Good day, ladies and gentlemen, and welcome to the Fourth Quarter 2018 NXP Semiconductors Earnings Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] And as a reminder, this conference is being recorded. I would now like to hand the call over to Mr. Jeff Palmer, Vice President of Investor Relations. You may begin.

Thank you, Amanda, and good morning everyone. Welcome to the NXP Semiconductors fourth quarter and full-year 2018 earnings call. With me on the call today is Rick Clemmer, NXP's CEO; Kurt Sievers, NXP's President; and Peter Kelly, our CFO. If you've not obtained a copy of our earnings press release, it can be found at our company Web site under the Investor Relations section at nxp.com. This call is being recorded and will be available for replay from our corporate Web site. On our call today, we will include forward-looking statements that involve risks and uncertainties that could cause NXP's results to differ materially from management's current expectations. These risks and uncertainties include, but are not limited to, statements regarding the macroeconomic impact on 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 2019. Please be reminded that NXP undertakes no obligation to revise or update publicly any forward-looking statements. For a full disclosure on our 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 compensation, impairment, merger-related costs, 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 fourth quarter earnings press release, which will be furnished to the SEC on Form 6-K and be available on NXP's Web site in the Investor Relations section. Before we begin the call today, I would like to remind you that beginning January 1st we have shifted our revenue reporting to an end market view from an operating segment approach. We believe this change over time will enhance the insight into the drivers of our business relative to the markets in which we operate. The current and historical end market information is available from our Investor Relations Web site in the historical financial model, which we post every quarter. And now I would like to turn the call over to Rick.

Thanks, Jeff, and welcome everyone to our conference call. On today's call, I would like to cover three major themes: our full-year financial performance, our view of the market environment in which we operate, and then the specifics around our fourth quarter performance. Overall, looking at 2018, our revenue was $9.4 billion, an increase of 2% year-on-year. The drivers of the full-year growth were the automotive and industrial end markets with flattish trends in mobile, following a strong 2017, offset by weaker trends in the communication infrastructure and other end market relating to a decline in our digital networking business. Turning to the details of the full-year, automotive revenue was $4.51 billion, up 6% year-on-year. Highlights include double-digit growth of both our radar transceivers and processing solutions for ADAS applications and the growth of i.MX processors used in auto display cluster applications. For the full-year, ADAS products were just under 10% of overall automotive revenue, and the expectation is for continued strong growth as automatic braking and other safety features become more widely deployed and mandated. Industrial and IoT revenue was $1.81 billion, up 6% year-on-year, including high single-digit growth in general purpose MCUs. Within the portfolio, growth of our 32-bit ARM MCU products were up in the high-teens, driven by the breadth of our power optimized portfolio, and 25,000-plus customer base served through our distribution partners across industrial and IoT applications. We also continue to see the acceleration of design wins for our RT crossover processor family announced last year. Mobile revenue in total was $1.16 billion, essentially flat year-on-year, with sales of mobile transaction products up mid single-digits in 2018. In mobile transactions, we continue to be focused on moving the attach rates of mobile wallets down into the future phone market, and adding new used cases, including…

