Q1 2020 Earnings Call
Some of <unk> listen only mode. After the speakers presentation. There will be a question answer session to ask a question during the session. Please press star one of your telephone.
Please be advised that today's conference is being recorded through quite any further systems. Please press star zero.
Turning the conference over to your Speaker today, Rick Clemmer CEO. Thank you. Please go ahead Sir.
Yes, Thank you Chris and good morning, everyone. Welcome to you have XP semiconductors first quarter 2020 earnings call ill the call today four corners of the World, It's Rick Clemmer, <unk> CEO, Kurt Cbres piece project.
Kelly our CFO, we're all in remote locations today, so if there's any delay responding to questions. Please.
Yes.
The call today's being recorded it will be available for replay from our corporate website. Today's call will include forward looking statements that involve risks and uncertainties that could cause had its piece results to differ materially.
Managements current expectations.
These risks and uncertainties include but are not limited to statements regarding the continued and talk to the cobot 19 pandemic on our business back on economic impacts on the specific end markets in which we operate.
Ill deal in existing products and our expectations for the financial results for the second quarter of 2020.
Please be reminded that NXP undertakes no obligation to revise or update publicly any forward looking statements full disclosure on forward looking statements. Please refer to our press release.
Additionally, we will refer to certain non-GAAP financial measures, which are driven primarily by discrete events that management does not consider to be directly related to NXP is underlying core operating performance.
Pursuant to regulation G. Oh, excuse provided reconciliations of the non-GAAP financial measures to the most directly comparable GAAP measures in our first quarter 2020, <unk> earnings press release, which will be furnished to the FCC on form 8-K and is available on NXP is website under Investor Relations section and NXP Dot Com now I'd like to cross sell direct labor.
Kurt.
Are you on huge.
Well there might be there might be a problem with Rex.
Well actually.
So this is Ted Christie was I believe.
Take over from Rick.
Such that we couldn't get started some swiftly so once again.
Thanks Trevor.
Good day, everybody on the cool.
The last several months.
That's been one makes the most disruptive periods in the semiconductor industry.
But throughout this current period of widespread and unprecedented disruption due to the cold at lunch in virus.
We've never been as proud as no as a whole entire NXP cheap.
They are collectively demonstrating our core values.
During this challenging.
As we continue to books to supply our customers.
Junior to focus on the development.
Key programs.
We have put a dedicated team in place you focus on the safety or employees and the management. That's all our employees can work effectively.
Remotely.
Safely on site when necessary.
[noise], Kurt and back to what inning.
All right so.
Yeah.
Yes. Please.
Right.
Thank you well NXP has long been geographically diverse we now have over 12000 up our worldwide team, including 90% plus the brain direct employees that are not in manufacturing.
Working from home or or just recently returned from working from home in China and Korea.
Daily our employee.
Our taking initiative intensely collaborating and focusing on delighting our customers.
I am heartening to see the genuine engage curiosity their desire to solve problems and everyone looking to drop positive outcome in respect to bear is expertise.
In Threed, it's all just fighting a sense of confidence that we will all successful we get through.
NXP is structured to adapt to respond to unknown challenges and to support its people.
As an example, our team members are assuring that our customers need help your medical areas are critical and see you in central products to enable the increase production respirators and other related medical equipment. So this is not a sufficient amount of revenue.
Globally, we are donating P.P. or material, where do you needed and providing laptops to students NGL and nursing home page shows. Our team members are also independently raising funds in donating back in their local communities to help the less privileged.
From an operational perspective.
All of our manufacturing facilities are up and running although we did previously have some limited government ordered closures.
Our manufacturing plant in China has continued to operate through the entire period.
I have not experienced any major bars related supply issues.
We have been extremely fortunate that the virus, that's not materially impacted our broad employee base.
We will continue to closely monitor all government orders and take a cautious approach, allowing employees to return working from home.
The safety of our employees remains our top priority.
Therefore, we will not rush to return to the opening so that we can limit the number of employees on site, allowing for continued so do so to social distancing, especially where we have a manufacturing and other operations combined on a single site.
Turning to how we view the current business in Bible, just crises is unlike anything previously experienced by the semiconductor industry with bracket changing characteristics, making it hard to identify true demand indicators.
We will continue as we've always done in the past did share information openly to enable all of our stakeholders to understand the conditions that we are operating.
We currently ponder selves attempting to Mike accurate projection of true OEM customer demand. This is especially true in global automotive markets, where we have gum.
You are customers.
And work with them to reduce their did mean signals to more accurately reflect true auto OEM requirements.
North American Europe automotive OEM in tier one suppliers currently have full or partial factory shutdowns and extended supply chain. Although they are beginning to identify plans for real.
