Texas Instruments Incorporated

Welcome to the Texas Instruments First Quarter 2024 Earnings Conference Call. I'm Dave Paul, Head of Investor Relations, and I'm joined by our Chief Financial Officer, Rafael Lazzardi. 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. 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 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 insight into first quarter revenue results with some details of what we're seeing with respect to our end markets. Lastly, Rafael will cover the financial results, give an update on capital management, as well as share the guidance for the second quarter of 2024. Starting with a quick overview of the quarter. Revenue in the quarter came in about as expected at $3.7 billion, a decrease of 10% sequentially and 16% year-over-year. Analog revenue declined 14% year-over-year, and embedded processing declined 22%. Our other segment declined 33% from the year-ago quarter. Now I'll provide some insight into our first quarter revenue by end market. Revenue declined sequentially across all of our end markets, Our results reflect the current environment as customers continue to reduce their inventory levels. Similar to last quarter, I'll focus on sequential performance as it's more informative at this time. First, the industrial market was down upper single digits. The automotive market was down mid-single digits. Personal electronics was down mid-teens. Next, communications equipment was down about 25%. And lastly, enterprise systems was down mid-teens. Rafael will now review profitability, capital management, and our outlook. Rafael?

Thanks, Dave, and good afternoon, everyone. As Dave mentioned, first quarter revenue was $3.7 billion. Gross profit in the quarter was $2.1 billion, or 57% of revenue. From a year ago, gross profit decreased primarily due to lower revenue and, to a lesser extent, Higher manufacturing costs associated with reduced factory loadings and our planned capacity expansions. Gross profit margin decreased 820 basis points. Operating expenses in the quarter were $933 million, flat from a year ago and about as expected. On a trailing 12-month basis, operating expenses were $3.7 billion, or 22% of revenue. Operating profit was $1.3 billion in the quarter, or 35% of revenue, and was down 34% from the year-ago quarter. Net income in the first quarter was $1.1 billion, or $1.20 per share. Earnings per share included a 10-cent benefit that was not in our original guidance, primarily due to the sale of a property. Let me now comment on our capital management results, starting with our cash generation. Cash flow from operations was $1 billion in the quarter and $6.3 billion on a trailing 12-month basis. Capital expenditures were $1.2 billion in the quarter and $5.3 billion over the last 12 months. Free cash flow on a trailing 12-month basis was $940 million. In the quarter, we paid $1.2 billion in dividends, and in the past 12 months, we returned $4.8 billion to our owners. Our balance sheet remains strong with $10.4 billion of cash and short-term investments at the end of the first quarter. In first quarter, we issued $3 billion in debt. Total debt outstanding is now $14.3 billion with a weighted average coupon of 3.8%. Inventory at the end of the quarter was $4.1 billion, up $84 million from the prior quarter, and days were 235, up 16 days sequentially. For the second quarter, we expect TI revenue in the range of $3.65 to $3.95 billion, and earnings per share to be in the range of $1.05 to $1.25. We continue to expect our effective tax rate to be about 13%. 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.

Thanks, Rafael. Operator, you can now open the lines for questions. In order to provide as many of you as possible an 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?