Thank you, Rick, and good morning to everyone on today's call. As Rick has already covered the drivers of the revenue during the quarter, I'll move to the financial highlights. In summary, our Q4 overall revenue performance was modestly better than the midpoint of guidance and as it's all year-end I'll review the full-year financial trends and then we want the results for the fourth quarter. For the full-year, revenue was $9.41 billion of 2% year-on-year. Non-GAAP gross profit was $4.98 billion or 52.9% of revenue. Non-GAAP operating income was $2.7 billion or 28.7% of revenue, essentially flat year-on-year on dollar basis as we stepped up R&D investments over the course of the year. While we managed SG&A expenses out. We generated $3.76 billion in free cash flow, which included the one-time termination fee from Qualcomm and we return $5.08 billion to our owners that have a combination of share buybacks and cash dividends and we reduced our diluted share account by 15% versus the same period a year ago. Focusing on the details of fourth quarter, total revenue was $2.4 billion down 2% year-on-year down modestly above the midpoint of guidance. We generated $1.8 billion in non-GAAP gross profit and reported a non-GAAP gross margin of 53.1% down 110 basis points year-on-year. Total non-GAAP operating expense -- expenses were $543 million, down $25 million year-on-year and a reduction of $20 million from the third quarter. This was $8 million better than the midpoint of our guidance. From a total operating profit perspective, non-GAAP operating profit was $731 million and non-GAAP operating margin was 13.4% down 17 basis points year-on-year reflecting the previously mentioned items. Interest expense was $60 million, non-controlling interest was $13 million and cash taxes for ongoing operations were $29 million. Stock-based compensation, which is not included…

Thank you. [Operator Instructions] Our first question is from the line of John Pitzer of Credit Suisse. Your line is open.

Yes, good morning guys. Thanks for letting me ask the question. Rick, I guess my first question is just can you talk a little bit about the expected inventory trends as you go through the March quarter, both on your own balance sheet, but I guess more importantly in distribution. When you look at your rev guide for Q1 do you think that that represents kind of under-shipping end demand? And is there any meaningful difference on what's going on with inventory by geo?

Well, I think, John, as we've talked about, if you look at our automotive business, the bulk of that that's outside of China is actually on a vendor-managed inventory, so we actually only ship it to the customer when they're actually using it in production. In the case of China, it's not quite as refined yet, so most of the shipments we have for the automotive market in China do go through our distribution partners. As we talked about, our total distribution inventory is at 2.4 months, and our target is to maintain that at around two-and-a-half months plus or minus a half. So, clearly the guidance we have would be dependent upon our anticipation of what we believe the POS to be for Q1 with the reduced inventories that would go associate with that. I think we're in a very unusual environment where the U.S. is okay. Europe is basically okay, maybe not quite as robust as it was in Q3, but China is just kind of locked down, it's in a quagmire. Our distribution partners' customers are not placing orders and not taking inventory because of their uncertainty about what's going to happen in the trade war. And so long as we see this uncertainty on the trade war there'll continue to be reluctance by them to place orders and take inventory. Now, if you believe that the full-year's GDP growth is going to be 3% or just under, then clearly that can't continue. So, if that's the case then we'll see a significant rebound in the second-half of the year. And as we said, our orders right now would indicate that Q2 will be higher than Q1. So, I would say that we see an improved environment, but we're still going through the shipments in Q1, and we'll have the distribution inventory reduced associated with those reduced shipments in Q1.

And on our internal inventory, John, I think I said last time, I want to get it down to 95 days. And we're putting a lot of pressure on the organization to do that. Clearly Q1 is a difficult quarter to do because it tends to be a low quarter, but I have a lot of confidence we'll get there. we're certainly not going to allow our inventory to grow on a dollar basis.

That's helpful. And as my follow-up, just on the auto trends in Q1 and then throughout calendar year '19, clear autos is outperforming the midpoint of the overall guidance. Does that, in your view, reflect just kind of you keeping up with the market or are there company-specific drivers that you see kicking in, in Q1, that are helping you outperform the overall market? And how does the company-specific stuff trend throughout calendar year '19?

Well, I think the company-specific -- I'll let Kurt comment on it in just a second, but I think we believe that on the ADAS, specifically in radar, that will continue to ramp through the year. But Q1, we've been shipping, it's just under 10% of automotive revenue for full-year '18, and so we'll continue to see that more robust than the rest of the automotive market. And that will continue to ramp through the year, specifically in automotive.

