恩智浦 (NXPI) 2013 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Fourth Quarter NXP Semiconductor's Earnings Conference Call.

My name is Patrick, and I'm your coordinator for today.

(Operator Instructions).As a reminder, this conference is being recorded.

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.

Good morning, everyone.

Welcome to the NXP Semiconductor's 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 sales of new and existing products, and our expectation 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 compensation, 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 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 a save-the-date for our upcoming analyst day, which will be held on May 8 in New York City from approximately eight a.m.

to one 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.

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 would like to personally thank all of the NXP team for their very hard work in helping to deliver our results.

We successful 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 as 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 over year to nearly $1.3 billion, due in part to the strong growth associated with the 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 rap 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 fraud-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 over year to 23.3% of revenue.

This is a 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 over 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 1.9 times 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 a 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 you 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 and appreciation.

Now I'd like to review the specific results for the most recent quarter.

Overall, our results for 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 reference, 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 for 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 HPMS 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 of 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 a 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 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 [e-gov], 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 the 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's been in the news lately.

As we have commented on for some time, there's a sizeable 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 reflective 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 (inaudible), 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 for optimal service levels in 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 continue 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 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 will be to improve the ability to consistently deliver solutions in a timely manner, and we will structure our business to support this improvement, which helps to enable our customers' success.

Now, with that, I'd like to turn the call over to Peter to discuss the financial details.

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.

It's 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 over 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 a 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 segment, 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 $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.

On a total operating profit perspective, non-GAAP operating profit was $324 million and represents a 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 re-priced our term loan due in 2020.

Together, the two actions have lowered our overall blended interest cost to 4.3%, a 90-basis-point improvement from the prior quarter.

Non-controlling 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 compensation, 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 a ratio of net debt to trailing, 12-month, adjusted EBITDA at the end of Q4 was 1.93 times.

Improving our leverage ratio was a significant milestone, an area of intense focus for the Company, especially when considering at the time of the IPO in August 2010, our leverage ratio stood at 4.2 times.

We've also improved our non-GAAP interest coverage from 2.4 times at the time of the IPO to 8.3 times today.

We believe our leverage is appropriate given the size and cash flow generation of the Company.

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 a 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 pre-bills associated with the restructuring of our (inaudible).

Our effective DIO was 83 days.

Days receivable were 35 days, an increase of 4 days sequentially, while days payable were 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 (inaudible).

Cash flow from operations was $313 million.

Our 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.

Historically, our 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 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 the sequential (inaudible) 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 market influence our outlook.

Infrastructure & Industrial is expected to be down in the mid-single-digit range, primarily a result of weaker demand in our emerging and 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 a range of $1.21 billion to $1.25 billion, or about $1.23 billion at the midpoint.

We expect non-GAAP gross profits in a range of 48% to 49%, or about 48.6% at the midpoint.

The sequential decline in gross margin is expected to be a result of lower IP revenue with effective annual price reductions and slightly lower fixed cost absorption, offset by incremental cost and 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 that, early this morning, we announced our intention to re-price 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.

A copy of the press release detailing the re-pricing can be found on our Company IR Website.

As a result of the previously mentioned actions taken in Q4, combined with the re-pricing announced today, we believe our full year interest expense will be about $135 million.

Cash taxes are expected to be roughly $8 million.

And non-controlling interest expense should be about $18 million.

Stock-based compensation should be about $27 million, which is excluded from our guidance.

Alleged 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 at 2013, I'd like to observe the following.

It was a strong year for revenue growth, and I think we 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 began to demonstrate the cash generation capability of the Company.

Our EBIT margin improved dramatically, but we are still below where it needs to be.

So we would consider our performance in 2013 to be a B or B+ at best.

Clearly, our expectation of ourselves is that we are A+ performers and are certainly to continue to drive 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).

William Stein, SunTrust Robinson Humphrey.

I wanted to congratulate you on the very nice sprint 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 prioritized hierarchies 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 2 times EBITDA, we've been maniacally focused on paying down debt.

So that's a significant achievement for us to be down at 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 a size that we couldn't repay back within three to five 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 repurchase, as 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, you know, 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 and maybe clarify the comments around the contribution in the quarter and in future quarters?

