NXP Semiconductors N.V. (NXPI) Q4 2013 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Fourth Quarter NXP Semiconductors Earnings Conference Call. My name is Patrick, and I'm your coordinator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today's call, Mr. Jeff Palmer, Vice President of Investor Relations. Please go ahead, sir.

Thank you, Patrick, and good morning, everyone. Welcome to the NXP Semiconductors Fourth Quarter 2013 Earnings Call. With me on the call today is Rick Clemmer, NXP's President and CEO; as well as Peter Kelly, our CFO. If you've not obtained a copy of our fourth quarter 2013 earnings press release, it can be found at our company website under the Investor Relations section at nxp.com. Additionally, we have posted on our Investor Relations website a supplemental earnings summary presentation and a document of our historical financials to assist in your modeling efforts. This call is being recorded and will be available for replay from our corporate website. This 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. The risks and uncertainties include, but are not limited to, statements regarding the macroeconomic impact on the specific end markets in which we operate, the sale of new and existing products and our expectations for financial results for the first quarter of 2014. Please be reminded that NXP undertakes no obligation to revise or update publicly any forward-looking statements. For a full disclosure on forward-looking statements, please refer to our press release. Additionally, during our call today, we will make reference to certain non-GAAP financial measures, which exclude the impact of purchase price accounting, restructuring, stock-based compensations, impairment and other charges that 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 -- fourth quarter 2013 earnings press release, which will be furnished to the SEC on Form 6-K, and is available on NXP's website in the Investor Relations section at nxp.com. Before we begin the call today, a few housekeeping items. I'd like to highlight NXP's attendance at the following investor conferences during the first quarter: We will be presenting at the Goldman Sachs TMT conference on February 11 in San Francisco; and the Morgan Stanley TMT conference on March 5, also in San Francisco. And lastly, we would like to announce the save the date for our upcoming Analyst Day, which will be held on May 8 in New York City from approximately 8 a.m. to 1 p.m. We will be sending out a formal invitation in the coming weeks and would appreciate an RSVP if you plan to attend. I'd like to now turn the call over to Rick.

Thank, Jeff, and welcome, everyone, to our earnings call today. As this is our fourth quarter and full year report, I will spend a few moments highlighting key aspects for full year results before moving on to the details of Q4. Overall, 2013 was a very good year for NXP, and I would like to personally thank all of the NXP team for their very hard work in helping to deliver our results. We successfully delivered on most of the goals we outlined at the start of the year. The positive highlights include: First, we delivered very strong revenue growth. Product revenue was $4.68 billion, up 13% from 2012 against an addressable semiconductor market, which we believe to be about 4% to 5% in 2013. Overall, the HPMS segment revenue was $3.53 billion, up 19% versus 2012, with a broad-based growth as we continue to realize positive customer traction with our unique HPMS solutions. Looking at our focused HPMS end markets, we saw robust growth within our ID business, which was up 32% year-on-year to nearly $1.3 billion, due in part to the strong growth associated with initial ramp in our China bank card business. In our Portable & Computing business, revenue was $488 million, a 17% increase versus the prior year, as key wins in the high-end smartphones and tablet market continued to ramp throughout the year. In our Infrastructure & Industrial business, revenue was $729 million, up 15%, a result of good growth across nearly the whole portfolio, although partially offset by declines in our noncore silicon tuner business. Lastly, we experienced broad-based growth in our Automotive business, with revenue of just over $1 billion, up 9% versus the prior year, which we believe is stronger than the overall automotive semiconductor market growth. The second highlight is that we improved our overall profitability. Our overall non-GAAP operating profit, which we believe is a key performance metric for NXP, improved 34% year-on-year to 23.3% of revenue. This is very good performance, notwithstanding the challenges we experienced in our Standard Products segment in the first half of the year. Our non-GAAP gross profit margin improved about 15% year-on-year to 47.7%. Third, we generated $681 million in free cash flow, or approximately 14% of the total revenue. This was up 44% versus the prior year. Lastly, we improved our capital structure significantly and lowered our leverage to about 1.9x on an EBITDA-multiple basis, successfully achieving one of our long-term goals. We took actions throughout the year to further improve our very reasonable maturity profile, resulting in an overall blended cost of debt declining to 4.3%, over 100 basis point improvement, and moving the majority of our debt to fixed rate and unsecured. In summary, 2013 was a very good year for NXP. Let me assure the team has no intention to rest on its laurels. We will continue to invest in products and solutions that will ultimately delight and enable our customers' long-term success. Our product investments, plus the strength of the markets we have focused on, should result in our continued revenue outperformance versus both our immediate peers, as well as the overall semiconductor market. We will continue to maniacally focus on improving our long-term operating profitability. We believe this will translate into robust free cash flow generation from our current strong levels and provide the foundation for the company to continue to create significant shareholder value appreciation. Now I'd like to review the specific results for the most recent quarter. Overall, our results for the fourth quarter came in at the higher end of our guidance. Product revenue was $1.25 billion, a 3% improvement sequentially, and up nearly 17% versus the prior year period. This was about 200 basis points above the midpoint of our expectations, reflecting better-than-seasonal results versus the overall semiconductor industry. As a result of preference [ph], we would normally expect product revenue to decline about 4% to 5% sequentially into Q4. Total NXP revenue was $1.29 billion, nearly a 4% sequential increase, and up 16% from the year-ago period. Turning now to our segment performance. HPMS revenue was $957 million, an all-time record of the segment. HPMS revenue was up nearly 4% sequentially, and up 22% from the year-ago period. To put this in context, since the time of the IPO, the HPM segment has delivered average quarterly growth that is 4x the average quarterly growth rate of our HPMS peers over the same period, well above the objective that we had established. Now I'd like to review the results for our various HPMS businesses. Within our ID business, revenue was $329 million, flat versus the prior quarter, which was in line with our expectations, but still up over 13% on a year-on-year basis. Additionally, during Q4 as part of the program to monetize our IP, we were able to sign a comprehensive intellectual property licensing deal, which, over its lifetime, is worth about $40 million. This particularly -- particular deal included intellectual property and software licenses and is mainly in our ID business. The deal will impact our P&L for a number of years, and the impact to our Q4 EBIT was about $24 million. Order trends within the core ID business were in line with our expectations, declining about 2% sequentially, but up 30% versus the year-ago period, and the core continues to represent about 85% of total ID revenue. Within core ID, eGov, automatic fare collection and tags and labels product lines were all incrementally up in this quarter, offset by sequential declines in banking and infrastructure product lines. I believe it is important to highlight that our banking business is now up over 100% year-on-year and is now the largest revenue contributor in our core ID business. We continue to see the recent softness in end market, primarily in China, as only a temporary pause and fully believe that we will see a reacceleration of demand during coming periods. Within our emerging ID business, which includes mobile transactions and authentication, revenue was up 18% sequentially as a result of the noted IP licensing agreement but declined about 30% versus the year-ago period. I'd also like to take a moment and address a topic that has been in the news lately. As we have commented on for some time, there's a sizable EMV chip-based bank card upgrade cycle on the horizon in North America. We believe the recent highly-publicized credit card thefts at major retailers will ultimately prove to be an additional catalyst to move the upgrade cycle along. We believe NXP is ideally positioned in the secure banking market, with about 70% global market share. But beyond market share, NXP is the recognized leader in secure identity solutions, including government, banking, mass transit, point of sale and mobile transaction implementations. As we've said for some time, we believe our ID business should be able to sustain a robust compound growth rate for several years to come, and the global chip card banking upgrade cycle is only one of the growth areas. Moving now to our Portable & Computing end market. Revenue was $159 million for the quarter, an all-time high for the group, clearly reflected to the unique design wins we have won. Revenue was up 22% sequentially, better than our original expectations, and up 50% from the year-ago period. During the quarter, we experienced substantial growth in MCUs related to key design wins at a strategic smartphone and tablet customer, combined with very good sequential demand for our high-performance interface products. Within our Infrastructure & Industrial business, revenue was $194 million, down about 4% sequentially, slightly below our original expectations, while revenue was up about 20% versus the year-ago period. During the fourth quarter, after a strong Q3, our High Performance RF business for base stations was up modestly in Q4 versus the normal seasonal decline we would expect to see, while we experienced sequential declines in our silicon tuner business, and to a lesser degree, seasonal decline in our power and lighting business. Within our auto business, revenue was $275 million, a new record for the group, which firmly puts the business on a solid run rate in excess of $1 billion per year. Revenue was up 5%, better than our original expectations, and up 21% versus the fourth quarter of 2012. From a product perspective, we experienced broad-based sequential demand for keyless entry, car infotainment and in-vehicle networking products, while sensor products were essentially flat in the quarter. Finally, turning to the Standard Products segment. Revenue was $294 million, up 1%, slightly better than our expectations, and up about 2% versus the prior year. The key message on our Standard Products segment is the improving profitability profile. Turning now to our distribution channel performance. Total sales into distribution were up 3%, with sales out of distribution down about 1%. The total months of inventory in the distribution channel were 2.4 months. Inventory levels were still at the low end of the levels we would normally like to operate the channel at for optimal service levels and customer support. Absolute dollars of inventory in the channel increased about 7% on a sequential basis. In summary, our results in Q4 were very good, especially within our HPMS segment, as key design wins continued to contribute to our better-than-industry growth. We achieved record revenue levels in both our Automotive and Portable & Computing end markets. Looking at the full year, we clearly outgrew the markets and we -- that we operate within and believe this has resulted in positive market share gains for NXP. We are entering 2014 with a solidly improved financial profile. Our margins are up. Our leverage is down to where we want it to be, and we are generating significant positive free cash flow. We believe NXP is ideally positioned with the right mix of products, intellectual property, unique systems and application expertise, which will enable us to help solve our customers' problems. Our ongoing priority would be to improve the ability to consistently deliver solutions in a timely manner and we will structure our business to support this improvement, which help to enable our customers' success. Now with that, I'd like to turn the call over to Peter to discuss the financial details of the quarter.

