Good day, and thank you for standing by. Welcome to the NXP Third Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, Jeff Palmer, Senior Vice President, Investor Relations. Please go ahead. Thank you, Shannon, and good morning, everyone. Welcome to NXP Semiconductors Third Quarter 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 macroeconomic impact on specific end markets in which we operate, the sale of new and existing products, and our expectations for the financial results for the fourth quarter of 2023. Please be reminded that NXP undertakes no obligation to revise or update publicly any forward-looking statements. For 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 third quarter 2023 earnings press release, which will be furnished to the SEC on Form 8-K and available on NXP's website in the investor relations section at nxp.com. Now I'd like to turn the call over to Kurt. Thank you very much, Jeff, and good morning, everyone. We appreciate you joining our call today. I will start with a review of our quarter three results, discuss our guidance for quarter four, and provide our early views of 2024. Now, let me begin with quarter three. NXP delivered quarterly revenue of $3.43 billion, $34 million above the midpoint of guidance and essentially flat year-on-year. Revenue trends in our Mobile, Industrial & IoT, and Automotive end markets all performed in line or better than anticipated, while our Communications Infrastructure & O ther end markets was slightly below our expectations. Our distribution channel inventory during the third quarter declined slightly to a 1.5 months level, well below our long-term target of 2.5 months. Non-GAAP operating margin in quarter three was 35%, 30 basis points below the midpoint of our guidance. This is primarily due to an unforecasted potential legal liability of approximately $14 million, which is reflected in SG&A. Non-GAAP operating margin was down 190 basis points versus the year ago period, primarily as a result of higher R&D investments and the noted potential legal expense. Now, let me turn to the specific trends in our focus end markets. In Automotive, quarter three revenue was $1.89 billion, up 5% versus the year ago period and in line with the midpoint of our guidance. In Industrial & IoT, quarter three revenue was $607 million, down 15% versus the year ago period, so above the midpoint of our guidance. In Mobile, quarter three revenue was $377 million, down 8% versus the year-ago period and above the high end of our guidance. In Communications I nfrastructure & Ot her, quarter three revenue was $559 million, up 8% year-on-year, so slightly below the midpoint of our guidance. During the third quarter, from a geographic perspective, we experienced incremental improvement across most regions, with China solidly improving quarter-over-quarter, so our ship-to rates to China are still down versus the year-ago period. From a channel perspective, sequential growth was led by improved sell-through in our distribution business. At the same time, our direct business sequentially declined, a reflection of NXP actively managing inventory digestion at our direct customers. Overall, our distribution business represented 57% of sales, up from 51% in the second quarter. Now I will turn to our expectations for quarter four, 2023. We are guiding quarter four revenue to $3.4 billion. This is about 3% versus the year ago period up and represents a sequential decline of approximately 1% at the midpoint. We anticipate the following trends in our business. Automotive is expected to be up in the mid-single-digit percent range versus quarter four, 2022, and flattish sequentially. Industrial & IoT is expected to be up in the high single digits on a percentage basis versus both quarter four, 2022, and quarter three, 2023. Mobile is expected to be down in the mid-single-digit percent range versus quarter four, 2022, and up in the low single-digit range on a sequential basis. Finally, Communications Infrastructure & Ot her is expected to be down mid-single digits on a percentage basis versus quarter four, 2022, and down in the upper teens% sequentially. Our guidance for quarter four contemplates ending the fourth quarter at a 1.6 months of distribution channel inventory. Zooming out, the combination of our third quarter results and the midpoint of our fourth quarter guidance indicates the full year 2023 revenue will be flattish versus 2022 in a challenging and cyclical market environment. When we now turn to our early views on 2024, we continue to see an operating environment with a number of crosscurrents. Clearly, the macro environment remains weak, including subdued demand in China, geopolitical challenges, and elevated inflation, which is constraining demand. At the company level, lead times have normalized, and we anticipate a more neutral pricing environment going forward. Already since early this year, we have actively engaged with our large direct customers to drive a reduction in on-hand inventory where needed, rather than just blindly enforcing NCNR commitments. Furthermore, we have demonstrated over several quarters, proactive management of our distribution channel, resulting in a very lean channel inventory position of 1.5 months at the end of quarter three, versus our long-term target of 2.5 months. Through all of these proactive actions, we believe we will enter 2024 with a comparatively balanced customer inventory position, with some remaining pockets of inventory digestion yet to occur. Hence, we will also begin to replenish the channel sometime in 2024. In terms of NXP's focused end markets for 2024, we are assuming global auto production to be up 1%, as anticipated by S&P. We assume the mix shift towards semiconductor content-rich hybrid and battery electric vehicle