Texas Instruments (TXN) 25 Jul 232023 Q2 Earnings call transcript

Welcome to the Texas Instruments' Second 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

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

cover results of expected with quarter and XX% will Revenue for the of third quarter Starting about guidance at the Rafael XXXX. the an of increase year-over-year. a X% lastly, And as financial billion, came in in the sequentially our $X.X decrease of and overview quick quarter. a

XX%, and Analog XX% Embedded segment declined ago X%, the Processing other grew from our year quarter. revenue declined

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

markets quarter, as During across weakness the Similar all time. more sequential performance Automotive. we on last experienced quarter, it at this focus except to informative is continued I'll

was Industrial the about First, flat. market

the Enterprise digits. low-single was Electronics mid-teens, digits finally, up low-single communications down was of digits. several And down market up quarters Next, was after equipment sequential and Personal declines. was mid-single Systems automotive next,

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

good and everyone. Dave, afternoon, Thanks,

profit cost As a XX% LFAB-related charges or of Dave billion, year primarily $X.X the transition expenditures, of of mentioned, from to was second year revenue. and due increased $X.X billion capital revenue. gross quarter down ago. ago, in XX% decreased revenue to lower was the a quarter Gross revenue, profit From

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

per income or was $X.XX quarter and billion $X.X profit ago Net or down quarter. the of the revenue $X in billion share. the was in second XX% Operating from XX% year was quarter

$X.X results, management basis. generation. on operations trailing Let billion flow our from $X.X me starting on capital was Cash and cash XX-month with now comment billion quarter a our the in

quarter In the Capital a XX dividends billion we billion. million the Free in expenditures were the months. $XX $X.X and $X.X flow repurchased billion $X.X basis quarter, cash our last $X.X on paid in of billion own about trailing was and XX-month over stock.

returned we in total, In XX have $X.X months. past billion the

quarter, with remains short-term balance Our and of $X.X the investments of $XXX debt million of of strong $X.X end and issued the sheet at debt. we cash billion second quarter. the repaid In billion

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

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

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

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

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

let it With to me back that, Dave. turn

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

America Arya with will this time with be conducting Instructions] Please our a [Operator At we Bank proceed question. of from question-and-answer And Securities. of line the session you. first your comes Vivek Thank question

near-term if down to close for down what per the of the help cash you're your in optimizing is say since model will seen Thanks to is question But trailing when sub-XX%, and gap sales to right compare just point peers, side in I back your free strategy in that we margins at year, the significantly understand versus XXXX. metric. line? which almost growth cash decline share, growth that level one but the which something flow a high on flow double-digit preferred TI's lowest have free the consistent it's free XX-month needs I cash flow my for trend look question. to the So get my right change TI and the now taking when is is XX%, I below, had not I help model obviously just XX% that

what So to start see cash trends? free we should back to historical at get point flow

Yeah.

Vivek. thanks, So,

and big if we're back start, management in. want your in in Let during and told to that Dave, question. you to to nature But we as what chime step investments picture long-term making you you capital me alluded are the

for XX company years. the the XX And next to growth going revenue for to we are enable

Okay.

thinking making it. we're that's why this how that's are next years, year billion investment about four we about and to for committed we're particular, in CapEx, investments. the So on per And $X those

that's flow of cash excited operating fluctuations and why means of regardless revenue those course unexpected. of making the you're the which with is seeing to lower now revenue not free short-term the cash, lower on We're investments CapEx,

had followed for time. I'll add and know, maybe us you that as just and some Vivek, Yeah,

is and competitive of technology. manufacturing One advantages our

advantage So time. these are investments CapEx really strengthening over that

controlling when produce fairly It's to us significantly to demand that today's cost important. at allow and those world -- service is lower increasingly assets obvious in products will those investments

that growth. the do Not Combined with it with easier us. only place to can to support we're that, other customers putting the make in inventory we're So see their business the that to investments systems we've got making. with

reactions is customer And positive to extremely that.

all us we great these So, be will believe investments for long-term. of

You've a on? follow

years ago question, years also, I three TI to saw with this growing maybe are but quarter sales one way, declining. had CapEx a strategy peers almost guess growth we two now and I grow again in peers sales Yeah, have respect, ask than than year, say, And are last while been same worse peer not thank different it's same your two right? so is sales you. the year but two undergrowing or or mean, phenomena, the sales quarter worse for growing and

So questioning results still right actually whether justifying whether is strategy that's the the the why I'm are strategy.