Thank you, Rick, and good morning to everyone on today's call. As Rick has already covered the full year highlights, as well as the drivers of the revenue, I'll move directly to the highlights of the quarter. Overall, Q4 was a good quarter and better than our expectations. Total revenue, non-GAAP gross profit, operating profit and net income were all better than the midpoint of our guidance, which resulted in non-GAAP earnings per share of $0.99. Focusing on the details of the fourth quarter. Revenue was $1.29 billion, $28 million above the midpoint of our guidance. We generated $636 million in non-GAAP gross profit, $12 million above the midpoint of our guidance, and reported a non-GAAP gross margin of 49.2%, in line with the midpoint of our guidance. This was 240 basis points above our results in the previous quarter, with about 100 basis points of the sequential improvement resulting from the IP licensing revenue deal that Rick spoke about earlier and the remainder due to the combination of incremental revenue, pricing, mix and utilization. Now let me turn to the operating segments. Within the HPMS segment, revenue was $957 million, up nearly 4% over the previous quarter, with non-GAAP gross margin at 56.5%, 240 basis points above the third quarter. Non-GAAP operating margin was 30.3% of revenue, an increase of 310 basis points, primarily the result of the previously mentioned items. Within our Standard Products segments, revenue was $294 million, up 1% sequentially, with non-GAAP gross margin of 31.3%, a 210 basis point improvement versus the third quarter, primarily as a result of improved utilization and fall-through on the incremental revenue. Non-GAAP operating margin was 16.3%, a 150 basis point improvement as a result of the noted items, as operating expenses were essentially flat quarter-on-quarter. Total non-GAAP operating expenses were $313 million, up $30 million -- $13 million on a sequential basis, and in line with the midpoint of our guidance range. Please note our Q4 operating expenses included about $9 million associated with the Dutch crisis tax. The anticipated expense was included in our guidance for the quarter. For the total operating profit perspective, non-GAAP operating profit was $324 million and represented 25.1% operating margin. Interest expense was $39 million during the quarter. We finalized the refinancing of our 9.75% senior secured debt and essentially repriced our term loan due in 2020. Together, the 2 actions have lowered our overall blended interest cost to 4.3%, a 90 basis point improvement from the prior quarter. Noncontrolling interests were $19 million and cash taxes were $13 million. This resulted in total NXP non-GAAP earnings per share of $0.99, $0.04 better than the midpoint of our guidance and $0.14 better sequentially. Stock-based comp, which is not included in our non-GAAP earnings, was $31 million. Now I would like to turn to the changes in our cash and debt. Our total debt at the end of Q4 was $3.32 billion, a decline of $376 million, sequentially, due to the timing of the 9.75% debt exchange highlighted previously. Cash at the end of Q4 was $670 million, a sequential decline of $271 million, also a result of the timing of the noted debt exchange. We exited the quarter with a trailing 12-month adjusted EBITDA of approximately $1.38 billion, and our ratio of net debt to trailing 12-month adjusted EBITDA at the end of Q4 was 1.93x. Improving our leverage ratio was a significant milestone, an area of intense focus for the company, especially when considering the time of the IPO in August 2010, our leverage ratio stood at 4.2x. We've also improved our non-GAAP interest coverage from 2.4x at the time of the IPO to 8.3x today. We believe our leverage is appropriate given the size and cash flow generation of the company, and it provides us with a significantly lower cost of capital. We bought back 3.97 million shares at a cost of approximately $163 million or a weighted cost of about $41.07 per share. I'm also pleased to announce that the Board of Directors has approved a new 25 million share stock repurchase program. Consistent with our prior comments, we believe our shares continue to offer compelling value, and we will continue to be opportunistically active in our repurchase program. Turning to working capital metrics. Days of inventory were 96 days, a decrease of 5 days. And excluding prebuilds associated with the restructuring of our funds in Europe, our effective DIO was 83 days. Days receivable were 35 days, an increase of 4 days sequentially, while days payable was 71, a decrease of 2 days. Taken together, our cash conversion cycle was 61 days versus 67 days in the prior quarter due to better collections and higher sales. Cash flow from operations was $313 million and net CapEx was $70 million, resulting in positive free cash flow of $243 million or 19% free cash flow margin. Now I would like to provide our outlook for Q1. As far as the fourth and first quarters were our seasonally weakest periods. However, as Rick highlighted in his remarks, our Q4 results were significantly above seasonal norms. We continue to see constant trends across our business and view the demand environment incrementally better than we have in the past. With this as a background, we currently anticipate product revenue in the range of down 3% to down 6% sequentially. At the midpoint, we expect product revenue to be down about 4% in Q1, reflecting the following trends in our business. Within our HPMS segment, we expect Automotive to be about flat. Identification is expected to be down in the mid-single-digit range, with a sequential comparison influenced by the IP revenue in Q4. Portable & Computing is expected to be down in the mid-teens range, as seasonality in the high-end smartphone and tablet markets influence our outlook. Infrastructure & Industrial is expected to be down in the mid-single-digit range, primarily as a result of weaker demand in our emerging silicon tuner business. Standard Products is expected to be down in the low single-digit range sequentially, and we anticipate revenue from the combination of manufacturing and corporate to be approximately $35 million. Taken together, total NXP revenue should be in the range of $1.21 billion to $1.25 billion, or about $1.23 billion at the midpoint. We expect non-GAAP gross profit to be in the range of 48% to 49%, or about 48.6% for the midpoint. The sequential decline in gross margin is expected to be a result of lower IP revenue, the effective annual price reductions and slightly lower fixed cost absorption, offset by incremental cost of mix improvements. Operating expenses are expected to be about $308 million plus or minus $1 million, and this translates into a non-GAAP operating profit in the range of $276 million to $306 million, or about 23.6% operating margin at the midpoint. Interest expense on our debt should be approximately $35 million. I would like also to highlight earlier this morning we announced our intention to reprice our existing $486 million term loan that is due in 2017, with the terms and maturity remaining the same. We expect the transaction to reduce our interest expense and be accretive. The copy of the press release detailing the repricing can be found on our company IR website. As a result of the previously mentioned actions taken in Q4, combined with the repricing announced today, we believe our full year interest expense will be about $135 million. Cash taxes are expected to be roughly $8 million, and noncontrolling interest expense should be about $18 million. Stock-based compensation should be about $27 million, which is excluded from our guidance. Diluted share count should be about 256 million shares depending on share price fluctuations. Taken together, this translates into non-GAAP earnings per share in the range of $0.84 to $0.96, or $0.90 per share at the midpoint of our guidance. As we look back to 2013, I'd like to observe the following. It was a strong year for revenue growth, and I think we've clearly demonstrated we have a number of growth drivers which will benefit the company for a number of years. It was clearly a good year for cash generation, and we've begun to demonstrate the cash generation capability of the company. Our EBITDA margin improved dramatically, but we are still below where it needs to be. So we will consider our performance in 2013 to be a B, a B+ at best. Clearly, our expectation of ourselves is that we're at A+ performance and essentially need to continue to drive the above-market revenue growth and deliver EBIT margin in the 26% range, and this will be our focus as we go forward. I'd like now to turn it back to the operator, and we will be answering your questions.

