NXP Semiconductors NV (NXPI) — Q1 2023 Earnings Call Transcript

Thanks very much, Jeff, and good morning, everyone. We appreciate you joining our call today. I will start with a review of our quarter 1 results and then discuss our guidance for the second quarter. So let me begin with quarter 1. Our revenue was $121 million better than the midpoint of our guidance, with the trends in all the end market segments performing better than our expectations. Taken together, NXP delivered quarter 1 revenue of $3.12 billion, essentially flat year-on-year, while we continued to maintain our distribution channel inventory at a 1.6 months level, which is well below our long-term target. Non-GAAP operating margin in Q1 was 34.8%, 50 basis points above the midpoint of our guidance, so 90 basis points below the year-ago period. Year-on-year performance was a result of flattish revenue combined with better gross margin offset by higher operating expenses. Now let me turn to the specific trends in our focus end markets. In Automotive, quarter 1 revenue was $1.83 billion, up 17% versus the year ago period and above the midpoint of our guidance. In Industrial & IoT, quarter 1 revenue was $504 million, down 26% versus the year-ago period and near the high end of our guidance. In Mobile, quarter 1 revenue was $260 million, down 35% versus the year ago period and near the high end of our guidance. And finally, Communication Infrastructure and Other, quarter 1 revenue was $529 million, up 7% year-on-year and above the midpoint of our guidance. During that first quarter, after a slow start, we have seen modest incremental improvement in our China-exposed businesses, which are primarily served through the distribution channel. This was particularly true for our Industrial & IoT and Mobile businesses. At the same time, we saw solid demand in our North American and European businesses across all market segments. Now I will turn to our expectations for the second quarter of 2023. We are guiding Q2 revenue to $3.2 billion. While this is down about 3% versus the year-ago period, it represents a sequential resumption of growth to about 3% at the midpoint. At the midpoint, we anticipate the following trends in our business. Automotive is expected to be up in the high single-digit percent range versus quarter 2 2022 and up in the low single-digit range versus quarter 1 2023. Industrial & IoT is expected to be down in the mid-20% range year-on-year and up in the high single-digit percent range versus quarter 1 2023. Mobile is expected to be down in the low 30% range year-on-year and to be flat on a sequential basis. And finally, Communication Infrastructure and Other is expected to be up about 10% year-on-year and up in the mid-single-digit range sequentially. In summary, as we progress through 2023, we do see a continued solid demand environment in our automotive, core industrial, and communications infrastructure businesses, while our consumer, IoT, and mobile businesses are stabilizing. We believe the severe shortages that we have experienced over the last 2 years should subside as we progress towards the end of this year, with now only about 1/3 of our portfolio with lead times greater than 52 weeks. This is down substantially from prior periods. However, we continue to still be supply constrained in several specific technology nodes, primarily for the automotive and core industrial segments. In addition, we are experiencing higher input costs. Hence, we continue to execute our consistent pricing policy, which is to pass along the cost increases to our customers while not padding our gross margin. Within Automotive, we see a combination of positive tailwinds continuing throughout the year. This includes the ongoing secular adoption of xEV drivetrains and ADAS, as well as NXP-specific content and price increases. Third-party research firms anticipate a modest increase year-on-year of global car production, while at the same time, we believe there are pockets of elevated inventory held at some select Tier 1 auto suppliers due to the golden screw issues which have plagued the extended auto supply chain. In Industrial & IoT, we expect relative strength in the core industrial submarkets as our products enable critical infrastructure and companies to be more efficient. However, while the consumer IoT business is stabilizing, more significant growth will be dependent on a cyclical rebound, especially in China. In the Mobile segment, we continue to navigate through a sub-seasonal trough in the first half of this year. However, we do anticipate normal premium model releases in the second half to help resume growth. And lastly, in Communications, Infrastructure and Other, we are further improving our supply capability against growing secular demand, specifically in our RFID tagging solutions, and against pent-up demand for secure card solutions. On the other hand, our RF power business remains lumpy, and growth this year is limited to 5G build-outs in India. Our guidance for the second quarter contemplates that we maintain the 1.6 months channel inventory level. And yet, we may start increasing this level if and when we see consistent strength in channel sell-through into the second half of this year. Overall, we are very well positioned with on-hand inventory to satiate a possible rebound in demand as it emerges. In summary, the combination of our first quarter results, the guidance for the second quarter, and our early views into the second half of the year leads us to believe that total revenue for the second half of the year will be greater than the first half. Despite our cautious optimism, we do acknowledge the ongoing uncertainty in the demand environment. Therefore, we will continue to be very disciplined and manage what is in our control and stay within our long-term financial model. With that, I would like to pass the call over to Bill for a review of our financial performance.

