Texas Instruments (TXN) 25 Apr 232023 Q1 Earnings call transcript

Welcome to the Texas Instruments' First Quarter 2023 Earnings 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

Today, we'll updates. following provide the

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

of to into Next, quarter's revenue markets. details some our some respect with insight first what provide seeing I'll with we're end results

financial and our the the cover quarter of for will second Rafael Lastly, results guidance XXXX.

and of Starting quick at from XX% first a of the processing year-over-year. with ago our in year a declined, the X% quarter billion, in overview X% other expected the as segment revenue quarter. XX% and embedded Analog about declined Revenue quarter. sequentially decrease came XX%, $X.X grew

our with markets As all weaker the exception reflect expected, in automotive. demand end results of

demand customers, in As the of mentioned reductions weaker quarter. to continue inventory quarter, expect our a last the we was by second component which

Now, market. I'll quarter revenue into by insight provide first our some

last quarter, I'll this as at informative to sequential on more time. it's performance focus Similar

we the to weakness. was about flat. as mid-single digits. broad The see First, Personal electronics industrial about XX% market was based declined automotive market up continued

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

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

and Dave, good Thanks, afternoon, everyone.

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

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

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

our management our capital cash on now me results. generation. with comment Let Starting

trailing Cash month basis. last quarter billion expenditures quarter billion. a $XXX was was a were cash XX in month basis XX the flow on billion the Free billion XX months. operations Capital on the flow over $X.X in trailing from $X.X $X.X and and $X.X million

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

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

to up of of with Total the dollars Inventory quarter, $XX.X were $X.X XX days billion X.X%. was outstanding In we $XXX debt XXX, and average weighted from debt. million the issued coupon billion sequentially. days a prior were up billion $X.X

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

continue our rate we Lastly, XX% be about to to to tax XXXX XX%. effective expect

In areas the value add closing, will we stay in that long-term. focused in the

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

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

back me Dave. it With that, turn let to

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

comes Our At with line first Stacy question-and-answer session. Rasgon your we Bernstein from question [Operator questions. will Instructions] conducting this with be proceed a Research. the of time, Please

questions. Hi, guys. Thanks for taking my

into CapEx wanted and depreciation. just I one, first my dig For to

number that's tax of quarter. at Depreciation just or number clarify in the CapEx true, would capital guess any you that's the there number annualized million. should CapEx below management run the that of both maybe just, $XXX CapEx give the assuming the quarter $X.X you for in are the I $X without depreciation the the So gross year. And billion can the you running did million the have first, and rate well I been credits? about

So am ramp depreciation? the and I metrics, a into for of back assuming right in implies half CapEx fairly that and end those year the substantial both

questions, So Stacy. thanks for there. the Good questions

to gives chance us though. it a So clarify

first first four quarter that in months ago, with $X we to years. CapEx, billion at year CapEx just we've That's shared year. in Everything's we but also on progress pleased with made the line for expectations of couple call we're expect So as both XXXX average an per of this the next a year-to-date, the average.

and will the years million, the continues one that's other beginning our quarter, $X also gross. for billion will just especially years per expectation is Those lower, numbers, $XXX some But And higher. be to be that the you to year. gross. at billion the billion that quoted $X $X be So close

for the Act accrue to continuing CHIPS are We benefit.

tell continue be can you numbers. and in follow-up I like. to have gross that will the about But you numbers been question a if CapEx

part your depreciation. second on of the question On

So call depreciation we on about told billion that or around you increase that to $X.X at the will XXXX. capital management

year expect this that We linear below be trend. to

when expected, depreciation, Essentially other it it's service in And coming CapEx place just we Okay. things. out. that starts how it's had equipment as a that of that's the assumptions is you playing exactly but how on when the versus the and in function

a follow-up? have You

to ask CHIPS going to I'm Act ask I else accrual. somebody Thanks. about want let inventories. the about do. I

XXX said So almost XXX end comfortable be target you And days that. above top the of you're at I inventory. you'd was your think of and

if need given the full sitting assuming I'm and especially to year? trajectory right those close there. we loadings days? now. the are to loadings, I come and the building we're inventory fab guess, done Are of go guess, XXX so case, you that's end you're I the as happens of down, fab given to running what revenue now, kind inventories into And pretty pretty Do

go capital management our let inventory. you start reminding call. So can to slide our believe I everybody with me And seven. back objective for