Operator, please poll for questions, if you will.

[Operator Instructions] Your first question comes from the line of William Stein with SunTrust Robinson Humphrey.

I wanted to congratulate you on the very nice trend and in addition the big buyback that you announced. And I'm wondering if you can talk a bit, Rick, about your prioritization of cash flow. Your buyback seems to be a little bit less than 10% of the shares outstanding. What would cause M&A to prioritize above that? And what other priorities would you consider in the coming year?

So first off, thanks for the comments. I think we've been pretty specific on our capital structure that until we achieve this low 2x annualized EBITDA, we've been maniacally focused on paying down debt. So that's a significant achievement for us to be down at the 1.9 level here in Q4, which basically, as we've said, gives us another tool in our toolkit where we could consider acquisitions so long as they weren't of the size that we couldn't repay back within 3 to 5 quarters. So I guess all we're trying to say is we now have the ability to consider M&A opportunities as they become appropriate and which would expand our growth above the organic growth objectives that we've set as a company well above the marketplace growth. Relative to the focus, so long as our stock price continues to trade at a significant discount to our peers, then we plan to continue to be focused on stock repurchases, indicated by the 25 million shares, or basically $1 billion committed to -- over $1 billion committed to in the stock repurchase. So that will continue to be our priority. If we were to see our market price increase to more in line with our peers, then at that point in time, we clearly would be in a position to consider dividends as well. We'd have a little bit of work that we would have to do associated with some of our debt structure to be able to achieve that. But clearly, that's not something that we're working on in the near term so long as we continue to trade at a significant discount to our market peers. But our primary focus and objective will be on continuing to buy back our shares in the marketplace, as you've seen over the last couple of quarters.

That's great. I appreciate that. If I could follow up with one more on the ID end market, could you talk a little bit about the impact of the IP licensing deal, maybe clarify the comments around the contribution in the quarter and in future quarters? And then also, any view on when China, the PDOC [ph] or their equivalent to their EMV initiative might come back, and your view for the full year growth in that market?

