Hi, everyone. My name is François-Xavier Bouvignies from UBS, covering semis in Europe. We're happy to have Kurt, CEO, Bill, CFO, and Jeff, Investor Relations of NXP. As you notice, my voice is lost in London somewhere, so I will try to speak clearly despite my French accent, so apologize for that. Thank you, guys, for being here with us. Maybe let's start with the first question, maybe more on the near-term outlook, and then we will move to the more longer term. Can you describe a bit the outlook that you see right now by end market for NXP, whether it's for automotive, industrial, consumer? That would be great to start. Yeah, thanks, thanks, François, and thanks for having us today, and good morning, everybody. Well, on the short-term outlook, I guess I have to say that this is mostly driven by how much inventory needs to be digested or not digested. I believe actually that while the macro is weak all over the place, the fundamental growth drivers are pretty much intact. So especially in automotive and industrial, which are our main segments, we do believe that the content increases, which are driving demand for us fundamentally, are in principle intact while the macro is weak. But the near term is really driven by inventory management. And for NXP, we have chosen this time, with a lot of effort, I have to say, to do things differently than we've done in the past. Which means we've been very, very careful in not stuffing the channel, and we've also been very, very careful to not blindly enforce these NCNR orders from our direct customers in order to not sit at some point in front of this mountain of inventory at our customers. The result of this, François, is indeed that we are seeing near term for quarter four, actually a year-on-year growth. So we see about 3% year-on-year growth with our revenue in the fourth quarter, which is led, and that's interesting, I know, relative to peers, it is led by industrial and by automotive. So our automotive business in quarter four is guided to be 5% up year-over-year, which is under shipping demand. I have to stress that we, we definitely believe the demand is higher than this 5%, with all the design wins and content growth, et cetera. But we are under shipping demand in order to make sure we, we exit the year on the right inventory level at our customers. The industrial and IoT business is guided to be up high single digits, both year-on-year as well as sequentially in the fourth quarter, which is in a stark contrast to, I guess, all of our peers. But you have to be reminded that we did see our trough already in the first quarter of this year because we had brutally reduced distribution inventory in industrial. In industrial, 80% of our business is going through the distribution channel, so that's the main mechanism when you think about inventory. Since that quarter one of this calendar year, we've seen gradual, slow, but gradual inventory, revenue growth over the quarters, while keeping the inventory at the lowest ever levels, which we've had in the channel of one point five months-one point six months. So long story short, François, we do clearly see a very weak macro environment. However, in our business with our customers, we have chosen to navigate for a soft landing, which is all about careful, thoughtful inventory management. That's interesting because when you compare to peers, the inventory management is something that stands out with your, the way you want to run the business. I mean, to compare to, I mean, STM and Infineon, I know very well, Renesas as well. In the U.S., a bit, these are a bit more cautious about that, but you seem to do a significant work on this inventory management. Can you explain us how it works quickly? Because, you know, what's the limit to say, "Oh, I'm losing market share here," or, you know, what's the limit to say, "Okay, now I can go," or you say just to customer, "No, I, you want it, but I'm not gonna give it to you?" I mean, just how it works really it would be very helpful. Yeah. So first of all, why do we do this? It is really because in the last cycle, we did it the other way. We shipped into the channel happily, and we're happy about the revenue in the first place, and we did fall flat on our nose later when we had to find out that suddenly we had these enormous drops in revenue, which are really bad to your gross margin. So the reason behind the reason is actually that we want to have a smoother revenue through the cycle in order to not have too much variation on the gross margin because of underloading in factories and taking not enough from the orders from our suppliers, et cetera. So it's really the gross margin which is the reason. So we had it last time wrong. This time we said, "Let's do it differently." Now, to be fair, we were lucky because we entered this period out of the supply crisis with very low distribution inventory. The starting point was low because we couldn't ship. I mean, in the first place, we just didn't have the supply. Then sometime six, seven quarters ago from now, we had the moment that supply started to normalize. We had enough supply, and we could have chosen to refill the channel from this one point five months level to two and a half months, which has been our historic target, which is about $500 million of revenue. And as you say, yes, we had the orders, but we clearly decided then, Bill and I, we don't want to do this, and we actively indeed engaged with our distribution partners. We have a monitoring and measurement system in place, which Bill and I personally review every week, to only ship in as much as they sell through. So it's very simple. In the end, it's a complicated process, but the outcome is a very simple one. We