You the maintain minimize high levels look customer objective obsolescence. service, is at there to of

and be XXX number XXX. clarify you It's informative We just meant have that the than a to it's range versus mentioned. wanted that there. to greater just I

Now, is, to deck. refer know, hasn't slide you anybody in download you it slide that, who I important that can our you go seen the And XX. thing XX to more from website,

you planning shows how That we think for long-term. the about

are ups manage CapEx. the semiconductor, we of and through in how cycle investing that how So and also the semiconductor downs inventory, we informs informs

we're the an inventory upward So as near we the on into but to over certainly long-term, of we account. that we expect for is bias prepare growth. have take In one the trend through inventory that those things long-term cycles thinking term,

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

Please Our comes with proceed next line Bank America with of Arya your Vivek question. the from Securities. question of

Thank question. the you for

is flattish first industrial The to industrial in one you, I and If automotive. was I specific QX. heard you said think Dave,

down the last quarter. XX% was it think in I

starting it's that's flatten I like seems check to So to just if conclusion. wanted But out. the right

I both in said you think thought as autos and I mid-single said well. QX QX up was in and I

also that be direction. So to seems in right the

specific also industrial do auto? the kind weakness? into stay is, and you QX, at flattish exposed about should we think they think how So or look they are least Can that the of question to we macro as

Yeah.

think And was Industrial something provide end mid-single practice flat you need we explain as that when in know we guidance if quarter only heard market, automotive about to our was first the about highlight going on. that you and we market correctly. color confirm by first digits. So up to there's what's

on. that's it's You've going or markets do end multiple or that seen something regions us times, specific it's whether

said, as So of guidance, you at our flat. revenue the is midpoint

markets, very semiconductor both so And strategically confident unit content we're great to when for those will growers we look continue and us. they that of at be per add

follow-on for have you So a that?

in But thing what you same into that same weak. with seeing to weak, because at well is microcontroller QX? industrial right, analog to known. and go shoe Enterprise in want of auto And your industrial. there TI Because, I competitors, as right? is I noticing confirm stability And on demand That stay drop They specifically when they strength. in actually is some consumer Yeah. those yes, you that auto markets markets. kind I are that's and that peers a what weakness of question you semiconductors. level in is seeing also? to this the Dave, of the in direction are wanted a in adjustment are is and are do last and perception inventory you front or and you now are trending think Do the right think QX look

things we're outlook all guidance closer not are specific add we over specific what service by And service not overall a quarter. The second relationships us roughly them that out, in markets. second channels, had I capacity The continue our trying we're strengthen. and to of the think to customers, in something just position to continues If great put specifics portfolio Yeah. But to our flat time. doing product quarter. And to yeah each is we approach would. we into to so into market go to our call we're building customers that well going in with provide again

those we'll the to So And caller, next thanks questions. for on please. go

your Our next question comes Arcuri question. with of Please proceed UBS. Timothy from with the line

to your Dave, I have the less in Thanks peers. guess are than where many sort because wanted lot. think cycle of ask you I exposure of you a you

and you're demand. real farther inventory and you So correction be to theory, in should along the more time connected

where of do think you you innings think when the look bit So your for you correction sort we that real you in demand levels, of are? in connected are customer a we're more you inventory to of time? sort the late Do at because

you differently know, this markets, for not Yeah, we've first this cycle. gone into industry time that I the the behaved is have as Tim, us, think, only but as our

personal we quarter you second weakness ago, began right? personal electronics seeing at if look in So back a year electronics,

into our of quarter now we're fourth weaker demand. So

with automotive quarter markets of weakening the other before The began the last. exception

quarters in a that. on we're of couple So

course of and quarter. strong through So last remained automotive has

So all that put together. you

market depends it at. which I you're looking think on

the PE, top. than you're to bottom in the If obviously are closer you you're to

I slide bottom really draws top your predict try about. our practice, the or XX we that to don't attention -- to draw So talked think the where is, we back

we trend decisions. planning inform is you on and Do what term at we believe can longer have our to what That look we're follow-on?

