Texas Instruments (TXN) 27 Jan 212020 Q4 Earnings call transcript

Good day everyone and welcome to today's Texas Instruments Q4 2020 Earnings Release Conference Call. At this time, I would like to turn things over to Dave Pahl. Please go ahead, sir.

Good afternoon. Thank you for joining our fourth quarter and 2020 earnings conference call. Financial with Chief today. TI’s Lizardi, Officer, me is Rafael

broadcast review uncertainties differ release, who We as risks find recent ti.com/ir. and release that For A Notice to web replay being the materially our encourage you available This more a accessed the can This over you be and management’s is involve will at TI’s earnings to filings description. could SEC any statements that of statements results well forward-looking website. website expectations. call from current you missed will the most can contained the regarding through forward-looking cause for complete the our as it call in TI’s today, through be live web. on include published

let what done XX into information provide to February our a important our call calendars. management some will I your capital approach Central review business a.m. progress past, allocation. some time. X hold and summarize insight to for we've on We provide our in to capital the plan to Rafael and at and me First, that's Similar

call, let I be by summarizing me what will Rafael and start reviewing. today’s For

of the by end insight market, I'll of start guidance annual And the also will with And into quarters, provide financial details And done quarter the lastly, and some the few we’ll I it's summary cover end items a revenue quick will results, time. this fourth one-time in next, including first provide XXXX. I'll at informative have our Rafael breakout of First, more by performance, provide quarter we markets. for quarter. overview into as results. revenues the since past sequential insight

revenue by company's On revenue grew of industrial demand grew Embedded the Analog Analog a strong grew markets. the XX%. year-over-year XX% with in grew driven revenue year-over-year, a quick The Embedded XX% X%, starting So, sequentially. personal XX% automotive, and sequentially and X% and electronics increased basis, quarter. fourth overview and

grew ago from segment a Other year Our X% quarter.

revenue our into Moving on, some quarter I'll end now market. insight fourth by provide

most market First, from quarter market year-over-year continued second year the X% within The and was XX% growth. ago. with the was sequential following electronics XX% personal and Personal and across to seen automotive ago. strength across XX% XX% market its a was electronics. XX% sectors. The sequentially sectors strength up up industrial the year customers and broad-based was compared growth rebound The up bottom, sequentially

markets XX% down down our end our year characteristics. and sequentially are describe Next, electronics, phones, tablets into automotive; and sequentially as XXXX. is down do from year and calendar PCs, TVs; six end each calculators. expected, includes personal which life ago. at And are industrial; as X% by lastly, The six grouped equipment; X% equipment down their communications market and from cycles and other, categories systems Enterprise market end primarily such enterprise I'll We systems; break which that products markets mobile communications as XX% for end was year, a was a ago. by of the revenue we

XX%, a revenue X%, of personal percentage XX%, automotive systems enterprise year, XX%, the and was electronics communications As for X%. other was industrial X%, equipment

but our one was even percentage XX% XXXX, strategic increased XX% revenue, of percentage percentage percentage point, point, declined up last about in all emphasis from on we the see and with personal industrial industrial one and versus of TI's made markets, combined up XXXX. increased industrial and additional place good electronics opportunities automotive equipment even, automotive. We and in year Looking other systems enterprise automotive changes point, In X%, at XXXX, point. X X declined communications declined

will will continue efficient. our markets. faster review turning automotive safer, more more per Rafael These their make resulted growth in to to result drive chip products end and to and analog connected other to are outlook. and industrial compared growing now technology will and our Our capital customers application, smarter, and profitability, increasingly trends content embedded which have management

in trailing Gross $XXX gross increased ago, were Operating in operating profit about XX% the quarter margin expenses a of $X.X or expected. quarter XXX basis and was the points. due a profit On Dave, expenses revenue. higher From profit afternoon down and as revenue. of year XX% were billion, Thanks, X% increased good to Gross everyone. from million, year ago basis, a XX-month primarily revenue.

