Q1 2019 Earnings Call

Right.

Today ING lady for gentlement that welcome to Q1 2019 and makes a? Ing Sydney sductors earning conference call. At this time, all participants turn mode. Ladies will conduct the question and best instructions will be given at that timeif think what requires has been going to conference, F? stard your V? O address from telephone as a reminder this conference call is be recorded. Have all F your host of today's conference, mic cha sumer, Vice President of Investor leers. Very may begin.

Thank to reassfer and good morning everyone. Welcome to the NP Ning contor's first quarter 2019 earnings call. On the call any's la and xtpc Curt ceivers and xtps presentce and or cury our CFO . If you not obtain the copy of our earnings press release that can befound that our company website under the Investor Relations questressions P com. This calls being recorded and will be available for replay from our corporate website. Our call today will include forward-looking statements that involve risks for uncertainties that could cause P's results to differ materially from management's expectations. These risks and uncertainties include, but are not limited to, statements regarding the maaccurual economic impact on the specific or markets in which we operate, the F? Ed, new and existing products and our expectation for financial results for the second quarter 2019. Please be reminded: P undercascase no obligation revisvise, update publicly any forward-looking statements. For forll closure on forward-looking statements, Please refer to our press release. Additionally, during our call today we will make reference to certain non-GAAP financial measures which exclude the impact of purchase price account, ING restructuring, str baseds compensation impairment, mer related causes and other charges that are primarily by discre events that management does not concertain be directly related to nxtp's underlying orre operating performance pursuants regulation D and xtp's provide reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures. And our first quarter 2019 earnings press release, which will be furnished to the fsec on Form six today and available on NP's website to Investor Relations seion at P com. Now like to turn the call over- directthanks, Jeff for that- in likely rease and we welcome that everyone to our compference call today.

Today we're going to take a new approach to our prepared remarksi'll start off and provide some longer-term strategic commentary. Thank current ceivers, who is the President of the company, will review the end market revenue details of Q1 and provide some revenue guidance for Q2.

And finally, Peter Kelly will review the financial details of the quarter and expectations for Q2.

Now for all of those VIE that have followed the company for aofwhile. No, we spend on a lot of our efforts ensuring that our product portfolio is aligned to the long-term customer needs in our chosen application segments.

We believe that we consistently make the right product development posisitions. This will result in very sticking our relative market share positions and true leadership, which should allow us to outgrow the market by one in a half ton.

You complicate a few of the micest things from our September 2018 Analyst Day. In the progress we've achieve, D that clearly reflect the positive traction.

First our automotive sales was just over $4.5 billion in 2018 and we continue to be the number one rked global automotive semiconductor supplier. We have 10 share in the strategic areas of auto processing, aid-us radar solutions and digital clusters.

According to TR P strategy analytics, nxtt is the leading supplier of both auloaded processing and instfotainment applications processors.

30% of our auto business is focused on high growth sectors like eight-os and electripication, which has grown at nearly 40% term on the growth rate since 2015, in which we expect to continue to grow at 20%, 20 -five percent to 30% compounded growth rate as the businesses becomes more material in size.

The R 70% of our automotive business represents a very large and incringed core business with hot barriers to entry.

We anticipate our core business will grow in a modest premium to the overall auto semiconductor market.

Our key customer relationships with both Tier one suppliers, as well as the OEM, enable us to gain long-term insights into the requirements.

It is these relationships, combined with our world-class IP, which has allowed us to expand in new high-growth application solutions.

As an example, our AO business, which currently represents about 10% of our total automotive revenue, has grown in over 50% turncouned annual growth rate since 2000 and fifteenin a few short years we have emerged as the number one supplier for the complete radar subsystem, including the 77 gigards runningin transceivers, that acre B compliance, back-end processing, engine power management and the high-speed interconnect, all tied together with our software.

Based on the designinewin.

We.

That we are partrently shipping and design. We have been awarded with major OEM. We see the business continuing to grow in the high 20% range through tothousand per 21 and beyond.

We believe this growth rate is about one point four X factor than the overall RS radar market, which is still in its relative infancy.

Another new auto business we're very excited about is our battery management are from our BMS products for our record power trade which we have.

Run from customers, particularly to actual battery manufacturers, is the need to increase efffficiency and resulting range of the battery that systemto be able to achieve that required ability to monitor and take real-time action on the health of the battery on a sale retail basis.

What required is the combination from precision, analoy capability acrd, functional safety expertise, a deep automotive process or M? He.

Our team has developed a truly unique solution which combines these capabilities.

While the business is relatively small day.

However some of the annualized run rate basices. It has doubled over the last year.

As more lelol auto went OEM to expand our electric vehicle offerings. We are actively engaged winning designes and anticipate emerging in our leadership position versus current existing suppliers.

We think the bmms market is a subset of overall power control market. We expanded about $8 million in 2021 at about a 30% count on the growth rate.

If we expand the designs we have been awarded in ourth beginning to ship.