It is easy be completely focused on dramatic in negative impacts of the virus. However, we must also be aware Rob nature.
It seems that rig slightest <unk> I don't pick up here.
See that in the last two weeks data for car sales in China.
So they are above the same period last year.
You also your reports of people buying their first vehicle as they do not want to go back to mass transit with the fear overhang from the virus.
However, the reopening off the T. alone and Oh, Yeah manufacturing plants continues to be uncertain.
And then this this significant uncertainty that is making our planning so difficult right now.
At the same time demand environment in China has clearly improved in the industrial immobile and markets.
We are encouraged with the increase in distribution self who.
In the reasons weeks and people would continue to closely monitored or the sustainability of these trends.
The Big question, though it's the impact from the economic weakness through all the rest of the girls on consumption.
And hence the ultimate impact it may have on demand in China.
Considering all of these indicated that creates conflicting signals.
The are attempting to maximize or flexibility to ensure that we adequately support our customers Trudy month.
Violet, the same kind of reducing or manufacturing supply risk.
Ultimately avoiding excess inventory.
No more than ever maintaining close constant communications with our customers is really critical <unk> supply chain.
You are cautiously optimistic.
S B.C. early two or three D. lawn trends.
Indicate a slightly sequential improvement.
Combined with the benefits from the plans for M.N.X.P. specific programs.
During any economic downturn.
Invest through attention always turns clip of sustainability or robustness off accompanies financial performance.
Well those if you have followed N.X.P. for some time, though beep you wonder if our inherent skills as keeping a steady hand on the financial and operational level, we can control.
Yeah, I'm not I'm emotional button challenging times like these we have to cultural bias. So it's cost conscious.
We are not making neat trick decisions.
Taking an active review of all area also discretionary spending.
<unk> and critical investments in areas that Villa sure N.X.P.'s long term success.
Or business model is solid.
And they continue to have ample financial liquidity and strengths.
<unk> unpredictable environment.
In closing.
They are extremely proud of the adaptability a whole or teams during this challenging period.
And people would continue to succeed.
And are focused on driving positive for size for all of our stay quotas.
And at this point I move on actually to what what is my old rich most script here. So that most rick's pops and I will start to read you with the specifics to fall a quarter, one resorts and at the same time for white on outlook for water too.
We find ourselves navigating a really really fluids and challenging periods due to the corporate 19 virus.
S. There you began we had them incrementally positive outlook portraying 20.
As a customer reactions and engagement with our N.X.P. portfolio and product roadmap.
Continue to be really positive.
However.
That's the breaths of corporate 19 virus impact evoked in mid February.
We did find ourselves shifting from dealing with both the assumed to a temporary supply chain disruptions post Chinese lunar new year.
And we have to ADEPS too much provider more disruptive broad base of shut down so far across the most of manufacturing facilities.
Increasingly also outside of China.
It does have a direct ripple effect swell up to supply chains, we are exposed to.
Whether it's making our short term outlook more uncertain.
We do continue to execute consistently to all long term strategy.
Deeply engaged with a shop focus.
Enabling or custom of success.
Obeyed from a virtual distance.
Oh, let me turn to already sides.
You've on revenue Cayman below our original guidance.
Many of the automotive Oh, yeah initiate factories shut stones.
Combined with all the push ourselves from both industrial and will buy customers.
Taken together.
X.P. delivered revenue.
Oh 2.02 billion.
Above $204 million below the mid points or originally guidance range.
<unk>, 24.8%.
About 280 basis points below guidance.
As a recitals lower operating profit fourth rule on the reduce revenue levels.
Let me turn to the specific trends in our focus and markets.
Starting with the automotive.
Revenue in automotive was 994 million.
Down 4% versus the year ago.
And showing 9% sequential decline.
In industry in Iowa tea.
Revenue was 376 million.
<unk>, 2% versus the year ago periods.
And the whole 9% sequentially.
Immobile revenue was 247 million up 2% versus the euro periods.
And down 26% sequentially.
And lastly, communication infrastructure and other.
<unk> 404 million.
Fountain per cent year on year and says percent sequentially.
Oh before I'm, turning to the specific so far a quarter to expectations.
I'd like to make a few comments.
Oh revenue guidance range for a few too is wider than normal.
Which is a reflection or what v. view as well I'm certain and highly fluids demand environment.
You do provide as much transparency as possible.
That'd be are caught in the sense that or ability to accurately predict the future is limited.
As I said before many off the ultimate and customers of our products.
Like the automotive Oh, yes in Europe, and North America.
Are still partially closed.
Just coming gradually back to work.
Therefore, the customer demand signals, which we rely on two off the supply chain.
Need to be recalibrate, it's true and market two months.
They are anticipating this <unk> cure over the next few months.
