• Q4 Revenue: $3.11 billion, down 9% year on year.
• Full-Year 2024 Revenue: $12.61 billion, down 5% year on year.
• Q4 Non-GAAP Operating Margin: 34.2%, down 140 basis points year on year.
• Full-Year 2024 Non-GAAP Operating Margin: 34.6%, down 50 basis points year on year.
• Automotive Q4 Revenue: $1.79 billion, down 6% year on year.
• Automotive Full-Year Revenue: $7.15 billion, down 4% year on year.
• Industry and IoT Q4 Revenue: $516 million, down 22% year on year.
• Industry and IoT Full-Year Revenue: $2.27 billion, down 3% year on year.
• Mobile Q4 Revenue: $396 million, down 2% year on year.
• Mobile Full-Year Revenue: $1.49 billion, up 13% year on year.
• Communication Infrastructure and Other Q4 Revenue: $409 million, down 10% year on year.
• Communication Infrastructure and Other Full-Year Revenue: $1.69 billion, down 20% year on year.
• Q4 Non-GAAP Gross Margin: 57.5%, down 120 basis points year on year.
• Full-Year 2024 Non-GAAP Gross Margin: 58.1%, down 40 basis points year on year.
• Q4 Non-GAAP Earnings Per Share: $3.18, $0.05 above guidance midpoint.
• Full-Year 2024 Non-GAAP Free Cash Flow: $2.09 billion, 17% of revenue.
• Q4 Non-GAAP Free Cash Flow: $292 million, 9% of revenue.
• Q1 2025 Revenue Guidance: $2.825 billion, down 10% year on year.
• Q1 2025 Non-GAAP Gross Margin Guidance: 56.3%.
• Q1 2025 Non-GAAP Operating Margin Guidance: 31.5%.

• Warning! GuruFocus has detected 6 Warning Sign with AMCCF.

Release Date: February 04, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• NXP Semiconductors NV (NASDAQ:NXPI) delivered Q4 revenue of $3.11 billion, which was $11 million better than the midpoint of their guidance.
• The company maintained distribution channel inventory flat at eight weeks, below their long-term target of 11 weeks, demonstrating effective inventory management.
• NXP's automotive segment showed company-specific growth in accelerated growth drivers such as S32 for software-defined vehicles, automotive connectivity, radar, and electrification.
• The company announced strategic acquisitions of Aviva and TTTech Auto, which are expected to enhance their long-term competitive position in the automotive market.
• NXP returned $2.41 billion to shareholders in 2024, which was 115% of the total non-GAAP free cash flow generated during the year, indicating strong shareholder returns.

Negative Points

• Q4 revenue decreased by 9% year on year, reflecting challenges in the macroeconomic environment.
• The non-GAAP operating margin in Q4 was 34.2%, down 140 basis points from the previous year, indicating margin pressure.
• The Industrial and IoT segment experienced a significant decline, with Q4 revenue down 22% year on year.
• Communication infrastructure and other segments missed expectations, with Q4 revenue down 10% year on year.
• NXP is experiencing poor forward visibility and high turns business, reflecting uncertainty in customer demand and order patterns.

Q & A Highlights

Q: Are you set up for normal seasonal trends into Q2 and beyond, and where do you see relative strength or weakness? A: Kurt Sievers, President and CEO: Visibility is poor due to low order lead times and late customer orders. Q1's 9% sequential decline is on the lower bound of seasonal expectations. Automotive and Industrial IoT are relatively stable, but communication infrastructure is weak due to end-of-life products. For Q2, expect flat to slightly up, but this is not based on strong forward visibility.

Q: How do you see gross margins evolving given current cycle conditions? A: William Betz, CFO: Gross margins declined by about 120 basis points due to annual price negotiations and lower revenue fall-through. However, improved mix and lower supplier costs partially offset these headwinds. We expect gross margins to remain at current levels until revenue growth resumes, at which point we will return to our long-term range of 57% to 63%.

Q: Can you discuss the regional trends, particularly inventory situations at North American customers? A: Kurt Sievers, President and CEO: In Q4, Asia, led by China, was stronger, while Europe and the US were weak due to inventory digestion and weak demand. This trend continues into Q1, with Asia showing relative strength. Inventory digestion at Tier 1 customers in the US and Europe continues, affecting revenue performance.

Q: What is your outlook for the Industrial IoT segment, which is flat sequentially? A: Kurt Sievers, President and CEO: The relative strength comes from Asia, particularly China, where we have high exposure. Low channel inventory helps us benefit directly from any end-demand improvements. However, it's too early to call it a trend.

Q: How are you addressing the end-of-life process in the communication infrastructure segment? A: Kurt Sievers, President and CEO: The digital networking products, which are about 30% of the segment, will continue to decline over the next few quarters. However, the secure card and RFID businesses are stable, with RFID being a growth area for NXP.

Q: What is your expectation for global automotive production and content growth in 2025? A: Kurt Sievers, President and CEO: We expect around 89 million units in car production, slightly down, with China being more stable compared to Europe and the US. For content growth, use the percentage growth rates from our Analyst Day, offset by current underperformance due to inventory digestion.

Q: How do you view the sustainability of current strength in China, and are you concerned about inventory build-up? A: Kurt Sievers, President and CEO: China grew by 4% last year, with no indication of inventory build-up. Growth is driven by increased content and market share of Chinese OEMs. We are aggressively ensuring competitiveness through local manufacturing and dedicated solutions for Chinese OEMs.

Q: Can you elaborate on the strategic importance of the TTTech acquisition? A: Kurt Sievers, President and CEO: The acquisition enables us to engage with automotive OEMs on software-defined vehicle architectures. It allows us to co-design STB architectures with OEMs, moving us up the value stack without directly competing with our customers.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.