Good day, and thank you for standing by. Welcome to the NXP first quarter 2022 earnings conference call. At this time, all participants are in a listen only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during this session, you'll need to press star one on your telephone. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Jeff Palmer, Senior Vice President of Investor Relations. Please go ahead. Thank you, Catherine, and good morning, everyone. Welcome to NXP Semiconductors first quarter 2022 earnings call. With me on the call today is Kurt Sievers, NXP's President and CEO, and Bill Betz, our CFO. The call today is being recorded and 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 NXP's results to differ materially from management's current expectations. These risks and uncertainties include, but are not limited to statements regarding the continued impact of the COVID-19 pandemic on our business, the macroeconomic impact on specific end markets in which we operate, the sale of new and existing products, and our expectations for financial results for the second quarter of 2022. Please be reminded that NXP undertakes no obligation to revise or update publicly any forward-looking statements. For a 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's underlying core operating performance. Pursuant to Regulation G, NXP has provided reconciliations of the non-GAAP financial measures to the most directly comparable GAAP measures in our first quarter 2022 earnings press release, which will be furnished to the SEC on Form 8-K and is available on NXP's website in the investor relations section at nxp.com. I'd now like to turn the call over to Kurt. Thank you, Jeff, and good morning, everyone. We appreciate you joining our call today, and I can tell you after two years, finally, I do very much look forward to a series of in-person investor meetings through the rest of this week. Now, let me begin with a review of our quarter one performance. Our revenue was $36 million better than the midpoint of our guidance. With automotive, industrial IoT, and mobile at or above our guidance, though trends in the communication infrastructure markets were just slightly below our expectations due to supply issues. Taken together, NXP delivered quarter one revenue of $3.14 billion, an increase of 22% year-on-year. Non-GAAP operating margin in quarter one was a strong 35.7%, 480 basis points better than the year ago period, and about 70 basis points above the midpoint of our guidance. Our results reflect strong execution with good operating leverage and profit fall through on higher revenue, improved gross profit, and modestly lower operating expenses. Now let me turn to the specific trends in our focus end markets. In automotive, revenue was $1.56 billion, up 27% year-on-year, in line with our guidance. In industrial and IoT, revenue was $682 million, up 19% year-on-year, better than our guidance. In mobile, revenue was $401 million, up 16% year-on-year, better than our guidance. Lastly, communication infrastructure and other revenue was $496 million, up 18% year-on-year, just modestly below guidance as a result of ongoing supply challenges. Overall, the demand in our strategic end markets continues to be robust, putting our customers' requirements in excess of our improved supply capability. In that context, let me provide some data points of what we see in our daily engagements with our customers. In the distribution channel, which serves about half of our total revenue, inventory remains stubbornly below our long-term targets. During quarter one, the months of supply in the channel was 1.5 months, which is about one month below our long-term target, and it is now the sixth consecutive quarter of an exceedingly tight supply situation in the channel. Internal inventory days continue to be below our long-term target of 95 days. In quarter one, DIO increased by six days, with all of the increase in support of our growth outlook for the second quarter. Lead times across the board continue to be extended with more than 80% of all of our products being quoted at 52 weeks or greater. Essentially, we are supply constrained for all of 2022. The level of inbound supply-related customer escalations continues to be elevated across all focus end markets and regions. Lastly, let me zoom in on the trends we see in the automotive market. In the U.S., new car inventory at dealers is substantially below historic levels at 27 days versus the historic metric of 64 days. The pace to xEV vehicle penetration globally continues to rapidly accelerate, hitting 19% of global production in 2021. Is expected to hit 23% penetration in 2022 and moving to 30% next year in 2023. With xEVs having roughly 2x the semiconductor content, this is another strong secular tailwind to semiconductor content growth. The Ukraine war has disrupted predominantly European Tier One suppliers and OEMs with shortages of wiring harnesses. In China, the COVID-19-related shutdowns are creating yet another level of significant supply uncertainty. The extended auto supply chain continues to be very lean, with reported days of inventory at the Tier 1s and at the auto OEMs out of sync with each other. Lastly, based on our very frequent and detailed customer conversations across the supply chain, the Tier 1s and OEMs continue to be challenged by kitting issues to complete module and vehicle assemblies. These kitting issues are not due to one semi supplier or shortage of just one common golden screw device. Against all of this dynamic backdrop, our first quarter was a very good beginning to what we view will be a positive year for NXP. In the face of the loaded customer escalations and elevated lead times, we are proactively and relentlessly working with our customers to redirect material to assure that customers get what they need, where they need it, and when they need it. Zooming out, customers have begun to much better appreciate and embrace the strategic value semiconductors play in their long-term success, both from an innovation as well as a supply perspective. Hence, as a result of our adaptability, the level of engagements with strategic customers is resulting