From a positive few points the supply chain inventory rationalization trends, we witness through 2019 <unk> centrally played out.
Both with all of direct customers.
And also those served through global distribution.
And therefore, once we begin proceeding <unk>, two or and customers.
We are assuming there should not be a significant leg effects.
Any excess supply chain inventory.
And we have continued to apply the highest this to plumb color distributor shuttling bent tree.
Asby helps basketball the hundred $50 million of shipments for this trip at us during the first quarter.
And this is in order to maintain or targets gentle inventory metrics of 2.4 months of supply.
What's that preamble, we are guiding quarter to revenue at $1.8 billion.
The only about 19% versus quarter to 2019.
Within the range of down 14% to 23% year on year.
From a sequential perspectives. This represents a decline also about 11% at the midpoint versus the prior quarter.
At the mid point B.R. anticipating the following year on year trends in our business.
Automotive is expected to be down about 30% versus qualified to 2019.
And don't into high 20% range versus quarter 120 20.
Industrial an I.O.T. is expected to be up low single digits, whereas this for the 219.
And mid single digits, whereas what's called a 120 20.
Mobile is expected to be down to the mid teens range versus quarter to training 19.
And opt low single digits wasn't squatter 120 20.
And finally communication infrastructure and other is expected to be down in the mid teens range, whereas the score the tool training 19.
And opt mid single digits versus scored a 120 20.
In summary.
<unk> unprecedented periods or society for our industry.
Or our customers.
<unk>.
Our number one priority is to assure the health.
The safety, Alright, and X.P. team members why facilitating the best plausible business continuity with a customer focus on supply chain and R. and D. execution.
They are extremely proud of the huge engagement and flexibility of all N.X.P.M. who use.
And as I previously mentioned to me do not have any unique insights as to when this challenging period will subside.
But we do continue to have ample financial liquidity and trends <unk> the current environment.
One of your actively reviewing all areas of discretionary spending.
We do continue to maintain critical investments.
In the area, there sure and X.P.'s long term success.
So are chosen strategy.
Or focus investments in leading edge, new products and customer engagements.
In fact scrolling segments, such as eight us and automotive electrification.
Insecure connected x. processing for the I.O.T.
It's a secure ultra wide sent.
Our old very durable and didn't Troy significant assignment traction.
Once this pandemic is under control.
And it's pretty much strongly and living assume it's gross within its strategic focus areas.
Systems with all prior long term expectations.
<unk> execute consistently and we are committed to a long term strategy.
And be continue to be deeply engaged with and sharply focus on enabling or customers excess.
And at this point I would like to pasta cold computer.
Or a review of our financial performance either.
Oh, Thank you could on good morning to everyone on today's cool.
<unk> <unk> don't look for the something quota on moved to the financial how much.
In summary.
Q1 revenue performance was well below what we'd planned as a result of the covert varnish.
What's the will struggle to cope with a significant descriptions of aren't as cool we showed approximately $200 million of all rubbing your disappear from a cool.
This significant <unk> revenue fell through to known got gross profit.
No one got approaching profit with a full through them grow smoking slightly off so quickly operating profit level by reduction in Norfolk.
A truly stunning turn of events.
No moving to the P. felt were the first quota total revenue was $2.22 billion down 3%, yeah, I'm $240 million below the midpoint of all original guns.
We generated $1.25 billion and <unk> gross profit.
<unk> gross margin of 51.2 sent down about 90 basis points here on yeah on 140 basis points below the midpoint of on college.
Total known got operating expenses were 545 million essentially flat year on year I'm better by 18 million for full of cool to.
This was $28 million below the mean points of all gone.
From a total approaching proper perspective, known got operating profit was $502 million I'm known got operating margin was 24%.
About 190 basis points here on here, but the results of the lower revenue.
No one got financial expense was sort of $5 million.
Touches from ongoing operations for $28 million unknown controlling interest <unk>, we're 8 million.
<unk>.
Based compensation, which is not included in on on got buildings was $170 million.
Now I'd like to to to the changes you know <unk> <unk>.
Oh total that to the end of the first quarter was $7.37 billion.
Sequentially <unk>, ending cash position was 1.0 billion Oh $34 million.
The resulting that was $6.29 billion.
We accepted the call to the trailing 12 month or just the even the 3.05 billion.
Oh ratio that patrolling 12 month and just to the T.I. at the end the one with 2.1 times <unk> trolling 12 month adjusted <unk> interest coverage.
1.6 times.
Oh, she will know typically say, though balance sheets is very strong you know liquidity is excellent.
We're proud of the fact that wearing investment drug company.
We achieved this by having a business stuck generate significant cash.
Being a very large revenue stream and by having strong financial discipline.
Including not extending also sort of things with Rosie.