Yes. So on China, let me address your last question specifically first. We've said that we expected their supply chain to be kind of stopped as they're trying to distribute the cards that we distributed earlier on. And we would not expect to see a resurgence of growth in the China contactless banking market until kind of the springtime. So we still believe that to be the case. It's a huge market opportunity still, and one that we think our leadership position can continue to bear fruit. But clearly, the recent activities in the U.S. banking business present opportunities for growth, maybe late 2014 and 2015. As we've talked about, we have our ID business expected to grow in the mid to high teens for 2014, and those are clearly the contributing factors, or some of the contributing factors, to give us the comfort with that rather bold commitment about the continued growth of that business, which continues to grow well above semiconductor industry growth. And our leadership position there continues to bear significant fruit.

And Will, along the -- on the IP deal, so we signed an overall deal, as Rick mentioned. The total value was about $40 million. The impact on profit in Q4 was about $24 million, which is just over 100 basis points impact to our gross margin and EBIT. In terms of kind of how it plays out, the balance will be reflected in our P&L over the next couple of years. And as you know, these deals are never simple. They involve lots of different aspects of the business.

Yes, and if I could just add one other thing to that. It will require that we increase our operating expenses a little bit going through this period of time with the implementation associated with it. So -- but hopefully, with extremely good pay-off over the long term.

Your next question comes from the line of the Vivek Arya with Bank of America Merrill Lynch.

So Rick, Peter, you had very strong growth and execution last year. How should we think about the sales growth and profit growth, just conceptually for 2014?

We've consistently said that we want to outperform the industry by at least 50% on the growth rate basis. We've clearly been able to demonstrate well above that through this period of time but believe that we have the design wins and the product portfolio in the right markets -- right end markets that will continue to support growth well above the overall semiconductor market. So that clearly gives us a solid base, as we believe that strong revenue growth is the key ingredient in appreciating our shareholder value. And then from a profit viewpoint, we've set profit objectives, we want to ensure that we perform at the top tier level in operating income, and it continues to be the highest priority focus we have going in 2014. So I would expect us to continue to see improvements in our operating income percentage performance. And clearly with the strong cash flow generation capability that results in, we'll have the opportunity to maximize the impact on our capital structure and thus our shareholder value.

Got it. And as a follow-up, I think, Peter, you had alluded to reaching 26% EBIT margins. Is that a goal for this year? Is it a goal for exiting this year? Or -- and just beyond sales growth, what are the other levers that you have to reach that goal?

Okay, I guess a couple things. One is I'm not going to give full year guidance or guide Q4 '14. Our target is to get to 26%. And as I mentioned in my remarks, until we get there, I won't be happy. I don't think there's any kind of magic levers. I do think we have the ability to grow more than 50% faster than the market, obviously that's a help. We need to continue to work on all the things that good semiconductor companies do. So improve our yields, manage our costs, improve our mix, manage our pricing, but there's no one big lever. I think the one thing I would add is we have no intention of going above 26%. So to the extent that we see opportunity to do that, we would invest more in R&D. So in your models, you should not assume we get beyond 26% on an annualized basis.

Got it. And just one last one if I may. I think you have said previously that the Standard Products business is nonstrategic to the business. You have seen very good profit improvements there. Any progress in looking at potential divestments? And just given the profit contributions from that group, is there a way to make any potential transaction neutral to earnings? Just conceptually, how are you thinking about that business as part of NXP?

I don't think there's a lot of point in us talking conceptually. Our view on Standard Products is -- has not changed. And clearly, we wouldn't talk about any specific M&A, if there was any.

But the key focus for us is to continue to improve the performance of that business. And while we've made some good progress, we still have more progress to do. We think the best thing that we can do is continue to improve the performance, which, by the way, is already well above the industry average of the competitors in that space. But we think we've got a superior business, and we want to continue to operate it to the fullest extent possible. But clearly, our priority and focus on growth is in our High Performance Mixed Signal areas, where we have a much stronger application spaces and direct connectivity with customers, but we have extremely solid Standard Products business that we think can get -- continue to make progress into at least 18% plus operating income levels, and that's our focus associated with it.

Your next question comes from the line of John Pitzer with Crédit Suisse. John W. Pitzer - Crédit Suisse AG, Research Division: I'm kind of curious, this time last year going into 2013, you guys had some pretty high-profile potential socket wins that were maybe kind of for us from the outside looking in, kind of look at and see outsized growth. I'm kind of wondering this year if you can help us out a little bit. As you look at about outgrowing the industry in '14, what are the top sort of 2 or 3 areas either by end market or specific products that you think are going to show the most outgrowth for you guys throughout the balance of the year?

John, we've already stated pretty clearly that we think our security business -- our ID business will have the opportunity for mid- to high-teen growth, which puts us in a very strong position, that's with design wins. Clearly with the banking business coming back on in springtime, on the China contactless banking market, with the beginning surge and more obvious growth of the banking in EMV being a significant contributor associated with growth in that as well. We talked about our P&C business based on the design wins we have and the position we have with the strong customer relationships in those design wins, clearly being able to grow kind of in the mid-teens basis. And our I&I business, which will have some upward pressure because of the kind of turn on of the -- finally of the base station market, we have low double-digit, as we had some tempering factors based on our kind of our nonstrategic silicon tuner business that we expect to continue to see very strong growth in our HPRF business focused on base stations. And in our Automotive business, we've talked about kind of mid- to high-single-digit growth which is, clearly we believe, a strong position in the industry. So we have extreme confidence in continuing to outgrow the industry. There's been some people that have talked about the outgrowth of the industry is -- we demonstrated, and give us credit for that, and say that there's not more -- any more to be had. And clearly, we see the design wins and the customer relationships to continue that for the foreseeable future. So for the next 12 to 24 months, which is kind of as far out as you have any relative confidence level in your overall growth rate, but we feel very comfortable with that, and we think that we'll continue to deliver the performance associated with that. John W. Pitzer - Crédit Suisse AG, Research Division: Rick, that's helpful. Maybe as my follow-up, I always hate to use the word normal seasonal because there's so much variance in this industry around seasonality. But it sounds like despite the better-than-seasonal Q4, the guide for Q1, I guess I should look at through the window of your view of normal seasonal. But I'm wondering if you can help out, just given the growth in P&C, how is -- how do you think seasonality is evolving through the model? And as you think about Q2, Q3, Q4, how do we -- how should we think about kind of a baseline normal seasonality for the business?

