Texas Instruments (TXN) 22 Jul 212021 Q2 Earnings call transcript

Good day and welcome to the Texas Instruments Q2 2021 Earnings Release Conference Call. Please note that today's call is being recorded. At this time, I would like to turn the conference over to Dave Pahl. Please go ahead.

Good afternoon and thank you for joining our second quarter 2021 earnings conference call.

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

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

of First, I'll quick a start with the overview quarter.

revenue Next, XXXX. end the of and with one-time items driven basis, I'll results, Starting grew provide performance $X.X at insight of demand On grew of into grew guidance some Rafael our including Revenue revenue was and And and personal details second since by financial the quarter X% basis, will billion, the a usual time. year-over-year, insight more a third On the quarter X%. Embedded XX% informative Processing results, quarter Analog with XX% this some than into sequential for quick it's more a market, lastly, and electronics. sequential increase XX%. in Analog an by industrial, and sequentially automotive grew quarter. second Embedded in overview year-over-year strong X% cover

grew quarter. Our year-ago segment the Other from XX%

this I'll end some provide quarter again insight second environment, times. current comments and market by the on quarter our given revenue on, our Moving into lead

sequentially XX% even up customers within The weak mid strength grew year-ago. following seen quarter doubled Personal year-ago than was electronics XX% personal a The broad-based from about was from was and market was strong First, about sequentially about first the sectors. year most to industrial compare. electronics. teens sequentially a sectors strength The up up and and a XXXX across a market across and compared ago. automotive more

year-ago. a teens upper sequentially and digits from Enterprise and was teens down even Next, was from was sequentially low-single up equipment about systems communications upper grew year-ago. a

to our of Regarding lead continue the majority products steady. remain times,

However, the required times. extending demand again XXXX expanded hot second lead the of in growing our spots, of list which some quarter

As we additional the second our startup will fab, the of RFABX, from first incremental half third continue capacity planned, to come with online in support XXX-millimeter and XXXX. of XXXX half XXXX wafer add that of in

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

Thanks, Dave, and good afternoon, everyone.

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

in outlook, our invested acquisition. second to or level billion, the year-ago Operating in National the Over in quarter are XX% not the XX% profit quarter billion $X.X was Operating $X.XX in a third through a of signing were of $X.XX the was included revenue. of the to million was the quarter, second prior in $X.X charges quarter. Net a benefit or that share, which expense, charges, XX Acquisition acquisition the Semiconductor per quarter income royalty due $X.X was up the agreement. from remain billion noncash last and and $XX profit we've then to this about will related go XXXX at R&D. months, These zero.

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

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

remains of balance with the sheet Our quarter. strong and short-term at of billion second the $X.X investments cash end

an planning. down our of strengthen and to TI Lehi in part Regarding which continues levels. XXX-millimeter inventory, below the competitive were quarter, completed desired manufacturing are be long-term investment soon-to-be days fab joining technology we prior acquire capacity The quarter, is the from fab and XXX-millimeter Utah. RFABX were This Micron's fab RFABX inventory fab, in our our dollars fourth signed $XX advantage XXX, second agreement our operations. million will to In Lehi, and wafer in manufacturing DMOSX, and

growing to We that our manufacturing of and of in importance supply continue and chain. will believe competitive owning advantage technology our be controlling

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

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

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

And of we Thank Bank to America. first of go Instructions] Vivek will Arya [Operator you.

stronger mean, hard we range. demand to Rafael flattish. to XX% to to making strong? right distinguish that’s your sales I the very it and to And to is Thanks and significantly suppose Should original for your just Should in because and even last read conservatism? you’re we at how outlook I question. You’re cycle take my how increasing is the few yet between look is your that outlook sales a seasonally but X% and peaking that guiding reported now that above quarter. Dave, so your quarters, a outlook what between your above to be taking been take like guidance, be when be guided flattish the have supply,

a love you it's guidance. the and in to them I interpret insights or very think right reading into how way? Are confusing I we your message would

Yes, Thanks Vivek, thanks. question. the for

as perhaps we period seasonal move periods I would not the look certainly patterns continue think, may through. gone agree the in all I best that this, normal through say things, quarters like be first, been to measure have last to few at we’ve and we unusual would

as the So have been said, few quarters and strong. you last exceptionally

and Second year-over-year. quarter strong was both sequentially certainly

guidance, that be strong quarter. at suggest very So, our the will again look if it would you next a quarter

is you guidance that we know, have as the best our estimate this at in time. So

So we what try that that's insight. you And to try to give do.

