Q1 2025 Texas Instruments Inc Earnings Call

<unk> Chief Financial Officer Raphael was already in addition, like Beckman has joined us.

As you May know I will be retiring and Mike will replace me as vice President of Investor Relations.

Haviv Ilan: Before I go to our second quarter guidance, let me take a minute to frame how we are approaching the current environment. It is a time of high uncertainty in the world as tariffs and geopolitics are disrupting global supply chains and creating unpredictable economic conditions. Adding to that, semiconductors are highly visible as it is broadly understood that people and economies are increasingly dependent on them. To navigate in this environment, we will continue to rely on our three key ambitions. We will act like owners, we'll own the company for decades. We will adopt and succeed in a world that is ever-changing.

Mike has worked at Ti for nearly two decades and has worked directly with me in Investor Relations for five years, Mike will moderate today's call and with that let me turn it over to Mike. Thanks, Dave I'm looking forward to the opportunity for any of you who missed the release you can find it on our website at <unk> Dot Com Slash IR. This call has been.

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.

[inaudible] John

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.

Haviv Ilan: and we will be a company that we are proud to be part of and would be proud to have as our neighbor. These guiding ambitions are not new, they have served us well for decades and they are enormously valuable in times like this.

Today, we will provide the following updates.

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First <unk> will start with a quick overview of the quarter, including insight into first quarter revenue results and some details of what we're seeing with respect to our end markets.

Haviv Ilan: We look at the current environment in two important categories. One, where we are in the phase of the semiconductor cycle, and two, providing geopolitically dependable capacity and navigating in a world that is changing. To help understand where we are in the cycle, we spent some time looking at previous events including Y2K, the global financial crisis, and the COVID-19 pandemic. While no two scenarios are identical, these recent examples help inform our decisions as we prepare for a range of market scenarios. What may be unique right now is that we are at the bottom of the semiconductor cycle and customer inventories are at low levels across all end markets.

Speaker Change: Next he'll share how we are approaching the overall market environment and provide guidance for second quarter 2025.

Welcome to the Texas Instruments First Quarter 2025 earnings conference call. I'm Dave Pahl and I'm joined by our Chief Executive Officer, Haviv Ilan, and our Chief Financial Officer, Rafael Lizardi. In addition, Mike Beckman has joined us.

Speaker Change: Lastly, Raphael will cover the financial results and give an update on capital management.

Habib: With that let me turn it over to Habib.

Habib: Thanks, Mike Let me start with a quick overview of the first quarter.

Habib: Revenue came in at $4 $1 billion, an increase of 2% sequentially and an increase of 11% year over year.

Dave Pahl: As you may know, I will be retiring and Mike will replace me as Vice President of Investor Relations. Thank you very much.

Speaker Change: Mike has worked at TI for nearly two decades and has worked directly with me and investor relations for five years.

Habib: Analog revenue grew 13% year over year and embedded processing was about flat and both segments grew sequentially.

Dave Pahl: Mike will moderate today's call, and with that, let me turn it over to Mike.

Habib: Our other segment grew 23% from the year ago quarter.

Dave Pahl: Thanks Dave. I'm looking forward to the opportunity. 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.

Haviv Ilan: So relative to where we are, history says it is important to have capacity and inventory in times like these, and we are well-positioned. In addition, geopolitically dependable capacity will matter more, and it is increasingly critical and valuable to our customers. We have flexibility and are prepared to navigate the evolving supply chain dynamic.

Habib: Now I'll provide some insight into our first quarter revenue by end market.

Habib: We continue to see recovery across our end markets within industrial showing broad recovery across sectors and geographies.

Habib: We believe customer inventories are at low levels across all end markets.

Dave Pahl: 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 T. I S. Most recent SEC filings for a more complete description.

Habib: Last quarter I will focus on sequential performance.

Haviv Ilan: Translating all these to second quarter guidance, I would like to make three points. First, we remain cautious as there are many things still changing and we are working with our customers to understand and support their needs. As such, potential impact on our customers, suppliers, and TI is unclear and will likely evolve. Second, at this time, we don't see near-term impact to second quarter, and we expect TI's revenue in the range of $4.17 billion to $4.53 billion, and earnings per share to be in the range of $1.21 to $1.47. Finally, we will have to see what happens in second half 2025 and going into 2026, and we are prepared for a range of scenarios.

Habib: It is more informative at this time.

Habib: First the industrial market increased upper single digits after seven consecutive quarters of sequential decline.

Dave Pahl: Today, we will provide the following updates.

Habib: The automotive market increased low single digits.

Dave Pahl: First <unk> will start with a quick overview of the quarter, including insight into first quarter revenue results and some details of what we're seeing with respect to our end markets.

Habib: Personal electronics declined mid teens in line with typical seasonal trends.

Habib: Enterprise systems grew mid single digits and communications equipment was up about 10%.

Dave Pahl: Next he'll share how we are approaching the overall market environment and provide guidance for second quarter 2025.

Habib: Before I go through our second quarter guidance, let me take a minute to frame how we are approaching the current environment.

Dave Pahl: Lastly, Raphael will cover the financial results and give an update on capital management.

Habib: With that let me turn it over to Habib.

Habib: It is a time of high uncertainty in the world is tariffs and geopolitics are disrupting global supply chains, and creating unpredictable economic conditions are.

Habib: Thanks, Mike Let me start with a quick overview of the first quarter.

