Good day, ladies and gentlemen, and welcome to the NXP Semiconductors Second Quarter 2016 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. As a reminder, this conference is being recorded. I would like to introduce your host for today's conference, Mr. Jeff Palmer, Vice President of Investor Relations. Sir, you may begin.

Thank you, Trea, and good morning to everyone. Welcome to the NXP Semiconductors' second quarter 2016 earnings conference call. With me on the call today is Rick Clemmer, NXP's President and CEO, and Dan Durn, our CFO. If you've not obtained a copy of our second quarter 2016 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. Included in this supplemental presentation and the historical financial model is additional information providing insight into the combined adjusted revenue for NXP and Freescale. This unaudited non-GAAP information has been prepared for comparative purposes only and provides historical revenue of each of the company's adjusted for divestitures. Please be aware of the disclosures associated and detailed in both documents. This call is being recorded today and will be available for replay from our corporate website. Our call today 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 specific end markets in which we operate, the sale of new and existing products, and our expectations for the financial results for the third quarter of 2016. 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 today. 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…

Certainly. Our first question comes from the line of John Pitzer of Credit Suisse. Your line is now open. John William Pitzer - Credit Suisse Securities (USA) LLC (Broker): Yeah, thanks for letting me ask the question. Rick, I wanted to first go to the Auto business. You talked about in your prepared comments having design wins with 9 of the top 10 OEMs for the complete radar solution. Can you help me better understand what the dollar content that would represent? And I guess more importantly, where are we in the ramp of that? And how is that going to look over the next, call it, 12 to 18 months? Richard L. Clemmer - President, Chief Executive Officer & Executive Director: So, John, I think the key is the design wins. It's a typical Automotive product and the actual ramp of revenue will take place over the next few years. It won't be over the next few quarters. I think the key for us is winning those design wins, ensuring that we offered the best solution. And the architecture of each one of those solutions by each one of the OEMs will be slightly different with some of those having three or four sensors or front ends to go along with the microcontroller. And some of them being as large as double-digit radar sensors to go along with the controller. So the architecture is quite different by each individual customer. The key for us is being in a position where we can continue to lead from a technical view point and be sure that we are the leader in the design wins to be able to really be pre-eminent position as the volume really begins to ramp over the next few years as the auto companies bring this significant…

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

Hey, good morning, guys. This is actually Matt Diamond on Ross' behalf. Nice job on the synergies in 2Q as operating margin-wise. Could you give us an update on where we stand in terms of capturing the synergies right now and what's left to be done going forward? Daniel Durn - Chief Financial Officer & Executive Vice President: Yeah, thanks for the question. I think what we've always said about synergies is watch the operating margin. We want to be measured on an operating margin roadmap that's reflective of synergy capture, as well as operating a disciplined business. What you noticed in the recent quarter Q2 is a 230 basis point sequential improvement in operating margin on a flat gross margin. And if you look at the midpoint of the guide on an operating margin basis into Q3, 27.5%, you see a 420 basis point uplift in a six-month period, with very little contribution from a gross margin basis. If you roughly think this is a $10 billion business and you're looking at 400 basis points of margin improvement in a two-quarter period, I think it pretty quickly gets you to the map that shows the synergy capture is very, very strongly on track. And we're happy with the profitability uplift that this company's seeing from those efforts.

Excellent. And on the cash return side, could you update us on the approach to cash returns between now and the Standard Product sale? And how do you plan to balance the cash returns after you hit the planned two times leverage? Daniel Durn - Chief Financial Officer & Executive Vice President: So I think we'll start with what our capital allocation strategy is. We talked about being very balanced between debt and equity until we get to a two times net leverage position. And so if you think that the proceeds from the sale, just given other debt we have outstanding, needs to be used to primarily repay debt or acquire additional assets to increase the asset base of the company, it pretty much locks us into one side of that equation, addressing the leverage of the company. I would say we will balance that perspective with a heavier focus in the near term on share repurchase so that by the time we are exiting Q2 next year, you'll see a more balanced approach to share repurchase and debt repurchase based on our capital allocation strategy than just the use of proceeds from the sale of the divested assets would suggest. Richard L. Clemmer - President, Chief Executive Officer & Executive Director: Yeah, I guess one thing if I could add to that, I think our confidence in being able to close the Standard Products transaction continues to improve with the regulators. And so that gives us a good comfort level of the cash that will be available to us early next year. And so between now and then, we want to be sure that we're opportunistic in doing what's in the best interest of shareholders.