You’ve a follow on?

Thanks, Yes. Dave.

are, again, the low conservatism otherwise. you from in real suggest is, So unless you activity, at that assume it's said, what question been But buyback implying share you I when very my I the look are attractive quarters. the is a or why few that would these strong, at part return it has reason very free dividend preparing of last is there And maybe it One right. the a your activity such last could And about only you're perhaps reasons of stock right. buyback understand for macro? be simplest M&A caution a valuations, not flow few cash that understand the -- large is or now. has the to under CapEx almost the in share but low material been strategy, some been there some that year be terms to shift or why trying We over is very some

at the buying we pace your are you So which you Thank views so. done not as your stock back you. appreciate just at to have historically why

Now, I’m happy Vivek. to one, address that

do take and me management, well for years. a in to human comes about you heard buybacks. to you that let back cash of And it's return you've talk our it about us we the think to very many capital owners cash return. in to first, company. out So follow how year well this year through us flow as dividends returning the cash as all when free objective We And

met going If our or where single Now at has XXX%. you that quarter over even single be return been exactly Right? XXX%. mean and every years, has never history, it plus above that to look is actually every doesn't XX year that that

has commitment So that that commitment shows changed. our to not and that

the all cash are over We to free owners committed time. company flow of the to returning

Great. and to next please. the caller, go Thank we'll you, Vivek,

be Hari the of caller Sachs. Toshiya Goldman will And next

Hi, guess I guys. well. Thanks clarification, so one, as two much the question. for I had Dave. taking

I you give you about think said I second you number when automotive? Did Did quarter. of automotive, talked up right? in test a specific the sequentially not that

single up low was That's digits, Toshi. correct. It

got it. Okay,

another have you one? Do

Yes.

how you're guide on How So in strong are you business the your very, forward? know your management your thinking in about for well pricing leverage what about the going you run in I business? going quarter in both analogue forward. utilization guys a gross rates margins. as you side the margins, don't going terms of OpEx as you. know and clearly, very factories, Thank given I margins forward the embedded business, don't realize on had gross based gross kind side business of But margins But QX, you in thinking gross about you

no. Yes,

just how me So run emphasize business, do flow free on like We the not you our focus first, gross margins on cash said, let is point focus generation. we in a you made.

for we ultimately, the long-term factors. many to you company cash how quarter you but way the only of look over higher that we margin, long is to at or at And drives of can a year, do over can to speaking that to right margin, follow XX% the share, you have on what XX% model XX% or the a can number term, as go to grow guided company. free forward. right, answer And not as that the and specific way fact, over the we think In your lower through we one generally always question, then long-term, can flow right even a value it the the depends one because margin owners per at is do do at

So be through, as in the ballpark. that you put you expectation whatever you'll about there and have follow that and rate what revenue

Okay. to okay. I questions, move Thank caller. that if you, we'll on next two Toshi. our that's will consider And

is be And the Rasgon going Research. caller of Stacy next to Bernstein

thanks for question. taking my guys, Hi,

it, take. with you give the that think to anyways. In a math, So X but have about in have XX.X. off said quarter. question last think something you I another had this should quarter X.X as margins strongly do would That had have Austin quarter. XXX of going ask gross I then points, basis very That did But don't of And now business should million you he about you or like was $XX I rolled margin gross points running to gross been been royalties that I'm $X.XX understand unexpected. the Obviously right. if this years, cost margins,

-- were what's take of a out up that. cost massive have margins fact, XX gross So increase, revenue with points been like I'm gross have basis off with margins going rolled why actually points in current they if that all would wondering with basis given happened should what with on quarter the the only royalties, of I in XXX

let I … and -- ask have your don't So, question, one part your me quite I understand Stacy, but address I question. of then to

royalties, gross maybe Or maybe working margin, they … weren’t

did part Exactly, I it. That’s the

Okay.

assuming you’re So royalty?

Okay.

Okay.

We four we expense. me let three income -- other years first. I that be yes, that or was to used margin. talk about to So gross and that We royalty. and years in It ago, But revenue ago. move address think,

is income So line, that expenses. other in that

or been the year. for years amount. So moved a -- it has has minimis, that about million or X do very it's nothing de It we since is and $XXX It X to small relatively margins. averages reason so a with we

of a we the and amount, in relatively be to course, big to small small Of continue expect things, is forward. given be revenue level scheme going that our

of On the part your other question.

of quarter in So was and storm our about gross We about that talk that Texas. in gross million because That the was during the did call hit $XX last all a had to mentioned margins. we winter we margin.

