Texas Instruments (TXN) 24 Jan 232022 Q4 Earnings call transcript

Welcome to the Texas Instruments' Fourth Quarter 2022 Earnings Release Conference Call. I'm Dave Pahl, Head of Investor Relations, and I'm joined by our Chief Financial Officer, Rafael Lizardi.

For any of you who missed the release, you can find it on our website at ti.com/ir. This call is being broadcast live over the web and can be accessed through our website.

In addition, today's call is being recorded and will be available via replay on our website.

forward-looking TI's involve from results expectations. include that and management's will cause could to call statements risks that uncertainties current This differ materially encourage description. as TI's forward-looking recent SEC "Notice earnings We a published most review more for in complete release well contained the regarding as today, filings, to you statements" the

you'll Rich become CEO on sure April First, you we to week Chairman. and last want continue announced that our and in President of that Templeton me likely saw Haviv will as Ilan congratulating will them. join Xst I'm both

Secondly, let to me provide calendars. important some information your that's

Next summarize into confidence approach capital week expansion February management our progress XX:XX in millimeter we Rafael XXX done at our allocation. to time, business Similar to past, a.m. of we've and an what increasing insights provide capacity Central our include on Thursday, growth. our our call. the capital in that have update will we support I will and will the This our Xnd, long-term have plans and to some

updates. on, provide we'll the today, following Moving

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

of financial with Next, and markets. to revenue I'll into revenue seeing quarter with Starting our results for details end market. a summary XXXX. by quarter provide breakout with will of provide are the we our customers Rafael fourth some and an then cover I what our quick will results, overview. annual insight respect of first lastly, And guidance

XX% same a quarter decrease Revenue was the $X.X year billion, sequentially and from of X% a ago.

believe was than with component we will In the continue reduce reflect of levels. in expect reduce their quarter, we exception A inventories. customers to automotive. automotive, the markets customers a results end to demand with our expected, weaker as of decline, weaker working As the inventory exception seasonal weaker demand first of all

declined Analog segments, our to quarter Embedded fourth XX%. grew and X% revenue year-over-year Turning Processing

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

end time. into quarter, market. revenue insight is this performance our I'll focus fourth it some sequential by again this quarter on at as provide I'll Now informative more

was mid-single digits with XX%. First, mid-teens automotive broad-based was industrial sectors. about down market market with The the down weakness. strength most electronics Personal in was up

Next, communications about XX%. enterprise about was finally, was systems down down and XX%, equipment

which cycles TVs; tablets end such our characteristics. products do by market the PCs, end calendar are automotive; six year, break phones, I'll as six as are We enterprise electronics, and The communications Lastly, of grouped end for by XXXX. we life each markets which and end markets at revenue calculators. their categories describe market our industrial; that is mobile primarily and other, equipment; personal systems; includes into

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

points from automotive. about all of markets, percentage In emphasis XXXX, strategic industrial combined and from and place XX% revenue, XX% additional made of TI's We up our XXXX. good but on XXXX see three and in up industrial up automotive opportunities in we

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

now and capital will outlook. management our Rafael profitability, Rafael? review

everyone. afternoon good And Dave. Thanks,

Dave As mentioned, revenue fourth quarter $X.X billion. was

points. XXX revenue, the and gross XX% to profit margin lower revenue. decreased increased in expenditures capital of decreased cost transition of to primarily Gross profit or due basis From year profit revenue. quarter Gross LFAB-related charges of a $X.X billion, was the ago,

XX% were basis, billion, Operating were a $X.X expenses X% $XXX up million, or of On in quarter XX-month operating as year from a ago about expected. the revenue. and expenses trailing

$XX associated the costs. with were were LFAB and factory quarter preproduction million in charges Restructuring the fourth

where revenue, December, these of cost of production reflected forward. at moving beginning As be the then to they started will costs transitioned

In addition, on depreciation begun assets. these has

profit Operating year-ago down the revenue. of XX% in profit was XX% billion the from or quarter. Operating quarter, was $X.X

in income the items our $X.X a billion, were original $X.XX not guidance. that quarter included was benefit Net in Earnings or fourth $X.XX for per per share share.

