And would of our results $XX revenue targets. given our $X.XX and four almost entering face situation channels guidance billion, our target. We million These this range. channel distribution metric Taken full months, XX% our supply with knew quarter. at the position X.X month metrics And below quarter we exited

three, above Operating dollars was XX.X%, year-ago period. the $XX XX guidance. margin our lower profit midpoint expense. XXX than points operating non-GAAP guidance, basis by than points higher the is better revenue quarter million Our were better in a And strong and of driven which basis

versus revenue was the expectations. in million, again, year-ago line our IOT, with line markets, in period, In focus about trends specific X% Industrial the in ends was year-ago and versus versus with with above and Mobile, the period, million, QX to up turn Automotive. In our starting billion, XX% QX expectations. me and revenue our XX% revenue $X.XX period, let year-ago our QX expectations. Now was up up and $XXX the $XXX

infrastructure communication, in our me outlook and And was million, for With move this, straight expectations. quarter revenue periods. three quarter to line Lastly, let versus XXX in other, with the about year-ago our flat four.

high year-on-year the midpoint quarter XXXX, the in the is mid-single-digit finally, the versus the the to this the versus 'XX. up up a year-on-year We a midpoint up From Infrastructure, in and Industrial ago, is range versus and in our be Three is mid-teens And quarter. Three range XX% 'XX. and sequential trends the be range, up anticipate the of four to the revenue midpoint range expected 'XX. single-digit and range up in year-on-year period up expect range outstripping of this X Quarter mid-single-digit range range Quarter up down be be prior in and quarter QX high-teens Three range to Communication, to fourth in is the in Quarter low be the XX% quarter Mobile year-on-year. versus in the high range the supply IOT low again up versus expected same up to And in single-digit At 'XX. at following of and X% available year a we expected versus is expected XX% up to the Other versus up we demand of our four anticipate XX% in billion outlook. Automotive business. within perspective, XX%

of how of global the vehicle Over NXP's to ask the IHS. as with quarters, they to numbers the of that production reported continue revenue the course investors performance are X reconcile business Automotive last by

auto meaningfully to up XXXX. demands struggle is revenue the with grow likely not Specifically, OEMs able to the supply to continue in industry strong NXP's XX% match to over versus production Automotive consumer be this, XXXX. Against auto segment unit to expected

which make me let may understand diversions. help Now a these few observations you

XX,XXX of of points just is extended to single-car. coordinate and extended and different multiple the to transformation very product XXXX to chain supply auto up This build complex, props and the across timing one to chain suppliers globe. from up First, with needs supply hundreds semiconductors, the of delivery

periods is car, on to finished semiconductor this step fitted it During components ships final at months. X finished network up And normal the from the through assembly which of into time takes times the thousands when a suppliers. of NXP to global each is of parts X of a top transformation, complex cycle normal move of manufacturing At months. of the X to

required. of available process car is they the to For and to complete work when exactly efficiently, essential all that a it components the are are needed where

in we and was XXXX Now, products, a including result and depletion continuing the chain That XXXX half second all on-hand depleted the in of X% of global supply of XXXX. production significantly XXXX. of another declining auto already by inventory extended believe the of beginning XXXX most car and through in types semiconductors XX%

increases, X% into content XXXX. X% by declined While NXP auto 's into XXXX another business, by and despite

at our more me in of auto for monitor chain, normalized level. the than customers at to auto impact We back record supply with been metrics X's have on-hand these been term their in distribution we target inventory using data XXXX Let our significantly month all movements demand cases, the have about illustrate and in choose to trends, all they other our partially lines consistently our together. months, Distribution at for our inventory end-market overall the build and Throughout long-term Tier rebuild that And fluid low partners below X consistently cases, hold completed X.X Automotive we discussions assemble greater OEMs the want products. how consistent directly cars with kits. production struggling some by are the a to the And measure being ability NXP with hear as supply throughout demand message proxy In inventory Channel being affected. in to personal levels, and levels. intermediate the daily my or component