continues and reaches about 40% of all cars produced in 2024, up from 33% in 2023. This is very supportive of the NXP specific secular content drivers such as radar systems, electrification solutions, and high-performance processes for software-defined vehicles. Turning to core Industrial, we see the trends, including especially content growth, to be pretty similar to automotive. In our Consumer, IoT, and Mobile business, after over a year of weak demand, we see an incrementally improving environment. Finally, we do believe the weak demand in Communications I nfrastructure & O ther likely continues, as we have satiated pent-up demand in our secure cards business, anticipate a weak environment in mobile base station build-outs, and expect end of life in some of our network edge products. When putting it all together, netting the positives against the known headwinds, we continue to navigate a soft landing for the business and anticipate a return to year-on-year revenue growth throughout 2024. For the first quarter, we expect seasonality to return more to the typical pre-COVID seasonal patterns in a range of down mid- to upper-single digits sequentially. Now I would like to pass the call to you, Bill, for a review of our financial performance. Well, thank you, Kurt, and good morning to everyone on today's call. As Kurt has already covered the drivers of the revenue during Q3 and provided the revenue outlook for Q4, I will move to the financial highlights. Overall, our Q3 financial performance was good. Revenue and non-GAAP gross profit were modestly above the midpoint of guidance, with solid gross profit fall through. Now, moving to the details of Q3. Total revenue was $3.4 billion, $34 million above the midpoint of the guidance and essentially flat year-on-year. We generated $2.01 billion in non-GAAP gross profit and reported a non-GAAP gross margin of 58.5%, up 50 basis points year-on-year, and 10 basis points above the midpoint of the guidance range, driven by the fall through on higher revenues. Total non-GAAP operating expenses were $803 million, or 23.4% of revenue, up $73 million year-on-year, and up $32 million from Q2. When compared to the midpoint of guidance, this is a miss of $18 million, where $14 million is due to a potential unforecasted legal liability and the remainder from higher variable compensation. From a total operating profit perspective, non-GAAP operating profit was $1.2 billion, and non-GAAP operating margin was 35%. This was down 190 basis points year-on-year, and slightly below the midpoint of the guidance range, due to the previously noted potential legal liability, which created a 40 basis point headwind to non-GAAP operating margin. Non-GAAP interest expense was $65 million, with non-GAAP income tax provision of $168 million, reflecting a non-GAAP effective tax rate of 14.8%, which is favorable versus our guidance range of 16%-17%. Non-controlling interest was $5 million, and stock-based compensation, which is not included in the non-GAAP earnings, was $103 million. Taken together, this resulted in a non-GAAP earnings per share of $3.70, $0.10 above the midpoint of the guidance. Now, turning to the changes in our cash and debt. Total debt at the end of Q3 was $11.17 billion, flat sequentially. The ending cash position was $4.04 billion, up $179 million sequentially, due to the cumulative effective capital returns, improved working capital metrics, flat CapEx investments, and positive cash generation during Q3. The resulting net debt was $7.13 billion, and we exited the quarter with a trailing twelve-month adjusted EBITDA of $5.38 billion. The ratio of net debt to trailing twelve-month adjusted EBITDA at the end of Q3 was 1.3 times, and the twelve-month adjusted EBITDA interest coverage ratio was 19.9 times. During Q3, we repurchased $306 million of our shares and paid $262 million in cash dividends. Taken together, we returned $568 million to our owners in the quarter, which represented 72% of non-GAAP free cash flow and 81% on a trailing twelve-month period. Furthermore, subsequent to the end of Q3, we continued to execute our share repurchase program, buying an incremental $124 million or approximately 658,000 shares through Friday, November 3rd. Now, turning to working capital metrics. Days of inventory was 134 days, a decrease of 3 days sequentially, and distribution channel inventory was 1.5 months, or approximately 45 days, down about 4 days from the second quarter. When combined, this represents approximately 179 days, or a 7-day decline from the prior quarter. We continue to be laser focused on tightly controlling our channel inventory levels while leveraging our balance sheet strength to hold product in die form for quick turnaround as demand materializes. Days receivable were 25 days, down 4 days sequentially, and days payable were 60 days, a sequential decrease of 3 days. Taken together, the cash conversion cycle was 99 days, an improvement of 4 days versus the prior quarter. Cash flow from operations was $988 million, and net CapEx was $200 million, or approximately 6% of revenue, slightly better than our guidance of 7%, resulting in non-GAAP free cash flow of $788 million or 23% of Q3 revenue, which is up from 17% in the prior quarter. On a trailing twelve-month basis, this represents a 20% non-GAAP free cash flow margin. Overall, we continue to be focused on driving non-GAAP free cash flow margin to greater than 25%, a level we have demonstrated in the past and a level we believe we can achieve in the future. Turning now to our expectations for the fourth quarter. As Kurt mentioned, we anticipate Q4 revenue to be $3.4 billion ± $100 million. At the midpoint of our revenue outlook, this is up about 3% year-on-year and down about 1% versus Q3. Furthermore, given our