First off, I think we would agree with you that seasonality is hard to track and changes every damn year. So I'm not sure that seasonality can -- you can draw a lot of conclusions from it. I think the one thing that's important in what we've said for first quarter is you have to realize that we outperformed in Q4. So that tempers the growth a little bit in Q1 as you look at it. So I think we feel very good about our Q1 outlook contributing which, clearly if you look at on a seasonal basis, is usually down as Q4 is usually down. We were able to outperform that in this Q4 with our performance. But then we see usually from there an uptick in Q2, and probably the strongest quarter of the year in Q3, typically a little bit of a decline in Q4. This year, we were able to offset that -- this year -- last year in Q4 that we just finished, we were able to offset that. But we actually think that our Q1 outlook is quite strong and above where most people were but from a higher base from Q4, which actually tempers the growth a little -- or reduces -- makes the decline from a higher point a little bit. So we think that the performance even in Q1 is above what we would have been talking about 90 days ago. It's just that from a Q4 basis, it doesn't have something that's much different than a typical seasonal basis.

Your next question comes from the line of Blayne Curtis with Barclays.

Rick, you kind of touched on this, but the outlook for the I&I business, can you talk about what you're seeing on the infrastructure side? And then are you seeing that headwind in silicon tuners continue into Q1?

The silicon tuners business is one that -- there's a lot of people talking about focusing on that area. We're clearly still the industry leader, but we're not focused on it as a strategic area and so -- just because of the competitive nature of it, and it doesn't support the profit models that we want to achieve. So we'll see. We'll continue to see some headwinds on silicon tuner. I would tell you that our base station business -- when we had the earnings call last quarter, we talked about that we were yet to see the recovery in China. About 2 or 3 weeks after that, we began to see customer orders coming in significantly. And now we see -- we actually have difficulty in fulfilling all the customer requirements where they've increased their orders significantly. If you look at the growth that we've had in our base station business, it's been very strong, and we expect that to continue throughout 2014. And so if anything, we might see some upward pressure in that portion of the business. But the key thing for us today is to be able to meet our customer requirements and ensure after we've been successful at winning these design wins, now that it looks like the demand is truly there, that we're able to support our customers. But yet we want balance that off and be sure that we don't -- with the orders going up 2x and 3x in a matter of a couple of months, we want to be sure that there's not double and triple ordering so that we have fixed assets we put in place that are not able to be utilized. So the balancing act for us is to put the right level of capital investments in place to support the design wins we have and be able to support our customers with clearly an uptick of base station deployments around the world, not just in China, but actually orders coming from around the world based on the continuing desire to expand the networks and improve the performance associated with that in most developed regions of the world.

And then you touched upon some of the growth drivers in core ID. I was wondering if you could touch upon emerging ID and particularly, NFC outlook for this year.

So last year was -- obviously with our Q4 results, it's pretty obvious was a slow year for us because we had gone through a period of time where we had done the Galaxy II and III, and we were pretty public about losing the Galaxy IV. So we would not expect to see a strong resurgence in NFC the kind of middle of the year. We think there are clearly a lot more increased activity on the mobile wallet. And we're very encouraged about the activity, with the potential of it being much more successful with the deployment than what we've seen in the past from the customers we worked with associated with that. So I would say we're very optimistic about growth in the mobile wallet space, and the opportunity is for that to become a much more significant convenience factor for the consumer as we look out into the second half of this year.

Excellent. I'm going to squeeze in one more for Peter. The gross margin guidance is actually quite strong if you pull out the IP impact. Particularly, Standard Products is back over 30%. Can you keep it at this level? And are you looking at this business a bit differently given what happened last year?

Well, I think we always said we feel Q1 and Q2 was the aberration where we're performing today. So yes, we think we can keep it at 30%.

Blayne, if I could, I think the one disconnect we saw is the investors' view on Standard Products as being a impacted business, and we've never viewed it as that. We knew it had some issues, we knew we had to get through it, but we never saw it as an impacted business that was not -- that couldn't generate at least low 30s gross margin and kind of high teens operating margin if it was running correctly.

And so Blayne, well, our focus is on continuing to make improvements from where we were in Q4. So it's -- we would not expect to see us slip back from those levels, but yet continue to incrementally improve from that to get to those margin levels that Jeff talked about. So we believe we have the best performing Standard Products business in the industry. And the key is just the cash that it generates and the customer relationships associated with it and how we can take advantage of that as a company, drive more growth associated with our High Performance Mixed Signal business.

Your next question comes from the line of Craig Hettenbach with Morgan Stanley.

Just touching on the Automotive business and the $1 billion run rate. Can you talk about trends you're seeing from a dollar-content perspective? And then on that very strong growth, is there anything to note by geography or penetration that's helping you out?

Well, the strength we have, it's really been the underpinning -- from a different factor than just the normal growth of the market is in our car infotainment business, where over the last few years, we have now won 27 of the 28 mid- and high-end car radio platforms. And we want to go win the 28th as well, but there's like roughly 4 to 6 of those that we've won over the last year, 1.5 years, that are still -- that ramped in 2013 and are still in the ramp phase in 2014 as they shift from their previous suppliers to our products. So clearly, that's been the most significant growth segment that we have in our Automotive business in the near term, and then the rest of it is continued design wins. We had a design win with the second largest U.S. automotive manufacturer on keyless entry that we started shipping 1.5 years, or a year and change ago. And we continue to ramp additional models associated with that and contribute to our growth associated with it. As we look forward, we're quite excited about the U.S. announcements that took place earlier this week on vehicle-to-vehicle communications, where we clearly believe that we've [indiscernible] out and have a leadership position, taking basically the software defined radio from our car infotainment to be able to provide a bridge and work with Cisco in the infrastructure side, and we both have invested in a software company to be able to do the -- facilitate the software stack associated with that. So we're quite excited about the opportunity on vehicle-to-vehicle communication. So as the Department of Transportation talked about, significant reduction in accidents and ability to save lives with just improved intelligence in the car. So we see that over the intermediate term, not significantly in 2014, but in the intermediate term as being another significant opportunity for growth in our Automotive space.

And, Rick, the geographic concentration will considerably [ph] -- real concentration we can highlight.