So, yes, that. adjust can you

you when the trends. however right. for get gross may without at quarter more that you can wish fourth you You that to guys -- impact, look make margin the And sense just

Yes.

that your Does answer question?

Yes, Thank very you. that’s helpful.

where have still follow-up? a you second are a I think you have

So my you're and yes, follow-up, down guiding slightly. guiding EPS you're flat, revenues

up. going So either OpEx gross are margins is going down or

Although, there as any QX of you those going seasonably think normal QX I into be mean, trends it's expecting normally like down on else OpEx down optics, points. normally see few sequentially? on in would guess into would normally is I sort QX the you are I different because a something

from So Yes. so you just royalty just out is And well just the right? reason midpoint that EPS $X.XX -- the moving that take the EPS is that that about, at delivered. talked we we the

in We quarter. to there's that it to range. we that revenue there Nothing's much nothing the But unusual. next between more and And EPS give see You out without between we and changing compare lines, something there's and other obviously unusual the then lines, unusual the a if there. get normalized you'll was EPS nothing that would royalty, --, only right, point yep.

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

Credit John And of Pitzer Suisse. next we have

part Yes. guidance I go to your see your demand went any like the which about down and down I'm the kind deficiencies grasping. fact guys into you back sequential still Good calendar Rafael, back around third maybe midpoint time question. strong. ask down bit quarter? Or the wrap head the talk off they're there a flat sequentially, It quarter, my like Dave, quite to is cooling be of you to down have of want yet you time look of sort sounds a said Dave to markets having your go to trying June that I a end afternoon, guys. sequential? Thanks in the to that that see, just I'm revenue relatively there's I increased me Are flat for can And think could sequentially hotspots hard up? to just QX. guess with the of guidance, markets. at sequentially. particularly a end why I let have the

to imply say it of that other will you could it clarify, part would down down John, that saying part be would And when be range the just our that imply and up. you sequentially, are

Yes.

That's Yes. part question. clarify that to got what -- I that’s just of the you.

something we end would within feel region say area, on. to John, or So explain or just yes, I'll that even understand, always unusual provided what's current like help, insight on nothing a going or a that in that, product that's if we happened there's that outlook an to going something unusual into there's market that's quarter. we've that, need

I implies, think thing isn't be I through would the been the on Vivek's will that seasonality question we've say quarters. the last to that, as few to what probably strong. will as revenue I -- at earlier mentioned range topic, the be looking still moving be And best still

So on? you've a follow

think what RFABX but kind and pilot purchase on as Yes, do on, at how RFABX, about just my CapEx of of should now year. your Lehi, follow about Lehi slowed planned, as we building with as of sort think comes capacity of proposed in as of or the on the for on I'm means curious going kind just And going we mix line of ramp The the RFABX? capacity planned. that next

let Yes. that. No, me you tell about

time advantage, specifically, that it's is part and of me back strides. to manufacturing step and it let long our first, cost to right? new primarily technology XXX-millimeter, invest support core a to remind talked objective CapEx growth. everyone development revenue And So about when for we’ve our comes So low extending a

the sometime middle that fourth that. is RFABX RFABX XXX-millimeter XXX-millimeter advantage. One manufacturing CapEx will will then of technology be and of that's factory. be there. the we're shell of be when will equipment and in deploying incurring Lehi completed the factory. our third because be having then competitive will next become we will our And operational year, advantage

talked will we Lehi absolute we then of call, higher, have because we which the top and when be at percent -- dollars when of call. had on at as revenue last So as had didn't last I that, And said right, CapEx the both quarter of earnings in that.

