Texas Instruments (TXN) 28 Apr 212021 Q1 Earnings call transcript

Thank you for standing by. Good day and welcome to the Texas Instruments Q1 2021 Earnings Release Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Dave Pahl. sir. ahead, go Please

thank call. joining and XXXX first earnings conference you afternoon our for quarter Good

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

Chief today, me is Financial updates. and will Lizardi, Officer, Our the following with Rafael provide

XX%. sequential overview insight details quarter demand quarter; and with XXXX. strong second grew into since Analog grew Analog in revenue first grew First, quarter. the lastly, industrial, insights next, at year-over-year of it's start increased by X%. basis, quick and the The more usual basis, and the of than results items, On Starting by Processing overview grew guidance provide automotive I'll quarter electronics. Embedded company’s some year-over-year our X% XX% X% a revenue with and cover results, of XX% a market, On driven informative a the and sequentially financial Embedded personal end a sequential I'll Processing and Rafael then time; onetime including some performance first the with quick this for into will more

a year grew segment XX% other Our quarter. ago from

times. first current the lead end revenue by comments our and quarter on, I’ll Moving into on environment, then again our some some market quarter, insights provide this given

fourth across pre-COVID-XX XXXX the of up based both as was personal ago. our year First, up first up ago. The almost automotive electronics. the XX% the up the was from and seen about and down sequentially across work our to about levels compared most up automotive ago. to XXXX recover strength the year XXXX about Personal XXXX market a fourth was supply of the to and compared automotives sequentially was sectors. were very of XX% sectors and to about year about even we industrial quarter chain within strong market quarter shipments to electronics quarter fourth customers from Compared was XX% from The XX% their strength XX% about customers broad in XX% disruptions. help The and the a

Next sequentially, the year down from high the communications even was grew equipment year ago. upper in systems and about sequentially, Enterprise from and ago. single the teens digit XX% about grew was

over times, more lead XX,XXX products the Regarding than times, ti.com. via of XX% parts and our have shelf steady off lead availability have

hotspots, first some However, quarter XXXX lead the expand of times. required demand in list our extending the growing did which of

XXXX of incremental of half from the continue millimeter XXXX our XXX additional in with and the XXXX. come II will third RFAB half will second fab, the to add of in first start-up that We online capacity support wafer

outlook. supply advantage costs environment a and during in lower of Management through control shows market and which discussed our our technology Raphael of greater this. look now review will profitability, benefits Review February, chain, capital delivers As Capital competitive like our manufacturing our the management, really internal and and of

good afternoon And everyone. Dave. Thanks,

increased ago, XX% revenue. a profit trailing From of XX% a gross the $X.X year year revenue. was revenue XX% basis margin as expenses quarter in XXX profit Gross were billion ago. from $X.X ago. billion, And or about First a up expected, the basis, was year Operating in were up from X% a quarter quarter points. on expenses operating million, $XXX XX-month of

due invested last about the expense this were the and acquisition level R&D, first through in $XX benefit, was non-cash at that to was the XX million of per $X.XX partially was our which charges of in was of related quarter charges expense $X.XX have offset cost $X.X profit then outlook, is benefit the $X.X billion, quarter. billion to discrete other months, $X.X winter remain a XXXX ago this and and was or net Texas. first in of prior Acquisition we not included will tax Over in share, in results. of in to million go which income zero. costs Operating $XX XX% by utility XX% segment quarter about quarter reported from our revenue or up third Most Net Operating the the quarter. our a revenue. in year February profit storm in billion primarily

basis Capital capital starting our from Let in quarter. cash XX-month results Cash quarter billion. $XXX me XX was now with $XXX total, Free operations past dividends months. expenditures the quarter. stock. of million returned repurchase million management $XXX our flow we billion in were trailing a we paid the our In million In comment $X.X have in the and cash the was $X.X in on $X.X generation. flow billion

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

debt quarter. $X.X investments the million of first average weighted billion billion strong at We Our $XXX with quarter with the and X.XX%. of term coupon balance of the a short end leaving cash in of total retire $X.X of debt sheet remains

prior dollars Regarding million the were and dates $XX inventory, TI-inventory XXX. from were down quarter,

quarter, earnings $X.XX. to to second the the $X.XX of in in TI-revenue For of range billion and share the range $X.XX be expect we $X.XX per to

and XX%. me invest that, making to closing, expect annual about our Dave. in strengthen competitive rate business to operating tax we be We stronger. advantages In continue turn continue to With our back our to it to let

a we’ll follow the up, limit Operator, for question now for provide you you question, Rafael. to single opportunity an order you our a the lines many additional yourself Thanks, the response operator? of as in can ask opportunity as to questions open after possible to please provide

first, Instructions] [Operator you Chris Danley Thank with go to Citi. And we'll

Hey, thanks, guys.