manufacturing cycle times, the current demand environment, and our lean channel inventory, our guidance contemplates improving the channel inventory to 1.6-month level for Q4. We expect non-GAAP gross margin to be flat sequentially at 58.5%, ±50 basis points, as we continue to balance mix and internal utilizations. However, we do see slightly higher input costs from our suppliers. As a result, we remain focused on mitigating these higher input costs through a combination of productivity and passing higher input costs along to our customers. Operating expenses are expected to be $785 million, ± about $10 million. Taken together, non-GAAP operating margin will be 35.4% at the midpoint. We expect non-GAAP financial expense to be $69 million, and the non-GAAP tax will be $180 million, or an effective non-GAAP tax rate of 15.9% of profit before tax. Non-controlling interest will be $6 million. For Q4, we suggest, for modeling purposes, you use an average share count of 260 million shares and capital expenditures of 6% of revenue. We expect stock-based compensation, which is not included in our non-GAAP guidance, to be $106 million. Taken together at the midpoint, implies a non-GAAP earnings per share of $3.65. Now, for 2024 non-GAAP modeling, we propose you to assume the following: We expect to increase channel inventory sometime in 2024 to support anticipated growth, ensure proper customer stock levels, and to support our long-tail customers. We expect non-GAAP gross margin to remain at the high end of our long-term model, ±50 basis points. Non-GAAP operating expenses, we plan to manage the business at or below 23% of sales. For capital expenditures, we expect to stay within the long-term model of 6%-8% of sales. For stock-based compensation, which is not included in our non-GAAP results, we suggest using approximately $450 million. For non-GAAP taxes, we expect a 17% rate versus the prior view of 18%. In closing, I would like to highlight what we shared last cycle. First, from a performance standpoint, as we navigate a soft landing through a challenging and cyclical demand environment, we will continue to be disciplined to manage what is in our control and stay within our long-term financial model. Second, operationally, the Q4 guidance assumes internal factory utilization will be in the low- to mid-70s range, a level we expect to hold until internal inventory normalizes. Lastly, we plan to hold more cash on the balance sheet to enable greater flexibility. We also plan to retire the $1 billion March 2024 debt tranche when it comes due with our cash on hand, which will result in an improved gross debt leverage ratio below the current 2.1x level today. Finally, we will remain active repurchasing our shares. I would like to now turn it back over to the operator for your questions. Thank you. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Ross Seymore with Deutsche Bank. Your line is now open. Hi, guys. Thanks for letting me ask a question. Congrats on navigating the choppy times. Kurt, for my first question, I just wanted to talk about the linearity of demand. It was very helpful that you gave the fourth quarter and, and so much details on the first quarter in 2024. But in general, it seems like you're, you're refilling the channel a little bit in your fourth quarter guide, and, and the channel was a big driver sequentially in the third quarter. So how are we to think about the channel directionally from here, appreciating, of course, that it's already at the low end of the range? What are the puts and takes in your decisions to seemingly slowly refill that? Hey, thanks, Ross. Let me indeed, first of all, say that these fluctuations between 1.5 and 1.6 are partially beyond our control, to be honest. I mean, you know, it just ticked down a little in the third quarter. We think we are anyway sitting at the absolute minimum where it should be, so we felt that it's appropriate to move it back to the 1.6 level. What I think is more important in the bigger context of that channel management is that over 1.5 years now, I would say, we have kept it intentionally very, very lean, always around this 1.5 and 1.55 or 1.6 level in a dropping environment. So in an environment where demand was weak and rather dropping. Going forward, as I said in my prepared remarks, we think the environment is more stable or up again, which is why we did say that at some point through next year, we will also start to refill the channel again. The speed of that and the magnitude will really depend on the environment. We will not go higher than the 2.4 or 2.5 level, which is our long-term target and which has been our long-term target in the past. If there was a sharp rebound in China and we said the same last quarter, then of course, we would probably go back relatively quickly. But in a more stable environment, as we anticipate into next year, we will start to refill next year, Ross, because we think that is important to make sure we hold competitiveness in the channel for our long-tail customers. So there will be a moment where it will be just important in a stable environment to have enough product on the shelf to remain competitive. Thanks for that color. I guess this is my follow-up one for Bill. On the gross margin side, you guys have done a great job keeping it at the high end of the range, despite all the, the puts and takes on the end markets and the, the weakness overall. What are the puts and takes for next year? And, and you said that you'd stay at the high end of the range, plus or minus, still through that period, also impressive. Is that just the structural new base for the company? How are you able to keep it at the, the 58% range versus the 55%-58% that you had given at your last analyst meeting? Sure. So let me address the current, the