01—Abstract
Summary
Summary of the 10-Q filed July 24, 2024. Cited figures are marked; the original filing is the authoritative source.
Texas Instruments (TXN) reported a 16% year-over-year decline in revenue for the second quarter of 2024, reaching $3.82 billion, compared to $4.53 billiona in the prior year period.
This decline was primarily driven by lower revenues in the Analog and Embedded Processing segments, with Industrial and Automotive end markets continuing to contract sequentially. Net income also saw a significant decrease, falling to $1.13 billionb, or $1.22 per diluted share, from $1.72 billion, or $1.87 per diluted share, in the same quarter last year. Despite the revenue and profit declines, the company highlighted its strong business model and competitive advantages, emphasizing its focus on maximizing long-term free cash flow per share.
Total cash and short-term investments remained robust at $9.69 billionc. The company also noted the receipt of a $312 million cash benefit from the U.S. CHIPS and Science Act investment tax credit, which helped mitigate some of the impacts of lower operating income on cash flow. Management continues to invest in R&D and capital expenditures, particularly in manufacturing capacity, expecting these to remain at elevated levels.
02—Key points
Key Highlights
- Revenue for Q2 2024 decreased by 16% to $3.82 billion compared to $4.53 billion in Q2 2023, primarily due to declines in Analog and Embedded Processing segments.
- Net income for Q2 2024 decreased to $1.13 billion ($1.22 EPS) from $1.72 billion ($1.87 EPS) in Q2 2023.
- Gross profit margin declined to 57.8% from 64.2% year-over-year, attributed to lower revenue and higher manufacturing costs related to capacity expansions and reduced factory loadings.
- The company received a $312 million cash benefit from the U.S. CHIPS and Science Act investment tax credit in the first six months of 2024.
- Total cash and short-term investments stood at $9.69 billion as of June 30, 2024, reflecting a strong liquidity position.
- Capital expenditures for the first six months of 2024 were $2.31 billion, consistent with the company's strategy of investing in manufacturing capacity.
- Despite declining revenues, the company reiterated its strategy focused on long-term free cash flow per share growth driven by its competitive advantages and disciplined capital allocation.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2024, Texas Instruments kept $0.29.
- Revenue$3.82B100.0%
- Cost of revenue−$1.61B42.2%
- Gross profit$2.21B57.8%
- Operating costs−$963.0M25.2%
- Operating income$1.25B32.7%
- Interest, other & tax−$121.0M3.2%
- Net income$1.13B29.5%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2024filed July 24, 2024Financial Statements
Q2 FY2024 against Q2 FY2023
| Line item | Q2 FY2024Q2 FY2023 | Change |
|---|---|---|
| Revenue | $3.82B$4.53B | −15.6% |
| Cost of Revenue | $1.61B$1.62B | −0.6% |
| Gross Profit | $2.21B$2.91B | −24.0% |
| R&D Expenses | $498.00M$477.00M | +4.4% |
| SG&A Expenses | $465.00M$461.00M | +0.9% |
| Operating Income | $1.25B$1.97B | −36.7% |
| Net Income | $1.13B$1.72B | −34.6% |
| EPS (Basic) | $1.23$1.89 | −34.9% |
| EPS (Diluted) | $1.22$1.87 | −34.8% |
| Shares Outstanding (Basic) | 912.00M908.00M | +0.4% |
| Shares Outstanding (Diluted) | 919.00M916.00M | +0.3% |
05—Questions
Frequently Asked Questions
What are the primary drivers behind the decrease in revenue and net income?
The decrease in revenue and net income for Q2 2024 was primarily driven by lower demand in the Analog and Embedded Processing segments, with Industrial and Automotive end markets also experiencing sequential declines. This led to lower shipment volumes and impacted gross profit margins due to reduced factory loadings and higher manufacturing unit costs associated with planned capacity expansions.
How is the company managing its liquidity and financial resources?
Texas Instruments maintains a strong liquidity position with $9.69 billion in total cash and short-term investments as of June 30, 2024. The company's primary source of liquidity is cash flow from operations, supplemented by existing cash, investments, and access to debt markets. They also received a significant cash benefit from the U.S. CHIPS and Science Act investment tax credit, which positively impacted cash flow from operations.
What is the company's outlook on capital expenditures and long-term strategy?
The company continues to invest heavily in capital expenditures, with $2.31 billion spent in the first six months of 2024, primarily for semiconductor manufacturing equipment and facilities. This aligns with their long-term strategy to strengthen competitive advantages in manufacturing and technology. Management remains focused on maximizing long-term free cash flow per share growth through disciplined capital allocation and operational efficiencies.
How does the U.S. CHIPS and Science Act impact the company's financial results?
The U.S. CHIPS and Science Act has provided a significant cash benefit to Texas Instruments. For the first six months of 2024, the company received a $312 million cash benefit from the investment tax credit used to reduce income taxes payable. This legislation is part of the company's strategy to invest in U.S. semiconductor manufacturing and is expected to continue to play a role in their financial performance.
06—Continue