seasonality. guidance however, flat is clearly is above well seasonality was QX sequential above So strong, below very and well your guidance,

So my and Thanks. such QX? cancellations question why weak outs strong push are guidance you that's or guys after seeing, a is,

Yes, thanks for that Chris. question. Yes,

aren’t you that your We look into, just cancellation say very I year-on-year. or if QX to both seeing and push was observations, outs. strong sequentially,

midpoint, the a at strong second will you from standpoint, be year-on-year So, quarter have follow a up. a quarter

be would guys follow in I I the some this to guess the question, time. you Yes, first just have mean, a sequential be lowest guidance would on given

even a So I guess for guide close sequential guide? not not? or why seasonal seasonal Why

that Chris again. revenue again, our Yes, following as, it describe it best we I be for quarter. really And, would a the quarter. very for it a first is have quarter will, estimate will strong It the it strong

you. go caller. So We'll okay, to next the thank

go next And Stacy Rasgon we'll with Research Bernstein to

guess parse Hi, fact just guess, I guys, poles the and so shipping your I strategy. orders some having thanks customer extended as out know with loadings getting is of this time I are build dollars taking to how being still your pockets And do the for guess up? of know? getting? How that like what at to service. that Are that's of asked inventory of just lead you point? that you're you're those have inventories going just down, and I weakens? plans a demand whatever my the of inventory been do go reconcile you're do replenish strategy inventory question. a that into to to that that I talk function you want Is in are quality about for keep And you is try the the for drained? we can't to inventory for QX, you light, strong how you just I

for thanks question, so your Now, Stacy.

question, to objective high minimize, inventory levels and and while have of higher levels customer And remind would we to of as prefer minimize improve So you is manufacturing step first, maintain let there me we in inventory. back alluded realization. obsolescence everyone our service the

fact, we're In XXX, But ago like target days yes, we from environment, we capacity, we capacity the slowdown, year are output inventory, inventory things things will this them some have in continue incrementally, of next to XXX half XX then will, in into to our management the build we then that capacity to we increasing point for of to able RFAB first a as have a next that, follow what the fulfilling missed have that XXX And building up will on know the on up your a had increase II Prior demand, which we'd to use or XXX. inventory. which to day more don't half second question. year, at for you we of together, increased But to balance as those strategy, capital days or that so from our something? current focusing not more whenever inventory. why I you couple be if parts other come I year. of their the will and first

Okay, I'll follow up. use the

So quality whatever how parsing getting? just at orders being are you that skipping you're the is of point? you Are this the ordered

exited that a as to. few Yes, last no know, actually have too process. environment. a of follow lot last just I'm really I'll really, many To ship us the particularly the And the chose in with direct direct years, they position, almost customers we longer that of who we years, going revenue, two access where, Because of But pulled glad and couple you distributors we with, we're away you have a moved our one as you I'm have to in our glad highlight, year up. we from the now over of we current last better XX that now year used and shipping understanding it's point the we those distributors great been trigger more into more, more what a a need. in thirds customers. has have, put direct, with

that up. have, don't We frankly, have between clouding intermediary in we things

As lot it the as with distributor. way a happened frankly the

our so that our manufacturing, etcetera, So, fulfill in customers. resources, better then inventory, use to order from allocate both information demand to we

That's great. Thank you, Stacy.

