Texas Instruments (TXN) 23 Jan 242023 Q4 Earnings call transcript

Welcome to the Texas Instruments Fourth Quarter 2023 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

I'd like that's information some important for to provide your calendars.

management Rafael done February Central our provide Time, capital I our our for capital ahead. prepare Next in summarize a.m. we'll we've the approach we what past, XX week, call. X, on progress to at some and our Thursday, will insight to the Similar business opportunity as have and allocation into and

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

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

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

Starting XX% declined the year was Analog decrease declined billion, a quarter Embedded and and quarter. XX% the ago. of with sequentially quick $X.X of a XX% revenue Revenue XX%. from a Processing year-over-year overview same

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

provide I'll revenue insight quarter some market. Now into end by fourth our

focus to increasing time. performance in sequential this work levels. reflect their reduce decline informative quarter, on customers industrial more weakness as inventory I'll results to in Our and a as automotive sequential at Similar it's last

X.X Enterprise about single was next, very growth. low low as equipment digits. First, digits market that digits. down increasing grew of the saw down And weakness. strong we after automotive mid-teens was was communications flat. single lastly, industrial electronics was The Systems mid-single Personal And down market years

each I'll addition, year, as our the end by do calendar describe revenue market. end of we at In

In XXXX, XX%, up Systems strategic from XXXX, Communications opportunities and other of XX%, and XX%, emphasis TI's Equipment X Industrial of additional up XXXX. X%. good a revenue about our automotive revenue, was in all we XX% X% combined from up automotive XXXX markets As was place but made on industrial We was and Enterprise X%, of automotive. see XX% percentage points for in industrial percentage and Personal Electronics

are Our and to industrial to drive content their per and will compared continue automotive and make empower. reliable, faster turning These growth technologies growing products in to and to trends more markets. resulted Analog customers which more have increasingly lower Embedded other end result affordable will application our chip

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

good Dave, everyone. and Thanks, afternoon,

of as revenue. income billion our $X.XX a operating revenue. the not quarter in billion Operating was Operating billion. year $XXX manufacturing fourth XXX benefit profit margin were Dave XX-month points. quarter $X.XX X% the gross was ago Operating for per of that revenue the year As Net and higher expected. quarter were revenue. and per share about a guidance. expenses XX% XX% was revenue loadings. $X.X share. costs up billion On the ago, From capacity billion was was $X.X from Gross were $X.X mentioned, profit quarter of basis due primarily reduced or quarter. a in to in lower Earnings included decreased $X.X associated Gross items quarter $X.X a profit decreased from or million, fourth the profit or with in factory trailing XX% in planned down expansions profit expenses basis, XX% ago year original or

our billion Capital In in capital starting $X.X $XX expenditures our million and comment now the dividends billion with Cash generation. our me stock. were quarter. paid quarter, of repurchased the Let $X.X management on in $X.X we in billion flow was from the cash quarter. results, operations

in the the X% owners. We year share also XX returned past per billion dividend marking have In months fourth increased our we $X.X XXth of in total, consecutive quarter. by to increases. our dividend

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

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

decisions believe invest objective free is support as to share, well cash assets of long-term we the per to value. cash strength which manufacturing and XXX-millimeter model Our flow inventory free driver reflects of primary maximize our in long-term as to overall business the our flow our

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

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

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

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

back it to Dave. turn me let that, With

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

Instructions]. [Operator

Goldman Sachs. Our first Hari the comes from question Toshiya line of with

outlook. QX My first is your on

you're guiding broad-based I to you markets weakness device that be think Or clearly consider or regions or midpoint, out is call is view? driving we applications. types what revenue typical that's seasonality. well across it so, which below at end Any can that or down all XX% the

in would to believe operate the we'll a And the Yes, industrial I'll we quarter, customers fourth automotive. and decline just that, one inventories continuing in the are We weakness question. weak continue see rebalance to sequential guide Thanks we in Toshiya. there. overall. take that weakness In did environment for their where as increasing saw suggest

have specific on. comment a nothing you Do to but -- So follow-up?

do. I

Just revenue that on the pricing guys be would a surprised can revenue. a drop in you're what will, strategy But it you bit in good pricing seeing in you if the the margin understand what increase volume kind what's from explaining essentially I'm dropping I kind job through, a pricing to more driving with decline Is margins, if dollars are from little think the much gross and your of the your gross gross driving did it. margins? year-over-year the that's perspective, depreciation. helpful. I Still, you underutilization, as you as Or speak than of decline marketplace, seeing in perspective? a

everyone reason chooses remind you But just why know industry doesn't Yes. customer else, I is pricing Toshiya, it know quickly a in move the nor well. And and the our overall. primary our I'll markets products.