last couple of quarters. As mentioned, our internal utilizations are running, call it low-to-mid 70s, and that headwind is being offset by our distribution mix. It's a bit richer in margin, and that represented about 57% of our composition of revenue of this quarter, which is up from 51%. So they're sort of offsetting each other in the short term, and we see the same to occur in Q4. Now, if we look ahead, what are some of the levers that perhaps can drive gross margin higher over the long term? And I think we've talked about these in the past, but again, higher revenues over our fixed cost structure is one. Obviously, we're gonna have continued productivity gains. Clearly, you know, eventually, we're gonna demand from our internal factory standpoint, so think about higher utilizations. Kurt talked about next year we're seeing neutral pricing. And then, you know, really, I think a focus, more longer term, is expanding our long-tail customers in the mass market. And then eventually, what we've always talked about with where our, our, our R&D investments go, is that, is that ramp of our new product introduction. So some of those are the levels, levers that we have that get us comfortable on continuing to bring gross margin above our current high end of our model. Again, 58% is not the end goal. It's not our final destination. We're gonna continue to work on this from a company initiative. Thank you. Thank you. Our next question comes from the line of Vivek Arya with Bank of America Securities. Your line is now open. Thanks for taking my question. Kurt, you mentioned you expect to grow through 2024, but how do we square that with just, you know, 1% or so auto production growth that is lower than the mid-single-digit auto production growth that we saw in 2023 when your overall sales were flat? So I guess the question is, what content lift did you see in 2023, and what are your assumptions for Automotive content growth in 2024? Hey, thanks, thanks. Good morning, Vivek. Yeah, it's clearly that the revenue is driven and the demand is driven by content increase, much more so than SAAR. At the same time, you are, of course, right. The latest SAAR update for this year, which I saw, is actually almost 8% up over 2022, which is a. By the way, every quarter that was taken up further, so kind of through this year. And yes, indeed, also the forecast, which we use from S&P for next year, I think is just 1% up, so it's almost flat next year. Now, if you take NXP Automotive revenue, Vivek, if you take our Q4 guides, then this year's annual revenue growth of NXP will be like 9% or so. So 9% Automotive NXP in 2023 over 2022. With that number, I believe we are under shipping demand, and we are actually intentionally under shipping demand, because as we've always said, we did not want to create this wave of inventory ahead of us, which will lead to a cliff to drop down from. That's why, since early in the year, we have tried to make sure to not enforce NCNRs to an extent that it would not build excess inventory. And as we discussed with Ross just a minute ago, we kept the channel very lean. And mind you, also in Automotive, 40% of our revenue goes through the channel. So the channel is a pretty significant part also of the Automotive business. So what I mean to say here, Vivek, is that we think we are through this inventory digestion at some point next year, which means the revenue growth in our Automotive business will return more to levels which are reflecting the true end demand. I can't tell you when exactly that's gonna be next year, but maybe it's safe to assume that through the first half, we are still a little bit working ourselves through this inventory digestion, but in the second half, we should be, we should be clean from that, including then the replenishment of the channel. And that's why, I make that statement of growing year-on-year throughout the year, every quarter. By the way, that statement was relative to the whole company. Yeah, we discussed it now for Automotive, but in principle, that whole pattern, which I just explained, is also true for entire NXP. And that's why we continue to be confident that we are properly managing that so-called soft landing, since we have just anticipated this inventory issue relatively early, have proactively managed it, which means we do not run into this cliff and then resume into year-on-year growth as early as quarter one of next year. Thank you, Kurt. For my follow-up, just on 2024, thanks for giving us the high-level views. So Q1, you know, you mentioned normal seasonal. What is normal seasonal for your Automotive business sequentially in Q1? And if I can just expand that question overall to 2024. In your presentation, you kept your 2021 to 2024 model, right? That suggests that even at the low end of that 8%-12% CAGR, your 2024 sales should be in the neighborhood of $14 billion or so. Is that, you know, a useful assumption as we think about overall 2024? So just Q1 autos and overall 2024 sales. Thank you. Yeah, look, Vivek, I think we really went quite far in this call, given the turmoil around us and some of the uncertainty created by some of our peer companies. We went quite far here in order to give quite some color on next year. We really don't want to go down the path of providing that color by segment, by revenue segment, by quarter. That would be just one shot too far. So stay with me with what I said of a more seasonal pattern for Q1 for the whole company, which was a mid- to upper-single-digit sequential decline, which is, by the way, what we've always had pre-COVID. So there's nothing really strange about this. In a normal pricing environment with normalized lead times, everything pretty much back to normal. The other half of your question was about the commitment, which