in unprecedented levels of customer intimacy. Our engagements are unlocking new and significant long-term customer arrangements and cooperation that is closer than ever, which will enhance our relative market share over the longer term. Now let me turn to our expectations for quarter two. We are guiding revenue at $3.28 billion, up about 26% versus the second quarter of 2022, within a range of 22%-30% year-on-year. From a sequential perspective, this represents growth of about 4% at the midpoint versus the prior quarter. At the midpoint, we anticipate the following trends in our business. Automotive is expected to be up in the low 30% range versus quarter two 2021 and up in the high single-digits range versus quarter one 2022. Industrial and IoT is expected to be up in the low 20% range year-on-year and up in the low single-digits range versus quarter one 2022. Mobile is expected to be up in the low double-digit range year-on-year and down in the low single-digit range versus quarter one 2022. Finally, communication infrastructure and other is expected to be up about 20% versus the same period a year ago and flattish on a sequential basis. Our guidance incorporates several items to be aware of. First, the year-on-year comparison of our auto business in the second quarter benefits from the easy compare versus quarter two, 2021, when we were impacted by the effects of the winter storms on our wafer manufacturing facilities in Texas. Second, our Tianjin backend facility in China is fully running at maximum capacity. Remember, we lost about one to two weeks of output during the early part of quarter one. Lastly, our guidance does contemplate several tens of millions of dollars of potential supply and logistical disruptions due to the lockdowns occurring in China related to COVID outbreaks. Now, before I pass the call to Bill, I would like to provide an update on our ESG journey, something our management team and I are personally committed to. On April 1st, we published our annual corporate sustainability report, which included the achievement of several goals. On a year-over-year basis, we have reduced our normalized carbon footprint by 11% and have increased the use of renewable electricity in our facilities to 31% of our total consumption. Additionally, we have realized an 11% normalized decrease in our water consumption and 76% increase in our recycling efforts. These are all solid and positive steps, but I believe we can and should do more. Looking forward, we have committed to achieve carbon neutrality by 2035. We have formally committed in the Science Based Targets initiative, and we are transitioning toward 100% renewable energy sources in our facilities. These will all be a significant task for our organization, and we are committed to providing regular updates documenting our progress. From a global employee perspective, we grew by 8% during 2021, despite a difficult talent market, and women now represent 37% of our total employee population. To keep the organization focused on the sustainability journey, I am proud to announce Jennifer Wuamett, our General Counsel, has been named NXP's Chief Sustainability Officer, and she will oversee our sustainability program. Finally, to demonstrate that we as an organization are all responsible to improve the impact we have on our environment, the NXP board has approved that a portion of our employee annual incentive compensation will be tied to achieving progress towards long-term sustainability goals. Now in summary, the robust growth we have anticipated for 2022 is materializing in spite of all supply challenges. We do continue to see strong customer demand, especially our company's specific accelerated growth drivers. Overall, demand continues to outstrip increased supply and inventory across all end markets remains very lean. With that, I would like to pass the call over to you, Bill, for a review of our financial performance. Bill? Thank you, Kurt, and good morning to everyone on today's call. As Kurt has already covered the drivers of the revenue during Q1 and provided our revenue outlook for Q2, I'll move to the financial highlights. Overall, our Q1 financial performance was very good. Revenue was $36 million above the midpoint of our guidance range, and both non-GAAP gross profit and non-GAAP operating profit were near the high end of our guidance. Now moving to the details of Q1. Total revenue was $3.14 billion, up 22% year-on-year and above the midpoint of our guidance range. We generated $1.81 billion in non-GAAP gross profit and reported a non-GAAP gross margin of 57.6%, which is up 340 basis points year-over-year, and both above the midpoint of our guidance range, driven by the improved utilization, higher revenue, and positive product mix. Total non-GAAP operating expenses were $688 million, or 21.9% of sales, up $88 million year-over-year and up $7 million from Q4, which was below our midpoint of guidance and below our long-term model. From a total operating profit perspective, non-GAAP operating profit was $1.12 billion, and non-GAAP operating margin was 35.7%, up 400 basis points year-over-year, and both at the high end of our guidance range, reflecting solid flow-through and operating leverage on the increased revenue levels. Non-GAAP interest expense was $103 million, with cash taxes for ongoing operations of $122 million, and non-controlling interest was $9 million. Furthermore, our stock-based compensation, which is not included in our non-GAAP earnings, was $89 million. Now I would like to turn to the changes in our cash and debt. Our total debt at the end of Q1 was $10.57 billion, flat sequentially. Our ending cash position was $2.68 billion, down $147 million sequentially due to capital returns and increased CapEx investments during Q1. The resulting net debt was $7.89 billion, and we exited the quarter with a trailing 12 month adjusted EBITDA of $4.58 billion. Our ratio of net debt to trailing 12 month adjusted EBITDA at the end of Q1 was 1.7x, and our twelve-month adjusted EBITDA interest coverage was 12x. Turning to working capital metrics, days of inventory was 89 days, an increase of six days sequentially. The increase in