yeah. do, I Dave,

like I say your parts in things kind back, it early gone and it of on So COVID. at and always peaked it analog to where noisy the roll looks of down TTM you versus basis a data roughly if has of in sort points share you look know SI be basis the XXX can

data? try sort industry of and you if that you the at the that to forensically entirely words, that's I'm other that you to supply? back based as you look as do you loss have in share? figure So wouldn't relative to back how So you didn't think what's happened, shortages the out go just explain did, think on have numbers, you try that Thanks. lost wondering, of kind forensically share you

as Yeah. you And over we we've look talked have something to that's think about time. at

go as and back made to run we And year to served started, our very pandemic long-lived inventory. If remember well. with the you continue you prior us decisions factories some to those the decisions build

customers We with compare the numbers each across and through term, that went ship doing. the product. probably short to the what we respond the as when quarter, in you So against that could as really And us was it board. industry expedited them helped

following as year, our we course, compares. of the are into So tougher those go

lot many different a I than our think But peers. of we are practices have that of

their better As insight. relationships what short better. term need long with We believe moved direct closer more We both we've an period, that can see much giving to that's through customers. clearly. and can We much term see they more us demand example,

moving have I'd with customers Also say their our align of long-term reducing most were as we sales period an a or through are that non-cancelable, their employee contracts. non-reschedule we like things inventory needs, to where agreements

aren't So that need. don't customers they product taking

we gains, to just those think easy business well are want gain can. think as that all with So to we I be as isn't And -- those to setting continue share. do practices us, it's for I share -- up to us

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

proceed with next the with question Please question. Srivastava Capital comes of your from BMO Ambrish Our line Markets.

much. depreciation right. What's modeling it first is very answer I the much the And I to run all is Thank because implications assume but be think number the rate that -- has the Rafael, sure implication. would margin. I run rate got quarter to had. Hi. that just should the we you very a you the make want for Obviously, lower, said linear, were we than kind positive it lower please? think that, billion of way how about $X.X And right gross we

you if until do $X.X get billion on billion about would it you We're unchanged million not breaking year plus linearly, top in then But that were on every that. you get going specifics of and to to down to the $X.X $XXX XXXX.

an to year, next capital run the going subsequent it's lower we'll that, this yes, you So and on update give than years. management

Got it. Got it.

Just a not and a clarification follow-up.

look at the and a year into from want right higher just versus COGS year, about doing I then would fall-through now Am you apples-to-apples right and way? least. going if the sure gross restructuring So And offsets last thinking about. talk I'm that at this it right the is add LFAB margin be depreciation. the to factors then Is three the I three parts? you is flow-through that make the

you electronics, example, for long-term. auto those factor, trends when always right one period, are three at you of more a quarter, Those Any there things place right? and the Yes. are different a And into personal many over factors is a over have this pieces, long the than -- are yes, parts. mix that But the moving should account high modeling industrial level, this. enough that's take the a course,

Thank it. you. Got

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

of your the proceed line Seymore Deutsche Please question. with next comes with Ross question Our from Bank.

LFAB about took a sequential it not Thanks as COGS. have ask and better OpEx Ambrish's a gross down go up it I I for talk to on as would but just put follow into than guys. me in did you sequentially, of question. the margin, out held margin want much letting but and It expected. basis, if the Hi, expense even gross

So any need don't you think And know, forward? more we unique unique that? specifically. to to there margin importantly, to offsets I gross going consider probably as were offsets we any And Rafael, guide

if fall-through. revenue, relatively small you, going we've was I one very the level, to Ambrish's XX% on you it to work any in quarter, model But on XX% high to a changes is precisely, not given that No. but in tell year-on-year it's even Yes. think especially similar would question, basis, right? of sequentially that's

So that a time, enough but long over well. works

you the in cost then primarily for talked were now to had in depreciation. adjust Lehi As you we about, revenue. that quarter, that the to were particular cost And restructuring just have go that for to of this

is there Now are going factor. play, to that a a other Ambrish are to but mentioned and I example, it for factors ago, mix second

a with plays that you less industrial get So more electronics, automotive quarter and a lot personal into it.

necessarily to doesn't be flow depreciation needs P&L inventory. one, to it through final the the And matched immediately because

the that -- flows sometimes So through so inventory then impact generally first that depreciation true the and delays margin. the to of of gross impact

earlier, But I clearly, increasing, is so as depreciation, mentioned it it's coming.