Yes, Rick, so I -- absolutely, it's on the -- as we had this cost earlier the ADAS being now just below 10% of the total order revenue is a strong content story. And the current environment, we don't see that disturbing that trend. So we clearly see that the, say, 25% to 30% growth rate of that part of the business is fully intact also in the current environment. While other parts of the business, obviously, are much closer tied to the SAAR, which is then more suffering from the Q1 environment. Another one which we, and Rick was speaking about it earlier, which does clearly outgrow from a content perspective is our i.MX applications process of business which goes into the digital clusters. So there is a continued strong trend of adoption of digital-to-cluster solutions, where we have a very strong leading solution with our i.MX applications processes. So, those two, I would say clearly are content driven, also through a weaker market environment.

Thank you.

Thank you. Our next question comes from the line of Stacy Rasgon of Bernstein Research. Your line is open.

Hi, guys. Thanks for taking my questions. I wanted to ask about the gross margin guide. You're still holding the 55% for the end of the year. What revenue level is required to hit that? And can you give us some idea of the gross margin drivers that drive your trajectory from the Q1 point through Q4 exiting the year to get there?

Yes, sure, Stacy. I obviously anticipated that we'd get a lot of questions around this. I think if you go from Q4 '18 to Q4 '19, so flat revenue. To get from 53.1% to 55% there's several things. First of all, we have our annual price reductions, so that gives us about an 80 basis point headwind. Mix has a little bit of a benefit in what we're planning right now, probably about 60 basis points. Operationally, I've got about 200 basis points of performance locked in to get to the 55%, so that's about 130 basis points in input pricing which we've got identified, and about 60 basis points in factory efficiency which we've got identified. Now, to be honest, on that last one in particular, the factory efficiencies, I'd like to see that improve actually. But I said it last time, I don't think we need a volume or a revenue increase off of Q4 '18 to get to 55%. And I think we've got it pretty well identified right now. And if I can do better I'll do better, but there's always things that have the potential to offset some of the other potential goodies we could see. And I'm feeling pretty comfortable about it still.

Got it, thank you. For my follow-up, I wanted to ask about buybacks. I know you've been buying back more incremental amounts lately. I think you had said that you needed to hold a shareholder meeting to authorize like a further large repurchase amount. Why have we not seen that shareholder meeting? Is it going to happen soon, and how much of the existing authorization on the buyback remains?

Well, I can still -- yes, there's a kind of technical thing in the Netherlands where basically you get an authorization to buyback up to 20% of your stock. And typically people don't buy back 20% of their stock. But we're getting close to it. The reason we've not asked for that meeting yet is I can still buyback about -- I think it's about 14 million shares, which is at least, well, one of our current prices $1.5 billion or so. So as soon as I use all that, I'll go and request a meeting, but either way, our next annual general meeting is on the record probably currently is in May or June, and we've got it topped up to 20% of that. But if the simple answer is, I have the capacity to still buy an additional $1.5 billion, so I don't need the approval right now.

Got it. Thank you so much.

Thank you.

Thank you. Our next question is from the line of William Stein of SunTrust. Your line is now open.

Great. Thanks for taking my question. Just one more quick one on the buyback, Peter, you said I think you've said either at the Analyst Day or the last call that you anticipated spending approximately $3 billion from Q4 '18 through the full-year '19, is that still the plan?

Yes, we said we would return and we said this for many years all excess cash to shareholders. So we do the math obviously, yes, we now include our dividend and but yes roughly that number.

Okay. And then, I guess I'd like to turn to 5G. Rick, last quarter. I think you expressed some skepticism about the near-term strength in that market owing to your customer's sort of design approach and expressed an expectation that there might be some change in that would accelerate demand. Can you update us on your view in that market in the quarter and as we progress through '19? Thank you.