only give them as much product as they sell out, and that really goes on product level. So it's not on a high aggregation level. It's a very detailed process. And over time, of course, we found out that was the right move, because we saw that the end demand got softer, so it was good that we hadn't filled it in the first place. I think by now we are 2/3 through this. Now, the other side of the coin is, of course, François, yes, it is about competitiveness on the shelves. I mean, of course, you wanna have enough product on the shelves of your distribution partners, such that they also create enough business for you. And here I am personally, I say, in a very close contact with the CEOs of our large distribution partners to not create a disadvantage for NXP. I mean, that's, that's absolutely something which we've been watching, which is also the reason why I think in earnings, a few weeks ago, I said, "At some point next year, we will start replenishing the channel." So it is not that our forever target is one point six, it was the target through a falling knife kind of situation. Now, I think it has stabilized. At some point, it will gradually start to come up again, and then we will also start to replenish the channel. So our long-term target of two and a half months is still valid. It's not. It's just a long pause, but we are definitely getting back into it sometime next year. The harder side of all of this, by the way, is the direct customers, because mind you, that in NXP, 50%+ is going through the channel. So what I discussed now is it was last quarter, 58%, the quarter before, 51%. It is a substantial part of NXP, but it's not all of NXP. The rest of it is direct customers, where inventory management is much harder because we do not have 100% transparency in all cases from our customers on how much NXP product inventory are they holding. However, in a way, we were again lucky. I, I declare that as, as luck, which we used at the right moment. Because of the NCNR orders, which we had agreed with, I would say, literally all of our automotive customers, most of the industrial customers, they figured out early in this calendar year that if they had to purchase everything which they had signed up for in these NCNR orders, they would likely end up with too high inventory positions at the end of the calendar year. So it started in, I would say, mid-quarter one. We had these direct customers coming to us and say, "Listen, we think we have a problem if we purchase everything we have signed up to. Can we find alternative scenarios?" And after a short and hefty debate, because, I mean, we of course built that product and we had these agreements, but after a short and hefty debate, Bill and I clearly realized enforcing it doesn't create demand. I mean, by enforcing it, you create revenue, but that doesn't create more demand. So also with the direct customers, we started to be kind of flexible in finding alternative scenarios, which typically were commercial agreements about price increases, about new design wins, or something which we asked them in order to let them off the hook in terms of the obligations. That's the other side of the coin. I don't think we are completely done, so there is some more of this, of this direct inventory digestion to be done through the first half of next year, I guess. But again, here, I believe we are just in a less accentuated situation than most of our peers, if I listen to their calls, because we've been—we've also had less revenue growth than they had in the earlier part of the year. So I mean, it really works out. If you look at our revenue in this year, we have undergrown most of our peers, especially in automotive, because we haven't enforced. That's very clear. Maybe the elephant in the room is your automotive. Briefly, you know, I think if I do a survey, 80% of the people at least will think that's gonna fall off the cliff after a very strong two years. Automotive is still stubborn, because even if you manage, you know, with the way you do, it's still a much better output than many, many people think. Maybe can you help us understand? Also, what would be interesting is to... We see the news of OEMs, EVs, you know, pushing, like GM, Honda, even the demand in Europe is sluggish. Yeah. I think you still target 30% growth of EV next year. You know, we all question this, right? In the macro. How can we have a soft down cycle, even if you manage inventory the way you do, with all the data that we get in the automotive? So, I mean, we also don't know the end SAAR numbers. It's just important to understand that this year, let me start here, what's the baseline? Where I remember since February, March, people have been very negative on automotive already. End of story is that this year's SAAR growth is gonna be around 8%, so it's gonna be, I think, 89 million unit cars. That's not EV or anything, it's just the total, which is much better than people had thought. And that includes the UAW strike and a lot of things which certainly didn't go right, but it still came out strong. I do indeed believe that next year, the SAAR is probably flat. I mean, we use S&P as our data source. They say 1% growth, but let's say it's about flat. So indeed, the content growth is really the driving force. And with the content growth, you start to speak about electric vehicles, where this year, and again, this is—since we are almost at the end of the year, I think it's just a matter of fact, about 33% of the global car production this year are hybrid or fully electric vehicles. Now, you can argue, how much is this going to grow into next year? We use S&P, and they think it's going to grow another 29% year-over-year, which moves it then to a 40% of