Texas Instruments Incorporated (TXN)

“Let's meet again in October, tell you how it went. But the team has executed in Q2, and I expect them to do the same in Q3.”

“But it shouldn't be flat. It should be a little higher.”

“As far as second -- third quarter is that 70% to 85% is a good placeholder.”

“I expect this business to be growing sequentially, but maybe at a lower level.”

“On OpEx, net other income and expense and acquisition charges, you should expect all of those to be flat, second quarter to third quarter.”

“When you think about the above seasonal guide, I think the contribution will come from all markets. The 3 markets that we've -- that drove the 2Q growth, meaning industrial, data center and automotive. But Q3 is traditionally a quarter of personal electronics strength. So I expect strong demand across the board.”

“We expect our effective tax rate to be about 13% in the third quarter.”

“We expect TI's revenue in the range of $5.65 billion to $6.15 billion and earnings per share to be in the range of $2.23 to $2.57.”

“Lehi 2 will come in just in time at the end of this year, we'll have the shell, and we can again grow into it seamlessly as it's not a new site, and we don't need new customer qualifications.”

“Our objective is not to put a certain growth rate, but actually to outgrow the market. I believe we will do it in 2026, and that's our plan into 2027.”

“We still expect to close in the first half of next year. And really no changes on how we're planning for the transaction to be financed, still expected to fund the transaction with cash on hand and debt.”

“First, on the CapEx expectation for 2026, it continues to be $2 billion to $3 billion. I could not skew it -- I would not skew it or bias it lower on the lower end at this point. If anything, it could be on the higher end of that midpoint, just given demand and how we want to support that for the subsequent years.”

“Yes. Again, we do continue to see strong demand in the data center market, Atif, and I don't expect that to change in the foreseeable future.”

“So let me just again remind everyone that we gave a framework of revenue and free cash flow. I think the case of revenue, if I think -- if I remember well, at $20 billion, it was $8 billion to $9 billion. And I think at '22, it was $9 billion to $10 billion. So that framework is still valid, Jim.”

“I will say that we have started executing price increases, yes. ... Some of it will start to play in, in Q3, but I expect that to continue into the fourth quarter.”

“I also want to believe, and again, time -- the results will tell that we grew share on the larger content opportunity. So let's see how it does, but I think that's the reason you see such strong growth in industrial and expect that to continue.”

“If we see that benefit, it would likely be in third and beyond as those conversations happen.”

“we are looking at 17% to 18% growth year over year for the first half of the year.”

“Yeah, no. The fall-through that you should expect is in the 75% to 85% that we have guided.”

“We expect our effective tax rate to be about 13% in the second quarter.”

“But right now, assuming we do not have another false start, I think it is very likely we will easily be at $8 free cash flow per share for 2026.”

“I think I mentioned during the Capital Management call that as long as revenue is growing mid- to high-single digits, that $8 free cash flow per share is very probable, highly probable.”

“Taking a longer view than just the next quarter, when you think of our range of inventory days—150 to 250—during an upturn, we should be draining that number. Right now, we are at 209. It should drift towards the lower end.”

“On the direct funding, we have just received over $500 million. In total, what we received in fourth quarter and first quarter is $630 million out of the up to $1.6 billion of direct funding. The remaining should come over the coming years as we continue fulfilling the various milestones stipulated in the contract.”

“And then for 2027, continued upward pressure, but likely at a slower rate.”

“No change to depreciation. The expectation for this year is $2.2 billion to $2.4 billion.”

“Beyond that, what I would tell you for CapEx beyond 2026 is to think of the 1.2 times rate that we have talked about before for the long-term CapEx intensity. So, for example, if you take 5% growth, that would translate into 6% CapEx as a percent of revenue, and that is how you would want to model it.”

“Yes. I will start. First, the answer to your question is yes. We are looking at $2 billion to $3 billion of CapEx for this year.”

“I do expect that they will kick in more in the second half of the year and into 2027.”

“You should expect to continue to have charges there every quarter at the tune of what we just reported in first quarter. We will continue having those there every quarter until we close, at which time it will be a lot higher at close, and then they will be steady after that for a number of years.”

“We expect the transaction to close in 2027 subject to necessary approval.”

“I will mention that as I look at the year, if demand—and right now, the demand signals are strong—continues to be strong, and we are monitoring the market price and there is definitely at least an average price increase in the last several months across the Analog market, I think it is likely that prices may go up in the second half of the year.”

“OPEX is up low single digits, and you should get into a reasonable number for gross margin.”

“we left the year at about $450 million a quarter revenue footprint, and I think that continues as we move forward.”

“As CapEx continues to be invested in data centers, we expect that growth to continue.”