And then, also, any view on when China, the PDOC, or their equivalent to their EMB initiative might come back in your view for the full year growth in that market?

Thank you.

So, on China -- let me address your last question specifically first.

We said we expected their supply chain to be kind of (inaudible) 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.

You know, 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 US 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, you know, our leadership position there continues to bear significant fruit.

And, 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 but, hopefully, with extremely good payoff over the long term.

Thank you for taking my questions, and congratulations again.

Vivek Arya, Bank of America Merrill Lynch.

So, Rick, you have very strong growth and execution last year.

How should we think about the sales growth and profit growth just conceptually for 2014?

You know, we've consistently said that we want to outperform the industry by at least 50% on a growth rate basis.

We've clearly been able to demonstrate well above that through this period of time.

But, I believe that we have the design wins and the product portfolio in the 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 a 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 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?

And just, beyond sales growth, what are the other levers that you have to reach that goal?

Okay.

A couple of things.

One is I'm not going to give full year guidance or guide Q4 2014.

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 (inaudible)?

I don't think there's a lot of point in us talking conceptually.

Our view on Standard Products has not changed.

And, clearly, we wouldn't talk about any specific M&A if there was any.

But, you know, 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 applications basis and direct connectivity with customers.

But we have an extremely solid Standard products business that we think can continue to make progress into at least 18%-plus operating income levels.

And that's our focus associated with it.

Okay.

Thank you.

John Pitzer, Credit Suisse.

Congratulations on the strong December quarter.

Hindsight's always 20/20, but I'm kind of curious.

This time last year going into 2013, you guys had some pretty high-profile, potential socket wins that were easy to kind of for us from the outside looking in to look at and see (inaudible).

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 2014, what are the top sort of two or three 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?

You know, John, we've already stated pretty clearly that we think our Security business, or our ID business, will have the opportunity for mid to high teen growth, which puts us in a very strong position with that.

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 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 turn on of the (inaudible) of the base station market, we have low, double digit as we have some tempering factors based on 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 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've demonstrated, give us credit for that, and decided there's not 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 continue to deliver the performance associated with that.

Rick, that's helpful.

Maybe as my follow-up, I always confuse 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 could help me out.

Just given that the growth in P&C -- How do you think (inaudible) is evolving through the model?

And, as we think about Q2, Q3, Q4, 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.

It 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 it 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 decline in Q4.

This year, we were able to offset that -- 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 or reduces -- it 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.

Perfect.

Thanks, guys.

Congratulations again.

Blayne Curtis, Barclays.

Great results.

Rick, you kind of touched on this, but the outlook for the I&I business -- 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 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 two or three 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 to 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 orderings so that we have fixed assets we've 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.

Thanks for that.

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.

Last year was -- obviously, with our Q4 results, what's pretty obvious was a slow year for us because we had gone through a period of time where we had done the Galaxy 2 and 3, and we were pretty public about losing the Galaxy 4. So we would not expect to see a strong resurgence in NFC to 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 opportunities for that to become a much more significant convenience factor for the consumer as we look out into the second half of this year.

Thanks.

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?

I think we always said we thought Q1 and Q2 is the aberration, not 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 investors' view on Standard Products as being an impacted business.

And we've never viewed it as that.

We've 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's running correctly.

And so, Blayne, our focus is on continuing to make improvements from where we were in Q4.

So 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 the cash that it generates and the customer relationships associated with it and how we can take advantage of that as a company to drive more growth associated with our high-performance mixed signal business.

Perfect.

Thanks, guys.

Craig Hettenbach, 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?

The strength we have that'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 in the 28th as well.

But there's like roughly 4 to 6 of those that we won over the last year or year and a half that are still -- that ramped in 2013 and are still in the ramp phase in 2014 as they ship from their previous suppliers to our product.

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 US automotive manufacturer on keyless entry that we started shipping a year and a half 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 US announcements that took place earlier this week on vehicle-to-vehicle communications, where we clearly believe that we've staked 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 on the infrastructure side.

And we both have invested in a software company to be able to do the -- to facilitate the software stack associated with that.

