NXP Semiconductors NV (NASDAQ:NXPI) Q2 2020 Earnings Conference Call - Final Transcript

Jul 28, 2020 • 08:00 am ET


NXP Semiconductors NV (NASDAQ:NXPI) Q2 2020 Earnings Conference Call - Final Transcript


Loading Event

Loading Transcript


Good morning, ladies and gentlemen, and welcome to the Q2 2020 NXP Semiconductors Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct question-and-answer session and instructions will follow at that time.

[Operator Instructions]

As a reminder, this conference call is being recorded. I would now like to turn the conference over to Mr. Jeff Palmer. Thank you. Please go ahead.

Jeff Palmer

Thank you, Jerome, and good morning, good afternoon, everyone. We hope you're all safe and healthy. Welcome to the NXP Semiconductors' second quarter 2020 earnings call. With me on the call today is Kurt Sievers, NXP's CEO and President, and Peter Kelly, our CFO.

The call today is being recorded and will be available for replay from our corporate website. The call will include forward-looking statements that involve risks and uncertainties that could cause NXP's results to differ materially from management's current expectations. These risks and uncertainties include, but are not limited to, statements regarding the continued impact of the COVID-19 pandemic on our business, the macroeconomic impact on the specific end markets in which we operate, the sale of new and existing products, and our expectations for the financial results for the third quarter of 2020.

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 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 the reconciliations of the non-GAAP financial measures to the most directly comparable GAAP measures in our second quarter 2020 earnings press release, which will be furnished to the SEC on Form 8-K and is available on NXP's website in the Investor Relations section at nxp.com.

I'd now like to turn the call over to Kurt.

Kurt Sievers

Thanks very much, Jeff, and good morning or good afternoon, everyone. We really appreciate you joining the call today.

Now, let me turn to our results. Our Q2 revenue was modestly better than the midpoint of our original guidance. Our Automotive business was significantly impacted by the COVID-19-caused factory shutdowns of our customers, though we did experience better-than-anticipated trends and sequential growth in all of our other end markets. We are encouraged by the positive trends we experienced in China and the sales out of our distribution channel did improve sequentially. Taken together, NXP delivered revenue of $1.82 billion, $17 million above the midpoint of our original guidance range.

Non-GAAP operating margin was 20.7%, about 170 basis points above the midpoint of guidance. We experienced slightly higher revenue with a higher proportion of distribution channel sales, we did deliver better gross margin because of a positive product sales mix, and all of this combined with tight control of our operating expenses resulted in better-than-expected operating profitability.

Now turning to the specific trends in our focused end