we had given in, I think, in November 2021, in our Investor Day, about the three-year growth, which indeed was a 8%-12% corridor. And yes, Vivek, we stand behind that corridor. We do stand behind hitting that corridor of 8%-12%, like all the rest of the model, by the way. I mean, Bill just talked about the gross margin being more at the high end of the model. On the revenue, we will also be in the corridor of 8-12. Where we will be in that corridor really depends on a couple of macroeconomic factors, including especially more of a return of China and the timing thereof, which is very hard to judge. So we can't, we just can't go there. But that should not get us either way out of that corridor. We should hit it. Thank you, Kurt. Thank you. Our next question comes from the line of William Stein with Truist Securities. Your line is now open. Great. Thank you so much for taking my questions. First, Kurt, I think it was in your comments. I'm not sure if it was restricted to your, your outlook of EVs specifically, but maybe more this electrified drivetrain sort of hybrids, maybe is what you were talking about. But it still seemed like a big jump to me next year, and, you know, would we consider the overall EV market as one North American OEM that's been growing very quickly, and there's one Chinese, maybe many, but one really big Chinese OEM that's been doing very well. But among the sort of traditional multinational OEMs, their EV sales have been really weak. I wonder if your outlook for next year embeds a view that the multinationals are gonna do better in this category, or if the companies that have had success only get bigger? Then I have a follow-up. Thank you. Thanks, Will. That, I see where you are going, and let me try to be as clear as possible. First, yes, I did talk about what the category is called xEVs. That is a combination of the hybrid electric and the fully battery electric vehicles. It's a category used by S&P, so it's not our invention, but it's basically every car which has either only a electric drivetrain or also an electric drivetrain next to a combustion engine drivetrain. That's what matters for us because that is the stuff which calls for more semiconductors. And yes, we do believe it continues to grow quite sharply. So this year, the latest forecast is, and since we are in November, I guess it's quite accurate, 33% of the total car production, which is in the order of, I think, 89 million units this year. 33% of that 89 million cars produced this year are xEV. And that number is forecast to grow to 41%, which is a 29% year-on-year growth. So if you go in absolute terms, then there will be 29% more of these xEVs next year than this year. Now, where does it come from? Look, well, I think it is a little misleading to look at this from a U.S. perspective. The U.S. car producers are actually, from a global perspective, relatively small. Europe is a little better, but where really the main volume is driven, that is China. And on top of that, China is the one which is also driving the dynamic now in the electric vehicle space. So I think if you just take some of the commentary as, and some of the adjustments in investment programs, which were published of U.S. companies, then that is not representative of what is gonna happen on a global level. But long story short, yes, we do believe this xEV category is moving to a solid 40-41% of the global norm next year, which is obviously very supportive to our semiconductor content growth. By the way, beyond pure electrification systems, as we discussed earlier, those cars tend to be higher featured in electronics above everything. So also ADAS systems like our radar and the whole SDV, software-defined vehicle introduction, happens faster with these cars, which is why it is so supportive to our revenue. We believe in that. We do not see a massive slowing in the electric vehicle penetration. It's really helpful. Thank you. And, you sort of led me into the follow-up, which is, ultra-wideband. I think you were, you know, early to see this, among other trends, but I'm hoping you can update us as to how, you're seeing, uptake in that product, both in automotive and handsets. Thanks so much. On the handset side, nothing really new. We are still waiting for a bit more dynamic in the Android space, which has nothing to do with ultra-wideband, which is more a mobile-wide industry situation. Where you might have seen in our in our guide for Mobile for the for the fourth quarter, excuse me, we are again sequentially up a little in Mobile, which is also driven by Android. So given our very lean inventory also in Android space, we think if there is now a bit more dynamic in the Android space, we're going to benefit from it, and with that, ultra-wideband, because it's going to go proportional then up. In the auto space, we feel very good, so we are ahead of what we wanted to achieve in ultra-wideband. So we have, I think something like 7 platforms in production. So there is 7 car platforms which are in production with our ultra-wideband automotive product. To my knowledge, something like 18-20 new platforms are awarded, or 18 of 20 are awarded to NXP. So there is 2 small platforms which have not gone to NXP, out of 20. Actually, we rejected them because they were under the security standards, which we want to ship and would have been much diluted. So that means overall, the momentum in ultra-wideband automotive is very, very good. Thank you. Thank you. Our next question comes from the line of Stacy Rasgon with Bernstein Research. Your line is now open. Hi, guys. Thanks for taking my question. I wanted to go back to the channel inventory. Is the amount that you have to ship still $500 million? And would you still grow year over year in 2024 if you didn't decide to fill