I'm really pleased to save up this is exactly the environment when having a strong business model and financial discipline pays off.
So we continue to have a strong balance sheet and we have excellent liquidity and access them all cuts that a strong investment company has.
During the first quarter, we paid $105 million in cash divisions.
Purchased $355 million of all shows.
No too small increasing all leveraging Q1 over Q. pool. This is driven by a reduction of trolling 12 month or just for T.V.T.I.
Leverage will increase again and Q2 to 2.2 times driven by all linked to scoggins for the cool.
Oh, so thrilled temporarily suspend or buyback until all trailing 12 month interested even the a a ratio improves put a level, where we can once again via the two point toned up to two times leverage ratio.
We will in the meantime continue to probably Oh quarterly dividend.
Turning to working capital metrics days of England tree was 115 days and increase of 11 30 sequentially as revenue levels declined.
Would continue we continue to closely money until distribution channel within train the channel 2.4 months.
Definitely within a long term tone.
It's kinda noted we held back about $150 million voters into distribution tuition <unk> remained within our target range.
So he's receivable with 28 days of truly sequentially <unk> 83 values, an increase of two dogs versus the product cool to.
Taken together or cash conversion cycle was $58, an increase of 11 dogs versus the <unk>.
Cash flow from operations was $512 million on that Catholics was $143 million, resulting in <unk> free cash flow of $369 million.
<unk>.
Mentioned, we anticipate something cool to revenue to be about 1.2 billion plus or minus about $100 million.
Other than normal range, considering the incentive environment.
Yeah.
Oh, the mid point this just on 19% here on yeah, I'm down 11% sequentially.
We expect <unk>, 48%, plus or minus 100 with based approach.
Operating expenses are expected to be about 523 million plus or minus about 5 million.
Taken together, we've seen known got operating margin to be about 19% plus or minus about 240 basis points.
We estimate no one got financial expensive I think two 2 million <unk> tax related to ongoing operations to be about $17 million.
Known controlling interest will be about $6 million.
Finally, I have a few closing comments I'd like to make.
Firstly.
<unk> for the second quota about half of the drop was explained by the reduction in revenue.
On the other half as a result of the fact that will be running on channel five.
As a sign of approximately 50%.
But this level utilization, we take additional fixed costs charges in quota rather than carry them through an inventory to the third cool.
As the global economy stops the correct itself on on revenue Reaccelerates Wishy No reason why we cannot.
Oh, 55% gross margin target 2.4 billion dollar level of cool totally revenue.
Secondly, we are closely monitoring or cash them feel comfortable will continue to generate cash even those these extremely low revenue model.
As part of this we've taken down the utilization of all internal factories are working with <unk>, there's to manage all purchases with them.
In fact, the biggest part of the restriction wife is for this cool.
<unk>.
Badly we will continue my could carefully amount of jump x. levels minimize any variable costs and in particular incentive payments.
Finally, these are very difficult times.
Along with <unk>, so I'd like to thank all my colleagues around the world for the commitment to N.X.P. I'm doing the right thing for all customers.
The current period is unprecedented.
Is extremely difficult.
But for the long run N.X.P. has the right strategy is in the right markets and I certainly products to win.
Before we tend to your questions I'd like to call back to Cook for a moment.
Yeah, Thanks, much Peter and I can just also multi for everybody that's rickets Ah back on the cold and all.
Before we are moving on to to <unk> I still would like to take the opportunity to express my deep credit you to Rick.
That is both on behalf appendix P., but also very much whose movie.
Ricks, it's it's appears to be your <unk> you off the company.
You have successfully let <unk> being appointed President and.
<unk>, who falls in line.
And under your leadership X.P.S. transformed into a profitable hype appointments mixed signal leader.
Definitely with the N.X.P. Frisco <unk> as a very remarkable my storm.
And I want to thank you for your many years of hot work.
And much more importantly for your personal dedication and commitment building N.X.P.
Into the industry leader B.R. today.
<unk>, whose nobody surf till the last 10 years as a member of your N.X.P. Executive management team.
I, especially like to thank you for your deep Trust.
And for everything I've seen privilege to learn from you.
In my eyes in my view, you personally and body of the N.X.P. cried sure customer focused passion to win.
And that along with great business acumen, and very thoughtful leadership.
Given all of that's fine, particularly Glandon thankful.
You know I can count on your continued support.
That's a strong and close to teach a good wise oh, the prime to come.
Thank you once again.
And that's that's operator be opened the cold for questions. Please.
Thank you.
Ladies and gentlemen, as a reminder to ask a question that we need to press start one of your telephone.
Two of drier question. Please press the pound key please stand about how the culinary roster.
I first question comes from the line of Stacy Rosnano with bare interesting.
Research, you're not as no.