So long depreciation. factor the need talked we to you have the and time, a fall-through multiple certain right, about, as enough years, quarters, in over increase it

follow-up, Ross? have you Do

statement? And the question Yeah, Rafael, I that? probably equally you up Act income that an pivot likely for just when earlier. could the flow do. round I'll give that to importantly, CHIPS us on update through what accruals from does are cumulative

Yes.

CHIPS the ITC, benefit a credit, have potential has to back, an stepping and us. two There's components grant. Act that So tax investment

our those, document, and If on capital about and management accruing benefits. said we those to the the planning you benefits are talked we're we ITC, we from go

the On we're the highly the up Department not grant, of It's are grants discretionary. Commerce. to because

everything So on we and But on those for applications in nothing. asking applying we're there. not grants, right process can those, we're the counting and now those we're we're to on but of get counting submitting -- those

benefit. ITC, Now $XXX let are balance on the another last me This one we we just accrued sheet. which the quarter, that focus booking on the is million

on that's million last top of $XXX roughly year. So the

That and $XXX a rest that's increasing of States. number benefit assets that we qualifying XX% have United for continue in the will year, total accrued now So the of of million. the we have a

to number increase we'll over So continue the that year.

what happens the that of plant And then property benefit is of equipment PP&E, couple out ways. One, basis. comes P&L we in the a accrual

have to So basis lower now you a depreciate.

placed that small they -- in grow this depreciation getting that those now their million time benefit So goes but lower rate. in a will that a it's service as a to equipment of dollars, -- couple over into already at forward. We're be appreciate and lower is is going of year, but going

More that year. get importantly, associated will the benefit with the cash following

is that that's cash we will service we're and okay? get in -- anything 'XX the XXXX, So in what and at we're accrue -- placed we end of year that this And XXXX, planning on. in

I think question that your answers fairly well.

Okay.

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

your Our comes question. from next Danely question Chris the proceed Please of with with Citi. line

guys. thanks, Hey,

Just seeing there. some out you're color on correction the inventory

think or that higher? point worse? not tell? the better Do Or through this it's getting we or of worst about lower you where guess, you it? So it's at can I do think it's, Maybe where we're getting that talk

Yes.

Chris the you personal look of have the is probably that, one think in right? right? previous it to somewhat at of probably by of questions, would bottom. similar, being other the you're you're in I quarter closer the fourth weakness to I than in but no electronics, There's markets, Certainly, market. think indicate guarantee closer

we being use So where things isn't to And grey we've that's really talked That's is. we that we our predict. for kind that investments to have where is that that what's And try something about. ready and growth. the how longer-term focus make we is about you line Do think the chart important on follow-on? guide just a of what do

imply I your the talk just about the that what during linearity you ago? months three Can backlog the for bookings year? looks quarter half And Yes. second the of of now versus, and guess, how does

Yes.

where we in quarter. sales I ti.com. the you we got carry on that get our got and as consignment through direct flowing would was feeds stronger the a don't in last know, backlog. We've say, we've actually So linearity month backlog, are of And sales

to our lot backlog. carrying, peers. a visibility with more inventory got really many compared we're put that good because and of we're on controlling of But directly. don't relationships I The Overall, of emphasis just our close we've we think customers. fact the So that owning

we've believe so great visibility on -- demand. we us got actually really And that gives

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

question Moore your question. line Stanley. with next with the Joe of comes Morgan Our Please proceed from

seeing guys. to you, of are came as signal from know year? lockdowns. strength the that potential pretty economies the I you Thank Great. the the you Are as to headwinds starting were in you that China What COVID early see rest of re-emerge? some into the going now

to to understood continue looking easily more we significant that that way end and wasn't changes last China say the of markets, follow-on? any you Do would revenue by change revenue I a Joe, believe at is but in best the our inside this Yes, at we look saw have there quarter.

in know Or And electronics Sure. do that that I people down enterprise personal in and areas more have of Does like any as both. shift kind multi-sourcing then -- XX% in the share reflect you phones what do PCs in Are a of down any that think and market that servers the first in that's you and as seeing was headwind? whatnot. quarter? and you kind just the

Yes.