total. So 40% of SAAR next year. Admittedly, François, if it is only growing, 2% less or 2% more, we cannot measure that precisely anyway. I definitely believe that the EV penetration is currently at a tipping point, but you have to look at it from a global perspective. I think in the U.S., where we are this morning, there is a much more negative sentiment to this as compared to, for example, China. The majority of the market growth for EVs is China. It is a little confusing if you, if you think about it from a U.S. perspective. It is really China which matters, which is also, to a large extent, Chinese companies plus Tesla. Right? Yes, GM and Ford and Honda, all of them have issues, but you don't hear about these issues from the Chinese manufacturers, and they provide the bulk of the EV numbers. So that's why we are not that pessimistic on the EV growth, while in the end, of course, it can always, fluctuate a little. At the same time, we have, I believe, a different EV exposure as a semiconductor company to most of our peers. And I speak especially about those peers which have these extreme. They focus on power discretes like silicon carbide or IGBTs, which is great business, but it is totally dependent on EV. In our case, other than battery management and gate drivers, we have been benefiting and continue to benefit from EVs, more from the perspective that they are higher tech featured across the board. But those features, like radar systems, like part of our infotainment, keyless entry solutions, microcontrollers and microprocessors across the car, those features are not specific to EVs. They happen to be more in EVs, but they—if now OEMs would choose to build more combustion engine cars, they still need radar, you know? So that's why we don't have this single dependence on EVs, which is why I think we are a little bit more robust in that period, where at the same time, when it was purely about EVs, maybe we participated a little bit less in the uptick. So I mean, it's a, it's a give and take kind of, kind of situation. So long story short, I do believe that we will grow next year in automotive. I also do believe that our three-year growth in automotive, which we had given at our Capital Markets Day, end of 2021, of 9%-14% growth over three years, which ends then at the end of next year, we will easily meet. So I see no issue why not hitting that growth target of 9%-14%. I would actually lean forward and say we are certainly rather at the higher end of this 9%-14% than at the lower end. And yes, I believe the first half year, we might still be under shipping demand because of this inventory normalization situation. Makes sense. Thank you. And I will come back to China and, and pricing later, but maybe a question for, for Bill. One of the, most, you know, important, execution you did last quarter is the gross margin. I mean, again, if I always try to compare with peers, what the industry is delivering, they are all talking about gross margin down because utilization is down, you know. And I was with Texas Instruments CFO last night. Half of the question were on the headwinds of gross margin next year, whether it's because of depreciation, you know, increasing significantly. But in your case, that's quite remarkable to have, you know, stable gross margin in this environment. So maybe can you explain us, how do you do that first? Second of all, if I look next year, and it's very different than the industry, I struggle to see gross margin coming down for NXP, at least meaningfully, which is really the opposite of what the others are forecasting in a way. So maybe can you explain on that. That would be great. Yes. Thank you, François. Gross margin, again, represents the quality of the portfolio, and I would say this is another lesson learned. Kurt talked about managing channel inventory in the past, and we learned a lot not to stuff the channel. Another one was our internal utilization. In the past, we would kinda move it around too extreme, and that causes all sorts of disruptions. So for over the last year, we've been tapping the brakes, going from the high 90s%, mid-90s%, mid-80s%, and now in the low 70s%, over several quarters. And when you do that, you actually get better throughput. You get to focus on cost initiatives, improve your yields, and so forth. And so the team's doing a really nice job from that standpoint. So a lesson learned, not to jerk your factories around. But more fundamentally, from a foundational standpoint, NXP is much more variable in cost versus fixed costs over the last several years. Our internal foundry, producing of wafers is about 40%. Again, many years ago, that was much higher, so it reduces the variability of these swings. Now, in the short term, how gross margins are staying where they are is, as we indicated and talked about over the last several quarters, is in the mix that we're having between distribution and direct is offsetting each other in a way. And what I mean by this is, if you look at our distribution sales in Q1, they were 48%, then they went to 52% in Q2, and then they went to 57% in Q3. Distribution has a higher rich mix, right? More profitable, more quality, because you're focused on that long tail mass market accounts... And so as direct comes down, as Kurt talked about on NCNRs and adjusting them throughout the quarter, that mix and how we're handling it, that favorable mix between the two is offsetting this unfortunate underutilization impact that we're experiencing. So we expect that to continue for the next several quarters, and then eventually, as we move forward, you have a tailwind of bringing those factories back up to 85%. You also have refilling the channel, which is more richer mix, of