About 150 million that you didn't ship in the quarter can you give us some feeling for how that splits off my in Marquette.
What you're expecting to do with handling the Tories into two two and if you can give us some color maybe on what the selling books since sellout wise in the quarter into the channel that people really helpful.
Thanks, Stacey so you know the hundred and $50 million that we had orders far from our Disty partners did we chose not to ship to be sure that we maintained or distribution inventory at the 2.4 months was probably a higher concentration of industrial but it was across the board in all areas. So.
Can't really give these details, but I would say it has a concentration more on the industrial site and probably less on the other areas are in 10 is is to continue to maintain the 2.4 months of inventory we learned our lesson you know several years ago associated with this and and we're trying.
To be sure that we maintain that position and and controls are a inventory commitment into the channel. So we're actively as we talked about the script working with our customers to be sure that they adjust their demands signals to be sure that we do not increased.
Or the working process inventory with our <unk> customers either.
Thank you for my follow up.
I understand the the ought to decline obvious indicate to but what what's driving me sequential increases in the rest of the businesses. It sounds like it's not.
It sounds like you don't think it's put forward just giving the commentary on on the tandem 20, just now let me know if that is correct and I think you'd give us any color on what's driving that sequential demands on the other segments that would be super helpful.
Sure. So you know it clearly is not any pulled forward that we see it's based on a orders from our customers on a sequential basis.
You know in Q2, we're.
We're up our sorry down, 11% and total, but actually down 27% and automotive, while we're up to 6%.
In industrial Uno tea and five.
<unk> and slightly up in mobile the industrial is are we as we sit in the script, we've actually seen some strength in China and the cell through clearly Europe continues to be fairly weak and the U.S. is a is also pretty weak although.
Maybe a little bit of Ah glimmers of improvement in the U.S., but clearly the key indicator only industrial side for Q. too is in our China cell through and really what gives us confidence and being able to achieve the 6% sequential growth in industrial and no tea and.
Some of that include some of our a new product appointments as well Stacey.
Got it. Thank you very much good luck. Thanks.
Thank you.
Thank you.
Next question comes from the line of <unk> are you with Bank of America Securityjam on is now.
Thank you for take my question and that's the current on the <unk> next adventure asked me to work with you.
First question I want it to just dig into the automotive market I think book you do you mention automotive scene is potentially town about.
I'm, 30% that is obviously much better than some of the unit sends you know over down over 40% a year on year.
Could you give us some sense. So how you are seeing a unit and the content <unk> Oh no business played too loud you do and and importantly, do you think you to Denmark. The trough in your orders business, because I I have <unk>, you're saying that cutesy could be up slightly sequentially. So does.
Does that imply that you do as as perhaps the trust in your autos business. So just some more color in in auto customer engagements would be like.
Thanks for the back this is Rick current I'll, let you take that.
Yes. Thanks, So yes, we we you have to Capitol you that.
Q, we should be slightly up over too too.
Well, if you think about Automotives specifically.
Mind, you that you can never really track. This are on a quarterly base is back to our business.
Too much going on into supply chains, and especially these days. So it it doesn't really books that you take the call to protect the car production, if if anybody knows that at all and and hold that back to our Duall revenue. So our revenue forecast in automotive for the second quarter is really just there'd be size of a very.
Be careful alignments with our main customers on most be very update application specific products. So it's really just the basketball basketball alignments.
More than anything else, it's <unk>, it's not really tied to the sovereign defense.
But still well what is important in this in this period of uncertainty we do absolutely belief that the content increase story Oh, It's a soul that continues also through this period.
Secondly won't be as seen in the reports from <unk>.
Is that the premium cars are actually going down a little bit less then the ever which car.
Bitches halted be good for the mix given the fact that there's obviously more semiconductors in premium product is a very broad statements be Kendall probably gets back to any specific model or any specific product of hours, but that that's probably use the trend as long as we can see you know.
Finally.
So be the continue to use <unk> as the guideline.
They just came out actually on April 27, so very fresh with the latest for cost.
Which is a 22% decline for the gear.
Ah Barry Indeed, they probably see the biggest year on year decline in the second quarter. So for the car production I I would support what you are saying, but again you pedalled one on one <unk>.
No on it and then some I follow up maybe be the one on gross margins on so clearly I think you extend the drivers or you do for gross margins to get the words, 48% or so so sort of a similar question to the first one do you think if that's you know all else being equal if you start to see.
I'm a revenue deep down in <unk> that have the kind of seen the trough in gross margins you know what's on your dashboard <unk> kind of look at the trajectory of gross margins over the next a handful of walkers. Thank you.
[laughter].
<unk> to the almost you know right now and you you showed it from the the range we gave of revenue.
Plus or minus 100 billion on 200 million on Q. too.
