10-QPeriod: Q1 FY2016

TEXAS INSTRUMENTS INC Quarterly Report for Q1 Ended Mar 31, 2016

Filed May 4, 2016For Securities:TXN

Summary

Texas Instruments Inc. (TXN) reported its first quarter 2016 results, with total revenue of $3.008 billion, a 5% decrease year-over-year, primarily driven by weakness in the personal electronics market. Despite the revenue dip, the company achieved a record gross margin of 60.6%, benefiting from lower manufacturing costs and a favorable product mix, particularly in its Analog segment. Net income was $668 million, or $0.65 per diluted share, a slight increase from $656 million ($0.61 per diluted share) in the prior year's quarter. The company demonstrated strong free cash flow generation, with $3.7 billion for the trailing twelve months, underscoring its robust business model. Texas Instruments continues to return capital to shareholders through dividends and share repurchases, reflecting confidence in its long-term prospects.

Financial Highlights

51 data points
Beta

Revenue

$3.01B

60.8% Gross Margin

Net Income

$711.00M

23.6% Net Margin

EPS (Diluted)

$0.69

Total Assets

$15.69B

Cash & Equivalents

$1.28B

Free Cash Flow

$529.00M

Financial Statements
Beta
Revenue$3.01B
Cost of Revenue$1.18B
Gross Profit$1.83B
R&D Expenses$322.00M
SG&A Expenses$441.00M
Operating Income$984.00M
Net Income$711.00M
EPS (Basic)$0.70
EPS (Diluted)$0.69
Shares Outstanding (Basic)1.01B
Shares Outstanding (Diluted)1.02B

Key Highlights

  • 1Revenue declined 5% year-over-year to $3.008 billion, impacted by a slowdown in the personal electronics market.
  • 2Achieved a record gross margin of 60.6% in Q1 2016, up from 57.7% in Q1 2015, driven by manufacturing efficiencies and product mix.
  • 3Net income increased slightly to $668 million ($0.65 EPS) from $656 million ($0.61 EPS) in the prior year.
  • 4Analog segment revenue decreased by 8%, while Embedded Processing segment revenue grew by 8%, indicating a strategic shift.
  • 5Free cash flow for the trailing twelve months was $3.7 billion, representing 28.4% of revenue, highlighting strong cash generation.
  • 6The company returned $4.2 billion to shareholders in the past 12 months through dividends and stock repurchases.
  • 7Total cash and short-term investments stood at $2.8 billion, with a strong liquidity position.

Frequently Asked Questions

The primary driver for the 5% year-over-year revenue decrease to $3.008 billion was weakness in the personal electronics market, which declined as expected. This was partially offset by strength in automotive and improvements in industrial and communications equipment.

Texas Instruments achieved a record gross margin of 60.6% due to a combination of factors, including lower manufacturing costs and a higher percentage of more profitable products (a favorable product mix). The company also benefited from its efficient manufacturing strategy, including the use of 300-millimeter wafers for Analog production.

Texas Instruments has a strategy to return 100% of free cash flow, plus proceeds from equity compensation exercises, minus net debt retirement, to shareholders. In the trailing twelve months, the company returned $4.2 billion through stock repurchases and dividends, demonstrating its commitment to shareholder returns.

The Analog segment saw an 8% revenue decrease, primarily driven by the High Volume Analog & Logic (HVAL) product line, though operating profit margin improved. Conversely, the Embedded Processing segment experienced an 8% revenue increase, led by Processors, and saw a significant improvement in operating profit margin from 18.3% to 25.0%.