Yes, so thanks, Will so, I think 5G is still pretty fluid right now. I think one of the major U.S. carriers actually announced that they were going to delay some of their deployment on the CPE with the last mile because they didn't believe the architecture was ready for primetime. A little bit like we talked about on our last earnings call. So I think we kind of confirmed our view associated with that. We anticipate that, there's not really going the 5G availability of a reasonable cost architecture that's not driven by FPGA until late in '19. So we would not see a huge ramp of that, CPE or last mile for 5G until late '19. I think in the meantime, in preparation for 5G mobility. The infrastructure investments are ongoing and we see a very solid demand, a very solid increasing demand that frankly we're struggling a little bit to get in position to be able to fulfill all the requirements, so it is kind of a tale of two pieces when you look at the infrastructure side we do see that really beginning to ramp now but when we see the deployment of more for the last mile we think that that'll be later in the year before really the architecture will be cost-effective to be able to support a significant ramp.

In that last comment you're talking about massive MIMO and your power amps. Is that the business you're referring to?

Yes, that's what we see today is we see for the infrastructure deployment massive MIMO as well as the deployment for the base stations to get prepared for the 5G rollout actually beginning to be receive orders for today.

Thank you.

Thanks. Will, sorry. Just before the next question. I need to correct something. Stacy, I have $10 million shares capacity left not $15 million, so I could only buyback for some $1.1 billion, $1.2 billion before I have to go back to the shareholders. But again, I don't think that's an issue and it's an easy thing to do. Should we need it? Operator, we will take the next question.

Thank you. Our next question comes from the line of Vivek Arya of Bank of America Merrill Lynch. Your line is open.

Thanks for taking my question. Rick, from a high-level perspective, do you think NXP is more exposed to China versus your peers? So you are perhaps seeing more of this downturn and if there is a great resolution perhaps you also see somewhat better recovery and that's part of that. I think, you mentioned some optimism around Q2 being better. I was hoping you could give us some color on which and markets are starting to stabilize and main week I know it's pretty early and data is limited.

So I guess that relative to China I think, China represents a significant portion of our business if you look at what we see, we see that end market China from the distribution view point for the industrial side is kind of continuing to be somewhat on hold or gray area. I think what we talked about that gives us the confidence for Q2 is the order right that we see for the last few weeks coming in actually really gives us the confidence the Q2 will be in access or larger than Q1. I do think that China is somewhat the contributor, but I think obviously there was a hardship to hard reset by a number of our customers specifically in automotive but also with our industrial novelty customers in China. As we see that taking place so long as the world's GDP continues to be relatively healthy. Then I think we're very confident we'll work our way out of that, but the increased orders that we've seen over the last few weeks really give that ability to have the confidence to be able to say that on this call, and then relative to the second-half the year. It all gets down to what your belief is on the world's GDP. As long as you believe it's going to be close to 3%, then we clearly believe that on the second-half of 2019 will be better than the first-half.

I think that our exposure to China is complicating things slightly in the sense and we know what we shipping and the supply chain in China is certainly more opaque than the what you seen in western Europe or the US. So it feels to us like, we do get moved about in terms of what's going on in the supply chain over there, but once we shipped in you don't know where it comes out, we [indiscernible] some of it will be for domestic, some of it global or industrial products we assembled into devices like it shipped all over the world.

Yes, it works both ways actually. It even some of the ship to in Europe and the U.S. ends up in the end market of China. So we don't have a 100% traceability which shipments are really down to the market itself in China. Both outside of China shipments could end up in China, some of that into China shipments could be tied to end market outside of China. So that's why it's really a bit hard to say what exactly that exposure is. Jeff, was our -- do you have our 2018 shipping number? Is it 20…

Just at 20 some odd percent into China.

Yes, 20, high 20.

No, 30%.

It was 27%.

27%, I think 27% to 28% in terms of shipping for 2018. Q – Vivek Arya: Got it. And for my follow up, back on the automotive business. So it grew about 6% you mentioned full-year. It was going growing at obviously higher phase until Q3. How would you characterize the market share environment in your traditional market? And let's say we are in a situation where the automotive industry has negative units down 3% or 4%? Do you still think your automotive business can grow in that environment that some of the new initiatives, Rick that you mentioned in Battle Management Systems and radar and other areas. Can they grow enough to from a content perspective to help you do better than the unit environment? Thank you.

