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Capital management Haviv Ilan, president, chief executive officer Rafael Lizardi, senior vice president, chief financial officer Dave Pahl, vice president, head of investor relations February 4, 2025, 10 a.m. Central time 1
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Capital management update and agenda 2 Our capital allocation approach remains focused on supporting the opportunity ahead. We are nearly 70% through a six-year elevated CapEx cycle that, when completed, will uniquely position TI to deliver: • Dependable, low-cost 300mm capacity at scale to meet customers’ demand • Scalability of CapEx, including capacity modularity • Free cash flow per share growth across a range of market conditions Today we will provide: • An overview of our objective, strategy and business model • An update on our capital management scorecard and view of capital allocation • Insight into our growth expectations • Progress toward strengthening our competitive advantages • Free cash flow* per share results and cash returns * Free cash flow (FCF) = Cash flow from operations minus capital expenditures
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Executive summary (from Investor Overview on TI.com) 3 At Texas Instruments: • We run the company with the mindset of being a long-term owner. • We believe that growth of free cash flow per share is the primary driver of long-term value. • Our ambitions and values are integral to how we build TI stronger; when we’re successful in achieving these ambitions, our employees, customers, communities and shareholders all win. • Our strategy is comprised of a great business model, a disciplined approach to capital allocation and a focus on efficiency. • Our business model is built around four sustainable competitive advantages: manufacturing and technology, broad product portfolio, reach of our market channels, and diverse and long-lived positions. • After accretive investments in the business to grow free cash flow for the long term, the remaining cash will be returned over time via dividends and share repurchases.
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4 Objective: Maximize long-term growth of free cash flow per share Strategy: 1. Great business model focused on analog and embedded products and built around four sustainable competitive advantages 2. Discipline in allocating capital to the best opportunities 3. Efficiency, which means constantly striving for more output for every dollar spent Our company objective and strategy
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Building competitive advantages unique to TI More opportunity per customer, more value for our investments Access to more customers, projects, sockets per project, and insight Less single point dependency and longer returns on our investments 5 Manufacturing and technology Broad portfolio of analog and embedded products Reach of market channels Diversity and longevity Business model built on competitive advantages Lower costs and greater control of our supply chain What we get (tangible benefit)
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Metric Long-term objective Target Result Free cash flow generation Maximize long-term growth of free cash flow per share. 25-35% of revenue (TTM) 10% of revenue Capital expenditures Invest to support new technology development and revenue growth. Extend our low-cost manufacturing advantage, including 300mm. Recognize it may run higher if there is an opportunity to extend long-term manufacturing advantage. ~$5B/year 2023-2026; 10% to 15% of revenue 2027 and beyond ✓ Inventory Maintain high levels of customer service, minimize inventory obsolescence and improve manufacturing asset utilization. Will vary based on market conditions. 130 to >200 days ✓ Cash management Provide necessary liquidity in all market conditions. Recognize there may be times for strategic buildup or drawdown of cash. 10% revenue (TTM) + dividends (NTM) ✓ Pensions Be fully funded on a tax-efficient basis. Have annual free cash flow reflect what is available to owners by minimizing one-shot calls for cash, unless there is a P&L or cash advantage. Fully funded ✓ Debt Increase rates of return with some leverage on balance sheet when economics make sense. Avoid concentrated maturities and ensure strategic flexibility. When economics make sense ✓ Cash return Return all free cash flow via dividends and repurchases. Recognize there may be times for strategic buildup or drawdown of cash. All free cash flow ✓ Dividends Provide a sustainable and growing dividend to appeal to a broader set of owners. 40-80% of free cash flow 5% increase Repurchases Accretive capture of future free cash flow for long-term owners. Free cash flow minus dividends ✓ Capital management scorecard 2024 6