before, regularly and or hasn't how pricing we talked I months monitoring appropriately. now market as we've changed. that's that come the strategy what And more over demand last X to think, last we've XX -- so, as seen. and XX our years. So behaved as our and back would course, expect we it's products over balance we've And we're of to or supply revert to the the mentioned in expected couple pricing always pricing And quarters, of about a for,

somewhat we're that out I wouldn't time of as a is So expecting what unusual. decline in single-digit and low describe

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

basis basis about XXX of ask down Even points. to implied down strip depreciation, from margin points maybe wanted I gross points. It's I Dave, to factory it's out be about kind March. loadings. XXX was XXX down basis if

like bit. also So lower, is And seems it a down coming bit utilization a little came December. for too, CapEx in

then loadings. March in that going loadings see to on first talk that, too. you come I had follow-up we a down inventory about also the begin So and be bottom Is can March? on in to should question is, the And

Yes.

thanks the So for question.

back in we our talked inventory accordingly. we then quarter, step the the this as our factory have about quarter, levels, adjusted So at have near third we end of third loadings

an into that on further. we that, margins bigger third quarter, So in underutilization. now taking of that first was quarter gross and adjustment Fourth had than impact And quarter. some quarter, going adjustment we're third and did

on we have to be parts will we bias an bigger. So upward inventory the be continue have Do the But adjustment on a continue the be to you as build of the side right utilization for cycle. will quarter ready the on to first other buffers right the follow-up?

did. I Yes.

actually about a quite $X CapEx, then running So rate bit a that? little lower. can the below billion It now. on It's run you was talk

actually on you're since -- CapEx loading? you are So now factory with cutting bringing

we're not. No,

billion and expected, In came been billion, fact, year. in we've as per CapEx talking about $X $X.X

about $X we investment per we've about. target. and XXXX on So been we to expect through expect continue that at you And complete it should running right as year the plans talking was billion

with comes Our next from Citibank. Danely question of the line Chris

utilization the on follow-up a rates. Just

So guess, for rates not is might expect do do some have more level, And to you QX? that utilization bottom think adjustments TI? the so inventory I into changed in you for target, you you has inventory Or going QX guys?

Chris. thanks, No, Yes.

So targets have our X, -- cycle. changed not X broadly speaking, our over inventory through this months. the last

some I did some worth billion have on $X.X go that inventory. billion to than talked less ago. ways At $X one X clearly But have about we ways to point, still So we front. we will still go to months of

as But we as And as this just that's underutilization we're far X going finished depend -- only bottom, just So we shy time. point, to when expectations ballpark. at only give on quarter $X billion. a in that's of and at revenue the always,

about we'll we'll So days and now, tell that. we you XX see where are from

look the Maybe how product, are It's us manufacture set by I'll to how look -- like many the just patterns like, what product. inventory long at really our of the we buying buying target customers takes add that device. it is things

it's very, on plan So a bottoms-up very really built specifically. that

target to overall, what want growth. we a side and inventory term. is that's long This that support over drives So to comment. the positioned have

Chris? follow-on, So a you have

for Yes. just the Thanks little I color that. market guess on end commentary. bit a of

you downside excess it And automotive weakening, wouldn't markets/inventory as was then there side, the under reason due fall of On well. not with most confirm is that any the why industrial would sounds that. like same inventory, industrial is end I demand. automotive the to the issues hoping could

Yes.

orders you from either they and whether if anything. Rafael, to are demand that directly fees. start we place, that that that's the signals consignment get or customers would want I'll add say then So through I

see we data can XX%, that know as see. a down see that's handsets down hasn't We levels we So XX%. electronics is personal like gone inventory PCs we the market that. as market actually can that and can't anecdotally their as much We

So that know we're below anecdotally we demand. shipping

on industrial. that's in that believe we what's So going

inventory that built We plan customers to they have correct and who told that. have have us

isn't like a that having something see So look real of and demand their looks channel what their picture overall. clear we like can inventories directly