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

Suisse. Pitzer And question come our Credit from next John will with

good afternoon, guys. Yes,

curious asked original did sequentially but be growing I'm you up a I supply to the would follow you think the March said not somebody guide. to from revenue question, June June. just Rafael;

not So is, inventories to build revenue sequential bring supply by growth? across customers be sheet. the to on, Why just you some incremental how wouldn't curious, lean be you your balance are you given your show that and actually might used able in implication I'm the inventory would expect channel. own

question picking some getting the I in I think new a little and ones things said. you're that of

inventory if a build fourth statement inventory Just that I to that earlier, going you drain that that able be output, take doesn't as shouldn't said build mean right? we'll would into I So to even second inventory. going we What to you, first, increasing we're necessarily we're quarter.

this of first And I we're year, and add incremental this that to through II in the of going which or balance the incremental add RFAB of next XXXX. second be capacity until comes the year, inventory on, would would through half half

are you've there. got moving So, pieces that multiple

You follow a on, John? have

Yes.

kind turning the that see kind corner embedded cyclical within market to see like market, analog. Just analog, of on growth kind of it the guys sequentially, in of rate the do And the past, was the the you And beyond understand this of of there kind funnel embedded be March than what about Can in nice about we've the lag the it? talked us you're there? design growth feel faster is that you at recovery? quarter Dave, in how growing you might least help

pleased But Dave, the our you up. phases, Yes, embedded. in pleased goal early we -- I'll made first give was And, a embedded, we're We're we said to have in that our want few -- early have still results. you competitive And however, that. of in we're level, we direction. to still to the those leverage with but have embedded with right? then follow phases, we're advantages a early embedded some headed very stabilize on As and trajectory that high changes before, better comments make we're have with

Great. Thank you.

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

go to Craig Moving Hettenbach Stanley. Morgan on, with we'll

areas give impacted? been would the XX% times. normalize? lead I And has color you sense maybe for just to expect in thanks certain when seeing a maybe or you're hotspots, there? so that sense Dave, guess, times lead what of the Can of that's on your the in you

Yes. a correct of moving on to pieces lot There's that that. just

pick to I probably try premature to that. it's think

obviously with are hard needs. and customers close demand those fulfill working Our those to teams very

So technologies and those requirements on and are. what packages it based really just customer

You have follow a on?

I some about Year-over-year, you from some XX%. up electronics, QX? And feel for personal home. work then, And Thanks. more how been Sure. nice from that business that there's of in segments you're Any color terms know the growth? seeing tailwinds of

Yes.

back color a give to that we'll on. we feel into in I that say, When can has I'd as what that demand into we've personal seen there's past very both the board call nothing quarters something the unusual end we've level, quarter, by quarter, high market, and customer, sector. a really look the at we few there When So unusual really say broad seen, the by in look by there's first going across we well as been if out. based, electronics, out that need

things. just as speakers, electronics, we'll and laptops, televisions, like reminder, spite and handsets those a -- in and personal of personal types including have tablets So of things smart computers,

pretty printers. So category -- a it's broad

broad pretty it's categories. So

I personal think up there ten different nine, electronics. sectors is that make

demand seen across those. very we've and really -- strong So of -- all across

the going point we But people times manufacturing technology, of one our are want lead asked own It tied. our day, advantages. as things long ahead competitors. go That are our of Rafael. differentiator the inventory. I the is going right? and just a as going tied be is Earlier, here the be key of versus be competitive tied, demand to are to supply, own is key to is to things At lead back to end Yes. about several question This is times.

and position So But able or be control that equipped. -- get to and year that incrementally in add we inventory, half so. after when to capacity is in able that next to a have significantly to strategic more starts to II a are RFAB strategically unique a then the for that it built, be

difference big all customers really position automotive, much industrial both haul, It over are demand, importantly, as short continue those better fulfill that in term to the us competitors. a and So puts customer's our a versus in more those focus great we that's on spaces. to long

you. Good Yes. color. Thank

Please. to We'll next caller. the Okay. go

Sur Thank come Harlan with from you. And will JPMorgan. that

Good my for afternoon, question. answering Thanks

to the extended lead times question. the different way On maybe ask a

test of asked just just outsourced partners? more internal is you maybe across outsource, also XX% You wondering your capacity seeing Or I'm XX% your about as embedded as manufacturers? times extended requirements, lead and this and most the tight both is of if of the you're wafer your it is outsourced assembly. and of it where given

more Yes. just not technology types. It's there, Harlan. specifically package end is on It based or driven really market or

as So, it we've described hotspots.

that outside. the the assembly point. Rafael's we've term got So our things supply. demand peers test in-house, of it's of back we kind a have that don't do those majority that our is most outstripping But combination of when to short that do of The of assembly fact peers that. Most

very things well. incrementally. cost number So our of even as we to are because do XX% higher the XX% a we wafers and that much we can XX%, that these. is Also, than times in-house, that control like peers very control Also, in-house. expand capacity degrees And our those we important a large do in

tremendous top we're fact advantage. a millimeter, the capacity. So it’s On that adding of XXX

to addition lower it's in it. cost So in structurally at coming

a have follow you So, on.