course, at some point over a period of time next year and beyond. And then longer term, what I'd say is you have your new product introductions that come on steadily, over years, I would say. It just takes years. Just the portfolio that we have is quite sticky, and the maturity, I'd say it's, you know, you're talking five, 10 year type of ramps for industrial and automotive. So we feel pretty confident going into next year, and as I mentioned on the earnings calls, to stay, you know, at the high end of our model, plus or minus the normal 50 basis points in any given quarter. François, that really goes directly back to what I said earlier about not stuffing the channel in the first place, because we kept that as a buffer. I mean, we try to make sure that we don't have to have this jumpy behavior on factory loading, as Bill explained, as we had it last time, actually. Yeah, additionally, as Bill says, it helps that the distribution business is accretive to the company. So it goes right back to the whole theme which we have around soft landing. Great, and I mean, it's linked to the gross margin, but one of the biggest fear of the investor community is around pricing. You have many factors, right? I mean, you have the demand a bit uncertain, the huge supply coming from everywhere, and you see your traditional rate going a bit very low from foundry players and in industry. When we look at the last two years, the price increased significantly. So everybody's thinking, how can you sustain your pricing in this environment? You know, when you are in an oversupply, you have pressure on demand, and everybody's putting still capacity. So what makes you confident you can have a different price, I mean, good pricing environment, and what do you see on the pricing in the next year and more? Yeah, I mean, pricing, I think, through this cycle is the biggest difference of this cycle to any cycle which at least I've seen before in this, in this industry. Because indeed, I can say it for us, we have increased price for NXP in 2021 by 2%, in 2022 by 14%, and with our December earnings, I will reveal this year's price increase, but it's gonna be somewhere between the 2% and the 14% of the two years before. So indeed, yes, we've had now three years behind us with very significant price increase. But, and this is again, part of the whole soft landing discussion, we have not padded our margin on these price increases. I have to call it out because different companies, and I think it really depends on your portfolio, have taken different strategies in how to leverage that environment. What we have had as a policy was to pass on the input cost increase, which we had to face, it to our customers in a very simple formula. It was all about protecting the gross profit percentage, not padding it, but protecting it. So the gross margin increase, which you've seen from NXP over the past years, is not from pricing. So pricing was neutral, if you will, to that, but it came simply from the volume effect. It was just that we have enormously grown versus pre-pandemic times. So that philosophy stands, and we will also continue to have it, and that's very open with our customers. Now, when you ask me about next year, the input cost environment has improved. From today's vantage point, I'd say we probably see a slight increase in input cost. Now, you read about second-tier foundries, which are very aggressive. We have, of course, a mix of all sorts of things. We have about 40% of our input is internal factories, where we have some inflationary cost increases, but also it got milder than it was. We have large foundries, and we have second-tier foundries, and if you put them all in a pot with the mix for what we need next year, we see a very slight cost increase. And that led me to the statement, and continues to lead me to the statements, that what we will manage from a pricing perspective for next year is about flat. So I think on the earnings call, I said neutral pricing. What that means is it's gonna be flattish, year-over-year, which from a customer perspective, is much better than what they've seen the three years before. I mean, this is relative, right? Now your question is, how can you be sure to stick to that? Now, François, this is not like every customer and every product is 0% price. There is products and there is subsegments which see much more aggressive pricing because it's required in the competitive environment. But we still have other parts of the business where we are actually increasing price, which is part of contracts which we have, which is part of segments where the product is still short and where depreciation from either our foundry partners or ourselves is just sitting on the cost. So it's just a mix, which turns out to be about flat, and I think that's extremely realistic in the current environment. So yes, I am confident we managed that flat pricing into and over next year. I anyway do not believe that prices in at least the part of the industry which we are serving will fall back down to the levels pre-pandemic. So those increases over the last three years will stick. But of course, we are entering now a period of a new normal, I would say, where I guess the next couple of years we will again see low single-digit ASP erosion year-over-year, which is, which is what we had before, for forever. So but it's not falling back down. Now, the capacity which you speak to, I do believe mature node capacity, which is the bulk of our business, it is not too much. From what we can see, what the industry has invested and is investing, I think it is about right. It might feel a little too much at the moment because of this inventory cycle, but once we are through that cycle, I