we capital For of $X.X important our invested billion element the in R&D, have year, allocation. an

this allow to charges, in million a the We’re long XX% which due Net the a we of ago pleased our expense, us of the to grow multi-year Other from due million fourth in of top-line to and not agreement about benefit related benefit $X.XX the to level share, in $XX in quarter quarter billion, through profit the or R&D, expense to was a royalty a with which was $X.XX income our agreement. over of quarter. were year included disciplined allocating royalty noncash one-time our just profit mentioned. income capital was we signing or quarter was $XXX continue $X.X believe at the prior per Acquisition that to process quarter. revenue. billion, outlook, XXXX. primarily remain will charges the term. was Operating third Acquisition Operating XX% will up the $X.X fourth

a in our X% we flow management comment Capital paid expenditures million Cash In me $XXX operations a million quarter, the results, flow in Free year billion quarter. $X.X capital were from Let $XXX starting on was dividends. ago. our billion, basis with on the generation. in trailing quarter. XX-month cash the down was now from cash $X.X

our of million dividend of the repurchased year of a about increases. XX%, billion. per own quarter by total our XXth dividend increased We share fourth for $XX cash have in marking owners We stock our to $X of return

XXXX, all we the free with consistent our cash to owners. For billion, our strategy to $X year flow returned return

of flow, XX% cash free dividend underscoring its represented period, our Over the sustainability. same

down investments strong fourth the were end of XX year and debt XX Our X.XX%. quarter. sequentially. from of a XXX, and with the was of at sheet weighted days average Total a billion remains with days balance down Inventory $X.X $X.X short-term cash billion ago, days coupon

at results or cash Now of expenditures XX% or some revenue. from was let's million, for flow billion. of In were operations $XXX $X.X these year. Free Capital cash XXXX, billion, for revenue. $X.X X.X% was look the XXXX flow of

strength cash reflects of business the Our flow model. our

free flow the via share repurchases. the over As of dividends said, the we share growth time remaining is driver be we value. after that long-term accretive believe returned And investments of business, and cash in will have primary cash per

and our shares, count reducing billion $X.X of billion outstanding dividends by purchased $X.X X.X% in Over the share last XX months, XXXX. we paid in

billion our and outlook to be we in per Turning of the to range revenue quarter, expect for the in the of billion to to share $X.XX earnings $X.XX $X.XX. TI first range $X.XX

and about to in We to about tax expect that lower in the add our long XX% term. percentage tax our XXXX focused effective closing, rate continue be the than stay value areas rate point that. In a annual operating we will

continue our long-lived and to and in diverse advantages, reach technology, our invest portfolio, We competitive and broad of which positions. manufacturing product channels, are

and let free believe turn me to on to the will disciplined continue these back focusing improve deliver over flow capital market we it the Dave. and cash share continue by to We which per best enable opportunities, through With will us that, growth to allocation advantages strengthen long-term.

an questions. order as response, for you ask provide questions, of an many opportunity Operator, up possible now can Rafael. limit open you the an lines In to your as will question. for provide please to a we our opportunity follow-up. Thanks, Operator? single you to additional yourself After

Credit Thank you. go We'll to Suisse. John with Instructions] [Operator first Pitzer today

as to guys. help demand afternoon are Thanks you backdrop. pricing. mean, the peers ask the a understand I solid you bit time Congratulations supplying Rafael, talking in results. fuller on out talk you now? having bit clearly, What current a strategy stretching ran little pricing? ability importantly, are guess do about little some lead questions. of year, wondering that just hearing a gain last David, your if thinking current represent around And of about are good letting the peers we your semi Yes, guess, doing many the me for incremental industry, just I'm I fact guys, you can you you the the right raising about are customers time harder some us doing? results your your what share fabs and think are inventory to I guys about your lead your more specifically given could times

of Yes, John, with let first me covered – that a you question. take lot ground

foundational And, – obvious, the add I seeing it. is of is answer supply peers supply The first that a let releases follow-up. prices. if me greater that, our anything, to and certainly same same advantages control our on brings to is from the doing raising and miss of and some technology, Rafael lower One, benefits. short no. think, of give that second and provides reports, you pieces John, that we if want but one the But two our cost; the is competitive the we'll is the the which chance I anything us manufacturing for constraints read take in the really short answer is we've you one So, chain.

