10-QPeriod: Q3 FY2019

TEXAS INSTRUMENTS INC Quarterly Report for Q3 Ended Sep 30, 2019

Filed October 31, 2019For Securities:TXN

Summary

Texas Instruments (TXN) reported its third quarter and nine-month results for 2019, indicating a slowdown in revenue and profitability compared to the prior year. For the third quarter, revenue decreased 11% year-over-year to $3.77 billion, and net income fell to $1.43 billion from $1.57 billion in Q3 2018, translating to a diluted EPS of $1.49. The decline was primarily driven by weaker demand in both the Analog and Embedded Processing segments, with revenues down 8% and 19% respectively. Despite the revenue dip, the company highlighted its strong free cash flow generation of $6.0 billion for the trailing twelve months and continued commitment to returning capital to shareholders through dividends and share repurchases. For the first nine months of 2019, revenue was $11.03 billion, a decrease of 9% from the same period in 2018. Net income for the nine months was $3.95 billion, down from $4.34 billion in the prior year. Management attributed the performance to macroeconomic factors affecting most markets. The company continues to invest in its core Analog and Embedded Processing segments, with a strategic focus on the industrial and automotive markets, leveraging its manufacturing capabilities and broad product portfolio.

Financial Highlights

53 data points
Beta

Revenue

$3.77B

64.9% Gross Margin

Net Income

$1.43B

37.8% Net Margin

EPS (Diluted)

$1.49

Total Assets

$17.99B

Cash & Equivalents

$3.89B

Free Cash Flow

$1.84B

Financial Statements
Beta
Revenue$3.77B
Cost of Revenue$1.32B
Gross Profit$2.45B
R&D Expenses$379.00M
SG&A Expenses$399.00M
Operating Income$1.59B
Net Income$1.43B
EPS (Basic)$1.51
EPS (Diluted)$1.49
Shares Outstanding (Basic)935.00M
Shares Outstanding (Diluted)950.00M

Key Highlights

  • 1Revenue for the third quarter of 2019 decreased by 11% to $3.77 billion compared to $4.26 billion in the third quarter of 2018.
  • 2Net income for the third quarter of 2019 was $1.43 billion, a decrease from $1.57 billion in the same period of 2018.
  • 3Diluted Earnings Per Share (EPS) for Q3 2019 was $1.49, down from $1.58 in Q3 2018.
  • 4Both key segments, Analog and Embedded Processing, saw revenue declines: Analog down 8% and Embedded Processing down 19% year-over-year for Q3.
  • 5Free cash flow for the trailing twelve months ended September 30, 2019, was $6.0 billion, representing 40.9% of revenue, demonstrating strong cash generation.
  • 6The company returned $7.4 billion to shareholders in the past 12 months through stock repurchases and dividends, with a 17% increase in dividend announced.
  • 7Total cash and short-term investments stood at $5.07 billion as of September 30, 2019, indicating a healthy liquidity position.

Frequently Asked Questions

The decline in revenue and profitability was primarily driven by weakened demand across most markets, impacting both of Texas Instruments' core segments: Analog and Embedded Processing. Specifically, revenue in the Analog segment decreased by 8% and in the Embedded Processing segment by 19% compared to the same quarter in the prior year.

Texas Instruments demonstrated strong free cash flow generation, with $6.0 billion for the trailing twelve months. The company continues its commitment to returning capital to shareholders, having returned $7.4 billion in the past 12 months through a combination of significant stock repurchases and dividends. An increase in the dividend by 17% was also announced.

As of September 30, 2019, Texas Instruments maintained a strong liquidity position with $5.07 billion in total cash and short-term investments. The company expects its annual operating tax rate to remain around 16% for 2019. Despite the short-term revenue and profit pressures, management emphasizes the resilience of its business model and its strategic focus on the industrial and automotive markets for future growth.

During the first nine months of 2019, Texas Instruments issued $1.5 billion in new fixed-rate, long-term debt (split between notes due 2029 and 2039) and retired $750 million of maturing debt. The total long-term debt increased to $5.302 billion from $4.319 billion at the end of 2018.