We think this business could usually be sever $1 million of revenue in 2020 months.

Now working at our industrial and NTE business, which is about $1.8 billion in 2018. it is primarily made up of our broad microcontrollers and application process portfolios, along with some analog attach.

This is a business which is levered to the secular trends of the increased processing and security requirement of the edge and IoT marke.

In xhere in a unique position to address the market demands for higher-performance micro controllers which are combined with functional aardudio visual capabilities and features normally found in applications processors.

We term lift the crosover processing market. We see the addressable market for crosssover processors growing about 2, from about two hundred and Seventy million dollars in two thousand and eighteen to just under $1.5 billion by 2020 -three, our 40% five -year compounded growth rate.

We are already seeing great traction for this class to products which range from our RP, LP and in-scare L families to processors.

In application SP from the secure aspower btory automation and building trail in the industrial baseto home audio solutions enabling full obe atmath report.

Down to high-volume smart home and also urlooked our wearable Cox devices.

To be specific, we just received our dopting one point six at M certification last week to make on a multicore crover processor, as opposed to the previous solutions based on multidfps.

We're seeing very good early fraction on these families for processors and anticipate. Our crossover business will grow into a multi hundred billion dollar business. By 2020 -two and.

These are ject three cing product areas that we believe will differentiate in xexped in the coming years.

Clearly our strategy is yielding positive results enabled us to aggressively return capital.

Since the termination of the qualcon transaction through a report D, we've aggressively reduced the total number of share dust, standing by approximately 65 million- shares are about 19% of the float- and returned over $6 billion to our shareholders.

A testament to the strong free cash flow of our business that our business creates, based on our long-term strategic decisions.

I'd like now now to back the call over to Kirk to discuss the results of the current quarter.

Thank you.

And I am less to be able to talk to all of you today.

Overall Q. other results were justipped above the midpoint of our guidance.

And the next teen deverted revenue of $2.1 billion.

However due to rsial technames.

Combined with's hand control, we successfully deliver profitability to wards, a higher REN of our guidance range.

Looking forward, our second quarter guidance reflects the successful decline in momentum and traction which we have achieved with our customers.

However my continues to believe the demand enquirements in the second half of 2019 should improve versth the firstd half.

The macroeconomic environment is still uncertainven.

He spent man fire.

Let we close to the Q1 trends in the ank market.

ohmore.

Revenue was one point zero four million, Buds down eight for than year-on -year, in line with our guidance.

It was a challenging quarter given the macro environment, especially in China.

All major product categories declined, as expected.

Except for revenue from our adata solutions.

Which were half double diges vers the the stsameed period from a year ago.

As continued reflection of the strong customer fraction of our solutions in that space.

In industrial. I will see. Revenue was 300 of $68 million.

Down put into the same -on year.

This will below our expectations. Has to demand from chanl important microcontroller products in the broadband chnea marketts continues to be very weak.

Remember this part of our business is's very intended on thousands of smaller customers.

Service through distribution.

Who appears to be particularly affected by the? U's tryina trade action.

Thank me. Heard from mor.

Revenue wor: $241 million.

Down 9% year and Europe better than our expectations.

Overall we experienced longer seasonality in that market.

Yet as we've presented in our Analyst dayace and coneffortts from 2018, we are beginning to see the tax rate of mobile transaction solutions with a broad set of customers accelerated.

In the premium platform marketts, we have seening reduced demand for customer interface products.

Lastly, communication infrastructure and other revenue was four of the full nine million Boss up 10% year-on-year. With our head power solutions have a strong double-digit versus the year-for period.

The large currentcy seen strong all der rates for both our method, mininyal andanti-power, single channel, parct or amplifiers.

De demand: draw space across. Spectrum of global base station OEMs.

Based on our customer conversltations. Low SP train RAIN will be the big year for the five sheet base BI infrastructure Su.

Especially in nexttria.

From product uspensive. We think this transplates include bace buildout approach.

With subsex ness products driving the furish core portion of thesupply sheet caritital, and that in trange 21 and two and 22 we will see carriers begin to deploy high frequencies millimeter wte product.

In digal net working we continue to seease stabilization and defined interactions for the lest family of market or our processes, which is positive. So revenue contribution is just beginning.

Now turning to our expectations for quarter two.

We currently do facilitate total revenue increase in a range of up 3- seven successs sequentially.

Reflecting improved ownder rates asiscated for the company's specific drivers.

At the midpoint of our range. This is an increase of 5% sequentially.

Or Chun K Cho theandmark.

From a year-over-year perspective, this represent a decline of 4% wasth Su sameained period a year ago, of which two per its elimination of the msj versus the year-ago period.

At the midpoint we hicitated for plling setential detrends in our businesses.

automo is expected to be pentially planning.

Industrial I is expected to be up in the mid-single DIT range on a percentage phase.

Mobile is expected to be up in the low teens range on the percentage periable.