think it should be okay again. What concerns me a little more is that with all of the localization requirements because of geopolitics, so like Europe, it's building its own manufacturing base, the U.S. is demanding its own base, and now China is also asking for a lot of localization of manufacturing. It will be harder to manage the global pool of capacity. It's been hard anyway in our industry, but I think now it's going to get even harder because you have kind of that capacity is only for that geography. That makes it not easier. Makes sense. You mentioned China. China is also a big topic, right? I mean, we see if you look at the equipment makers, China is going through the roof, so they buy tools. We don't know yet for what, but they definitely buy a lot of tools. I mean, UBS did a tear down. I don't know if you had the chance to look at it, but it shows that Chinese is gaining some traction somehow. But it's also a conversation with industries like acknowledging much more than maybe three-five years ago, that China is coming. I mean, it is there and knocking at the door. And you saw last evidence was Aptiv doing their earnings call, saying that they are looking at semis as well to reduce the cost of the car because it's a high pressure for them. How do you factor this China risk in a way or threat? I don't know how to phrase it, but you know, it's quite difficult in terms of market share pricing, how it can impact your business. Maybe I quantify first what is China to NXP and what not? Yeah, perfect. We have about 30% of our revenue, which goes into China. We estimate about half of that, so 15% of the company is China for China. The other 15% are just shipped into China. They are sub-assembled or assembled in China, and then the product goes again to the Western world. So in a way, 15% of NXP is a China for China revenue, which is a lot, which is important. And as we discussed earlier, in markets like automotive and industrial, I think China is currently very aggressively winning world market share. So that's why it continues to be a place for us, which we have a lot of focus on. Now, from a competitiveness perspective, yes, I clearly see that because of the geopolitical situation, because of the local industry growing so much, there is a lot of efforts underway in China to build a much stronger local semiconductor industry. Not only foundries, but actually, a device design. We've seen this for years in low-end microcontrollers, which hasn't been too hard for us because we abandoned in a way low-end microcontrollers anyway, and it's been largely in non-automotive applications. What we currently see is that this, they try to move into automotive on low-end microcontrollers, which again, isn't really that much our business, but we see it happening. My estimate would be, we don't have a lot of proof yet, but maybe some early data points, that also the lower, more standard type of analog mixed signal product is something where Chinese local companies are going after. Which is then, if they move higher, definitely an area where we are keenly looking at in order to stay competitively ahead of them. And we see a lot of work, which doesn't matter for us. Actually, I see it with joy because it takes a lot of attention away, a lot of work in silicon carbide. So there seems to be a lot of work in factory engineering and device engineering in China on power technologies, especially silicon carbide, but also on IGBTs. Which again, I'm happy to see that because that keeps the focus a little away from us. Now, I would tell you the following for sure. We have now significant requirements from our Chinese customers for localization of manufacturing, which is very good because of our manufacturing policy. Had we our own factories all over the world, that would be much harder. Since more and more of our manufacturing is anyway outsourced, we can relatively easily satisfy the local manufacturing requirements, which is already a first step to satisfy what they want from us. When it's on competitiveness per se, in my view, we've learned to be competitive also in Korea and in Japan and other places before. Where I would be more concerned is when this becomes more a government push-pull game. So if there are mandates for local content, et cetera, then of course it can become a kind of competition, which is unfair, if you will, which is much harder to deal with. We haven't seen this yet. But so I would still confirm what you say, there is more energy in the local competition. Not really yet in where we are playing. I mean, most of our business in the end is microprocessors and microcontrollers, which have very high hurdles to entry because of software legacy. But we are paranoid about it. I mean, we act as if they would come in order to stay ahead. Good. Unfortunately, we are running out of time, but if I may squeeze one last question. You gave. You had the CMD in 2021 with long-term target, but it was 2024, and we are in 2024 in one month's time now. So do you have any plan to update these targets or give, provide new long-term targets in 2024, or is it? Yeah, the plan of record is that we will have in this time next year, so say late November next year, a new Capital Markets Day, which will then provide a new model and new long-term targets. In the meantime, the old ones are valid, and I would say we see no reason to not be in the 8%-12% revenue range, which we had given for the three years. Bill talked about the gross margin, which is more playing on the high end, which also means that from a profitability of the operating margin for the company, we are pretty well in or at the high end of the model. Great. Thank you all for listening, and thank you, NXP team.