“For the company, the overall price effect like for like in '25, we expected it to be low single digits down... That's my assumption for 2026. That's what we expect the market conditions to be.”

“what we've said is it's about 1.2 times long-term revenue growth.”

“Direct funding not changed. We expect up to $1.6 billion as we reach several milestones.”

“for 2027, we expect an upward pressure on that number, but at a slower rate of increase.”

“We now expect $2.2 to $2.4 billion on depreciation in 2026.”

“First on CapEx. We continue to expect CapEx for 2026 between $2 and $3 billion.”

“We continue to expect our effective tax rate in 2026 to be about 13 to 14%.”

“the loadings will depend on demand, and we'll adjust those as needed.”

“That's the one market that we see CapEx going into I'm not seeing any slowdown there in the at least in the foreseeable future.”

“when I think about OpEx, I do not include restructuring in that... the the the regular OpEx, I expect it to be above flat third to fourth quarter.”

“As you said, I look at it as a roughly seasonal guide, as you said. And the reason is, there is a recovery, but it's a very in a moderate pace”

“expect OpEx to be about flat to third quarter and that's Saviv alluded to the benefits from the restructuring.”

“That is also going to take place in the next couple of quarters for the company.”

“Now given where revenue, the midpoint of our revenue, in order to continue to maintain those levels of inventory and where we want to be an inventory, we're adjusting the loadings down. Into fourth quarter.”

“Our fourth-quarter outlook includes changes related to the new U.S. Tax legislation and now assumes an effective tax rate of about 13%.”

“if it wants to continue in that moderate recovery, of course, we will be at the lower end the CapEx and free cash flow will grow.”

“for next year, we've said $2.3 billion to $2.7 billion but to be on the lower end of that range.”

“It has the potential to accelerate and grow even faster next year as we have outlined in our framework back in the capital management.”

“We will see a gradual reduction in cost related to this to two factories.”

“expect our effective tax rate in 2026 to be about 13 to 14%.”

“I think the probability of being lower is probably more probable than higher than $26 billion, right?”

“But at the end of the day, our objective remains the same when it comes to returning capital to owners, and that is to return all free cash flow through dividends and buybacks.”

“You should continue to think of 75% to 85% is a good number to use over the long term.”

“Based on our initial assessment, what we expect, what would likely happen is our GAAP tax rate will increase in third quarter in 2025; however, it will decrease in 2026 and beyond.”

“On depreciation, switching to depreciation, for 2025, we continue to expect $1.8 billion to $2 billion.”

“On CapEx, for this year, 2025, we continue to expect to spend $5 billion.”

“And then you -- what you're probably missing is the net of other income and expense and interest expense that's going to be unfavorable, about $20 million as we have lower cash levels, interest is lower while debt interest expense has continued to increase.”

“Our earnings per share outlook does not include changes related to recently enacted U.S. tax legislation and assumes an effective tax rate of about 12% to 13%.”

“Our CapEx plans remain consistent with what we shared in February and will depend on revenue.”

“More importantly, the cash -- from a cash flow standpoint, we expect significantly lower cash tax rates for the next several years.”

“And for 2026, we continue to expect $2.3 billion to $2.7 billion and likely to be at the lower side of that range.”

“And for 2026, it's going to be between $2 billion and $5 billion, depending on revenue and growth expectations at that time.”

“You know, our our objective when it comes to to buybacks and in general, just cash return is to return all free cash flow via dividends and and repurchases”

“Right now, we're at seventy percent we're seventy percent through the the elevated investment. So we're in the approaching the last innings of of the elevated CapEx period.”

“I do expect it to come in last, but it was always very, very shallow.”

“On a forward looking basis, our base case right now at the midpoint we expect factory loadings to increase slightly.”

“For the second quarter, we now expect our effective tax rate to be about 12% to 13%.”

“And I don't see right now at least any slowdown there.”

“We continue to expect CapEx for 2025 to be $5 billion.”

“We're not planning -- $4.5 billion of inventory is a healthy level of inventory, and we would not want to be draining those levels at this point.”

“I expect that to have a step forward in 2025, especially as our automotive business, we have a bunch of products that are what we call -- they have a safety effect that usually the call is a little bit more complex, it just takes a little bit longer, but we are moving well on that execution.”

“Right now, as I mentioned, we expect a hit from that in first quarter, but that just as it's a hit sometimes, it's a benefit when you go the other way.”

“Depreciation for 2025, now you should expect $1.8 billion to $2 billion; that's slightly down from the previous expectation.”

“We've received some of that already in 2024 and expect 2025 and beyond to continue.”

