NXP Semiconductors NV Q4 2024 Earnings Call Summary

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

Question: CJ Muse Muse - Cantor Fitzgerald - Analyst : Yeah. Good morning, good afternoon. Thank you for taking the question. I guess high level, all eyes are on the rate of recovery off of a likely Q1 bottom for you guys as well as the industry. So be curious if you think we're set up for normal seasonal trends into Q2 and beyond? And if you could kind of parse through that, where you're seeing relative strength and perhaps we're you see relative weakness or where you see concerns where perhaps trends won't be as strong as seasonal.

Question: CJ Muse Muse - Cantor Fitzgerald - Analyst : Very helpful. And then maybe a question for you, Bill. Our gross margins, given where we are in the cycle, [57% to 63%] is spectacular. Would love to hear kind of how you see a recovery playing out from utilization rates from mix, from bringing in higher-margin distribution? Would love to kind of how you see things evolve.

Question: Tom O'Malley - Barclays - Analyst : Hey guys, thanks for taking my question. I wanted to focus in on the regional trends. It sounds very similar, what you're kind of talking about, at least on the auto side with some inventory at the North American guys with potentially some better environments elsewhere. Could you just maybe talk about the inventory situation at the North American customers versus three months ago? Do you feel like that's coming to a bottom here with some inflection from this point forward or -are you still kind of working that down? Any additional color there would be helpful.

Question: Tom O'Malley - Barclays - Analyst : Super helpful. And then just as a follow-up, I think you gave a lot of really good pieces there. So the days the inventory is low. You talked about low 70s range in terms of internal utilization. Like clearly, visibility going into this year is really difficult for you guys right now. But can you just maybe walk through for us on the line, when do you start to make decisions about internal utilization? Like is it like two or three quarter out scenario where, hey, things are getting better, we're going to reduce a bit. It seems like things are at a healthy level right now from the utilization perspective. But when do you make that call? And maybe what levers do you look at when you think about potentially reducing that if demand isn't coming back?

Question: Ross Seymore - Deutsche Bank Research - Analyst : Kurt, the industrial IoT segment being flat sequentially. You alluded a little bit to Asia acting a bit better, but I think that flatness is a welcome surprise to people. Can you dive a little bit deeper into what's going on there and keeping that business flat?

Question: Ross Seymore - Deutsche Bank Research - Analyst : Thanks for that. And then I guess as my follow-up, switching over to the comms business and other, you've mentioned about kind of an accelerated end-of-life process. Is that now behind us? And so the business a little under $300 million, I guess, in the first quarter for your guide is now going to act along with whatever demand does? Or is there more room that, that has to be taken down?

Question: Vivek Arya - BofA Global Research - Analyst : Thanks for taking my question. Kurt, on the first one, maybe a little deeper into the automotive segment, There's a lot of talk of tariffs, et cetera, this year. Have you seen any change yet in customer behavior, pull in, push out, mix of EV, et cetera? Just how are you reflecting this kind of evolving landscape in your thinking for 2025?

Question: Vivek Arya - BofA Global Research - Analyst : And maybe one for Bill, just kind of a hypothetical if I sort of take what was said about Q2, and I completely understand visibility is limited. But if I assume some semblance of normal seasonality in the back half. I kind of get it conceptually sales down high single digit or so this year. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 04, 2025 / 1:00PM, NXPI.OQ - Q4 2024 NXP Semiconductors NV Earnings Call So I'm not asking you to endorse that. But let's say that was the situation what would be the right way to mathematically think about gross margins and OpEx this year? Thank you.

Question: Stacy Rasgon - Bernstein Research - Analyst : Hi, guys. Thanks for taking my questions. I wanted to go back to gross margins. You said gross margins would probably stay here, give or take, until revenue started to grow. You suggested Q2 would be maybe flattish or up a bit. So I assume Q2 gross margins in that environment don't really go up very much. Hopefully, that revenue grows in the second half. But before you had suggested that margins for the full year would land still within your range of 57% to 63%. Given you're going to be in the 56% is in the first half, do you think you can still get into the range for the full year? And if you do, is it like very close to the low end because I'm having a hard time getting it much more than that without a lot of growth in the second half.

Question: Stacy Rasgon - Bernstein Research - Analyst : At the Analyst Day, you said that.

Question: Stacy Rasgon - Bernstein Research - Analyst : If you don't know if you'll be there for the full year 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. FEBRUARY 04, 2025 / 1:00PM, NXPI.OQ - Q4 2024 NXP Semiconductors NV Earnings Call

Question: Stacy Rasgon - Bernstein Research - Analyst : Okay. And I guess on that point of visibility, you said you have a lot of terms. What is your percentage of orders that are coming from turns right now? And like how does that differ across the different segments?

Question: Toshiya Hari - Goldman Sachs - Analyst : Hi, good morning. Thanks so much for taking the question. My first one is on the automotive business. Just from a business planning perspective, and again, I realize you've got a little visibility and a lot of moving parts here. But from a planning perspective, what kind of global SAAR or global unit production are you expecting for the year? And more importantly, Kurt, you talked about the secular drivers that you guys have been speaking to the 32 connectivity radar, et cetera, what rate of outperformance or content growth should we or can we expect in calendar '25 versus '24.

Question: Toshiya Hari - Goldman Sachs - Analyst : That's helpful. And then as my follow-up, you mentioned for the year, you're expecting blended pricing to be down in the low single digits. I'm curious what your expectations are in terms of foundry costs or wafer costs in '25 versus '24? And then somewhat related to that, Bill, you talked about potentially consolidating 8-inch facilities. If you can expand on that and kind of speak to timing and magnitude in terms of potential gross margin tailwind in future years, that would be helpful. Thank you.

Question: Chris Caso - Wolfe Research - Analyst : Yes. Thank you. Good morning. The first question is, again, on some of the digital networking products that are going end of life. I want to make sure that we're calibrated on this correctly. So I think what you said is that was about 30% of the common infrastructure segment. Should we expect that a large part of that goes away over the next few quarters? I guess I'm trying to quantify -- how much of the business is affected by end of life and sort of the timing that you expect for that to finally work its way down. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 04, 2025 / 1:00PM, NXPI.OQ - Q4 2024 NXP Semiconductors NV Earnings Call

Question: Chris Caso - Wolfe Research - Analyst : Understood. A follow-up question is on China. And obviously, it's very strong now given some of the share shifts that are happening in the industry. I guess, in the interest of no good deed goes unpunished, we do get a lot of questions about the sustainability of that strength and owing to the fact that there are a lot of OEMs in China trying to gain share. Could you talk about your view of the sustainability of what's happening in China now and the steps you're taking to make sure that the customers aren't building inventory, we're not over shipping to that region.

Question: Joshua Buchalter - Cowen & Company - Analyst : Hey guys, thanks for squeezing me in and taking my question. Very much appreciate that you gave us the, rough outlook for the second quarter given the low visibility environment. I guess as you sit here today, do you expect to still be under shipping in that second quarter? Is there any way to quantify that amount? And I assume within that flat to up number, that still includes the channel staying in sort of the eight to nine week range. Thank you.

Question: Joshua Buchalter - Cowen & Company - Analyst : Got it. I appreciate the color there, and I'll give the cycle a break for a moment. I wanted to ask about the TTTech acquisition. You're moving into -- further into the software space and acquiring the middleware assets. Can you maybe speak to, I guess, one, how that changes your conversations with your OEM customers and the potential pull for your broader set of hardware solutions? And also, is there any element of -- with this acquisition in particular that where you're competing a little bit more so with your customers. Thank you.