Executive Summary
Texas Instruments Incorporated (TXN) reported its Q4 2023 results amid a challenging economic landscape characterized by a softening demand across key markets. Revenue decreased to $4.1 billion, marking a 10% sequential decline and a 13% year-over-year decrease. Management pointed to weaknesses particularly in the industrial and automotive sectors, where inventory adjustments among customers led to reduced orders. Despite this backdrop, TI's strong cash flow generation continued, enabling the company to return $4.9 billion to shareholders over the past year, including a dividend increase—its 20th consecutive year of dividend growth.
Profitability metrics were notably impacted, with net income falling to $1.4 billion and gross profit margins narrowing from 61% to 60%. Management forecasts a conservative revenue outlook for Q1 2024, projecting revenues between $3.45 billion and $3.75 billion, reflecting ongoing inventory corrections in the market and a continuation of existing demand pressures. Investors should remain vigilant of TI’s strategic investment in manufacturing capabilities as a long-term growth driver in the face of current cyclical headwinds.
Key Performance Indicators
QoQ: -10.04% | YoY:-12.70%
QoQ: -13.64% | YoY:-21.25%
QoQ: -18.97% | YoY:-29.55%
QoQ: -19.78% | YoY:-30.12%
QoQ: -19.79% | YoY:-30.23%
Key Insights
**Revenue**: $4.1 billion (YoY: -13%, QoQ: -10%)
**Net Income**: $1.4 billion (YoY: -30.1%, QoQ: -19.8%)
**Gross Profit Margin**: 60% (YoY decline of 650 basis points)
**Operating Income**: $1.5 billion (Operating Income Ratio: 38%, YoY: -30%)
**Earnings Per Share (EPS)**: $1.49 (YoY: -30.2%, QoQ: -19.8%)
**Cash Flow from Operations**: $1.9 billion
**Free Cash Flow**: $776 million
**Dividend Paid**: $1.2 billion, with a 5% increase in dividend per share
**Inventory Level**: $4 bi...
Financial Highlights
Revenue: $4.1 billion (YoY: -13%, QoQ: -10%)
Net Income: $1.4 billion (YoY: -30.1%, QoQ: -19.8%)
Gross Profit Margin: 60% (YoY decline of 650 basis points)
Operating Income: $1.5 billion (Operating Income Ratio: 38%, YoY: -30%)
Earnings Per Share (EPS): $1.49 (YoY: -30.2%, QoQ: -19.8%)
Cash Flow from Operations: $1.9 billion
Free Cash Flow: $776 million
Dividend Paid: $1.2 billion, with a 5% increase in dividend per share
Inventory Level: $4 billion, days of inventory outstanding at 219
Debt: Total debt of $11.3 billion, with cash and short-term investments totaling $8.6 billion.
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
4.08B |
-12.70% |
-10.04% |
| Gross Profit |
2.43B |
-21.25% |
-13.64% |
| Operating Income |
1.53B |
-29.55% |
-18.97% |
| Net Income |
1.37B |
-30.12% |
-19.78% |
| EPS |
1.50 |
-30.23% |
-19.79% |
Key Financial Ratios
operatingProfitMargin
37.6%
operatingCashFlowPerShare
$2.12
freeCashFlowPerShare
$0.86
dividendPayoutRatio
86.1%
Management Commentary
Market Insights
- Dave Pahl: "Our results reflect increasing weakness in industrial and a sequential decline in automotive as customers work to reduce their inventory levels."
- Rafael Lizardi: "Gross profit decreased primarily due to lower revenue, higher manufacturing costs associated with planned capacity expansions, and reduced factory loadings."
Operational Performance
- Rafael Lizardi: "We expect TI revenue in the range of $3.45 billion to $3.75 billion and earnings per share to be in the range of $0.96 to $1.16 for Q1 2024."
- Management comments on their focus for long-term growth: "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 per share growth over the long-term."
"Our results reflect increasing weakness in industrial and a sequential decline in automotive as customers work to reduce their inventory levels." - Dave Pahl
— Dave Pahl
"We will stay focused in the areas that add value in the long-term." - Rafael Lizardi
— Rafael Lizardi
Forward Guidance
Management's forward guidance indicates a cautious outlook for Q1 2024, projecting revenues in the range of $3.45 to $3.75 billion, reflecting a expected decline of approximately 12% compared to the previous quarter. They anticipate continued headwinds from inventory cleanup efforts and softening demand in key markets, particularly industrial and automotive sectors. TI also plans to maintain its capital investments, emphasizing the importance of manufacturing capabilities and technology advancements as vital for long-term value generation. The effective tax rate for 2024 is anticipated to be approximately 13% as well.