“these three markets, I think they are on the upturn. And I don't think that I expect at least that if nothing major changes to continue into 2025.”

“So that's -- in this case, about $50 million less fourth going to first.”

“OpEx will increase 3% to 5% fourth to first, and that's kind of normal seasonal increases that happened in first quarter on OpEx in addition to the overall increases in investments that we're making.”

“Based on current tax law, we now expect our effective tax rate for 2025 to be about 12%.”

“This drives growing chip content per application, or secular content growth, which will likely continue to drive faster growth in industrial and automotive.”

“So, when we ramp -- as we ramp LFAB and as we move from external to internal, you're really going to like the fall-through both to GPM, but even better to free cash flow as we do that.”

“based on what I see right now, you shouldn't expect the plan to change in terms of our Phase 1, Phase 2 as I described.”

“Over the life of the -- maybe the most important point is over the life of the program between the ITC and the direct funding, we expect to receive $7.5 billion to $9.5 billion in total.”

“if revenue materializes in the future and we expect that to continue, then we ramp up the factories and that helps with the loadings and that tends to take the 75% to 85% towards the high end of that range.”

“I think we -- what I said about the third quarter, I think you think about it, there's not a lot of change that I see right now going into the fourth, but there is -- it's Q4, right? So there is a seasonality effect.”

“No, I think all three are sequentially growing in a fast pace... My point is that they are still not at the previous peak, okay? So to me, when I think about the momentum, I think, I expect momentum to continue to build.”

“In fact, for 2025 and beyond, the way to think about it is, we continue to have a disciplined process, as you alluded to on our investments and our OpEx. But when it comes to R&D, we'll continue to invest there. So you'll see our investments grow overtime and continue to grow.”

“We do expect to grow inventory in fourth quarter. So we grew a couple of hundred million in third quarter. We expect probably a few $100 million of inventory growth again in fourth quarter.”

“We continue to expect our effective tax rate to be about 13% in the fourth quarter.”

“Whereas in SG&A, the focus there is efficiency, so continue to drive efficiency. So there the -- it will probably grow, but at a much lower pace than R&D.”

“I think the inventory correction is still ongoing, but I do expect that to start to recover, I cannot predict the quarter because usually when we see it, we call it.”

“So as we -- and in addition to revenue, as we bring more executing our strategy to load more 300-millimeter wafers and bring in more external loadings internal, the fall-through excluding depreciation will likely trend more in the range of 75% to 85% on a year-on-year basis.”

“When it comes to third quarter, we expect utilization or factory loadings to be flat to slightly up.”

“So for 2024, we now expect depreciation to be between $1.5 billion and $1.6 billion. And for 2025, we now expect depreciation to be about $2 billion to $2.3 billion.”

“I mean, it's at the midpoint of the range. We expect revenue to grow about 7%.”

“And we expect to receive another $200 million in 3Q and for a total of $1 billion for 2024.”

“We continue to expect our effective tax rate to be about 13%.”

“But for the next year, two or three because Lehi, all those costs are -- all those fixed costs are already there, including people, we are going to have some nice tailwind and all of the -- a good portion of that will go to embedded.”

“But over the longer timeframe, 75% to 85% ex-depreciation is a good guide to use.”

“And for 2025, we continue to expect $2 billion to $2.5 billion in depreciation.”

“We've been talking about depreciation for this year, $1.5 billion to $1.8 billion. That is -- we continue to expect that -- but we're more likely to come in at the bottom half of that range.”

“So describe it roughly in the low to very low single-digit declines over time. And I would say, just generally that's what we are continuing to see.”

“Maybe the best thing I can tell you is don't expect a significant or even any drain on inventory because just given our business model and how we want to run the company, keeping lead time short and also the upside potential that we have with having this inventory and the capacity in place, is so much higher than the downside risk.”

“And then for second quarter, we are going to adjust those loadings depending on future demand.”

“And starting next quarter, so in second quarter, we expect to receive about $300 million and a total of $1 billion for all of 2024.”

“We continue to expect our effective tax rate to be about 13%.”

“because that is the most important allocation of capital has been for the last few years and will continue to be for the next three years.”

“These trends have resulted and will continue to result in growing chip content per application, which will drive faster growth, compared to our other markets.”

“I would expect to continue holding relatively high levels of inventory.”

“For 2024, expect $1.5 billion to $1.8 billion and for 2025, expect $2 billion to $2.5 billion.”

“And we'll get the rest further down the road, mostly the following year and then after that.”

“We have accrued to-date over the last year and a half or so $1.4 billion. We expect to get about $500 million of that later this year, probably in fourth quarter as far as the current law and regulations stipulate.”