So let me, this is Kurt, let me let me try and capture the pieces of your question. So firstly on the environment for 2019, we do see external sources forecasting somewhere between plus 1% and minus 1%. So a big data point, which particularly look at this actually HIS which talks about plus 1% SAAR rose for a 2019 but also some people are more negative like minus 1%. So we think it's going to be somewhere in that range. 2018 however was actually a negative SAAR reported at minus 2%. So in that environment we did grow 6% as you said so, obviously the content grow story did play out the way we were speaking about it earlier. And in that regard, yes, we do think that also for 2019 that theme is intact, I talked earlier about ADAS as a large contributor being pretty independent of the SAAR but also the ideal mix cluster applications helping in that respect. So in a SAAR environment which is maybe around the zero unit growth in '19, we do think indeed that our content growth story does help us to outgrow the SAAR continuously.

Hey, Vivek, this is Jeff. I'd just like to also clarify I looked at the wrong number. Our ship two for China is high 30% range, apologies. Q – Vivek Arya: Okay, no worries. Thanks very much.

Thank you. Our next question is from the line of Ross Seymore of Deutsche Bank. Your line is open.

Hi guys, I want to go back to the disty side of things and maybe that's the revenue visibility in a different way. Can you just talk about what you're seeing on the disty side versus the OEM side? And maybe specifically in your first quarter guide is down 13% sequentially, how the OEM versus disty side differs either in aggregate or if the disty side is worse given your commentary in China, is that really localized to the industrial market or any of the various end markets that your new segments define?

Well, clearly Ross, when we talk about the marketing channel in the industrial, a significant chunk of that is somewhere around 3/4s or 80% of that is served through the distribution channel and that's really the area of significant weakness that we see combined with automotive. So in the case of automotive, it's probably somewhere between a fourth and a third of our total business goes through the channel primarily for shipments into China. The rest of it is pulled from vendor managed inventory. We have seen declines, we talked about it in Q4, I mean in our Q4 call for Q3 results that we had seen a decline in auto production in Europe for the CO2 testing and we see that continued through Q1. So there continues to be a impact of that and then you know there's also the uncertainty of Brexit and the auto industry has a lot of parts moving from Europe to the U.K. and vice versa, and so that's created some concern with the lack of clarification of what's going to happen on Brexit as well, but I do think really the key areas that we see the weakness is really China.

Yes, and I think Ross, your question was indeed then for China disty versus direct, clearly that weakness in China expresses itself in the distribution channel for us and that's both for industrial as well as automotive.

As my follow-up question, Peter, you did a great job of walking us through on your expectations for the full-year on the gross margin side with a lot of helpful detail. I want to switch over to the operating margins side and specifically the OpEx side. Given that revenues are weaker than expected, what's your plan as far as how OpEx spend might trend directionally throughout the year? Are you tightening things down given the revenue level, are you investing more for growth, any sort of changes in your strategy from the last time we spoke?

Well, you can see our Q4 actuals are Q1 guide. We're definitely keeping a lid on things at the moment. So we're not taking out any programs, we're managing travel, not replacing all attrition straight away, trying to push out various expenses. So little bit kind of things you normally do. On a more long-term basis so into 2019 and 2020, I go back to our percent of revenue, so we want to run R&D about 16% of revenue, we'd like to run SG&A 7.5% and so going forward we see over the next 3 years R&D round about 16% and ultimately getting SG&A down to about 7%.

It's important to say, Ross, we are definitely taking actions in the near-term to significantly control our cost. We're adjusting people levels relative to that. As Peter said, we're not really stopping any programs but we clearly are not replacing attrition and in some cases…

Performance improvement, so we work to actually use this to move low performers eventually out of the company to strengthen the organization. So all of that has the cost levels -- I think you've seen historically from us and I think it was a clear indication in Q3, Q4 and Q1 that we will manage our OpEx and we know how to do that.

