Q1 2024 Texas Instruments Inc Earnings Call
Dave Pahl: Welcome to the Texas Instruments first quarter 2024 earnings conference call. I'm Dave Pahl, head of investor relations, and I'm joined by our chief financial officer, Rafael Lizardi. For any of you who missed the release, you can find it on our website at ti.com slash IR. This call is being broadcast live over the web and can be accessed through our website. In addition, today's call is being recorded and will be available via replay on our website.
Welcome to the Texas instruments first quarter 2024 earnings Conference call I'm, Dave Pahl head of Investor Relations and I'm joined by our Chief Financial Officer Raphael was already for any of you who missed the release you can find it on our website at Ti Dot com Slash IR.
All is being broadcast live over the web and can be accessed through our website.
In addition, today's call is being recorded and will be available via replay on our website.
Unknown Executive: This call will include forward-looking statements that involve risks and uncertainties that could cause TI's results to differ materially from management's current expectations. We encourage you to review the Notice Regarding Forward-Looking Statements contained in the earnings release published today, as well as TI's most recent SEC filings, for a more complete description. Today, we'll provide the following updates.
This call will include forward looking statements that involve risks and uncertainties that could cause ti's results to differ materially from management's current expectations. We encourage you to review the notice regarding forward looking statements contained in the earnings release published today as well as Ti's most recent SEC filing.
For a more complete description.
Speaker Change: Today, we will provide the following updates first I'll start with a quick overview of the quarter.
Dave Pahl: First, I'll start with a quick overview of the quarter. Next, I'll provide insight into first quarter revenue results with some details of what we're seeing with respect to our end mark. Lastly, Rafael will cover the financial results, give an update on capital management, as well as share the guidance for the second quarter of 2024.
Speaker Change: Next I'll provide insight into first quarter revenue results with some details of what we're seeing with respect to our end markets.
Speaker Change: Lastly, Raphael will cover the financial results give an update on capital management as well as share the guidance for the second quarter of 2024.
Speaker Change: Starting with a quick overview of the quarter revenue in the quarter came in about as expected at $3 7 billion, a decrease of 10% sequentially and 16% year over year.
Dave Pahl: Starting with a quick overview of the quarter, revenue in the quarter came in about as expected at $3.7 billion, a decrease of 10% sequentially and 16% year over year. Analog revenue declined 14% year-over-year, and embedded processing declined 22%. Our other segment declined 33% from the year-ago quarter. Now, I'll provide some insight into our first quarter revenue by end market. Revenue declined sequentially across all of our end markets. Our results reflect the current environment as customers continue to reduce their inventory levels.
Speaker Change: Analog revenue declined 14% year over year and embedded processing declined 22%. Our other segment declined 33% from the year ago quarter.
Speaker Change: Now I'll provide some insight into our first quarter revenue by end market.
Speaker Change: Revenue declined sequentially across all of our end markets our results.
Speaker Change: Reflect the current environment as customers continued to reduce their inventory levels.
Dave Pahl: Similar to last quarter, I'll focus on sequential performance as it's more informative at this time. First, the industrial market was down higher single digits. The automotive market was down mid-single digit. Personal electronics was down mid-teens. Next, Communications Equipment was down about 25%. And lastly, Enterprise Systems was down mid-team. Rafael will now review profitability, capital management, and our outlook.
Speaker Change: Similar to last quarter I'll focus on sequential performance as it's more informative at this time.
Speaker Change: First the industrial market was down upper single digits.
The automotive market was down mid single digits.
Speaker Change: Personal electronics was down mid teens.
Speaker Change: Next communications equipment was down about 25%.
Speaker Change: And lastly, enterprise systems was down mid teens.
Speaker Change: Raphael will now review profitability capital management, and our outlook Raphael.
Rafael R. Lizardi: Thanks Dave, and good afternoon everyone. As Dave mentioned, our first quarter revenue was 3.7 billion dollars. Gross profit in the quarter was $2.1 billion, or 57% of revenue. From a year ago, gross profit decreased primarily due to lower revenue and, to a lesser extent, higher manufacturing costs associated with reduced factory loadings and our planned capacity expansion. Gross Profit Margin Decreased 820 Basis Points. Operating expenses in the quarter were $933 million, flat from a year ago and about as expected.
Raphael: Thanks, Dave and good afternoon, everyone as Dave mentioned first quarter revenue was $3 $7 billion gross profit in the quarter was $2 $1 billion or 57% of revenue from.
From a year ago gross profit decreased primarily due to lower revenue and to a lesser extent higher manufacturing costs associated with reduced factory loadings and our planned capacity expansions gross profit margin decreased 820 basis points.
Raphael: Operating expenses in the quarter were $933 million flat from a year ago and about as expected.
Rafael R. Lizardi: On a trailing 12-month basis, operating expenses were $3.7 billion, or 22% of revenue. Operating profit was $1.3 billion in the quarter, or 35% of revenue, and was down 34% from the year-ago quarter. Net income in the first quarter was $1.1 billion, or $1.20 per share. Earnings per share included a 10 cent benefit that was not in our original guidance, primarily due to the sale of a property.
Raphael: On a trailing 12 month basis operating expenses were $3 $7 billion or 22% of revenue.
Raphael: Operating profit was $1 $3 billion in the quarter or 35% of revenue and was down 34% from the year ago quarter.
Raphael: Net income in the first quarter was $1 $1 billion or $1 20 per share.
Raphael: Earnings per share included a 10 cent benefit that was not in our original guidance, primarily due to the sale of a property.
Rafael R. Lizardi: Let me now comment on our capital management results, starting with our cash generation. Cash flow from operations was $1 billion in the quarter and $6.3 billion on a trailing 12-month basis; capital expenditures were $1.2 billion in the quarter and $5.3 billion over the last 12 months. Free cash flow on a trailing 12-month basis was $940 million. In the quarter, we paid $1.2 billion in dividends, and in the past 12 months, we returned $4.8 billion to our owners.
Let me now comment on our capital management results, starting with our cash generation.
Cash flow from operations was $1 billion in the quarter and $6 $3 billion on a trailing 12 month basis.
Capital expenditures were $1 $2 billion in the quarter and $5 $3 billion over the last 12 months.
Raphael: Free cash flow on a trailing 12 month basis was $940 million.
Raphael: In the quarter, we paid $1 2 billion in dividends and in the past 12 months, we returned $4 $8 billion to our owners.
Our balance sheet remains strong with $10 $4 billion of cash and short term investments at the end of the first quarter.