Habib: Revenue came in at $4.1 billion, an increase of 2% sequentially and an increase of 11% year over year.

Habib: Think of that semiconductors are highly visible as it is broadly understood that people and economies are increasingly dependent on chips.

Habib: Analog revenue grew 13% year over year and embedded processing was about flat and both segments grew sequentially.

Haviv Ilan: We are, and will remain, flexible to navigate, especially in the immediate term.

Habib: To navigate in this environment, we will continue to rely on our three key ambitions.

Habib: Our other segment grew 23% from the year ago quarter.

Rafael Lizardi: With that, let me turn it over to Rafael to review profitability and capital management. Thanks, Haviv, and good afternoon, everyone. As Haviv mentioned, first quarter revenue was $4.1 billion. Gross profit in the quarter was $2.3 billion, or 57% Sequentially, Gross Profit Margin Decreased 90% Operating expenses in the quarter were $989 million. 6% from a year ago and about.

Habib: We will act like owners will own the company for decades.

Habib: Now I'll provide some insight into our first quarter revenue by end market.

Habib: We will adapt and succeed in a world that is ever changing.

We continue to see recovery across our end markets with industrial showing broad recovery across sectors and geographies.

Habib: And we will be a company that we are proud to be part of and would be proud to have as a neighbor.

Habib: These guiding ambitions are not new they have served us well for decades and they are enormously valuable in times like these.

Habib: We believe customer inventories are at low levels across all end markets.

Habib: Similar to last quarter I'll focus on sequential performance.

Habib: We look at the current environment in two important categories.

Rafael Lizardi: Trailing 12-month basis, operating expenses were $3.8 billion or $24 billion. Operating profit was $1.3 billion in the quarter, or 33% of revenue. up 3% from the year ago. Net income in the quarter was $1.2 billion or $1.28 billion.

Habib: As it is more informative at this time.

Habib: One where we are in the phase of the semiconductor cycle and to providing geopolitically dependable capacity and navigating in a world that is changing.

Habib: First the industrial market increased upper single digits after seven consecutive quarters of sequential decline.

Habib: The automotive market increased low single digits.

Habib: To help understand where we are in the cycle. We spent some time looking at previous events, including y2k.

Habib: Personal electronics declined mid teens in line with typical seasonal trends.

Rafael Lizardi: Earnings per share include a five cent benefit, not in our original.

Habib: The global financial crisis, and the COVID-19 pandemic, while no two scenarios are identical. These recent examples help inform our decisions as we prepare for a range of market scenarios.

Habib: Enterprise systems grew mid single digits and communications equipment was up about 10%.

Rafael Lizardi: Let me now comment on our capital management results, starting with our cash generation. Cash flow from operations was $849 million. $6.2 billion dollars on a training to almost Capital Expenditures were $1.1 billion in the quarter and $4.7 billion over the last Free cashflow on a trailing 12-month basis was $1.7 billion. In the quarter, we paid $1.2 billion in dividends and repurchased $653 million of our... Total, we've returned $6.4 billion to our owners in the past 12 The balance sheet remains strong with $5 billion of cash and short-term investments at the end of the... In the quarter, we repaid $750 million of debt.

Habib: Before I go through our second quarter guidance, let me take a minute to frame how we are approaching the current environment.

Habib: What may be unique right now is that we are at the bottom of the semiconductor cycle and customer inventories are at low levels across all end markets.

Habib: It is a time of high uncertainty in the world is tariffs and geopolitics are disrupting global supply chains, and creating unpredictable economic conditions are.

Habib: So relative to where we our history says it is important to have capacity and inventory in times like these and we are well positioned.

Habib: Adding to that semiconductor was a highly visible as it is broadly understood that people and economies are increasingly dependent on chips.

Habib: In addition, geopolitical dependable capacity will matter more and it is increasingly critical and valuable to our customers we.

Habib: To navigate in this environment, we will continue to rely on our three key ambitions.

Habib: We will act like owners will own the company for decades.

Habib: We have flexibility and are prepared to navigate the evolving supply chain dynamics.

Habib: We will adapt and succeed in a world if you've ever changing.

Rafael Lizardi: Total debt outstanding is $12.95 billion with a weighted average coupon of $3.93 billion. Inventory at the end of the quarter was $4.7 billion, up $160 million from the prior quarter, and days were 240, down one day.

Habib: And we will be a company that we are proud to be part of and would be proud to have as a neighbor.

Habib: Translating all of these to second quarter guidance I would like to make three points.

Habib: First we remain cautious as there are many things still changing and we are working with our customers to understand and support their needs as such potential impact on our customers suppliers and Ti is unclear and will likely evolve.

Habib: These guiding ambitions are not new they have served us well for decades and they are enormously valuable in times like these.

Habib: We look at the current environment in two important categories.

Rafael Lizardi: Second Quarter, we now expect our effective tax rate to be about 12 to 13%. In closing, we will stay focused in the areas that add value in the long We continue to invest in our competitive advantages, which are manufacturing and technology, a broad product portfolio, reach of our channels, and diverse and long-lived... We will continue to strengthen these advantages through discipline, 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.

Habib: One where we are in the phase of the semiconductor cycle and to providing geopolitically dependable capacity and navigating in a world that is changing too.

Habib: Second at this time, we don't see near term impact to second quarter, and we expect the Ais revenue in the range of $4.17 billion to $4 five $3 billion and earnings per share to be in the range of $1 21 to $1 47.