up the channel next year? So the answer is yes and yes, Stacy. That delta between—well, now it's actually even a little bit bigger because to be perfectly precise, the $500 million, I think, came from 1.6 months going to 2.4. Since now we are at 1.5, it's probably even a little more than the $500 million, but that's—it's immaterial. So the answer here is yes, that is. Secondly, no, we do not need the $500 million to grow next year, because that whole channel replenishment next year is something we will do sometime to some amount, so that cannot be the basis of a guide for next year. Got it. Thank you. For my follow-up, I just wanted to ask you about some of the geographical macro trends that you mentioned. I found them a little confusing. It sounded like you thought China was getting better, but then you said next year, like, where you land in, you know, in the guidance for the full year, depended on China and getting better. We're not hearing from any of your competitors that, like, China or anything else is getting better. I'm just. Can you give us a little more color on what you're seeing by geography? And maybe, like, what do you think the sources of, kind of the discrepancy? Why do you guys see things improving, in an overall market where you still sound, like, fairly cautious, and your competitors certainly all sound fairly cautious? Okay, so let's let me peel the onion, Stacy. First of all, maybe really on a company level, the reason why we do comparatively better if you look at the quarter to our peers is again a soft landing navigation, which we have entered into already early this year, and when you think about the channel, already middle of last year. We have simply shipped less over that period, Stacy. And you find that if you compare our growth rates, say a three-year CAGR over the last three years versus some competitors, especially in auto, and you see that even more sharply if you look at this year's auto growth, as I said earlier, which I think is 9%, we have undergrown competitors. And that undergrowth is simply that we shipped less on inventory than we believe some of the peers have done. That, of course, also explains that going forward, we don't see this sharp decline. It's just a softer management through this cycle. Now, we do it very, very intentionally because we believe this is very beneficial to our growth margin trajectory, which is not going to suffer that hard from underloading factories too hard. So that's actually where that direction has been coming from. Now, on the geographic side, Stacy, you had to ask this because I do know that what we just guided, especially in Industrial IoT, and that is largely relative to China, is very different to what you heard from a lot of peers. So I just want to repeat, we have both sequentially and year-on-year, we just guided quarter four up by high single-digit percentage. Which is in sharp contrast to what several of our competitors have said. We simply think this is because we saw and had our trough in Industrial IoT already in quarter one of this calendar year. If you look at the numbers, we had a sharp drop there. We have made absolutely sure we would not increase inventories from there. So we are very close to the pulse of the demand. Since then, since Q1, we have been gradually going up, and there was no mixed messaging, which might have been a bit confusing around China. What I meant to say is, we keep moving up incrementally quarter to quarter to quarter, while it's still down from a year-on-year perspective. So we are still waiting, and we don't put this in any of our numbers on the big rebound in China. So that's not there. But incrementally, sequentially, it keeps improving. It has improved the past couple of quarters, and it does improve again now into, into quarter four. So that, that was the commentary on China. So it's, it's cautiously positive, but again, it is simply because we had our trough there already in quarter one, and it was a tough trough. I mean, it, just, just do the math. It was, it was really deep. We just did it much earlier than many others. Got it. That, that's clear. Thank you, guys. Thank you. Our next question comes from the line of Gary Mobley with Wells Fargo. Your line is now open. Hey, guys. Thanks for taking my question. Clearly, China is a market, the China automotive market is a market where you can be quite vertically integrated from a chip supply chain perspective. The market's large enough in terms of volumes, and there seems to be some ability to invest in that area by domestic China competitors. So my question for you is: how are you planning to retain your business with China automotive brands, when you probably long-term see increasing competition from the domestic players? Yeah, Gary. First of all, it's our business. It has been our business, and it will continue to be our business to be competitive. So I come back to your specific points, but I mean, in itself, it's nothing new. Our whole game, our whole priority in life is to be competitive wherever we play. So in China, indeed, so far, the competitors which we do see in the Automotive space, which you focus on, have been largely our Western competitors, plus Renesas from Japan. So we have hardly seen any local competition. So that's absolutely right. Now, over the past, I'd say, couple of quarters, local competition in China came more up in low-end microcontrollers. However, not in Automotive. We haven't seen that entering into Automotive at all. We also don't play that much in the low-end microcontroller space. So I mean, we've been seeing it, but it's not been a big event for us at all. Secondly, we do see a significant focus of local Chinese up-and-coming semiconductor companies on silicon carbide. I mean, I just spent one and a half weeks