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

our and repurchased the quarter, in the In $X.X billion In to have owners. paid XX $X.X of stock. we total, $XXX we dividends billion past in million returned months

fourth in year our dividend our dividend the We per by increased XXth increases. share of marking also quarter, X%

quarter billion sheet debt. cash X.XX%. balance with $X.X in at the short-term quarter. investments end of weighted Our we remains Total the fourth issued average In was million outstanding billion of strong and debt $X.X $XXX a the coupon of with

$X.X prior Inventory to days $XXX XXX, quarter was XX up and from billion, sequentially. million the days up were

we XX% eventually income credit lower as long-term in depreciation, our statement investments through about under factories. in million accrued accrued sheet Next, and we million flow in the future. on the quarter. in third for associated U.S. due to benefit receive our are investment of $XX to cash accruals will to our Act, CHIPS These tax fourth assets This the will benefits $XXX balance the the in summarize quarter, addition the

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

the reflects business flow cash Our model. of our strength

driver value. said, we growth the long-term per believe flow As cash we have of that primary free is share of

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

will that to We now XXXX focused the expect our value to in in tax the XX%. long-term. XX% areas rate stay effective annual we be add In closing, about

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

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

me back let to Dave. it that, turn With

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

Thank of you. [Operator Caso hear Instructions] from Chris Suisse. We'll first Credit

you you is, terms based of by of into segment seeing that by Yes, seasonal. any first you're I to being burning you're thank the to if the what about you. know than Good as decline characterize just could maybe guess, kind you're in also the evening. I to provide going talking the in QX, know extent guide which broadly color worse seen quarter? question that you Is could segment, QX? but inventory And don't as what first are and you customers as seeing you've

trends expect with that say that the our the we to quarter automotive. that end question. for markets into thanks in Chris, the I'd exception fourth of decline Yes, continue that will meaning saw we first,

to So that to continuing work inventories believe, automotive as the said, lower. resilient. continuing is be you to And are their do customers get we just

a have So follow-on? you

as could I depreciation the do. you you of about year. Thank if speak I go expenses you. through next wonder pace

it's it depreciation know about You I hitting and production RFAB now. started and spoke

happens Capital depreciation timing and that guess, should as of And the we going come maybe tend Day incremental about CHIPS RFAB that on additional to decrease production you, think speak LFAB from that coming time. some start I'm starts the go from the year. depreciation? as there Is when that What you're coming about as I the then that depreciation how you of to Act up well. benefits hitting over through to sure

Yes.

me Act depreciation in ITC through of that, great take the CHIPS we're to going Let all detail and next that, the and both CapEx, and go week.

I production, is, is RFABX tell what you as would now, is said, For production. Lehi in you in

in cost cost starts that are depreciating right? – those they’re function revenue, when it is is of service, equipment of both that placed that both and in running the depreciating, and So of is a the now

but of on those that depreciation linearly ramp again, what the you give about XX $X.X last So want surrounding next ramps, since talked this our days do that ago, would in you we was picture, week, told I long-term depreciating. as say confidence it just starts our to an update grown. said equipment year, last And on I as to XXXX. in goes only we we’ll year But growth both billion big about that service have roughly prospects

that, to, alluded pass we’ve had you the if legislation And August. Act last since in also CHIPS that year

puts give picture the you we’ll the and all trends takes that – a next clearer we’ll between we’ll paint point. those and So at – week,

Yeah.

get we the this just $X.X add year you. depreciation from go for linear about that of $X.X a till billion doing that maybe a will kind small about so a billion, billion $X had piece ramp at year we And just math to

thanks, to and caller, the go next Chris, So we’ll please.