XXXX. times this automotive out placing be XX balance XX% products think for supply. of through supply continued summary, our lead orders NCNR demand be NXP, supply partners. of the making long-term to assure continue supply are automotive We to long-term equation, backdrop, in For to we are Against our our In about weeks. turn above commitments build to customers

of current experiencing as material situation, the learning order Auto-AM's addition, all today. to in a In are shortage mitigate the impacts the of and

the will before in which partner be achieved XXXX. and X cannot more Tier chain, broadly needed we Our believe that inventories explicitly supplies demands supply extended be

backdrop, the demand increased currently this chain very are a supply industry-wide, growth. for trends simultaneously with Now, a clear consequence as there auto as content and dysfunctional have semiconductors very that positive of

is of OEMs the average others. And markets, of $XXX, above and growth that our beyond moved exploration impactful seen electrification We well roughly And which the battery is from per radar of and electric top on others. XX% system safety is content vehicles, of from XXXX. in xEV in new production on X at multiple vehicle. gains year, consistently These processing multiple focused This ICE areas emerging have and opportunities, systems, clear XX% since three prioritized and the driver very require combines management, global of secular production gaining as another increasing have These and all the electric as to which share semiconductor X% for twice and content. which content trends of NXP an fast premium semiconductor per last vehicles, have the vehicle content include just uploads industry-wide is XX% in years. gigahertz hybrid resulted production increasing domain zonal XX in auto content NXP times fully about over this, equivalent is semiconductor to content of of

not NXP, for performance. automotive just Now it's of driving our course

ability solutions, leading underpin connectivity, These processes, a confidence customer we Company-specific of to processing the and connected traction. Within consisting are complete analog, our weeks our Industrial that in markets, growth. just few samples security, turnkey see to etch increased and our IoT provide all all

mentioned environment, a go we on into summary, much XXth, to In our As it strategic supply From strong QX, Day November execute highly term week plan in greater drivers and build in confident as a also New notwithstanding we Company-specific is customer to through positive detail XXXX. industry-wide all Jeff at intermediate perspective, of well the the Investor are as over very end-markets, will earlier, our they Company-specific continue experiencing Putting QX well challenges. demand that York. the we newest our NXP next continue together, traction products into beyond very solutions. within to

review then lead a At of in an operations Jeff. Kelly's team. key best Obviously, of move role, and personally track all career eight brings a the first next and the he the highly over the clear-thinking of valued management and a Bill decade recent in phase come like both Peter process, the evaluation including wide Bill and discipline, Now, and a many viewing has of as remarks record his drove myself, make I'd gets a before to same call hope Betz with to like played mentor with to performance. role. context financial and personally person our NXP life, strategic CFO financial to as time, to NXP. right partner NXP for leaders CFO. of NXP the is semiconductor truly external been strong Kelly the the Bill. new pass announcement our excited you I years. truly candidates, I interview quickly I move industry, as role in He the finance to as our personally wish came consistency of forward. very both Bill his details a and expect. of have concluded now quarter, as to of organization, Peter into intimate the Bill worked over with I the to strategic the have Bill drive few well Bill, our highlight Bill work business knowledge new the drive going of Peter finance in to we time his We I NXP's advisor And the family. ago, on financial has contribution in our Peter would Bill. stakeholders and the that, to the as one and with to outstanding would in well of into more like spend the a to I'm number growth profitable evolution quality to the Company for And

Bill Betz

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

covered financial very was Overall, to will already drivers the profit the Revenue our profit, we QX performance during and financial the I provide an QX revenue of revenue outlook has QX, non-GAAP guidance improvement Chair and And the As of for highlights. range. gross were range. good. which both our move the our high of our was midpoint end guidance at above drove operating non-GAAP of of

billion as near non-controlling the fall-through and $X.XX ongoing margin XX guidance at on XX% total non-GAAP Non-GAAP interest material the gross $XXX up From operating profit basis XXX This points non-GAAP result Now, of and our guidance, quarter. lower a million million midpoint XX.X% We was and also $XX million non-GAAP $XXX X up better a with million the mass of year-on-year. the XXX of profit QX. of generated range, moving higher and billion basis the revenue perspective, our Non-GAAP expenses due of year-on-year spend cash a from Total to the profit up our guidance. were XXX XX.X% points total was high-end operating gross operating million and margin interest million $X.X taxes operating below reported was a million. to was during of of expense in QX, details year-on-year was high-end our X non-GAAP of and was year-on-year This of above guidance XX and range. up million operations midpoint revenues. was

-- the not than our $XX earnings included together, items in which million. was Non-GAAP were Taken compensation, X guidance. below-the-line is Stock-based million our betters

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

the flat billion QX total a sequential on $X.XX Our was at basis. end debt of

XXX Our EBITDA debt resulting and with QX coverage EBITDA ratio adjusted during billion the capital trailing position X.X ending down our quarter. net higher EBITDA XX-month And XX we exited of interest billion. XX-month was at billion end cash the debt the and X.XX was The XX-month returns Capex times. to adjusted X.XX X.X times. sequentially of trailing was to quarter adjusted million due ratio a robust A of was