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Metric Long-term objective Target Free cash flow generation Maximize long-term growth of free cash flow per share. 25-35% of revenue (TTM) Capital expenditures (gross*) Invest to support new technology development and revenue growth. Extend our low- cost manufacturing advantage, including 300mm. Recognize it may run higher if there is an opportunity to extend long-term manufacturing advantage. 2023-2025: ~$5B per year 2026: ~$2B to $5B per year 2027+: depends on revenue and expected growth Inventory Maintain high levels of customer service through a range of market conditions by providing competitive and stable lead times, while minimizing inventory obsolescence. 130 to >200 days Cash management Provide necessary liquidity in all market conditions. Recognize there may be times for strategic buildup or drawdown of cash. 10% revenue (TTM) + dividends (NTM) Debt Increase rates of return with some leverage on balance sheet when economics make sense. Avoid concentrated maturities and ensure strategic flexibility. When economics make sense Cash return Return all free cash flow via dividends and repurchases. Recognize there may be times for strategic buildup or drawdown of cash. All free cash flow Dividends Provide a sustainable and growing dividend to appeal to a broader set of owners. 40-80% of free cash flow Repurchases Accretive capture of future free cash flow for long-term owners. Free cash flow minus dividends Capital management scorecard 2025 7* Gross CapEx, does not include CHIPS Act benefits
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Purpose Organic growth of business Appeal to broader set of investors Accretive capture of future free cash flow for long-term investors Inorganic growth Where and why we’ve allocated our capital Capital allocated: $101B (2015-2024) Billions 8 $0 $10 $20 $30 $40 $50 Acquisitions Share Repurchases Dividends R&D, Sales/Marketing, CapEx, Inventory
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Insight into our growth expectations 9
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Semiconductor cycles: planning for the long term * Source: WSTS excluding memory trailing twelve months through November 2024 • History has shown the importance of staying focused on the opportunity ahead, even through weak periods of the semiconductor cycle • We are prepared for a range of market recovery scenarios 10 0 20 40 60 80 100 120 140 160Units (B) TTM monthly average Semiconductor market units shipped*
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Portfolio and market positions have strengthened 11 • Our exposure to industrial and automotive has increased • These markets likely continue to be fast growing • We are well-positioned for future growth • Our portfolio position has changed and strengthened • “Other” segment is now small and stable • Expect Analog and Embedded to drive future growth 0 5 10 15 20 2014 2018 2022 TI revenue by segment Analog Embedded Other ~7% CAGR ~7% CAGR $B 0 5 10 15 20 2014 2018 2022 TI revenue by end market Industrial Automotive Other ~10% CAGR ~13% CAGR $B
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12 Advancing technologies in industrial, automotive TI product portfolio addresses an increasing number of sockets across all sectors TI industrial and automotive grew 7% CAGR from 2013 through 2024 Automotive 2024 TI revenue: ~$5.5B • Amplifiers • Discrete logic • Isolated gate drivers • Isolated power • LED drivers • Current sensors • High-/low-side switches • Voltage references • Switching regulators • CAN/LIN transceivers • Wired and wireless battery mgmt • mmWave radar • Lighting matrix manager • Zonal control motor drivers • SERDES video/radar interface • Audio amplifiers • Functional safety power mgmt • Automotive vision processors Infotainment & cluster ❖ Advanced driver assistance systems (ADAS) Hybrid, electric & powertrain systems ❖ Body electronics and lighting ❖ Passive safety Application-specificGeneral purpose Industrial • Amplifiers • Discrete logic • Isolated power • Linear voltage regulators • Clock buffers • Microcontrollers • Current sensors • Switching regulators • Voltage references 2024 TI revenue: ~$5.3B Application-specific Industrial automation ❖ Aerospace & defense ❖ Medical & healthcare ❖ Energy infrastructure Building automation ❖ Test & measurement ❖ Appliances ❖ Power delivery ❖ Robotics General purpose • Medical imaging analog front ends • mmWave Radar • Real-time control MCUs • GaN power modules • Precision analog to digital converters • Industrial processors • Brushless motor drivers w/ integrated control • Digital power controllers • Clock synthesizers • Space-grade high- speed data converters