Citi. Next, we’ll Danely hear of from Chris

Brothers. the to remain expect months expect conversely, last cool the months Dave, All confidence seen to three that so I or Chris that’s strong you’ve us right. six And your confidence. Hey increased. to markets auto this said share what you bounce long-term Maybe off only guess to you giving year? rate in you in would growth the, It’s just has all the that I guys, you with Do believe non-auto back year?

things rates higher particularly question, Chris. we’re we’re automotive. to going are that seeing are from that’s for grow and longer-term the and three higher semiconductor growth I and how the – Yes. comes the content I next again, – and confidence – industrial And to years. thanks growth XX – in five the really that over speaking It

two of fact now markets those that the revenue. two-thirds make And that up our

market, getting So I’d to also than our of the drive just continue the have top inside than products faster that say to we capacity. that geopolitically structurally also and dependable markets. our more that line of ever convinced will as the customer those we’re response the And strong that rest grows we’re

in shared response So plans say the our since management publicly last just has I call, February very, capital that strong. very been that, we’ve

confidence. adding are those really the our that So things are three to

have a follow-up? You

inventory. Yes. One on

achieve you know take start I maybe rates how long guess, towards to How back spend long-term mix? out talk think target. And inventory to you sort mix. there’s this the So year of a of little bit there. when would I maintain on Can your still it’s to, time ideal shortages think to about do out do ease then it’ll you bouncing inventory? your that up some you balance – utilization

Yes.

for is strategy our me you to me scorecard. talked diverse, one take very stable picture levels And that. customer lead big high portfolios of it times inventory in let point used our we maintain the when minimizing So The objectives our long-lived that first, let – when while to we base. to service, and a inventory it’s such comes customer obsolescence, keeping that capital management our about

of the is So obsolescence very risk low.

part a of that’s So the equation.

the short-term customers. that And part having upside get is inventory we by the to support that other long-term both and

from So the revenue why of we’re been depends additional about could billion comfortable $X that’s inventory. I’ve a levels holding current add we levels to trends. inventory. And $X higher all billion of that timing, on talking

it’ll trends then If longer. faster So to those there. a then be if take they’re serving little little it’ll a weaker, higher, are get

On both mix a a have chip of very angles number other, that, some risk. the we In versus the on of than of but mix stock to one it they’re have those. of makes is more sense both low cases, finished goods,

about how So it. we think that’s

Great. Thank you.

the We’ll please. caller, to Yes. go next

Goldman Toshiya of Hari Sachs.

trends bounces about talk so Are in you how’s a in more toward quarter, question. guys end I could importantly, you’re there signs and back you if Thank choppiness was China, there’s that of much out hope how recovery end the of what QX and as in beyond. taking Hey, China your for in you seeing about of saw terms there XXXX. early QX, consumption guys any the any economy going? the hoping products? of an guess, Dave, thinking little bit it you a

year, quarter. Yes, I’d in say, saw we that fourth of here see we the that some didn’t of disruptions earlier the in the any

there’s call we China as held a versus regions. exceptional out long with And going if other so we on. something the report practice And the it nothing that region to

well. as and So what in back that It world comes nothing was helping obviously certainly, expect. increases GDP, economy but as China, would would And the that obviously we us exceptional. really consumption help

have you So follow-on? a

I Yes, do.

business the guys X% analog down to obviously the first quarter you and Your was year-to-year report. are in

pricing demand it the one and to in your did guys have competitive it’s us your group. quarter, How I for But only the relative competition Thank landscape compare as So of you you. to patterns and soften? you seeing you may quarter. or today? hard kind What’s trends are like contrast. start like realize peer feels What it’s underperformed to

like certainly the markets years take XX best of or even And behave I’ll talked and go at and months one add. that got performance XX if at we’ve the when five I Yes. Rafael, before looking I performance to longer, times way and in about particular want our you think But quarters measured at time. or is through that any that just been looking choppy think to three over like you question last even we’ve look year the you’ve and so. through especially that’s

with so that, just pricing on I’d there’s going And nothing pricing. to on comment that say unusual

the why but know, reason choose reasons many not product. our in and our markets, marketplace, We why choose they’ve changed continue know quickly customers top our isn’t in that There’s pricing have product. changed. they though you pricing the price not practices with our doesn’t the practices As pricing usually our move just I aggressively our to of peers, few

no really So on that front. changes

we’ll next you for to those thank So questions, go and the caller.