So we're quite excited about the opportunity on vehicle-to-vehicle communications so that, 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.

Rick, on geographic concentration, (inaudible) concentration we can highlight?

I think the only thing I would say 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've moved up from being the third largest in 2012 to actually deleting -- 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.

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 (inaudible).

Got it.

And, then, just as a follow-up, can you talk about your expectations for the business channel this quarter.

You mentioned last quarter sales in distribution were a little bit higher than sales out.

How are distributors managing business today?

And any comment on order trends there?

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 in to 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 sell out 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 have 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 at the end of the year.

We'd like to be able to take that up a little bit more as we move forward just to be sure that we can be able to support our customers' increased growth that transpires and takes place.

Got it.

Thank you.

Ross Seymore, Deutsche Bank.

Congrats on the strong report and guide.

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 in 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 as supply chain.

So it would take a little while before we would see the factory orders.

Where we really see orders are as they go through manufacturing.

So they would have to adjust their manufacturing levels.

And we have not seen any significant weakening in the tool 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 a significant adjustment in northern Europe nor in North America.

But I saw the same report on 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 US 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 individual, and any sort of color on the timing when you think that ramp will begin?

Ross, there's a lot of people that you paid a lot more money than I do to protect EMV's 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 itself.

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 we'll make that a more sustainable growth as it gets pulled in and the 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'll 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 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 US 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 will take several years to upgrade it.

So, while we're excited about the opportunity, we don't want you guys putting it in your model for the next two or three quarters.

Thank you.

Chris Caso, Susquehanna Financial Group.

I'd like to just come back to some of your comments about inventory and 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 to bring inventory back to closer to historic levels?

And what impact would you expect from that?

Or do you think that this is 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?

You might think calling this a recovery may be a stretch.

It's somewhat --

That's true.

(Inaudible) the beast to say the best things at this point in time.

I think, on the inventory channel, it's always an arm wrestle, especially with the two US major partners in distribution as they're focused on turns and earns and try to keep their inventory as low as possible.

And we try to keep their inventory at somewhat reasonable levels to be able to support our customers associated with it, which is the reason we pay them the margin associated with it.

So I think that 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 tenth or two over the next quarter or 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 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, not anything that's specific, even though you continue to have concerns like the China reports that came out in the last week or so.

So I think the key for us 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 two 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.

Hopefully, it gets better.

But the industry is still cyclical.

And, I guess, what can you guys do when, inevitably, things slow and you know kind of convince the investors this operating margin structure has a degree of permanence to it?

Well, I think there's a couple of things.

First of all, we have a very significant portion of our cost that's variable.

So you don't really see huge improvements in our profitability because of our revenue increases.

At the same time, you're not going to see huge declines in our profitability if our revenue was to decline.

I think the key really is the markets.

You clearly get in 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 number one in a 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 are 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 in 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, 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 cycles, but it doesn't follow the typical semiconductor cycle.

And our ID business, if you look at demands associated with it, really follows more of a project orientation and the ramp-up of deployments of those projects, which is not really following the 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 reminder of the business.

Great.

Thank you.

James Covello, Goldman Sachs.

A 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 wraps in?

I think your point's well taken about the sequential growth or relatively kind of flat on a sequential basis.

But, still, our ID business was up 20-something percent.

Actually, our quarter was up 30% versus a year ago.

Yes.

The quarterly business is up 13% year on year all in.

In total.

But the core itself was up 30% year over year.

So I think you go through -- with a business as broad as that business is with the different customer bases and the different products that are shipped there, it's a combination of a number of things.

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 US on EMV will be a contributing factor to increase growth associated with that business.

And then we talked about that, 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 the broad bases 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 wall, based on the mix of businesses we have and would clearly expect to see some improvement in the Q2 timeframe and continue to see that improve beyond there, as well, Jim.

That's very helpful.

Thank you.

And, if I could get some perspective, if you could help us 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?

Are you including stock-based comp expense in there?

Are you including the Standard Products peer group?

That would be helpful.

Thanks.

Look, 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 the market in 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 that appears.

But any multiple we look at, we trade at a discount to our peers associated with it.