Excellent. Thanks so much.

Thank you. Our next question comes from Stacy Rasgon of Bernstein Research. Your line is now open. Stacy Aaron Rasgon - Sanford C. Bernstein & Co. LLC: Hi, guys. Thanks for taking my questions. First I wanted to ask about the guide for Secure Connected Devices. It's up mid-teens almost to maybe 20%. I think more than half of this business is actually industrial microcontrollers, as well as the mobile payments and everything is in there. Can you give us some feeling for what's driving the strong guide? How much of it is coming from mobile payments versus the broader industrial microcontroller business versus like the handset audio business? Richard L. Clemmer - President, Chief Executive Officer & Executive Director: So the guide for Q3, Stacy, is strong across the board. It's not really in any particular area. If you look at that that also includes our mobile wallet business which is seasonally strong in Q3 with the rollout of new models associated with it, as well as the momentum that we have with China on the transit side. So that's really the most significant factor associated with the growth is in the mobile wallet side of it. But even on the microcontroller side, we see good strong growth in Q3 as well. And then actually have seen a little bit of pick-up even in the audio side with some of the design wins that we have. So it's pretty much across the board, Stacy. But the most significant contributing factor associated with it is the mobile wallet growth that will take place, more on a seasonal basis than anything else, as well as the success that we're having in China on the transit basis. Stacy Aaron Rasgon - Sanford C. Bernstein & Co. LLC: Got it. Thank you. That's…

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

Great. Thanks. Congratulations on the strong results and outlook. I'm hoping you can give us some update in terms of the regulatory and operational timing effects with regard to the Standard Products sale. Richard L. Clemmer - President, Chief Executive Officer & Executive Director: Yeah, I think, Will – I think we feel good about the progress we're making on the regulatory basis on the Standard Products transaction. And we talked about the – we actually put out a press release relative to the FTC side of that. So I think we feel good about the progress on the regulatory side. But the long pole in the tent, as we talked about at the time of the announcement, is actually being able to pull the IT systems apart. We're in the process of combining the IT systems of NXP and Freescale. And now at the same time trying to pull out Standard Products which is the most significant share of the actual quantity of units that we ship. So that's really the thing that will be the gating factor relative to the close. And we still anticipate being able to close in first quarter of 2017. But it's not going to be driven as much by the regulatory basis as it will be with our actual separation of the business.

Helpful. If I can have one follow-up, going back to Automotive for a moment. You spoke before about the success you're having in radar. I'm wondering if the company might have any comment as to traction in Vision and other ADAS solutions. Richard L. Clemmer - President, Chief Executive Officer & Executive Director: So I guess the one thing that I must not have emphasized enough, Will, on the call was that we had a very significant design win on vehicle to vehicle. And we continue to be really the only company that has gotten the technology design wins in vehicle to vehicle that we believe will be a very fundamental element in a complete autonomous driving solution. If you look at the auto industry, there's really four levels of autonomous driving with only the last levels being fully autonomous. If you actually get through level three, which is a lot of safety features that assists the driving, we get about 80% of the revenue associated with it. The significant portions of that will be vehicle to vehicle, will include radar, and will include the processing associated with it. We will be sure that we have the processing capability associated with the Vision side, but we're not going to have the fundamental software logarithms and the capability that one of our competitors does to be able to focus on that, from a Vision side. So we think that it's really critical that you have all of the capability to make driving safer, including the vehicle to vehicle and radar, in addition to Vision and potentially even lidar associated with it. But the real key for us is being the leader in vehicle to vehicle, the leader in radar, and the leader in the processing that brings it all together for a safer driving experience. And will drive a much more significant growth than just the inherent growth of the Automotive market itself.