So it's difficult to to really speculates on where we might be in a in two or three to four as for those recommendations in his speech, we think will be up slightly.
I would hope this would be the the <unk> on gross margin, but you know it really depends on how we right now at these levels, how we load all Oh five.
I think it's going to be.
Took a couple of Coulters from a a gross margin perspective.
I think I think the main thing for me is maybe this is where you really going as as we as we move up more strongly and we got back. So the 2.4 billion dollar level like I don't think anything's changed in terms of the structural potapov business on I I still on current components, we can get to the 55% level and.
No more normal market. So I was all revenue comes back to your own personal I don't know.
Thank you.
Thanks for thank you.
Thank you. There next question comes in the line of John Picture with Credit Suisse. Your line is now open.
Yeah. Good morning, guys thinks but let me ask the question first work I I just wanted to thank you for all the help you've given me personally over the last decade really appreciate that more it's been interesting 10 years, but but relative to mind Kinda first question I'm just kinda curious you use the term recalibrating of demand signals a couple of time.
When talking about the gene guidance I I'm, just kinda curious to what extent is in June guide kind of a top down view of the world from you versus a bottom sub D.U.I.D.R. your customer bookings actually still coming in stronger than you would have expected given did the the the demand destruction that's likely.
And if so you know how are you able to kind of under ship to what customers want the woman mentor.
Well, John first off but thanks for your comment it's been fun for the last decade, So Ah Ah owned own the demand signals I think what we're really trying to communicate is is as we look at the tear ones and obviously the car factories actually being shut down as well as a lot of.
Tier one the demand signals haven't been adjusted as much as they should've been and so we kind of took the lead from the industry you point in going back to our customers and aggressively working with them to modify their demands signals to really more accurately reflect the production levels that we're taking place so.
Our intent is to be sure that we try to minimize any inventory <unk> are working process inventory build throughout the process on though inside we're doing the same thing with their distribution partners. You know every one is struggling to get their hands on what the real demand does with the.
Hotly fluid levels of inputs and how things move, but we <unk> aggressively worked with our customers both William as well as even with our distribution partners to really modify their demands signals.
We talked about we could've shipped another hundred and $50 million or.
Two distribution partners in Q1 based on the water's we had him we chose not to do that so we didn't increase or inventory levels and the distribution.
Channels. So our focus is really insuring that we maintain the right kind of working processing and disty inventory levels. As we go through this process not to build up this to work semiconductor industry levels that are just happen frequently in the past and industry.
What's the help with the guys that this is my Paula Kurt I know you guys. You only officially guiding 90 days out your cautiously optimistic commentary around Q3 potentially being modestly sequentially is that mostly an auto automotive view or is that happening across all of your.
Markets and then you're prepared comments you talked about.
Kind of company specific drivers behind that in addition to just sort of general industry recovery wondering if you could elaborate on those companies specific drivers.
Yes from I'm happy to do so so principle, let me check very plain deep the coleman's about it she was squeeze slightly up over to to give the Coleman for the entire company.
So so into critical the company.
I'd say the main reason, which gives ship it gives us some confidence to make that statement.
His product customer combination specific drivers Bebee. After you signed wins beach are either starting to rent or starting to quickly go up when they have started to rent a little bit earlier already.
So I'd say, that's the main elements bitches them across the known a big <unk>. So clearly an automotive I I continue to.
Emphasize radar and battery managements or being in here.
Community in I would see industrial I would say oh across over processes are no more and more along with the with the clinic to the key you've been but the the assets, which we which we both from from my belt is playing up nicely together.
And didn't <unk> broken continuation off the touch rates well the growth it'd be a touch rates or more by bullets.
So these are all the elements, which actually are behind my comment about the come as we possibly slightly up over a quarter to.
Okay. Thanks, guys.
Thanks Ya.
Thank you.
Question comes in a line of Rusty more with Deutsche Bank. Your line is now.
Thanks, guys, New Wanda also congratulate wreck and thank you for all your help over the the many years. So I guess my first question is in the second quarter itself. The the non automotive side to being up I think Rick you mentioned that you were excited about what was happening initially in China for your industrial I.O.T. cell.
But the other kind of 35.
You're not quarter, 45, or 40% of the business and mobile income infrastructure can you just talk a little bit about what's going on in those two segments to drive the increased sequentially.
[noise] sure you know the in Q2 are common name for a is projected to be up to that five per cent sequentially, but down 15% year over year. So I think we're still in the process obscene a little bit of improvement in the five g. deployment associated with.
Merely in China on base stations Ah and you know the thing that are really.
Fluid would that is they're still working this specification.
And the requirements associated with it so it really is evolving rapidly, but we see clearly the combination.