I think the only thing I would say is, is we clearly continue to see weakness in Southern Europe, but Northern Europe and North America, China, I guess the one thing that we should probably comment on, while we've been the fifth largest semiconductor supplier worldwide, in China, we moved up from being the third largest in 2012 to actually the leading -- actually, that's in 2012, to the leading semiconductor supplier in China. So the growth that we see in China is probably the strongest segment, followed kind of equally by North America. And -- I should be careful, China, plus developing countries, is where we see disproportionate growth, with North America and Northern Europe being next, and clearly, some weakness in the Southern European customers.

Got it. And then just as a follow-up, can you talk about your expectations for the business -- the channel this quarter? You mentioned last quarter sales into distribution were a little bit higher than sales out. How are distributors managing business today? And any comment on kind of order trends there?

Yes. I think what you actually see in the most recent quarter is we had one product line that we had not been able to really get any inventory into distribution because we didn't have the capacity available to do that. So we didn't have sufficient levels to be able to support our distribution partners with that, and we were able to kind of fix that in the current quarter, which was one of the factors about the sell-in versus the sellout in the current quarter. I think as you talk to our distribution customers, they're beginning to be much more optimistic relative to demand, and that's delightful since it's the first quarter in quite some time that I had been able to say that. But I think we do see from our distribution partners more of a positive perspective about demand. And frankly, we'd like to see our inventory levels edge up a little bit from where we were in the current quarter. We're up a little bit in -- at the end of the year, and we'd like to be able to take that up a little bit more as we move forward.

Your next question comes from the line of Ross Seymore with Deutsche Bank.

You went through a lot of auto business commentary there a bit ago in the last question, Rick. But there's been some investor concern of late, just the last couple weeks, about rising inventory and potentially slowing demand. Could you give any color commentary on what you guys are seeing as far as any near-term trends in that business?

We're removed from that. So if there's car inventory that takes place, to be fair, it's not as efficient a supply chain, so it would take a little while before we would see the factory orders. Where we really see order -- or as they go through of manufacturing, so they would have to adjust their manufacturing levels. And we have not seen any significant weakening in the pool from the vendor-managed inventory that would indicate any slowdowns relative to production. I think the one thing you have to also be thoughtful about, Ross, is the real growth factor that we believe will be a contributing factor for 2014 is in the developing countries and in China. And it's amazing how China is moving from low-end models to mid- and higher-end models all the time as well, which obviously plays to the semiconductor content. But I don't think -- I think it's a little early. And clearly, with the inventory levels, at least what I've heard about it being a lot concerned about the weather, I think it's a little bit early to be overly concerned about the demand in the automotive space. We still see very healthy demand in developing countries, China, and frankly don't see a slowdown or significant adjustment in Northern Europe nor in North America. But I saw the same report inventories, although I understood it was significantly a factor of weather related.

Great. And I guess as my follow-up question, a bit of a longer-term one. Everybody here in the U.S. obviously is excited about the EMV thing and that transition beginning. What sort of help could you provide us, if any, on sizing the absolute opportunity, the TAM that, that represents in your mind? And any sort of color on the timing when you think that ramp will begin?

So Ross, there's a lot of people that get paid a lot more money than I do to project when EMV is going to take place -- I mean, when electric vehicles are going to take place. On electric vehicles, I think...

I actually meant the EMV for the banking side.

On the banking side, it's up. Okay. So I think there's clearly going to be more pressure to pull that in than what we've seen before. We've been talking about that as being a contributing factor in the growth opportunity that we see in our ID business and will make that a more sustainable growth as it gets pulled in and ability to contribute more in the following year associated with that as well. I guess the real key for us in our security business is the broad breadth of the product portfolio that we have, everything from the infrastructure side that's required as there's improvements in the contactless banking, even RFID tags with accelerated deployment associated with that, transportation ticketing, so I don't think there's any one thing associated with it. I clearly do believe that there will be some significant pressure on EMV. We clearly are a leader in the banking market, so we want to be in a position to take advantage of that. And we're working with our customers to be able to look at what can be done with -- like the programs to be able to support the retailers that have identified the specific issue associated with it. But we clearly believe that it's about time that the U.S. get in line with the rest of the world and reduce the fraud rates, which clearly, EMV is an opportunity to be able to accomplish that. And we've been pushing that for some time and plan to continue to be there to support our customers in the deployment of that.

Ross, if I could just add to your one question about sizing. I'd say if you look at some of the data from people like EMVCo, in North America, the card size is probably 1.5 billion cards. But don't get yourself too excited to think that, that's all going to get upgraded in a 12-month period. It'll take several years to just upgrade it. So while we're excited about the opportunity, we don't want you guys putting it in your models for the next 2 or 3 quarters.

Your next quarter comes from the line of Chris Caso with Susquehanna Financial Group.

I'd like to just come back to some of your comments about inventory in the channel. It seems a bit unusual that the inventory in the channel has stayed this low this far into a recovery. Do you think, going forward, there will be a catalyst for the channel become -- bring inventory back to -- closer to historic levels? And what impact would you expect from that? Or do you think that there's a sort of a more permanent phenomenon of the channel and I guess customers in general just running the inventory a lot more lean than they have in the past?

Well, I think calling this a recovery may be a stretch. It's somewhat [indiscernible] recovery to say the [indiscernible] say that up to this point in time. I think on the inventory channel, it's always an arm wrestle, especially with the 2 U.S. major partners indistribution as they're focused on terms and earns, and they try to keep their inventory as low as possible. And we try to keep their inventory at somewhat reasonable levels to be able support our customers associated with it, which is the reason we pay them the margin associated with it. So I think the key thing for us this quarter was we had one specific product line that we were able to put some inventory in place to support our customers going forward. I would like to personally see our months of inventory jump another 1/10 or 2 over the next quarter so. I think as our distribution partners begin to feel better about the general economic environment, then we'll see them much more willing to do that as well. And clearly, there's some initial signs of that, which is encouraging because we haven't seen that in the past quarters. Always before in the general economic environment, we've talked about a very anemic overall economic viewpoint. And I think we are beginning to see signs and signals of an improved economic environment with random indicators and not anything as specific. Even though you continue to have concerns like the China reports that came out in not -- in the last week or so. So I think the key for us is, is we want to continue to edge up our inventory levels a little bit, so as the market takes off, we're able to support that. One of the best examples of not having sufficient inventory is the base station increased demand we see now where we're clearly struggling to be able to support their demands. And we actually have another product area or 2 where we're having issues in being able to support significant increases in demand from our customers.