And largely communication infrastructure in others is expected to be up oabout 10%.

Now I would like to pass the call herear for the review of our our our financial performance, ter. Thank you K, and good morning to everyone. Today's call.

As the cur has already Kip, the drivers of the revenues were the quarter and provides our early outlook for Q2. Cr moved to the financial highlights.

In summary, our first quarter revenue performance iststed of the midpoint of guidance.

In combined with reachest rich sales mix and good expense conttrial, we delivered better than-anticipated non-GAAP operating costs.

Focusing on the details of Q1, total revenue was two point zero nine billion down 8% year-on-year, of which 2% was the elimination of the MSA versus the year ago period.

We generally war by $1 billion in non-GAAP drove profit and reported the non-GAAP tose margin of 53%, down 20 basis points year-on-year, but 40 basis points above the midpo of drivers, given the better mix.

Total non-GAAP operating expenses were fin mitting 47 million dollarsdown: $37 million year-on-year and $4 million from the fourth quarter due to goverpment expenses.

This was premly low below the midpoint of our guidance.

From a G operating profit perspective, non-GAAP operating profit was 559 million dollarsand non-GAAP operating margin was 27% down fifty-basis points year-on-year, despite the 175 million drop in revenue over the same period.

Right.

Our interest expense was $61 million. Noncontrolling interest was spggeting dollars and track taxed for ongoing operations with $17 million or modly better than the midpoint of guidance.

mock based comp, ensction which is enough, included in our longga banningings with $86 million.

Now I'd like to turn for the changanges in our cash and death.

Our total Deb at the end of Q1 was se $34 million, essentially fllos sequentially.

Tracked with $2.19 million, and the next step was five or more five toillion dollars.

We exed as the broad over the tlling 12 months- or just ebitda- of $3.11 billion and our rateio of net debt to Ting 12 months- or just ebitda- at the end of Q1 was one point six five times and our non-GAAP trulect coverage was nine times.

Our liquidity of excellence and our solante continues to be very strong.

During the third quarter, we returned $788 million to shareholders, as we bought about eight point five will insurers of 716 a million dollars and paid $73 million in cash dividends.

Turning to working capital metrics, days of inventory was 113 days, an increase with 11 daysase. Sequentially, without inventory on a dollar basis declined $38 million.

We continuue to aggressively manage our distribution channel and inventory in the channel to continuue to be a very healthty two point four months in line with our long-term targetsthey receivable with 35 days and increase of five days sequentially and they pay able over 74, as is secre- six days versus the prior quarter. Taken together, our cash convion start over 74 days as deteriorating of 22 days versus the prior quarter due to lower sales.

Cash flow from operations was $296 million and net CapEx was $144 million, resulting in fved cash flow of $152 million.

Turning to our expectation to the second quarter, at tria momentioned, we anticipate Q2 revenues to be about two point two million dollars plus a minus $5 million at the midpoint. This is up five percentense sequently and we expect long-gaap growth margin to be about 53% plus a minus 50 basis points.

Operating expenses are expected to inview about are expected to be about $552 million, plus or minus about one million, and taken together we see non-GAAP operating margin to be about 28%, plus or minus about 60 bas points.

We estimating have tense to be about $64 million and anticipate tax-related to ongoing operations to be about their jagmentillion dollars.

Noncontrolling interest will be about $6 million, a reflection of our reduced loges and asseand CY.

I would like to provide an update on our share busthis program that preigures reled. During the first quarter we bought back approximately eight point five million sharres of cost of $716 million.

It's not steady better.

We are referchto an additional two point five M insurers out of the cost of about $252 million under a 75 program.

We suggest from modeling purposes, due to an average share count for Q2 of two hundred and eighty-seven million.

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

A Rick highlighted, NXP has multiple unique drivers of growth which will play out over the coming years, which feel our product portfolio as idely position to address multiple secular market trends, from the evolution of next generate automobiles all the way to securely connected edge and IoT devices.

As pointed out, our revenue for the first quarter was slightly better than guidancewith a richest fergrow mix combinment to the expense control. Taken together, resources in a inv than guided non-GAAP operating margin.

The while grow market improved in Q1 and we anticipated improvements in Q2. We not have work to do to achieve our long-term targets but we continue to anticipate achieving our intermediate targets of fifictly 5% ex iting the fourth quarter of two thousand and nineteen.

We continue to believe our tax actually tax rate related to ongoing operations for 2019 should be about 5% and.

nowwe continue to be committed to returning all excess, all excess SPE catalys of our owners and we currently have approximately three point seven mution shares remaining under the current growth line. So with that I' I'd like now to beneffect to the operings and our friends. questreedly we might have.

Thank you please, gre. If you like to ask quest and or Please ress the STAR and then the warrant you on your touch phone telephone. If your question has been ansered for you with your removieyou and go have the que, please press the penalty.

Every minder, if you pectfully ask, if you runing yourself to one question in one follow-up Form, a mecord record.