JP of Sur Morgan. Harlan

they Thanks the off? aggregate Hello, the are forecast? In business, of continue QX? good increase trends taking talked team increasing my are Did And your to within level to afternoon. sort nine last six are for we Did rolling that then customers call, cancellations you months, to question. what cancellations. about consignment-based seeing seeing earnings the

first up is, a in cancellations not Yes. question too quarter. were Harlan, surprising. the weakening the so environment, in The

visibility even a XX six did months, we So time. not certainly can know And long we’ll there. get consignment visibility a versus within windows – as there. visibility increase move backlog, difference those see classic the or customers demand very to out though their days their really we Their an as within rapidly change, much even from days XX

doing oftentimes I what So out canceling that they’re that. them back customers in is aren’t there’s would much say rescheduling not in if changed time. And orders,

that well. Do seeing happen follow you a as So certainly on? have

Yeah.

drove embedded last year, slight in XX% of it fourth So year-over-year second half growth drove also quarter. growth in the the sequential

business the of near-term like the trends know past up have Is and and to And focused restructuring, the the headwinds this few next do the team analog. I some selective segment refocusing, outlook right? over you holding opportunities, how embedded? embedded is you’ve sort seems So investments well as markets that helping years? about forward all opportunities in think of relatively And growth on versus with for the that of the in moved

for yes. Great, I we’re results measured just just progress it. impact, that Yes, say again would to that believe great I just Thanks. with And Yes, efforts with pleased first that in would that we you Thank making progress question. having our And the be time. they there embedded. we’re need those are. over say

to continue on continue we work do that and that. business So, we’ll to

about analog, market the of about for we opportunities. think embedded we growth both think and markets When those have opportunity that same the

longer they term, can grow will rates But quarter. the in time rates. differences given converge, could believe the though we same growth be at in could see So – any you they that

Harlan the go caller, next to And please. you. will thank So

Timothy UBS. Next Arcuri of from we’ll hear

to we is some it’s at – in clear kind XXXX that a back to know looks about the this of margins is and back analog chain basis share, calendar Thanks a share Dave, levels. share just point? on year, and XXXX quite be down of are the in supply guess, all going lower I related but do the get And bit than a like, fourth still that question And XXX that both margins. pretty don’t just point, just revenue. business we bit had you’re with generally, share, respect lot. early quite about costs? on all same then the that quarter the The points a more what I to

why I of be Is So Thanks, And some just Dave. there a share wonder up. much? on pricing kind have what’s then explain issue there? going might down would follow that so that I

first on the Yes, start. huge me let company. is margin go Analog ahead of question. portion and me address Let a your

many, when in results what the the seeing with said to the at to you’re very cost to top-line seeing expected. company remarks, profit, well we it transition very for came related analog years well a pleased decrease, prepared growth come. those you as through due revenue, over primarily in anything gross are in And we’re is the decreased cost investments it last investments many level. revenue, as So position as to you’re of the LFAB-related lower about several the are comes it cost And quarters of now And us to to flowing as P&L. increased are long-term that going for the that

second the during you particularly look Dave part at this time, not think long I answered, times. and the on quarter to this, over of go one a And question, already choppy any

stay on So, that. tuned

to just customers Yes, closer approach our relationships think and I us add served has I’ll with that building well.

moved As you providing ti.com. through direct revenue our as we’ve and know, well taken services of as more

And it’s So or see trying their to haven’t long-term able lot are their and being as including, to to them and and for changes as reducing focused customers, well of respond sales non-reschedulable you a needs now, any long-term. non-cancelable, the know in on provided demand. advantages meet employed better customers agreements really contracts, service we just inventories

in next able going next plan. do that insight the our we’ll I we talked believe we’re give few change those that’s as position a we over has to think into and things some that to all the where of years. top-line some week, grow you about, us And how faster

up, So up, or, follow Tim’s was follow that a Tim? you have

do Dave. do Dave, thanks. I I

basis, Q-on-Q Thanks. that a Or in in autos autos you also expect Is a comment? on year-over-year be So that comment a up QX. just to grow QX?

