10-QPeriod: Q1 FY2015

TEXAS INSTRUMENTS INC Quarterly Report for Q1 Ended Mar 31, 2015

Filed May 5, 2015For Securities:TXN

Summary

Texas Instruments (TXN) reported a solid first quarter for 2015, demonstrating continued revenue growth and improved profitability. The company posted revenues of $3.15 billion, a 6% increase year-over-year, driven by strong performance in its Analog and Embedded Processing segments, which now constitute 86% of total revenue. This marks the sixth consecutive quarter of year-over-year revenue growth. Net income rose to $656 million, a significant increase from $487 million in the prior year's first quarter, leading to diluted EPS of $0.61, up from $0.44. The company highlighted improvements in gross margin, which reached 57.7%, up nearly 4 percentage points from the prior year, attributed to product portfolio diversity and manufacturing efficiencies. Operating expenses also saw reductions in R&D and SG&A due to cost-saving initiatives. Texas Instruments continued its strong cash flow generation, with free cash flow for the trailing twelve months reaching $3.6 billion, representing 27% of revenue. The company also returned substantial capital to shareholders through dividends and share repurchases, underscoring its confidence in its business model.

Financial Statements
Beta

Key Highlights

  • 1Revenue increased by 6% year-over-year to $3.15 billion, marking the sixth consecutive quarter of growth.
  • 2Net income surged by 34.7% to $656 million, with diluted EPS rising to $0.61 from $0.44 in the prior year.
  • 3Gross margin improved significantly to 57.7% from 53.7% in the prior year's first quarter.
  • 4The Analog and Embedded Processing segments continue to be the core revenue drivers, accounting for 86% of total revenue.
  • 5Free cash flow for the trailing twelve months was robust at $3.6 billion, representing 27% of revenue.
  • 6The company returned $4.1 billion to shareholders in the past 12 months through stock repurchases and dividends.
  • 7Inventory levels increased slightly, with days of inventory rising to 124, attributed to planned product builds and slightly softer demand in certain markets.

Frequently Asked Questions

Texas Instruments' revenue growth in Q1 2015 was primarily driven by increased demand in its core Analog and Embedded Processing segments. While automotive and industrial markets showed strength, the company experienced weaker demand in personal electronics (especially PCs) and communications equipment (particularly wireless infrastructure), as well as a negative impact from foreign currency exchange rates.

The company has successfully reduced its operating expenses, with R&D expenses decreasing by 8% and SG&A expenses also decreasing by 8% year-over-year. These reductions are attributed to cost savings from previously announced restructuring actions and broader efforts to align costs with growth opportunities.

Texas Instruments aims to return 100% of free cash flow plus proceeds from equity compensation exercises, minus net debt retirement, to shareholders. In the past 12 months, the company returned $4.1 billion through stock repurchases and dividends, reflecting confidence in its long-term business model.

Inventory increased by $60 million from the end of 2014, leading to 124 days of inventory on hand, up from 117 days. This increase is due to planned builds of long-lived products and revenue coming in at the lower end of expectations. Accounts receivable increased by $148 million, with Days Sales Outstanding (DSO) at 40, up from 34 at the end of 2014, primarily due to higher revenue at the end of the quarter.