So now. build that the that on customers there good comment automotive. want -- did they're We we in believe know and And position to inventory. a

saw it sequential So a there. we decline that wasn't surprising

thanks, Chris. So

our next We will caller please. go to

Our the next of question comes O'Malley from Barclays. with Tom line

understand signaling quarter or the was baked the I of you at goods than to is timing and to I businesses quarter, a one just automotive bit up better worse that expectations? declines. And inventory understand, into dynamic the X then bit. of versus it weaker behind than you're your is of were reason finished set just quarter, buckets. the the terms in wanted little like wanted other of any more the than other these kind a And they the looking there When in bit customers just both in the trends? your just Or where because linearity there? looks your in out a some later your went industrial expectations, came

with the one, Dave, take want start second do first better. the And me Let question. the you of part to

about. that's seeing Second earlier, alluded you're those reflection inventory is they many finished goods of that the the to are we of customers. there sell one call the means ability to vast finished talking catalog, we And that And we're side. That's XXX,XXX those on set targets one, to our we part, that's have of a build majority Dave buffers as what different Remember, many, parts. at what have. goods level. That's just which

also finished want So the for into good can X, chip build certain Think level. X, of to XX we we're each finished level at different But go of parts. goods. one chip building those a

works But have out want finished to operationally. -- to inventory level have chip goods. it some So you have also well

that's So what you there. saw [indiscernible]

guidance, midpoint our Tom, were, revenues less markets, end by our in, And where Yes. X% you think, than we of guidance saw I range. from as the came the

overall. versus -- unusual So or expected in the in as business automotive came industrial in we our and about expectation nothing

have do So a you follow-up.

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

ask a for focus Embedded were the the X the versus I product better strategic side, embedded. just dynamics, very between down know analog dropping pricing different competitive had other analog I versus to those. dynamics, X% else difference there's significantly performance XX. end segments. year, But exposures wanted dynamics, explain anything to about market those the the of there

Ross, through and those your instincts the on embedded lens Yes, is heavied to up automotive. the are things I in and that at has look think spot industrial end markets first

revenues So for a stronger time. there period of longer were

analog second on is is consideration relies done foundry more of The heavily. internally. business that our embedded supply wafer Most

constraints the been now There, lasted longer behind have resolved So are us. and and

lag between created of some as So the that there well.

a which have is plans follow-on? have So of -- and of you wafers Do internally, overall our Embedded. know, spend CapEx will you built inclusive more and as our

And cyclical Yes, it's a question. of do. I kind

are guys this cyclicality of of industry. astute whole students You

I guide, of this just the TI-specific year-over-year that's you cycle, in negative be quarter pricing good think sixth this so comps. is see your that's included before. Do going anything got to different

Now headwind. it's a bigger

You little any is And bit of But specific? it kind addressed much making a dynamic this so of duration what's longer? before. pricing TI the

sequential time how and electronics you saw in different ago. make the in have the we've begin think a a are automotive, this second And as studied weaken last What's to the cycles this behaved quarter comment, We anything. saw same, add quarter. is over and personal right, them want just I Rafael, All a year time. we clearly to all if all different, Ross, the markets I'll bifurcation. they're decline

other the in markets, in somewhere So between.

that's So that's that you lots pricing, I think addition, whether been other mentioned. and inside -- of as in then we've had the noise of system,

are non-reschedule noncancelable don't customers than that contracts had companies longer-term more heavily product others. using need to orders whether take distributors We've and they that other have required

into noise So all adds of it. that

course, that position to we our we're focused to getting in what stronger, to long think competitive that advantages, need on, share in term. itself is over out great just I over we're So bring of let And cycle. a noise the believe we continue the investing gain

non don't the just who new competitors our done to I maybe that. that. those for clarify Many non-cancel, returnable talked when of about we that's want have they've call, Yes. our do orders, on not,

second case in that, is view, And same us. So point, that distributors, the our with towards thing. market the the wasn't

with XX% opposite. We're revenue smaller to our than distribution or whereas distribution so many Our competitors competitors. of XX% footprint is through direct of much of of our our down many the are

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

I of or wonder you and the investment things the tax credit issuances act, if you any of chips that? of may about on that's kind thoughts how kind grant both through have timing then talk like could flowing

happy No, Yes. talk to that. about

ITC go the then I'll address me let first, grant. first, So to and the

$X.X ITC have CapEx or States, the X.X billion. in So XX% last tax date over the on years we investment so, the United credit accrued credit, for manufacturing to

benefit about law get the in regulations of as get quarter year and accrue then the further continue following year, XX% far road, current fourth the the And the as in manufacturing. States $XXX anything again, to cash after rest probably million we'll this we'll the and mostly We United the to down side expect stipulate. that later sheet. just we and And balance that. spend for on the that That's

that build that the depreciate even seeing been for already benefit that tends over time it because, you're buildings And some but front. small, be be of P&L, that we're small already for the benefit of depreciation. tends up on started to is so On will to has that -- haven't example, far lower to

at happens Commerce December. hear Department wait in the ITC. The application to this our the what So from submitted see And we grant of will and point, we for that's those there.

a have You follow-on Joe?