Yes.

levels was up are in quarter XXXX. just I auto the And – revenues up in that in pre-pandemic fourth [ph]. put XX%. from So that just mid-XX%s because picked it’s year-on-year, are about automotive context

So strong to we growth continue there. see

was Tim. that’s the year-on-year. comment comment, that mid So it that the The before made we was up it sequential single-digits

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

Next from Markets. we’ll BMO hear Ambrish Capital Srivastava of

very Hi, Dave. I’ll much, just thank stay you autos. with

it’s versus the rest of looking seems and accelerating, auto as kind to going same XX% auto maybe not But in these be, Usually and business at interconnected if expect, would to range. your perspective data quarter the So wanted that follows I’m point everything your quarters pre-pandemic. is on, the high-XX%s, the two the all of sense? business just things and pretty before just interesting decelerating are everything or a what’s you it’s cadence. I

perspective love on disparity between we’d just So, businesses. of autos to get some broader the guys you from the the and rest

Yes. in Ambrish, back went pandemic pandemic all saw automotive. as wide how spread and and we into we remember, quarter, third. our and to very the thanks. all including either to you bought the a say to that first a home revenues set as deep as and I’d third printer cancellations we But we the beginning across if you PC. almost we monitor behaved or new – home offices, up second markets of as the through of went And have quarter go or

customers very back and our back remember. personal came quickly came So electronics if very strong you

The follow, And house. of respond. began going other the the pandemic shopping to people the automotive to they was early weren’t for weren’t in cars, markets last but out

as to to reopen, online. So manufacturers issue. bring protocols plans their they had back working more they had that with issues COVID tried and And

asynchronously as it’s out. came So down. an there going asynchronously that surprising too It’s not

demand. same. just will So believe – the will And And at reasons point across a not, very It we product there’s more to built of all we some that correction but that. of behave don’t of mix gaining inclusive we’ll markets. lots inside us and clearly over inventory we It’s There’s automotive. factors there’s may why these to long term besides other It’s content, know. But believe – all but the don’t see we markets in there’s ship obviously continue customer automotive. share, we strong.

follow-up? have you do So a

I did.

the recollection when whatever to of CHIPS read, delineate my it that is will have come the kind cash guidelines in one cash I Just that Act. And the in? side your QX may incorrect. of what’s on starts a quick timeframe, and QX, be the of But expectation government grant

Yes.

So the credit has CHIPS investment grants. ITC, an both tax Act and

about grants. So the you’re asking

We’re right still working an have through the to share in though open not now those details. applications February. do update We

those we’re could So whatever in we seek to on – actively we are – actively going qualify. whatever for funding

February. we the manufacturing. accruals So share for that. right to But we’re any taken our taken that for for far, that information all have all now, have XX% investment going the are credit investment to don’t the credit, we The tax submit XXX the application – on ITC, so we U.S.-based in have million

that, Rafael, you on cash timing will about through know the on, the let that And right? later when us flow flows

Yes.

it a the fact, second of through In flows how me take financial. and walk let kind through

So X balance our you of our can actually release. Page on look at sheet the

other to The assets billion. long-term up X.X that is

increase If and You the receivable not $XXX taken year-on-year, a that’s to property, have is what the would million can XXX had plant we gone million ITC. – see for that that’s equipment. XXX that ITC, the

billion. So would been you property, $X.X $X.X can have and see billion equipment plant that

a on cash. depreciate that because it's asset, instead doesn't part get eventually, to therefore So million appreciate it's of $XXX not we'll the and PP&E, going not a receivable long-term