Got it, thanks, guys.

Thanks, Ross.

Thank you. Our next question comes from the line of Matt Ramsay of Cowen. Your line is open.

Thank you very much. I wanted to ask about I guess two of the smaller segments of the business, I think one growing really strongly in the other one on decline, did you guys mentioned that 32 bit MCU programs an aggregate were up on the order of high teens maybe you could give us sort of an update about how big that is in the overall mix and the trends you see there relative to demand and sort of distribution level. And then on the flip side you've been very clear about how you're going to manage the decline sort of directionally of the digital networking business. But if you just talk to us about where that business is run rating now so we can sort of I guess calibrate models going forward? Thanks guys.

Yes sure on the 32-bit ARM we don't talk about the specific associated with it, but it's the biggest chunk of our industrial and IoT business. And so that really gives us the benefits of looking at that from a growth. The one area that we're seeing really strong design wins on is our new crossover product that we announced really about a year ago the so called RT Family, which takes the processing capability of our i.MX family down to a cost of micros on specific applications like visual or error detection, our audio. So that's really a significant factor for us in driving that growth and we continue to see that accelerate with design win. So that puts us in a really unique and positive position for the 2019 outlook and we're kind of uniquely positioned where there's not a lot of competition in that space, most of our competitors in i.MX don't participate in micros and vice versa the same thing with the macros. So we're kind of in the sweet spot where it gives us the ability to really drive that participate in it. On the digital networking business that business is kind of stabilized, it's declined through 2018 and kind of stabilized just over $100 million a quarter or so. There was some opportunities for growth with design wins we won over last year so as we see those finally begin to ramp and the PowerPC legacy business not continuing to decline as much as it has in the past. So I think we've got more of a stable level there and with some of the applications that we see there are some opportunities for growth later in the year in 2020 that we'll see how they materialize.

Thanks very much.

Thanks Matt.

Thank you. Our next question is from the line of Blayne Curtis of Barclays. Your line is open.

Hey guys, thanks for taking question. So you won an order just try to better understand the trends there you obviously called two segments in double-digit growth. Just curious obviously orders are slower just kind of curious is there are any segments that are providing a headwind above and beyond what we're seeing from just the overall environment. And then in 5G, I wanted to understand that was a big boost it kind of surprise people end of 2018, it seems like you are saying things may take a little bit pause but I just wanted to understand what's your expectations are for the RF business and kind of the first-half of the year?

Yes, let me take the RF business personal, and let Kurt comment on automotive. So RF we are seeing demand ramp for the massive MIMO and 5G infrastructure and we're frankly struggling here on near-term basis and being able to meet all the requirements from our customers. So we are seeing a ramp and that's being a significant contributor, positive contributor versus overall environmental issues that we see in the other businesses. So we think we're in a unique position with our massive MIMO product and have done really very positive feedback from customers and our requirement to be able to actually see we can build more for them then what they had originally anticipated as we are going to the near-term. And let me let Kurt then talk about auto.

Yes, I think in auto it's really differentiated between what is the content growth story versus what is very tightly associated to the SAAR growth. So those product or application segments where we are holding a high share but the penetration itself isn't growing anymore, we are obviously more swinging with the SAAR quarter by quarter. So you could call this especially with the China environment and the WLTP in Europe a headwind, where again at the same time the content growth and I mentioned ADAS radar before, is largely independent of this. So it's the mix of those two which drives our overall growth number. And roughly speaking we think that about 70%-ish of our total business is pretty close associated with the SAAR where another 30% are really benefiting from strong content growth. And in that 30% the largest is obviously the ADAS, which is just under 10% of total run rate.