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 will move to the financial highlights. Overall, our Q1 financial performance was very good. Revenue was above the high end of our guidance range, and both non-GAAP gross and operating profits were above the midpoint of the guidance. Now moving to the details of Q1. Total revenue was $3.12 billion, essentially flat year-on-year, while $121 million above the midpoint of the guidance range. We generated a non-GAAP gross profit of $1.82 billion and reported a non-GAAP gross margin of 58.2%, up 60 basis points year-on-year and 20 basis points above the midpoint of the guidance range. Total non-GAAP operating expenses were $728 million or 23.3% of revenue, up $40 million year-on-year and up $15 million from Q4, modestly above the high end of the guidance range, driven by variable compensation and slightly higher R&D investments. From a total operating profit perspective, the non-GAAP operating profit was $1.09 billion, and the non-GAAP operating margin was 34.8%, down 90 basis points year-on-year, though above the midpoint of the guidance range, reflecting solid fall-through on the increased revenue level versus the guide. Non-GAAP interest expense was $76 million, with a non-GAAP income tax provision of $167 million, consistent with the high end of the guidance due to better profitability, reflecting a non-GAAP effective tax rate of 16.6%. Non-controlling interest was $8 million, and stock-based compensation, which is not included in the non-GAAP earnings, was $99 million. Taken together, this resulted in a non-GAAP earnings per share of $3.19, which is near the high end of our guidance range. Turning to the changes in our cash and debt. Total debt at the end of Q1 was $11.17 billion, flat sequentially. The ending cash position was $3.93 billion, up $85 million sequentially due to the cumulative effect of higher working capital, CapEx investments, capital returns, and cash generation during Q1. The resulting net debt was $7.24 billion, and we exited the quarter with a trailing 12-month adjusted EBITDA of $5.46 billion. The ratio of net debt to trailing 12-month adjusted EBITDA at the end of Q1 was 1.3x, and the 12-month adjusted EBITDA interest coverage was 16.4x. During Q1, we paid $219 million in cash dividends, which represented 35% of cash flow from operations. Due to the uncertain macro environment and the recent liquidity issues in the regional banking sector, we paused our share repurchases during Q1. However, we plan to resume buybacks in Q2, and our capital allocation strategy has not changed. We plan to return 100% of excess free cash flow back to the owners of the company. Turning to working capital metrics. Days of inventory was 135 days, an increase of 19 days sequentially, and distribution channel inventory was 1.6 months or 49 days. When combined, this represents approximately 184 days. As mentioned during the last earnings call, our inventory strategy is to manage both on hand and channel inventory together to better serve our customers and prevent excess finished goods inventory on our balance sheet and/or in the distribution channel. Our goal is to only ship products into the distribution channel that have a high likelihood of selling through in the current quarter or being pre-staged if needed for customer delivery in the next quarter. From an internal standpoint, we are comfortable supporting approximately 140 days of inventory on the balance sheet, so long as we hold the channel at 1.6 months or 49 days. As the channel inventory returns to the long-term target of 2.5 months or 75 days, we would correspondingly lower our balance sheet inventory. In Q1, the inventory flexibility on the balance sheet enabled us to deliver an extra $120 million of revenue by leveraging the die bank inventory on hand. Moving on to days receivables. It was 31 days, up 5 days sequentially. Days payable were 68 days, a sequential decrease of 9 days due to the timing of material receipts. Please note, beginning in Q1, we reclassified certain payables amounts to other current liabilities to better reflect true payable trends. Taken together, the cash conversion cycle was 98 days, an increase of 33 days versus the prior quarter as we leveraged the balance sheet to avoid overshipping into the channel. Cash flow from operations was $632 million, and net CapEx was $251 million, resulting in non-GAAP free cash flow of $381 million or 12% of revenue. The reduction in free cash flow quarter-on-quarter is primarily due to increased working capital needs as previously noted. Our long-term target has not changed, and we are focused on driving non-GAAP free cash flow margin to greater than 25%, a level we demonstrated in the second half of 2022. Turning now to our expectations for the second quarter. As Kurt mentioned, we anticipate Q2 revenue to be $3.2 billion, plus or minus $100 million. Furthermore, given our manufacturing cycle times and the current demand environment, our guidance contemplates maintaining channel inventory at a 1.6-month level, though we may move this upward pending improved market conditions. At the midpoint of our revenue outlook, this is down 3% year-on-year and up 3% versus Q1. We expect non-GAAP gross margin to be flat sequentially at 58.2%, plus or minus 50 basis points. Operating expenses are expected to be $760 million, plus or minus about $10 million, reflecting annual merit increases. Taken together, non-GAAP operating margin will be 34.5% at the midpoint. We expect non-GAAP financial expense to be $69 million and the non-GAAP tax rate to be 16.5% of profit before tax. Non-controlling interest will be $7 million. For Q2, we suggest for modeling purposes you use an average share count of 261.2 million shares and a CapEx rate of 8% of revenue. Taken together at the midpoint, this implies a non-GAAP earnings per share of $3.28. In closing, I would like to highlight the key themes for this earnings cycle. First, we will continue to manage our inventory as a combination of internal and channel inventory. This enables us to better serve our customers' requirements, prevent excess inventory buildup in the channel, and supports our outlook for the second half revenue of 2023 to be greater than the first half. Second, the Q2 guidance contemplates internal factory utilization to be in the mid-70s range, which is modestly down from the low 80s in Q1. We believe operating our factories at a more reasonable utilization level enables better flexibility and improved throughput. Despite the lower utilization level, we anticipate our gross margin to remain at the high end of our long-term model for the remainder of 2023, driven by improved product mix. Thirdly, we are holding more cash on the balance sheet to enable greater flexibility. This includes options around the timing and magnitude of share repurchases, cash dividends, or the ability to retire debt early, as well as any small tuck-in acquisitions, all of which can be funded with cash on hand. Finally, we will continue to be very disciplined to manage what is in our control and stay within our long-term financial model. I would like to now turn it back to the operator for questions.