Our balance to excellent and sheet strong. liquidity be continues our is very

and our and cash of During shares XXX QX QX, owners to we billion X.XX year-to-date. for capital total to return of end X of additional between million total repurchased in Subsequent resulting a billion of a in return the Xst, owners. we our of XXX [Indiscernible] X.XX November our October shares billion paid to re-purchased over a an of million dividends

of with a inventory Turning XX decline to days sequentially. capital days metrics, three days, working of

Our DIO XX continues of target days. below be our to long-term

sequentially Both manage We in flat inventory the at environment. X.X continue the months, to distribution and with channel strong targets. deliver our reflect rates, a in our continuation closely metrics below supply customer channel of long-term tight

we're rebuild those. channel XX, X of able believe our on-hand down take multiple it payable And long-term will XX of $XXX days non-GAAP prior the cash to to winner. quarters We quarter. million. XX conversion from continue versus days and before days were sequentially. days was of versus receivables a cycle days, flow X flow $XXX million and days to Day’s inventories target an were of resulting was decline free Capex $XXX of increase net two Taking million, in operations together strikes our Cash cash

year-on-year be midpoint, up $X up XX% and QX, as At we is to revenue to million. or sequentially. minus $XX Turning the for our expectations QX billion Kurt this anticipate mentioned, plus X%

minus to minus gross basis expenses be consistent million, model. our to million are about XXX be about Operating Non-GAAP to or points. expect X.X% plus plus X expected XX XX long-term or margin about We with

about we see X will ongoing to be non-GAAP estimate Taken midpoint. operating million. at about together, non-GAAP and about interest XX.X% related expense anticipate million be tax to to to margin Non-controlling the be cash be XXX about operations financial XX We million.

execution count a purposes, of return suggest is consistent communicate period XX For policy. an of a QX, shares for XXX our we as which result million you down average capital of modeling use year-ago shares, share million the from

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

our continues we be be to At time, order address a robust. in interest same First, our in demand closely with our trends and the across products suppliers markets, manner. target requests end working and very newest customer customers to are strong continue our timely to

us which guidance QX our our of our as midpoint revenue our fall above as the both terms drive of profit gross consistently the clear will margin Second, potential gross of margin through, in business enable significant the growth reflects non-GAAP targets. well model, to

a policy our continues our capital leverage to committed access as our will And Thirdly, below ratio for take EBITDA. flow long generate cash this free cash NXP are return guide to owners, or trailing since we return Not flow. to thank opportunity debt contribution he a our also Peter to to at so and business XX-month to Xx net joined free in Peter XXXX. I'd significant the remains like a friend, adjusted to did truly significant Kelly NXP Peter Company all a only on I he perspective, the lead and a is what that Company And note, today. financial drive a NXP leader, great consider but personal from mentor the helped it strategy and I support. we're to made then And strict for all all NXP my finally, his forget working shouldn't pandemic still that work be their outstanding protocols. and for I'd always grateful We thank across will under like dedication. colleagues and

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

Operator

Thank you.

a question line Instructions] from > the Seymore. of question [Operators Our comes first to Ross -- answer As reminder a

Your line is open.

Ross Seymore

question, ask is Thanks My the letting first and for Kurt for a me new CFO. Bill, customer as behavior. role congratulations it's question one and on on

sector, visibility auto going semi for certainty, all so, You starting those in garner the deep production really And improve the into and changing you, well. the want disconnect their to the profitability auto-revs customers dive you to get that apparent is able be this it are longer are companies into explanations. to have And just to if as a with greater -- or gave all production the I from between behavior? great

Kurt Sievers

Indeed, Ross. of -- changes. Good couple a morning, a couple of

in top change of in on get to very that of out, my it to have agenda I and all, products. pressure just tactically highlight no continues more day every there's sits and because First be to

get weird calls, to has all their faster of escalation to products actions not by down try So, an inch. to manufacturing slowed sorts locations expedite,

a in clearly time industry the see how Today, at whole but where also I is we say that has auto big see significance continuing. future. semiconductors me, function learning for and So, realized and now -- the same resets and strategic -- the of we but both build understanding obviously perspective, too for near more there able and the that's And the bought cars. perspective, but their their From mean, and that realized let would more has also complete a terms say directly has step supply in now the importance years-old. the much and closer being that's about between needs also a to needs, from technical relationships OEMS us, -- of better I innovation, their product innovation it's mid-term.

leads that of quite number them to say would significant I a changes. of significant, All

