10-QPeriod: Q2 FY2016

TEXAS INSTRUMENTS INC Quarterly Report for Q2 Ended Jun 30, 2016

Filed August 4, 2016For Securities:TXN

Summary

Texas Instruments (TXN) reported solid results for the second quarter of 2016, demonstrating resilience in a challenging market. Revenue saw a modest increase of 1.3% year-over-year to $3.27 billion, driven by strong performance in the Embedded Processing segment, which grew 9%. The Analog segment remained stable year-over-year, highlighting the company's diversified product portfolio. Profitability improved significantly, with operating profit increasing by 10.6% to $1.12 billion and gross margin expanding to 61.2% from 58.2% in the prior year, attributed to lower manufacturing costs and efficient operations, including the benefits of 300-millimeter wafer production. Financially, TXN continues to generate substantial free cash flow, which increased 7% year-over-year to $3.9 billion for the trailing twelve months. This robust cash generation enabled the company to return $4.1 billion to shareholders through dividends and share repurchases, underscoring their commitment to capital return. The balance sheet remains strong, with $2.5 billion in cash and short-term investments, providing ample liquidity. The company is also strategically investing in R&D, with plans for continued increases, signaling a focus on innovation and long-term growth.

Financial Highlights

52 data points
Beta

Revenue

$3.27B

61.3% Gross Margin

Net Income

$819.00M

25.0% Net Margin

EPS (Diluted)

$0.79

Total Assets

$15.69B

Cash & Equivalents

$1.24B

Free Cash Flow

$951.00M

Financial Statements
Beta
Revenue$3.27B
Cost of Revenue$1.27B
Gross Profit$2.01B
R&D Expenses$341.00M
SG&A Expenses$454.00M
Operating Income$1.13B
Net Income$819.00M
EPS (Basic)$0.81
EPS (Diluted)$0.79
Shares Outstanding (Basic)1.00B
Shares Outstanding (Diluted)1.02B

Key Highlights

  • 1Revenue for Q2 2016 increased by 1.3% to $3.27 billion compared to Q2 2015, driven by a 9% growth in Embedded Processing.
  • 2Gross profit margin improved to 61.2% in Q2 2016 from 58.2% in Q2 2015, due to lower manufacturing costs and efficient 300mm wafer production.
  • 3Operating profit grew by 10.6% to $1.12 billion, with operating margin increasing to 34.1% from 31.3% year-over-year.
  • 4Net income for Q2 2016 was $779 million, or $0.76 per diluted share, up from $696 million, or $0.65 per diluted share, in Q2 2015.
  • 5Free cash flow for the trailing twelve months increased by 7% to $3.9 billion, representing 30.0% of revenue.
  • 6The company returned $4.1 billion to shareholders through stock repurchases and dividends over the past twelve months.
  • 7Cash and short-term investments totaled $2.54 billion at the end of Q2 2016, indicating strong liquidity.

Frequently Asked Questions

Revenue growth was primarily driven by the Embedded Processing segment, which saw a 9% increase year-over-year. While the Analog segment remained stable, demand in the automotive and industrial markets was strong, while the personal electronics market saw a decline compared to the prior year.

Profitability improved significantly due to a higher gross margin, which rose to 61.2% from 58.2% a year ago. This was achieved through lower manufacturing costs, efficiencies from 300-millimeter wafer production, and a favorable product mix in key segments. Operating expenses were managed effectively, with R&D increasing as planned for future growth and SG&A seeing a slight decrease.

Texas Instruments demonstrated a strong commitment to returning capital to shareholders. Over the trailing twelve months, the company returned $4.1 billion through stock repurchases and dividends. Their strategy aims to return 100% of free cash flow plus proceeds from equity compensation, minus net debt retirement, reflecting confidence in their business model's sustainability.

The company maintains a strong financial position with robust liquidity. As of June 30, 2016, Texas Instruments had $2.54 billion in cash and short-term investments. They also have an undrawn $2 billion revolving credit facility. Long-term debt stands at $2.975 billion, and the company is actively managing its debt obligations, including issuing new debt and retiring maturing debt.