And our first question constants. You are unconcerned with credit space. You may per see.

yesthat, thanks. Let me ask the question, appreciate on the detail. I wonder if ask Li about the industrial IoT segment and the expectations for the calendar that the quarter then you're coming off of Q1. Were you monitoring this, your expectation, but you are guiding it up sort in single i'mwonderingif you CAn't help put PLE bottoms up perspective, just given all the Matthew, certain guide the confidence level of sequential growth and, as you ask the question, can your mind is what normal seasonality is for that business fure?

I always only going to go the second half of the years one.

The third one terms of Q2. As always, our revenue, based on our backlog and and what we believe will will bro in. Certainly the industrial market, particularly in China, has been ficort in in qon and thank you two that.

I guess your third question in that what's not what's normal techno the other stace 2019 from normal seasonallogy of a window. It's really hard. So what might my happ certainly as we thought two two strong two Some wrong on the spec half. We've been like be stronger than the first half beyond that I don't know with do so much small. So I think the key Jon is specific design. W we have that will drive our revenue increase. It run about an expectation ever rebound in the market place but more kind of its stableization and frankly. The China continues to be which is clearly our. Large market for us from an industrial perspective continues to be some what growth and our distributors are. Partners are becominging some of creed but the customers are still quite rather than placeed on retrade uncertainty and the general environment about what's going to take place. But what really give me the confidence and now what that we had is the specific customer design's with the ramp up those new designs that will allow us to outperform the general market one thing that was interesting on is going the big perment on the.

Well our distribution Tri are thinking we probably could hth about another $42 million ven tro at the end of at the end of the quarter in terms of what distribution we're asking for. But we werere not seeing them figure out to their end customers so we we've would not allow them to take that product yet.

So So this is second, that we've see a little bit strength in plla, but we haven't seen the additional or more importantly, the strength in PL here.

That's helpful. And then, from my follow-on, lot of conversation about China? U's trade Relations. But I'm wondering, relative to autos, if you can examouple the? U's Europe and what's going on around potential tariffs, around mission and, as you look at your patidance for q2- kind of flat revenue growth Q on q- how are you thinking about sort of overall industry production versus company specific drivers and it's the like. Delayed our co from.

Yes ton, if we think it's.

wewhen we think about the conposisactction being, really look at the forecast of IHS might, mainly which had increated a little bit and spent our last call where I think we talked about like minus pointero four for the global production in 2019, over 18 by all, the ishx forecast is minus point o nineety percent, So almost minus 1%.

Which clearly did not have a great start in China. So the China to one production number includde on 19 was actually minus 15%. Now if you look at the forecast for the full year to e minus zpointero, 9% only in growth, that means has obviously does project wefoundound in bothth in Europe and China in the second half of the year and that's largely what we take as the basis for our forecast. So with that we also believe our business is going to be prer in the second half of the year, relative for the first half of the yearand yetyes, we were rightfully pointing to that part of our business which is largely independent of that most prominent effect, certainly the radar business. We did say in the prepure growth earlier. We are on track year in Q1 and we see this also four Q2 in the rest of the year to be in the highest training percent range in year-on year growth: Fu 25, 30% growth in radar. We perfect continuation of the 20 we per seen over the past year ready.

Thank that.

rha.

And ourinternext questionation from term Wood spine for struonures even could see.

I think your my question also to. On the demand side, I think the year Q2 guidance, I think both your infrastructure and handset business look like being guided both seasonality can take a little bit into into a trend, especially in what well inion and really Thank you. Well, I think the key, the communication side, is really the, the some of the early deployment of the five G which we clearly been near term acceleration and then we think that we go through a little bit of a overall for a period for won't see that continued growth but clearly very positive borisingin Q2 in our positive distribution in mobile we really comes down to the continued deployment of the mobile wallet in the applications that we've been referring to in the past. We're beginning to see that come to piction with developing countries in new customers really offering opportunities to drive the growth rates that we're talking about for Q2. Yes, that that' let me ask AR there really full in line with the lower pro which we call earlier. So from an ofression ATE over all through and last year seeason mobile, the comporate going for 50% age rate run and that's fellow trre and that questionction: the H the year, the growth for us Q2.

You mobile.

If I could just take into one of those. First se, I think you mentioned something in our DNA U design wins, that business chbalance for some time. isthis sort of a turnaround we should expect here, with growth going forward and some acceleration business? Well, we didn't't try to say that. What we didn't was the decline we think is under control. I think I think we have been getting design to be fair through this period of time is shifts that the revenue ramp associated with those had been delayed and what we are now in see some of the revenue increases from those new design wins growing faster than the declines of the over legacy business which is created, the much pressure over the last few years, as you well aware. We are encouraged about our VM business in the design which we have though, and the full engagement in the opportunity to participate in a number of new areas where we really offer a differentiating technology, with some of a ver software decline, radio technologylogies that get our customers that. The working to expand into different networking, innovthey networking applications.