“And now going into first quarter, we're taking that adjustment further. So the first quarter adjustment on underutilization will be bigger.”

“as we expected supply and demand to come more in balance, that we would expect pricing to revert back to how it's behaved over the last 10 or 20 years. And over the last six months or so, that's what we've seen. So somewhat of a low-single-digit decline is what we're expecting out in time and wouldn't describe that as unusual.”

“We now expect our 2024 effective tax rate to be about 13%.”

“you should expect, and we expect, to continue running at about $5 billion per year through 2026 as we complete the investment plans that we've been talking about.”

“A portion of that, we will get some time next year, probably by fourth quarter next year is when we expect to get that cash, so that's when the cash will start flowing in.”

“As an update for 2024, we expect depreciation to be between $1.5 and $1.8 billion, and for 2025 to be between $2 billion and $2.5 billion.”

“So for fourth quarter, let me start fourth quarter of 2023, we expect depreciation to increase on a quarterly basis at about the same rate as what we have been seeing throughout 2023. So essentially, we're going to end the year just shy of $1.2 billion, maybe [11.90, 11.80, 11.70] (ph), somewhat in that range for the year.”

“Lastly, we continue to expect our 2023 effective tax rate to be about 13% to 14%.”

“So we continue to expect $5 billion of CapEx per year in 2023, 2024, 2025, and 2026. So you should count on that.”

“So roughly about $4 billion of that we're going to get back on ITC about one year offset.”

“To support these buildouts and enable future growth, we continue to expect associated capital expenditures to be about $5 billion per year through 2026.”

“But those hotspots are closing and closing pretty quickly.”

“And of course inventory levels always depend on demand expectations and for the time being in the near term, they will likely have an upward bias.”

“Lastly, we continue to expect our 2023 effective tax rate to be about 13% to 14%.”

“And that's why we're making this investment on CapEx, in particular, about $5 billion per year for the next four years, and we are committed to those investments.”

“So when we look strategically at both of those markets, we're very confident that they will continue to add semiconductor content per unit and be great growers for us.”

“More importantly, the cash benefit associated with that will get the following year. So anything that we accrue this year and -- in '22 and is placed in service in 2023, we will get that cash at the end of 2024, okay? And we're -- that's what we're planning on.”

“That will grow over time as those -- that equipment goes into -- is placed in service and now they appreciate at a lower rate.”

“This last quarter, we accrued another $200 million benefit. So that's on top of the roughly $400 million last year. So now we have a total benefit that we have accrued of $600 million. That number will continue increasing for the rest of the year, and that's a 25% of qualifying assets in the United States. So we'll continue to increase that number over the year.”

“In the near term, we expect to have an upward bias on inventory as we prepare for long-term growth.”

“Lastly, we continue to expect our 2023 effective tax rate to be about 13% to 14%.”

“our expectation continues to be $5 billion per year”

“These trends have resulted and will continue to result in growing chip content per application, which will drive faster growth compared to our other markets.”

“You can expect that to continue increasing a little bit over the, in 2023 and over the next several years as we continue to increase investments.”

“I think all those things has us in a position where we do believe that we're able to grow the top-line faster over the next few years.”

“We think that both of those markets have about the same growth opportunities. So in time the growth rates will converge, though they could be – you could see differences in any given quarter. But longer term, we believe that they can grow at the same rates.”

“I've been talking about from current levels we could add a $1 billion to $2 billion of additional inventory.”

“We now expect our 2023 annual effective tax rate to be about 13% to 14%.”

“So, this last quarter, $20-some million. Of course, that is a direct result of the CapEx investments that we are making. And so you should expect depreciation to continue ticking up.”

“And I would expect that to continue ticking up over the next many quarters and years as we continue stepping up our investments.”

“Bigger picture, as I said earlier, the CHIPS Act, great legislation. We’re very excited about that. That is going to decrease on a net basis. our investment because we’re going to get a 25% reduction from the investments that qualified and manufacturing investments in the United States.”

“Well, short-term, we expect our change – our CapEx expectation for 2022 have not changed. That is $2.6 billion to $2.8 billion for this year; depreciation, about $1 billion for this year.”

“So we don’t expect any meaningful or significant impact to our revenue with those export loss.”

“We don’t expect that there is really much, if any, impact due to those changes really to that or in any of the restrictions from overall from that.”

“As you are looking at your models for 2023, without additional changes to tax law, we would expect our effective tax rate to remain above what it is in 2022 with a similar quarterly profile.”

“We continue to expect our 2022 effective tax rate to be about 14%.”

“We are now in production in RFAB2 and expect production in LFAB later this year.”