like great supply your times really greater So, chains and XXXX, it's this a throughout of control really really becomes advantage. that

maintain in inventory, I angle many question, objective talked management John. have Remember add is of as customer obsolescence. to our inventory your we while high levels will service, minimize of for just on the about long-term calls capital Yes, we inventory

advantages are positioned can into our and of we competitive catalog is parts that do strategically the mainly where automotive. reason we parts the part Now, are the – that and we our business sell that company, industrial model run we way

position order we is well customers. that maintain life customer we of continue our us inventory Our from and long build so service with of demand, in to can those well will product high XXXX inventory to very serve on those well us levels that a can model focus standpoint served business in ahead with cycle,

you So, have of got most we I a the John, we or can pieces, pieces other on? follow-up touch think,

I give quarters. quick last wondering of year for gross I unusual of with the but was a I COVID. OpEx Yes, recovery margins, into mean, expense we're was heading revenue us year parameters kind in cyclical some you an just Rafael, couple strong don't what know specifically around you guide off of Rafael. next follow-up if

costs know should around margin And about that give that to so, and But us March I the as us thinking be SG&A to R&D the help you target, avoid if we great. want frame period quarter, about? tend a be kind we would you And you of can gross think that.

a of to gross like XX% just XX% fall have we said margin through. on think before, Yes,

OpEx, that a get one good out you'll So, we operate you between three about place just the On or right. revenue, little much, last you and can play XX% a follow the be want quarter lower, talked we through years, higher XX% XX%. right, In between and the at what we to in and four XX% over to any revenue XX% incremental right. to and can been have figure pretty long-term XX%

So, that neighborhood. and in I expect that's to but where mean narrow that phrase, I to we've would been somewhere running stay don't

XX% Between and XX%?

XX%. and XX% between Yes

Right.

Okay. caller, Thank to you, John. And we'll please. next go the

Bank That will Arya Vivek from America. with of come

Thank growth. you the for strong on taking question. my Congratulations

to base we the the are follow-up because you if very very from supply question. versus the of are they customers, What your helpful and become facing especially strategic think you of kind reconcile other wanted on of trying Just demand demand news views? And very supply be strong your supply able and constrained sense true bottlenecks? parts that automotive around demand the others hearing maybe chains of even from auto that curious, on would of the those to across and outlook, is your side, capacity, get strong, might materials constraints. backdrop more do the I'm all be customer your results to hear your to bill your with just I'm

as third in a market we're Sure happened think, second in last I We in great quarter maybe from time saw are a a chain automotive And quarter a seeing. just full with same you followed by we this that's describe that was just increase. And, sequential think, essentially the that's supply quarter. a increase a the is that the seeing reminder, restarting Yes, best XX% XX% what stop what Vivek. see in question. to I reports sequential way

any is, is reports those signals aren't is are us constraints show widespread, that there we out you that's that releases. of seeing demand pointing are what I'll anything would say or that with that consistent those but have fairly are press a in on? So, follow that Do you

of made you because in you if to benefits start see markets, growth somewhat to so to I Thank Analog on what start also we the you to curious do see give just in tend last Embedded know regain XXXX, Yes. Dave. can segment you. in they business Do year? you update we think and changes could grow your in see share? the to I'm to market year. be some you, us start business the that Good are think stickier an you this will And your Thank business doing specifically line with Embedded that

give I'll those Yes. a you ones. feel on

So first, progress we're in with pleased seeing we're the Embedded.

that called first then plan advantages, consistent we can a and broad-based, Our then prove particularly growth. product has can building that deliver business leveraging a portfolio long-term We're sustainable long-term resume our more to the our growth. start stabilize to competitive diverse

related announced, we Embedded XXXX some about other that lines, product where of on the charge it had we we from and think seeing some resources the we're decreased beginning reallocated I – side restructuring quarter in increased of to same front. and stabilization was we that a second where investments,

you Thank for Okay. that.