inventory was all in raw materials and work in process to support revenue growth and continues to be below our long-term target of 95 days. We continue to closely manage our distribution channel with inventory in the channel at 1.5 months, well below our long-term target. We anticipate the coming year will be very similar to 2021, where customer demand is in excess of incrementally improving supply. Days receivable were 27 days, down one day sequentially. Days payable were 93 days, an increase of six days versus the prior quarter as we continue to increase orders with our suppliers. Taken together, our cash conversion cycle was 23 days, an improvement of one day versus the prior quarter, reflecting strong customer demand, solid receivable collections, and positioning for customer deliveries for future periods. Our working capital management and balance sheet metrics continue to be very strong. Cash flow from operations was $856 million, and net CapEx was $279 million, resulting in non-GAAP free cash flow of $577 million. During Q1, we paid $149 million in cash dividends and repurchased $552 million of our shares. Overall, we returned 121% of our non-GAAP free cash flow back to the owners of the company, consistent with our capital allocation strategy. Again, the cash flow generation of this business continues to be excellent. Turning now to our expectations for the second quarter. As Kurt mentioned, we anticipate Q2 revenue to be about $3.28 billion ± about $100 million. At the midpoint, this is up 26% year-on-year and up about 4% sequentially. We expect non-GAAP gross margin to be about 57.6% ± 50 basis points. Operating expenses are expected to be about $720 million ± about $10 million, which is up about 5% sequentially, driven primarily by our annual merit increases. Taken together, we see our non-GAAP operating margin to be 35.7% at the midpoint. We estimate non-GAAP financial expense to be about $103 million and anticipate cash tax related to ongoing operations to be about $154 million or about 14.5% effective cash tax rate, consistent with what we communicated during Analyst Day of 15%. Non-controlling interest will be about $13 million. For Q2, we suggest for modeling purposes, you use an average share count of 265 million shares. Finally, I have a few closing comments I'd like to make. First, as Kurt mentioned in his prepared remarks, we have attempted to de-risk our Q2 outlook given the uncertain macroeconomic environment and the potential impact on our supply chain. Despite these potential risks, customer demand for NXP products remain very strong in the markets we serve. Secondly, from a revenue standpoint, we expect our second half revenue to be greater than our first half on an absolute basis as we continue to work on improving supply. From a modeling perspective, think of a gradual quarterly improvement sequentially through the remainder of 2022. This improvement is still well short of the demand signals we are seeing and constantly monitoring from our customers. Overall, we believe supply will remain constrained and challenging throughout 2022. Lastly, barring any significant supply disruption, we believe our gross margin should trend in a fairly tight range consistent with our performance in the first half of the year. We continue to see the business as generating strong cash flow, and we will continue to execute to our well-communicated capital allocation strategy consistent with past periods. With that, thank you, and we can now turn it over to the operator for questions. Thank you. As a reminder, to ask a question, you'll need to press star one on your telephone. To withdraw your question, please press the pound key. Our first question comes from Gary Mobley with Wells Fargo Securities. Your line is open. Good morning, everybody. Thank you for taking my question. I noticed in the 10-Q filing that your purchase commitments were down about 10% from the fiscal year 2021 end. Was that the high watermark fiscal year 2021 end, or should we think about NXP perhaps reloading on the purchase commitments? Indeed, it came down somewhat, which is simply a consequence of selling that part of it. It's just the regular revenue. It was converted into revenue. Going forward, I would not exclude that we might again enter into longer-term obligations with our suppliers since the context and the environment of the, say, supply-demand situation has not fundamentally changed, which means we are effectively sold out for the rest of this year. Certainly in certain technologies and capacity buckets, we also see that demand will continue to outstrip available supply, further into the future, so also going into next year. With that, yes, I would not exclude that we also enter additional and separate supply commitments to the ones which are in place already. Thank you for that, Kurt. Bill, I think you mentioned previously that supply chain increases were a headwind to gross margin in fiscal year 2021, but you would expect it to be a tailwind, your price increases that is, to be a tailwind for fiscal year 2022. Is that still the case? Perhaps if you can quantify that tailwind. Sure. What we've mentioned related to pricing from our customers is that we're only passing on the higher input costs and inflationary costs that we're seeing onto our customers related to it. If I look internally, we do about 43% in-house on our front-end manufacturing side, and we are running in the high 90s compared to a year ago when we were in probably the mid-80s. We're maxed out internally from a utilization standpoint. Expect our margins to be, as I indicated in my prepared remarks, to be at these levels plus or minus the 50 basis points we talk about mix in any given quarter. Our number one priority is really servicing our customers with, as lines are down, escalations are occurring, and we're doing everything possible firsthand for our customers. Got it. Thank you, guys. Thank you. Our next question comes from Vivek Arya with Bank of America. Your line is open. Thank you for taking my question. Kurt, I had a question about just the quality of the demand signals that you're getting from your automotive customers. I believe you