Thanks for leal thankgoodbye.

And I disquestionct from some stinking ramkin with bernstin resseerarch, you may provieme.

I I think you'repartictaularking my questionions. But the first 1: we want to be hit on on margins and I you're still holding to the every R 50 right percent. Can you talk a little bit about growth margin drivers? I guess in Q2 and then through the rest of the year, what's going to get you there as well as you about o action operating people, because for the rest of you ank well growross margin. I just go back to exactly what I said the last year about last quar, that I think that best was. But where we are on flat volume from of F revenue from Q4, 18 to Q4 and 19, it's basically fill the basis points of health. Health but itself anyone single individual, I you know we a bch of things going on in test test time in the year old.

uh there's a bunch of, but I guess the lot of is part it is.

Savings that we have the T with supply pricing, So that that really hasn't han't changed.

At twelveand in terms of OpEx what we what we said to you we should think where we remember for the full year to take 16% of So that for our annual RG number and seven perpointcentpoint a half percent per next be nine number and.

gu given now that we've given you the Q2 and a apportionately of difference over over Q3 and Q4, based on on how you think revenue is happening. But in OpEx the big changes to see from quarter-to quarter typically more around what we're doing from our mass perspective than anything else. Right now we're not really, we're not really hiring. Clearly there are on.

phitical replacements we've put in place but we're trying to keep both a cash fromall on PR something. I think what we saw in Thank you soon as we're able to some mon going pretty well ious. I think that's really important sta.ce we look at it with the crre environment. We see we're keeping our expenses completely under control in keeping them fairly constrained. We clearly will have investments that we drant But when we see a robust return to the marketplace. But clearly that's not something that we're this in the line of side that we have today. As we talked about the ramp, but we see revenue is more customer specific and design W specific than the general market improvement.

gotahead. Thank you, I M SM followup about 50 channel So I mean glad the city go to marics highghtly.

But I don't understand. You said that this channel could have taken an additional $42 million re that you chose not to shipift. But how do I reconcile that with your comment on the general uncertainty causing the market? Why would the channel be looking to take additional inventory if the environment is so uncertain? If that have some of the poses, but how they're truly seeing how they should Al the outlook of the second other. You should read too much into that. I think the point is we had the orders from this, the that they have the termiffidence that they will need the requirement.

That would have driven a $4 million additional revenue for us but without seeing the pickup in actual shipments out from the distributors. We chose not to shipift that in because that would have obviously increased our months of inventory and we're very focused on maintaining that around the two point four range. I think the distributors are more encouraged than I see them in a a few months but it's not really materializing into shipments out to their customers in a significant fashion. So I think it's more of a general indicator but it's clearly hasn't resulted in the improved business yet.

I guess what that is. What do you think is driving that sort improved outlook from the, that improved confidence from, because you don't mto C most of the place C C, C just wasn T just follow from in general, like at this second half better- or I think it's should- their business planning? Is they guess through it and look at whethertheir plans are that played orders that would have driven and further increase in our shipments. In the distribution, which obviously we chose not to do, bas on the impact it would have had inventory levels but the quire wasn't one well order from one thedistribution of rect there.

I across the distribution.

Yeah the to, I think, is I apciate itthank.

And our next clation soon per time by the. Are you with think the macro merwi you may rece?

Thanks for in my question the first one for tech, Al cardt there. Q2: see, ourum is among the best that you have seen in your the who are all complainaining about China deakness. Just kind of surprising my sensees that and ext have and to be more exposed to that market. So maybe think, could you give us some sense of trends you're seeing? I think you mention China is kind of frozen. So the trends you're seeing in Q3, is that measure of your own company specific designment activity or are you just ING better trends outside? I can just give us some quantification on what you're see in and outside of chinayes. So I think it's really important to understand that our guidance is based company specific design that we have with customers that give usust the confidence about our Q2 revenue network. If you look at the market, the market in China continues to be pretty growth. We don't see your robust recovery coming yet there's still a great deal of concern rel to the trade activity in certainty associated with it. I think if you look at Europe , Europe has been kind of OK but you know it's actually maybe even often a little bit recently it's not clearly a robust improvement in. You continues to operate quite So. So I think all of that the together but clearly our revenue G increases based the any specific design L which we've been working on for along very the time and we now beginning to see the results of that design activity that we've had.

And so right. I'll follow up on the automotive business. The revenue was on on a quarterly basis, have been in this one per per point one billion range for the last two years. Now I do you that workpoint. Do you think all the new activities you mentioned- whether it's an radar, the ms- can help your overall automotive business that get back into a target total, which I think you have at a 7% to 10%? Take on a longer term perspective. Thank you.

When I would say they will have right now, because if aboutad 30% of the total revenue, which is which is real AB? busve average in terms of growth, So once other chally percent based on the SAR come back to a more, more growth rate, you will see this striking through for the total. So can obviously with pleased above average growth engines, migradar or be can have, or the addigital levees of for being share against the total. This will become more and more material over the time.

