Texas Instruments Incorporated (NASDAQ:TXN) Q1 2023 Earnings Call Transcript
Texas Instruments Incorporated (NASDAQ:TXN) Q1 2023 Earnings Call Transcript April 25, 2023
Texas Instruments Incorporated beats earnings expectations. Reported EPS is $1.85, expectations were $1.78.
Dave Pahl: Welcome to the Texas Instruments' First Quarter 2023 Earnings Conference Call. I'm Dave Pahl, Head of Investor Relations, and I'm joined by our Chief Financial Officer, Rafael Lizardi. For any of you who missed the release, you can find it on our website at ti.com/ir. This call is being broadcast live over the web and can be accessed through our website. In addition, today's call is being recorded and will be available via replay on our website. This call will include forward-looking statements that involve risks and uncertainties that could cause TI's results to differ materially from management's current expectations. We encourage you to review the notice regarding forward-looking statements contained in the earnings release published today, as well as TI's most recent SEC filings for a more complete description.
Today, we'll provide the following updates. First, I'll start with a quick overview of the quarter. Next, I'll provide some insight into first quarter's revenue results with some details of what we're seeing with respect to our end markets. Lastly, Rafael will cover the financial results and our guidance for the second quarter of 2023. Starting with a quick overview of the first quarter. Revenue in the quarter came in about as expected at $4.4 billion, a decrease of 6% sequentially and 11% year-over-year. Analog revenue declined, 14%, embedded processing grew 6% and our other segment declined 16% from the year ago quarter. As expected, our results reflect weaker demand in all end markets with the exception of automotive. As mentioned last quarter, a component of the weaker demand was inventory reductions by our customers, which we expect to continue in the second quarter.
Now, I'll provide some insight into our first quarter revenue by market. Similar to last quarter, I'll focus on sequential performance as it's more informative at this time. First, the industrial market was about flat. The automotive market was up mid-single digits. Personal electronics declined about 30% as we continued to see broad based weakness. Next, communications equipment was down mid-teens and finally enterprise systems was down about 30%. Rafael will now review profitability, capital management and our outlook. Rafael?
Rafael Lizardi: Thanks, Dave, and good afternoon, everyone. As Dave mentioned, first quarter revenue was $4.4 billion, down 11% from a year ago. Gross profit in the quarter was $2.9 billion, or 65% of revenue. From a year ago, gross profit margin decreased 480 basis points. Operating expenses in the quarter were $929 million, up 14% from a year ago, and about as expected. On a trailing 12 month basis, operating expenses were $3.5 billion or 18% of revenue. Operating profit was $1.9 billion in the quarter, or 44% of revenue and was down 25% from a year ago quarter. Net income in the first quarter was $1.7 billion or $1.85 per share. Earnings per share included a $0.03 benefit for items that were not in our original guide. Let me now comment on our capital management results.
Starting with our cash generation. Cash flow from operations was $1.2 billion in the quarter and $7.7 billion on a trailing 12 month basis. Capital expenditures were $982 million in the quarter and $3.3 billion over the last 12 months. Free cash flow on a trailing 12 month basis was $4.4 billion. In the quarter, we paid $1.1 billion in dividends and repurchased about $100 million of our stock. In total, we have returned $7.5 billion in the past 12 months. Our balance sheet remains strong with $9.5 billion of cash and short-term investments at the end of the first quarter. In the quarter, we issued $1.4 billion of debt. Total debt outstanding was $10.2 billion with a weighted average coupon of 3.2%. Inventory dollars were up $531 million from the prior to $3.3 billion and days were 195, up 38 days sequentially.
For the second quarter, we expect TI revenue in the range of $4.17 billion to $4.53 billion and earnings per share to be in the range of $1.62 to $1.88. Lastly, we continue to expect our 2023 effective tax rate to be about 13% to 14%. In closing, we will stay focused in the areas that add value in the long-term. We continue to invest in our competitive advantages, which are manufacturing and technology, a broad product portfolio, reach of our channels, and diverse and long-lived positions. We will continue to strengthen these advantages through disciplined capital allocation and by focusing on the best opportunities which we believe will enable us to continue to deliver free cash flow per share growth over the long-term. With that, let me turn it back to Dave.
Dave Pahl: Thanks, Rafael. Operator, you can now open up the lines for questions. In order to provide as many of you as possible the opportunity to ask your questions, please limit yourself to a single question. After our response, we'll provide you an opportunity for an additional follow-up. Operator?
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