mentioned that the days of inventory at Tier 1 and OEMs is out of sync because of kitting issues. I was hoping you could expand on that. How does that impact your visibility and confidence in shipping to the automotive end market, you know, and give you the confidence you are shipping in line with demand? Because when I look at auto semiconductor sales and auto unit production, you know, there is this kind of consistent almost 40-point delta, which was there last year and it's probably there in Q1 also. Just what is giving you the confidence that you're shipping in line with demand, right, and that you're not over shipping just given the state of flux among your Tier 1 and OEMs? Yeah. Good morning, Vivek. Indeed. I mean, that question, we also watched it very carefully, and I can tell you from continued, very personal experience, so I continue to spend a good time of my work week in escalation calls, especially with automotive and industrial customers. It is actually to the point now on this kitting that we are here and there, redirecting product because it is falling so short in places that we actually go back to other customers and ask if not, they have a few parts which they only maybe need a week later, and then we use that week to redirect the part to somebody else. I think we are extremely close to the pulse of the production of our customers and our customers' customers. This is a triangular supply relationship with the Tier 1s and the OEMs, which is why I have a very, very high confidence that we are not at all over shipping, but actually barely meeting the demand. I would actually say, Vivek, the reduction we have now seen from IHS in the forecast for the SAAR for this year, I think it came down from something like 8%-9% in the last quarter to now a forecast of only 4.5%, so almost half. A good part of that is due to semiconductors again. All of these modulations you see there in terms of possible demand is actually above what we can service anyway. That's why we still fight day in, day out, to try to fill holes and actually meet production demand. Got it. From a bigger contextual perspective, because you mentioned again this striking delta between SAAR and, say, the semi shipments into automotive, it comes back to the same points we had mentioned earlier, which is a massive and accelerated content increase thanks to the penetration of xEVs. I have to mention also premium vehicles. What we did now is we looked at the combination of premium ICE vehicles plus xEVs, and if you put that in one basket because it has similar levels of semiconductor content, you actually find it's about 30% of the global car production already. Alone that is double from the levels we had in 2017 or 2018 pre this whole turmoil. Content increase continues to be an accelerating, very strong factor. There is certainly a portion of pricing. There are the NXP specific share gains which continue to be very much in check, I would say, with our planning. Finally, there is this inventory situation across the extended supply chain to actually keep it functional, and I can only say it continues to be dysfunctional. The overall inventory level across the extended automotive supply chain is still too low, which means the whole thing is totally dysfunctional. Got it. For my follow-up, Kurt, you know, many investors are worried about some kind of demand slowdown, right? Even talking about you know recession at some point over the next you know one or two years. How do you think about your trough gross margins if that were to happen? You know, you have a very interesting hybrid model. So what steps would you take? Let's say semiconductor sales were to go down 5% or 10% hypothetically next year, what steps would you take? How should we think about the bottom in your gross margins? Thank you. Well, Vivek, I would say in principle, we don't guide here next year. In the end, what counts is the model which we've given you in our Analyst Day back in November of last year. Yes, I think I can give you a few bits and pieces to this question. Clearly, our gross margin benefits from utilization of our internal facilities at the moment. We are running full out. Secondly, Bill just replied this to a different question. We are compensating our input cost increases with price increases to our customers. I absolutely do not believe that pricing will go backwards going forward. I think the environment is simply such that we move now to a higher level of pricing, and this is to stay. That doesn't mean that there are not ASP erosion again going forward, but from that higher level. Don't worry about that impact on the gross margin. I think the pricing is a step function which has been or is being achieved, and then we operate from the new level through the next years. The bottom of your range, the 55%-58%, is that the right way to think about trough gross margins, Kurt? Thank you. Well, we've given the model, and we have the absolute intention to stick to our model, yes. Okay. Thank you. Thank you. Our next question comes from Ross Seymore with Deutsche Bank. Your line is open. Hi, guys. Thanks very much for asking that question. I wanted to ask one short-term one and then my follow-up will be a longer term one. Kurt, in the shorter term, I just wondered you talked about de-risking due to a lot of the macro events. We've seen different companies. So basically, it's not having any impact. Others take a big haircut with little precision. Just wondered where you fall in that spectrum. Kind of any more details on what you're seeing on China, and maybe is it a bigger or smaller cut than what you experienced in the first quarter? Well, in the first quarter, I think we actually quantified it. I think I remember we said about $50 million, which is really what it was, which was this one to two weeks shutdown of our own Tianjin facility in the neighborhood of Beijing. For the second half, what I just said is a couple of tens of millions, which we see as impact, which is baked into the guidance which we just gave you. Now, what I think, how I would qualify this, Ross, is this is entirely a supply discussion. I say that because I know that some of our peers talked