Texas Instruments (TXN) 26 Apr 222022 Q1 Earnings call transcript

Good day, and welcome to the Texas Instruments First Quarter 2022 Earnings Release Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Mr. Dave Pahl. Please, go ahead, sir.

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

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

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

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

revenue grew increase Other in XX%, was our the quarter. Analog first the driven of Revenue into what Embedded guidance Rafael quarter. sequentially and $X.X COVID-XX quick with the China. Next, quarter, And in of billion, results lastly, results Processing I'll from X%, segment and will revenue with growth insight industrial impact grew the including a customers second quarter markets. Starting as year and systems. restrictions our our well and enterprise seeing overview first an to financial in we're with provide and quarter X% of grew for by cover year-over-year, XX% XX% details ago automotive, from as some respect

markets to products and as was geographies. on specific that we the The we've expediting the in was expedite rather environment family, the came markets. set, completed on the saw continued Customers across product on end than what me with This in market and about any quarter requests, let geography. or comment in to context customers a quarter last environment products market what the expected not observed behavior their segments, to in the to be first selective Overall, focusing matched similar for quarter product end our we across several some Now, quarters. board. provide first

I'll revenue Moving end ago market provide insight first into our on, some quarter. the by year quarter from

compare, First, the industrial growth each about broad-based up primarily up electronics management XX%. And Systems were from weak by the across growth next, was equipment was off and up down sectors. review enterprise Rafael profitability, a And computing. Enterprise automotive finally, Personal data was and Rafael? off our digits markets XX% was outlook. centers about of and now and were mid-single and strong driven compare. capital about communications a both XX% will

Thanks, good everyone. and Dave, afternoon,

a quarter was mentioned, year gross Gross the year in $X.X from up first of profit profit Dave billion quarter XXX XX% was increased billion, As points. From or a ago, basis margin XX% $X.X revenue ago. revenue.

was quarter a revenue. XX% share, of which $X.X quarter trailing about the Net $XX October up As in or were included the year profit first or was year. $X.XX first year $X.XX XX% $X.X our income was of was in related Restructuring operating in a of in ago quarter. million, On ago in expected. closed with a were last $XXX million quarter winter $XX the additional storm revenue not expenses from in about cost that of year quarter. benefit were Operating per million we to in utility the reminder, are had the prior expenses expenses in the billion outlook. quarter and from the and billion we revenue. charges XX% a XX-month purchase Operating the flat LFAB associated billion as of about or ago $X.X basis, profit Operating

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

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

the balance up first was with up $XXX levels. billion below the to weighted XX prior of $X.X coupon and the sequentially cash days average debt investments outstanding million end the and $X.X strong billion remains $X.X days quarter. with X.X%. dollars Our from sheet a short-term at quarter billion but higher were Total of XXX, Inventory of were still

China, quarter, manufacturing operations. of second $X.XX our to which we be the impact outlook restrictions range $X.X in share earnings TI of COVID-XX in the comprehends revenue and customers' billion in affecting reduced demand billion range $X.X to from to This an are expect per to For $X.XX. due the

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

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

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

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

to Instructions] go [Operator with going Rasgon We're from Please Stacy Research. Thank our first you. take ahead. question Bernstein

my questions. Hi guys, for thanks taking

any would you Do of ship? for I all, in gap like just any if But in the all? wondering at of have view out be revenue demand And size color like of it what gap if getting the give the kind you feeling any demand you had by overall Is for . issues First getting can order could impacted ship. was size customers and COVID like that's line environment can't like that you the China. of was, on would helpful. are the of where the you be

on comment that. I'll Stacy, Yes,

Our assessment that early April in indicated revenue in to continue again quarter. would second the grow incrementally

changing it just demand, China. just related cancellations. behavior However, lower that it clear, backlog restrictions or COVID-XX as customers' became to were experiencing due in clear we particularly wasn't And to to be

expedites In we see for fact, deliveries. to continue

being However, we did see impacted. that manufacturing operations were customers' our

widened the that we Stacy? the and the midpoint $X.X And did approach we XX%, higher we reduced seeing range was thing just so the of that second comprehend took, result, to at the to we overall. tops-down quarter Do from by a just we're see. midpoint second you as a So that slightly uncertainty assessment billion you $X and follow-up, billion the took roughly a just have the

I helpful. do. Thank And you. that's

internal with same these is be wondering Just the guys ship that impact your to you think that if the the issues fact Do I that that do to you're most industry, more direct manufacturing China? you mean going Does kinds and direct. customers imply is everybody would than degree? dealing think most this something to that go you you or in more have have you of to trying have to broader to

primarily our operations factories. shipping or is or to Stacy, our not it related our And that customers to anything due direct is this issues distribution of that sense to with sort.