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Industrial positions are diverse and growing 13 Diverse customer base purchasing wide range of products Industrial revenue by customer Each industrial customer purchases thousands of products across TI’s portfolio Industrial customer revenue by product Top 100 TI parts Next 5,000+ TI parts Top 100 TI parts Next 50,000+ customers Top 100 customers
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Industrial positions are diverse and growing Secular content growth across factory automation, robotics 14 Diverse customer base purchasing wide range of products Industrial revenue by customer Each industrial customer purchases thousands of products across TI’s portfolio Smart factory lines 1000s of chips per system $10,000+ of content • Higher use of robotics to drive efficiency, increased automation • More sensors to improve safety, enable predictive maintenance • More motor drives to enable sophisticated motion • Increased connectivity and processing needs at the edge • Higher power needs require greater power density, battery backup Industrial robot $700-1000+ of content 250+ chips per robot 50-200+ robots per factory Servo drive $100+ of content 60+ chips 100-250+ servo drives per factory Programmable logic controller $90+ of content 70+ chips 50-150+ PLCs per factory Industrial customer revenue by product Top 100 TI parts Next 5,000+ TI parts Top 100 TI parts Next 50,000+ customers Top 100 customers
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• Market exposure: Industrial and automotive have grown from about 40% in 2014 to about 70% of TI’s revenue in 2024 • Stronger portfolio of general purpose and application-specific products: Breadth of analog and embedded products, combined with investments in process and package technologies, strengthens product portfolio • Positioned to grow: Our exposure to large, fast growing markets and our strong portfolio of analog and embedded position us to capture the opportunity ahead In summary: TI is positioned to grow 15
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Strengthening our sustainable competitive advantages 16
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17 Investing to support growth for the long term Extending our 300mm cost advantage and greater control of our supply chain Manufacturing and technology Broad portfolio of analog and embedded products Reach of market channels Diversity and longevity Business model built on competitive advantages
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Support for growth Investments in manufacturing capacity will support growth for decades to come Benefits of owning & controlling our supply chain 18 Control of our supply >90% of wafers, assembly and test will be manufactured internally Optimal technology 28nm to 130nm process technology optimized for analog and embedded, vital for industrial and automotive markets Structural cost advantage 300mm provides ~40% lower cost and ~2.3x chips per wafer compared to 200mm Providing geopolitically dependable capacity for analog and embedded processing semiconductors
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Chip cost is ~40% less on 300mm Built on 200mm wafer Built on 300mm wafer Sales price of example part $1.00 $1.00 Cost of goods: Chip cost $0.20 $0.12 Assembly, test, other $0.20 $0.20 Total $0.40 $0.32 Gross margin % 60% 68% *Unpackaged Illustration of the GPM impact from 300mm 19
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20 Strategy of our 300mm wafer fab investments <2020 2021 2022 2023 2024 2025 2026 2027 2035+ Richardson site RFAB1 RFAB2 Lehi site LFAB1 + qualifications LFAB2 cleanroom LFAB2 Sherman site SM1 cleanroom + pilot line + qualifications SM1 SM2 shell SM2 SM3/4 Phase 1 (2021-2026) Transfers & incremental growth Phase 2 (2022-2026) New fab preparation Phase 3 (2026+) Modular capacity • Equip RFAB2 and execute 150mm fab shutdowns, transfer into RFAB2 • Equip LFAB1 and complete technology and customer qualification • Transfer external foundry wafers into LFAB1 • LFAB2 cleanroom ready for first production start, no customer re-qualification needed • Construct SM1 and complete pilot line to begin technology and customer qualification • Complete SM2 shell, eliminating construction lead time • Ramp fabs to meet customers’ demand, without re-qualifications • Scalability of CapEx, including capacity modularity • Deliver free cash flow per share growth across a range of market conditions