Yeah. I'll of about Rafael, to add. Again, quickly share markets. move start, is if inside you we've want doesn't talked our

portion you're I oftentimes think on can peer market the to, depending the good it. a explain that exposure of comparing

factors using. other is like distribution much There's how someone

using we've mostly As you distribution direct. know, to having transitioned come from revenue mostly

transition. be channel the inventory is to out as of needed burned So there that made we that

there's So multiple factors.

continue they've resonates extremely high. our forward, their customers. products share manufacturing in the someone's know is capacity reaction is not from capacity wanting with to directly to makes someone able they to to going need gain to being supplier, confidence but runway that got they think know really that have Customer I that from

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

Thank you.

next from Toshiya your Our with Hari question. Please of comes the question Sachs. line with Goldman proceed

you the QX is first Hi, on one guys. Thank My guidance. your question. taking for

of to stand-outs end-market up saw automotive healthy. Dave, in QX you to revenue anything guiding the continuation sequential QX? from it You're QX continues or one X% trajectory out about out point But sequentially. you what or is that think a as any you as be to called the

just out automotive the I'll in board continued weakness point like the Yeah, this last up out. XX% of asynchronous And PE called that our be point quarter behavior. and exception over markets you've to just out we ago across that with a in We strong continued second that exception it's but weakened followed, had markets year-on-year. back the and the quarter to of year obviously, automotive other with saw

as And to look end-markets strong our quarter. very into see significant not definitely there. quarter, growth compared the we're change third we last this So to any in expecting

a follow You have on?

Thanks. do. I

Dave, you from down transition think was Disti start your manage today? are to appreciate, Direct. utilization do rates you XXX. on I But where the up Are range you your management and cut days or XX% think up more than inventory? to upper at know call the I things what I you on to inventory with sequentially, point comfortable XXX. grew of cut balance target the still sheet your production revised need capital to also So to

the Yeah. question, Toshiya. we Yes, are. comfortable we No, where for thanks are

to management service minimize XX to I our high and our obsolescence. would you objective reminder, inventories call. slide customer maintain capital a As levels at of point for

always that they will and semiconductor levels one That shows years us and future cycle on of likely what one near the inventory the the demand could time cycles, in over through expectations long-term bias. being term, informs have for even what year. depend in many an happen course for and quarter growth not some the XX in of upward on any those planning years or about we're any And the

Okay.

point? clarify, you're running still just full to fabs your this at So

than lower of was quarter largely quarter. was capacity. last previous this adding function That Utilization the a

you. thank Okay,

The please. Toshiya. you, Thank next caller,

line the Bernstein of from Rasgon Research. question. Please comes question Stacy proceed with next with Our your

taking question. for Thanks my guys. Hi,

follow one first is on my So to just that. up

inventories said an You the upward bias. have

that days, in QX? So you inventory to expect increase like dollars again do means and

upward the depends dollars course, Well, an but on bias. days has on revenue, -- the of

dollars very in the there's that So likely up go will QX.

growth know inventory of to in but the quarters' is about one it's worth point finish. days and stages time, and -- Of the meant in inventory is future on this course you right, support balance various couple at of but sheet XXX of is

quarters they are going up to though? going many keep How for

forecast that revenue on on then, we That's decisions factory, the expectations, a we depend and quarter one at going to now beyond time. and make the

our know Toshiya Just -- I the I previous term in as managing mentioned cycles, And as long through right? in to it's the thinking, that we're nature, talked call.

we right? going going On going to adding of in happen capacity years, what headroom. longer going we're not support So for us to So on what's quarter to that is two that's happen think it's capacity, give many to plenty or even quarters, over one us inventory. than

there's product it inventory comment very The listened obsolescence. are more is, in last maybe on just that on that the buy itself dozens year and counterparties customers for our have very -- tens inventory, cycles very XX inventory low who life have, not our those shelf, know is customers, fact, bulk we years product. the you of with or of to cases, -- long but often, the up the for One in but us has many to

So of inventory. low very the the is risk in obsolescence

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

Oh. Was my -- that

yes, was What your thank you. second,

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

a And thanks having lead My thanks, is by for on first call. much semis, Hey, unique the It's and concise conference times and shortages. just guys. appreciated. question nice, way,

inventory, Given mean, normal. ago I any are now us there? sort with share much, could versus on there back you six the the to , in the the we pretty we times And improvement least that guess months and are peers the Are of shortages at you're or among I capacity metrics that gone? pretty all are much all say adding can lead lowest, TI three