Thank next And caller you, we’ll go Stacy. to please.

go Vivek of Absolutely. from ahead. Please We'll America Securities. Bank take with our Arya next question

question. my taking for you Thank

demand The or also kind China how would Is where destruction you there something first no one related of can is is restrictions recover? China. something excluding this customers were you Do you other demand then recover? those And this think to this in characterize along place? these of you can your lines,

be. just of down the we Yeah. took what impact really top assessment was Vivek, again, would the that a approach XX%

So that choosing of any what into of the I the trying as to unfolds. why could the that reason happen I get quarter wouldn't think predictions widened at number. guidance, Part precision as we look in

when and tell, over. quarter we'll will report time that think how see that and is we'll unfolds, the I

So that's a you assess we really Do to the have at approach took going on. that what was trying follow-on?

Dave. Yes. Thanks

utilization managing points margins sequentially. down fab basis few So and you're how hundred seems implying It a inventory? gross you like your are your

I inventory level. target how So fab heard I managing are your curious just Because Rafael utilization? thought say you're below that still you

continue do build So to you more the quarter? plan inventory during and

Yeah.

So a couple of things in that question.

last of me adding incremental of been We, fact, high capacity, Let them. our would. years -- they of over in to thing breaking next of we the beyond will said be And address well, RFABX really. have this incremental as couple XXXX, the the second of first of in factories try We've factory. at later quarter Sherman the we then most continue the step utilization have we running that the in are as levels continue year and LFAB half year starts next for year we're ground the production one

we're So, our production high. continue to running going

inventory going inventory, in We we to are did level. last but reported, build below we're still million just this about build quarter $XXX desired

target even of continue building service intent end we roughly that inventory to of high that, at to range. is is uncomfortable our high as our of days, that inventory, not objective customer that we levels our you but end the and to want is So, is to be and would be high maintain -- XXX XXX the know, above

the to call. Okay. Thank we'll Vivek, go next you, and

We’ll you. hear Bank. next from Thank Deutsche with Seymore Ross

with. guys. for across elsewhere, good come and and wouldn't as the up shipments China? XX% little there increase see I you're your Hi from letting shortages side are your the Thanks just otherwise like preamble, going anyone is customers is fungibility for of China a weak shortages it's I shortfall it part that doesn't bit a and to the sound the standard number question. those guess to me in this the allow make of guess extent of up as could to product But ask the industry Why to Dave. to demand changed

the doable. our that So yes, no, fair extent question, is process in that's that's and that, to already embedded a

for is stressed redirecting that about a XXX,XXX other XX,XXX keep a in this other tell to fits different different we're imply the And I – then in the meant you, XXX,XXX couple precision. customers, players situation process one to where of not parts our right? go assessment are Italy, can allow mind, in Dave never We parts, adjustment, inventory. thing tub-down quite place on just estimate it’s But that so times, different of talking like -- the it a in access perfect would

now will can add we've symptomatic mix. couple match maybe about of And The behavior that be just of sets we've focused talked a more growing for of seeing too, customer I Ross. as out that inventory on customers being quarters been to that that and that's

region, one in So may them though, available customers even might that have some parts other. the not we need are in

you've got there. dynamics you multiple work a Do have at So, follow-on?