I guess first question, I was hoping you could speak to perhaps pricing tailwinds in 2023. You told us in January that you saw a 14% increase for the overall business. And obviously, you're not going to update each quarter, I get that. But just curious, embedded in your outlook for a stronger second half versus first half, how are you thinking about the impact of higher pricing as it relates to your higher input costs? And is that something that is broad-based across all segments, or is that something we should be thinking about for just specific segments?

Thanks, C.J. We do not anticipate any challenges from pricing this year. In fact, I would say it’s the opposite; we are facing increasing input costs but remain committed to our pricing policy, which involves passing on these rising costs to maintain our gross margin percentage. As a result, we expect to implement price increases throughout the year, which acts as a tailwind for us. We will provide more details on the extent of this tailwind early next year, similar to what we did in previous years. Regarding the impact on different segments, it follows a straightforward supply and demand dynamic. The supply shortages I mentioned earlier are most pronounced in the automotive and core industrial sectors, which will see the most significant pricing tailwind this year. Additionally, a significant portion of our business relies on annual price negotiations, meaning we set prices for the entire year without adjustments. In summary, there are no pricing headwinds. The expected growth in the second half of this year, compared to the first half, is driven by ongoing price increases.

Very helpful. As my quick follow-up, your OEM sales grew to 51% of total sales versus 45% a year ago. Is that simply a function of kind of mix shift to auto/industrial, or is this a permanent shift that we should be thinking about for NXP?

No, that was actually a function of the weakness of China in Q1. As we spoke on the last call, we had the significant weakness to start within quarter 1 in China. China is largely distribution for us, and a large part of our China business is then again with the industrial IoT and also automotive business. This is why the distribution part of the business came out so much weaker relatively speaking through the first quarter. So no, this is not going to be a permanent thing, but it has been a direct impact and consequence of this Q1 weakness in China.

I wanted to just talk about the Auto segment. Kurt, you just mentioned about still some shortages there. It's great to see significant upside in everything other than Auto. Can you just talk about a little bit of what you're seeing on the demand side in Auto? Is it really just supply limited? Is that the reason that it was a great quarter, but didn't upside as much as the others? Just some puts and takes on end demand versus supply, please?