Rafael R. Lizardi: Our balance sheet remains strong with $10.4 billion of cash and short-term investments at the end of the first quarter. In the first quarter, we issued $3 billion in debt. Total debt outstanding is now $14.3 billion with a weighted average coupon of 3.8%. Inventory at the end of the quarter was $4.1 billion, up $84 million from the prior quarter, and days were 235, up 16 days sequentially.
In first quarter, we issued $3 billion in debt.
Raphael: Total debt outstanding is now $14 $3 billion with a weighted average coupon of three 8%.
Raphael: Inventory at the end of the quarter was $4 1 billion up $84 million from the prior quarter and days were 235 up 16 days sequentially.
Rafael R. Lizardi: For the second quarter, we expect TI revenue in the range of $3.65 to $3.95 billion and earnings per share to be in the range of $1.05 to $1.25. We continue to expect our effective tax rate to be about 13%. In closing, we will stay focused on the areas that add value in the long term. We continue to invest in our competitive advantages, which are manufacturing and technology, a broad product portfolio, the reach of our channels, and diverse and long-lived positions.
Raphael: For the second quarter, we expect Ti revenue in the range of $3 six five to $3 $95 billion and earnings per share to be in the range of $1 five to $1 25, we continue to expect our effective tax rate to be about 13%.
Raphael: In closing, we will stay focused in the areas that add value in the long term, we continue to invest in our competitive advantages, which are manufacturing and technology, our broad product portfolio for each of our channels and diverse and long lived positions.
Rafael R. Lizardi: 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 flow per share growth over the long term. With that, let me turn it back to Dave.
Raphael: 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 flow per share growth over the long term.
Raphael: With that let me turn it back to Dave.
Raphael: Raphael operator, you can now open the lines for questions in order to provide as many of you as possible an opportunity to ask your questions. Please limit yourself to a single question. After our response, we'll provide you an opportunity for an additional follow up operator.
Dave Pahl: Operator, you can now open the lines for questions. In order to provide as many of you as possible with an opportunity to ask your questions, please limit yourself to a single question. After our response, we'll provide you an opportunity for an additional follow-up. Operator? Thank you.
Thank you well now be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad.
Operator: Thank you. We will now be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we pull up for questions. Our first question is from Timothy Arcuri with UBS. Please proceed with your question.
Raphael: Confirmation tone will indicate your line is in the question queue. You May press star two if you'd like to remove your question from the queue for participants using speaker equipment and may be necessary to pick up your handset before pressing the star keys.
Raphael: Please while we poll for questions.
Raphael: Yeah.
Raphael: Our first question is from Timothy Arcuri with UBS. Please proceed with your question.
Timothy Michael Arcuri: Thanks a lot. Rafael, I'm wondering if you can give us an update on any ChIPSAC money that you may have gotten. I know basically all the money for the advanced nodes has been allocated and has been announced, but there's still like $9 billion outstanding for mature nodes. So can you kind of talk about that for us? Yeah, no.
Timothy Michael Arcuri: Thanks, a lot Raphael I'm wondering if you can give us an update on any chips Act money that you may have gotten I know basically all the money for the advanced nodes has been allocated and that's been announced but there is still like 9 billion outstanding for mature nodes. So can you kind of talk about that for us.
Raphael: Yes, no happy to do it.
Rafael R. Lizardi: Yeah, no; I'm happy to do it. First, let me address the grants, which I think is what you're referring to. On that, Frankly, we don't have an update to give. We're still going through that process. We submitted our application late last year and are working through the details with the CHIPS Program Office. As we said before, we believe our investments in manufacturing in both Texas and Utah are well positioned with the objectives of the CHIPS Program Office.
Raphael: First let me address the grants, which I think is what youre referring to.
Speaker Change: On that frankly, we don't have.
Raphael: An update to give we're still going through that process submit our application late.
Raphael: Late last year and are working through the details with the chip program office.
As we said before we believe our investments in manufacturing in both Texas, and Utah, well position with the objective of the chips. The program office now let me give you an update on the ITC the investment tax credit.
Rafael R. Lizardi: Now, let me give you an update on the ICC, the Investment Tax Credit. To date, we have accrued about $1.5 billion on that credit, and based on the recently released regulations, we will be receiving the ICC cash benefit throughout the year in 2024 and beyond, and starting next quarter. So in the second quarter, we're expected to receive about $300 million, and a total of $1 billion for all of 2024.
Raphael: To date, we have accrued about one 5 billion on that credit.
Raphael: And based on the recently released regulations, we will be receiving the ICC cash benefit throughout the year in 2024 and beyond.
Speaker Change: And starting next quarter. So in the second quarter were expected to be about $300 million.
A total of $1 billion for all of 2024.
Speaker Change: I'll follow up.
Unknown Caller: I do. Yeah.
Speaker Change: I do yes.
Rafael R. Lizardi: I wanted to ask about factory loadings and sort of where you think inventory goes for June. If I look at your guidance, the gross margins implied pretty flat x depreciation. So it seems like loadings are sort of leveled off in June. Is that right? And kind of what do you expect for inventory in June? It seems like it should start to come down a tick, you know, maybe in June.
Speaker Change: I wanted to ask about factory loadings, and sort of where you think inventory goes for June if I look at your guidance the gross margins implied pretty flat ex depreciation. So it seems like loadings has sort of.
Leveled off in June is that right and kind of what do you expect for inventory in June it seems like you should start to come down a tick maybe in June. Thanks.
Rafael R. Lizardi: Yeah, sure. Of course, we give guidance, we give a range on revenue, we give a range on EPS, and then 90 days from now, we'll discuss that more or less. But for now, I'll tell you that in the first quarter, we adjusted factory loadings as we neared our desired inventory levels, and as we said in our remarks, we grew our inventory by about 80 some million dollars. Then, for the second quarter, we're going to adjust loadings depending on future demand.
Speaker Change: Yes sure.
Speaker Change: Of course, we gave our guidance we gave a range on revenue we gave a range on the EPS and then 90 days from now we will discuss that in more or less but for now I will tell you that in first quarter, where adjusted factory loadings as we neared our desired inventory levels.
Speaker Change: And as we said during the prepared remarks, we grew inventory about $87 million and then for second quarter, we're going to adjust those loaded is dependent on future demand.
Operator: Thank you, Tim. We'll go to the next caller, please.
Speaker Change: Thank you Tim will go to the next caller please.
Stacy Aaron Rasgon: Our next question is from Stacy Rasgon with Bernstein Research. Please proceed with your question.
Our next question is from Stacy <unk> with Bernstein Research. Please proceed with your question.