kind Since do. given last have not I over any buying your really guys of despite of you some return we back XXX% goals. cash stock, years grief collectively for couple the

did, to This return. got it you pretty quarter, you seems like that What darn XXX% close back changed? and

you long objective cash in returns when and flow really it really do in do we us record. we've to the cash else, good track a for So that return, about known return We for talked time capital the Ross, a free dividends management have we all owners and how through repurchases. about consistent comes you've that every to just company. and this to And but of cash been know everybody our how we think quarter, we

done do have are and to we to So that committed that. continuing

caller, Ross. Okay. go you, next to please. the Thank We’ll

Chris hear next we’ll Danley And with Citi. from

Hey, thanks guys.

these and shortage of the it you the rest from world. situation change will but So better no Do this, the expect do TI issues or or in think in no then change. shutdowns, and all COVID Semi’s get to given in be at China you worse

to Rafael, want out even and of the Yes. not -- we're the in. I cycle add take to shot, first or what's call quarters trying I'll a predict if on. you going

the for what that independent manufacturing just is on how R&D, that building in of term. staying company includes we we approach investing we'll -- how things new cycles continue just in the think, and to long the do adding And things have, in new like investing capacity I stronger focused capabilities.

we Chris? can that's that are stay we'll those follow-on, on. things the Do you a and what focused -- have control So

Yes.

expectations, in commentary how worse make, the either market end So better if would your any China or take issues forward? sort anything -- the outside, little quarter of you going a or would COVID during than we

markets. driven We just overall. by primarily enterprise The say talked industrial automotive the the about. That end We growth was computing. we data from as was came in Yes. in, quarter and did had and about enterprise I'd what expected. of slightly center were quarter above strong The our see top range a we systems,

of years, grow as to a that's very will Now, large a over And our look small that of a last revenue, it you portion you it's continue probably but strong quarter. grower, saw part strongly but be just the coming our revenue. not

continue out is strategic be That pleased that for for that the industrial seeing zoom and So to we been in the growth automotive. company. you where the -- focus when second, we're has a with

so, And see in turn to we're to term. longer that pleased grow

go So, you, we'll to please. thank Chris, next and the caller,

from Moore Stanley. Joe next Morgan hear We'll with you. Thank

Can internal seeing that I fab the just you. first an idea address us Thank you you're wonder if -- foundry you give Are are back seeing said could capacity end? expedite the in guys still Great. of of your you coming constraints still you are? where terms bottlenecks from from kind strong activity.

I'll So start.

to adjust your little want what premise a maybe I First, bit.

are still mentioned But seeing how to selective couple experts. they're of customers some a We Dave continue in as be expedited. times,

they're on So to continuing across match it's the not expedite just okay? the So board. set, focus

the of question, being part is your is Second, second customers' manufacturing what and the primarily how said our operation seeing on you we're are China. based specifically on -- in affected on what

able requests expedite meet we're as to of well. those And many

the is quarter your product have we area. where more, can I Joe, any And driving specific one So that's to constraints, from question particular not what’s think It those. or any to move things other drive that may it, be other. customers follow-on? It a work Do It on needs. could technology, those process technology. packaging meet our to teams you that may with have a be a do

of reacted us -- to give And increases your have what price you for pricing has Yes. extent on along any was a you kind that? done curious I also about guys the to prices. you has foundry pricing basis? passed and your How that raised has competition can do sense have like-for-like

Yes.

things. of couple a So,

our part the one manufacturing of is side cost of competitive own and veins, vast of manufacturing. of input the on advantages First, our technology, we our majority --

front fact, years. the In XX% over goal grow on is and end, the to coming that our to over XX%,

really to do of much us what costs. input of situation handle subcons mercy be to foundries that good So, puts those So, in have terms a better not the those pricing, in beholden to we a right? or way

side cost that's on So, things. input the of

our in are the pricing we customers. On general, with pricing

process Our on that changed. has not

price the did last and to well, as have tailwind. prices from as over is quarters, three that pricing in or process benefit up market. Our first have moved And two growth our and we quarter to happen moved did certainly prices in first the quarter,

Okay. the next to Thank please. go caller, We'll Joe. you,

Thank our you. Arcuri with from take question UBS. Timothy next We'll

they're XX% on little little haircut push lockdown about of kind the for to wanted just this up I bit. to If like a they're seem a you bit that the June. getting seeming better, already loosen talked