To help understand where we are in the cycle. We spent some time looking at previous events, including y2k, the global financial crisis, and the COVID-19 pandemic.

Habib: While no two scenarios are identical. These recent examples help inform our decisions as we prepare for a range of market scenarios.

Habib: Finally, we will have to see what happens in second half 2025, and going into 2026, and we are prepared for a range of scenarios.

Unknown Executive: With that, let me turn it back Thanks, Rafael.

Habib: What may be unique right now.

Unknown Executive: Operator, you can now open the line for questions.

Habib: We are and will remain flexible to navigate especially in the immediate term.

Habib: We are at the bottom of the semiconductor Psycho and customer inventories are at low levels across all end markets.

Unknown Executive: In order to provide as many of you as possible an opportunity to ask your questions, please limit yourself to a single After our response, we'll provide you an opportunity for an additional follow-up.

Habib: With that let me turn it over to Rafael to review profitability and capital management.

Habib: So relative to where we our history says it is important to have capacity and inventory in times like these and we are well positioned.

Rafael: Thanks, <unk> and good afternoon, everyone as Habib mentioned first quarter revenue was $4 1 billion.

Unknown Executive: Thank you. Again, we will now be conducting Thanks much.

Rafael: Gross profit in the quarter was $2 3 billion or 57% of revenue.

Habib: In addition, geopolitical dependable capacity will matter more and it is increasingly critical and valuable to our customers we.

Rafael: <unk> gross profit margin decreased 90 basis points.

Rafael: Operating expenses in the quarter were $989 million up 6% from a year ago and about as expected.

Habib: We have flexibility and are prepared to navigate the evolving supply chain dynamics.

Rafael: On a trailing 12 month basis operating expenses were $3 $8 billion or 24% of revenue.

Habib: Translating all of these to second quarter guidance I would like to make three points.

Habib: First we remain cautious as there are many things still changing and we are working with our customers to understand and support their needs as such potential impact on our customers suppliers and T. I is unclear and will likely evolve.

Rafael: Operating profit was $1 3 billion in the quarter or 33% of revenue and was up 3% from the year ago quarter.

Unknown Attendee: So the guidance up 7% that's even better than normal seasonal. I know this is a hard question to answer.

Rafael: Net income in the quarter was $1 2 billion or $1 28 per share earnings per share included a phys and benefit not in our original guidance.

Haviv Ilan: But is there any way for you to know how much of this is pull ins ahead of the tariffs? I mean, is there any way your discussions with customers any of the tonality that's changed? Thanks. Tim, thanks for the question.

Habib: Second at this time, we don't see near term impact to second quarter, and we expect the Ais revenue in the range of $4.17 billion to $4.53 billion and earnings per share to be in the range of $1 21 to $1 47.

Rafael: Let me now comment on our capital management results, starting with our cash generation cash.

Rafael: Cash flow from operations was $849 million in the quarter and $6 $2 billion on a trailing 12 month basis.

Haviv Ilan: So first, before I talk about our approach into the second quarter, just as I said in my prepared remarks, we are looking at two different categories of change in front of us. One is related to the cycle. And the cycle we saw in Q1, a continued recovery. I think we mentioned before, I think it was in the last, in the previous call, we have three markets now growing year over year and recovering. It was the personal electronics market, enterprise and comps. It's very obvious to us now that industrial is really joining the pack and it's a large market for us.

Rafael: <unk> expenditures were $1 $1 billion in the quarter and $4 $7 billion over the last 12 months.

Habib: Finally, we will have to see what happens in second half 'twenty twenty-five and going into 2020 six and we are prepared for a range of scenarios.

Rafael: Free cash flow on a trailing 12 month basis was $1 7 billion.

Rafael: In the quarter, we paid $1 2 billion in dividends and repurchased $653 million of our stock in.

Habib: We are and will remain flexible to navigate especially in the immediate term.

Rafael: In total we returned $6 $4 billion to our owners in the past 12 months.

Rafael: Our balance sheet remains strong with $5 billion of cash and short term investments at the end of the first quarter.

Habib: With that let me turn it over to Rafael to review profitability and capital management.

Rafael: In the quarter, we repaid $750 million of debt total debt outstanding is $12 $95 billion with a weighted average coupon of 393%.

Rafael Lizardi: Thanks, <unk> and good afternoon, everyone. As Hamid mentioned first quarter revenue was $4 1 billion gross profit in the quarter was $2 $3 billion or 57% of revenue.

Haviv Ilan: We've seen some evidence in Q4, but based on what we've seen in Q1, I think this is a real recovery rather than, you know, the way I see it right now, related to tariffs, at least not for the first quarter, right? And the cycle has hit a bottom because we are seeing more and more evidence from customers that they are really, really short on inventory. They have sometimes a few days of inventory. We've seen that age in phenomena or orders within the quarter turns, as we call it, strengthening in Q4. It continues to do the same in 1Q.

Rafael: Inventory at the end of the quarter was $4 7 billion up $160 million from the prior quarter and days were 240 down one day sequentially.

Habib: <unk> gross profit margin decreased 90 basis points.

Habib: Operating expenses in the quarter were $989 million of 6% from a year ago and about as expected.

Rafael: For second quarter, we now expect our effective tax rate to be about 12% to 13%.

On a trailing 12 month basis operating expenses were $3 $8 billion or 24% of revenue.