CapEx is CapEx, million talking both but of And that. will advantage of but So two there. ready about our with to to probably it's And deploy going relatively That's volumes $XXX which I'm will think will factory, strength is manufacturing we a volumes. run more as in have top then factory that half those will right, it, once to that time. price, over now technology CapEx of of still will -- factories. years, qualify addition competitive CapEx on want of to that add run. the it for We what take to purchase or we strengthen to is going Lehi production through be low at RFABX and we at the run XXX-millimeter equipment add be to happen over that probably going and to And

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

be will that And Barclays. Curtis of Blayne

not that quarter. I Actually out I the probably a December, Hey, typically ask you on, taking want guide for has know can thanks just to the but been window any Obviously, down kind you're for quarter. just question. of seasonality going feel to

to get obviously Anything at year half Just trying but flattening handle market, the you much back the can out throw December? on there better a levels. for higher

on the cycle. to frame as read are And we and ensure obviously stated, certainly, demand it's -- those the ground. And I really we've automotive particularly long-term. of reward long we think that us to honestly quarter comment will and of the say decline soon for going to not really, actions anticipated that years speculations because strategic we've Blayne. gain And that know, ground, for the know we gone I don't in gains some as that the taken time. anyone us our widely or it the independent the come. the we we're are to quite and Yes, accelerate phase, even and forecast and and lots for going that second I you continue last into working And will we there's industrial how is investing know, But that, strong going that as in you enabled how seen in cycle And last, don't others long we've phase, you've how knows. think on gain the through can certainly approach to to first end ranges fourth the us

the obvious some new RFABX. can things the see you that are So of in investments manufacturing

down here Texas, will in you're see the up over If you building. cranes

at The the at continuing. Lehi, or investments additional max counted visible some I capabilities were are that. think that investments I and ti.com those new the the six are up over and R&D seven of less ones

advantages. So it, invest go to be cycles. place will the through able stronger. continue we our we predict make won't can to We We but can competitive we won't -- in

you do follow-on? So have

to ask way Thanks. wanted your if levels. able inventory, to levels amount Yes, just in on sales and a that you're days but on ability at the I these you down Obviously, that inventory to grow September? do absolute

will there, and an objective let Dave, while not start minimizing remind customer business But our I model. to you issue first, maintain of inventory which me want follow-up. high frankly levels given the is everyone levels, satisfaction obsolescence

We we said desired clearly the remarks, prepared just levels, like are during below right.

point part when their fact, We decreasing I about At second and was about. talked increased everybody, we to situation now and right. to have fact year why we -- yes, is levels, where, great strategy, And inventory levels. inventory levels. model than from of last our But helped competitors or better target to pandemic business back the position take the increased running levels. of that is way were the and are all That's our desired quarters, advantage four that helped our over right. XXX factories. our with XXX in put a maintained quarter same production XXX went to has XXX, below We the do are the us will days, go year, March three our business our we reason last the a us We went in our competitors almost. you, gotten have last days XXX starting, to some things slowing down other tell of We in to about days. we They inventory significantly the XXX hotspots along time days

or of for will in to then and Once the sometime operational but year, the especially we continue talked of will when after then also significant half capacity and year, in capacity a finish in RFABX -- RFABX, is there. we then capacity talked second quarter Lehi with will come we is about, next when in have shortly that’s revenue additional all as our the we add revenues as sometime line that tranche amount that of incremental factories, next about second next earlier. add We come of capacity bigger that will produce that, in will that

just And future, then Yes. maybe to rebuild obviously, whenever things in use growth to to that, will what quickly, those so. of period that do in inventories positions support add able might be we to time the I slow,

knew factor, is way revenue year the going our those Analog I they it we company that RFABX -- most has clearly last work that -- will They us. half, why with are fine we Both that the are buying That's environment. the likely, add medium Lehi more just but and advantage, strengthen not this And which These it term, support completely to to and Lehi, that not in but growth play, already important Yes. is if and down are that don't, is proven both manufacturing owning our that's the long-term equipping thing. one over things current help positioning Embedded. those happen out if doesn't slow of for bought manufacturing, in is long-term we're right? a and has long-term in how the we to are proven to own why

Okay. Thank you, Blayne.

caller We will please. to go next the

of we will BMO. go next Srivastava Ambrish to And

Dave. basis. know much, And you a quarterly question very flow look I share. had a Thank Hi. don't cash guys it on at Rafael per and I free you on

background with was an up it and -- on last when But then it to said lag basis, double-digit the the this if in consistently. this the at conference that back call. for should you at And double-digit, look per What's last line the trailing we If has happens months a look look years on the I if XX but about is I’m down flow cash years, that's free I what at it should to -- annualized lagged X and X%. about it on so year right how going to X share, come the forward? know I if think sorry way we the flat. basis. a expect I at have it think trailing look So I over XXXX XXXX noise XX-month always

Yes, this this one to one metrics you any is long-term, any could or year, be want -- the financial one at little too, most way are but they a this over look if quarter even right, choppy.