Now You change. until forward one-year it cash we're are planning will to in get And areas, right that get that's not to that our right could then But that year, Clearly, now, XXXX. but XXXX. one-year every interpretation be a kind early. companies to going the something get law, we're get of like of until right? that your on late based advocating now, not cash question that late, to

how So balance you PP&E. sheet, again, on lower the that's see it

a you get You corporate the – the use company then see have And the a to the it depreciation receivable lower cash, lower Then instead. you the the goes we life so PP&E, for from receivable to [ph] it cash then of business. line, right? receivable return other for asset eventually, or the core over of of the because the receivable venture, it and because owners

your answers question. that Hopefully,

Thank very much. you

we file right? our XXXX, to there quickly XXXX Yes. Maybe taxes is when timing for tied just

Yes.

more so the get So filing through but confusion, we cash taxes. not the to yes, add

tax as see described, and cash of because PP&E the taxes again, this filing will affect section. October actual to you, so in the just But not However, in of lower tax the accounting the to will the put But investing cash statement rate I of through the in cash just rate that, flow you change. the every time and or not that. year, receiving happens we the confuse less at will paid not September actually tax

an you, more-than Thank It's [ph] guys. accounting.

more we Operator, caller, for have Okay. time please. one

Thank question Cowen. you. And for today final our will of come from Joshua Buchalter

Hey guys. Thanks squeezing in. for me

the mentioned You customers getting lower inventory quarter. in

than of your peers You're end more I view theoretically. that better, a into you direct demand guess, many have

And so were short-term? in Do And think the acute healthy – you. you markets getting more you end saw to particular Thank understand we're correction help can us inventory that levels? to we close there are bottoming?

Yes. what inventory, but will customers happens depend its obviously, believe it to yes, won't It you sight because a for We with usually demand, Joshua, reducing predict. one quickly, do more relationships that which do begin we have obviously we on? quarter end just and number takes that their have visibility – also follow direct overall, a so we maybe can't phenomenon. on customers And when better have get we happen. to quarters several

Yes. Thank you.

fair or R&D a unfair or for for I for R&D paid to but on few attention you a your guys XXXX the obvious X% flat know, lines. after think get being You gets years. of under-investing And I dinged in grew lot reasons, think X% CapEx

your through priorities think of for for that was spending R&D should Thank you we a and you. week. it into walk could I wondering next Recognize XXXX? question some might be how about So

Sure. that. No, I’m address to happy

a on in get these R&D, investments we portfolio. investments. where to get are also not nature. you and growth that and long-term picture. process where in tied future. to where we’re to into CapEx broad and continue could channels our company obviously many to the we’re investing, best SG&A that we reach example. long-term the, tied R&D, years going we place to strengthen be that’s it’s build That’s the that is even capabilities. many, clearly That’s But add to So line another manufacturing The That’s we just a long-term protect the those of top over have advantage. the And investment advantage, to have technology strengthening first, that’s technology areas are the of TI.com results

the steady five so and SG&A, If very picked last $X.X you over $X.X look our up R&D at like four at years. they’ve billion or a to first for for that year five years, This time, or been four the, we billion. OpEx, the

So company bit that There’s over which immune inflation, over to years the actually XX next years. little And continue for that the will can increase XX investments. went bit growth as and up the, to investments long-term impact XXXX we and an little we’re that, we as inflation we over picture, the the on several to the was next increasing that continue also component to a but due increased not big a you investments. expect those to feel great are in

to will Good website. all AM us. available Central our evening. at Joshua. our for joining Again, of And you, thank replay forward Thank next February XX:XX And a be call on this management update capital sharing you Okay. with look Xnd, you Time. Thursday, shortly we

for That does today’s you participation. conclude conference. Thank your all

You may now disconnect.