Habib: Operating profit was $1 $3 billion in the quarter or 33% of revenue and was up 3% from the year ago quarter.

Rafael: 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.

Habib: Net income in the quarter was $1 $2 billion or $1 28 per share earnings per share included a five cent benefit not in our original guidance.

Rafael: <unk> product portfolio reach of our channels and diverse and long lived positions.

Rafael: We will continue to strengthen disadvantages 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 Mike.

Haviv Ilan: So more and more evidence and signals that across all channels, all geographies, a recovery of the industrial market is here. But the automotive market was always correcting a very shallow manner. So you can kind of say that the markets are now pointing pre the trade challenges all up into the right.

Habib: Let me now comment on our capital management results, starting with our cash generation.

Habib: Cash flow from operations was $849 million in the quarter and $6 $2 billion on a trailing 12 month basis.

Mike: Thanks, Rafael operator, you can now open the line 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.

Habib: <unk> expenditures were $1 $1 billion in the quarter and $4 $7 billion over the last 12 months.

Habib: Free cash flow on a trailing 12 month basis was $1 7 billion.

Haviv Ilan: Now, when you look at the second quarter, I think we have to say, very cautious, as we said about the forecast. So, we are seeing that many things are still changing. It's a very, very dynamic environment. And I say sometimes by the day. And there is a potential impact on our customers and our suppliers and also on our revenues. So, it is unclear and it will evolve. But as I need to call a lot of time on it, looking at past examples, understanding where the cycle is, and looking at the data we have in front of us, we don't see an immediate near-term impact.

Habib: In the quarter, we paid $1.2 billion in dividends and repurchased $653 million of our stock in.

Speaker Change: Thank you again, we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May Press star two if you remove yourself from the queue for participants using speaker equipment. It may be necessary to pick up the handset before pressing the star keys one more.

Habib: In total we returned $6 4 billion dollar store owners in the past 12 months.

Habib: Our balance sheet remained strong with $5 billion of cash and short term investments at the end of the first quarter.

Habib: In the quarter, we repaid $750 million of debt total debt outstanding is $12 $95 billion with a weighted average coupon of 393%.

Mike: Please while we poll for questions.

Speaker Change: Our first question comes from the line of Timothy Arcuri with UBS. Please proceed with your question.

Habib: Inventory at the end of the quarter was $4 $7 billion up $160 million from the prior quarter and days were 240 down one day sequentially.

Timothy Arcuri: Thanks much.

Haviv Ilan: Of course, the customers wouldn't tell us why we see the orders coming in. But I would guess that, you know, a time like this, when there is a little bit of anxiety and do you want to have a little bit of more inventory on your shelves or less? So, my guess is more. And that's maybe why we are seeing kind of, I would call it a seasonal, maybe a little bit of a typical seasonal second quarter forecast.

Timothy Arcuri: So the guidance up 7%, that's even better than normal seasonal I know this is a hard question to answer but is there any way for you to know how much of this is pull ins ahead of the tariffs I mean is there any way your discussions with customers any of the tonality of that's changed.

Habib: For second quarter, we now expect our effective tax rate to be about 12% to 13%.

Habib: 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 reach of our channels and diverse and long lived positions.

Timothy Arcuri: Tim Thanks for the question.

Timothy Arcuri: So first before I talk about our approach into the second quarter, just as I said in my prepared remarks, we're looking at too.

Habib: We will continue to strengthen disadvantages 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 Mike.

Timothy Arcuri: Different.

Mike Beckman: And Mike, you've looked at some more data on the second quarter. Maybe you can add a little bit more information on what we're seeing specifically for the second quarter. Yeah. So so quarter to date, you know, the revenue linearity we've seen is started out about as we'd expect. And it shouldn't be too surprising just given the low inventory levels across the customer base. And it also we see diversity across the end markets and geography. So consistent with what Haviv shared.

Timothy Arcuri: Categories of change in front of us while is relevant as it related to the cycle and the cycle.

Timothy Arcuri: We saw in Q1.

Mike Beckman: Thanks, Rafael operator, you can now open the line 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.

Timothy Arcuri: <unk> recovery.

Timothy Arcuri: I think we mentioned before I think it was in the lagged in the previous call that we have three markets now growing year over year and recovering it was the CEO of personal electronics market, the enterprise and comm.

Timothy Arcuri: It's very obvious to us now that industrial.

Unknown Attendee: You have a follow up, Tim? I do. Yeah.

Mike Beckman: Thank you again, we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May Press star two if you remove yourself from the queue for participants using speaker equipment. It may be necessary to pick up the handset before pressing the star Keith one one.

Tim: Is there a way to handicap sort of what your exposure is in China to these retaliatory tariffs? I know you report 19% as companies into China, but there's probably some added exposure from other companies that are, that are, you know, domiciled beyond China that are building product in China. And I guess, can you offset some of that by having product on consignment? Do you have a lot of inventory on consignment in China, to sort of offset? Yeah, and again, Tim, as I've said in my prepared remarks, we are providing geopolitically dependable capacity to our customers and we are working, you know, every hour with them right now to navigating the changing world.

Timothy Arcuri: Yes.

Timothy Arcuri: <unk> is really joining the pack and it's a large market for us we felt that we had seen some evidence in Q4, but based on what we've seen in Q1.

Timothy Arcuri: This is a real recovery rather than you know.

Timothy Arcuri: The way I see it right now.

Timothy Arcuri: Related to tariffs at least not for their first quarter right.