Yes, I did.

but think, that terms keep share and help you dividend. paying repurchases flow I that the road, the to of right free the is stuff flow leave I the obviously, will uses important other does level cash in So the cash? it's assume cash of pretty down Where of your below dividend now,

Yes.

First, our to cash. I operating would point you

it is operating strong, our flow Our strong. investment the business cycle. and very cash is growth for through our very And model supports

of with the big in have cash but revenue now strong. with environment operating the cash that depressed clearly, at even that free operating levels cash picture the CapEx [indiscernible] we flow, right understand and So the the a look flow very is hits

and We also objectives management our take you have we and track When of have year years a to I dividends dividends return. free one And we good repurchases, doing to Each But capital it those. via repurchases. different on return $X.X cash for over of very sheet, all flow a finished strong on repurchases. comes would balance just objective the is has cash many of those both objectives to and our record billion. really

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

to team activity into cancellations continues pushouts consecutive team quarter, expanding of pushouts, environment. and numerous the seeing signs starting typical see behavior month that and Are maybe your the I right, cancellations, in or some quarters [indiscernible] cancellations into the QX demand commentary expanding customer assume almost to still see Up weak that December of given a had pushouts seen stabilization? of increasing a to you're you March.

Yes, Harlan.

at comprehended would cancellations you of the wouldn't had and quarter higher with as And quarter that remained see going and all is I As still in in what's levels. guidance backlog we have fourth outlook. the describe all of cancellations expect, we're elevated quarter. increasing, our and we early seen the say them but would our I just inside on

This year. down the downturn, from seen of significant has perspective, through a this your geography during when sales headquartered last XX% of about October decline Perfect. shipments yes, down continuing XX%, QX European then most quarter it's up year, is China And weakness this was through the geographical your based? U.S. total stepping contribute and to into to Is Or weakness year-to-date right? last geography this year? XX% the business the more of experienced about

say regionally all rest you from a this dollar of with regions Asia. look standpoint, got you've of from the were down would I when the quarter the sequentially, Yes. -- -- just a exception

So nothing unusual overall. with China specifically going on there

again, most China think So by business, recovery hadn't And expecting. end were us I at think markets. of explained when our the a inside certainly, is of most we we that of that seen I look

Our next of with TD question Company. comes & from line Buchalter the Joshua Cowen

given about as grew business ask on to OpEx right growth. last for Any X% Is I expected? that wanted you about thinking than with investing the sort level in the weakness Or longer you're the be more how defensive of OpEx extended getting thoughts XXXX? the long-term in OpEx softness. you the need think to you that

Big process OpEx a Yes. a during to of get where during a picture, have we've to disciplined SG&A ahead pandemic, we didn't number pandemic, and time and capital hand very steady skis. post we opportunities. allocating held best manage of that R&D throughout our years, well And of the the pre-pandemic,

discipline So biasing we're automotive, we very will industrial term is where continue these particularly course, with investments, nature. which Remember, process. of investments, in long they're that

going what is to say -- would You're -- going long-term to you not growth. now hurt revenue your

we're to not going So that. do

So the long for investments maintain we're to those going term.

You Josh? a follow-on, have

you've of in revenues, think, accretive? we to should larger. depreciation gross be right metric amount can mechanics given is the the I changed. incremental to flowing incremental through your math be margin And I ask still if the hear XXX-millimeter gross I XX% mean, guess good I fixed that be has start and cost through a basically, to I'd using on when anything past, revenue. just Yes. and the leverage. fall margin capacity wanted lower curious about margin talked that Is about, in

Yes.

to same. still So starting The a is the point. math reasonable the is [indiscernible] XX% That is fall-through XX%. still

will to and ago, for an you to have as always in point, you like adjust have more alluded to gave are puts our to continue at that you but any out, in then quarter depreciation, depreciation. benefit there a some I'll days from the time, XXX-millimeter wafers, we on on utilization, goes cost that then that under reinforce update but given You pointed this Throughout that. way. which now, -- for you adjust takes increasingly right XXX-millimeter I second, And it's a have other XX but advantage. as

as back billion $X go ago XXXX, me right to let numbers. billion everybody same million $X.X to the just expect depreciation, to days has for So the million. what for I It's $X.X XX to and sure XXXX, said make $X.X expect

next question from CJ line comes Our Muse Cantor Fitzgerald. with the of

gets half question, I guess is first inventory kind your at to first your basically of the roughly revenue us levels. double. March same outlook for XXXX time, pre-Covid Yet back

about also, recovery kind And today? you curious, of of kind about where gross the are inventory out are so thinking inventory are levels over look how what a like margin normalized trough, And you how of thinking time? coming given your will

So to shy multipart tell has our just we're would now, we're of level, a inventory comfortable What that's question, you, with level. very high I that. angles many Right $X billion.