insights Yes. No. Thanks there. for the

And question of guys wondering to -- know to good in ask could previously, but you year-over-year the within about tried some year. this the embedded business. somebody So refocus the last just momentum embedded a I sub know I see you again segments if

is same business? it end markets? towards if wondering profile? of a the dollars? go I us to you guys now basis mean, more Just embedded what one overall more have a R&D spending markets you as it Or give end could or within exposure does the are the market on forward corporate overall end particular like skewed embedded profile And relative

Yes.

growth embedded, what the I directed in the have best that we we opportunities. So, at -- investments that think have

that pointed of and a markets do two automotive those largest a that, of the enterprise is those are PE have but industrial direction. as revenue bit of majority the [ph] well. towards So, They we to focus The are took markets. we revenue wanted them the markets. two little portion We of in inside communications revenue bias our and step into in back, as in

in as again, early we're the said, stages. So, Rafael

revenue was objective get first to the Our stabilized.

because we've embedded we're growth believe feel contributor term. be good investments cash And long about making to free we a there over very will progress we So, the the far. made flow the that so great

years very embedded back made. be and growth believe company. cash several we We'll we'll investments pleased pleased free be So, will from have very that that that with the with we'll we've look flow the contributed the to now

So, okay. Thank next the you, Harlan. to please. We'll go caller,

Thank with you. And will of Montreal. come that Srivastava from Ambrish Bank

you Thank much. very Hi.

are peers and -- are patterns of But the cancellations about customers what order any you're that haven't Just Many or a no your change say customers in seen seeing you. that having on looking in for then talked the guys. policies, business think front? never. clauses policy, result, and to cancellation with you on of capacity, question Are you're a your of facets that you to the could have we there changes as that commitments terms have

Yes.

of So, assure good be from need us where really tell they need May they April we down XXXX. we don't But that think to don't that tell or what I to idea be a need, can demand a and supplier a what that I customers year now. can don't force as that well. year can We a what now. path supply to you -- know from count a in position they want to they you they what they them that's can need in they you, on go

there. us owning manufacturing control controlling gives that advantage our competitive asset of our Our costs technology of manufacturing also and

So to raise we as we've in position have. peers haven't prices go many other our and of where been in had a

So, revenues quickly quarter, share right? that this point at gains, we is that. of and And are into you I'll also the those we combined out two believe -- believe in part gains. when that share translating So things look

measure time. that got over You to

measure or But that will us believe over at very benefit something time that come. for to be one just it look don't we quarter. a will So do long

Ambrish? follow You have on,

I Yes, do.

the and CapEx. on quickly capacity Just

we third few shouldn't Fab? expecting? And be the were be the you quarters, given modeling guidance the within a then, intensity, build as So, pull you've versus second that range a intensity different what next is XXXX in We correct? over should that half you

about a But answer expected. where not me in. That's part pull always it's first now the No, we've of your question. let

absolute current our that to great the they've a to manufacturing advantage percent in technology, that in for you've proven -- our the as about, you of we also And CapEx and revenue the of well, we're longer model own to We meeting. that's And during We but higher revenue a talked such own our did than percent both it's at reality CapEx. very our talked X%. But the that you a is term supply you continue valid number to term. strengthen term know that particularly controlling we just following early of been situation, for more is ahead guide structural is years, the has as as capital terms, worthwhile. cycle going run having we management manufacturing provides to get continue about strategy of As us over for XXX as that pandemic, while. three been two, millimeter cost competitive a think and our term long as importantly, short the that at about about short this in invest advantage help

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

question Arcuri Timothy come with that And UBS. from will Thank you.

your maybe some thought going you chain, know and And not a I that Dave, comp conservative, I school product anyway, sort supply lot. gains guidance. model are your there of guidance? you're is, elsewhere? given upside on know typically are on. is, due what's wanted of And not QX. the of you from if I Because customers there's and consignment because inventory more them? your waiting you guess that June wonder pulling just drive and tough pulling it in they're some share a contributing the also But And very shortages that -- ask question your to that's to of I Thanks shortages because control I somewhat would about have any and I just customers maybe that that hearing your some for elsewhere? to sitting

going probably Tim, we that any that point. believe on at don't we Though, at that that's level. goes think significant on any

believe second on don't in we quarter. yes, factor that's going So that significant a that's

You follow have on?