Mike Beckman: Please while we poll for questions.

Timothy Arcuri: And the cycle.

Is it a bottom because we are seeing more and more evidence from customers that they are really really short on their own inventory. They have sometimes a few days of inventory, we have seen that AIDS in phenomena orders within the quarter Burns as we call it.

Speaker Change: Our first question comes from the line of Timothy Arcuri with UBS. Please proceed with your question.

Timothy Arcuri: Thanks much.

Timothy Arcuri: So the guidance up 7%, that's even better than normal seasonal I know this is a hard question to answer but is there any way for you to know how much of this is pull ins ahead of the tariffs I mean is there any way your discussions with customers any of the tonality that's changed thanks.

Timothy Arcuri: Strengthening in Q4, it continued to do the same in <unk>.

Timothy Arcuri: So more and more evidence and signals that across all channels all geographies a recovery of.

Haviv Ilan: So, as you said, we have a lot of capabilities.

Haviv Ilan: I think it is important to start and focus first on our China headquartered customers. You know, as you said, it's a little bit, maybe it was 19% of our revenue last year. I think it was 20% in Q1. Aligned with our GDP share, so nothing very special here. And I think we said many times, it's an important market. And our customers, we have a long-term relationship with them, right? The value, they value our product breadth, they value our quality. They also value our scale and To your point, part of the service we provide is having inventory on hand, some of it consigned, some of it very close to their manufacturing plant.

Tim: Tim Thanks for the question.

Timothy Arcuri: The industrial market.

Tim: So first before I talk about our approach into the second quarter, just as I said in my prepared remarks, we're looking at too.

Timothy Arcuri: Thus the automotive market was always correcting it very shallow manner. So you can kind of say that the markets are now well appointing brea.

Tim: Different.

Timothy Arcuri: Trade challenges all up into the right.

Tim: <unk>.

Tim: Change in front of US one is relative to related to the cycle and the cycle.

Timothy Arcuri: Now when you look at the second quarter.

Timothy Arcuri: I think we have to say a very cautious as we said about the forecast. So we are seeing that many things are still changing it's a very very dynamic environment and I'd say sometime by the day.

Tim: We saw in Q1.

Tim: <unk> recovery.

Tim: I think we mentioned before I think we are in the lodging in the previous call that we have three markets now growing year over year and recovering towards the PEO personnel electronics market, the enterprise and comm.

Timothy Arcuri: And there is a potential impact on our customers and our suppliers and also now on our revenues. So it feels it is unclear and it will evolve, but as I need to call and we spent a lot of time on it looking at past examples understanding where the cycle is in looking at the data we have in front of us.

Tim: It's a very obvious to us now that industrial is.

Haviv Ilan: So, all of that is part of the way we serve our customers and have been serving them for years, especially in the last several years where we've taken more customers direct in China and worldwide.

Tim: Is really joining the pack and it's a large market for us we felt that we had seen some evidence in Q4, but based on what we've seen in Q1.

Timothy Arcuri: We don't see an immediate near term impact of course, the customers wouldn't tell us why we see the orders come again.

Tim: This is a real recovery rather than you know the way I see it right now are related to salaries at least not for their first quarter right.

Haviv Ilan: Now, you also remember saying that these guys, they want to be, they are and want to continue to be and even further grow their global play. They are making end equipments that are sold into China, but they're also making end equipments that are sold worldwide. And again, this is where our geopolitically dependable capacity is very, very important and valuable. This is where our immediate focus is right now. And this is where I'm sure we'll have some follow-up questions on that. I'll just say at a high level, we do have flexibility and it's a case by case, but we are working with the customers.

Timothy Arcuri: But I would guess that.

Tim: And the cycle.

Timothy Arcuri: Tyler leaves when there is a little bit of anxiety and.

Tim: There is at the bottom because we are seeing more and more evidence from customers that they are really really show up on their own inventory. They have sometimes a few days of inventory, we have seen that AIDS in phenomena orders within the quarter Burns as we call. It a strengthening in Q4. It continued to do the same in <unk>.

Timothy Arcuri: Do you want to have a little bit of more inventory on yourselves. The OLED. So my guess is more and.

Timothy Arcuri: Maybe why we are seeing.

Timothy Arcuri: I would call it a season, maybe a little bit.

Timothy Arcuri: Pretty typical typical seasonal second quarter.

Timothy Arcuri: Forecast.

Tim: Q, so more and more evidence and signals that across all channels all geographies a recovery of.

Timothy Arcuri: And then Mike you've looked at some more data on the second quarter, maybe you can add a little bit more information on what we're seeing specifically for the second quarter, yes, yes. So so quarter to date the revenue linearity. We've seen has started out about as we'd expect.

Tim: The industrial market.

Haviv Ilan: Everyone has different requirements of how we can support them on an immediate basis and alleviate some of their concerns on what's going to happen in the second half of 25 or even into 2020. Thanks, Tim.

Tim: Is there does the automotive market was always correcting a very shallow manner. So you can kind of say that the markets are now aware of appointing brea.

Timothy Arcuri: It shouldnt be too surprising just given the low inventory levels across the customer base and it also we see diversity across the end markets and geographies, so consistent with what <unk> shared.

Tim: The trade challenges are all up into the right.

Tim: Now when you look at the second quarter I think we have to say a very cautious as we said about the forecast. So we are seeing that many things are still changing it's a very very dynamic environment and I'd say sometime by the day.