This is today. It's a curious businessis- growth as far ve average, but food pedal calls take a higher share in the in the coming year. I think the clear thinging is: for reasoncent you could ment seen our total growth because of the general automotive market and the declines in production. So the fact is we've been able to hold that level on our shipments based on most new product areas. And as the general automotive market production level come back to more of a normal basis, clearly it will kick it and drive revenue growth. Parts of the company.

Thank you.

And our next expquenure. Con M able be more with those events, ioity.

Guys think. Let me ask question. I want to pick on the tomotive side of things and between the first quarter report in your second quarter guide it looks like you're down in auto 8, 10% year-over-year and I understand a sto marke for all the reasons you've given in answering prior questions. But it we think about that in relative to SAR the last couple years you guys outperforms arear, you have the 30% driver et ceter and then you outgrow it even in the 70%, but it doesn't seem like that's happening in the first half of the year. Can talk about some of those drivers is it's simply the inventory burn in the first half in our, your expectations still to be able to outgrow the STAR side of things and even the tomotive 70 cars as we get through 2019 and beyond.

So yes clearly, the expectation to continue to grow the orto, car it just doesn't work on on a quarter by-quarter basis. I mean you have a little bit, a little bit longonger timewe studies also historically it just bring and one big quarter does't really there, doesn't really work. But yet clearly we will continue to. The overall borls are by the five to 7% that that that have seen the basis and continues to be with basis for our we want to forecast which is like 7% percent, which was based for a 2% are now it are in the toouple of quar return to more lower rate like 2%. We are also effect to the growth rate, rel to appe. I mean I highdon T know PE footprint over time but clereallyly our shooting field of focus, which we also mentioned at the beginning of the total, clearly the best remainagement for the, for the electric, our train or rate down within the eight basis. We have growrown and we will continue peod very clearly.

Thank So, thir. As my follow-up is one of the past returns properly for Peter, I know you have a couple million shares left tobuy in ter accrued authorization. Can you just talk about the logistics to expand that and how you're planning to return cash in the balance between cherry repurchase and the dividend as you think, going forward beyond this to the reversals program? That's about two expprior.

Yes we can actually ly be combineed back about another three point seven million res between now and our annual general meeting, which is in twoun, turn youune and we'will, we'll.

Well.

Request that the very request, authorization from shareholders to have been general buyback capability of it 20% doesn't mean we at that point say we by about 20% of's, but nor only. A good company runs with this 20% allowance inits craft pocket and but no one has spent in a six mention before we play through the spent in lot coun.

Which we kindd unusual in June . We'll get that thought up. But, more generally, our commitment to could return all excess cash flows through to our shareholders, from whether H Tory going living to that commitment and and we'll continue to, we'll continue to do.

Por.

As we. We continue to have dividend and we all get the chances. We go forward to possibly and potentially inprode my presentility.

Thank you.

I question cur that my ch to make the keep gu. Thank to my question. I just want to revisit the RF segment. It looks like it's reaccelerating and being just kind of curious your perspective on that trgratuate this year in the next. There's been and thought about mabe, your customers positioning ahead of many's pendareas, So maybe you go will PL loading the P curod viewed there and then any perspective on your GaN product would be helpful.

Yes So I don't think we see a lot of preordering associated with that. But we were really are seeing is a ramp up of deployment of our massive Mino solutions which we've had. Quite our success, our market price and frankly we're limited by our manufacturing capability right now. So I think that's really kind, the contributing factor for us. It's not about- I think the term use was- preorders associated with choury. We don't see that as being a significant factor in our Q2 guid, but off. But to the massive minimal results. Our gain. Solutions continue to be well received in the market. We continue to re design wins and and frankly, a challenge to be able to supply the customer requirements associated with it. And we do have our internal manufacturing facility to be ramping later this year associated with D. So I think we're in, we believe, quite reasonable shap again and I think we can continue to take our leadership positions in the base section, our F market, even as the market ver more again. But the timing of the transition again has clearly changed over the last few years and frankly the massive moo opportunity represents a much more significant growth, we believe, in the next number of quarters- year and a half or so- than really the opportunity specifically associated with D and now demar technology is. Clearly we've just been been able to move into higher what people would have anticipated several years ago.

S sort of follow-up on the comments on our bm. In fact, about several hundred million dollars potential in 2021 is just you wrap any color in terms of geographic and any sort of between now 2021 is anything else to have to happen in terms of that design progress.

While the focus from a part of the perspective is really the btory companyy Don only provework not 10 much with the classic automotive Q1 companyyies, but with the battertory companyy.