Stacy Aaron Rasgon: Hi guys, thanks for taking my questions. I wanted to follow up on that.
Speaker Change: Hey, guys. Thanks for taking my question.
Stacy: I wanted to follow up on that if and when revenues begin to recover.
Rafael R. Lizardi: If and when revenues begin to recover, how do we think about what that would imply for your factory utilization given your current inventory position, as well as additional capacity coming online, which I guess sort of just naturally gives a downward bias to utilization anyways? Like, I guess, how would you need to take utilizations up or how much revenue growth would you need to start taking utilizations up given your position on inventories and incapacity additions?
Stacy: How do we think about what that would imply for your factory utilization given your current inventory position as well as additional capacity coming online with I guess sort of just naturally gives a downward bias to utilization anyways I guess, how long would you need to take utilization drop or how much revenue growth would you need to start taking utilizations up given your positioning on inventories and capacity there.
Stacy Aaron Rasgon: Yeah, so Stacy, that's a good question, but it's a complex question, and at the end of the day, it's going to depend on a number of factors, you know, what kind of revenue profile we're faced with, and not just in one or two quarters but really over a longer horizon. Maybe the best thing I can tell you is, you know, 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 times short, and also the upside potential that we have with having this inventory and the capacity plate is so much higher than the downside risk. So hopefully, that gives you some good insight into how we think. Do you have a follow-up?
Stacy: Sure.
Speaker Change: Yes, so I'll say, it's a good question, but it's a complex question and.
Stacy: At the end of the day, it's going to depend it's going to depend on a number of factors what kind of revenue profile you.
Stacy: We're faced with.
Stacy: And not just in one or two quarters, but really over a longer horizon, maybe the best thing I can tell you is.
Stacy: Don't expect.
Stacy: A significant or even any drain on inventory.
Stacy: Because just given our business model and how we want to run the company keeping lead times short and also the upside potential that we have with having this inventory and the capacity in place is somewhat higher than the downside risk. So so hopefully that gives you. Some some good insight into how we're thinking do you have a follow up.
Stacy Aaron Rasgon: I do, thanks. I was wondering if you could talk a little bit about pricing. I think last quarter you suggested that pricing was sort of resuming historical trends, which I think suggested that it was down. I think it was low to mid-single digits. Is there any update on what you're seeing in terms of the pricing environment?
Stacy: Thanks.
Speaker Change: I was wondering if you could talk a little bit about pricing I think last quarter. You had suggested that pricing was sort of resuming historical trends I think it suggests it was down I think it was.
Speaker Change: Low to mid single digits.
Is there any update on what Youre seeing in terms of the pricing environment is that still the environment that we're in are things that are things worse like where do you where do you see that going as we go forward.
Rafael R. Lizardi: Is that still the environment that we're in? Are things better? Are things worse? Like, where do you see that going as we go forward?
Rafael R. Lizardi: Yeah, Stacy, I'll comment on that. And as I said last quarter, really, we began seeing things change mid last year, in the back half of last year, as we began discussions with customers about their demand for, you know, the following year and out in time, whatever those pricing windows would open up. And those are really just going back to what we've seen, you know, the last 10, 20 years, kind of pre-pandemic. So, you know, describe it roughly in the, in the.
Speaker Change: Yes, Stacy I'll comment on that as I said last quarter really we began seeing things change.
Speaker Change: Mid last year in the back half of last year as we.
Stacy: Began discussions with customers.
Stacy: For their demand in.
Speaker Change: The following year.
Speaker Change: And out in time whenever those.
Speaker Change: Pricing Windows would open up and those are really just going back to what we've seen.
Speaker Change: The last 10, 20 years kind of pre pandemic.
Describe it roughly in the low to very low single digit declines.
Rafael R. Lizardi: Let me add one more thing, Stacy. I want to give you a bonus answer. You always ask about OPEX. I appreciate it. Thank you.
Speaker Change: Over time, and I would say just generally what that's what we're continuing to see.
Let me add one more thing.
Speaker Change: Hey, do you want to give you a bonus answer you always ask about opex.
Speaker Change: Thank you.
Operator: Thank you, Stacy. We'll go to the next caller, please.
Speaker Change: So you're not asking but I'm going to give your opex remember that second quarter is a full.
Vivek Arya: Our next question is from Vivek Arya with Bank of America Securities. Please proceed with your question.
Speaker Change: Three months of races, whereas the first quarter only had.
Speaker Change: Two months and raises is something something for your modeling.
Speaker Change: Alright. Thank.
Speaker Change: Thank you Stacy and we'll go to go to the next caller. Please.
Vivek Arya: Thank you for taking my question. I think in the prepared remarks, you said customers continue to reduce inventory levels, but you're also guiding Q2 sales to be up 4% sequentially. So my question is, you know, should we think of Q2 as kind of a normal seasonal quarter, just any more color on what you're seeing real time? Are we past the industry inventory correction? Are we kind of, you know, getting back to some semblance of normalcy from a demand perspective?
Speaker Change: Our next question is from Vivek Arya with Bank of America Securities. Please proceed with your question.
Vivek Arya: Thank you for taking my question.
Vivek Arya: Thank <unk>.
Vivek Arya: Prepared remarks is that customers continue to reduce inventory levels, but youre also guiding Q2 sales to be up.
Vivek Arya: 4% sequentially. So my question is should we think of Q2 is kind of a normal seasonal quarter, just any more color on what youre seeing real time RV past the industry inventory correction or are we kind of getting back to some semblance of normalcy normalcy from.
Vivek Arya: From a demand perspective, any other color you could get from an end market or a geo perspective.
Vivek Arya: Any other color you could give from an end market or geo perspective? Just, you know, you are the largest, right, most influential vendor in the market. So I think your views would be very useful to understand where we are in the inventory and the broader demand.
Vivek Arya: You are the largest and most influential vendor in the market. So I think your.
Vivek Arya: Perspective, it would be very useful to understand where we are in the inventory and broader demand cycles.
Dave Pahl: Yeah, Vivek, let me start with what we saw happen, you know, in the last quarter, because I think it's helpful. You know, the first thing we saw, you know, personal electronics was the first market that went into correction. It really was the first to come out in the last few quarters and describe it as behaving more seasonal. If you go to the other end of the spectrum, you know, we've had industrial, which has been declining sequentially for some time.
Speaker Change: Yes, Vivek, let me start with what we saw happen.
Speaker Change: In last quarter.
Speaker Change: I think it's helpful.
First we saw.
Speaker Change: Personal electronics was the <unk>.