Yes, Blayne, it's probably worthwhile to talk about -- in the case of automotive, you know, in our last quarter's call we talked about in Q3, we'd really seen weakness in the CO2 testing in Europe, and we actually didn't see a lot of weakness in China in automotive at that time. It was really not until kind of mid to late Q4 where we began to see some weakness in the automotive market in China as all of that basically served through the distribution channel partner. So we saw that weakness really began to materialize at that point…

This is Kurt, indeed. So while many of the Tier 1 companies talked about this already, we didn't see it in our orders nor in our revenue. But I think it was like late Q4 kind of late November, early December that we also saw that hitting us. But again, that only relates to that product, which is in a one-one relation with the car production.

Thank you.

Thank you, Blayne.

Thank you, our next question is from the line of C.J. Muse of Evercore ISI. Your line is open.

Hey guys, this is Matt Fresco [Ph] on for C.J. So outside of GDP forecasts, are there any customer conversations or other factors that are giving you confidence in this second-half recovery and regarding the recent order uptick, do you think any of that's related to ahead of the Chinese new year tariff deadline?

No, there was none of that. It felt like it was full in, with the Chinese new year tariffs. Once again, the U.S. is okay. We really don't see a lot of concern about demand from our customers in the U.S. The general economy even though it's down somewhat is still performing quite well. In Europe, I would say we see things pretty reasonable, but we do see isolated pockets, again, driven primarily by automotive. And we believe the biggest chunk of that is CO2 testing and we'll see how the demand comes out after we get work through that, you know.

Some of the Brexit, and then the effects associated with Brexit that we talked about. So in the case of China, that's much more cloudy, much more murky as far as determining what's happening in the [indiscernible] year. I think it does depend on some kind of resolution or confidence in what's going to happen out of the current trade issues that are being discussed. So if you believe that the trade issues were going to continue, you know, then the world's GDP is not going to be close to 3% for the year. And then that's a different factor. But so long as you believe that the world's GDP is going to be just under 3%, so there probably has to be a trade resolution with China to be able to accomplish that. And with that then we think we'll see a very strong growth in the second-half of the year.

Fair enough, thanks. And then as a follow-up, just a housekeeping item, I think your incidental cash tax forecast increased for 2019 and deferred 2020, could you give us some additional color there?

Right, so you are talking about the taxes for the businesses that we sold off, and also the tax on the Qualcomm transaction. You actually have to look at the Q4 Excel. So we were saying previously that we'd spend $295 million in Q4 and we only spent $32 million because we went into quite a long-winded negotiation with the Dutch tax authorities and were able to negotiate that particular transaction, the Qualcomm deal went through the innovation box. So we managed to reduce that a little bit, I guess because of the time, we want to go to and it slipped from Q4 into Q1. So the big move is really just the fact that we move the payment on the Qualcomm breakup fee from the end of December to early January. I think, if you actually do the math on Q4 actual and what we've guided for 2019 and '20. The amount is actually lower and it's a very specific cash flow item. So that's why we pulled that one out separately.

Operator, we will take the next caller, please.

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

Yes, thank you. Just a question for Kurt on the BMS side just curious to get kind of what type of feedback you're hearing from customers given you're taking more of a kind of complete system approach versus some of the existing players and just how you feel about the pipeline of opportunity in BMS?

Thanks, Craig. Yes, we feel actually increasingly stronger because in the whole environment, the one sub segment, which has really pushed is electric cars. So there is a pretty strong drive to really be on time from a car company perspective to do the launches, which we have launched for my '19, so if you think about it short-term, the design win finally which starts to turn into a couple of 10s of millions revenue in '19 is on track that is all firmly designed in, it depends really on the timeliness of the car launches and I unfortunately cannot tell you which cars those are but once they are out, we will tell you and it's pretty prominent nice cars. On the more strategic side, yes, the solution play, which we talked about earlier, is absolutely hitting the mail as much as the ASIL-D capability. So I really want to say it's two things, that is the solution play between micros and the analog front-end and the ASIL-D capability of the whole solution which continues to settle apart from competition.

