Texas Instruments Incorporated

Please stand by. We're about to begin. Good day and welcome to the Texas Instruments first quarter 22 earnings release conference call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Mr. Dave Paul. Please go ahead, sir.

Good afternoon and thank you for joining the first quarter 2022 earnings conference call. For any of you who missed the release, you can find it on our website at ti.com. This call is being broadcast live over the web and can be accessed through our website. A replay will be available through the web. 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. Our Chief Financial Officer, Rafael Lazzardi, is with me today and will provide the following updates. First, I'll start with a quick overview of the quarter. Next, I'll provide insight into first quarter revenue results with some details of what we're seeing with respect to our customers and markets. And lastly, Rafael will cover the financial results and our guidance for second quarter, including the impact from COVID-19 restrictions in China, starting with a quick overview of first quarter. Revenue in the quarter was $4.9 billion, an increase of 2% sequentially and 14% year-over-year, driven by growth in industrial and automotive, as well as enterprise systems. Analog revenue grew 16%, embedded processing grew 2%, and our other segment grew 27% from the year-ago quarter. Now let me comment on the environment in the first quarter to provide some context on what we saw with our customers and markets. Overall, the quarter came in about as we expected across product segments and markets and geographies. The market environment in the first quarter was similar to what we've observed for the last several quarters. Customers continued to be selective in their expedite requests focusing on products that completed a matched set rather than expediting products across the board. This behavior was not specific to any product family, end market, or geography. Moving on, I'll provide some insight into our first quarter revenue by end market from the year-ago quarter. First, the industrial and automotive markets were each up about 20 percent, and both were driven by broad-based growth across sectors. Personal electronics was down mid-single digits off a strong compare. And next, communications equipment was up about 10%. And finally, enterprise systems was up about 35% off of a weak compare. And the growth was primarily from data centers and enterprise computing. Rafael will now review profitability, capital management, and our outlook.

Rafael? Thanks, Dave, and good afternoon, everyone. As Dave mentioned, first quarter revenue was $4.9 billion, up 14% from a year ago. Gross profit in the quarter was $3.4 billion, or 70% of revenue. From a year ago, gross profit margin increased 500 basis points. As a reminder, we had about $50 million of additional utility expenses in cost of revenue related to the winter storm in the year-ago quarter. Operating expenses in the quarter were $830 million, about flat from a year ago and about as expected. On a trailing 12-month basis, operating expenses were $3.2 billion, or 17% of revenue. Restructuring chargers were $66 million in the first quarter and are associated with the LFAB purchase we closed in October of last year. Operating profit was $2.6 billion in the quarter, or 52% of revenue. Operating profit was up 32% from the year-ago quarter. Net income in the first quarter was $2.2 billion, or $2.35 per share, which included a $0.02 benefit that was not in our prior outlook. Let me now comment on our capital management results, starting with our cash generation. Cash flow from operations was $2.1 billion in the quarter. Capital expenditures were $443 million in the quarter and $2.6 billion over the last 12 months. Free cash flow on a trailing 12-month basis was $6.5 billion. In the quarter, we paid $1.1 billion in dividends and repurchased $589 million of our stock. In total, we have returned $5 billion in the past 12 months. Over the same period, our dividend represented 62% of free cash flow. Our balance sheet remained strong with $9.8 billion of cash and short-term investments at the end of the first quarter. Total debt outstanding was $7.8 billion with a weighted average coupon of 2.6%. Inventory dollars were up $150 million from the prior quarter to $2.1 billion, and days were 127%. up 11 days sequentially but still below desired levels. For the second quarter, we expect TI revenue in the range of $4.2 to $4.8 billion, and earnings per share to be in the range of $1.84 to $2.26. This outlook comprehends an impact due to reduced demand from COVID-19 restrictions in China, which are affecting our customers' manufacturing operations. We continue to expect our annual operating tax rate for 2022 to be about 14% and our effective tax rate to be about a point lower. 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.