Speaker Change: First market that went into the correction. It really is was the first to come out in the last few quarters and describe it is behaving more seasonal.
Speaker Change: If you go to.
Speaker Change: The other end of the spectrum.
Speaker Change: We've had <unk>.
Speaker Change: Industrial which has been declining sequentially from some time and over the last few quarters, we've been talking about how.
Dave Pahl: And over the last few quarters, we've been talking about how there is some asynchronous behavior inside of the 12, 13 sectors that we have there. And that continued during the quarter. So we've got some of the later cycle sectors that are continuing to decline and declining at double digit rates. But there are some that are, you know, beginning to, you know, begin to slow in the declines and even a couple that grew sequentially.
Speaker Change: There are some asynchronous behavior inside of that.
Speaker Change: At $12 13 sectors that that we have there.
Speaker Change: Continued inside of the quarter. So we've got some.
The later cycle.
Sectors that are not continuing to decline and declining at double digit rates.
Speaker Change: But there are some that are.
Speaker Change: Beginning to.
Speaker Change: Begin to slow in the declines and even a couple that that grew sequentially. So.
Dave Pahl: So, you know, that I would just describe as being more mixed this quarter, which is certainly different than last quarter. So, and if you look, historically, a second quarter is a seasonally strong quarter for us. So it's not unusual for us to see sequential growth sequentially.
Speaker Change: I would just describe it as being more mix this quarter, which is certainly different than than last quarter. So.
Speaker Change: Look historically, our second quarter is a seasonally strong quarter for us. So it's not unusual for us to see sequential growth sequentially.
Speaker Change: Sure.
Vivek Arya: Thank you, Dave. Maybe I can press a little bit on that. For Q2, specifically industrial and automotive, is your assumption that customers will continue to work down inventory, or do you think that they have worked down most of the inventory, and we are getting back to some semblance of what normal demand looks like for TI in Q2? What does your guidance actually imply? Are we below seasonal? Are we seasonal, or are we something different?
Speaker Change: Yeah. Thank you, Dave maybe perhaps a little bit on that for Q2, specifically industrial and automotive do you think as.
Speaker Change: Is your assumption that customers will continue to work down.
Speaker Change: Inventory or do you think that they have broke down most of the inventory and we are getting back to some semblance of what normal demand looks like for Ti in Q2 like what does your guidance.
Speaker Change: <unk> imply that RV below seasonal RV seasonal or are we.
Speaker Change: Different.
Dave Pahl: Well, again, we're not, you know, in the practice of giving guidance by end market. And, you know, but even inside of, you know, last quarter, as we looked at it, inside of industrial, there obviously are some customers that are nearing the end of that inventory depletion cycle. So, as you know, we try to be very cautious and not try to predict, you know, tops or bottoms or those types of things and just report, you know, what we see and just stick to the facts. So thank you, Vivek, and we'll go to the next caller, please.
Dave: Well again, we're not.
Dave: <unk>.
Dave: In the practice of giving guidance.
Dave: By end market.
Dave: <unk>.
Dave: But even inside of.
Dave: Last quarter as we looked at it inside of industrial there obviously are some customers that.
Dave: Are nearing the end of that inventory depletion cycle. So.
Speaker Change: As you know, we don't we try to be very cautious and not try to predict.
Tops or bottoms or those types of things and just report.
Speaker Change: What we see and just stick to the facts.
Speaker Change: So thank you Vivek, we will go to the next caller. Please.
Thomas O'malley: Our next question is from Thomas O'Malley with Barclays. Please proceed with your question.
Speaker Change: Our next question is from Thomas O'malley with Barclays. Please proceed with your question.
Thomas O'malley: Hey, good afternoon. Thanks for taking my question. Mine is in regards to China. 2023 data came out recently, and it looks like, you know, some of the larger North American players didn't really lose share, despite some concerns on the trailing edge that you would have some increased Chinese competition. Can you talk? Has there been any change in the way that customer behavior has kind of trended over the last couple of months? And can you talk about just that competitive environment? Are you seeing more players there? Are you seeing players that you didn't see before?
Speaker Change: Hey, good afternoon, and thanks for taking my question minus in regards to China 2023 data came out recently and it looks like.
Thomas O'malley: Some of the larger North American players didn't really lose share. Despite some concerns on the trailing edge that you would have some increased China competition can you talk is there been any change in the way that customer behavior has kind of trended over the last couple of months and can you talk about just the competitive.
Speaker Change: Environment are you seeing more players there are you seeing players that you didn't see before any color on China would be super useful. Thank you sure yes.
Dave Pahl: Any color on China would be super useful. Thank you.
Dave Pahl: Sure. Yeah. Thanks, Tom, for that question.
Speaker Change: Thanks, Tom for that question I would say no.
Dave Pahl: And I would say, you know, it'll change over the last couple of months. But, you know, I think certainly over the last few years, there are many things that are changing in China. You know, we've got very competent local competitors there, as well as, you know, subsidized capacity going in place. And, you know, when you compare that to five or ten years ago, is it harder to compete there? You know, it certainly is. But again, I would not describe that as a competitive landscape that's, you know, changing overnight.
Speaker Change: No change over the last couple of months, but I think certainly over the last few years. There is many things that are changing in China.
Speaker Change: Got very competent local competitors there.
Speaker Change: As well as theirs.
Subsidized capacity going in place.
Speaker Change: And when you compare that to five or 10 years ago is it harder to compete there certainly is.
Speaker Change: But again I would not describe that as a competitive landscape.
Speaker Change: Changing over overnight and we've talked about that for some years. So.
Dave Pahl: And we've talked about that for some years. So, you know, China is an important market for us. It continues to be a growing market. And, you know, we can and will compete there to support our customers. So, you know, our competitive advantages, whether that's our manufacturing and technology, the breadth of the portfolio, the reach of the markets, all serve us very, very well in China. Do you have a follow-on?
Speaker Change: China is an important.
Speaker Change: Market for us.
Speaker Change: It continues to be a growing market.
Speaker Change: We can and will compete there to support our customers. So.
Speaker Change: Our competitive advantages, whether thats, our manufacturing and technology the breadth of the portfolio the reach of the market's all service very very well in China. We are following.
Thomas O'malley: Yeah, just on auto, particularly, I know that you're not guiding the out quarter, but just conversations that you've had since you last updated us with those customers. I think you just mentioned that inventories are coming down. But, you know, through the pandemic, there was a kind of change in stated ordering patterns of just in time to just in case. Do you see that kind of persisting? Or do you think that we're moving back to a situation in which customers really want to have, you know, a much lower inventory on their balance sheets? Obviously, you have a unique supply chain, but just any thoughts on just the auto environment, particularly in the last several months?
