10-QPeriod: Q3 FY2020

TEXAS INSTRUMENTS INC Quarterly Report for Q3 Ended Sep 30, 2020

Filed October 21, 2020For Securities:TXN

Summary

Texas Instruments Inc. (TXN) reported its third-quarter 2020 financial results on October 20, 2020. The company demonstrated resilience in a challenging environment, with revenue slightly increasing year-over-year to $3.817 billion. Net income for the quarter was $1.353 billion, resulting in diluted earnings per share (EPS) of $1.45. While overall revenue saw a modest uptick, a significant shift occurred within the segments, with Analog revenue growing 7% year-over-year, driven by Power and Signal Chain products. Conversely, Embedded Processing revenue declined 10% year-over-year, reflecting a challenging market for microcontrollers and processors. The company continues to emphasize its long-term competitive advantages in manufacturing, broad product portfolio, market reach, and product diversity. TXN generated strong free cash flow of $5.2 billion for the trailing twelve months ended September 30, 2020, a testament to its efficient operations and business model. This robust cash generation supports its commitment to returning capital to shareholders through consistent dividend payments and share repurchases, with $6.4 billion returned in the past 12 months.

Financial Highlights

53 data points
Beta

Revenue

$3.82B

64.3% Gross Margin

Net Income

$1.35B

35.4% Net Margin

EPS (Diluted)

$1.45

Total Assets

$18.21B

Cash & Equivalents

$2.82B

Free Cash Flow

$1.30B

Financial Statements
Beta
Revenue$3.82B
Cost of Revenue$1.36B
Gross Profit$2.45B
R&D Expenses$386.00M
SG&A Expenses$407.00M
Operating Income$1.61B
Net Income$1.35B
EPS (Basic)$1.47
EPS (Diluted)$1.45
Shares Outstanding (Basic)917.00M
Shares Outstanding (Diluted)929.00M

Key Highlights

  • 1Revenue for Q3 2020 was $3.817 billion, a 1% increase compared to Q3 2019.
  • 2Net income for Q3 2020 was $1.353 billion, a decrease from $1.425 billion in Q3 2019.
  • 3Diluted EPS for Q3 2020 was $1.45, down from $1.49 in Q3 2019.
  • 4Analog segment revenue grew 7% year-over-year to $2.865 billion, while Embedded Processing segment revenue declined 10% year-over-year to $651 million.
  • 5Free cash flow for the trailing twelve months ended September 30, 2020, was $5.168 billion, representing 37.6% of revenue.
  • 6Texas Instruments returned $6.4 billion to shareholders through dividends and share repurchases in the twelve months ended September 30, 2020.
  • 7The company maintained a strong liquidity position with $5.52 billion in total cash and short-term investments as of September 30, 2020.

Frequently Asked Questions

Texas Instruments stated that the impact of the COVID-19 pandemic on their lead times and ability to fulfill orders was minimal in the first nine months of 2020. However, they remain cautious about potential future constraints due to pandemic-related factors such as local manufacturing restrictions. The company has a business continuity plan and has invested in inventory and internal manufacturing to mitigate disruptions.

In the third quarter of 2020 compared to the prior year, the Analog segment showed growth, with revenue increasing by 7% to $2.865 billion, driven by Power and Signal Chain products. In contrast, the Embedded Processing segment experienced a decline, with revenue decreasing by 10% to $651 million, primarily due to lower demand for Processors.

Texas Instruments is committed to returning all free cash flow to its shareholders. In the twelve months preceding September 30, 2020, the company returned $6.4 billion through dividends and share repurchases. Dividends represented 64% of free cash flow during this period, highlighting their sustainability. The company also announced a 13% increase in its quarterly dividend in September 2020.

As of September 30, 2020, Texas Instruments had $5.52 billion in total cash and short-term investments. They also have an undrawn $2 billion revolving credit facility. For the first nine months of 2020, financing activities used $3.70 billion, which included issuing $1.50 billion of long-term debt and retiring $500 million of maturing debt. The company believes it has sufficient financial resources to meet its obligations for at least the next 12 months.