Okay, great. As a follow-up, with respect to the margins, and clearly, you guys achieved what you set out to do with respect to the margins over the last year. Can you talk to what you can do to keep them there? And of course, I agree with your comment that it hasn't been a very strong recovery so far. And hopefully, it gets better, but the industry is still cyclical. And I guess what do you guys -- what can you guys do when, inevitably, things slow and kind of convince the investors this operating margin structure has a degree of permanence to it?

Well, I think -- it's Peter. I think there's a couple of things. First of all, our -- first of all, we have a very significant -- course of our cost is variable, all right? So you don't really see huge improvements in our profitability because our revenue increases. At the same time, you are not going to see huge declines in our profitability if our revenue was to decline. I think the key really is the markets you take and the positions you have in those markets, we're very, very focused on having a relative market share of 150. So we don't just want to be #1 in the market. We want to be significantly larger than the next person there. I think if you look at our Automotive business, the pricing structures we have in there, the long-term pricing structures, sometimes it's kind of frustrating from our perspective as we have to -- not we have to, we've agreed annual cost reductions to our partners that we have to support. But in the end, it's having good products and good markets, continuing to manage your costs, continue to work with world-class suppliers, continue to improve our yields. So I don't think we're as subject to cyclicality as you may think we are.

I guess the only other thing I'd like to add to that is, is when you look at our business mix, with our Automotive business and our ID business, which, combined together, are over half of our total business. Clearly, the Automotive business follow the typical semiconductor cycle. And our ID business, if you look at the demands associated with it, really follows more of a project-by-project orientation and the ramp-up of deployments of those projects, which is not really following the semiconductor -- typical semiconductor cyclicality either. So we're kind of at least immune in a significant share of our business to typical semiconductor cycles themselves. And then as Peter talked about, I think with the cost structure we have in place, you would not see the same kind of fall-through or impact if there was any semiconductor cycle pressures on the remainder of the business.

Your next question comes from the line of James Covello with Goldman Sachs.

First question on the ID segment. You guys had tremendous growth there on a year-over-year basis, 32%. On a sequential basis though, that business hasn't grown in a year in terms of quarter-over-quarter growth, inclusive of the first quarter guidance. You mentioned the springtime as a potential rebound sequentially in that business. Should we expect to see a significant sequential rebound maybe in Q2 in order to put us back on that mid- to high-teens growth trajectory? Or is that going to be something that kind of more gradually ramps in?

So I think your point is well taken about the sequential growth. They're -- are relatively kind of flat on a sequential basis. But still, our ID business was up 20-something percent. Actually, our core was up...

Well, the core...

30% versus a year ago.

Yes, the quarterly business is up 13% year-on-year, all in.

In total, but the core itself was...

It was up 30% year-over-year.

Up 30% year-over-year. So I think you go through -- with a business as broad as that business is with the different customer basis and the different products that are shipped there, it's a combination of a number of things, Jim. And when we talked about a resurgence, we're really talking about the contactless banking in China beginning to come back in second quarter. Clearly, as the concern in the U.S. on EMV will be a contributing factor to increased growth associated with that business. And then we talked about with the interactions and work that we're doing with a number of players on the mobile wallet, we expect to see a significant improvement in that kind of mid to -- midyear as well, midyear to fall. So I think we feel very comfortable with mid- to high-teens in that business and with a broad basis and continuing to see very strong growth. So I think that we're going to go through this period just a little bit of a lull based on the mix of businesses we have and would clearly expect to see some improvement in the Q2 time frame and continue to see that improve beyond there as well, Jim.

Very helpful. And if I could get some perspective. If you can help us to understand your comment about the significant discount to the peer group. What metrics are you using there? Is that a cash flow-based multiple or earnings-based multiple? And are you including stock-based comp expense in there? And are you including the Standard Products peer group? That'd be helpful.

Yes, we shouldn't be telling you guys about the multiples associated with it. Hopefully you guys can do the calculations. I mean, clearly, every calculation we look at, we are a significant discount to our peers associated with it when we look at it on a normalized basis. But the key for us is we're going to perform, and you guys can determine the appropriate value associated with it. But we know that we can continue to outperform marketing growth. And if you look at most industries, a company that grows higher than the peers actually has a trading multiple that's above the peers as opposed to a discount to the peers. But any multiple we look at, we trade at a discount to our peers associated with it.

Including and excluding stock-based comp.

Your next question comes from the line of Steve Smigie with Raymond James. Jonathan Steven Smigie - Raymond James & Associates, Inc., Research Division: I just want to clarify some of your earlier comments on market share in the banking card business. I thought I heard you say 70%, and I think at your Analyst Day you said overall, you're 44%. And I thought the MIFARE was 70%, so backing into that seemed like banking card would be lower, so if you can just clarify that. And then as we think about EMV in the U.S. and more banking cards in China, can you talk a bit about your competitive advantage, maybe from a technologies perspective, why will you continue to win in these markets versus some of your competitors?

So I'll take the comment on the market share, Steve. So at the Analyst Day in '12, that was before the significant acceleration of the China banking upgrade cycle. We went through a kind of a review today, just in the last few days, and we still think our market share on a global basis, in the banking card market, is about 70%.

And that clearly comes from a transition of the marketplace to -- from mag stripe to contactless, with contactless growing very rapidly and mag stripe actually decreasing associated with it, and our strength focused on the mag stripe. Our position and what really has facilitated our leadership in the China banking market is the dual interface standard where we're kind of a leader in establishing that. And it comes down to not only the security you provide, but the speed with which you have the ability to read on the card from a contactless viewpoint as well. So that leadership position, on the combination of the speed, as well as the security, is really what continues to position us very well and in a true leadership position. If you look at the MIFARE, our market share is actually more like 85%. And it's really a different market not included in that bank card market. So it's a separate market. And on the infrastructure side, we continue to be something in the 75% to 80% range as well. So our leadership position in ID is one that we've invested in for a long time, worked on in for a long time. And it really comes as much from the fundamental core security technology that you have in-house, which really has nothing to do with the semiconductor business. It's the cryptology and the software associated with it where we believe we have some of the world-leading experts to be able to facilitate that and will continue to be a significant factor for NXP as the industry grows. When you start looking out at the Internet of things, you're going to want to be sure that each one of those things has some level of security associated with it. So we think that the position that we have in security plays well to that overall continued growth. And one of the reasons we feel as comfortable as we do about having a conviction in outgrowing market by at least 50%, and as we've demonstrated since the IPO, actually outgrowing the market by over 4x. Jonathan Steven Smigie - Raymond James & Associates, Inc., Research Division: Okay. That's very helpful. And then just in the emerging identification, so excluding NFC, but looking at some topics you touched on today, and as you mentioned the past. You've talked about tagging, you talked about authentications/cyber security. Can you talk about if those have been developing here as you might thought? And could those be significant dollar drivers over the next year and 2 years?