about demand issues. I wanna highlight that in our case, we clearly talk about a de-risking from a supply perspective, and that has to do with logistics issues in the greater Shanghai area, and it also has to do with all sorts of suppliers from the Shanghai area into our own operations. Think about epoxy suppliers, substrate suppliers, et cetera. That's the impact which is baked into our guidance. From a demand perspective, Ross, it's a little different. In the meantime, I have numbers that solidly more than half of our customers in the Shanghai area are fully operational again, so they are running 100% of their operations again. Another third is, say, partially operational, and rapidly coming back now. During their shutdown periods, they pulled all the products because they all knew they would come back very quickly. We have been under-shipping them anyway for 1.5 years now. That's why that doesn't have any demand impact on us. All of this de-risking, Ross, is a supply consideration and $20 million. I leave it to you how you wanna interpret this from an exact number perspective, but it is about our supply situation out of the Shanghai area. That's very helpful. Thank you for that. Just the longer-term question, this kinda goes back to what if the world isn't as good at some point in the future. Earlier in your narrative, you talked about the closer relationship with your customers, more intimate relationship, value add, et cetera, et cetera. I was wondering, does that change your inventory strategy? In the last couple downturns, you guys were very aggressive to cut your utilization. I know you don't have standard products that are very application-specific, et cetera. But to the extent your customers are giving you more visibility, you have that more intimate relationship, is your willingness to go above the 95 days in a downturn and not cut utilization, is your willingness for the channel to hold more inventory, is that at all different from prior cycles? Do you think that you will run it with just as abrupt of changes with your factory utilization as you have in the past? Yeah. We've been looking into this very carefully because indeed we have certainly lots of discussions with our customers about longer term supply assurance programs, et cetera. The solution to this is not to increase our internal inventory. So I have a clear-cut answer, Ross. No, the 95 days stand. I'm actually glad when we get there again, because you see we are still below that. No, we don't have an intention to change that because we kind of remodeled how we went into this crisis. What we find out is that even if we had more inventory, it would have it wouldn't really have made a significant difference to the whole situation at all. However, we are of course working with customers on all sorts of different models where inventory at our customers in the chain, maybe at distribution partners in cases, is part of an overall package to have better supply assurance going forward. One big element, and you said it yourself, is actually the transparency and knowledge about the ultimate end customer demand. I think in the past, we and I would dare to say the whole industry, we have too much reliance on demand signals of our direct customers, not fully understanding and not having full transparency to the end customers. That is something which in this relationship concept which I mentioned, which has significantly changed over the last 1.5 to 2 years. that gives me some confidence that we are in a better position to handle this going forward. Again, internal inventory is not gonna be the one which is gonna be changed. Thank you. Thank you. Our next question comes from Stacy Rasgon with Bernstein Research. Your line is open. Hi, guys. Thanks for taking my questions. My first one, you know, you talked about revenues kind of like ramping incrementally sequentially into the second half as supply improves. Are there any end markets where you think supply is getting better or worse? Are you prioritizing any particular end market in the second half? Like, how should we be thinking about that trend, like spread across your end markets, just given the supply trends and demand trends that you're seeing? Yeah. Hi, Stacy. I think we are across the board continuously short of supply, so that applies to all of our four revenue segments. If I had to qualify it, I would say the worst case we have in industrial and automotive. Those two continue to have probably the bigger steps between supply and continued growth in demand. I also see that in those two, this is a longer term situation ahead of us. When we speak about the gradual increase of revenue through the year, then at least for this year, I would indeed say that is largely a function of supply becoming available, Stacy. It isn't that much a question of what is the demand pattern in those four different markets. It is much more where we are coming closer through the year to the demand signal from a supply perspective. As we discussed earlier, this is something. It comes from different factories. It's internal supply ramping up. It is external. It's foundry supply going up, et cetera. It's also not the same each quarter. I cannot qualify the gradual revenue growth through the year by a segment from a demand perspective, because all of our supply is still under the demand signal anyway. Thank you. For my follow-up, I want to revisit the China COVID-19 situation. I heard what you said in a prior question, but at the same time, like, you're calling for, you know, maybe 1% or less, overall impact, to next quarter from China. Your bigger competitor obviously was calling for 10%. I know you talked about, maybe differences in what you're seeing in terms of demand versus supply. I think both of you have more than 50% of your revenues going into China. How can that be that one of them is seeing demand issues? I think their demand issues were also logistics related. Why do you think you're not seeing anything along those lines and they are? Is it just the nature? You know, you have a channel, so there's a bigger buffer in China? Or what are some of the differences you think are going on that actually