Ladies and gentlemen, welcome to the STMicroelectronics Analysts Conference Call and Live Webcast. I am Maira deCors, Call Operator. I would like to remind you that all participants will be in listen-only mode and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing Star and 1 on your telephone. For operator assistance, please press Star and 0. The conference must not be recorded for publication or broadcast. At this time, it is my pleasure to hand over to Jérôme Rammel, EVP Corporate Development and Integrated External Communications. Please go ahead. Thank you, Maira, and thank you, everyone, for joining us for this conference call. Hosting the call today is Jean-Marc Chery, ST President and Chief Executive Officer. Joining Jean-Marc on the call today are Marco Cassis, President, Analog Power and Discrete MEMS and Sensors Group, and Head of STMicro Strategy, System Research and Application and Innovation Office, as well as Lorenzo Grandi, President and CFO. This live webcast and presentation material can be accessed on the ST Investor Relations website. A replay will be available shortly after the conclusion of this call. This call will include forward-looking statements that involve risk factors that could cause ST results to differ materially from management expectations and plans. We encourage you to review the Safe Harbor statement contained in the press release that was issued yesterday evening and also in STM's recent regulatory filing for a full description of these risk factors. Also, to ensure all participants have an opportunity to ask questions during the Q&A session, please limit yourself to one question and a brief follow-up. I'd now like to turn the call over to Jean-Marc Chery, ST President and CEO. Thank you, Jérôme. Good afternoon, everyone, and thank you for joining this conference call. Yesterday evening, we announced the acquisition of NXP's MEMS sensor business, which will strengthen our position in sensors. I am pleased to introduce Marco Cassis, President of Analog Power and Discrete MEMS and Sensor Group and Head of STMicroelectronics Strategy, System Research and Application Innovation Office, who will briefly present the rationale of the transaction and give more color on the business to be acquired. Marco, Lorenzo, and myself will then be available to answer your questions. Marco, the floor is yours. Thank you, Jean-Marc. Good afternoon to everyone. As announced yesterday, ST entered into a definitive transaction agreement for the acquisition of NXP's MEMS sensor business to strengthen its position in sensor. The purchase price of up to $950 million in cash includes $900 million upfront and $50 million subject to the achievement of technical milestones. The transaction is expected to be all cash and financed from our existing liquidity. The transaction remains subject to customary closing conditions, including regulatory approvals, and is expected to close in H1 2026. Before addressing the deal we just announced, allow me to briefly remind ST's existing position in sensors. ST has been a global leader in semiconductors for sensing applications for over 20 years. Initially focused on personal electronics, ST's sensors technology now extends into automotive and industrial applications. ST's MEMS business benefits from our IDM business model covering the entire semiconductor value chain, from research and development to design, manufacturing, and sales. Today, the majority of ST MEMS sensor revenues is related to consumer applications. Our unique product portfolio includes both sensors and actuators for a broad range of applications, including smartphones, personal devices, computers, automotive, industrial, healthcare, and IoT. In particular, ST has a number one position for motion and pressure MEMS in Android devices, in MEMS for automotive navigation, as well as in actuators for printing. As presented at our Capital Markets Day in November 2024, our aim is to make our sensors even smarter, enabled by technology fusion and embedded AI. This involves investing in R&D to develop state-of-the-art proprietary technology for sensing and actuating, developing sensor fusion at silicon or package level to reduce size and cost for customers and embedding processing and edge AI for localized intelligence. The transaction announced yesterday is a great strategic fit for us. The MEMS business of ST and NXP are indeed strongly complementary in terms of technology and product portfolio, with the combined product offering to be well-balanced across automotive, industrial, and consumer end markets. Actually, ST has been providing premium foundry services to support NXP's MEMS business. Moreover, the planned acquisition will enhance ST's MEMS technology, product R&D capabilities, and roadmap with leading IP technology and products for automotive safety application and highly skilled R&D teams, enabling us to better serve all our customers worldwide. The transaction will provide stronger exposure to the rapidly expanding MEMS automotive market and unlock new opportunities. Last but not least, the business to be acquired is already currently accretive to our 2027-2028 target model for both our gross and operating margins, and it is expected to be accretive from completion for ST earnings per share. Let me now give more color on the business