Now we'll next please. go to the caller,

hear will with Craig next We from Morgan Stanley. Hettenbach

that that you'll back or from time how for of Dave, terms chain they be repercussions and couple of just-in-time an changes think it operate inventory angle, to inventory but you. certainly for over on XXXX quarters, up dealing with perspective do for those see might on next particularly supply autos, around Thank challenging you a the we're something and some your year kind of some difficult Yes. the the comments was that, of to now. But, gets just-in-time? just in

customers Yes, don't for our I they're speak inventories. Craig. how to managing or want their

seen I hard us customer's you've in our very as we've operations. and to to have think and to managed worked our support how capacity We’ve business try needs. place just our

we'll like earlier optionality to year their automotive chains continue to the and to other supply to in just high the that customer's service we made whether and And try the saw in that's in look decisions You whatever support the our try needs, keep place. or market so market.

we try them just will happy. to we trying will – we're do. what make So to That's

do you So follow-on? have

year down I And Analog XX% a I then up at looking just difficult and off that of a out thanks. comes know do cycle. coming year-over-year, of

how of feel some but at you're so get is that's thoughts seeing strength high-level your a out what demand curious the about just And of it, to just just and type of you the there?

a make that sure bit clarify I Craig? the right you answer so for can you, me, Can I question. little Just

Yes.

of an just of some so So out your you year-over-year, view supply calls feel with up relative demand some if I curious, easy business coming the our that's demand XX% I it. just, comp, you Analog just just like your will, down trending when how is about how and cycle, that's coming But off know think to hey talked of the businesses equilibrium, of or right is now? you of these

Yes. well. Oh,

come that cyclical a I and of types a is, think things. those where think through business at just indicators we've that when look that I you from –

go when to or industry it the COVID-XX throw-in, beginning cyclical stabilization you the COVID XXXX XXXX we beginning to year, the end of had and the peak top. had of last signs have hit. sprinkle back reached of at then seeing of on really to was begun even had before that You'd the

that had that customers really point what shipments overall. in to And inventories beginning beginning that our to were reflect point in time. at problem weren't we So ship said a at time were

I of think to shipping customers is asking what what ship. again, are that So today are we us reflective

we're that And please. that mean, That have hotspots, product, to have of because Craig. but course of And a caller where lead-times are always we go we kind good Thank doesn't made. the that's don't working. have of remain we today. have hotspots we'll decisions remained the we've of We that stable. our And availability you, next

We with Sur will next hear JPMorgan. Harlan from

Good afternoon. execution. Congratulations the on strong

leading edge. your demand know requirements edge the and its with foundry about strong of of for both wafer MCUs. You embedded it lagging know products, pretty we XX% amidst most as capacity environment, that MPUs, TI know, I tight all And outsources is

somewhat the and constraining, Is perspective maybe from and test I on assembly some think assembly also same is of your this your or or in XX% are about of to outsourced the products constrained Embedded either shipments an the thing team test QX the QX requirements because also foundry here term? So of your tightness, and sub-cost. near

loadings. At loadings have a good still outsource is long-term suppliers still small with we a a though our we Even part other of with a high-level of like suppliers. amount raise. company big only agreements these we being do We're relatively there

So some leverage. we still get decent

to hotspots the here getting there, seeing degree we what and some largest need. but So we're we're

Yes.

would our of sourced wafer is analogs that sourced internally, of advantage say, a great for XX% almost I having our and And all us. internally

times about – remained lead So overall, stable. we've as lead times the talked have

a has been for huge Do a us. So that follow-up advantage have you Harlan?

insights Yes, the kind location, just think demand absolutely. Can of to the I overall it's guys trends I it's quarter-over-quarter, with profile to there. us you of assuming? for know still but breadth you by Yes. shipped Thanks guys year-over-year shipment the geography? provide the understand useful

Sure.