And they to be by deposition Bo Asia in euro or in the? U us. So I would, based from a geographic design in perspective, think about sign, could we even japanbut they doesn't mean that that has to do with the local conduction there. It they are leg globally and eic technology in the, my eic technology, but they through shif and we do have done certain in which between programs are reic, that absolutely G I mean I wouldn't make any differentiation there between European? U us or Asian car program in initial production. Quite exexping platform. I try place because just about, but actually it's a large very, very large determan car or which is which, which has entire electric power train IC platform based for our posions and the first cars which are very high, high or C? Certain think role to have, but they are to. By the way, for the next the car and of bas leg launch in MA some this year. But again that that the platform which is then actually going PR out into all of theelectric people, of that of the car companytell, again that happens to be a ger company, but it doesn't mean that the the betteric work has been done with company which ex but actually all. So it a very littlebal business. I think we SP very strong based on the combination, our analog position of our as be much bas and the M which we have across, continues to to give up the unique position that markeket.

No OK.

In your next questionress from earthquake headedenburg with organstery you may proceive.

Yes Thank you, our strong industrial IoT, if you can just talk about kind of attach rate connectivity with the core Mike controlers and any update on some of the trends seeing along those lines.

Yes I think we've talked about that. The connectivity requirements for both our Wi-Fi associated with industrial and oot market we announced from partnershipi and this previous in the most recent quarter. one of those in specifically was an announcement with marada and Cyprus associated with a solution that we're offering. But we continue to see high demand from our customers working for a important solution with the connectivity there with our processing and capability to be able to facilitate their solutions and what we're trying to accomplish.

And then just power appreciate the current Tal and inventory any updates on just kind of how lead times are, and then just the comments are around, kind of overall the marketts stable, just kind of how things are through the quarter. Is it still kind of chop the intra quarter or anything along? Ones on that were front.

So I guess on the order front, as we talk a little bit about, we've actually seen an improvement in orders, but we don't see the sell-through from our distribution partners picking up, specifically in China. So I think while we've seen that increased order activity, we're a little bit reluctant to expect that to really fall-through to the customers in the near term in the Q2 front and that we're relying on the specific design lins that we have to be able to achieve the revenue increase that we have an M toryy Africa governers first. We basically explain all these. We don't. We've all talk about log. We the.

one of gosiic.

Yes we're pretty religious about our lead times- is from a almost to pointing quarter within the lead times where we actually have an ining charge of a premium associated with being able to meet those requirements.

Go of thanks it.

Thank.

Yes ES at the courtyes I can morning. Good afternoon. Thank you for dking my question, I guess. Great question and expperi specific design when momentum is, and clearly key them on this. So, curry <expletive>, you look at your second half outlook for continued recovery. Is that an exp specific again, or is that something cyclically structurural? They where you see improvement.

We're not. We're not talking about the second half as far as projections associated with it beyond what we said, that q2- I mean second half- will be above the first half. The confidence we have is clearly associated with the designs W we have and that being able to facilitate that, although there should be some normal pickup in market, even if there's not a robust recovery in the second half.

okful. And then I guess, as a follow-up, the mobile offload teenss in June is, I guess, a bit surprising, seasonally curious, how we should interpret that a in terms of impacting what the run rate will look flike into the second half of two thousand and nineteen.

That design wins that we talked about in the improved acceptance of our mobile wallet. As So we currently continues down the same path and we expect that to continue is per talked about from the from the 30% to 50% by 2021. So we're kind of on course to be able to maintain that and see a wider acceptance with more customers in different applications, to continue to increase our, our confidence and we're a player in the mobile market. We're not a Mainland player in the mobile market and they'll never plan to be a mainline player, but instead and take unique technology to drive applications for customers that just happen to be deployed in the mobile market.

Thank you.

Thanks.

Internet express. Come from thatt Ramsey with cower you make a see.

Thank you very much. Current I want to ask, as questionlected is on the automotive 70 macro, just small of a clarabification than anything the ado studiness that you have. 30% of your business obviously have really strong growth. The other 70% - it's been caught a bit a few timeses- is tied the STAR, but I wanted to make sure made distinction betweenstar growth and me anything muscle growth within the STAR. Maybe you could sort of remind us what you guys are forecasting for market growth for the semiconductor macro within the STAR.

Well let me address this frme clarify. When we say to 70 percentend on TI to the S?

The still outgrow the ST, So there is still content growth obviously could be LE by than theahead of the far. Also in the 70% port of our business. When we say PR ST what it really means sinceimply is clo to the car sw more the car there runther radar twent growth thepercent year year. I mean that ST, that the 2, 3% change actually does T ter. I mean that that was the condument made about appresociation of 1, apsociciation with the car. So that why I would say that se moal market should continue, Thank to the content increases across the Board. So continues to be, I don't know 4, five per than theahead of ST through the cycle through the yearthe more pro question is actually what the equonity- and I mentioned earlier on the co that the Q1 important, what the particularly great up. So I four reporting Europe minor basase percent year year in Q1 in conproduction and signin Min 13% and those are to pretty prettyific confective while still what us that for the year that this get better in the second half resul in minor 1% for the full year, indicate a positive or semiconductor market for the full year.