I do. Yes.

same it's last, bit you only repo. have But asked I share I So, a stock. months. thing about the if million guys buy last quarters the of So that trinsic know in that returned. flow your that seems quarter. three back it's a And And like over It's model you quarter sort that for like this say again the pretty I of row? I much always strong cash didn't you guess know $XXX free a nine pattern past and now maybe it's in value a matters

Thanks. So can you just that? talk about

Yes, thanks. sure. No,

XX all back, of time. at we XX, First, free and you is over cash that owners look alluded you to been the of the as And to stepping all to flow on long our to that doing history our to term. then if continue objective owners And returning goal, have company. the our the going flow over cash the year return we're company some free front,

buybacks. mean doesn't long quarter, all that over even of talked cash long And not flow for look maybe criteria there owners the that. year, the We -- Now quarter, But over we each right? over to term. those, the free return we've necessarily to we're That going are company. every not and every both --that means about do that through term, every of time dividends different certainly the at and

for Okay. We've got caller. time more one

with Stifel. Svanberg you. from Thank will that question come And Tore

and earnings. you, and record Yes. congratulations the revenues Thank on

just continue quarter? is exactly capacity that it or walk what changed the Does orders looking what XX Did back at you through just First could accelerate? Dave last last ease? just this Rafael, exactly the situation step to question. Maybe changed? days,

looking to if you a supply exceeds what comments. for. in continues where strong. you're I'll I We're demand capacity. be -- have perhaps But demand a environment sure still give Not few

growing clearly, capacity sequentially, are We're stronger, over has we revenue our that and we that we the that. also environment, course, have do And of both -- Now, continued have while we have in but pandemic, right? of at the cycle, in while phase in look year-on-year making or this on also incrementally done adding built back, when the we this right? entire everybody So first through was back, we back we you focused February cycle. company have March, that if pulling

a our turned So decision be strategic of position as And our it to low that was with other enabled part out. on side, focus build through by the tactical pretty started risk, that industrial we're demand prepared automotive, catalog once able on so obsolescence, quickly returning for cycle.

we We -- we did focusing and on ground, strategic gain industrial. that also as auto also a

And product on other we the availability immediate that's inventory high our for in with comp. we manufacturing really So our invested is there's for and many right? obvious that's We continue from that invested And the But may very comp, other obvious the availability, have how also us we're the you've about in the today that But strengthen in that free have phases. doing customers parts, have the is most we to one strengthen then those long one basis. continue cases one to of R&D while technology. there talked lot be support seen fact, we already channels, advantages, other with to about here. talked term. buy And to grown the a portfolio, done have competitive best everything the We in most there and in much. to customers we which direct very, haven't is

Tore? follow a have You on,

Yes. Thank you.

you've think XX.X%. margin, very operating revenue. of OpEx your of a XX% in between XX% about shy record the being Rafael, past, of I kind just and So was talked

forward -- to there's XX% going it's much ratio that Is there Now XX%? and going pretty so it's that say safe and maybe obvious sustainable. is to it at to OpEx out stay that that demand change

Yes.

trailing right? feel long month OpEx $X.X telecom we investment, Right? short you So doesn't that's, feel is, not Because they're is, those we in in run good think in part short even That's They're that what nature. the a but R&D, change is example, on also, in about very basis term, of going. those SG&A to. of going XX course, investments, I SG&A. it term about We about we will to where Clearly of tell at need the the good much in term, as billion. very it’s an on

don't that I the to the guidance term, over the many we over apply. see of you years, changing we in So XX% term number, XX% short given still long have but much, that

So, those in of it terms. so should still you think

was one. Okay, so the I think last that

term ultimately, per of So let me measure our is go But the wrap engineers our ahead generate cash of value reiterating the objective our is were growth and that and owners have said core flow and up free long best previously, for by share. what company. foundation we technology metric to progress and

company of achieve in will that's would pursue will we company changing. us to we neighbour. we're While to be proud that decades, personally a ambitions; owners And succeed like we we a world adapt we And and part a our who ever objective, to for strive will will own three be act our the continue we're will our want successful. and

owners benefit. Our employees, you customers, a communities and have good all Thank and evening.

And conference. to We'd for does thank participation. you. that like conclude their everyone Thank today's

disconnect. now may You