could be driving you to not see an impact, along the lines of like some of the others in the industry? Just given the amount of your revenue that's actually going into that region. Stacy, I obviously, I really cannot speculate and don't want to speculate about the specific strategies and situations of one or more of our peers. I just cannot. However, I can assure you that we put a lot of rigor and a lot of attention into assessing this particular question because it's been obviously very important for us to understand how to safely and confidently guide for this quarter in this turmoil environment. Given that this is very near term, it really has to do with the order patterns we have on the books and with the particular customer situations we talk to. This isn't much about strategic considerations, Stacy. It's really about what are we still getting out the next eight weeks of this quarter. The bottom line of the analysis is it is not about demand. It is all about the supply disturbances from this situation. There I feel we took a very balanced, risk-balanced approach to to figure that in. Again, I can't hold it against competitors because I really don't know what their exact channels and other policies are. Got it. Would you have the supply to ship the extra if there was no impact? Yes. The impact is on the supply, Stacy. That's the problem. If we did not have the COVID-related shutdowns in the Shanghai area, we have a higher guidance. Absolutely. That's the answer. That's what I tried to say. The whole reason of de-risking is supply out of China, and that's a couple of tens of millions. If that China zero COVID policy wouldn't be hitting now Shanghai and possibly Beijing later in the quarter, we would have a higher guidance. Yes. Got it. Thank you, guys. Thank you. Our next question comes from C.J. Muse with Evercore ISI. Your line is open. Yeah, good morning. Thank you for taking the question. I guess first question, was hoping you could discuss plans for CapEx. I know you're, you know, 100% sticking with the hybrid model, but your CapEx intensity is now up to, I think, 8.9% in the quarter. Curious if that's sustainable through 2022, and how should we think about beyond 2022? Sure, C.J. This is Bill. As mentioned during last quarter and our Analyst Day, our long-term model is 6%-8%. However, we do expect 2022 will be a bit higher, around that 10%, and then come back within the range in 2023 and beyond. Just to look back again, in 2020, we spent about 4.6%, 2021, 6.9%. As you can see, you're right, in Q1, we spent about 8.9%. Very helpful. I guess as my follow-up question, mobility was, you know, unusually strong in Q1, and in your 10-K or 10-Q rather, you suggested strength in China, secure mobile wallets, as well as early adoption of UWB. Curious how we should think about kind of those drivers into the second half of 2022. And you know, is it UWB that really is the incremental driver or just overall handset units? Thanks. It isn't really units. I think the mobile market, as we can all read, is a bit patchy maybe globally, but we are still on this content growth strategy. I mean, in the end, it is indeed about mobile wallet and the early stages of ultra-wideband penetration, and both are very much on track. The fluctuations between quarters is really supply related. I talked painfully about very tough supply constraints in mobile in quarter three and quarter four of last year, and I was anticipating it would get better. It got better now in Q1, but it's not perfectly permanent. I think it was a bit of a catch-up from a supply perspective in Q1. Not perfect going forward, since you saw that we guided single-digit down actually sequentially into the second quarter, where again we also have to, and this is a constant process, balance our available supply where it is fungible between segments to the extent possible. Every quarter, again, in this current environment, we have to see where we have the possibility to, that we are rebalancing between the segments where technology or capacity buckets are fungible with each other. This is where it hits a bit the mobile one in the second quarter. Don't read too much into it. This is all. It all has to do with supply between Q1 and Q2. Very helpful. Thank you. Thank you. Our next question comes from William Stein with Truist Securities. Your line is open. Great. Thanks for taking my question, and congrats on the strong results and outlook. I'd like to ask if you could remind us of your capacity expansion plans overall. What are you telling your customers in particular as to how you're gonna recover from the current situation and meet their demand? That's a big question, Bill. What we clearly communicate and break also to customers, of course, a bit more out in more detail as we can do it here is, A, what we do with the 10% CapEx, which Bill was speaking about, and I think still 6%-8% probably in the coming years against the significantly elevated revenue. This is from an absolute amount, a significant CapEx increase to fulfill that demand. Secondly, I think that was one of the first questions in this call, we have these long-term purchase agreements with foundry partners, which are assuring us capacity corridors going forward. Now, the way it plays out is that indeed we see this year, but especially the next year, we see more strong increments coming online from our internal capacity expansions in the front end. I mean, we have this all the time in the back end because you know that the cycle time from putting tools in, getting capacity out is much faster in the back end. This is an ongoing process. If you think about the investments into the front end, which is specifically in our mixed signal and analog processes in-house, that we see the positive impact from those coming late this year and then especially next year. We work continuously with our foundry partners to give us more access to capacity. In the end, Bill, that is why Bill highlighted in his prepared remarks that we will grow second half revenue of this year over first half revenue with gradual increase quarter on quarter. I mean, you know that normally we don't do this full year kind of directional