Yes. talked immediate on we've Chris, And I product come, would frame vast support be I how today would ti.com majority of it our about, that shipment. demand. are have able as -- to Rafael well for what behind is the -- got capacity the we'll whenever as as upgerm does that available to available products

a us at cycle time, customer lead order the if an much. haven't give changed over lead wants Now times that to those

inside if So majority that, it need they they have the can available. vast for can the place they of -- that order products, or of

a have those We'll quickly. hotspots. pretty are demand hotspots a have have closing place we we do But and and imbalance. probably supply closing where Now always

capacity As on bringing Rafael every talked quarter. we're about,

customer vary the hand. just meet gives does more on what to it got But So be us that demand. to beyond flexibility we've able

You have follow-on? a

are bunch are in the TI the XXX-millimeter this more about advantages earlier on have manufacturing call, guess, about in calls, little guess, than price Some and price? I more a and aggressive you keep aggressive your you getting just I below has and price internal able competition? happened of you, response of more that. competitors talking you to guys in your competitors, more to Are that recently. something a I have, getting given Yes, you recently? in Is your the wanted the complained manufacturing

the Yes. for Yes. Thanks question, Chris.

the with to And continue our strategy share we the there's course, monitor unusual goal over hasn't to on with products, changed. pricing of today. may going nothing maintain we of all gain Our time. pricing But pricing of regularly and

we when that there factory, of talked that you handwringing our that fact remember the we going X, out what and to to we if inside XX% point I'll were did. something place of unnatural. growth, the needed do putting up Fab had opened was that's was back and that tools capacity what support we it then And about And in

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

Thank you.

question. Harlan proceed of with with from line Sur your Our the next JPMorgan. question Please comes

you. demand and Thank or activity the quarter? the in behavior you right Up sort three team customer continue the consecutive pushout sort or team typical signs a you afternoon. June weak have cancellations Good have in and of environment. push-outs, Yes. to cancellations had into of of Or seen quarters March increasing are you of the stabilization? the Did expanding see seeing guys quarter, --

describe work that line way that I get down remain the And elevated to we The that Yes. demand. levels. in cancellations believe continuing more customers with are to at their inventories is

a have You follow-on?

Yes. Thanks for that.

if general catalog-focused, So the reflecting and MCU business in seems continues businesses holding over MCU due be analog your months, X% If industry on wanted purpose, XX also look at the very analog SIA performance down the know up team's the year-over-year look past -- data. versus why in it X%. I trailing But the delta I of to industry, competitors, broader better much your up other large embedded to MCU are business, analog. embedded? it perspective is get is the hold versus right? at few which More up well, part to right? the the you much, your this I year-over-year just the to refocusing I of it's versus strategy, I trends where years. think trend

we've the those them question, that how strong. we it. to you to our Yes, thanks out portfolio, that as put and made very products the response a say the in in for top changes I marketplace design Harlan, to level, would Yes. product continues at have that and be the customer framed

is talked that confidence for on growth place putting internally, that the before, time. based over business and about haven't some market quite able in that will share Our in we grow that support we've we're extremely that position embedded be to is And term gain high, and long as that. been a to

constraints is I would Near the foundries previously demand. over stabilizing, two rely to we've things last term, besides say, years greater has on experienced that supply had supply to embedded,

that that And so industry. that's just think you those constraints are I the alleviating. And see across something

So next And the we'll Harlan. caller. thank to you, go

from Our question. Curtis proceed with next Barclays. your question line Blayne Please with the comes of

question. my taking for Thanks

to scale I your eventually wanted to inventory but the Just mean, margins. go obsolete, to steal not from back future the I ability it's of understand be to going decision. to gross going is kind

you're a the run I So at to of billion next only it's increase kind going like mean, current rate, rate, run building year. $XX at and

and back So much harm here, an back what's the interim bit? in pulling understand inventory. utilizations it a I'm building so just trying pulling to not just

revenue not our In gross fluctuations not, and support of it's the the just frankly, Those focus of It's are on short-term, big to scheme revenue growth. is but optimize in the to things, irrelevant, is in margins. course, short-term supporting growth goal long-term. here midterm

having is plenty fluctuations, And of inventory low. supports -- we're cost And the incremental midterm inventory to we short-term mitigate of right, really can that inventory.

side, on what nature inventory. of obsolescence into goes on about, the also talked the we cost As variable

in we to trying when things -- decisions. make just those it's that sort of mind keep So just in

and wanted takes I like curious, it in? ask you I to I mean, Maybe just are it's layering points of XXX any puts Or basis is on depreciation But just there at color, don't know just other least give margin? margins. gross Yes. but sequentially. down is perfect consumers gross seems mixed. I'm it kind on

and have yes, that guidance, we EPS. I costs revenue added you're top I'm from particular gross and in third about guidance our the sorry, flat capacity the time. case, So in in guidance is So is the related we you and pointed depreciation embeds assume embeds it our our estimate talking other result over give that quarter? best line or that only out, But -- as margins and --

in year-on-year On a December of it asked fab basis mind cost COR, of year you know of is had now Lehi in just a that year-on-year keep you a year, last and but last basis, in in sequentially, cost I we when restructuring, -- revenue reminder, on as move. the acquisition