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21 Our 300mm wafer fab manufacturing footprint Execution progressing well across all three sites * Dependent on mix and utilization RFAB2 LFAB1 LFAB2 SM1 SM2 SM3/4 Groundbreaking 2020 Acquired 2021 2023 2022 2022 (shell) TBD Production (initial/fully equipped) 2022/2026 2022/2026 2026/TBD 2025/TBD TBD TBD Maximum revenue supported* ~$6B ~$4B ~$11B ~$9B TBD TBD CapEx ~$6B ~$4B ~$11B ~$30-40B Process technology 130-180nm 28-65nm 28-65nm 65-130nm 65-130nm 28-130nm Source of demand Organic growth & 150mm transfers Insourcing from external foundries Organic growth Organic growth Organic growth Organic growth CHIPS ITC 25% through 2026 25% through 2026 25% through 2034 25% through 2032 CHIPS direct funding $1.6B through 2030
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$0 $1 $2 $3 $4 $5 $6 $7Billions Estimated capital expenditure (gross*) Scalability of capital expenditures Supports long-term growth ~$5B/year average 2023-2025 Key metrics 2022 2024 2026 2030 % of wafers internal 80% ~90% >90% >95% % of internal wafers 300mm 40% ~60% >70% >80% % of assembly internal 60% ~70% >85% >90% * Gross CapEx, does not include CHIPS Act benefits 2027+ CapEx depends on revenue and expected growth 2026 CapEx $2-5B 22
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Manufacturing and technology Broad portfolio of analog and embedded products Reach of market channels Diversity and longevity Business model built on competitive advantages 23 R&D investments: Strengthening our technology and our product portfolio, while improving our diversity and longevity Broad portfolio of analog and embedded products
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24 Disciplined allocation of R&D strengthens portfolio Market segment R&D investments % of TI revenue 2013 2023 2024 Industrial Up broadly 30% 40% 34% Automotive Up broadly 12% 34% 35% Personal electronics Steady 32% 15% 20% Enterprise systems Up, focused on data center 6% 4% 5% Communications equipment Steady 15% 5% 4% Other Flat, at low levels 5% 2% 2%
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Market segment R&D investments % of TI revenue 2013 2023 2024 Industrial Up broadly 30% 40% 34% Automotive Up broadly 12% 34% 35% Personal electronics Steady 32% 15% 20% Enterprise systems Up, focused on data center 6% 4% 5% Communications equipment Steady 15% 5% 4% Other Flat, at low levels 5% 2% 2% Disciplined allocation of R&D strengthens portfolio 42% 69% 25
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Manufacturing and technology Broad portfolio of analog and embedded products Reach of market channels Diversity and longevity Business model built on competitive advantages 26 Building closer direct relationships with customers: Strengthening the reach of our market channels
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Building closer direct customer relationships 27 • We’ve made designing and transacting with TI easier • Customers have the choice of buying direct from TI: – Backlog scheduled at lead time – TI.com for immediate shipment • Deliver customer convenience with online ordering, best price and availability • TI’s reach of channel advantage results in higher growth through access to more customers, projects, sockets per project, and greater insight 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2019 2020 2021 2022 2023 2024 TXN SC % direct revenue Direct Distribution ~80% ~35%
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Free cash flow per share growth and cash returns 28
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Operating cash flows enable long-term investments • Operating cash flow at $6.3 billion in 2024 • Including $0.5 billion of inventory growth • CapEx at $4.8 billion, 31% of revenue • Continuing higher investment levels in 300mm wafer fabs to strengthen competitive advantages 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% $0 $1 $2 $3 $4 $5 $6 $7 $8 $9 $10Billions Operating cash flow CapEx CapEx % Rev 29
