Texas Instruments Inc Q4 2024 Earnings Call Summary

The following is excerpted from the question-and-answer section of the transcript.

Question: Toshiya Hari - Goldman Sachs Group Inc - Analyst : Hi, good afternoon, and thank you so much for taking the question. First one for Haviv. You're guiding Q1 revenue down, I think, 2% to 3% sequentially. I was hoping you could maybe provide some color by end market, what you're seeing on a sequential basis? You guys were quite helpful last quarter, diving deep into automotive, what you're seeing in China, et cetera, et cetera. So any color, any standouts to the upside or downside relative to what's typical seasonality would be very helpful. Thank you.

Question: Toshiya Hari - Goldman Sachs Group Inc - Analyst : I do, Dave. Thanks so much. The earnings outlook for Q1, Haviv, there's a pretty significant drop off on a sequential basis for a 2% to 3% decline in revenue. I was hoping you could kind of provide some context there. Is it primarily gross margin? And behind that, is it continued underloadings, increase in depreciation, some of the same dynamics we saw over the past 12 months? Or is it higher OpEx? Anything below the line? Any sort of additional color on sort of the drop-off in EPS for Q4 to Q1, that would be helpful.

Question: Chris Caso - Wolfe Research LLC - Analyst : Yeah, thank you. I guess first question would be with regard to the Embedded business. And we're seeing a sharp divergence there between those two businesses, particularly on the margin side. Can you give some explanation of what's going on between the Analog and the Embedded businesses, and is the reason for the decline the Embedded margins?

Question: Chris Caso - Wolfe Research LLC - Analyst : Yes. Got it. That's helpful. I guess the follow-up question would be some update on what's going on in China right now. You had spoken about, I guess, the auto business, again, is stronger there. Perhaps you could talk about the rest of the business that you're seeing in China, in the industrial business, for example. And we know that you've been taking some actions to kind of take back some of the share that you may have lost when your lead times were longer. Could you give us an update on that and how that may be affecting some of the numbers in the near term?

Question: Ross Seymore - Deutsche Bank AG - Analyst : Hi, guys. Thanks for having a question. I want to ask about the pricing environment in general. You didn't mention that, Rafael or Haviv, in any of your discussions about gross margin or the competitive environment or any of the sequential weakness. But just wondered if that has changed in any meaningful way, either Analog versus Embedded or in certain geographies? Just any update on that front would be helpful.

Question: Ross Seymore - Deutsche Bank AG - Analyst : Yeah, I do. A little bit of a longer-term question maybe for Haviv. Historically, the company has talked about share gains and losses in your markets being measured in basis points. I think, 15, 20, 25 basis points a year. Given the fragmented nature of it, it was kind of what you would aspire to. It can, of course, go down or up, I guess, for kind of idio reasons -- supply shocks, those sorts of things. But now that you have supply, it seems like the world has plenty of supply, is there any reason that, that historical share gain pace would be different going forward?

Question: Chris Danely - Citigroup Inc - Analyst : Haviv, I guess, just a little bit of a drill down on the end markets. How would you expect things to sort of play out this year? Maybe talk about where you would expect relative strength or not strength by the end markets? And have you seen -- would you say you've seen any change in business conditions over the last three months, like better, worse or not really?

Question: Chris Danely - Citigroup Inc - Analyst : Sure. Just quickly on Embedded. So it looks like you guys have the lowest margins there in I think over a decade or something like that. Does something need to be changed or restructured there to get Embedded back to an adequate level of margins? Or maybe talk about what needs to be done to get it to some sort of an appreciable level of margin?

Question: Harlan Sur - JPMorgan Chase & Co - Analyst : Good afternoon. Thanks for taking my question. One of the metrics we look at to gauge the health of the cycle is the number of customer pushouts, cancellations, rescheduling of the backlog relative to prior quarters or maybe big changes, right, on customer forecast inside of the quarter. Has this level of activity remained at kind of normalized levels? And then maybe on another metric we look at is turns orders. And I know, Haviv, you said it's at high levels, but -- is that coming in about as expected as well?