We're as support before, was that think to we're as it position building move we've talked sure, a inventory in materialize. demand if quickly. higher to I about doesn't

mostly again reflective what's that's So of think the we going on in market.

you Thank please. Joe. one time think data we've caller, that's for you that consistent out with you, there. I And I and that's see more from believe customers what other see can got

comes C.J. Please from next your Our Evercore proceed with with Muse question ISI. question.

just earlier. from to you some wanted question. the taking afternoon. the of confirm good I and Yeah, clarify statements for Thank

for So March. your a than we came margins gross what thought better little

you there tight of kind Are you timing on curious, there? a track $X.X installation that still seeing kind the still of were just equipment? year? so of And of changes the billion in supply depreciation are for any for And

Yes.

So let address that. me

a about an pleased our in. quarter. per that months has the the billion four ago We did year billion average. we of $X very We're CapEx. talked couple come next CapEx in that's about $X expect First, for with We years,

years will be years some less, some be So will more.

year. quarter. That's billion run $X rate billion for $X per So obviously a the

about billion expected. just on the CapEx. as So year for right would this be billion $X coming And somewhere between that's $X and in

the increase what expect -- ago expect we about XXXX. below talked at but billion of in about XXXX was months we linear. Depreciation, trend it or at future couple to some -- be to on a We call point to this $X.X in we we year, the that

XXXX. year million $XXX starting be point per less of in that instead 'XX, increase from the will So than it of

I the bridge think I'm that. number on at specific

disclosing $XXX look for tell We're you this just at not I -- did at just that but the we quarter. point, million would

math you of So that in previous own your can was million the -- do quarter. $XXX

and where can -- you you details, of subsequent quarters. more a come up, Do with a you So you decent and obviously, that may have in of we'll can think that give approximation end follow-up? up

longer-term a question. please, Yes,

XX-nanometer One vast China of plus of actually of discount couple But overriding side the XX-nanometer the spending domestic themes of semi-equipment focus the the the lagging edge is plus. world. on an part for the kind last obvious by I on shouldn't quarters with the

So kind regionalization are of competitor environment? as how rising in you'll next landscape you. a you pros about cons as compete the perhaps looking how you and and five-plus of years, think that you about thinking think and kind the over the about out Thank China in

The the to about is think C.J., those controlling question. first be world. us and before, important say that And we are to growing when continue than assets competitive look we and that where at they will our right? invest for Yes, thanks and us manufacturing competitors. believe, we've talked got our products we as will stronger Also, that in owning well. think to in, that different make a the markets, them technology benefit and we've be I advantages you X I'd

Second broad is our -- product broad portfolio. the

said, we've especially compete narrow cases, So couple that a usually product of decades in in portfolio. companies, with the world, around competitors competed those now. with for China, of very, only a have us some in our slice That very we

isn't there competition So new.

we'll XX them. and -- not different We learn And and the very We're we world competitors compete dismissive can around them, close closely track competitors. of so they're with. from somewhere believe number around that we I good the

our some of reach. look the customers channels. attracts especially the smaller just China, in don't reach you and have is the the just when that competitors advantage better They market have that gives of of us at they engagement breadth insight. don't competitive third portfolio The And for

And last and diversity then longevity. the is

there's market provide technology that we're one not share So to market dependent lift. or on

dependent them. be we'll Now of on all

But in term, in compete sometimes share translate the the that that one we And as favor longer broadly we all into another. short-term, sticky versus markets, may gains. and competitor think will long-term

we're overall, about for we Europe and So those pleased position in China. traditional excited a U.S. whether at we're where from the our here in are competitors looking standpoint, and as well as

you So it wrap to thank very up. much. I'll over to this Rafael turn And

Yes. Thanks, Dave.

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

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

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

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

this And this may Thank time. your lines disconnect and today's your participation. for you you concludes conference at