The businesses that are there, including a little bit of improvement in our network processor area that contribute to that 5% into two in mobile remember Q2, a year ago, we had a very strong quarter as well way really took the mobile wallet down across their product portfolio, but even with that will be.
Slightly in Q2 in the mobile business. So you know I think all of that comes back to the fact that we see some real improvement in China in P.O.S. that's encouraging.
And we just have to see how that continues Ross as we go for it.
Thanks for that and then I guess is my follow up either for for you or occurred on the automotive side of things and maybe a lining to Kurt what you said for the third quarter, maybe being up a bit sequentially for the entire company I just wanted to dive into that the kind of the symmetry of of how the automotive plants are shut down around the world and then when they turn.
Turned back on obviously true N. demand at the end of the day is going to drive how your business grows in there, but he just wanted to see how aligned do you think you are to those factories being turned on and off especially given the fact that the data points early as they may be out of China for automotive as you mentioned were positive is the third quarter Gonna improved.
Automotive just because of the factories hopefully, we'll all be turned on globally at that point or does it have to wait until true when demand gives us a sign of just how it turned on they actually are.
Yeah Rose.
It is clearly phase shifted because opie as the the biggest auto impacts into one blows in China.
<unk>.
European and us factories shut downs literally only started into the second top of March. So at the very very ends also <unk> and no heating in a in Q. too.
So while I think it's fair to have some optimism about the industrial automotive activity in quarter to in China.
It is really really hard to say how old is is going to pay all its in in Europe and the U.S.
I mean, just as an example would be the old so in the press that just this Monday so yesterday.
Widen started to manufacture again I mean, they just in in Germany that they they just went back to work to my understanding both at full capacity, but this is the gradual increase and I think nobody really knows exactly what the books the pays off those reopenings into both capacity level, They go under which time.
Frame during the second quarter.
But clearly it it looks like the the most significant coproduction impact in the back them build.
In the beginning off the second quarter and you have to see how long it takes into the second quarter and that's that gets me back to what I think I quoted earlier of both are you just leave the second quarter is is according to I have just been seeing the biggest exciting car production.
With what was quite some improvement in quarter three from a cop production perspective.
<unk>, Rick said earlier to one of the questions about us.
Being very careful with the with understanding the empty month.
This is exactly coming to this point gross we tried to make sure that most of your shipping to all the T. one customers in automotive aligns nicely to the real empty moms are such that you don't overshot close we learned that lesson in years ago.
And with that to be sure. If we do that right and and you work hard on it we should then actually more seat along the lake.
Rent a car production comes up because we shouldn't have over ship the of the supply chain.
Thank you.
Thanks rough.
Thank you.
And our next question comes from the line Williams done with Central Sherlon is now.
Great. Thank you very much for taking my questions first I'm, hoping you can lingered a little bit on the comments about aligning customers forecasts are going to them to ensure their forecast shrunk to date. He can you help us understand what portion of <unk>.
Mercy deal with to get forecast, whether those are the cheaper ones, who again what portion of those are open and having these engagements with you at least largely engagements where you work with customers and have a dialogue today or it is getting worse situation versus the chunk of demand.
Much more question because <unk> available call.
So we'll I'll I'll take a shot at it and then I'll, let a kurd add to you know what we found is is is sometimes it's a little more difficult to communicate with our customers at the tear one level, but but I think <unk> everyone is working from home so ultimate.
You have the ability to communicate I think what we're really trying to emphasize is that the demand signals. They had had not been modified for the plant closings either at their level are at a as they look at their individual manufacturing facilities are at the actual automotive companies leveled itself and so obviously.
We've been trying to push back in actually told them that we were not going to a ship parts and and.
And went out pretty aggressively with some <unk> a unique requirements on orders to be sure that we got as thorough assessment of demand as possible because we just felt like it was critical not to be shipping orders as they were indicating and building factory.
Was a ultimately not gonna be yet so we've been very aggressive about that and work with them and had good response in and I think the key is is we go through this period of uncertainty and fluidity fluidity, we must really have good communications with customers to really know what's going on and I think that's the key is being sure.
And we're able to do that as they work from home Kurt Please add anything you'd like.
Yeah, Yeah, I I completely seconds, what you're saying I would just after building deeds. We have worked is very very closely with the <unk> customers <unk> customers. There we have been sitting together over a number of weeks virtually sitting together and <unk>.
Very hops to come to won't be joined me believe and say is a reasonable for costs bitch, both not their first input. So it is the t. a ones, which we've done it with they are open race snow.
At this point in time.
And I think in T.N. pit Bulls are very positive protest because it. It also helps them in the in in the way forward.
Thanks for that one false and.
I I'm Wendy comments on your ability to continue the piece of information when so many please our remote and the same release your customers near Philly to.