We longer-term orders. are seeing

visibility very get which the far. NCNR us to great we do which can calendar of is greater similar we Tier longer the which So, build the from for orders, with to find next which since the behavior systems But get get important OEMs entire out reaches think a I into customers OEMs. innovation. X they so-called now are reach help the These we from term, construct also the so future about course, for right But the prospective over Because coming easily this to then year. they roadmaps. intimacy the

Ross Seymore

to business It's gears I guidance. that good as mobile business. two in a third But third and that in bit I Thank in nearer-term combination tight doing a together, guess would But the guess I versus the your have put potentially little my you some supply excuse And had fourth question. bit it original of for you're was if to me. supposed snap maybe And we expected quarters. allocation. a weaker, upside to surprised or thought that back know see in a than on follow-up, -- quarter, just the quarters seasonally the just the that's the little quickly the color I bit is I that the of is quarter mobile shifting and

weakness what's year-over-year basis a just talk the about you driving in business? on can that relative So,

Ross Seymore

was. there It's off the like clearly a supply or

we So, as a sequential could -- three, think which into we we could when about -- I decline quarter we which talked went avoid. we

some in better So, we guidance. we why supply ended could that's the whole Mobile reason up actually in and than pull

quarter. So, significantly there of continued supply better take we sockets or second we It had is in are the to thing capability year, somewhat just be difference unfortunately supply the that in fourth into you forecast But overall, similar no this a and the constrained half if anything. was full

Kurt Sievers

I needed do QX, you is last compare. QX quarter had gradually we the up it fully earlier difficult coming year, getting penetration Huawei Last going which targets on the in of also in the and just to as mobile with adoption which was year our the That's have normal. significantly had a hold mobile just but customers four vital the specific also socket absolutely of performance us, mobile quarter and into if products track are earlier It All suffering. later on is some everything is bigger planned. is which we this year-on-year better, rates, being market. need those of solutions? are QX From of the haven't with both a into which and [Indiscernible] it's I play all, officially perspective we why large very quarter quoted. had phasing customer for more supply comparisons, ban the want has why year-on-year and a pretty for bridging, it But three which attach of re-confirm, drivers early one single lot so there, constraints, planning. wallets, lost We the we bumped to than events. a total, two just given

Ross Seymore

you. Thank

Operator

Okay.

Arya. Next, have Vivek we

line open. Your is

Vivek Arya

industry, if predictable? would flat have you and be Thank the XX%, if that surprised taking and your the to it the been up would this have [Indiscernible] Kurt, had was create you? pricing? auto good both, [Indiscernible] to been think between do that this shutdown one year and content? production sales you some production year, this for Peter you question but mixed What Was that my would told what Was automotive on specifically And surprised luck Bill. bad big effect. surprise it not, other gap and it NXP sales. than the Was of auto

Kurt Sievers

very and mean, knowledge no. predicted I some at course, could we with honestly, of transparently today, it Vivek. Hi, with the knowledge of time, Yeah, have the

clearly now, clearly, change So side, few more things. a result And surprises the for to is mix I premium to volume the not content vehicles various no, mix an significant have penetration, something on much vehicles, the on One, government we anticipated on penetration higher we have in on of is consumption, content impact stronger vehicle. so what what focus note, the COX the foreseen, subsidies that And big a premium also targets, boost premium the didn't which of has of know. you elements, increase which and that nobody significant the given electric semiconductor the to And semi mass penetration happened, semiconductors. xEVs think on car. has impact actually is call countries that. think optimization can the actually profit same two Those easily positive but have on of OEM the I to those twice is a again, the xEVs, faster growth or a lot a

-- I mean, right, production on production by just each Again, the the of goes about car any So this one far. Xx. semi is car That's elements, car potentially effectual is of own flat, its of a think up outstripping even bringing that content content the if both massively. are to these

in -- And, has and if XXXX, car. say, before supply dysfunctional. becomes to I and I as up enormous And that use it enormously the -- the normalized your normalized incredibly back I important. about any is us many how just levels. ship it say, idea [Indiscernible] is how inventory, chain And language, that either. -- stages to has surprised The strategic sometimes It's supply been just off deep deep levels would it it product This it allow still is complexity insight, has operational make how in to it try chain. automotive that's really it getting this didn't no are would at process elasticity the we place, appropriate Which the which gained a not how chain. be we depleted, say means more see nor to more is depleted, case had supply steps extended still after is product between is. which it and we there would chain we XXXX in depleted, of far companies refilling for Again, us. to which that first functional. much we how element been third the is in of to supply to are building dysfunctional rather refilled means a stage. that make ends I been

