NXP Semiconductors NV Q2 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Vivek Arya - Bofa Merrill Lynch Asset Holdings Inc - Analyst : Kurt, I heard on the call the suggestion that you're in early stages of a cyclical recovery. So if you apply that to the automotive segment, Q2 sales, flattish year-on-year. I think Q3, you're also indicating to be flattish year-on-year. And that seems to be a somewhat more conservative tone that we hear from some of your analog peers who are more optimistic. They are seeing the year-on-year sales increase, especially in China. So how would you contrast the pace of recovery you are seeing in automotive versus your peers? And when do you expect your automotive sales to start

Question: Vivek Arya - Bofa Merrill Lynch Asset Holdings Inc - Analyst : Okay. And for my follow-up, just want to relate one for Bill. So Bill, if you could give us the contribution from the acquisitions. I think one has closed, two have not closed. So just how to kind of think about when they do close, what the contribution ranges might be? And then if I were to make a guess for Q4 and say if NXP sales were to grow low to mid-single digits sequentially in Q4, what would that do to gross margins? And is there any mix that we should be thinking about as we kind of conceptually think about Q4 gross margins?

Question: Francois-Xavier Bouvignies - Ubs Inc - Analyst : I just have a follow-up on your channel inventories. So you said, Kurt, that you expect to sit at nine weeks. Your guidance is based on nine weeks. And you may increase it either in Q3 and Q4, if I recall correctly. What are you waiting for exactly to increase? I mean, what are the signs that you would make you make the decisions and why you don't do it right now? So what are the moving parts that would make it increase to higher levels? That would be my first question.

Question: Francois-Xavier Bouvignies - Ubs Inc - Analyst : Makes sense. And maybe one for Bill on the inventory days, 11 days below is actually a big decrease in days, I mean when you look in the history. So that's welcome. Still on the absolute number, it's still very relatively high. But how should we think about your own inventories in Q3 and Q4? Do you want to work it down more aggressively, perhaps given the relative high level? Would be great to have your color here.

Question: C.J. Muse - Cantor Fitzgerald LP - Analyst : I guess digging a little bit deeper into auto, you talked about shipments tracking to natural end demand. I was hoping perhaps you could be a little more specific within your key growth drivers and the trends you're seeing there, both from China and kind of non-China perspective to get a sense of the rate of recovery geographically.

Question: C.J. Muse - Cantor Fitzgerald LP - Analyst : Very helpful. And I guess a follow-up question for you, Bill. You spoke earlier to Vivek around the key drivers to gross margins. I was hoping perhaps you could speak to maybe the near term, the next six to nine months within the kind of structure of 57% to 63% target model. Would you highlight any particular drivers outside of utilization and mix that could impact trends there or no?

Question: Christopher Danely - Citibank Cameroon SA - Analyst : Kurt, can you just give us a little more color on the visibility trends maybe through the end of the year or even into next year? You mentioned some shortages and escalations. Just any sort of quantitative metrics you can give us, say, now versus three months ago on how the rest of this year or next year is looking?

Question: Christopher Danely - Citibank Cameroon SA - Analyst : So just as a follow-up, I guess, on that same topic. I mean, it sounds like auto, you're most optimistic on that. If we look at the next, I don't know, 1 year, 1.5 years, Kurt, would you expect higher relative growth from your automotive segment or your industrial segment?

Question: Tom O'Malley - Barclays Services Corp - Analyst : If I look at last quarter and this quarter, obviously, one of the major changes is your confidence that you could actually up some of the weeks of just the inventory. And you're still kind of waiting mid-quarter here, and you kind of addressed that already. But you made the remark, 9 weeks to 11 weeks. Is 11 weeks the maximum that you guys would channel refill in this period of time? Or is there any circumstance in which you would go a little bit higher than that? Just walk me through why would be 11 weeks? Is that just kind of the stated goal long term? Or what would change to make you maybe go a little bit higher than that, given that you guys are clearly seeing a recovery?

Question: Tom O'Malley - Barclays Services Corp - Analyst : Helpful, Kurt. And then, obviously, you gave us a little sneak peek into Q4, so I can't help but pick a little bit there, too, but you're saying flat to slightly up. If you look at normal seasonality for your segments kind of into the December quarter, at least over the past seven, eight years, it looks like auto is up low single digits, industrials actually up a bit more robustly in the fourth quarter. If you were to plug that in, you kind of get greater than 20% growth in the Industrial business. You're clearly pointing to some strength there. But any differences that we should be thinking about in the recovery between auto industrial as the year closes or would you say the contributing factors to that flat to slightly up are relatively in line with what you've seen historically?

Question: Joshua Buchalter - Cowen and Company LLC - Analyst : In your prepared remarks, I think you talked about not seeing any material impact from the tariff environment or pull-ins. Can you maybe elaborate on what signals you're looking for and what makes you so sure that there's not really a meaningful impact yet. I think a few of your peers have commented your customers don't check a pull-in box when they place an order. So I'd be curious to hear if there's any changes in your customers' behavior and what you're seeing on the tariff front?

Question: Joshua Buchalter - Cowen and Company LLC - Analyst : Got it. You touched on this before, but I was wondering if you could maybe comment on behaviors from your auto customers, specifically related to their investment in software-defined vehicle. I mean, it's a very challenging time still to be an auto OEM. Like are you seeing them sustain, accelerate, pull back on their investment in newer technologies and features like SDV and ones that, that enables?

Question: Joshua Buchalter - Cowen and Company LLC - Analyst : Got it. And Kurt, this is indeed your last earnings call. Thank you for all the help over the years.

Question: Stacy Rasgon - Sanford C Bernstein & Co LLC - Analyst : Kurt, I wanted to revisit the TTTech in the guide. I know you said it was insignificant, but I mean, they have 1,100 employees, and you paid $625 million for it. Is the revenue really zero? Like how big is the insignificant amount of revenue that's actually in Q3?

Question: Stacy Rasgon - Sanford C Bernstein & Co LLC - Analyst : Okay. So it's like, what, single-digit millions or is it double? Like just help me size it, how big is it?

Question: Stacy Rasgon - Sanford C Bernstein & Co LLC - Analyst : Got it. Okay. So there's a business model change is what you're saying. Okay.

Question: Stacy Rasgon - Sanford C Bernstein & Co LLC - Analyst : For my follow-up, I wanted to take a little bit on Q4. So it does sound like, I get it, the guidance, that doesn't include still in the channel, but it's certainly on the table. And you sort of gave a number for kind of typical seasonality for Q4. Are there plausible scenarios where you could be above seasonal in Q4 without filling up the channel further than it is right now? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 22, 2025 / 12:00PM, NXPI.OQ - Q2 2025 NXP Semiconductors NV Earnings Call

Question: Stacy Rasgon - Sanford C Bernstein & Co LLC - Analyst : I'm not asking you the guidance.

Question: Stacy Rasgon - Sanford C Bernstein & Co LLC - Analyst : What I'm asking is, do you need to fill the channel to be above seasonal, is what I'm asking.

Question: Stacy Rasgon - Sanford C Bernstein & Co LLC - Analyst : I mean, even though, I wonder a little bit, we've had negative pre-announcements from auto OEMs and like the end demand environment for auto doesn't seem fantastic. So it's tied on normalization of inventory or likewise.