You mentioned a XX couple same the thing the of number years just when trajectory XXXX XXXX and right. the not that And even does arguably for term. or XXXX months where represent that longer trailing quoted, you

it, So company, of that's if that's the long-term, look to to this value ultimately over the want right. we at the owners and drive going you look how for what's at and

fair. That’s Okay.

Do Ambrish? you on, have follow a

discernible Are you and you of dime. designs peers? Thank and and Yes, are have I design some long your because contrast share show seeing that what such much in your any on result these don't you than lead tightness and we've shift the up with as quickly this lasting the from peers did. With business, seen of times managing probably the a your tightness and change all better a with you. your they inventory guys way in managed the the activity change

our journey have ago with to and teams, add. really pretty years processes -- business customers off direct the direct X, how applications start investments as do Rafael relationships have as closer on want distributors as to with of the structure you company. say we investments that on business operating our you you I I taking and and know, X transacting sales, X major would and if fewer Yes, started more ti.com, step ti.com. in our investments customers Ambrish, through well we with of year, And inside saw in last a just will

calls. with of c do sales to pandemic mix and ability our kind that you So together virtual the

those I to especially think us strategic gain want like have those we that things well markets markets all ground. industrial, automotive, where strategically, in positioned

XXXX say break like that. and you first up beginning after and availability shortages don't with pandemic but hit that reaccelerated in move really quickly, couple the quarter, second things a the in of started supply You or when the the then showing took

but are that that cases availability. cases But being just of that are are there but they describe intersected you as as unusual, all will to way an where redesign outlier. I have of come. into more customers that, So see because cases we sales are are there advantage we for where a boards cases great do designs a again engaged and again, be that teams pay And us our engineering that back that come time for those from long through. production and benefits is see strategic rewards things will the gives visibility will

last Okay. I Ambrish. And we've one think got you, Thank time for caller.

will Danely And that be Chris of Citigroup. caller

by thanks Dave, the guys. Hey, guidance. analysts the flat Thanks beat the for way other go first and you up on

to. the revenue. auto have on My don't is I So question

and auto etcetera, still the slightly the revenue headlines lot folks supply think the chain, I look to out etcetera there's there. up. shortages if your So a in talk we of was only at And

be discrepancy? for just parts bit folks It you the there? explain would can these So clamoring if more that than up it seems all a little there's out like

it point Chris. Well, would from over year-ago, a I doubled out

more I So and XX% pre-pandemic I bit levels, But again, over think a a little XX% it's we the think cars from little pointing shipping up you're it more sequential. pre-pandemic bit last are levels. from was than don't to quarter up right.

as are and we into significantly, there continue gaining to shipments -- and up we automotive share add up well. our we and capacity are believe to continue So

are time. it are up yes, But, measure our we to and so there up shipments got You over -- strong.

So you have a follow-on?

Yes.

Just, I the guess question. hotspot

few supply better. of guess. this think quarter. you handle When all I little bit think Do a you a think hotspots gets said guys more worse out you're issues last do situation that there you start you'll that to sort or So get a gets you seeing do the these quarter on it

to on going it's Chris, demand, right. depend

We are adding we the supply as side, are on said, we capacity incrementally.

RFABX We as now we and then we've capacity talked until about continue that. come year later The bigger to about, a tranche of will in right we have do been months Lehi. from doesn't X and just

be So before capacity of a tranches it online. we’ve big will coming while

demand. our we going factories are and At we process doubling there have been to own both we pandemic, day, but the this on of that. made in we the more decisions we in but We’ve So situation, business talked the control -- that and own is and were there. prepared the the about. tactical that we macro it's just end been of company, just It run our what whole a model more fully doing better are depend we key don't on during specifically in importantly, our manufacturing peers have really those down all a how with has than

Thank up you first? Chris. do Rafael you, want

Yes. wrap go up. I ahead and will

what our free So best let and we of said me But generate At our for flow ultimately foundation owners we and just metric engineers long-term the cash are share. objective emphasize and value our company. of core, is progress the the is previously. technology to growth have measure per

While we strive ambitions. to will our achieve our to three continue pursue objective, we

like the decades. for owners company will We will act own who

a our want a to as communities part be our succeed adapt would ever in have that's world benefit. where employees, you all are good be we and a changing company Thank that owners a evening. we and and will and When We will of proud neighbor. successful, and customers, personally

concludes call. participation. you today’s for your This We thank

You may now disconnect.