to be acquired. The MEMS sensor portfolio to be acquired primarily targets automotive safety sensors, both passive (airbags) and active (vehicle dynamics, including electronic stability control, rollover detection), as well as monitoring sensors, including the pressure monitoring system, engine management, convenience such as for key fobs and vehicle arm and security. It also includes pressure sensors and accelerometers for industrial applications. To give you an indication of scale, NXP's MEMS business generated revenue of about $300 million in fiscal year 2024. In automotive, MEMS technology increasingly enables advanced functionalities for safety, electrification, automation, and connected vehicles, paving the way for future revenue growth. The overall market for MEMS sensors and actuators is expected to grow at more than 4% CAGR in 2024-2028. Within this overall market, the acquired business is expected to grow faster, backed by exposure to the rapidly expanding automotive MEMS market, strong customer relationships, and innovation roadmap. To wrap up, this transaction is a strategic opportunity to expand our position in growing automotive and industrial MEMS markets, highly complementary to our existing product portfolio and manufacturing footprint, and accretive from completion for ST profitability. Last but not least, it fits perfectly within the wider strategy outlined at our Capital Markets Day for smarter sensors and more broadly with the ST IDM model. Thank you, and we are now ready to answer your questions. We will now begin the question-and-answer session. Anyone who wishes to ask a question or make a comment may press Star and 1 on their touchscreen telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press Star and 2. Participants are requested to use only handsets while asking a question. In the interest of time, please limit yourself to one question only. Anyone who has a question or a comment may press Star and 1 at this time. The first question comes from the line of Andrew Gardiner from CT. Please go ahead. Good afternoon, Jasmine. Thank you for taking the question. I just had one on sort of the general area of synergies, perhaps firstly on the production side. Marco, you mentioned that you're already providing foundry services for NXP in this area. Are you doing all of their manufacturing? Therefore, this is a very quite easy, sort of, yeah, sort of transition in terms of manufacturing, or are there some of the products that will have to be brought in-house? Then, are there any areas of product overlap that need to be, sort of, dealt with in terms of, yeah, sort of streamlining those portfolios? Thank you. Okay, I start from the second part. Thank you for the question. In terms of product overlap, I will say really minimal because it's basically the portfolio is really complementary. I will say that the NXP portion is much more on automotive accelerometer and pressure sensor, where we are much more in IMU and personal electronics, et cetera. Really minimal, if almost nil. In terms of what foundry service we provide to NXP, as you know, the MEMS is a combination of two parts. You have the mechanical part and you have the ASIC part. What we are providing now as a foundry business to them is basically the mechanical part. We have embedded in our fabs two of their technology, and we are providing that portion of the business. Surely, there is some legacy that still comes from, let's say, other fabs outside ST, but the majority for the front-end parts will come from ST, while for the ASIC is still, at this stage, provided from external foundries. I hope this answered the question. Thank you very much, Jérôme Ramel. Thank you. Next question, please, Maira. The next question comes from the line of Joshua Buchalter from TD Cowen. Please go ahead. Hey, guys. Thank you for taking my questions. I guess you mentioned it being accretive to your margin profile as you discussed in your 2027 model. Any more detail you can give on sort of the near-term accretion path and math in 2026? Like, you know, NXP's margins, I think, are sitting in the high 50% range. Like, are you able to share if it's above or below their corporate average gross margins? Thank you. Lorenzo, you can add to this. Fantastic question. But, you know, at the end, let's say. This business is accretive in terms of gross margin and EBIT margin, let's say, in respect to what we have claimed our model during the Capital Markets Day. So, in our model, if you remember, Capital Markets Day, we were talking about 45% gross margin. At the end, let's say, this business is already now, let's say, at the closing, let's say, accretive for this level of gross margin. So, you can understand where this gross margin of this business is positioned. So, for us, it's a good acquisition in terms of accretiveness for our, let's say, performance. Okay, thank you, Lorenzo. Actually, one more on the financial side. You know, I think post-close, you'll still have a healthy net cash position. Could you maybe speak to your appetite and how much room you think you have in the model for incremental M&A? Like, is this a signal of a desire to get more acquisitive over the medium and longer term? Thank you. Yes, you're right. At the end, let's say, our cash today can, let's say, in a comfortable way, finance