guidances, but since we have that supply in line of sight, unbroken demand signals, this is what it's gonna yield. Midterm, I think, Bill, the industry will continue to have quite significant capacity constraints, especially in the field of trailing edge. If you think about technologies, say, above 16 nm, especially in the area of 28, 40 and 90, I do believe that the industry, in the end, hasn't invested that much CapEx. Most of the CapEx went really into the leading edge, while the demand for those nodes, which is especially from automotive and industrial, continues to be super robust through the coming periods. That's very helpful. Appreciate it. One more, if I can. How much of the year-over-year growth achieved in Q1 and guided for Q2, approximately comes from units versus pricing versus mix? Well, I think Bill kind of hinted to this earlier. We are not parsing price and units on a quarterly level, Bill. I think we gave you the information for last year where we said that pricing was a very low single-digit element to our growth in revenue, and you will get a similar information for the full calendar year 2022 at the beginning of next year. Great. Thank you. Thank you. Our next question comes from Blayne Curtis with Barclays. Your line is open. Hey, thanks for taking my question. I had two. Just curious, when you talked about going forward, you'd pass through additional costs, you know, gross margin kind of stable here, so I guess it is in balance. Just curious, as you look the rest of the year, do you foresee any increased costs going forward there wafer or back-end? Well, Bill can go into more detail, and I think he also in his prepared remarks, he hinted to how we see this. Blayne, yeah, I unfortunately, given this inflationary environment, we can of course not exclude continued input cost increases. But our principle stands that if that happens, we will raise prices to protect our gross margins accordingly. Oh, Bill, I'm not sure you wanna add a little bit to this. No, nothing more. Great. Then I just wanna ask you said channel inventory is about a month below where they should be. You know, when you look at sequential growth, you know, the year, it does buck some seasonality in your core markets. I was wondering if you thought that you would make any improvements in that gap in channel inventory. Yeah. Blayne, I wish we could. Again, this is really the target of two and a half months which we had held over years in the past, is still our target. I am personally deeply convinced that it is a disadvantage that we currently do not have this two and a half months, so I wish we could get there, but we are just held back by supply. I mean, the more we ship into the channel, it's being pulled through immediately, so it immediately translates into POS. Again, this is not a guidance, but I see little chance that we get this anyway near back to our target in the course of this year. Okay. Thank you. Our next question comes from Chris Caso with Raymond James. Your line is open. Yes, thank you. Good morning. The question on cash return and last quarter you did return more than 100% of free cash flow. Could you give us an update of kinda what your thinking is here? Obviously, the cash flow is very strong in this environment. What are the plans for that? Sure. I'll take that. Again, no change in our policy, and we continue to execute to our capital allocation strategy. As you mentioned, we returned 121%. If I just look at the trailing twelve months, I think we returned 185%. We'll continue to do so. We raised our dividend in Q1, as you all saw. We also got approval for buybacks. Again, we've been very consistent here, and we'll continue to execute to that strategy. Thank you. As a follow on, just another question on OpEx. You talked about the 5% increase for this quarter on the merit raise. Does that tend to flatten out as you go through the year? Just generally, are you comfortable with the level of spending that you're at right now? I know some others have spoken about, you know, just kinda difficulty in hiring and getting access to talent. Yeah. Related to OpEx, we continue to do very well here. As you can see, we're operating below the 23% long-term model. Q1 finished at 21.9% of sales, better than what we guided at 22.4%. We also guided 22% of sales again, which incorporates that higher annual merit increases and project spend as we continue to manage and execute our portfolio to our strategy very well. I'm not gonna guide the second half, but you know, with all the different signals we just provided on revenue and gross margin, and you know, we should be probably trending below our long-term model of 23%. So we're not gonna get to 23% probably in the second half. Got it. Thank you. Thank you. Our next question comes from Matt Ramsay with Cowen. Your line is open. Thank you very much. Good morning, everybody. Kurt, there's obviously been a lot of conversation on this call about visibility and whatnot, but the one data point that really stood out to me was, I think you mentioned 30% xEV penetration this year in the auto market in terms of units of production, and that was quite a bit higher than what we were modeling, despite the bullish trends in EVs. I wonder if you could give us a little context there. Is that supply constraints that are hitting ICE vehicles, maybe more disproportionately than EVs? Is this new regulatory push? Is it infrastructure that's being built out more quickly for charging? I'm just trying to get an idea of why sort of a step-up in bullishness on xEV penetration. Thanks. Yeah. Thanks, Matt. Thanks for maybe then giving me the opportunity to correct what at least you understood. I'm not sure exactly what I said. The 30% I quoted, Matt, is the sum, the integral sum of xEVs and premium ICE vehicles this year. To break it out, it's about 23% xEVs and 7% premium vehicles. I put them together into this 30% number because from a semi-content perspective, they are in a similar ballpark, which is this at least 2x-3x, sometimes 3x of the average car. Sorry if that was not clear. The 30% is the sum of premium ICE and xEVs together. Yes, the principle holds, which you said because the