Unknown Executive: Let's move on to the next caller.

Unknown Executive: Thank you. Thanks so much.

Tim: Follow up Tim.

Tim: Yes is there a way to handicap sort of what your exposure is in China to these.

Tim: Retaliatory tariffs I know you report, 19% as companies into China, but there's probably some added exposure from other companies that are that are domiciled beyond China that are building product in China, and I guess can you offset some of that by having a product on consignment do you have a lot of inventory on consignment in China.

Unknown Attendee: First, just wanted to say thanks and best wishes to Dave and his next adventures and also goodbye.

Tim: And there is a potential impact on our customers and our suppliers and also now in our revenue. So it feels it is unclear and it will evolve, but designing to call and we've spent a lot of time on eight looking at past examples understanding where the cycle is in looking at the data we have in front of us.

Rafael Lizardi: For my first question, maybe for Rafael, so inventory was up again, and I think on the last call you suggested that factory loadings would go down, so it seemed like maybe they did not. So how much was the gross margin benefit from that? And then how are you thinking about the direction of loadings and the pace of gross margins? Yeah, no, sure. Let me give you a few pieces of information on that gross margin did better than expected. Most of that was due to higher revenue and the greater mix of industrial in the quarter, but also our load ins that were down versus fourth quarter, but they were higher than originally expected, the base case that we originally had.

Tim: To sort of offset some of that thanks.

Tim: We don't see an immediate near term impact of course, the customers wouldn't tell us why we see the orders come again.

Tim: Yeah and again as.

Tim: I've said in my prepared remarks, we are.

Speaker Change: But I would guess that you know a time like these when there is a little bit of anxiety and Ed do you want to have a little bit of more inventory on yourselves or less. So my guess is more and that's maybe why we are seeing.

Tim: Providing geopolitically dependable capacity to our customers and we are working.

Tim: Every hour with them right now to navigating.

Tim: The changing world. So as you said, we have a lot of capability. There I think it is important to start and focus first on our China headquartered.

Tim: I would call it a season, maybe a little bit.

Tim: Customers.

Tim: Pretty typical sort of typical seasonality in second quarter.

Tim: As I said, it's a little bit maybe.

Rafael Lizardi: And that was, of course, revenue did better than the midpoint. And what we're seeing, as Haviv described, the current environment with customers running pretty lean on inventory and demand being pretty strong and aging, et cetera. On a forward looking basis, our base case right now at the midpoint, we expect factory loadings to increase slightly into second quarter and gross margin to be up versus first quarter. So first quarter to second quarter gross margin.

Tim: Maybe it was 19% of our revenue last year I think it was 20% in Q1.

Tim: Our forecast.

Tim: And.

Tim: Mike you have looked at some more data on the second quarter, maybe you can add a little bit more information on what we're seeing specifically for the second quarter. Yeah. Yeah. So so quarter to date the revenue linearity. We've seen has started out about as we'd expect and.

Tim: With the JV with our GDP shows so nothing very special here.

Tim: And I think we've said many times, it's an important market and our customers. We have long term relationship with them right the value the value of our product breadth they value our quality. They also value our scale and service real points. They are part of the service. We provide is having inventory on hand, some of it consigned some of it very close to their manufacture.

Tim: And it shouldn't be too surprising just given the low inventory levels across the customer base and it also we see diversity across the end markets and geographies, so consistent with what <unk> shared.

Speaker Change: You'll follow up Tim.

Tim: During plan. So all of that is part of the way we serve our customers and has been serving them for years, especially in the last several years, where we've taken more customers direct.

Speaker Change: Yes is there a way to handicap sort of what your exposure is in China to these.

Unknown Attendee: You have a follow up. Yes, thank you. So, Haviv, for Q2, I think you mentioned that it is perhaps right in the range of seasonality or perhaps at the upper end.

Speaker Change: Retaliatory tariffs I know you report, 19% as companies into China, but there's probably some added exposure from other companies that are that are domiciled beyond China that are building product in China, and I guess can you offset some of that by having a product unconcerned and do you have a lot of inventory on consignment in China.

Tim: China and worldwide now.

Tim: You also remember the thing that these guys. They want to be they are and want to continue to be an even further grow the global player.

Haviv Ilan: I know it tends to be a stronger quarter for your other, you know, calculator business, but when you look at your core segment, could you help us get a feel for what is going to be better or lower than the 7% or so sequential rate, whether it is by industrial or automotive or consumer markets or whether it is by analog or embedded, just so we get a better feel for what is driving Q2 to be at kind of the upper end of seasonality, despite all these macro and tariff related. First, I would say when we are in a normal environment and we are in an upcycle, just to go back to trendline, you need to have some of these borders running a little bit above seasonality.

Tim: I'm, making.

Tim: And equipment that are sold into China, but they're also making.

Speaker Change: To sort of offset some of that thanks.

Tim: Equipment that is sold worldwide. Then again this is where our geopolitically dependable capacity.

Speaker Change: Yes, and again <unk>.

Speaker Change: I've said in.

Speaker Change: In my prepared remarks, we are providing.

Tim: He is very very important and valuable this is where our immediate focus is right now.

Speaker Change: Providing geopolitically dependable capacity to our customers and we are working you know.

Tim: And this is where I am sure. We will have some follow up questions on that I'll, just say at a high level, we do have flexibility.

Speaker Change: Every hour, we'd been right now so navigating.