-- XX% better I as or between conservative? now be of through guess question June, I that the So assume the prove it the then if And will to persists follow-up June and does had month a situation that is, the well. XX% gets

I site that is even what we Yes. said like repeat maybe the a said reflect assessment. is meant higher before. That range I'll but know to imply -- doesn’t uncertainty. it's This we we And to earlier, precision fine, on in fact, as widened just top-level just

report we when tell. time XX land. now, see So, And we'll will days things what from

my thanks -- yes, Got it. Maybe it's Dave.

asked just it it they lockdowns transitory, into second going customers inventory. But take is like customers would So, so product the and I are to question question are if certainly be guess that I seems would tight would put the this and think my if a is, Ross before.

guidance. tight they're So, product? to chain build trying accept your during because it inventory. everything I you out Thanks. three whole can't past is that has them cut because take be consignment shipments like is to weeks, this or out opted the the to it mean big the from versus to But pulling -- obviously, it shipment is because seems latter not pushing shipments or of just pushing and is they

for talked as we've on talked quarters match think to now I Tim, we've about shifted couple And a behavior those observed focusing where that And of we've Yes. really customers' behavior Sure. can products growing we've right? So a -- mix, that of that, and symptomatic on of available that inventory be ti.com. are about, not customer with got just thousands that's sets. of tens immediately

not can find they're indiscriminate they they get that industry, times, to to sometimes need. product. door. lot some trying match if Whether it's and the maybe those that's So, their complete it even more peers get wanted the that increasingly, they our and our products they product complete product types of a a In of sets out it's to need to cases, they're those products system semiconductor if But bills. that the in of

sitting so taking just because say indiscriminately have to you So aren't yeah, there, just product a product just overall. customers

that. Tim, are is customers your tactically for China Let just if in operations. me cases and to whether not understood to being in from We're factories bottleneck In the to if freight shutdown, to of seeing question their able them where -- not deliveries. correctly, shutdown. our asking ship the cannot you're add -- area where the run not other they factories in the China, the customers the will our I accept just are And distribution forwarders they Shanghai parts particular will centers take accept because cases, those

delivered keeping but parts this is that's primary our from tactically, that adjustment took So reason being to… we what's keeping because the

reducing are demand. Or you run going that's on that staff or reasons other

We’ll Tim. caller Thank you, to please. Okay. next the go

And from with question William take next our Stein Securities. so we'll Truist

ramping you recently And Thank basis maybe of fashion. choosing the what OEM ask When about I talk mine. is more in of about just or last talk it The what disruptions customers very wonder to an we at little bit Thanks. detailed to large facility a in the a you're a -- having you're And among this and terms want similar a with Great. question automotive bit to we've is more Are one broadly, least see then -- shipping detail. you just And provide you this to you. can opened the on a their maybe follow-up is whole, related a in that terms customer-by-customer heard of China, or exception? are more region to that, to up as vengeance. not you ship? you I taking if able are

Yeah.

It zero, news you what's there affected restrictions that and operating factor just my some the hundreds -- give Their area at dozens at different are cities in Obviously, more than complete There's some and But So shutdown, But are report, more. case. case. are of XX%, and XX% Shanghai, beyond is case I'll shutdown, forth. is levels, -- hundreds read right take. all have Shanghai. case but in we've like follow-on? you by if going other there are factories at a operating by not so are at operate that others are there least factories others. a it's that there on affected Do

a your you be slowdown talk changes in about of in any which you. think ti.com, Thank at can I'd Perhaps is by business? somewhat you direct in particular, different saw channel delivery I from patterns typical if curious orders channel;

rates seen it Yeah. first last would of couple seen last rates quarter, remain what those and quarters, we've and and different -- in inputs. what behavior and as quarter, we've and to are things I quarters. order say consistent the with reschedules Those cancellations, is strong, as those And would customer over across the just couple that describe low cancellation things consistent. the that's described we channels of environment over we order that the similar in

Yeah.

of I especially challenges seen of, relationship your direct ship relationship you the the customers, in entire advantage, thing face products. other The is, but operational having time intermediary for customer, frankly, to delivery but it's cases of being most have huge these able as not add would we the type optimal just tactical gets also and not with direct in kind of an the pandemic, during have other way, that, the with it's a and the just there's when

ti.com XX% So or our to it's close direct, shipments revenues to it's do legacy whether now are non-ti.com going of that, being huge able directly. a benefit,