Yes. Thanks, Ross. I actually felt Q1 in Auto was a great quarter. I think we did 17% year-on-year growth, which is above the high end of our long-term revenue growth guidance. Indeed, the upside in Q1 in Auto was all gated by supply capability. That's indeed a matter of fact. Going forward, the remaining shortages we see across the company are largely in automotive, a little bit also in core industrial, but the more material part of the shortages indeed continues to be in automotive, such that through the year, I would say the growth is really sitting on the drivers which we have discussed before. It is continued content increases, which follows the xEV penetration and ADAS penetration. I'm pretty sure that NXP continues to gain share in automotive. It is pricing, as I talked to C.J. earlier, which is quite vivid in automotive. I hope that the supply/demand situation, Ross, will normalize through the second half of this year, including automotive.

That's a perfect segue to my second question, and that's on the utilization rate and inventory. I was a little surprised that the inventory kind of did what you guys expected it to despite revenues beating so nicely. And then you're talking about taking utilization down while you're simultaneously sounding significantly more optimistic about the demand conditions, your ability to grow half over half, et cetera. Can you help us reconcile how the utilization/inventory versus conservatism versus more optimism on demand balance out?

Our utilizations are currently in the mid-70s, compared to the low 80s last quarter and the 90s in Q4. We believe the ideal range is around 80% to 85%, but we are slightly below that as we focus on rebuilding several of our buffer areas for inventory. This approach ensures we have everything ready to fulfill new orders in the quarter. Regarding our inventory, we're comfortable maintaining about 140 days and are currently at 135. We have 25 days that we could introduce into the market if we chose to, but we're being very cautious and only moving forward based on product sales and market improvement. Additionally, we hold another 10 days of what we call strategic inventory as we align our internal factories. Our capital expenditures are around 8%, with 75% linked to our internal factories focusing on our proprietary technology. We aim to retain another 10 days of inventory to handle potential customer orders. We believe that our internal inventory will gradually decrease throughout 2023, and by operating our front-end internal utilizations in the mid-70s, we will adjust our foundry purchase orders while catering to higher revenue. It’s important to note that the second half of 2023 is expected to show larger growth compared to the first half.

I wanted to ask about the automotive sector. I understand there are still shortages, but you've also mentioned some inventory available in the channel. This is the first time I've directly heard you mention automotive build-outs in the channel. Can you provide more details on that? What types of products are involved, and how much of your revenue comes from those categories? Are you experiencing any slowdown in those areas considering the current inventory levels?

Stacy, the way you phrased it seems to suggest a much larger issue than what I was trying to convey. We are seeing only a few select Tier 1 suppliers affected by pockets of surplus inventory due to the golden screw problem. Over the past two years, we frequently encountered scenarios where one component was missing while other parts were available, leading to a backlog of certain items until the missing parts arrived. There are some pockets of surplus, but it's not indicative of a widespread structural issue with specific products or quantities. On the other hand, there is an increasing conversation in the industry about the ideal inventory levels that Tier 1 suppliers should maintain. From my observations, automotive OEMs are being quite proactive in requesting higher inventory levels from Tier 1 suppliers moving forward. We need to determine how the elevated inventory I mentioned will be utilized to meet the industry's need for higher inventory levels as a safety measure in the supply chain. I want to emphasize that this situation will not impede the growth of the automotive business this year, which is expected to grow significantly year-on-year.

Got it. That's helpful. For my follow-up, I wanted to ask about China. It does sound like you worked through the China disti issues that you had mentioned on last quarter's calls. Would you characterize this as a recovery? Are you actually seeing recovery, or is it maybe a little too early to jump that far? Is it more just like little green shoots? Or what exactly are you seeing in China relative to what you were seeing last quarter?

Yes. Stacy, I think it's too early to make such a statement. We've seen a modest, gradual improvement throughout the first quarter from a very slow start, I mean, through Chinese New Year and these elevated infection levels in the first few weeks. It just came modestly up. I would clearly not say, and none of our forecast and guidance comments we are making today would be based on that; I would not see a sharp rebound. We don't see this. And again, our numbers are also not based on that. By the way, Stacy, just also connecting this to your first question, mind you that our automotive business is also 40% in distribution. So when I talk about these pockets of inventory, they are in the 60% of the automotive business which goes through direct. But another large chunk is actually the 40% through distribution and that is controlled through what Bill explained earlier through our disciplined channel management at 1.6 months.

My first one, Kurt, is about half-over-half growth because you mentioned it in your remarks. So if I exclude 2020, second-half sales for NXP have grown at least around 5% to 6% half-on-half. Is that the kind of expectation we should have about the second half? And what do you think is driving that? Is it just seasonality? Is it China coming back? Is it pricing increasing half-on-half? Just if you could help us set the models in the right place on a conceptual basis about what kind of expectation. And more importantly, what is driving that growth in the second half?