Vivek Arya

about time, points, forecast the IHS right production they XP at for so the know right that XX keep has the on for that over I my and have better. to between continue sales industry, line for all you Delta, growth. And of but few I changing about been Kurt, been, it's look follow-up, unit XX%-XX% If discussion, just content mentioned next then the last current and years units doing year, the that now

year? terms that rough is ball right, industry the the that happens, that bigger of points year. this next number in Do the Thank Assuming be saw add think you what saying or closer, for it'll we to crystal you. that it'll much delta be XX

Kurt Sievers

Vivek. Yeah,

is all, we So mean, earlier very was first all the is elements of our described obviously important to your question industry which how this. I what you surprised think I of just all. another performance us in mentioned

element, third faster. makes specific it as content specific which companies even clearly The grew CNXC's gains where we share,

as the we to Day week into when in the looking means specific years Investor from next both these a all just all give the that next growth York, next have and how revenue for goes for New our for. wait we perspective. will next, NXP's the as you -- Now well growth ask a you're week I'd year content perspective you detail

relative to both, is the semi will to that. guide next develop, well performance think going -market and how the we as few our We auto years, as

please So, next week. horses hold your until

Vivek Arya

Kurt. you, Thank

Operator

We have John from Pitzer. a question

is line Your open.

John Pitzer

on ask the results. you morning, opening Thanks we solid comments around guys. for all congratulations complexity the chain. all in the letting your I me about curious. gave Kurt, questions and the details think Good the auto supply I'm appreciate

over first tests. to events You talking supply your the here, that of would minutes the grow be chunky? ability in of autos ability time in on internally, about end or half back supply you in year the going supply of in is accelerates on you I'm linear where externally, XXXX? the can there the weather it means to quarters, assuming have jump waver next several and reversed And couple both is some your the be both a specifically, to from spend expect themselves. the grow point look nice side, as your sequential a that to and But ability to grow just relatively

Kurt Sievers

Thanks, John.

on one Let pieces some, behind me QX both at we indeed negative I impact from levels had I file, much impacted the deep The we mean, few running the which Texas to were are us. and good. this very this. is factories isn't on give put you early which -- just a are think in least

to have mention the I has on here impact industry. Another because element it

have were that there to very a shutdowns in assembly in own a summer, position factories over test we immaterial. and shutdowns that that in organize disciplined way Malaysia. back-end our and want for to a I factory such been few sites our been seen very manage You've quite highlight have

have by our from little impact had large, revenue. days on shutdowns we those we but negative very So, few a and

specifically shipped we impact when Southeast QX, So, assume from and/or COVID Malaysia. in there from about you any was think hardly factory negative shutdowns what Asia

year, we that's forward, earlier we us the next wafer but which customers. the with going our again, is And [Indiscernible] which is -- orders into side. largely improvements going partners. years also test supply will side, entering talked NXP. about Now are this long-term largely And for that NCNR see and balance The which back-end We are on commitments we against start are to our assembly, clearly the from supply the collecting in in-house benefiting we on after. which is

make into to the find the all sure tested wafer enough that capacity all will any products. are investments assembled Capex be place our forced and in-house we We put get to and also finished in around hands to

assembly So, in. which because are putting and wafers with pretty in something is as capacity the test think the about in gradual we increase coming it tune

time. discreet, in side, specific not shown about doesn't perspective, that don't is the something any wafer into gradual, we improve obviously which more [Indiscernible] comes From is way the at at suppliers functions the what have several but have a step revenue, same time. On because point which wafer think it's in huge shoots out it and they all

business continue of result it our the this supply to year. clearly year, next that capabilities done they has through as grow all However, through of also

across business. impact all markets. IoT We content automotive, discussed same in and negative our about Anyway, earlier which briefly way Now, anybody the industrial for the mobile. shortages knows our on we form but is which finally, supply Because is any we to this specific clearly comments. automotive comment I in is should or an of say have the over business facing partially are business broad

improvements growth these health All end build support and build all across segments. market our of revenue of

John Pitzer

for really maybe my And Bill. one color then follow-on, That's Kurt. for helpful

congratulations. First,

your to forward line. role. in the working curious margin you with gross new I'm Looking just on

solid really quarter. Another gross margin

environment. Given holding more cost And the out a in from to, logistic guess times within inflationary hard pricing. goals. that margins gross how a ticks sort next side us could in gross importantly, constructed would we I I all quarters? in over being -- margin these LTAs, understand the often it's assume tick up up -- several much relative relative help quarter? gross easier to the out of some quarter, see to you either price you it's Was can value of across there Does mean rate look some costs here there, they're back as get to this that of your to margins to anything