Yes it's really important to think about the mix of that Star as well. If you look at it, China right double the ARS of the U's market and Europe is larger than the U's market. So in fact, the two largest regions per SAR production were quite weak in the first quarter.

gu again, very much for the claborgation on just one quick follow-up on DMS: that has been brought up with the vines- maybe it just curated to your slia 4- or strategy for the charging side of the battery equation, whether that's supercharger, charger infrastructure et cetera, and as we are doing any work therethank.

I know you onit.

beh of ion that whole to notice that we do that charging and mobile for mobile joice above known onwork.

gotd, Thank you.

Right.

But I think I from preessre Hari looking for dets. You may proceive.

Yes I think veryty much for screening in. Peter had a flve question on gross margins. You talked about richer product mix driving your profitability in Q2. Can you talk to some of the product areas that drove upside there and related to that Rick? You talk extensively about eightas and DMS as long-term drivers. Can you speak to profitability for those 2- two segments as they continue to grow the percentage of sales going forward? We don't disclose pofitility by segment ason the gross small know the the opering moment in level.

I lo.

There's just lots of moving part, but those said previously, you can have the big, the big groups to us lighting different margin profiles, But within the group different F sets which have different margin profiles as well and has been tend out pretty nicely for this quarter.

Okay as were little consistent D to go. Yes, the nextix way in comment was really more focused from Q1 in our opinion, to facilicate that, and I guess the only thing that we could say is: they got some BMS. Margins per are quite nice.

Okay that's. And then as a quick follow-up to the comment for another segment, I believe the longter growth rate from your Analyst ST fl up 2%. Given the recent development there and given your comment term in the call, this is that a pretty conservative kind of guide at this point and could there, could there be potential upside or do you think in your term strength could be what? Often the ter- if you all- Thank you another- there's always some takes associated with it. So I don't think we're going back in changing our long-term guidance at 'all? Clearly in the near term it's a positive contributor and and help kind of off set regeneral market weakness that we create. But but clearly we were pretty conservative moment segment and we said that at the term that we've said the growth guidance, there could be an opportunity for upside. But it's always going to be give and takes and we're not really changing any of our long-term guidance at 'all?

Thank you.

Great that's. It will take one more a product take.

And and there PR come fromsome fores are with taking worgin, you may be he.

Money things. For taking my question on the inustal segment into where talked about companies, specific languments, pretty bro being segment, then tied on that perform town G, why 20 tvity can just help again, given the strong line. What are the specific application of products platform, that driving the quent just, and it is by more towards things and building automation or stru automation of connected home. Many insights would be helpful. So it's more also segment. If I think the Ke were what we intereststateing. The significant growth contribution is the cross resspegment. We're kind of uniquely positioned and if far is driving the growth is a lot more. On the sign tract, the wearable segment, GI thing outse, I think, over the med term there right like the emmersed sound solutions that we had be able to differentingtiate on be capability, a lot of fact. The automation that are spread, many thousands of customers and many VO that it really for area the variable which formion industrial automation which is only tection of the kind of the VO into and industrial and industrial SPE and finally the the phone bar, I think Reg the other, the other speificcase say both for very different segment but they all use tech nology case for the insights there and and insights into the R T cross over platformbut really partland it's not just the R T are cross famly process is the combination of R T, the and and the scale. So it, the combination of, that's not just our T, it's actually a pro broad, ING re visition, very good gover they, the are create the micro going to be the otherplication pro. So by weed with the's. On the R, I think the broad ING that because have so much section, the more to in ation, MA ically, brain some of the function, specific functionality, if you could normally only get in a very prorossper process down to a more reasonable prost point for a broader R of implementation.

Yes no, and that's a good thing. We're into my next question, which is that when we think about your Fu Brown process of family died MX family we, which we typically associated with auto, the imx, actually continue to have us, I think, strong traction in the industrial and IoT edge markets, for example, like your imx X family. That', T that's actually 14 naminometer technology. Can you just helppus understand the contribution in designual intertraction of the I MX in industrial and IoT markets?

It's significant. I don't hurt talk about the specific applications that we see in the broad base associated with that and we continue to have good traction, but it's a broad array of customers in not any individual single solution.

Great thanks for the insights.

Play for over.

Thank you actually, any question today conference. Like to turn to callmentback: JE MAR, maybe I'll make a few closing remarks as opposed to Jeff, but I think our our, if we were very pleased with our quarterly results in Q1 and encouraged about the customary presence that we have that allowed us to have the guidance for Q2, that opportunity continue to gain traction with the design is to make a difference for our customers, is really about our long term strategy and how we're focused on customer focused passion to win, to be able to drive our solutions, to be able to make a difference with our customers, and we're encouraged about being able to demonstrate the comprehensive results associated with that. So thank last of your support. We appreciate it, Thank you.

Lad ies this G? lemen, Thank you for T? Es today's conference and so your program. You may all disconnect every up a great day.