Speaker Change: Yes.
Speaker Change: On the auto, particularly I know that youre, not getting the out quarter, but just conversations that you've had since you last updated us with those customers. I think you just mentioned that inventories are coming down but.
Speaker Change: Through the pandemic there was a.
Speaker Change: Kind of change of stated ordering patterns of just in time to just in case do you see that kind of persisting or do you think that we're moving back to a situation in which customers really want to have.
Speaker Change: Much lower inventory on their balance sheet, obviously, you have a unique supply chain, but just any thoughts on just the auto environment, particularly through the last several months. Thank you sure yes.
Dave Pahl: Thank you. Sure. Yeah.
Dave Pahl: Thanks again, Tom. Yeah, I would say that many customers, and especially those in the automotive industry, as they went through and dealt with the disruptions that they had in their supply chains, actually were very thoughtful and looking at, you know, where their supply is coming from, what things that they could do differently, well beyond just carrying, you know, extra days of inventory. And when they went through that analysis, I think many found that they had a pretty significant dependence on wafers coming out of both China and Taiwan.
Speaker Change: Thanks again Tom.
I'd say that.
Speaker Change: Many customers and especially those in automotive as they went through and dealt with the disruptions that they had in supply chain is actually we're very thoughtful and looking at.
Speaker Change: Where their supply is coming from what things that they can do differently.
Well beyond just carrying.
Speaker Change: Extra days of inventory and when they went through that analysis I think many found that.
They have a pretty significant dependence on wafers coming out of both China and Taiwan.
Dave Pahl: And what they described to us is geopolitically dependable capacity. And again, we've talked about that before in our capital management updates. We believe that that's going to be highly sought after. We are seeing that today. And so I think we're in a position to be able to support customers and the growth that will come from that. So thank you, Tom. We'll go to the next caller.
And what they describe that to us is geopolitically dependable capacity as what they're seeking and again, we've talked about that before in our capital management updates we.
Speaker Change: We believe that that's going to be.
Speaker Change: Highly sought after it we are seeing that today.
Speaker Change: And.
Speaker Change: So I think we're in a position to be able to to support customers in that growth that will come from that so thank you. Tom we will go to the next caller. Please.
Ross Seymour: Our next question is from Ross Seymour with Deutsche Bank. Please proceed with your question.
Speaker Change: Our next question is from Ross Seymore with Deutsche Bank. Please proceed with your question.
Ross Seymour: Hi guys, thanks for asking a couple of questions. I guess for the first one, Dave, I know you don't want to guide by the segments, but you gave the quarter over quarters. Could you give us what the year over years were by end market in the first quarter, please? I can do that.
Ross Seymore: Hi, guys. Thanks, I'm going to ask a couple of questions I guess for the first one Dave I know you don't want to guide by the segments.
Ross Seymore: The quarter over quarters could you give us what the year over years, where by end market in the first quarter. Please.
Dave Pahl: I can do that, yes. So the industrial market was down about 25% from a year ago, automotive was down lower single digits, personal electronics was actually up single digits, comms equipment was down about 50%, and the enterprise system was down mid-teens.
Dave: Can do that yes, so the industrial market was down about 25% from a year ago automotive was down lower single digits.
Personal electronics was actually up single digits.
Dave: <unk> equipment was down about 50%.
Dave: And enterprise system was down mid teens.
Ross Seymour: I do. Rafael, you talked a little bit about the trajectory of the grant side of the CHIPS Act, or, excuse me, the ITC side, and where you're getting the money in over time. Does any of these inflows of cash have a differing impact on the income statement? Or is it just the same? It's just a matter of timing and when you're getting that, you know, billion dollars, as opposed to I think you said 500 million before.
Speaker Change: A follow on Ross.
I do.
Ross Seymore: You talked a little bit about the trajectory of the grant side of the chip to act or excuse me, the ITC side, where youre getting the money and overtime does any of that inflows of cash have a different impact on the income statement.
Ross Seymore: Or is it just the same it's just a matter of timing and when youre getting that $1 billion as opposed to I think you said $500 million before.
Rafael R. Lizardi: Right. No, no direct impact on the income statement that's already playing out as the lower depreciation and is already flowing through the P&L and in our expectations for depreciation. Of course, having more cash does have an impact in terms of, you know, if you have more cash, you're going to have more interest income, but put that aside. That's kind of below the profit line, the operating profit line. So, speaking of depreciation, let me give you an update on that.
Ross Seymore: Right no another <unk> <unk> impact on the on the income statement Thats already.
Ross Seymore: Played in.
The lower depreciation and are already flowing through the P&L and in our expectations on on depreciation of course, having more cash does have an impact in terms of.
Mortgages are going to have more interest income, but put that aside.
Ross Seymore: That's that's kind of below the profit line or the operating profit line.
So.
Ross Seymore: Speaking of depreciation let me give you an update on that.
Rafael R. Lizardi: We've been talking about depreciation for this year, 1.5 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. And for 2025, we continue to expect $2 to $2.5 billion in depreciation.
Ross Seymore: We.
Ross Seymore: We've been talking about depreciation for this year, one five to one 8 billion.
Ross Seymore: We continue to expect that but we're more likely to come in at the bottom half of that range and for 2025, we continue to expect two to $2 $5 billion in depreciation.
Operator: Thank you, Ross. We'll go to the next caller.
Speaker Change: Alright. Thank you Ross will go to the next fall or please.
Chris Danely: Our next question is from Chris Danely with Citibank. Please proceed with your question.
Speaker Change: Our next question is from Cristina <unk> with Citibank. Please proceed with your question.
Chris Danely: Hey, thanks, guys. Hey, Rafael, just another question on the balance sheet and cash. So you guys have seen the share count kind of flatten out here for the last four or five quarters, and then you're building cash and increasing your debt. I guess what's changed? You know, traditionally, you've sort of, you know, taken the share count down slowly but steadily. Any sort of changes in the long-term thinking there on cash usage, etc.?
Cristina: Hey, Thanks, guys, Hey, Rafael just another question on the balance sheet and cash so.
Cristina: You guys have.
Cristina: This share count kind of flattened out here.
Cristina: And an increase in your debt.
Cristina: I guess, what's changed traditionally you've sort of.
Cristina: <unk> taken the share count down slowly, but steadily any sort of changes in the long term thinking there on cash usage of cash et cetera.