Just sort of engaging in new technology evaluations as it were so your products in this environment and before I stop at least I congratulate voted on your your new roles with day.
Yeah, Bill I think that's actually boxing amazingly Bell and I'd say that because I had you asked me eight weeks ago would that be possible I, probably would have been much more cautious.
<unk> effect is that with all of these key customers for us we have very long standing and deep relationships, which actually make made it relatively easy you know to do this perfectly on a on the remotes, which will basis. So lots of video conference work by the also internally Rick.
Spoke about this in the beginning a lot of our engineers are in the work from home situation, we have almost no drops in productivity, which <unk>, which week with national So far so things really burke into saying the same way. It also works with our customers, but again I think it's every side effects that this is another new relationship which has to be built but.
He's had these relationships for many gifts or in most cases.
Q operator.
We'll pick one more question you have this morning, Thank you very much.
Sure and our last question comes from the line of C.J. and you should have record. Your line is now open.
Yeah. Good morning, Thank you for squeezing when I guess another question back to an auto can you speak to I guess, you know how how're you machine trends geographically it sounds like production you know positive territory for China, but you know down in double digits in U.S. in Europe and would love.
The year kind of how that plays a role in the thinking for your auto business growth or or decline and encounter corny and I guess it as part of that how are you thinking about potential for cash for clunkers <unk> for and you know within that.
How are you planning, perhaps for for what the magnitude of recovery could look like you know if we do indeed, yeah get that type of plan.
Let me take or something like this so <unk> Blanca programs, I mean, I I know as little or as much as you do so.
There is a lot of discussion about this which we are witnessing I think both in the U.S. as bad as well as in several countries in Europe I motivate our office specific one which is agreed yes.
And at least touching from how we did work in 2910, <unk>, then they'd had indeed pretty pretty significant positive impact, but again I I don't know more off any any any one which would be agreed yet what I do know is that.
China has renewed some of the syllables programs for about three electric vehicles.
Which seems to be working so there is clearly as we said no. The only the the the car sales and car production in China is moving up but also the the trend for electric vehicle, specifically seems to look pretty good in a in China.
From a I mean, we don't get a full year diamonds, and it's really hard to save all the both Europe and the U.S. they'll do.
But I think it is in deep fiance to China seems to be on the positive profit this points.
Bitch, which we have to follow obviously into two or three or four if it's oh, it's what the beginning of cute too with looks looks promising I would say.
Very helpful. <unk> could sneak last one in can you provide an update on where we are terms and U.W.B. deployment. Thank you.
Mm.
Yeah curtain go ahead and that would provide.
Oh, and sorry, yeah, which will wipe them. So deployment is on track to what would be spoken about earlier. So we have a small amount of revenue already running in the in the automotive space for a.
He lives in pre solution, which is based on which are white Benz.
And be be continued to work very hops on seeing.
Immobile deployment in the second top of the year, which which would deliver more significant volumes <unk> overall, both immobile and older motive and for the I.T. applications is absolutely on <unk> earlier expectations, so which for whites and I'd say continues to be really <unk>.
<unk> continues to be in the great leadership position.
Well thank you.
<unk> <unk> thing.
Thank you.
Concludes today's question and answer session, our knowledge turn to call back to <unk> Klimer sealed for closing remarks.
Thank you very much so it's a with a mixed emotions that I and talking to you guys. Today after 11 and a half years with the opportunity to work with the team in N.X.P. in one I believe to be a true industry transformation of where we really focused.
Shareholder value in a customer focus passion to win to drive through product leadership.
<unk>.
Which use the best of luck in really look forward over the next few quarters at to support you in a continuing to move forward from an N.X.P.D.
Has moved out of the current environment we're in.
Sleep that current environment is very fluid and very dynamic in clearly creates a lot of mixed signals.
We are currently focused on the challenges that we see that we want to be sure that we don't loose.
The opportunities and the positive trends specifically those recent trends that we talked about related to China. We know that N.X.P.'s longterm strategy is correct as we have a very strong portfolio and we're focused on what we believe are the best markets for auto industrial as well as being able to <unk>.
Toward the my wallet and comps <unk>.
We will keep Menai clique focused on key development programs and stay highly engaged with our customers.
Ensuring that we drive troop leadership, and then focus on taking that forward to solutions levels and driving thought leadership with our customers to be able to deploy more efficient solutions. So with that in my final remarks I appreciate all your support over the years and.
Since I know, there's a number of <unk> team that are only call as well I really appreciate all of your support and it's been a real honor to work with you over the last 11 and a half years and will continue to look forward. It's porting Kurt in the team as we move forward for the next P. quarters.
Thank you very much.
Yeah.
<unk>.
Thank you ladies and gentlemen, dis include today's conference call. Thank you for participating in human now disconnect.
Yeah.