Texas Instruments Incorporated : Q1 2025 Earnings Call Prepared Remarks

Q1 2025 Financial Results

Texas Instruments Incorporated

Conference Call Prepared Remarks

Wednesday, April 23, 2025

3:30 p.m. Central time

Dave Pahl, vice president and head of Investor Relations

Welcome to the Texas Instruments first quarter 2025 earnings conference call. I'm Dave Pahl, and I'm joined by our Chief Executive Officer Haviv Ilan and our Chief Financial Officer Rafael Lizardi. In addition, Mike Beckman has joined us. As you may know, I will be retiring, and Mike will replace me as vice president of Investor Relations. Mike has worked at TI for nearly two decades and has worked directly with me in Investor Relations for five years. Mike will moderate today's call. With that, let me turn it over to Mike.

Mike Beckman, vice president, Investor Relations

Thanks, Dave. I am looking forward to the opportunity.

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, Haviv will start with a quick overview of the quarter including insight into first quarter revenue results and some details of what we are seeing with respect to our end markets.
• Next, he will share how we are approaching the overall market environment and provide guidance for second quarter 2025.
• Lastly, Rafael will cover the financial results and give an update on capital management.

With that, let me turn it over to Haviv.

Haviv Ilan, president and chief executive officer

Thanks, Mike. Let me start with a quick overview of the first quarter.

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Revenue came in at $4.1 billion, an increase of 2% sequentially and an increase of 11% year over year. Analog revenue grew 13% year over year, and Embedded Processing was about flat, and both segments grew sequentially. Our "Other" segment grew 23% from the year-ago quarter.

Now I'll provide some insight into our first quarter revenue by end market. We continued to see recovery across our end markets, with industrial showing broad recovery across sectors and geographies. We believe customer inventories are at low levels across all end markets. Similar to last quarter, I'll focus on sequential performance, as it is more informative at this time.

• First, the industrial market increased upper-single digits, after seven consecutive quarters of sequential decline.
• The automotive market increased low-single digits.
• Personal electronics declined mid-teens, in line with typical seasonal trends.
• Enterprise systems grew mid-single digits, and communications equipment was up about 10%.

Before I go to our second quarter guidance, let me take a minute to frame how we are approaching the current environment. It is a time of high uncertainty in the world, as tariffs and geopolitics are disrupting global supply chains and creating unpredictable economic conditions. Adding to that, semiconductors are highly visible as it is broadly understood that people and economies are increasingly dependent on chips.

To navigate in this environment, we will continue to rely on our three key ambitions:

• We will act like owners who will own the company for decades.
• We will adapt and succeed in a world that is ever changing.
• And we will be a company that we are proud to be part of and would be proud to have as our neighbor.

These guiding ambitions are not new. They have served us well for decades, and they are enormously valuable in times like these.

We look at the current environment in two important categories: 1) where we are in the phase of the semiconductor cycle and 2) providing geopolitically dependable capacity and navigating in a world that is changing.

To help understand where we are in the cycle, we spent some time looking at previous events, including Y2K, the global financial crisis and the COVID-19 pandemic. While no two scenarios are identical, these recent examples help inform our decisions as we prepare for a range of market scenarios. What may be unique right now is that we are at the bottom of the semiconductor cycle, and customer inventories are at low levels across all end markets.

So relative to where we are, history says it is important to have capacity and inventory in times like these, and we are well positioned.

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In addition, geopolitically dependable capacity will matter more, and it is increasingly critical and valuable to our customers. We have flexibility and are prepared to navigate the evolving supply chain dynamics.

Translating all this to second quarter guidance, I would like to make three points:

• First, we remain cautious, as there are many things still changing, and we are working with our customers to understand and support their needs. As such, potential impact on our customers, suppliers and TI is unclear and will likely evolve.
• Second, at this time, we don't see near-term impact to second quarter, and we expect TI's revenue in the range of $4.17 billion to $4.53 billion and earnings per share to be in the range of $1.21 to $1.47.
• Finally, we will have to see what happens in second half 2025 and going into 2026, and we are prepared for a range of scenarios. We are, and will remain, flexible to navigate, especially in the immediate term.

With that, let me turn it over to Rafael to review profitability and capital management.

Rafael Lizardi, senior vice president and chief financial officer

Thanks Haviv, and good afternoon everyone.

As Haviv mentioned, first quarter revenue was $4.1 billion. Gross profit in the quarter was $2.3 billion, or 57% of revenue. Sequentially, gross profit margin decreased 90 basis points.

Operating expenses in the quarter were $989 million, up 6% from a year ago and about as expected. On a trailing 12-month basis, operating expenses were $3.8 billion, or 24% of revenue.

Operating profit was $1.3 billion in the quarter, or 33% of revenue, and was up 3% from the year-ago quarter.

Net income in the quarter was $1.2 billion, or $1.28 per share. Earnings per share included a 5-cent benefit not in our original guidance.

Let me now comment on our capital management results, starting with our cash generation. Cash flow from operations was $849 million in the quarter and $6.2 billion on a trailing 12-month basis. Capital expenditures were $1.1 billion in the quarter and $4.7 billion over the last 12 months. Free cash flow on a trailing 12-month basis was $1.7 billion.

In the quarter, we paid $1.2 billion in dividends and repurchased $653 million of our stock. In total, we returned $6.4 billion to our owners in the past 12 months.

Our balance sheet remains strong with $5.0 billion of cash and short-term investments at the end of the first quarter. In the quarter, we repaid $750 million of debt. Total debt outstanding is $12.95 billion with a weighted average coupon of 3.93%.

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Inventory at the end of the quarter was $4.7 billion, up $160 million from the prior quarter, and days were 240, down 1 day sequentially.

For second quarter, we now expect our effective tax rate to be about 12% to 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 Mike.

Mike Beckman, vice president, Investor Relations

Thanks, Rafael. Operator, you can now open the line 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 ...

[Q&A]

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