Speaker Change: The changing world. So as you said, we have a lot of capability that I think it is important to start and focus first on.

Tim: And it's a case by case, but we are working.

Tim: With the customers everyone has different requirements of how we can support them on an immediate basis.

Speaker Change: On our China headquarters cut.

Speaker Change: Customers.

Speaker Change: As I said, it's a little bit.

Tim: And alleviate some of their concerns on what's going to happen in the second half of 'twenty five or even into 2026.

Speaker Change: It was 19% of our revenue last year I think it was 20% in Q1 are aligned with the JV with our GDP show So nothing very special here.

Haviv Ilan: That's the only way to get back to trendline. So I think we've started to see some of it in terms of the demand signals we're seeing. And I think there is nothing I would call specifically versus Q1 other than the continued strength in industrial. I think the industrial signal is now, I would say. probably five months or so. I mean, we've seen some above industrial seasonality in Q4. Typically, it goes like mid single digits down in Q4. I think it went down low single, I think, Mike. And then, again, an above seasonal industrial in one Q, close to that 10% mark.

Timothy Arcuri: Thanks, Tim let's move onto the next caller please.

Aaron: Thank you Aaron.

Speaker Change: I think we've said many times, it's an important market and our customers. We have long term relationship with them right the value the value of our product breadth they value our quality. They also value our scale and service to your point, they're part of the service. We provide is having inventory on hand, some of it's consigned that some of it very close to their manufacturing.

Speaker Change: Our next question comes from the line of everything area with Banc of America Securities. Please proceed with your question.

Speaker Change: Thanks, So much I just wanted to say, thanks and best wishes.

Speaker Change: And it makes sense makes sense and also good wishes to Mike.

Speaker Change: For my first question.

Speaker Change: Maybe for Rob So inventory was up again and I think on the last call. You suggested that factory loadings would go down so it seemed like maybe they did not.

Speaker Change: So all of that is part of the way, we serve our customers and have been serving them for years, especially in the last.

Speaker Change: Several years, where we've taken more customers direct Inc.

Speaker Change: So how much was the gross margin benefit from that and then how are you thinking about the direction of our loadings and.

Speaker Change: In China and worldwide now.

Haviv Ilan: And I don't see right now, at least, any slowdown there. And that's also very, I think it's also very intuitive. As I said, when there is a little bit of anxiety and unknown, I think customers want to have a little bit more inventory than less.

Speaker Change: You also remember the thing that these guys. They want to be they are and want to continue to be an even further grow the global player.

Speaker Change: Pace of gross margins from here.

Speaker Change: Yes, sure let me give you a few pieces of information on that.

Speaker Change: I'm, making.

Speaker Change: Gross margin did better than expected most of that was due to higher revenue.

Speaker Change: Equipment that are sold into China, but they're also making.

Speaker Change: And equipment that is sold worldwide. Then again this is where our geopolitically dependable capacity is very very important and valuable. This is where our immediate focus is right now.

Haviv Ilan: So if I have to call the second quarter, I would expect it to behave very similarly to Q1. Remember, the automotive cycle was the last one to join the just kind of a late comer, both on the way up in COVID and down. So I do expect it to come in last, but it was always very, very shallow. Even in Q1, I think we've seen automotive growing sequentially, and I think even growing year over year. So the automotive cycle has been very, very shallow, kind of a mid to high single digit. That was what we've seen on a 20-plus month basis.

Speaker Change: And a greater mix of industrial in the quarter, but also our loadings were down versus fourth quarter, but they were higher than originally expected. The base case that we originally had and that was of course revenue.

Speaker Change: And this is where I'm sure we'll have some follow up questions on that I'll, just say at a high level, we do have flexibility.

Speaker Change: A bit better than the midpoint and and what we're seeing as we've described the current environment with customers running pretty lean on inventory and demand being pretty strong and agents et cetera.

Speaker Change: It's a case by case, there, but we are working.

Speaker Change: With the customers everyone has different requirements of how we can support them on an immediate basis.

Speaker Change: And alleviate some of the concerns on what's going to happen in the second half of 'twenty five or even into 2026.

Speaker Change: On a forward looking basis, our base case right now at the midpoint, we expect.

Speaker Change: Factory loadings to increase slightly.

Speaker Change: Thanks, Tim let's move onto the next caller please.

Haviv Ilan: So overall, that would be my read into the second quarter.

Speaker Change: In the second quarter and gross margin to be up.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of Zick.

Speaker Change: Versus first quarter, so first quarter to second quarter gross margin up.

Unknown Executive: Let's move on to the next caller.

Speaker Change: Area with Banc of America Securities. Please proceed with your question.

Speaker Change: You have a follow up.

Speaker Change: Thanks, So much I just wanted to say, thanks and best wishes.

Speaker Change: Yes. Thank you so maybe.

Speaker Change: For Q2.

Speaker Change: And it makes sense Sanchez and also good wishes to Mike.

Unknown Attendee: Hi, guys. Thanks for taking my questions. You know, Haviv, you said at first that you didn't see any pull forward, but then you talked about customers wanting to hold more, which sort of seems like the definition of pull forward, and you seem concerned about the second half.

Speaker Change: You mentioned that it is perhaps right in the range of seasonality or perhaps at the upper end I know it tends to be a stronger quarter for your other calculator business. When you look at your core segment could you help us get a feel for what is going to be better.

Speaker Change: For my first question.