Question: Harlan Sur - JPMorgan Chase & Co - Analyst : Yeah. Thank you. So right before the capital management update back in August, I remember you had just received your preliminary CHIPS Act grant allocation, $1.6 billion. That number was solidified, I think, in December, and this was not contemplated in your free cash flow per share calculation. In the CHIPS Act press release, you guys articulated some of the milestones attached to those grant dollars. And it looks like actually, many of those milestones are going to be executed in or before 2026. And that's $1.6 billion in grant dollars. That drives an incremental $1.75 of free cash flow per share versus sort of what you potentially laid out in your 2026 REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 23, 2025 / 9:30PM, TXN.OQ - Q4 2024 Texas Instruments Inc Earnings Call scenario analysis. So have you mapped out that $1.6 billion in CHIPS Act grants over 2025, 2026, and maybe have an updated view on the potential better free cash flow per share profile for Texas Instruments?

Question: CJ Muse - Cantor Fitzgerald LP - Analyst : Hey, good afternoon. Thank you for taking the question. I know you guys are loath to talk beyond the quarter, but I was hoping you could give us a framework for thinking about gross margins beyond the March quarter. You just gave us the depreciation. That's very helpful. Would love to hear kind of your thoughts on what's optimal inventory and therefore planned utilization beyond March? And is the March quarter kind of low for gross margin and we should start tracking higher? Any thoughts there would be very helpful.

Question: CJ Muse - Cantor Fitzgerald LP - Analyst : Yeah. Yes, just a quick one, Dave. Rafael, just to go back to kind of the loading question. If we do assume normal seasonal pattern for your top line into Q2, Q3, should we assume that loadings would move higher in Q2? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 23, 2025 / 9:30PM, TXN.OQ - Q4 2024 Texas Instruments Inc Earnings Call

Question: Joshua Buchalter - Cowen Inc - Analyst : Hey, guys. Thank you for taking my question. I guess I wanted to follow up on the previous one you mentioned, not necessarily wanting to drain the inventory levels below the $4.5 billion levels. As we think about how you're thinking about 1Q, though, is this the level you're comfortable with and you're going to manage to the $4.5 billion? And I guess to ask more acutely, is there a near-to-medium-term inventory target on a days basis that we should be thinking about? Because I know that's obviously evolved through the last several years. I'd be curious how you're thinking about it now as we sort of are chipping closer to end demand?

Question: Joshua Buchalter - Cowen Inc - Analyst : Yeah. Thank you for the color, Rafael. Yes, to follow up, I want to about -- there were some earlier questions about competition, specifically in pricing. I guess I wanted to ask bigger picture, not necessarily pricing related. But as some of your peers have sort of gotten through and lapped and are no longer shipping to NCNRs or LTSAs, have you noticed a change in the competitive backdrop on the number of sockets that are open for competition? I'd be curious to hear about if there's any big change in competitively over the last couple of quarters. Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 23, 2025 / 9:30PM, TXN.OQ - Q4 2024 Texas Instruments Inc Earnings Call

Question: Thomas O'Malley - Barclays - Analyst : Hi, guys. Thanks for letting me ask a question. This is for Haviv or Rafael. Just at the capital management day, you guys highlighted different CapEx ranges depending on kind of different revenue CAGRs. And I know the intention there wasn't to guide revenue. But you just updated us on depreciation in response to just the ITC and some of the grants as well. Is the depreciation being at the lower end entirely a function -- or the updated guide that you're giving today entirely a function of those tax credits and grants? Or is that a function of potentially lower CapEx as well?

Question: Thomas O'Malley - Barclays - Analyst : I do. Thanks for all the detail there. Last one of the call, so broader and hate to end it on this, but I just want to give you a chance to respond. So articles out on a China statement talking about dumping product in that market. I think there's an ongoing debate just around the sustainability of China longer term. I guess part of this question is can you just address what you've seen in the public there? And then kind of the derivative of that, you're obviously growing year over year in China. You're seeing strength in China auto. You highlighted that. But outside of that, are you seeing any change in the dynamic there in terms of your ability to ship product, competition, just addressing the whole debate.