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$0 $5 $10 $15 $20 $25 TXN free cash flow per share Delivering free cash flow per share growth • Free cash flow per share will begin to approach trendline in 2026 as growth returns and CapEx begins to moderate • We are prepared to support a rapid market recovery or a persistently weak market • Long-term free cash flow per share growth guides our capital allocation decisionsFree cash flow per share trend line continues at ~11% CapEx flat at $5 billion through 2025, then aligned to revenue scenario CHIPS ITC included; does not include $1.6B CHIPS direct funding 2026 revenue scenario $20B $22B $24B $26B CAGR vs 2022 0% 2% 5% 7% CapEx $2-3B $2-3B $3-4B $4-5B FCF/share $8-9 $9-10 $10-11 $11-12 Elevated CapEx 2004-2022 FCF/share trendline 30
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$0.09 $0.11 $0.13 $0.30 $0.41 $0.45 $0.49 $0.56 $0.72 $1.07 $1.24 $1.40 $1.64 $2.12 $2.63 $3.21 $3.72 $4.21 $4.69 $5.02 $5.26 $5.44 TXN dividend per share 31 • Increased dividend 21 consecutive years, including 5% increase in Q4 2024 • ~10% and ~16% 2024 CAGR (five- and 10-year) • Yield is 2.8% (as of 1/31/2025) Sustainability and growth of dividends
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32 Accretive capture of future free cash flow for long- term investors • Repurchase steadily when discounted cash flow value exceeds stock price • Disciplined with stock-based compensation • Shares outstanding reduced by 47% since 2004 • $20.3 billion of authorization remaining as of December 2024 0.0 0.3 0.6 0.9 1.2 1.5 1.8 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Basic shares EoP (Billions) 47% reduction in shares outstanding
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33 Strong return of cash continues 2024 return of $6.28 per share: • +18% versus 2023 • Returned 122% free cash flow in last ten years • 13% compound annual growth 2004-2024 $0 $1 $2 $3 $4 $5 $6 $7 $8 $9 $10 TXN cash returned per share Repurchases paid per share Dividends paid per share
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0% 10% 20% 30% 40% 0% 10% 20% 30% 40% 50% 60% -10% 0% 10% 20% 30% 40% 50% How TXN ranks on cash generation and returns 34Source: S&P Capital IQ, Public filings as of 01/31/2025 Free cash flow as % of revenue, S&P 500 Cash returns as % of revenue, S&P 500 Return on invested capital, S&P 500 TI 95th percentile TI 40th percentile TI 88th percentile operating cash flow TI 68th percentile
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Summary (from Investor Overview on TI.com) 35 • As engineers, it’s a privilege to get to pursue our passion of creating a better world by making electronics more affordable through semiconductors. • We were fortunate that our founders had the foresight to know that passion alone was not enough. Building a great company required a special culture to thrive for the long term, and we continue to build this culture stronger every day. • We will remain focused on the belief that long-term growth of free cash flow per share is the ultimate measure to generate value. We will invest to strengthen our competitive advantages, be disciplined in capital allocation and stay diligent in our pursuit of efficiencies. • You can count on us to stay true to our ambitions: to think like owners for the long term, adapt and succeed in a world that’s ever changing and behave in a way that makes us and our stakeholders proud. When we’re successful, our employees, customers, communities and shareholders all win.
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Risk factors and non-GAAP measures 36 This presentation is a statement of management’s intentions and describes a strategy that TI intends to pursue as management, in its judgment, deems appropriate. The application of this strategy during any given period may vary depending on market conditions and other factors that management deems relevant. This presentation includes forward-looking statements intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. See Item 1A of TI’s most recent Form 10-K for a detailed discussion of risk factors that may cause results to differ materially from the forward-looking statements. TI undertakes no obligation to update forward-looking statements to reflect subsequent events or circumstances. This presentation contains non-GAAP financial measures, specifically free cash flow (FCF) and ratios based on it. See www.ti.com/ir for reconciliation to GAAP. Free cash flow per share is not an alternative to earnings per share as an indicator of TI’s performance, and investors should not consider presentation of free cash flow per share as implying that stockholders have a contractual or other right to the cash.
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