Rafael R. Lizardi: Yeah, you know, when it comes to capital management, it all depends and depends on circumstances, and at the moment, you know, our objective when it comes to, you've known us for a while, we return all cash flow, offer cash flow to the owners of the company, and we do that over time. But there are times when we need to increase liquidity and build up cash. So you have seen us over the last couple years do that and steadily increase the cash on the balance sheet.
Cristina: Yes.
Speaker Change: When it comes to capital management, it all depends and it depends on circumstances and at the moment.
Speaker Change: Our objective when it comes to you can you've known us for a while we return all cash flow or free cash with the owners of the company and we do that over time, but there are times too.
Speaker Change: To increase liquidity and to build.
Speaker Change: Buildup cash so you have seen it over the last.
Speaker Change: Couple of years do that and steadily increase the cash on the balance sheet.
Rafael R. Lizardi: We finished at 10.4 billion last quarter. And we've done that very consciously, right to protect the investments that we're making, particularly the 5 billion per year CapEx investments in manufacturing, because that is the most important allocation of capital for the last few years and will continue to be for the next three years. So with that in mind, we've had that in mind as we have made overall capital allocation decisions, including decisions on repurchases.
Speaker Change: We finished at $10 4 billion last quarter.
Speaker Change: We've done that.
Speaker Change: Consciously.
Speaker Change: To protect.
Speaker Change: The investments that we're making particularly.
Speaker Change: The $5 billion per year Capex investments in manufacturing because that is the.
The most important.
Speaker Change: The allocation of capital has been for the last few years and will continue to be bought our next three years. So so with that in mind.
Speaker Change: So we've had that in mind as we have made.
Speaker Change: Overall capital allocation decisions, including the decisions on repurchases.
Speaker Change: A follow on Chris.
Chris Danely: Yeah, thanks, Dave. Just another question on China, but more on the, I guess, the insourcing side. So some of your competitors have talked about this impacting them. Do you guys see an impact of this on TI? Would or will this alter your long-term growth expectations or thoughts on your China business?
Chris: Yes, Thanks, Dave.
Chris: Just another question on China, but more on the I guess the in sourcing side. So some of your competitors have talked about this.
Chris: Impacting them.
Chris: Guys.
Speaker Change: See an impact of this on Ti.
Speaker Change: Or will this all.
Speaker Change: Alter your long term.
Speaker Change: <unk> growth expectations or thoughts on your China business as to any any color there would be very helpful. Thanks.
Rafael R. Lizardi: Just any color there would be very helpful. Thanks.
Rafael R. Lizardi: Yeah, so I'll start, and Dave, if you want to chime in, but, you know, as Dave alluded to earlier in the call, China's a very important market. We need to compete there. We do compete there, and we compete to win there.
Speaker Change: So I'll start and Dave if you want to chime in but that Dave alluded to earlier on the call China is a very important market.
Speaker Change: We need to compete there we do compete there.
Speaker Change: And we compete to win there.
Rafael R. Lizardi: You know, China, it's pretty clear that there is an incentive to design local semiconductor supplies. I think that's what you're referring to as insourcing. And today, yeah, today that share, my guess, my sense is that 10 to 15% of the local content is sourced by local semiconductor suppliers. I think the exact number is 12, the one I saw. So that means there's another 88% that is shared now between U.S. and European suppliers, and our goal is to continue that fight and maintain and gain that share, competing with local suppliers but also competing with U.S. and European semiconductor suppliers.
Speaker Change: China, there, it's pretty clear that there is an incentive to.
Dave: To the signed local semiconductor suppliers I think that's what you're referring to is as in sourcing.
Dave: And to date, yes today that share my guess my sense is it 10% to 15%.
Dave: The local.
Dave: Cant any stores by.
Dave: By local semiconductor suppliers I think the second number is 12%.
Dave: So that means there's another 88%.
That is that is share now between the U S.
Dave: And European suppliers.
And our goal is to continue that fight.
Dave: And maintain and gain that share comp.
Dave: Competing with local suppliers, but also competing with U S and European semiconductor suppliers and maybe I'll just add.
Dave Pahl: Yeah, and maybe I'll just add, you know, in China and in any market, we've just got to have the best parts. And when we have that, you know, that means we've got to be ahead of competitors, whether that's on performance, on support, availability, and cost.
Dave: In China in any in any market. We've just got to have the best parts and when we have that.
Dave: That means we've got to be ahead of competitors, whether that's on <unk>.
Dave: <unk> on support availability and costs so.
Dave Pahl: So, you know, and we have customers in every region that are beginning to think about where they're sourcing products from. So, you know, customers that aren't in China are looking at our, as they describe it, geopolitically dependable capacity, and that's about 80% of our revenue. The 20% that's in China, we have customers in China that have and support global markets, and they're coming and describing our geopolitically dependable capacity and wanting to have access to it because it is very unique.
Dave: And we have customers in every region that are beginning to think about where they're sourcing products from so.
Dave: Customers that are in China are looking at are as they describe it geopolitically dependent bulk capacity and thats about 80% of our revenue the.
The 20% that's in China, we have customers in China that have and support global markets and Theyre coming in describing our geopolitical dependent book kept capacity and wanting to have access to it because it is very unique.
Dave Pahl: We're the only ones that are building at scale outside of China and Taiwan's capacity. So customers understand that they understand it both in China, as well as, as well as outside. So thank you for that, Chris; we'll go to the next caller.
Dave: We're the only ones that are building at scale outside.
Speaker Change: Outside of China, and Taiwan capacity, so customers understand that they understand it both in China as well as as well as outside so thank you for that Chris will go to the next caller. Please.
Joseph Moore: Our next question is from Joe Moore with Morgan Stanley. Please proceed with your question.
Speaker Change: Our next question is from Joe Moore with Morgan Stanley. Please proceed with your question.
Joseph Moore: Great, thank you. I've asked this question before, but it keeps coming up.
Joseph Moore: Great. Thank you.
Joseph Moore: This question before but it keeps coming up can you talk about how you think about pricing kind of more strategically as you contemplate having.
Rafael R. Lizardi: Can you talk about how you think about pricing kind of more strategically, as you contemplate having a decent amount of capacity, more 300 millimeter capacity, more subsidization, you know, that changes the pricing paradigm at all? Are there markets where you might be more price aggressive than you wouldn't be? You know, if any of that were different?
Joseph Moore: A decent amount of capacity more 300 millimeter capacity more subsidization.
Joseph Moore: Does that change the pricing program at all are there markets, where you might be more price aggressive and you wouldn't be.
Joseph Moore: If any of that were different.