“So, I would not be uncomfortable, as I said before, adding another $1 billion, $1.5 billion of inventory over the next several quarters to get us well positioned for the next upturn that invariably comes at some point.”

“We have talked about a target of $130 to 190 days and as I have said before, I will not be uncomfortable to be at the high end of that range, because ultimately that inventory gives us just tremendous optionality, puts us in a really good position to support customers and just given our business model, they lessens risk on the inventory is nil, because that inventory goes to support products that sell to many, many customers and have very long lives.”

“On the last part of your question, on an absolute basis, I would expect to increase investments over the next several years as we continue to see strong market opportunities.”

“So whenever things do weakened, we’ll take that time to replenish inventories that will keep lead times stable and low.”

“And then we -- on Sherman, we just broke ground on that a couple of months ago and we expect Sherman facility, the first factory there support revenue in 2025.”

“We’re going to have RFAB2 sometime in the second half of this year supporting production and LFAB early 2023.”

“For this year, it looks like we’re going to be coming in at about $2.5 billion, about as expected it could come in a little higher than that.”

“On your second part of your question on a go-forward basis, as expected, depreciation is going to increase.”

“We expect our 2022 effective tax rate to be about 14%.”

“We are -- RFAB2 will ramp production in the second half of this year. Lehi will qualify and ramp production in the first quarter of next year.”

“So our -- in terms of CapEx. So our $2.5 billion per year for the next four years that is intact.”

“So we have done that and are committed to continuing to do that.”

“In fact, on the front end, over 80%, and our goal is to grow that to 90% over the coming years.”

“Now, that's a small part of our revenue, but you saw it grow strongly last quarter. And as you look over the coming years, that probably will continue to be a strong grower, but it's just not a very large portion of our revenue.”

“So, our intent is to continue building that inventory that is -- our objective inventory, as you know, is to maintain high levels of customer service and roughly our target is 130 to 190 days, but we want to be at the high end of that, and we would not be uncomfortable even above the high end of that range.”

“We continue to expect our annual operating tax rate for 2022 to be about 14% and our effective tax rate to be about a point lower.”

“This outlook comprehends an impact due to reduced demand from COVID-19 restrictions in China, which are affecting our customers' manufacturing operations.”

“These trends have resulted and will continue to result in growing chip content for application, which will drive faster growth compared to the other markets.”

“And then about six months later, first Q 2023, we'll have Lehi, LFAB come online once it's qualified, and that will give us also more legroom on that front.”

“We expect to continue to increase incrementally, again, relatively small steps for another two quarters, and then RFAB2 comes online sometime in the third quarter of this year of 2022, and that will give us more legroom on those tailwinds.”

“And that will have an impact on gross margins.”

“So I expect CapEx to go up, and depreciation will follow.”

“So that 3.2, I wouldn't expect it to change significantly in the short term.”

“Our guidance on that is 130 to 190 days.”

“As we have said, we expect to have about $75 million of cost per quarter until we start production, which is still expected in early 2023.”

“We expect our 2022 annual operating tax rate to continue to be above 14% and our effective tax rate about 1 percentage point lower than that.”

“But over time, over many years, it should -- 20% to 25% is probably the right way to look at it.”

“I would not be uncomfortable at the very high end or even above the high end of that measure at some point, 190 days of inventory.”

“But as long as we think the buybacks are creative to long-term owners, we're going to have some buybacks.”

“As a remainder, our capex will be higher on an absolute level, as well as a percentage of revenue as we strengthen this advantage.”

“Clearly, at the beginning there won't be a 100% absorption and we will get to that at some point, but we'll -- we're not going to in 2023.”

“We left last year with about the 2/3 of our revenues direct. So, we expected that percentage will increase over time.”

“Our goal, as soon as capacity increases if there's an adjustment in demand, we will build those inventory levels back up to be at more healthy levels.”

“The balance of the rest is equipment and we're going to be putting in that equipment starting next year and over the coming years.”

“We are working through detailed plans of our long-term roadmap and we'll have specifics of timing in capex spending in our capital management goal in February.”

“As you're looking at your models for 2022, without any changes to taxable, we would expect our annual operating and effective tax rates to remain about what they are this year.”

“We continue to expect our annual operating tax rate for 2021, to be about 14% and our effective tax rate to be about 13%.”

“The purchase price was about $900 million, and we expect ongoing cost of about $75 million per quarter through 2022.”

“And then on top of that, we'll put about $3 billion of capex over a number of years as we ramp that up.”

“And Lehi should add 3 billion to 4 billion of annual revenue.”

“RFAB2, with that capex, RFAB2 should add another $5 billion of annual revenue, again, when it's full week web price or not, obviously not on day 1.”