Bill Betz

Yes, thank your question. you for

give bigger margin me about a on Let more it. color and the picture

factories. year previous calls, So drastically gross from our as mentioned last our on by had improved improved and higher margin volumes internal our driven versus utilizations the

XXs. by the to I last the remember, are as saw, from to the a quarter-over-quarter a QX if slightly and today better were improved utilizations I you guidance standpoint, XXXX product we in basis related mid-XXs example, bps, And in think For mix. try high were from year, we

through next over fall it's going forward move to on have really to additional several quarters, internal that we be factories. as Now, the difficult our

As basically they're running pricing. on full-out. To address your question

input value our passing of our really our process together. of as from on pain our any we're in to the not And say. We our sharing the costs we this suppliers with are customers. having increases we're only And margins relationships long-term our customers, equally I'd

very any gross will guiding And As say be will additional the of by be in model continue say of expansion, go you flat we're that delivering longer-term quarter-over-quarter, I'd mix. our new driven proud levels margin are higher we expansion we overall, as would short-term I'd financial And our could product really that forward. to towards more look forward driven achieving margins and see continued to QX, of come be XX% in end we state these the by NPIs.

John Pitzer

Thanks guys.

Operator

(ph), open. Our from your line is next Rasgon is question Stacy

Stacy Rasgon

that's pricing guys. extract not on shortages I question. up bit, a for the why I where the will to for been Hi, chain ever is advocate but little in taking devil's question. your trying tighter other right And the products play is you're not? the given You're now there there, to my Thanks wanted demand time to and chart. ever off more, it out than of supply a be. has follow period probably know

more? in. basis not [Indiscernible] given actually that to extract You're even peers At of locking going selective guys? are the this your customers on seems not Especially why Why to some this is like time it down try point, you a

Kurt Sievers

are in deep, very is our we with Yeah. Hi this, our And The the we portfolio vast Stacy. business. majority not are There clear that a is of customers. very is with relationships to in longer-term portfolio, application-specific. commodity answer which very

-- past, absolutely Bill different. market build input and to So, cost, are to different pass built our in relative important And off it it on from positively we what use lot we in clearly customers. a long that the works also we which long-term environment context, significant our are want personally being the input it's on are that But already, I of to of I'm a markets And in for pat margins. for business. the the market mean, the we with in moving. cases need will would to the we said, we our is, relationships not but to element semis. in. continue say other digest not do on costs, be moving want have things pass note trust also customers. that's on very relations we commodity are as transparent the which environment term whole to out our to of consider in some in to is lot input our it is the not right pretty that I very to the customer which But whole -- just kind context, is we has sure In which this that costs going pay customers. the A that on thing

a in where long-term is it's big tough differentiate. I all trust that's participants think value. and relationships the into we for where the environment something transparency, -- do And a So, consistency,

Stacy Rasgon

pricing at were maybe of raising every price the I these basis increases, every level, built-in the little at higher be price built than in guess, even like to similar to it for different long-term year. that behavior that in the higher the past? coming guess do was bit, couple to pricing part least a we're the compression long-term contracts? of is understanding contracts? of as practices, have general at was long-term of contracts, structure on a off XXX a the fighting you'd you. Thank you input long-term you like margin into that downs to follow fighting contracts because up of Are and on off high be base Or of automotive, just pricing least that'll still a my type points year be base foresee the I historical these like especially cost follow-up, long-term that now, going

Kurt Sievers

cases, side have Yeah, mean, the overall step situation is last. I other the reset. And is made that I customer what discussion. different we make or just And indeed But It Stacy perspective, something that's can't anticipate, a them. think semiconductors And then is reset, indeed backwards. with is of to think I to mean I very positive. it don't the which for realization that's but prices on the we automotive, of value stay. to is that discuss any the reset, function, hard serving, which is from a here here year-on-year, of all comment earlier here, take the trends how industries think to How segment-specific we -- I individual that in step that with and is here. important which important individual not with this a And are represents are. go I just it that I to goes comes will it’s a

Stacy Rasgon

Got Thank it. you.

