Texas Instruments Incorporated

Welcome to the Texas Instruments Fourth Quarter 2024 Earnings Conference Call. I'm Dave Paul, Head of Investor Relations, and I'm joined by our Chief Executive Officer, Haviva Lahn, and our Chief Financial Officer, Rafael Lazzardi. For any of you who missed the release, you can find it on our website at ti.com slash 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. I would like to provide some information that's important to your calendars. On Tuesday, February 4th, at 10 a.m. Central Time, we will have our capital management call. Similar to what we've done in the past, Haviv, Rafael, and I will share our approach to capital allocation and summarize our progress as we prepare for the opportunity ahead. Moving on, today we'll provide the following updates. First, Haviv will start with a quick overview of the quarter. Next, he'll provide insight into fourth quarter revenue results with some details of what we're seeing with respect to our end markets. Haviv will then provide the annual summary of revenue breakout by end market. And lastly, Rafael will cover the financial results and our guidance for the first quarter of 2025. With that, let me turn it over to Haviv. Thanks, Dave.

Let me start with a quick overview of the fourth quarter. Revenue was $4 billion, a decrease of 3% sequentially and 2% from the same quarter a year ago. Analog revenue grew 2% year over year after eight quarters of decline. Embedded processing declined 18%, and our other segment grew from the year-ago quarter. Now I'll provide some insight into our fourth quarter revenue by end market. Our overall results reflect the performance from our two largest markets, industrial and automotive, which saw modest sequential declines. Similar to last quarter, I'll focus on sequential performance as it is more informative at this time. First, the industrial market was down low single digits. The automotive market was down mid-single digits. Personal electronics grew mid-single digits. Next, enterprise systems declined low single digits. And lastly, communications equipment grew upper single digits. In addition, as we do at the end of each calendar year, I'll describe our revenue by end markets. As a percentage of revenue for 2024, industrial was 34%, automotive 35%, personal electronics 20%, enterprise systems 5%, communication equipment 4%, and other was 2%. In 2024, industrial and automotive combined made up about 70% of TI's revenue, up from 42% in 2013. We see good opportunities in all of our markets, but we place additional strategic emphasis on industrial and automotive. Our customers across all regions are increasingly turning to analog and embedded technology to make their end products more reliable, more affordable, and lower in power. This drives growing cheap content per application or secular content growth which will likely continue to drive faster growth in industrial and automotive. Rafael will now review profitability, capital management, and our outlook.

Thanks, Aviv, and good afternoon, everyone. As Aviv mentioned, fourth quarter revenue was $4 billion. Gross profit in the quarter was $2.3 billion, or 58% of revenue. Sequentially, gross profit decreased primarily due to lower revenue, higher depreciation, and reduced factory loadings. Gross profit margin decreased 190 basis points. Operating expenses in the quarter were $937 million, up 4% from a year ago and about as expected. On a 12-month basis, operating expenses were $3.8 billion, or 24% of revenue. Operating profit was $1.4 billion in the quarter, or 34% of revenue. And profit was down 10% from a year ago quarter. Net income in the fourth quarter was $1.2 billion, or $1.30 per share. Earnings per share included a two-cent benefit for items that were not in our original guidance. Let me now comment on our capital management results, starting with our cash generation. Cash flow from operations was $2 billion in the quarter. Capital expenditures were $1.2 billion in the quarter. In the quarter, we paid $1.2 billion in dividends and repurchased $537 million of our stock. We also increased our dividend per share by 5% in the fourth quarter, marking our 21st consecutive year of dividend increases. In total, we have returned $5.7 billion in the past 12 months to owners. Our balance sheet remains strong with $7.6 billion of cash and short-term investments at the end of the fourth quarter. Total debt outstanding was $13.7 billion. We have a weighted average coupon of 3.79%. Inventory at the end of the quarter was $4.5 billion, up $231 million from the prior quarter, and days were 241, up 10 days sequentially. Now let's look at some of these results for the year. In 2024, cash flow from operations was $6.3 billion, and capital expenditures were $4.8 billion, as expected. We're nearly 70 percent through a six-year elevated capex cycle that, once complete, will uniquely position TI to deliver dependable, low-cost, 300-millimeter capacity at scale to meet customer demand. Free cash flow for 2024 was $1.5 billion, or 10% of revenue. Our free cash flow reflects the strength of our business model, as well as our decisions to invest in 300-millimeter manufacturing assets and inventory to support our overall objective to maximize long-term free cash flow per share, which we believe is the primary driver of long-term value. Turning to our outlook for the first quarter, we expect TI revenue in the range of $3.74 billion to $4.06 billion and earnings per share to be in the range of $0.94 to $1.16. Based on current tax law, we now expect our effective tax rate for 2025 to be about 12%. 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.