Okay. to Thank you, go please. the next caller, Will. We'll

our next Blayne Thank you. Barclays. with question take We’ll from Curtis

me flat guess, plans half. plans, level, the the filling CapEx base for you're about adding March about Thanks that the a talking the of guess, you were ask high. second are today. at I your pretty in kind on Hey. in. I capital fairly to you capacity bit clear little allocation want is of spend you I in of kind

maybe is us the kind spend So if if line in still refresh billion and half? going you're capacity in the $X.X still to coming of second

Yes.

question. So your of a couple angles on

long-term First, plans. no changes These to our plans. are

in -- our of So CapEx. terms

So for I'm that our about years intact. $X.X excited next year the very We're four very billion excited those. those. is per about

ramp will second the first the break In RFABX going month quarter -- in production half are weeks will or Sherman. of qualify in a of a or we're We of to in production Lehi matter ramp so, just and year. next ground this year.

very had is changing. quarter all Maybe short just first keep your that's mind term, not CapEx, Lehi that part the the there. question, in fourth So that numbers on CapEx the the and exciting of

an down million number close XXXX, we're $X.X higher average. about that. you plans, was place, is That's why $XXX But that's still But that -- rate worth run about XXXX, you're per first seeing had million come that and now just, year and very to that the that billion just our of course, in -- for of CapEx. that's XXXX, number So is quarter. XXXX, $XXX in excited

That's have Blayne, just Yes. you math. a follow-up? do

That question, was, sticking you're I guess guess, and forecast that still to X.X%. I you up. but as is times Well, I XXX Yes. X guess, not the go

billion an average, an just average. remember, $X.X just is Well, the

next the right? That's course, very higher just math to on So every that, likely which, of be going -- We'll three XXXX, billion. $X.X we'll run below it's means likely the years. run below in year, in not run X.X

sounds for utilization favorable then, to want Right. I that mechanics. and auto, sure guide, did like industrial mix The XX%. of margin, the has I make It the gross you high. I kind understand hit on been guess, stays And just all

I of perspective of margins the year. would rest of, your down. pricing curious of kind of the at gross as sustainable this have the that comes think, off on, gross a level tail rest I’m for year of signaled of maybe lot companies margins through kind being the kind

Yes.

Our focus margins. managing on is not gross

Our long share focus has been flow be term. free the to and continue growing for on will cash per

So what our gross margin it will plans generate be will be, CapEx make cash but and flow. on we'll continue our growth investments free support long-term revenue of to to

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

We'll you. with BMO. Srivastava next Thank question from take our Ambrish

what I you taking changing mention changed. down Dave. Hi. -- the to in last Thank I a versus by you, cancellations Dave, cancellation make been top then just But to on a shouldn't -- sure quarters? that got Why have I that have this. thought, couple perspective. I cancellations From should had not I lead I heard wanted that understood your down, Rafael, change they XX%, if of you're numbers question

Yes.

would where just impacted, are their explain that. like that Customers being So to operations they that product. still

are be product as it. that in those line they'd And take so to like they as and orders, get still they canceling can soon not

to So that's that. what they're us communicating from

as that's a at being showing why we're we impacted the seeing though not up not -- are So cancellation this demand that's point.

that the more for provide is or should you and is it for answer, this quarter -- But I metric longer -- than don't that quarter for usually or that know I a us it. Got is that metric usually for quarter? one than but is

be the quarter week a course, also receive longer want for cancellation of for as current demand a quarter look a or could, cancellations, of even six an would them, we months yeah, in in, order either time, the customer as Well, if in we are be for out could at cancellations and might comes say it that the of well. to that period next cancel right? they A outside

a record cancellation quarter received the it, so. they we but So in as we cancellation, that -- canceled if the it

Got it.

Well, that, ahead wrap and with Rafael? go up, we'll

Okay.

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

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

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

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

does Thank you. may And that We conclude you disconnect. you conference. your participation, now today's and do thank all for