Joseph Moore: Yeah, Joe, you know, the answer will be amazingly consistent with how you've asked it before, but you know, we haven't changed our strategy on pricing. You know that, you know, pricing doesn't move quickly in our industry, and it isn't the primary reason why customers choose our products overall. So, you know, we regularly monitor pricing for all of our products, which includes all end markets and all product categories and all regions, and we price to be competitive, and we can do that because we've got a great product portfolio, and we've got great access to the markets, you know, through our channels, and, you know, we've got competitive products because we build them on 300 millimeters. Hopefully, that's amazingly consistent Do you have a follow-on?
Joseph Moore: Yes, Joe.
Joseph Moore: The answer will be amazingly consistent with how you've asked it before but.
Speaker Change: We haven't changed our strategy on pricing you know that.
Speaker Change: Pricing doesn't move quickly.
Speaker Change: In our industry and it isn't the primary reason why customers.
Speaker Change: Choose our products overall, so we regularly monitor.
Speaker Change: <unk> for all of our products that includes all end markets and all product categories in all regions and weak price.
Speaker Change: To be competitive and we can do that because we've got a great product portfolio and we've got.
Speaker Change: Great access to the markets.
Speaker Change: Through our channels.
Speaker Change: And we've got competitive products, because we build it on 300 millimeter.
Speaker Change: Hopefully that's amazingly consistent you have follow on.
Rafael R. Lizardi: Yeah, thank you for that. Um, yeah, in terms of the embedded business, I know you've had a number of kind of vertical markets that you de-emphasize and things like that, with kind of a focus on more of a core kind of catalog strategy in that business. You know, where are you in that? Do you expect that, you know, you would, that your embedded business would sort of track the broader microcontroller business, or just, you know, how do you think about the transitions that are coming?
Speaker Change: Yes, thank you for that.
Speaker Change: Yeah in terms of the embedded business I know you've had a number of kind of vertical markets that you deemphasize and things like that with kind of a focus on on more of a core kind of catalog strategy in that business.
Speaker Change: Or are you in that do you expect that you would get your embedded business, what sort of track the broader microcontroller business or just how do you think about the transitions that are happening.
Speaker Change: Yes, I think that.
Rafael R. Lizardi: Yeah, I think that we continue to make progress overall in our embedded business. You know, the goal there is to, you know, have that business growing and contributing to our free cash flow over the long term. We think it's a great business and will continue to invest. So we're very happy with that strategic progress. So I think in the near term, of course, we're not going to be immune to cycle-related corrections.
We continue to make progress overall in our embedded business.
Speaker Change: The goal there is to.
Speaker Change: Have that business growing and contributing to our free cash flow over the long time, we think it's a great business and continue to.
Speaker Change: Invest so we're very happy with that strategic.
Speaker Change: Progress so I think in the near term of course, we're not going to be immune to cycle related.
The corrections.
Rafael R. Lizardi: It's a little bit later because of the constraints that we have due to the embedded reliance on foundry supply. And as you know, we're investing to put capacity in place, and we'll have control of that in the future and really are in a good position to gain share there. Thank you for that, Joe. We'll go to the next caller.
Speaker Change: A little bit later because of the constraints that we have.
Speaker Change: Due to embedded relying on foundry.
Speaker Change: Supply and as you know, we're investing to put capacity in place.
Speaker Change: And we will have control of that.
Speaker Change: In the future and really are in a good position to gain share there.
Speaker Change: So thank you for that Joe will go to the next caller. Please.
Tore Egil Svanberg: Our next question is from Tore Svanberg with Stiefel. Please proceed with your question.
Our next question is from Tories Lundberg with Stifel. Please proceed with your question.
Tories Lundberg: Yes. Thank you.
Tories Lundberg: Dave I had a question about the Q4 I mean, the Q2 outlook. So I know you obviously, you cant guide by market and things like that but from a bookings perspective are we starting to see sort of a broad based recovery in bookings or would you still say, it's quite selective in all the different applications that you are targeting.
Tore Egil Svanberg: Dave, I had a question about the Q2 outlook. I know obviously you can't guide by market and things like that, but from a bookings perspective, are we starting to see sort of a broad-based recovery in bookings, or would you still say it's quite selective in all the different applications that you're targeting?
Dave Pahl: Yeah, so let me speak to bookings at the top level. You know, we saw bookings increase each month of the quarter. That is very typical of what we would see in a first quarter.
Dave: Yes, So let me speak to bookings.
Dave: At the top level, we saw.
Bookings increased each month of the quarter.
Dave: It is very typical.
Dave: That we would see in a first quarter.
Dave Pahl: I don't have bookings by end market. If there's something very unusual going on, of course, that would jump out at us. So that's just not something I have here in front of me, but I would describe it as behaving as we would expect it to. And of course, those bookings, you know, and other demand signals that we get from our customers are obviously incorporated into our guidance. Do you have a follow on Tori?
Dave: Don't have bookings by by end market.
Dave: Something very unusual going on of course that would <unk>.
Dave: Out at Us so.
Dave: That's just not something I have here in front of me, but I would describe it is behaving as we would expect it to end.
Dave: And of course those bookings.
Dave: And other demand signals that we get from our customers are.
Obviously immune into.
Dave: Into our guidance.
Tore Egil Svanberg: Yeah, that's very helpful. As a follow-up, you mentioned there are a few segments within the industrial category that are starting to grow or perhaps have found the bottom from an inventory correction perspective. Can you talk about which segments those are?
Speaker Change: Yes, that's very helpful. As my follow up you had mentioned Theres a few segments within the industrial category that are starting to grow or perhaps have found the bottom from an inventory correction perspective can you can you.
Speaker Change: Talk about which segments those are.
Dave Pahl: Yeah, you know, again, as we talked about over the last several quarters now, there were markets that were behaving, or sectors that were behaving asynchronously. So, you know, there are shorter-cycle investment sectors that began to roll earlier, longer-term investment cycles that were rolling later, really just the last couple of quarters into it. So it's really, if you had to kind of divide them out, that's what they would look like. Thank you for that, Dory, and we're going to go to the next caller. And this will be our last caller.
Speaker Change: Yes.
Speaker Change: Again, as we talked about.
Speaker Change: Over the last several quarters now that.
There was.
Speaker Change: Markets that were behaving sectors that were behaving a synchronously. So there are shorter cycle of investment.
Speaker Change: Sectors that began to roll earlier longer term investment cycles that we're rolling later really just the last couple of quarters into it. So it's really if you had to.
Speaker Change: Divide them out that's what they would look like.
Well, thank you for that story and a great. Thanks to go to the next caller. Please.
