Texas Instruments Incorporated — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024. TI designs and manufactures analog and embedded processing semiconductors for customers worldwide. Results are unaudited interim results and are not necessarily indicative of full-year performance.
Financial performance
| Metric | Q1 2024 | Q1 2023 | Change |
|---|---|---|---|
| Revenue | $3.661 billion | $4.379 billion | Down 16% |
| Gross profit | $2.095 billion | $2.863 billion | Down 27% |
| Gross margin | 57.2% | 65.4% | Down 8.2 percentage points |
| Operating profit | $1.286 billion | $1.934 billion | Down 34% |
| Operating margin | 35.1% | 44.2% | Down 9.1 percentage points |
| Net income | $1.105 billion | $1.708 billion | Down 35% |
| Diluted EPS | $1.20 | $1.85 | Down 35% |
| Operating cash flow | $1.017 billion | $1.160 billion | Down $143 million |
| Capital expenditures | $1.248 billion | $982 million | Up $266 million |
Quarterly free cash flow, defined by TI as operating cash flow less capital expenditures, was approximately negative $231 million. For the trailing 12 months ended March 31, 2024, operating cash flow was $6.277 billion and free cash flow was $940 million, down 79% from $4.400 billion in the prior-year period.
Segments and material changes
- Analog: Revenue of $2.836 billion, down 14%; operating profit of $1.008 billion, down 36%. Revenue declined in both product lines, led by Signal Chain.
- Embedded Processing: Revenue of $652 million, down 22%; operating profit of $105 million, down 56%.
- Other: Revenue of $173 million, down 33%; reported operating profit was $173 million versus $123 million. The 2024 result includes a restructuring/other credit.
Management attributed the revenue decline to lower customer demand across end markets. Lower revenue and reduced factory loadings, alongside costs from planned capacity expansions, pressured gross profit and margins. R&D and SG&A together were $933 million, versus $929 million a year earlier.
Cash, debt and liquidity
- Cash and cash equivalents were $2.483 billion and short-term investments were $7.910 billion at March 31, for total cash and short-term investments of $10.393 billion, up $1.82 billion from year-end 2023.
- Total debt, including the current portion, was $14.189 billion, versus $11.223 billion at December 31, 2023. TI issued $3.0 billion of senior unsecured notes in February; net proceeds were $2.98 billion. Interest and debt expense rose to $116 million from $68 million.
- The $1 billion revolving credit facility was undrawn, and no commercial paper was outstanding. TI said it had resources and operating plans to meet requirements for at least the next 12 months.
- Dividends paid were $1.183 billion, compared with $1.125 billion. Stock repurchases were $3 million in cash-flow reporting. Inventory rose $84 million from year-end to $4.083 billion; days of inventory increased to 235 from 219.
Outlook, risks and unusual items
- TI provided no specific forward quarterly revenue or earnings guidance in the supplied filing text. Management expects capital expenditures to remain elevated as it invests in manufacturing capacity and technology.
- TI expected to begin receiving cash benefits from the U.S. CHIPS and Science Act investment tax credit for qualifying expenditures in Q2 2024; it also applied for manufacturing grants. The related investment tax credit asset reported in prepaid and other current assets was $999 million at March 31.
- Restructuring charges/other was a $124 million credit, primarily from a gain on a property sale. This materially benefited reported operating profit, particularly in Other.
- Key stated risks include semiconductor demand and customer inventory adjustments, especially in industrial and automotive markets; competition and pricing; manufacturing utilization and returns on capacity investments; supply availability and costs; trade and geopolitical conditions; cybersecurity; product claims; tax and regulatory changes; and credit-market instability.
- TI reported no material warranty or product-liability accruals or payments during the periods presented and said pending legal and administrative proceedings were not expected to have a material adverse effect. It incorporated its 2023 Form 10-K risk factors by reference.
Important facts for investors to verify
- Whether demand across end markets—and particularly Analog and Embedded Processing—stabilizes or continues to weaken.
- How factory utilization, capacity-expansion costs and elevated capital spending affect margins and free cash flow.
- The timing and realized cash impact of CHIPS Act tax credits and any manufacturing grants.
- Debt-service costs, upcoming maturities and capital returns relative to cash generation.
- Whether the property-sale gain and other unusual items distort comparisons with ongoing operating performance.