10-QPeriod: Q2 FY2018

TEXAS INSTRUMENTS INC Quarterly Report for Q2 Ended Jun 30, 2018

Filed August 2, 2018For Securities:TXN

Summary

Texas Instruments Inc. (TXN) reported a strong second quarter and first six months of 2018, demonstrating significant year-over-year growth in revenue, operating profit, and net income. Revenue increased by 9% for the quarter to $4.02 billion and 10% for the six-month period to $7.81 billion, driven by robust demand in the industrial and automotive markets for both its Analog and Embedded Processing segments. Key financial highlights include a substantial increase in earnings per share (EPS), with diluted EPS rising to $1.40 for the quarter and $2.75 for the six months. The company also showcased strong free cash flow generation of $5.7 billion over the trailing twelve months, underscoring its efficient manufacturing strategy and diversified product portfolio. TXN continued its commitment to shareholder returns, distributing $5.6 billion through stock repurchases and dividends over the same period, with dividends representing a sustainable 41% of free cash flow.

Financial Highlights

53 data points
Beta

Revenue

$4.02B

65.2% Gross Margin

Net Income

$1.41B

35.0% Net Margin

EPS (Diluted)

$1.40

Total Assets

$18.53B

Cash & Equivalents

$2.92B

Free Cash Flow

$1.58B

Financial Statements
Beta
Revenue$4.02B
Cost of Revenue$1.40B
Gross Profit$2.62B
R&D Expenses$384.00M
SG&A Expenses$441.00M
Operating Income$1.71B
Net Income$1.41B
EPS (Basic)$1.43
EPS (Diluted)$1.40
Shares Outstanding (Basic)977.00M
Shares Outstanding (Diluted)997.00M

Key Highlights

  • 1Revenue grew 9% year-over-year to $4.02 billion for the second quarter of 2018 and 10% to $7.81 billion for the first six months.
  • 2Net income increased significantly to $1.41 billion for Q2 2018 and $2.77 billion for the first six months.
  • 3Diluted EPS rose to $1.40 for Q2 2018 and $2.75 for the first six months, up from $1.03 and $2.00 respectively in the prior year.
  • 4Operating profit margin improved to 42.6% in Q2 2018 and 41.8% year-to-date, reflecting strong operational efficiency.
  • 5Free cash flow for the trailing twelve months reached $5.7 billion, representing 36.6% of revenue.
  • 6The company returned $5.6 billion to shareholders via dividends and share repurchases in the last twelve months.
  • 7Strong performance in both Analog and Embedded Processing segments, driven by demand in industrial and automotive markets.

Frequently Asked Questions

Revenue growth was primarily driven by increased demand for both Analog and Embedded Processing products, particularly within the industrial and automotive end markets. Higher shipment volumes for these product lines contributed to the overall 9% revenue increase compared to the prior year's second quarter.

Profitability saw a significant improvement. Gross profit margin increased to 65.2% in Q2 2018 from 64.3% in Q2 2017, and operating profit margin rose to 42.6% from 40.1%. This expansion is attributed to higher revenues, improved manufacturing efficiencies, and the benefits of 300-millimeter Analog production.

Texas Instruments maintains a consistent strategy of returning all of its free cash flow to shareholders. Over the trailing twelve months, the company returned $5.6 billion through dividends and share repurchases. Dividends accounted for 41% of free cash flow, indicating their sustainability.

The company adopted ASC 606, 'Revenue from Contracts with Customers,' effective January 1, 2018. While it required a modified retrospective transition, the primary impact was an increase to opening retained earnings of $206 million related to patent licensing agreements. The reported results for 2018 reflect the new guidance, while prior periods remain under historical accounting.