So one of the things that we continue to be extremely excited about is our authentication business. And we've talked -- actually Google talked at a conference now about NXP being the supplier for their so-called newbie [ph] device, which is a physical device that they now use where your computer has to have that physical device before you can access their cloud at the enterprise level, so it provides a much more robust security with a handshake to be sure that there's not tampering. It reduces the risk of tampering and cybersecurity associated with it. And also one of the things that they're looking at for their consumer users offers the opportunity to store your password information so you don't have to have a piece of paper you carry around, or like I typically do, forget my password when I go to a site I haven't been to in a month or 2 and have to re-create the password. So I'm actually looking forward immensely to the rollout of this to the consumers so I can actually implement that. I don't think that it'll be a huge growth factor in our ID business for 2014, but we believe out beyond the current year and looking forward that the authentication of the cloud, that NXP, because of the actual security leadership position we have in the technology basis, we can play a significant role in the security -- in the cybersecurity protection associated with access to the cloud.

And your final question comes from the line of Vijay Rakesh with Sterne Agee. Vijay R. Rakesh - Sterne Agee & Leach Inc., Research Division: I had a question on the banking side. Obviously, 1 billion to 1.5 billion cards in the U.S., big opportunity here, even with a -- even if you take 20% to 30% penetration, that's much bigger short-term opportunity than anything that you had before. What are the signposts that investors should look at to see that ramp? And also on the NFC side, you mentioned a midyear ramp. Is that for the marquee phones? And on the IP, are you going to add any more licensees as you go through 2014?

You've got a number of questions there, Vijay. So on the IP, we talked about our IP monetization, so we plan on continuing to work that diligently associated with it. We have lawsuits in place with some potential people that we believe are infringing our patents. We expect to continue to move those forward, so we'll have income associated with that. So it will be in a different form than what we talked about. But we think going forward, IP becomes the significant factor in being able to protect our market position and be able to provide our customers with a solution that has a -- and more secure from an intellectual property protection basis than the alternative. So we do believe that, that's significant, but we have also an IP monetization program that, as we've said, we want to be sure can contribute about 100 basis points of our profitability on a full year basis, and although it'll be choppy on a quarter-to-quarter basis. On your comment on the banking, at 20% to 30% share, I should be fired and our team should be fired if we were to let our market share on that go down from the 60%-plus level. 60%, 70%, down to 20%, 30%. So I would expect that on that opportunity, we would clearly have the same kind of market share we demonstrated in that market. So I think we plan to be a leader in the deployment of that and be sure that we work with our customers because we're not -- there are partners that we work with in being able to provide that fundamental technology, but we clearly believe that we should be a leader. The real question is, is how rapidly that will develop. And we've said that all along that we think it will be much more of a growth factor late in 2014 and 2015. That could get pulled in a little bit, but we don't think it'll be overall very significant associated with it. And I apologize; I forgot what your middle question was. Vijay R. Rakesh - Sterne Agee & Leach Inc., Research Division: Oh, it was on NFC, on the ramp. And maybe -- by the way, on the banking side, my question was more -- even if you see a 20% to 30% penetration off the 1 billion cards, there's a big opportunity for you. I know you guys are the leader there, so...

Oh, you're talking about more of the ramp-up associated with that? Vijay R. Rakesh - Sterne Agee & Leach Inc., Research Division: That's right.

Look, the bottom line is, is we want to be sure that we can provide the technology and provide our customers with ability to win in that space and be able to protect financial transactions so they're done in a much more secure fashion. I just saw a report yesterday that said the fraud rate in the U.S. was twice the fraud rate in the rest of the world where EMV was implemented. So clearly, it's a factor associated with it.

I mean, this is not new news to us. It's exactly what we've been saying for the -- I don't know, the past year or so. Clearly, it's been our expectation that ID can grow in the mid to high teens on a compound-annual basis over the next few years. So it's glad to -- it's good news that everyone is realizing -- everyone else is realizing this is an issue, but this is not new news.

And relative to the mobile wallet, I think we probably just should say that we see the opportunity for a significant increase or step-up kind of in the second half of the year associated with that with the customers that we're working with. Vijay R. Rakesh - Sterne Agee & Leach Inc., Research Division: And that's for smartphones, mobile wallet kind of thing?

Yes. Vijay R. Rakesh - Sterne Agee & Leach Inc., Research Division: Got it. And my last question, on Ethernet and cards, it looks like there's a big opportunity going forward with a lot of guys talking about Ethernet. How are you guys positioned there with your wins? And how do you -- how are you looking at the transition from CAN to -- CAN/LIN to Ethernet?

Well, first off, we think that they will coexist. We also should be sure that we don't lose FlexRay. When it comes to safety in-vehicle networking, FlexRay is still very significant, associated with it. So as the industry begins to move to Ethernet, one of the things that we've done is worked on being able to provide that. And actually, our customers has encouraged one of the leaders on the commercial side of Ethernet to be able to work with us in providing that same core technology that would be sufficiently robust to be able to support the automotive market. So we see it as a significant opportunity and one that we want to be sure that we continue to be a thought leader in the overall in-vehicle networking capability within the car.

Operator, we'll probably going to have to end the call now. Rick, would you like to make any final comments?

Sure, Jeff. Thanks. So listen, we thank all of you for your continued interest in NXP. In summary, we believe our results in 2013 demonstrate measurable success in executing our long-term strategy, specifically our full year revenue growth of 13%. We believe NXP achieved clear share gains in multiple HPMS markets. We made good progress towards our profitability goals, but we still have work to do there, and it's clearly one of our key focus priority areas. Full year HPMS revenue growth at 19% showed the increased traction in operational performance solidly within our long-term model. Every one of our HPMS businesses delivered robust growth in excess of the semiconductor market, and our design wins that we've been able to achieve will support continued growth well above the industry average. We generated significant improved free cash flow of $681 million, and we will continue to see that improve as we go forward. We believe NXP is well positioned to consistently outgrow its overall peer group, and although as we mentioned, trading at a significant discount to the peer group. So thanks a lot for your interest and support, and I look forward to our future discussions.

Thank you very much. With that, I'll end the call. Thank you.

Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect. Have a good day.