in China, and it was obvious that there is massive investment and massive focus, both in factory engineering and device engineering on silicon carbide in China. The good news, if you will, is that this doesn't really matter for us because that's one of the businesses we do not do. But I think it takes some of the focus away from the things we do. My personal take would be that probably going forward, we will see a start of more competition in, the simpler analog mixed signal world, in China, which would then probably also touch Automotive. I don't say, Gary, we have it, have it yet. It's not like we are losing or, or being under pressure there today, but my take would be probably that's, that's the one segment where, local Chinese semiconductor competitors will, will also focus on going forward. But again, I mean, we've, we've seen this in Korea, we've seen this in Japan in the past, and so it's not the first time that we are, we are confronted with, with local competitors. Yet we stay paranoid about it, and we'll, we'll make sure that we have mid and long-term strategies which are, which are on top of that. Thanks for the detail, Kurt. As a follow-up, I want to ask about your purchase commitments. They've been running just below $4 billion for the past year, which is consistent with your flattish revenue, but it seems counterintuitive to the, maybe the market dynamics that we're in, where seemingly you'd have to put less of a commitment with your foundry partners. So maybe you can just speak to the trends that you expect in your purchase commitments, you know, given the, the industry dynamics through 2024. Well, those are multi-year commitments. So I guess you refer to, I think, in the Q, we have something like a $3.9 billion commitment sitting, which is a multi-year commitment, which is badly required and badly needed, to support our growth over the next 5+ years, which is what this, is referring to. So, nothing unusual, nothing to worry about. It's just needed for those, third-party foundry wafers, which continue to be very tight from a supply perspective, and where we are glad we have these commitments to support actually the, the customer growth. You know, this, this whole supply situation, lead times have normalized. That does not mean, however, that, we are in every place, completely out of the woods. So there is still a couple of technology nodes where we are actually short, and which are also leading to quite a few complications. There is quite a few other, and there's actually quite, quite a few, where we are just fine, but where we have very stringent discussions with our customers that they need to make sure they give us mid to long-term forecasts, because once the business comes back out of this inventory digestion cycle, we really have to make sure we don't enter into a similar period like we did in the second half of 2020. Which is not, that's not far away from a supply capability versus demand perspective. So that's why those long-term agreements, which we have there, are really needed in the mix of our future revenue growth. Thanks again. Thank you. Our next question comes from the line of Joshua Buchalter with TD Cowen. Your line is now open. Hey, guys, thanks for taking my question, and good morning. So I wanted to ask about the auto outlook for next year. If we sort of lay out the puts and takes, you know, production growth will be lower, pricing neutral, it sounds like, but you mentioned that 2023, there was some element of digestion. I mean, as we stack up the content growth and sort of flat to up production and flat pricing, is there a reason... How should we think about 2024 auto growth for your business compared to 2023? Is there a reason it should be less than 2023? Thank you. Hey, Josh. Good, good trial. As I had to say to, I think, Vivek earlier, I will not guide now on the segment level 2024. But I can give you at least some of the dynamics at work here. Yes, the SAAR, the underlying SAAR growth next year is gonna be less than it was this year. I think the mix or the penetration to xEV vehicles is better, as we discussed earlier, so going to the 40+% level. So that's supportive relative to this year, so it drives further content from where we are. I agree with your statement about more neutral pricing. I think that's a, that's a fair assumption across the board. And having said all of that, the only remaining piece next to our company's specific growth drivers, which are well in place, the only remaining piece is the cycle of inventory digestion and going back to normal end demand, which is kicking through to our revenue. Currently, I can only repeat it, we are under shipping demands, and again, we do this intentionally. We've done it for a few quarters already. It's gonna be another couple of quarters, but maybe it's fair to assume by middle of next year, that is behind us. And then, the revenue growth rate in Automotive and everything else will go back much closer to what the real end demand is. Think about it this way, but so it is really misleading to just look at annual revenue growth in Automotive against SAAR because there is so many other things at work, especially this inventory cycle. Understood. I can't hurt to try. I guess I could ask another way. You guys used to give a metric about, I think it was 70% of your auto business was tied to SAAR and the balance sort of to more content growth drivers. Maybe you can help quantify that mix or maybe give some directional drivers of things like radar, BMS, the S32 platform, as you think? Thank you. Yeah. That's not our model, Josh. That might be a model you made, but we haven't really set that. So what we do say, and what fits also to your earlier question, is that we do see a continued strong content increase, which is independent of