Yes.

the the the revenue cost moving of as depreciation. into in So cost well yes, the that into or -- and -- from increase so change of as restructuring year-on-year, of revenue, in most

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

the of proceed your question. with comes next Buchalter Cowen. Our from Please with question Joshua line TD

guess wanted about milestones talk benefit margin taking when could the increased my depreciation Thank ask and output, it for previous maybe you can follow the Thanks to is to is. you. start medium-term the -- some of depreciation near offset on sort question. understand and I of to gross it through the help headwinds? XXX-millimeter I what that the through, that up But we flow

Yes.

-- the lot about over depreciate I five is XX depreciation, usually much a we years, they that equipment would Just longer, is five that years. But lasts what tell right? years than so. or equipment longer Buildings consider you is way average

today XX factories on years-plus. have We that are running

And broadly some but equipment But -- not five years it. decades, of for that has upgraded we speaking, equipment. depreciate that where the lasts

an benefit offset to So the XXX next an comparison the unfair the it's and try to to expect put short-term. probably depreciation in

you that geopolitically suggest That's earlier, adding we're what that that alluded standpoint. from to CapEx. capacity, cash, It's of -- enable the We're would a Dave to cash dependable going as investing is growth I which, is capacity. internal forget by depreciation, investing. think is CapEx about it

Sherman, then Asia, assembly two putting many Utah. in for test We're Fabs Philippines, in as Malaysia and as in in Richardson, facilities Lehi primarily four in two And example.

either going company that And to the investments. for of happens of to or redeploy lot in put grow that operating for the is to time. after what a the a can us So cash those there a position top a great then so then yields line owners that's really -- we long return company

a Do Josh? follow-on, have you

last anything about better did to now? Thank being But Thank And the you. safe is grew, end get bottom in particular, regarding you. talked commentary. in I of say it market Yes, change intra-quarter? electronics similar cycle. a language past four-quarter recognize sort you've sort or worse of sure. quarter that it the that's the any personal Is

see Again, continued to Yes. started we asynchronous that ago. I that year as think had overall, behavior a we back

has second. again, we've now to so continued. it started it first see in we And grew -- QX, -- to that so weakness PE, started actually completed

forward. markets So our we've sequentially. up slightly much got change again, we as quarters look It decline. we're end not was several expecting of And in

So, okay, thank you. And please. let's our caller, to last go

of comes with caller Chris the Wolfe last Our from Research. Caso line

Good guess a We And as I we it's up think you compared the weakness started issue. to other could noted, no you markets? could bring to you need PE incremental Perhaps more demand differentiate from are inventory thank of on It's that And evening. down still a to demand. of your customers last end you. following others talk just issue. could earlier. Yes, customers bit to that our the some questions. inventory few some where as heard you further. where through of weakness burning Perhaps for see about an your longer see end little inventory still segment

all sectors at that, like aren't industrial, you And think infrastructure, the identical, you of reflective showed course, other in that. even look in of Sure. sectors inside of look grid all the Yes, if had automotive. that across exception aerospace, Chris, of strength the with I not could and weakness broadly, inventories, meaning them you've end reducing say of customers it's markets if you --

all way, were the of the same sectors is as not as others. So strong or -- as weak and PE

markets. broadly, of you a it have those follow-on? you across Do -- say but was each So could

that began, has then. a had stable downturn And strong, commentary segment as maybe And that remained hit the I'll follow-on on believe Thanks. do. auto was auto. I your -- was remained this when I

in that past. because You has auto would the thought to it it come just eventually always

far, it So hasn't.

Do think some I do correct surprised resilience us, market? to point? why view And not, about the of of you lot your that different? Has expect the at a it think you it's on if that resilience changed the still has that. auto

Yes.

the build if the years industry surprise us the of inventory. types behaved anyone it I have past. I wouldn't of certainty the those in corrected. experience it things declare XX in think think markets in I've that future. now, will on But that's got customers can and don't way So the

you in case. generally surprised guide absolutes, make that's the a the but and So be but if good I pound future, table the can't wouldn't that certainly think were

up. we'll this to with it hand wrap So over to Rafael that,

Thanks, Dave.

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

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

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

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

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