01—Abstract
Summary
Summary of the 10-K filed February 22, 2019. Cited figures are marked; the original filing is the authoritative source.
Texas Instruments Inc. (TXN) reported solid financial performance for the fiscal year ending December 31, 2018, with revenues reaching $15.78 billiona, a 6% increase from the previous year.
The company's strategic focus on its Analog and Embedded Processing segments, particularly for the industrial and automotive markets, continues to drive growth. These segments benefit from long product life cycles, diversity, and less capital-intensive manufacturing, contributing to strong profitability and cash generation. Despite a slowdown in the semiconductor market towards the end of 2018, TI demonstrated resilience, with significant growth in gross profit and operating profit, and a notable increase in free cash flow to $6.06 billionb.
The company's financial health is further bolstered by its robust capital management strategy, which prioritizes returning free cash flow to shareholders through dividends and stock repurchases. In 2018, TI returned a substantial $7.66 billionc to shareholders.
The strong free cash flow generation, coupled with a disciplined approach to expenses and continued investment in its competitive advantages, positions TI favorably for sustained value creation. Investors can note the company's leading market share in the fragmented analog semiconductor market and its strong position in embedded processing, indicating continued potential for market share gains.
02—Key points
Key Highlights
- Total revenue increased by 6% to $15.78 billion in 2018, driven primarily by the Analog segment.
- Free cash flow grew to $6.06 billion, representing 38.4% of revenue, underscoring the company's strong cash-generating capabilities.
- Texas Instruments returned $7.66 billion to shareholders in 2018 through dividends and stock repurchases, reinforcing its commitment to shareholder value.
- The company maintains a leading position in the fragmented analog semiconductor market with an estimated 18% market share.
- Operating profit margin improved to 42.5% in 2018, up from 40.7% in 2017, reflecting strong operational execution and product portfolio.
- Strategic focus on high-growth industrial and automotive markets within Analog and Embedded Processing segments continues to yield positive results.
- The company's manufacturing strategy, including investment in 300mm analog capacity, contributes to cost advantages and supply chain control.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2018, Texas Instruments kept $0.35.
- Revenue$15.78B100.0%
- Cost of revenue−$5.51B34.9%
- Gross profit$10.28B65.1%
- Operating costs−$3.56B22.6%
- Operating income$6.71B42.5%
- Interest, other & tax−$1.13B7.2%
- Net income$5.58B35.4%
Where FY2018 revenue went
$15.78B- Net income: $5.58B, 35% of revenue
- Cost of revenue: $5.51B, 35% of revenue
- R&D: $1.56B, 9.9% of revenue
- SG&A: $1.68B, 11% of revenue
- Other operating costs: $321.0M, 2.0% of revenue
- Interest, other & tax: $1.13B, 7.2% of revenue
Kept 35% as net incomeOther operating costs $321.0M · 2.0%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2018filed February 22, 2019Financial Statements
FY2018 against FY2017
| Line item | FY2018FY2017 | Change |
|---|---|---|
| Revenue | $15.78B$14.96B | +5.5% |
| Cost of Revenue | $5.51B$5.35B | +3.0% |
| Gross Profit | $10.28B$9.61B | +6.9% |
| R&D Expenses | $1.56B$1.51B | +3.4% |
| SG&A Expenses | $1.68B$1.69B | −0.6% |
| Operating Income | $6.71B$6.08B | +10.4% |
| Net Income | $5.58B$3.68B | +51.5% |
| EPS (Basic) | $5.71$3.68 | +55.2% |
| EPS (Diluted) | $5.59$3.61 | +54.8% |
| Shares Outstanding (Basic) | 970.00M991.00M | −2.1% |
| Shares Outstanding (Diluted) | 990.00M1.01B | −2.2% |
05—Questions
Frequently Asked Questions
What were Texas Instruments' primary revenue drivers in 2018?
The primary revenue driver for Texas Instruments in 2018 was the Analog segment, which saw an increase due to growth in Power and Signal Chain product lines. The Embedded Processing segment also contributed to overall revenue growth.
How is Texas Instruments returning capital to shareholders?
Texas Instruments returned a significant amount of capital to shareholders in 2018 through a combination of stock repurchases ($5.10 billion) and dividends paid ($2.56 billion), totaling $7.66 billion. The company's strategy is to return all free cash flow to shareholders.
What is Texas Instruments' strategy for future growth?
Texas Instruments' strategy centers on its Analog and Embedded Processing segments, with a particular emphasis on the industrial and automotive markets, which it believes offer the best growth opportunities. The company leverages its four sustainable competitive advantages: strong manufacturing and technology, a broad product portfolio, extensive market reach, and diversity across products, markets, and customers.
How did the semiconductor market slowdown at the end of 2018 affect Texas Instruments?
While the semiconductor market experienced a slowdown and weakening demand in late 2018, Texas Instruments demonstrated resilience. The company maintained its focus on long-term investments and disciplined expense management, aiming to leverage its diversified markets and long-lived products to navigate the downturn.
06—Continue