Thanks, Rick. Richard L. Clemmer - President, Chief Executive Officer & Executive Director: Thanks.

Thank you. Our next question comes from Toshiya Hari of Goldman Sachs. Your line is now open. Toshiya Hari - Goldman Sachs & Co.: Hey, guys. Good morning. And congrats on the solid quarter. In your prepared remarks, Rick, you talked a little bit about your traction with the automotive OEMs in Japan. And I was hoping you could elaborate on that comment. Which product groups are you seeing momentum in? And what are some of the factors driving the success? Richard L. Clemmer - President, Chief Executive Officer & Executive Director: Yeah. I think the key thing is really the beginning to ramp the shipments on MCU design wins that were won several years ago. So that really represents a significant portion of the near-term traction that we see with some of our key customers in Japan. In addition to that, we've been now successful on the remote keyless entry so that we have kind of the last significant auto producer that we have the design win associated with as well, although that's not such a significant near-term revenue contributor. So I think we continue to make good progress. On the car infotainment side we basically supply virtually all of the major mid- and high-end car radios already, making good progress on our apps processor on i.MX as well as the automotive microcontrollers. Toshiya Hari - Goldman Sachs & Co.: Great, thank you. And my follow-up is on the inventory situation. You talked a little bit about the channel and how it's healthy. But how would you characterize your own inventory level today? Daniel Durn - Chief Financial Officer & Executive Vice President: Yeah, so, inventory on the balance sheet is 107 days. It's down 10 days sequentially. And if you unpack the inventory change in the financials there's two components. You get $236 million that gets reclassified as assets held for sale, which will go with the Standard Products business. On a dollar basis, the other mover is a $49 million reduction on a dollar basis of our own inventory. So we're making great progress to our mid-term target of about 100 days by dropping 10 days sequentially, 117 to 107. Toshiya Hari - Goldman Sachs & Co.: Very helpful. Thank you so much. Richard L. Clemmer - President, Chief Executive Officer & Executive Director: Thanks.

Thank you. Our next question comes from Craig Hettenbach of Morgan Stanley. Your line is now open. Craig M. Hettenbach - Morgan Stanley & Co. LLC: Yes. Thank you. Just wanted to follow up on the comments of the V2X at a top three OEM. Just as you think about the pipeline of potential business and discussions that you have, how that's progressing and how you see the market opportunity shaping up? Richard L. Clemmer - President, Chief Executive Officer & Executive Director: Well, you know I think the really key thing on V2X is the overall infrastructure requirements associated with it. We also just participated/partnered with the Department of Transportation on the Smart City award where they announced this quarter Columbus as the winner of the Smart City award where they'll get around $50 million of funding from the U.S. government and a related entity, as well as they've raised about $90 million locally. So they'll have $140 million. And one of the key things that they're trying to do is be sure that they have as much safety added to driving municipal vehicles as possible. So V2X I think is something that will develop over the intermediate term. It's not going to be growing overnight. The key for us is to win these significant design wins and this was one that was extremely significant that had been on the docket for some time and for some various reasons had gotten delayed. And so we're very pleased that we actually were the solution of choice for all of the bidders on this key business. And as they won that it gave us a really solid position to be able to drive that over more of the intermediate term. The key for us, obviously, is to be sure that we…

Thank you. Our next question comes from C.J. Muse of Evercore. Your line is now open.