So about thank another are as the was of year were of U.S. in so the where outside XX% based in and of the our customers the of that the by and of our revenues ship we sequentially or other shipments from and down up. all got there; XX% our quarter But color point just repeat And and revenues the U.S. won't on regions come products, Asia we've preamble it. for all flat ago regions either were except I up for you the China.

earlier. just more little bit comment you a there that the made So on color

go we'll please. to the And Harlan. you, thank So caller, next

Timothy from with have UBS. We now Arcuri

quarter also and I to were model a stock, intrinsic bought half, buying totally a XXX% head for the plan I a of stock. you were Rafael, value in of asked but you good you you too, pretty the running the certainly for but back a a pretty get this no you, guess I strong first back and again that question were last and repo the Thanks lot. kind the full-year, have share at next

I'll So the in Is that, comment of that to I quarter we guess that. row? read there can sort that you ask given a it's again second anything into on just maybe

to is goal generated what of and know, of return flow cash you of generated billion capital management, the well above free We tell owners I about clearly would company. as talk cash is so billion all flow, in XXXX; $X.X You flow we free doing generation. that to the $X we our free cash cash the flow

following... So

government I sort Okay. do. you timing I subsidies of you an leading can that, and And guess, some yes, guess around edge? on is I yes, XXX us that, give new on from that the the and the I FAB guess, be going to then Things. qualify or of yes, can millimeter, mostly update coming these for the

Yes, sure.

So on nothing factory the changed is new factory The our the being same, expectation. as built. update far has is as the

in We expected next completed so to be XXXX; year.

form fact, some some have second the half of year. output in – should level In we next of

not that was think approved was so chips, of hasn't that So one billion uncertainties the year. going hasn't is has that equipped, there to depending seen, potential the – that's funded, and one that one approved. approved, about two on been that even a that plane. in are a that how another incentives per $X remains out. question on per I On your as The one of funded; revenue When not was comes it but approved, one, it's was there's the legislations, fully lot be of the all been for on lot but

it anything the highest good. is us at countries us. it States do can the a So to But a and out, that field other for be that and we'll biggest and in the foundational semi-conductor comes that think when companies decide versus technology sense if level government level at a to that strengthen keep would playing United or we look makes the we'll

Tim. you, one Thank more time think for Okay. I got we've please. And caller,

Svanberg will Stifel. That Tore from with come

congratulations on and results. Yes. the Thank you

as because question but of lot we royalty these, I know million. and this Rafael, you color pretty for that you quarter on a like typically you $XXX any add I wouldn't expect that material get maybe sizeable First well? this going things forward should was ask the Can

Yes.

had So the rules. It about, those we that. comes million was and level, of become it's – They like not just frankly. – highest cash for at it it's quite but on a recognize it – over was actually accounting $XXX years. many in it time, We've in million, comes the that $XXX minimums more inside based The most licensing in, have the agreement. that

million standpoint So to cash a I that don't expect is about year. from a $XXX change

standpoint, matters million year So they've as is revenue that what said, passed, income the And that. or as which saw, stable about come much. from recognition the like a is sometimes again, but in really more and I $XXX expect change they it's you pops than to don't what I

Tore? follow-on Yes,

Dave. Thank you, Yes.

revenues So is long-term of and your goal at your I to spend know well X% CapEx. X% – CapEx grow to

think sort sort come was I related any it was things And look do that, you in slowed that, said think year X%? issues that you down? of there X.X%; we close XXXX, COVID will as last at to range that of it

Yes.

ahead So take I'll and that. go

X%. is our guidance yes, So,

a continues as and to CapEx into That's revenue. has building guidance guidance CapEx presented goes be Our everything long-term equipment. as X% that far includes

course number to out, just of just Now – can fluctuate, Like you it X.X%. pointed XXXX in it right? that down fluctuated

is it's It's you for models than with X% into it higher I just or I stick for little a gets your the if – future. wouldn't simpler way, be year two, So surprised the and suggest point across. a that it but X% out would

Okay. Thank you so much.

Tore. you, Thank

call. the concludes That

few and a with we key finish believe items comments that me deeply. let So

the the of flow value. free the growth per of primary believe long-term being First, of with run a We driver is company share cash owner. mindset we that long-term

all these how to Our ambitions and integral customers, are in shareholders, values built achieving and we're ambitions, TI our communities, we successful win. stronger. When employees,

The on us. available all of call Good joining be for website. will evening. Okay. replay our shortly And thank you this

joining again, conference. Thank for you will conclude that And all today's us.