10-QPeriod: Q2 FY2020

TEXAS INSTRUMENTS INC Quarterly Report for Q2 Ended Jun 30, 2020

Filed July 22, 2020For Securities:TXN

Summary

Texas Instruments (TXN) reported its second-quarter 2020 results, showing a year-over-year revenue decline of 12% to $3.24 billion. This decrease was primarily attributed to weakness in the automotive market, impacting both the Analog and Embedded Processing segments. Despite the revenue dip, net income saw a slight increase to $1.38 billion from $1.31 billion in the prior year, leading to a diluted Earnings Per Share (EPS) of $1.48, up from $1.36. The company highlighted its strong financial position with substantial cash flow from operations and a significant amount of cash and short-term investments. TXN continued its commitment to returning capital to shareholders through dividends and share repurchases, demonstrating confidence in its business model and long-term prospects, even amidst the uncertainties of the COVID-19 pandemic. Management expressed a cautious outlook due to the ongoing pandemic but emphasized strategic investments in manufacturing and product diversification as key strengths.

Financial Highlights

53 data points
Beta

Revenue

$3.24B

64.3% Gross Margin

Net Income

$1.38B

42.6% Net Margin

EPS (Diluted)

$1.48

Total Assets

$17.45B

Cash & Equivalents

$4.29B

Free Cash Flow

$1.59B

Financial Statements
Beta
Revenue$3.24B
Cost of Revenue$1.16B
Gross Profit$2.08B
R&D Expenses$379.00M
SG&A Expenses$401.00M
Operating Income$1.23B
Net Income$1.38B
EPS (Basic)$1.50
EPS (Diluted)$1.48
Shares Outstanding (Basic)916.00M
Shares Outstanding (Diluted)927.00M

Key Highlights

  • 1Revenue decreased by 12% to $3.24 billion for the second quarter of 2020 compared to the same period in 2019, largely due to softness in the automotive market.
  • 2Net income increased to $1.38 billion from $1.31 billion year-over-year, with diluted EPS rising to $1.48 from $1.36.
  • 3The Analog segment revenue decreased by 4% and Embedded Processing revenue dropped by 31% year-over-year.
  • 4Texas Instruments maintained a strong liquidity position with $4.96 billion in total cash and short-term investments as of June 30, 2020.
  • 5The company returned $6.7 billion to shareholders in the trailing twelve months via stock repurchases and dividends, emphasizing its commitment to capital return.
  • 6Gross profit margin remained stable at 64.3% despite lower revenue, indicating effective cost management.
  • 7The company is investing in its 300-millimeter Analog manufacturing capacity for a cost advantage and is building a new fabrication facility in Richardson, Texas.

Frequently Asked Questions

The primary driver for the 12% revenue decline in Q2 2020 compared to Q2 2019 was weakness in the automotive market, which impacted both the Analog and Embedded Processing segments.

Texas Instruments maintained a strong liquidity position with significant cash reserves. The company demonstrated a continued commitment to returning capital to shareholders by returning $6.7 billion in the trailing twelve months through dividends and share repurchases, which represented 56% of free cash flow in dividends.

Management remains cautious due to the ongoing COVID-19 pandemic and its potential impact on business activity, supply chains, and customer demand. However, the company has robust business continuity plans and has invested in inventory and manufacturing capabilities to mitigate disruptions, though these may not eliminate them entirely.

In Q2 2020, Analog segment revenue decreased by 4% and Embedded Processing revenue decreased by 31% compared to Q2 2019. While both segments saw revenue declines year-over-year, the company noted positive sequential growth in both, excluding the automotive market.