xEVs, I think they were more like 19% last year and moving to 23% this year. This is a significant increase, and I think next year it's gonna be another significant step up. Again, it is important to understand the concept of lumping into this also the premium ICE vehicles, because that number, that 30% I quoted there, is actually almost double from what it was between 2017 and 2018, where it was more in the ballpark of 15%. There is an accelerated trend both to premium cars and to xEVs, and that's an enormously strong driver to semiconductor content. The xEV trend, by the way, is clearly pulled by China and Europe. It is a little lower still. I think it's also gonna come, but it's a little lower still in the U.S. And as you rightfully said, in Europe, that has a lot to do with legislation, and tax incentives and stuff. And in China, I think it has to do with, in a way, an ideal situation for the industry because they don't have a lot of legacy from combustion engine cars. I mean, many, many startup companies there jump right away into xEVs. No, thank you for that, Kurt, and for clearing up the assumptions. As my follow-up, there's a lot of the call here has been focused on supply and demand and visibility in the auto business. Maybe you could compare and contrast your closeness to customers, visibility in autos versus what you're seeing in industrial and comms. Thanks. Yeah. Auto is very hard to serve because of the supply constraints, but the transparency is actually, in the meantime, very good. I mean, it's a complicated supply chain, but I think we have now, after exercising more than 1.5 years, very close understanding relationships to the Tier 1s and the OEMs when it comes to these supply challenges. I think the transparency is good, and that's why I also probably radiated here a solid confidence that we know that we don't overship because we have very clear visibility. In industrial and IoT, it is obviously more complicated because a solid part of the business there is going through the channel such that the channel inventory, which we discussed earlier, the 1.5 months, which is stubbornly low, is probably the best indicator we have there. That doesn't exclude the fact that also in industrial and IoT, we are serving well-known, very big customers. I mean, it doesn't harm to mention names like maybe Honeywell or Schneider or Siemens. I mean, that kind of customers. We, of course, also serve, and that's then more direct, where we have a similar visibility level like in automotive. I'm afraid I have to say, I fear at the moment, at least for us, for NXP, the shortages in industrial are even worse than in automotive. Thank you. Our last question comes from Toshiya Hari with Goldman Sachs. Your line is open. Hi, good morning. Thanks so much for squeezing me in. Kurt, in response to a question, you talked about your wafer processing capacity, potentially taking kind of a leg up in 2023. Can you help us quantify, you know, how much your capacity could increase there? Related to that, you know, consistent with what you said at your Analyst Day, you mentioned that capital intensity in the business should revert lower in 2023. You know, throughout the call, you sounded really confident about, you know, the sustainability of demand here and how, in some of the more mature nodes, you're kind of in a structural undersupply. Why not keep investing at a high level in 2023 and beyond? Yeah. That is actually because the level we need to achieve, Toshiya, with our own wafer facilities will then be satisfied to the possibilities we have. That doesn't necessarily mean it closes all the gaps to demand, but it's as much as we can do with the four walls and the facilities we have. That does not mean, of course, that we would not continue to push very hard to get a higher supply from our foundry partners. Because in the end, within our hybrid manufacturing strategy, the share of external foundry supply to NXP is only gonna grow. I think we are currently at a 55-45% levels of 55% external, 45% internal. I would dare to forecast that it will not take that long. It's gonna be more like 60/40, et cetera. That's why if you think about a revenue generation and customer satisfaction from that perspective, then the internal part on the midterm is actually the smaller part of this, and the bigger part is coming from the foundries, and of course, they keep investing, and we keep getting there more. Got it. That's helpful. Finally, as my follow-up, I think in your prepared remarks, you talked about supply issues in Q1, you know, driving the very slight miss in comms. Can you sort of elaborate on that? And has that been resolved at this point? Thank you. Yeah, that's just it. It's just the normal stuff. I mean, we have our LDMOS production in the RF comms business, which is running in those facilities which are also serving automotive and industrial customers, and they are just full. We were too ambitious, to be honest. I mean, it's just $2 million in the end, but we were too ambitious in what we could get out to these comms customers. Nothing dramatic in the end because you saw it also. It still continued to grow very nicely from a year-on-year and quarter-on-quarter perspective, but we just had a too ambitious plan from an output perspective. Nothing special in a way. Now, with that, I guess we get to the end of the call. Many thanks for attending this morning. In summary, I would say that we very rigorously reviewed the quarter two guide given this uncertain situation out of China. I wanna highlight again, we see this as a pure supply challenge, but we feel now very confident with the forecast which we've given you that this is in line what we will achieve. From a more longer term perspective, I think the anticipated strong growth for the year is materializing second half ahead of first half, and we see a continued imbalance between supply and demand through the whole year, especially in our strategic segments of automotive and industrial, which have very secular growth trends. With that, many thanks, and I look forward to seeing some of you in person later through the week. Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.