this acquisition full cash. There is no major issue here, let's say, in respect to the strength of our balance sheet. At the end, you see, in the future, our strategy in terms of acquisition is always being consistent. It has to fit with our strategy. It has to be, of course, accretive. It has to bring value. We will remain with quite a solid balance sheet. There will not be major problems in this respect. I think that at this stage, also from, let's say, our rating, will actually not impact in any way because in terms of indebtedness, cash, we are remaining quite solid. It gives us opportunity if, let's say, there are opportunities in the market to continue with our strategy in general. Thank you, Lorenzo. Thank you, Josh. Next question, please. The next question comes from the line of Josh Shah from Susquehanna. Please go ahead. Hi there. This is Chris Rollen. My question is around competition. For all of these products in particular, I do not know if you want to break them out into their individual products, but beyond NXP, who is the greatest competitive kind of threat among these auto products? Thank you for the question. Clearly, the biggest competitor that we have in the automotive field is Bosch, which is addressing external market, but of course, has also access to quite a large captive market. This acquisition goes exactly in the direction to make us stronger because we became, we are becoming the number two. Frankly, I think more or less the only alternative to Bosch, considering the portfolio. We reinforce the R&D teams. I think we will be in a position to compete extremely well against, at this stage, the number one, which is Bosch. This is the major competitor. Of course, after that, in some other products, you have Sensata, you can have HP, et cetera. Considering the market that we want to address, clearly, we are now in a position, I think, to close more the gaps towards Bosch and to have more weapons to play in the market. I am extremely positive on the acquisition and the results to come. I hope this answered the question. That did. As a follow-up, these products, I think you said previously you were providing the mechanical parts. They will not have to be requalified, if I understand that correctly. Is that true? You will not have to requalify these parts. If you were already doing the wafers for NXP and benefiting from those economics, why did you decide to bring those in-house and actually own them? First of all, because you are correct, the product will not need to be requalified. The ones that are using our mechanicals. Let's not forget that we are using their technology and they are owning those IPs and those technologies. The movement to acquire is reinforcing our offer because now the IPs and the technology are ours. We leave even the space to work on what we do in the ASICs, putting more intelligence. We really own now two new technologies that we are producing, which are extremely effective. We have also, let's say, the capability to further reinforce the technology that we have in-house. Overall, the deal makes a lot of sense. Being a foundry and owning the technology is a completely different game that we are playing. Understood. Thank you. Thank you, Chris. Next question, please. The next question comes from the line of Theresa Ngera from Baird. Please go ahead. Hi. You've mentioned the $300 million in fiscal 2024 revenue. Year to date and year over year, what's been the decline in that revenue given the ongoing inventory correction that we've seen in automotive? How would you characterize the inventory situation for those products in the automotive supply chain currently? You're speaking about the NXP portion overall? The NXP portion, yeah, the $300 million in revenue that NXP generated from that business in fiscal 2024. I think that overall, I think the overall situation should be pretty clean at this stage because typically for what we see, but I cannot comment on the overall situation of NXP, but I think it should be pretty clean. What is important, if you look, and this was also announced by Jean-Marc during yesterday. For example, on our MEMS, the ST MEMS in last quarter, we grew double-digit also year over year. It looks like that overall the positioning of MEMS ST and probably the position of MEMS and NXP should be on the healthy side at this stage. Great. Thank you very much. Thank you. Thank you, Jérôme. Next question, please. Next question comes from the line of Jean-André Menon from Jefferies. Please go ahead. Mr. Menon, your line is open. Yeah, hi. Thanks for taking the question. I have two questions. One is, you know, how does this NXP's MEMS gross margin compare with your own MEMS gross margin? You're saying it's higher than the company average, let's say, even at 45% for ST. Can I assume that their gross margin is also much higher than your own MEMS gross margin? If so, I'm just wondering, given that you are the foundry for the mechanical part, why is that? Is that mainly because they are more automotive-focused and you have more personal electronics? In general, the pricing pressure is higher in personal, and that's why? Is that the main reason? I have a brief follow-up. Lorenzo, want to take these or you want me to answer? Okay, I'm taking it. And then maybe Marco you can complement. Sure. Clearly, let's