I bias the bias As for on have that to inventory that continued of more parts long is sell for catalog least time. customers couple quarters quarter upward call, at many an one last good that least on a at upward But probably a earlier said that. a we

I expect things. the But of to on continue good we'll feel demand different depending and see I high early the things levels part play out how would inventory. cycle holding of So But and that. about in relatively really

in even are than of a catalog a how we much are terms of time. our ago different last revenue position years X type in our or We industrial in X parts just automotive, in that parts of were long and

have it that So to such that have our inventory. strategy to is makes sense

Our also order have fulfillment processes improved.

that We go different can and to tools to leverage direct market. we ti.com have

We percent is revenue, much have our a higher now XX% direct. of

real as inventory serve better. those we our all that leverage into can a factors to more even play customers use point So having

and much, I share can't but is hear online? front the the bringing anything CHIPS your question. thoughts Act. how on perhaps guess, summer. should you guess, can we and follow-up quick kind prior of your you're share in you a to capacity for impacting clearly on application between A I it's I there results that the know too now

nothing no, What see Unfortunately, application, ago sent No. Yes. Department our where said I goes. can would before just -- We share. Commerce. say of to It's like there's said really And we I plan I've a about decided year. build up from that billion the we fabs tremendous per is just and we'll grant take the up CHIPS $X this our United when to in States, comprehended year to year billion $X.X more decision. per CapEx in that to we

part But So our at point, this yes, that was front. thinking that all that's there. of we can on share

got I think And more call, we've time for please. one

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

a because of leg some advance took customers competitors the down trying they know come is Perhaps the your they lead about think a until industry rest of this why reacted of was of the normalized Just here? that's here. your rest you to saw note of markets were down the think times lagged understand you times little in perhaps bit your also simply have Do a a the have time Do just factor lead your we delaying inventory because normalization. adjustments know that for function some industry. may did of customers we their lead well end as

that we've as XX,XXX know, pin you you XXX,XXX one products well especially it got Chris, and Yes, we're managing. over thing, on customers can't

have on available to capacity high, in inventory, is putting building about talking lead or ti.com. with catalog place and all And was Rafael of the times got essentially our all time our we're objective customer products means almost now stable. our inventory we've immediately which keeping products of catalog remain service metrics As are our

in were their they built to statement. some and short right? grow in some equalize follow-on? markets, capacity So change, one to plans told up showed healthy coming XX%, seen have you told growth, into they're to and XXX,XXX that And customers but for be that grow and year. have I those we've ordering still have they're hard that those it's going think inventories planning going customers they XX% they won't their at Do their they us only us and put So numbers. all to have of concise a across time as they the product

if the how And comes us on of of be bigger snapback enough. sales we a when of underutilization headwind the margins now right finally right back providing be to side off? much recovery, now of get Will with the a And then what we Fair way impact Yes. of the go cost on as Or a kind underutilization the way those sort other do on to could model help right you basis? is the this. back mid-XXs to some of a this, just will incremental up. there of that

Yes.

and range, on reasonable to I we on depreciation reasonably straightforward would impact our So the our quarter underutilization what it, our tell into there. depreciation it'd at for our midpoint into just first, you fairly but relatively midpoint you, you back something and or back increase then can be first don't for quantify the numbers, utilization, looking consider the -- expected

be will of Now revenue it's are the how after what determining big those course, say, factor on XX that, and in from depend then all a depending the run. factories will expectations in the that half revenue to because, days going of let's now, year, second

we're picture a of bigger is the But XXX-millimeter, doing CapEx XXX-millimeter. is XX% deployment which all all on has cost versus that advantage

several As that. earlier, ITC benefits questions on has asked people

we XX% we'll much is So -- on see coming discount how grant. and the on the ITC, get in at

years investments the So fall-through many would will on many, very for say. be I positive, those

that, with Dave? So

call forward next of Rafael. shortly management Thank XX Thanks, this February will available I on update capital at Time, look all to be evening. sharing you our our Central We a.m. a Thursday, us. Good X, joining mentioned for replay as website. Yes. earlier and

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