Yeah. Good morning. Thank you for taking my question. I guess first question, trying to understand seasonality going into Q4. And I guess as part of that, Rick, trying to juxtapose your comments in the prepared press release in terms of subdued macro environment and how we should think about progression for you guys as we go through the year end. Richard L. Clemmer - President, Chief Executive Officer & Executive Director: So it's interesting because this is a new experience for us as well because of the combination of the two companies. It puts us in a different seasonal pattern than what we've been in, in a historic base. If you take the total business and look at it, typically Q4 would have been when you combine the two businesses would actually have been down, where historically it would have been just slightly, for an NXP viewpoint, it gets a little bit more of a decline when we combine it with Freescale. We aren't giving you guidance relative to Q4 and what we would anticipate for Q4, so I want to be very clear with that. But relative to if you look at the last three years, it's the best effect that we have of equating seasonal pattern, you'd be down mid-single digit in Q4 associated with it.

That's helpful. And then I guess quick question for Dan. I know you don't want to put out operating margin targets or anything like that. But looks like you've taken out about $200 million annualized OpEx. Great job there. Curious if it now gets harder, if you're slicing maybe into a little bit more muscle than fat. And if you can comment on whether the trajectory of cost-down efforts may slow a little bit? Where you're focused? Anything you can share there would be very helpful. Thank you. Daniel Durn - Chief Financial Officer & Executive Vice President: Sure. So the targets we have out on an overall company basis, post the divestiture of our Standard Products business, is a 31% to 34% operating margin target. And we expect to be in that range on a full-year basis in 2018 and exiting 2017 within that range. And so nothing about what we've seen to date causes us to come off of those long-term targets. As we think about the near-term footprints in the sand that walk us into that range and into those targets, you'll see big chunks of ground taken in Q2, as evidenced by the results. You'll see a big chunk of ground taken in Q3, as evidenced by the guide. That 420 basis point progression in those two quarters get us a lot of momentum towards the synergy capture. As you get closer to the target range, clearly you'll walk into that range a bit asymptotically. And so you'll see a bit more in the near term, a bit less on a quarterly basis, the rate of capture at the end second half of 2017 and into 2018. That's just the way these types of things progress. If you look at what we've done, when you compare it to Q1 of 2015 as a starting point, Q2 performance, like you said, suggests about $207 million of synergy capture from an OpEx standpoint on a annualized run rate basis. In Q3, the guide suggests close to $275 million on an annualized basis. And so you can see an incremental $70-ish million being captured into Q3. So we're still taking large chunks of ground. Again, we're focused. We're disciplined. We're driving execution to deliver the synergies, and nothing changes our long-term perspective on those operating margin targets.

Thanks, C.J.

Thank you.

Operator, we'll take the next question.

Our next question comes from Chris Caso of CLSA. Your line is now open.

Yes. Thank you. Just a follow-up question on the Secure ID segment. And I guess the question is how much of the business in that segment is single mode today? And understand that you're choosing not to participate in that segment, but how much could that be a drag on revenue going forward? And, therefore, how close are we to the bottom in that business segment? Richard L. Clemmer - President, Chief Executive Officer & Executive Director: Well, you kind of have to look at it by regional. You can't really talk about it in total. In China, it's all dual interface. And if you look at rest of the world, it's virtually the majority, very high percentage is contact today. We are making some progress with some of the user experience to actually implement dual interface in the rest of the world. But I think the key thing for us is you heard Dan talk about our lack of growth expectations for the current quarter. And that gives you our basis of what we believe the business is going to do. The fundamental opportunity for us is to take that key capability, the device security, the hardware security, and make that available to a broader array of applications so that we can be able to differentiate our solutions versus anybody else. So while the business itself is – we're going to continue to be very selective to ensure that we maintain the profitability requirements that we have. While they may be different than our competitor in that market, we're going to be selective. And so we'll see how that plays out over a period of time. But we don't – we're not laying out a significant growth opportunity in that business based on the environment we see from a competitive view point. But again, the fundamental core technology is the key element for us in being able to drive that for broader applications across the total company.