say our exposure on personal electronics, it's such that our gross margin, notwithstanding, let's say, that in MEMS, our gross margin is valuable. The average that today we have still, let's say, we have a good gross margin in MEMS. Yes, it's clearly, let's say, below the one that we can achieve in automotive, let's say. Consider that at the end, yes, we are producing, partially producing their, let's say, mechanical part, let's say. So means that there is for them some stock margin, let's say, with our activity of foundry. Their margin is, let's say, higher than our margin, mainly due to the different market that we serve. I repeat, let's say, MEMS gross margin also for our business, it remains, let's say, accretive for us, for our average of the company. I don't know, Marco, if you want to add something. No, no, I think you covered pretty well. I think for where we serve the automotive market, our margin are similar to the margin of NXP. Clearly, the personal electronics is where there is more pressure. Again, as you said, overall, the marginality of our MEMS is above. Understood. The company. Okay. And my follow-up is, you know, ST obviously was one of the early players in MEMS almost, you know, close to 15, 20 years ago. You saw extremely strong growth. You were a market leader. If I remember right, you know, since, and that was mainly personal electronics. And then if I remember right, around 8, 10 years ago, you said you wanted to diversify into automotive, which was clearly a great growth area for MEMS. I'm just wondering, you know, why you were not able to be that successful in the automotive on your own, you know, IP and production capabilities. And why you could not take on Bosch, for instance, on your own, and you needed to do the acquisition to get to that strong position in automotive? Okay, the past, you are right. First of all, automotive is a market that takes time to enter. Our major, if you look back in the years, the major, our technologies also were born at the beginning more to support the personal electronics and the computer equipment, computer peripherals field. We have success in automotive because we are number one in navigation system. More complex is the IMU, the six axes. Where, by the way, we are, at this stage, pretty, let's say, well-positioned. We could do expanding automotive, we are doing. This is an opportunity of a great acceleration because the position on accelerometers with the technology which is designed specifically for passive safety and vehicle dynamics control, traction control that NXP has, has been something specifically designed. These were fields that we are not really addressing inside the automotive. There is a very good complementarity. I would say, coming back, yes, we had good progress. Let's not forget that Bosch has a huge captive market and has been there for many, many years. We have good progress in the automotive, but with the acquisition of NXP, considering also the dynamics of the automotive market, it is surely an accelerator of our presence in that field. We can leverage on the knowledge and the IPs and the technology that they have developed specifically for that market. You will see a strong acceleration in what we are doing, not only adding the two things, but creating synergies to expand portfolio and to become even more aggressive in the market that we cover. I hope that this answered the question. Yeah, that's very clear. Sounds like a great opportunity. Thanks. Yeah. Thank you, Jean-Marc. We have time for one more question. Last question for today is from Domenico Gualotti from Equita. Please go ahead. Good afternoon. I have a question on the overlap in terms of client base. So if you see areas in which you can cross-sell and/or areas, geographies. I mean. Overlap, let's say, the tier one that they are serving, we are serving clearly because when we speak about Denso or Veoneer, et cetera, these are customers that we are serving. We are serving with a different portfolio. That is why. There is basically no overlapping. That is why it is a great opportunity because now, and I think the customer will be not worrying about the change because they do know us. We are an IDM vertically integrated. It is also a positive, I want to believe. We can leverage now on having a wider portfolio that will allow us to reinforce the overall sales of ST products at these customers. It is very important for you to understand that really the overlaps are minimal. We were focusing on different kinds of products. This is why it is really a great opportunity. Okay, while on the client perspective, you are basically serving more or less the same clients in all the regions. Yes, we are serving the same, the tier one, we are serving. I have to say that a little. One part where we are much more exposed or we are more in is, for example, the automotive in China with our MEMS, while they are less present. This can be also a good opportunity to expand the sales of their portfolio in that market. Okay, thanks. Thank you very much, everyone. Sorry for those who have questions, but feel free to reach out to the IR team. Thanks again for joining us today. Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call and thank you for participating in the conference. You may now disconnect your lines. Goodbye. Goodbye.