So Vivek, I need to disappoint you a little. I will not size it here. You know that we only guide the next quarter. Yet, I want to give you a few anchor points. Clearly, the seasonality in Mobile, with the premium models ramping in the second half, will support that growth of half 2 over half 1. I mean that's one element. The other element I would mention here is indeed increasing supply capability, and it is clearly in auto and core industrial as we discussed earlier. But it is also in Comms Infra. Within the Comms Infra segments, we have this RFID tagging and secure card business, which continues to benefit this year massively from finally supply becoming available. We had actually de-prioritized the business through the past 2 years. Now we can finally serve that secular demand in RFID and quite a bit of pent-up demand in the secure cards business. So together with the Mobile seasonality will drive the half 2 over half 1 growth.

Got it. And then just one more on automotive and just the state of play. When we look at the end market, we see a premium U.S. EV maker cutting prices; we hear of sluggish demand in China. How should we reconcile all those end market data points that are a lot more cautious and conservative because of macro factors versus the strength that you and your peers are reporting when it comes to automotive semiconductor demand?

Well, it really goes back to content increase in the first place. The latest data I have about xEVs, which is one of the two main drivers for a content increase, is that the number of xEVs in absolute terms globally this year will grow like 34% over last year, and it will then hit the 34% portion of the total SAAR this year. I mean, this is a massive move. And by the way, yes, there are shifts. There is clearly a wave of success of local Chinese OEMs. You might have seen that some of the Western companies are losing ground with electric vehicle sales in China against local companies. Now we are perfectly hedged. We are just as exposed to the Chinese OEMs as we are to the Western ones. So content increase is the main move. There is still also a forecast for an overall SAAR growth. The latest number I had seen from S&P was about 85 million or 86 million, so somewhere in that neighborhood, which is a growth of about 4% over last year. Even the underlying SAAR, if you take it all together, xEVs and combustion-engine cars, is also growing, and that's actually the reason why this business keeps going. So I don't find it that surprising.

Kurt, I wanted to quickly revisit the question of pricing. You were very clear on your comments, especially regarding the auto business, about what pricing will do for the rest of the year. However, I often hear the question of how you see long-term pricing in your auto business once lead times and input costs stabilize or potentially decrease. Are we returning to normal price reductions from a much higher base, or do you view many of these input cost increases as permanent? There seems to be some concern that what rises must eventually fall. I would appreciate if you could address this issue.

Yes. On the pricing, especially in Auto, or I would actually extend this question to all those areas where we've had the most significant shortages, it is important to understand where the price increases came from in the first place. They came from a structural, significant CapEx investment in order to cater for new capacity in mature nodes. Most of that is in the 16 to 180-nanometer area. A lot of CapEx has been spent but continues to be spent also through the next few years, and the depreciation of that additional capacity which became necessary, as we all painfully witnessed over the last years, the depreciation of that is going to sit on all of these products across the industry. My estimate here is that, yes, pricing will, of course, plateau at some point. Then maybe when supply and demand have normalized, we will go back to what we had before this situation, which was a small, single-digit ASP erosion year-over-year. But that is not falling back to the old price levels. It is from the new level we've achieved over 3 years of sequential price increases.

The main concept of managing our channel revolves around grasping the actual demand in the market. Ultimately, we aim to stock inventory that moves quickly instead of items that linger on shelves, which may lead to discounting and waste our valuable space. Our goal is to only transport products that sell rapidly into the channel. As you noted, we think about this in a similar way. We maintain the same total inventory but are experimenting with a new approach based on insights we've gained from previous experiences, as the key factor is understanding real demand.

I think we will enter this now possibly relatively soon, as we emphasized in our prepared remarks. As soon as we see a more consistent uptick in the sell-through trends in the channel, we will increase from the 1.6 months levels. Mind you, we're speaking about the $500 million delta when we would go from 1.6 to 2.4 or 2.5 months. We intend to fill back to that level in line with industry demand coming back. Those $500 million, we basically have that, and we will get it into the channel as soon as demand comes. Ultimately, that will be required to make sure we can gain market share through distribution the moment the industry ticks up.

I presume that your backlog continues to trend down, but I was hoping you can give us an update on where you stand today with weeks of backlog, the durability of that backlog and whether or not you're still sold out in automotive based on your available supply - sold out through the remainder of the year, I should add.