Got it. And then just to follow-up on the near-term alignment, on the WLTP issue, do you think once that passes, there should be kind of a catch up or because the overall amount of market is soft right now you wouldn't see any, kind of rebound if you will, in Europe?

Really hard to say, Craig, I'm very careful with that because of course this is also somehow related to the overall demand environment in the end and I'm hearing but I -- we don't have the latest detail that there is a second wave of WLTP plant, so another type of test limits for CO2 emissions. There I'm hearing that the OEMs now start to figure out how they how they can again go ahead with that one. So I -- what we can say at this point is that is the current one is not going to do be here before the end of Q1, if there is a strong rebound from this, I'm a bit careful to say that that this is going to happen there in Q2 not sure.

Okay, thank you.

Thank you. Our next question is from Mark Lipacis of Jefferies. Your line is open

Hi, thanks for taking my question. One for Peter and one for Rick; Peter, just accounting mechanics on the deem dividend, is that embedded in the cash flow statement under shares a repurchased? And then, for Rick a number of microcontroller companies and analog companies have kind of talked about a benign pricing environment and when Peter just walked just through the variance progress marches as we go through this year, I think there's a note of 80 bips of headwind on the pricing side. So I was wondering if you could share with us your thoughts on kind of like just a bigger picture what's going on in the industry with consolidation and how that seems to be helping some of the other microcontroller analog companies but doesn't seem to be benefiting you guys yes, so if you have any thoughts or color on that, that will be greatly appreciated? Thank you.

Hi, so first thing, it goes through the cash flow, not through the P&L and if you look on table three. You can see an item their cash paid on behalf of shareholders for tax on repurchase shares $142 million, right at the bottom of the cash flow. So, that's pretty specific. And then, the other thing just say on the comments I made on gross margin on pricing, that's, just our annual price reductions. It's not related to kind of anything that's going on in the market.

Yes, I would say that the general environment on pricing is okay. I don't think that we would say that, it's poor for us at all. I think if anything we're trying to whittle down, when you get to -- go through the annual price negotiations with the OEMs and the Tier-1, it's an arm wrestling that takes place and we try to get down slightly and that's under the contract and we try to reduce it slightly and they try to get a little more, but I don't think there's a significant changing environment that we see associated with that and I'm most of industrial in IoT, you said that price with the design wins. And then you have a built-in reduction that takes place associated with those that we honor contractually, Kurt?

Yes, it's also important to note that a lot of the ASP reduction, you see there is a once in the year element, I mean that happens in Q1 and then it's done for the year. So it's not like this, it repeats all the time. But it's, it's because those are annual contracts. And I clearly support what Rick was saying, I think we actually played it a bit tougher this year, meaning that directionally we gave let's prize away then on the average of the past years.

Thank you. That's helpful.

Yes, it really depends on the product family and so it has different characteristics based on the customer and product family and everything. So it's really hard to draw any conclusion but I wouldn't say that the pricing environment is problematic, it's very healthy right now.

Thank you. Great.

Thank you. And that concludes our question-and-answer session. I'd like to turn the conference over to Mr. Jeff Palmer.

Great. Thank you very much, everyone. Before we go, I think, I'll pass the call over to Rick, if he has any last comments he'd like to make.

Yes, thank you for joining us. I guess the thing that we have to point it out is that we remain in somewhat of a cloudy environment. But the encouraging sign that we see with increased orders over the last few weeks really improves our confidence for the Q2 outlook and that being larger than Q1 and again, then for the second-half of the year, it comes down to your belief on the GDP and whether the trade issues will be resolved, so that we will return to a healthy growth around -- just under 3% as most of the economist are projecting or not, but with that, I think it's important to point out that we are taking the appropriate cost actions to be sure that our costs are under control. And we can deliver on our financial performance to ensure that we continue to focus on improved shareholder value as we go forward. So thank you very much for your support. We appreciate it.

Thank you everyone. This concludes the call.

Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Everyone, have a great day.