Okay. As a follow-up question, just if you could give some thoughts on potential for further M&A? Just what your appetite would be at the moment, once, and I guess assuming that that would be the case once you hit your net debt to EBITDA targets? And what would be the criteria that you'd be looking for if you did have that appetite? Richard L. Clemmer - President, Chief Executive Officer & Executive Director: Well, the thing that we've been very specific about is is we want to ensure that we complete the integration completely before we really consider anything else. I think the industry is definitely in a consolidating mode that we see. It's interesting to think about what alternatives there might be over the intermediate term. We actually like our portfolio quite well. When we get to the position that we feel comfortable with our debt level, we'll look at the alternatives that really give us the best strategic position to be able to fill out our total applications associated with it. So it's clearly premature to talk about what areas that would be because our focus is really ensuring that we drive the integration of the complete business. But our focus is on maximizing shareholder value. And in whichever form that takes place that will be the key for us is how we can maximize shareholder value.

Thank you. Richard L. Clemmer - President, Chief Executive Officer & Executive Director: Thanks.

Thank you. Our next question comes from Ambrish Srivastava of Bank of Montreal. Your line is now open.

Hi. Thank you, Rick, I just had one question. Back to the SIS. You've talked about the dynamics which seem to be not typical end markets or competitive environments we have been accustomed to seeing NXP operate in. So I get the current quarter guide. And this business with $1 billion business now is going to be lower than $800 million. But longer term, what's the right way to think about the growth trajectory for this segment? I think you've laid out flat- to low single digit long-term grower. Thank you. Richard L. Clemmer - President, Chief Executive Officer & Executive Director: We did. And so we don't anticipate significant growth in that. It'd be very low single-digit growth based on what we see in the current environment. And that really depends on the competitive environment. If it continues to be as unreasonable as it is, where we have a competitor that doesn't have the same kind of profit expectations, then we'll continue not to participate in some of that market because we don't want to take our profitability down. We feel a responsibility to deliver a reasonable shareholder return for our investors. And if our competition doesn't have that same requirement, then we'll let them do that business and we won't participate in it.

Okay. So we should expect the same discipline that you have shown over the last several years? Thank you. Richard L. Clemmer - President, Chief Executive Officer & Executive Director: Absolutely.

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

Hey, guys. Thanks for taking my question. Rick, could you just talk about USB Type-C and your visibility into that ramp next year as a driver? Richard L. Clemmer - President, Chief Executive Officer & Executive Director: Yeah. So, Blayne, it's interesting because it really fits in well with our high-speed interface portfolio when you think about the power side as well as the ability to move data at very rapid rate. So we feel very good about the developments associated with it and the engagements we have with customers and the technical solutions that we can offer. It obviously has more work to be done. We're not delivering a lot of revenue today, but we would anticipate that this is a significant opportunity for us next year to be able to continue to maintain our leadership in the high-speed interface area, including Type-C.

Yeah. And Blayne, remember from our Analyst Day that we guided the Secure Interface & Infrastructure group to be up mid to high single digits on a three-year CAGR basis. So we're not moving off of that view. And USB Type-C would be one of those tailwinds that provides some growth there.

Thanks. And I just want to circle back on a prior radar question. Can you just talk about – obviously, it's far out, but when it does happen can you just talk about the number of radars, as you're starting to see some early interest in even wins per cars. The content per car I know it's ranged quite a lot. When you do see the initial revenue, will it be just one or are you going to see multiple units per car? Richard L. Clemmer - President, Chief Executive Officer & Executive Director: There's no question we'll see multiple units in most of the architecture that's provided associated with it, whether that's one to three, which is kind of in the level one implementation where it's really low level driver assistance, or level three, which is right at the edge of autonomous driving, is making driving as safe as possible, which would have about three to six radars per vehicle, or completely autonomous driving which could have up to 20 radar sensors per vehicle. So if you look at the value per vehicle, that's anywhere from $15 to $35 on the level one implementation, to be up to $35 to $60 on the level three implementation and $100 to $200 on the full autonomous driving solution. So that's the reason we're so focused on ensuring that we have a disproportionate market share and a true leadership position in radar as this develops and can be able to maintain that overall key contributing factor to providing safer driving.