We have not discussed the size of the backlog because we believe it is a misleading metric, particularly since the supply chain issues began. We have multiple orders in there, which adds to the confusion. It doesn’t make sense to use backlog size as an indicator of future growth, so we will not address it. However, in the automotive sector, the non-cancellable, non-returnable orders represent the largest part of our business this year. The size of that NCNR order backlog has remained unchanged. We also cannot increase shipments; it is what it is. While there may be shifts in product mix, the overall size has not altered, and we are simply executing against what we have.

And a follow-up, I want to ask about changing behavior following a 3-year period of supply chain shortages in the automotive end market. Under the idea that the automotive OEMs have learned a lesson and will work more collaboratively with chip companies like yourself, perhaps the big get bigger, and perhaps you can expand further your market share lead by collaborating more closely with these Automotive OEMs. Is there a way to quantify or qualify the impact of that and whether or not that has any validity?

I think you have a really good point here. Very clearly, the rate of collaboration and also the depth and intensity of collaboration from logistics all the way to innovation and new design wins has significantly jumped up between us and the auto OEMs. That indeed also leads to direct deals, which we are cutting with these companies on a very long-term basis, where the principle is often that we give supply assurance against a very long-term demand assurance from the OEMs. Yes, I believe there is a bit of a winner-takes-it-all game here because if I put myself into the shoes of the OEMs, they cannot play with 6 or 8 different semiconductor companies. They will focus down on a few select leaders, and you can be sure NXP is one of them.

Bill, I wanted to just double click on the gross margins. It's impressive that your utilization is down that much and it's flat. So maybe just walk us through the pieces again. Obviously, mix per segment, I wasn't sure if auto is accretive to that mix. I think Mobile going down probably helps. But I also wanted to understand your external loadings that you kind of mentioned that you might selectively bring that down. If you can comment on that as well.

Sure. The major drivers are first, again, we expect favorable product mix. What we see, obviously, and what we're building to is favorable, and we see that in our forecasts. Then it's clearly being driven by the customer orders we are serving. We talked about this new product introduction, and we're starting to see some of that. But again, longer term, that will kick in a couple of years out to continue that richer mix for the company. Second, you have to remember our fixed variable cost structure, which is approximately 30% fixed and 70% variable, and this has significantly improved versus the last down cycle and over the last decade. Finally, we are realigning our internal factories. We service about 40% of our wafers, with 2/3 supporting Auto and Industrial IT proprietary technologies. The equipment we're putting in is very sticky, very specific to our core IT technologies that service the 2 fastest growth markets over the next decade.

Yes. It is RFID and secure cards which are really leading here from a growth perspective. That doesn't mean the other stuff is not growing, but the incremental additional growth really comes from supply into RFID and secure cards. But again, the difference between the two is that in RFID, it's really secular growth, which we've been working towards for many years – now a lot of these projects are unfolding, whereas in the secure cards, it's somewhat more pent-up demand, which will saturate at some point. But the lion's share is RFID.

Congrats on the very good results and good outlook. The results came better than you expected, and I want to make sure I understand. I think at the beginning of the call, you said that the primary driver was an improvement in China. Is that correct? I'm trying to reconcile this with the idea that distribution was down as a percent of sales because I thought most of what goes on in China for you guys is through the channel. Is it just that the expectations in the channel and in China were so low you still came in low, but that's what improved through the quarter? Am I getting that right?

Yes. I'd say one part of it is China, where indeed it was less bad than feared in Mobile and Industrial & IoT. That's, I think, pretty much what you said. We took a cautious stance here because we had a really slow start in the beginning of the quarter. That gradually improved a bit more than we were fearing it would. However, the other side is more supply, which came into Auto and Comms Infra. So Comms Infra, as I just explained to Blayne. In Auto, the outperformance was also due to supply improvements. The important point is that the $121 million more revenue we did did not move the channel MOS up an inch. So that was really true good revenue, all the additional funds were truly realized. I trust you felt that we are at a pivotal point in navigating through this cycle, where we see that we are successfully navigating the consumer-oriented weakness in our business and seeing a change in slope of that business, while the Core Industrial, Automotive and also large parts of Comm. Infra. continue to be resilient and strong. If we put all of these pieces together, that leads us to what we said today, that the second half of this year revenue will be above the first half, and now also a guidance into the second quarter where each of our 4 segments is actually sequentially growing. And with that, I want to thank you all for your attention. Thank you.

Thank you, everyone, and this will conclude our call for today. Thank you very much.