SAAR. And I think that is something which is probably in the 5%-8% bracket, and that keeps going. Again, there is no reason why that would be slowing next year. But again, it is overlaid by the inventory cycle. Got it. Thank you. Thank you. Our next question comes from the line of Toshiya Hari with Goldman Sachs. Your line is now open. Hi, good morning. Thank you so much for taking the question. Kurt, I wanted to ask about the pricing environment into 2024. You mentioned that you expect a relatively neutral environment. You know, when we spoke at our conference a couple of months ago, I think at the time, you sort of hinted that your expectation back then was for 2024 pricing to be up a little bit more than what you saw in 2021, but a little bit less than 2022. So I guess, you know, there's been a slight change in how you think about pricing. A, is that correct? And B, if so, is this more demand-driven, or are you seeing lower input costs that's enabling you to keep pricing a little more flat, flattish into 2024? Yeah, Toshiya, it's indeed. It's slightly better. It depends on which perspective you want to take on this, relative to the input cost. So what we are seeing now is a slight increase in input cost across everything. So it's, it's really—I mean, there is pieces which are going up, unfortunately, quite a bit. Others are starting to come down, so, but in the mix, we have a slight increase. On top of that, we put our productivity efforts, and that is what we need to pass on to our customers in terms of... then you land in a pretty neutral area, and that indeed is a touch better than what we discussed when we recently met in your conference. And yes, it is just important to see this indeed in the context of what you mentioned of the past couple of years, because mind you, in 2021, we increased, I think, by 2% for the whole company, in 2022 by 14%. This year, we're gonna tell you in the Q4 earnings what it will be, but indeed, it's again a solid number, and that comes then down next year to a more neutral. But I actually made the comment in my prepared remarks because I wanted to make sure there is no confusion about this possibly going back, because we've had the question very often from analysts and investors if not this whole pricing would be reverting back down all the way to the pre-COVID levels. It is not. I just wanna be very clear, it's just neutral this coming year, which is fine from our perspective. Great, that's very helpful. And as my follow-up, you're guiding your comms and other business down, I guess, upper teens on a sequential basis in Q4. Is that primarily the base station business and the weakness in that market, you know, sort of catching up to you guys, or is there something more to it? And, is it fair to say that Q4 is the bottom for that market, or could things stay relatively weak, stay relatively weak into the first half of next year? Thank you. Yeah. So into Q4, it is both. It is the weak base station demand, which you're also quoting. So it's, I mean, all the hopes this year have been on India, and as you hear left and right, it's just, it's just not going as strong as people and as we had expected. But there is a second component in that, weaker revenue for us in Q4, and that is the decline of the pent-up demand in secure cards. I think we spoke about this a couple of times through the year, that by favoring Mobile demand in 2021 and 2022, we have brutally undershipped the secure card business, and the solid part of the pent-up demand to be actually satisfied through this year, and that starts now to go away. And so that plus the weak mobile base station environment explains the downside into the fourth quarter. How that all plays out next year, I mean, just to go back to my prepared remarks, clearly, that whole segment next year is not necessarily set up for a huge victory lap. Some of these trends, especially in the base station market, will likely continue into next year, so staying, relatively speaking, weak. Good. I'm looking at time now. I think we are nearing the end of the call. And I would like to summarize where Bill and I really think the main theme of this quarter is, especially that since there has been so much, say, different messaging from our peers. We really think that the fundamental content growth drivers in our key businesses, being Automotive and the Industrial IoT space, are in place. But all of this has been massively overlaid by to what extent people have proactively or, or not proactively managed the inventory cycle. We have tried to do this as proactively as we could, most notably for all of you in the reported general inventory numbers, which for six quarters now, we have kept very lean. And also earlier this year, we started to try and do a similar thing on our direct customers, by not enforcing NCNRs, by being reasonable, by finding alternative commercial solutions. Putting us actually in a situation where we think we have, due to this, somewhat undershipped the demand more than our competitors, which leads us now go forward in a situation which is much less pronounced relative to the dip, and much more realizing the intended message soft landing, which we wanted to have. That is the main point here. Other than that, business really going back to a more normal pricing environment, lead times being normalized, all reasons to believe that this growth quarter from a quarter year-on-year perspective, throughout all of next year, resuming growth. You see this in Q4 already. We have year-on-year growth, and that should continue throughout all of next year. With that, I thank you all for the attention today. Thank you very much. Bye-bye. Thank you, all. We'll call here. This concludes today's conference call. Thank you for participating. You may now disconnect.