10-QPeriod: Q1 FY2024

TEXAS INSTRUMENTS INC Quarterly Report for Q1 Ended Mar 31, 2024

Filed April 24, 2024For Securities:TXN

Summary

Texas Instruments Inc. (TXN) reported a significant year-over-year decline in revenue and net income for the first quarter of 2024. Revenue fell 16% to $3.66 billion, and net income dropped to $1.11 billion from $1.71 billion in the prior year period. This downturn was primarily driven by decreased demand across all end markets, impacting both the Analog and Embedded Processing segments. Despite the revenue decline, the company's core strategy remains focused on long-term free cash flow per share growth, underpinned by its competitive advantages in manufacturing, product portfolio, market reach, and diversity. While the current quarter shows a challenging demand environment, TXN highlighted its ongoing investments in R&D and capital expenditures, particularly in expanding its 300mm manufacturing capacity, supported by the U.S. CHIPS and Science Act. The company's liquidity remains strong, with substantial cash and short-term investments. However, the reported decrease in free cash flow for the trailing twelve months, coupled with increased long-term debt and inventory levels, warrants investor attention. Management attributes the revenue decrease to lower shipment volumes and is managing costs to mitigate the impact on profit margins.

Financial Highlights

52 data points
Beta

Revenue

$3.66B

57.2% Gross Margin

Net Income

$1.10B

30.2% Net Margin

EPS (Diluted)

$1.20

Total Assets

$34.88B

Cash & Equivalents

$2.48B

Free Cash Flow

-$231.00M

Financial Statements
Beta
Revenue$3.66B
Cost of Revenue$1.57B
Gross Profit$2.10B
R&D Expenses$478.00M
SG&A Expenses$455.00M
Operating Income$1.29B
Net Income$1.10B
EPS (Basic)$1.21
EPS (Diluted)$1.20
Shares Outstanding (Basic)910.00M
Shares Outstanding (Diluted)917.00M

Key Highlights

  • 1Revenue for the first quarter of 2024 decreased by 16% to $3.66 billion compared to $4.38 billion in the first quarter of 2023.
  • 2Net income for the quarter was $1.11 billion, a decrease from $1.71 billion in the prior year period, resulting in diluted EPS of $1.20 compared to $1.85.
  • 3Gross profit margin declined to 57.2% from 65.4% year-over-year, impacted by lower revenue and increased manufacturing costs due to reduced factory utilization and capacity expansions.
  • 4The Analog segment, representing the largest portion of revenue, saw a 14% decrease in revenue, while Embedded Processing revenue declined by 22%.
  • 5The company issued $3.00 billion in senior unsecured notes in February 2024, increasing its long-term debt.
  • 6Cash flow from operations for the trailing twelve months decreased to $6.28 billion from $7.74 billion, and free cash flow significantly reduced to $940 million from $4.40 billion.
  • 7Inventories increased by $84 million to $4.08 billion, and days of inventory rose to 235 days from 219 days year-over-year.

Frequently Asked Questions

The primary reason for the decline in revenue and profitability is a broad-based decrease in customer demand across all end markets, leading to lower shipment volumes for both the Analog and Embedded Processing segments. This, combined with higher manufacturing costs due to reduced factory loadings and ongoing capacity expansions, led to a decrease in gross profit margins and operating profit.

The company's inventory levels increased by $84 million to $4.08 billion, and the days of inventory outstanding rose to 235 from 219 year-over-year. This suggests a slowdown in sales relative to inventory on hand, a common occurrence in a weaker demand environment for semiconductor companies.

Texas Instruments plans to continue investing in capital expenditures at elevated levels, primarily for semiconductor manufacturing equipment and facilities. These investments are part of their long-term strategy to strengthen their competitive advantages in manufacturing and technology. The company expects to benefit from the U.S. CHIPS and Science Act, including receiving cash benefits from investment tax credits starting in Q2 2024.

The company issued $3.00 billion in senior unsecured notes in February 2024, which increased its total long-term debt. This issuance contributed to a rise in interest and debt expense compared to the prior year. While the company maintains a strong liquidity position, the increased debt load should be monitored.