And maybe if I could just add, Rick. If you remember back on our Analyst Day, Blayne, Kurt and Bob Conrad both also highlighted their view of ADAS as a percentage of overall Automotive revenue over the next couple of years and we said that by 2019, we think ADAS products can make up to 10% of our overall Automotive revenue. Clearly, it's going to be an area of very fast growth inside of that organization.

Thanks, Jeff.

Thank you. Our next question comes from Matt Ramsay of Canaccord Genuity. Your line is now open.

Thank you very much. Good morning. I wanted to ask another question, I think a longer term one on the Automotive business. It occurs to me that many folks are maybe a bit more focused on the inferencing processor or the application processor in future autonomous driving deployment. And one of the things that's impressed me about the NXP BlueBox platform is both being integrated but also separating the different functions, particularly savings (56:05). Maybe, Rick, you could talk a little bit about the competitive dynamics in that key application processor versus some other areas there that you guys might have less competition and more differentiation? And then second, how is the BlueBox platform designed to integrate processors from maybe other vendors that might have share in that one socket? Thanks. Richard L. Clemmer - President, Chief Executive Officer & Executive Director: So, thanks. The BlueBox for us is an integrated solution to really bring our complete computing horsepower to be able to provide a platform for our Automotive customers to really be able to do the work that's required to improve their autonomous driving experience. We'll take that fundamental capability. And, obviously, as they get to volume production, they will tailor that and we'll have a more focused processing to be able to meet the requirements associated with it. The real advantage for us on the BlueBox is being able to engage with the car companies themselves, show them the fundamental capability, and work with them on driving the autonomous driving experience and continue to provide the computing leadership position that we do today across the overall car. We're not in a position where we want to be focused on big GPU artificial intelligence processing. That's not our niche. That's not what we're going to really provide capability. We want to be focused on the high-volume computing that's really in support of allowing safer driving. Artificial intelligence systems are not what we're focused on and not where we're putting our investment associated with it. And they're a long ways away from being able to be implemented in a car today, provided or implemented in production today.

Thank you. And our last question will come from Tore Svanberg of Stifel. Your line is now open. Tore Svanberg - Stifel, Nicolaus & Co., Inc.: Yes, thank you. Dan, I was hoping you'd elaborate a little bit more on the debt that you just announced last night, the $500 million. Looks like you only need about $200 million here initially. So just wondering why you raised as much as you did, especially considering you'll get some cash from the Standard Product sale here relatively soon. Daniel Durn - Chief Financial Officer & Executive Vice President: So it's opportunistically taking advantage of the debt markets, doing a tag on offering to an existing tranche that's out there. You're right. There's $200 million maturity in the near term. But as you think about keeping that cash on the balance sheet and general corporate purposes and how we're focused on managing equity versus debt, the company is going to take a balanced approach. And so it was just taking advantage of an attractive market opportunity and then being smart about how we manage the balance sheet going forward knowing what we know is going to happen in Q1. Tore Svanberg - Stifel, Nicolaus & Co., Inc.: Great. And my follow-up is for Rick. Rick, as related to the RF Power business, you talk about some delays and push-outs in base station wins. So I was just hoping if you could elaborate a little bit on that, if this is a very short-term delay or is this little bit more extensive than that? Richard L. Clemmer - President, Chief Executive Officer & Executive Director: You tell me. I mean, the RF Power business is one that we have tire tracks on our back from trying to misjudge. We had heard feedback from our…

Thank you. And at this time, I would like to turn the call over to Mr. Rick Clemmer for any closing remarks. Richard L. Clemmer - President, Chief Executive Officer & Executive Director: Thank you very much, operator. Thank you for joining us today. Obviously, we want to ensure that we continue to focus on realizing the full potential of our combination. With the good progress that we've achieved to date, but still a lot more work to do as we focus on maximizing shareholder value resulting from the combination. Thank you very much for your support. Daniel Durn - Chief Financial Officer & Executive Vice President: Thank you, everyone.

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