Including and excluding stock-based comp.

Thank you very much.

Steve Smigie, Raymond James.

I was just trying to clarify some of your earlier comments on market share in the banking card business.

I thought I heard you say 70%.

I think at your analyst day you said overall you're 44%.

And I thought the (inaudible) was 70%.

So, backing into that seemed like banking card would be lower.

So, if you could, just clarify that.

And then, as we think about EMV in the US and more banking cards in China, can you talk a bit about your competitive advantage maybe from a technology perspective?

Why will you continue to win in those markets versus some of your competitors?

I'll take the comment on the market share, Steve.

At the analyst day in 2012, that was before the significant acceleration of the China banking upgrade cycle.

We went through kind of a review of the data just 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 in the marketplace 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 peed, 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 MyFare, 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 lead position in ID is one that we've invested in for a long time, worked 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 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 the market by at least 50%.

As we've demonstrated since the IPO, actually outgrowing the market by over 4X.

Okay.

That's very helpful.

And then, just in the emerging identification, excluding NFC, but looking at some topics you touched on today and that you've mentioned in the past, you've talked about tagging, you've talked about authentication/cyber security.

Can you talk about if those have been developing here as you might have thought?

And could those be significant dollar drivers over the next year and two years?

One of the things that we continue to be extremely excited about is our authentication business.

And we talked -- actually, Google talked at a conference now about NXP being the supplier for their so-called Newbie device, which is a physical device that they now use where your computer has to have that physical device before you can access the cloud at the enterprise level.

It's much more robust security with a handshake to be sure that there's not tampering.

It reduces the risk of tampering and cyber security associated with it.

It also is one of the things that they're looking at for their consumer users.

It 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 site I haven't been to in a month or two and have to recreate the password.

So I'm actually looking forward mentally to the roll out of this to the consumers, so I can actually implement that.

I don't think that it will 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 at NXP because of the actual security leadership position we have in the technology basis, we can play a significant role in the security and the cyber security protection associated with access to the cloud.

Thank you very much.

Operator, we probably have time for about one more call here today -- one more caller today.

All right.

Vijay Rakesh, Sterne Agee.

Good work on the quarter and a nice 10% buyback year.

I have a question on the banking side.

Obviously, 1 billion to 1.5 billion cards in the US -- big opportunity here, even with the -- 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 media ramp.

Is that for (inaudible)?

And, on the IP, are we going to add anymore licensees as you go through 2014?

You've got a number of questions there, Vijay.

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 a significant factor in being able to protect our market position and be able to provide our customers with a solution that has a more secure from an intellectual property protection basis than the alternative.

So we do believe that that's significant.

But we had 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 will be choppy on a quarter-by-quarter basis.

On your comment on the banking, 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% or 70% down to 20% or 30%.

So I would expect that, on that opportunity, we would clearly add the same kind of market share we've 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 how rapidly that will develop.

We'd said 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 will be overall very significant associated with it.

And I apologize.

I forgot what your middle question was.

The NFC, on the ramp.

And, by the way, on the banking side, my question was more -- even if you see a greater 30% penetration of the 1 billion cards, there's a big opportunity for you.

I know you guys are the leader there.

Oh.

You were talking about more of the ramp-up associated with that?

That's right.

Look, the bottom line 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 US was twice the fraud rate in the rest of the world where EMV was implemented.

So, clearly, it's a factor associated with it.

This is not new news to us.

That's exactly what we've been saying for about -- I don't know the past year or so.

Clearly, it's envisaged in our expectation that ID can grow in the mid to high teens on a compound annual basis over the next few years.

It's good news that 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 in the second half of the year associated with that with the customers that we're working with.

And that's what?

Smartphones, a mobile wallet kind of thing?

Yes.

Got it.

And my last question on (inaudible) cars.

It looks like that's a big opportunity going forward.

A lot of guys talk about (inaudible).

How are you guys positioned there with your wins?

And how do you -- ? How are you looking at transition from (inaudible)?

Thanks.

. 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 have 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.

All right.

Great job, guys.

Thanks.

Operator, we're probably going to have to end the call now.

Rick, would you like to make any final comments?

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 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.