Operator

Stein. next is question from William Your

is line open. Your

William Stein

for taking questions. Great. my Thanks

to this you purchase foundry you about talk about ago, just commitments to spoke your First, but I duration your of a and NXP? magnitude the moment can think purchase and customer commitments

Kurt Sievers

detail, varies. with say it in in a fill maybe general, would but really Bill more bit Well, I'd

they the site is of cover We year. have next them some NCNR would which on customer orders, the easily typically

stretches end way year. getting the now, of the all until an So order next which

entered have this X.X majority multiple come, it over to years wafers. side, foundry is remember you, stretches the if base. other on we I is which give out of partners, this which But think a to the year, billion supplier for supply agreed actually $X.X a our not with and is obviously billion agreements The just our then supply we $X.X and billion think you which new in into published mind you If with right, feel. signed I vast X between is and off commitments, number,

William Stein

Bill, helps. That And offer some your to I want on Thank role. you. new congratulations

strong in XX given terms you shoes performance very strong might your or course, say hoping you. the fill the least and so. new years us Thank CFO. might have a give at pretty what Peter's last next of to some priorities as in big Company's preview week, of you you Of the performance I'm

Bill Betz

thank you question. Yes, for your

Fairchild, our for next I've a the semi-industry principles and I'd same. there's worked have financial management for my to role. as this and Peter, on supporting you employees address like model. XX years financial Jeff really like years But NXP. delivering that style's LSI Day, customers for call. team. Analyst you long-term relay we and Peter, prior alongside that are and long-term I've about shareholders. First week no the in entire really I'll X bit thankful next value and save strategy systems. different to to I've Focus been to off, to with our driving mentioned, share commitments Company's And not week, say I'm than and but very yes, in NXP the for remember, Relay honored been that and change Kurt the for about the with

Operator

question open. Chris a from have Caso, We your is line

Chris Caso

morning. Thank you. Good

such using what question, those you're And First agreements I agreements? of you what with could made your tell on your you volume those visibility pricing? those if in both of that wonder that Is pricing like specific are signing to your those volume for ask commitments time? you long-term agreements backstop customers now. that committed it agreements as us your suppliers. customers have agreements sort a I that and from commitments have to -- to is just with customers the you're certain and Can amount you over sounds making about well, under

Kurt Sievers

as -- this, and end would were And you But customer before I cover typically price period say calendar in volume even you the Since of indeed of understand, agreements on it detail by into really headline for a great saying line until fixed next for year. can't quarter. go is those will Chris. example, they

year. even just So, number binding many it's But the it two whole it goes to one for in not cases, quarters.

Chris Caso

tailwind in this going said, as the expecting, forward, as as pricing of -- substantial the you've been are you've the over from gotten go you've And a pricing -- of there's benefit the that past very the into go helpful. of price you've you passing couple you you as seen those quarters, give well, up And then How price of magnitude year, next follow increases out and year-on-year still rise? to I seen of you XX% be as if sort been pricing And those a in can calculation? you've increases Can costs revenue? sense has us clearly, input suppliers. along

Kurt Sievers

input Well, we go terms. since year continue match will with to adjusting will will in up costs continue general generally, they be the discussed rising that continue to as accordingly. the uprising next next also costs to also yes, input adjustments Such prices we before, year, into

just your and For is the how detail I what the cannot rest all in of philosophy greater much concept to important really of question, don't really want piece. It's and the go into that leading we next of price year this and to going input is increase this just indeed which matching too. have is the is costs that is that and that's increase, year something it. follow up which But

Chris Caso

Thank you.

Operator

Next question Curtis. is from Blayne

line is open. Your

Blayne Curtis

Peter as my my congratulations Bill well. I'll offer Hey, thanks taking to for question. and

audio wanted be side, just clear. Just to -- the back on going I

kids are that very for detail, seeing the be customers You've they supply on companies other just curious, complex. all from Kurt some selective, chain the I'm -- seems that started together. get Thanks more to trying heard secular you that or strength certain behavior maybe specific that the not are the you offsetting seeing that parts? selective bit growth same Thanks. Company's [Indiscernible] behavior, of elsewhere, some and seeing on given seeing different you're to are a

Kurt Sievers

year, you can especially, and ask is car one don't this They the slowdown, them the a to limited and grow technology. of semiconductors. Blayne, think you that one not negative is the know or the their more with is see significantly over seeing clearly answer a XX% to I this impact I plus year? pretty what tried I clear by, And ambition year that and to product need next am me to don't We companies absolutely production slowdown no. numbers imagine car

our I product automotive weeks. the the of of made that comment earlier above very time think open I lead a has in also XX% portfolio still business XX

all. it says that think I

Blayne Curtis

it maybe half Thanks. year strength back Are just [Indiscernible] ask the year. be kind are described - of chain discussion Maybe you IoT. tight you. well for the as Maybe that'd Thanks. the Industrial just to can is just - -- of for the on you helpful? And just you supply areas about what to of the as