Speaker Change: This will be our last caller.
Christopher Caso: Our last question is from Chris Caso with Wolf Research. Please proceed with your question.
Speaker Change: Our last question is from Chris Caso with Wolfe Research. Please proceed with your question.
Christopher Caso: Yes, thanks. Good evening.
Christopher Caso: Yeah. Thanks. Good evening first question is related to the buybacks and I think you addressed this in a prior question, but I guess the question is.
Christopher Caso: The first question is related to buybacks, and I think you addressed this in a prior question. But I guess the question is, what would be the trigger for being able to resume some degree of buybacks? We realize that the intention is to return 100% of excess free cash flow, but at what point does the cash in the balance sheet and the industry conditions allow you to go back to what you've been doing previously?
Christopher Caso: What would be the trigger for being able to resume some degree of buybacks, we realized that the intention is to.
Christopher Caso: Returning 100% of excess free cash flow, but at what point does the cash on the balance sheet.
Christopher Caso: Industry conditions allow you to kind of come back to what you've been doing previously.
Rafael R. Lizardi: Yeah, well, a couple of things. For example, you know, the data point that I'll give you is our free cash flow for the trailing 12 months was $940 million. And we return, and also in the trailing 12 months, $4.8 billion. So, you know, one catalyst for a change there would be once we're past this investment phase that is consuming a good chunk of that free cash flow. Another catalyst is obviously revenue and how that behaves over a number of years. So, you know, these are just some of the puts and takes that we think about when we're allocating capital.
Christopher Caso: Yes.
Speaker Change: A couple of things for.
Speaker Change: For example.
Speaker Change: Datapoint I will give you is our free cash flow for the trailing 12 months was $940 million.
Speaker Change: And we will return in also in trailing 12 month, four 8 billion.
Speaker Change: So one.
Speaker Change: Catalyst.
Speaker Change: For a change there would be.
Speaker Change: Once we're past this investment phase that is.
Speaker Change: Consuming a good chunk of that.
Speaker Change: Free cash flow.
Speaker Change: Another catalyst is obviously revenue and how that behaves overdue over a number of years, but.
Speaker Change: So these are just some of the puts and takes there.
Speaker Change: That we think about when we're when we're allocating capital.
Speaker Change: Yes follow on Chris.
Christopher Caso: Follow on Chris. I do, thanks.
Christopher Caso: I do thanks.
Christopher Caso: And I guess the question is about where TI is allocating its R&D investment going forward and how that may be changing. You know, over the last year, it looks like auto industrial is about 70% of your revenue, and I know that's by design, but you've got some segments, you know, such as common equipment, that have been, you know, down a lot more. You know, as we look out over the next two years or so, do you think that that percentage of revenue from the segments kind of stays about where it is right now? Or, you know, based on the R&D investments you're making, do you think that changes substantially?
Christopher Caso: And I guess the question is about where Ti is allocating R&D investment going forward and how that may be changing.
Christopher Caso: Last year it looks like auto industrial is about 70% of your revenue and I know thats by design, but you've got some segments such as comm equipment that have been down a lot more.
As we look out over the next two years or so do you think that that percentage of revenue on the segments kind of stays about where it is right now or based on the R&D investments, you're making do you think that changes substantially.
Speaker Change: Yes, and it's a great question, Chris So.
Rafael R. Lizardi: Yeah, and it's a great question, Chris. So let me just use it as a backdrop for those that haven't looked at our capital management slide deck. Slide 21 shows our percentage of our revenue by end market. And the middle column there, it talks about what we're doing directionally from an R&D spend.
Speaker Change: Let me, let me just use as a backdrop for those hadn't looked at our capital management slide deck and slide slide 21 shows our.
Speaker Change: Percentage of our revenue by by end market.
Chris: The middle column there it talks about what we're doing directionally from an R&D spend so and we've talked about for some time that our belief that.
Rafael R. Lizardi: So, and we've talked about for some time our belief that there are going to be secular trends and increasing semiconductors in industrial and automotive. And as a result of that, we have been making investments there. And in the other markets, though, if you look at personal electronics and communications equipment, our investments there have been and continue to be very steady because we can find great opportunities inside those markets. And so we'll continue those investments.
Chris: There's going to be secular trends, and increasing semiconductors, and industrial and automotive and as a result of that we have been taking investments up there.
And the other markets, though if you look at personal electronics and communications equipment. Our investments there have been and continue to be very steady because we can find great opportunities.
Chris: Inside of those markets and so we will continue those investments and then enterprise systems.
Rafael R. Lizardi: And then enterprise systems, we've taken up the investments there slightly. And there are just opportunities, and enterprise systems likely will be a good grower as well. It doesn't have quite the same dynamics as industrial and automotive for us, but certainly things that sit inside of enterprise, we believe will make that a above-average grower over the next decade or so. With that, I'll turn it over to Raphael to wrap up. Okay, thanks Dave.
Chris: We've taken up the investments they are slightly.
Chris: And there's just opportunities in enterprise systems likely will be.
Chris: A good grower as well it doesn't have quite the same dynamics as industrial and automotive for us.
Chris: But certainly.
Things that sit inside of enterprise, we believe will make that a above average grower over the next decade.
Chris: So with that I'll turn it over to Raphael to wrap up okay. Thanks, Dave.
Rafael R. Lizardi: Okay, thanks, Dave. Let me wrap up by emphasizing what we have said previously. At our core, we're engineers, and technology is the foundation of our company. But ultimately, our objective and the best metric to measure progress and generate value for owners is the long-term growth of free cash flow per share. While we strive to achieve our objective, we will continue to pursue our three ambitions. We will act like owners who will own the company for decades.
Raphael: Let me wrap up by emphasizing what we have said previously at our core we're engineers and technology is the foundation of our company, but ultimately our objective and the best metric to measure our progress and generate value for our owners is a long term growth of free cash flow per share.
Raphael: While we strive to achieve our objective we will continue to pursue our three ambitions. We will act like owners, who will own the company for decades, we will adapt and succeed in a world that is ever changing and we will be a company that we're personally proud to be a part of and would one as our neighbor.
Rafael R. Lizardi: We will adapt and succeed in a world that's always changing. And we will be a company that we're personally proud to be a part of and would want as our neighbor. When we're successful, our employees, customers, communities, and owners all benefit. Thank you. And have a good evening.
Speaker Change: We are successful our employees customers communities and owners all benefit thank you and have a good evening.
Operator: This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.
Speaker Change: This concludes today's conference you may disconnect your lines at this time. Thank you for your participation.