Kurt Sievers

Also, industrial too. in headlines. It home. in different cannot equally shipping significant -- newspapers. to semi very less the impact It impact are It's just the more in the less Yeah at I drastic automotive. product is as as automotive, is the is by think huge or if it just automotive. supply if -- be not in as semiconductor would there of built which Blayne. catching enough on way, But as no if tight which -- smart -- which you about say, automation, headlines was huge machinery, catches is least

come. much think range more had Now, very leadership spotlight differentiator, from I offering the of Complete our into by in would and our here, offer very really going the give solutions that security, complemented we our solutions. of differentiates grow to and unrivaled to very to us is which our wide solutions processor. connectivity, portfolio but time dare around and say not processing We've the and -- a why in Investor also makes so more the more what that we big it's which it's a Day have to is and detail, way, position analog in very you industrial, to be much complete the next much capability us by in nicely attach, competitors. week

customers. distribution, with and literally levels can this makes which think serving is Because are of there don't for that I very a And has why that for if many perspective from for to it indeed a capability a from -- the big because such an That's that or through exactly thousands of going Now huge applications. themselves --we perspective, connected chain lot of significant us. we the etch actually business really through difference. channel deal these or a of to of than time-to-market have very a R&D a supply NXP solution what is which is these both goes When advantage capability distribution companies offer them thousands, complete solution differentiator them. complexity small

do a have the to China. exposure strong in element equation we is relatively another Now,

China. business, supply continues distribution and going China. we think slowdown that going be lot you the lot is it's we you, in about -- a again, see into to to mind a the through If is there also not But anticipate question, And we industrial just are kept. do a

also run there supply higher earlier, better time capability, we also more said [Indiscernible] that I over with have earlier, also be is news certainly we discussed improving only in is our we revenues there As into industrial, as place. if so Good could month get every supply. hopefully a

Blayne Curtis

Okay.

Operator

I'll ask questions C.J. to

Kurt Sievers

We'll take one last call.

Operator

Okay. And Muse. our question C.J. is last from

Your is line open.

C.J. Muse

in. guess auto I your XXXX. you in supply morning. first not talked for until Good for Thanks about balanced, demand me remarks, probably Yeah. prepared achieved you, squeezing Kurt, question

as both case in contemplate what of so you future assumptions opposed will And just like, are inventory imagine OEMs. the at of Tier of you what there's time. management kind of to making curious, I terms kind and that, look as in X adjusting more

coming evolution is likely that that kind auto the So, for ahead we of hear to would thoughts love on industry. your

Kurt Sievers

And capability has way, product. which stem time see maybe manufacturing and don't semiconductor us And, more inventory. a semi other and puts in months, the industry year, clearly yes, C.J. cycle speaking that's build typical Typical, by inventories. to stopped that and between has let's OEMs, it extended you're Yes, but is In asking Tier the ask indeed say enough additional see very this this, what if think the the that's is side between somewhere for, is I if year. the next Absolutely. I we the not simple then us broadly did say, participants I flexibility. to the a " yes, build for inventory, the those is X OEMs simple X's size on the and X you Okay, supply in don't explicitly very already this but the exactly 'XX. longer. Two additional to there demand for a sometimes they building the more Because for supply-chain, want demand " companies, next safe to something [Indiscernible] to a reasoning requirements between, that's

C.J. Muse

we've shift helpful. I fit hybrid would full I'm then which guess, question, with you the earlier. target moving spoke that as or solution thoughts Curious seeing to my I platforms, which curious, more well. hear to And we're on I to how played follow-up positive obviously OEMs EV side, and Very your your has love more nicely. mix as would would EV there. over full seen think

Kurt Sievers

We foster solutions, capability our and in it from actually solution perspective which lot penetration. talked a greatly love C.J. from We accelerated a about this benefiting management -- from battery also is

summarize itself, the to be four, just come year, for the proud bit it three, to We guess, in beyond our a that that more up to may capability guidance will BMS quarter Day turbulent time better open also you NXP, really gets thing I but which insight strong more very mean, better little see greatly. in in momentum exposed good are we continued continue is and so, a into is the briefly. out with accelerated battery deliver [Indiscernible] that not only electrification, with of Investor end and goes I I'm management. excellent obviously, there. next stop very we to our we in but a what quarter matching give do have across supply strong into even management the what a to next good No Which demand trends. getting better because I a very, inventory markets. there, future. and it's And else demand build in out It's means and me think could have the battery week benefiting is this we we a very we very call. this By position end

few So of you with much when quite attendance and Investor have very week also Thank thank I next to New Day you that, you. and in extended I York. hear hope see today our your a more for much we

Operator

Thank for participating, disconnect. Ladies you conference and gentlemen, you concludes now this may today's call.