Speaker Change: Maybe for a pad so inventory was up again and I think on the last call. You suggested that factory loadings would go down so it seemed like maybe they did not.

Haviv Ilan: I mean, I guess my question is, if there was pull forward going on, would you care? Or would you just would you just ship like is your typical plan? I always thought it was if you can fulfill it, you ship it and it doesn't really matter more than that. Is that how we should be thinking about? how you're living in this environment right now, given some of the upside that you are seeing clearly.

Speaker Change: So how much was the gross margin benefit from that and then how are you thinking about the direction of our loadings and the pace of gross margins from here.

Speaker Change: Our lower than the 7% or so sequential rate, but it is by industrial or automotive or consumer markets are of identify analog and embedded just so we get a better feel for what is driving Q2 to be at kind of the upper end of seasonality. Despite all these macro and tariff related headwinds. Thank you.

Speaker Change: Yeah sure. Let me give you a few pieces of information on that.

Speaker Change: Gross margin did better than expected most of that was due to higher revenue.

Speaker Change: And the greater mix of industrial in the quarter, but also our loadings were down versus fourth quarter, but they were higher than originally expected. The base case that we originally had and that was of course revenue did better than the midpoint and and what we're seeing as we've described they occur.

Speaker Change: Sure Vivek.

Haviv Ilan: Stacy, thanks for the question. Let me first clarify the first point I've made. Maybe I was a little bit not clear enough. I would guess that what we've seen in the first quarter, okay, the dominant signal I've seen in the first quarter, and we've seen it across channels, across geography, was very consistent. It's just a return of industrial. We've seen that in a broad way across the channel, on our online business. It's just been very, very broad. Nothing that looked anxious or nothing that looked like huge orders or whatever, just an acceleration of the aging trend we saw in Q4.

Speaker Change: Yes.

Speaker Change: First I would say when we are in a normal environment and we are in an up cycle.

Speaker Change: Just to go back to trend line do you need to have some of these quarters running a little bit above above seasonality right. That's the only way to get back to trend line. So so I think we've started to see some of it in terms of the of the demand signals we're seeing.

Speaker Change: Current environment with customers running pretty lean on inventory and demand being pretty strong and agents et cetera.

Speaker Change: And I think there is nothing I would call specifically versus Q1 other than the continued strength in industrial I think the industrial the signal is now I would say.

Speaker Change: On a forward looking basis, our base case right now at the midpoint, we expect.

Speaker Change: Factory loadings to increase slightly.

Speaker Change: Finally, a five months or so we've seen some above industrial seasonality in Q4 typically it goes like mid single digit zone in Q4, I think it went down low single I think by Mike.

Haviv Ilan: So, very consistent with what we've seen in Q4, but accelerated, right? So, that's my comment on the first quarter.

Speaker Change: In the second quarter and gross margin to be up.

Speaker Change: Versus the first quarter, so first quarter to second quarter gross margin up.

Haviv Ilan: For the second quarter, we have data only for, I mean, it's not even been, not even a month yet, right? So, and our lead times are very short, and the signals we see right now are nothing that signals anxiety or something very, very weird, but kind of a continuation of the cycle. My guess is, and again, that's when I think about industrial customers running low volumes, exposed to all these news, I think that you would want to have a little bit more than less. And also, my anecdotal discussion with customers, they do have a wish to maybe replenish some of their empty shelves.

Speaker Change: You have a follow up.

Speaker Change: And then.

Yes. Thank you so maybe.

Speaker Change: Again, an above seasonal in industrial <unk> close to the 10% Mark and I don't see right now at least.

Speaker Change: For Q2.

You mentioned that it is perhaps right in the range of seasonality or perhaps at the upper end I know it tends to be a stronger quarter for your other calculator business. When you look at your core segments could you help us get a feel for what is going to be better or lower than the 7% or so sequential rate.

Speaker Change: Any slowdown there and that's also very.

Speaker Change: <unk>.

Speaker Change: I think it's also very intuitive as I said when there is a little bit of anxiety and unknown I think customers want to have a little bit more inventory than less so if I had to call in the second quarter I would expect it to behave very similarly.

Speaker Change: But it is by industrial or automotive or consumer markets or whether it's by analog and embedded just so we get a better feel for what is driving Q2 to be at kind of the upper end of seasonality. Despite all the macro and tariff related headwinds. Thank you.

Speaker Change: Through Q1.

Speaker Change: Remember the automotive cycle was the last one to join the pack just kind of a late commerce both on the way up and cover then the down okay. So I do expect it to come in loss, but it was always very very shallow even in Q1 I think we've seen automotive grew.

Haviv Ilan: So I think we are seeing now maybe end-demand industrial plus a little bit, okay? And that's what I would say is a typical cycle behavior.

Speaker Change: Sure Vivek.

First I would say when we are in a normal environment and we are in an up cycle.

Speaker Change: Growing sequentially and I think I'll, even growing year over year. So the automotive cycle has been very very shallow kind of.

Speaker Change: Just to go back to trend line do you need to have some of these orders were running a little bit above above seasonality right. That's the only way to get back to trend line. So so I think we've started to see some of it in terms of the of the demand signals we're seeing.

Haviv Ilan: Now, when I say we have to prepare to any scenario, that thing can develop both ways. You know, the second half could turn into, I don't know, slowdown and just no end-demand, and we will see that in our orders at a certain point of time. We haven't seen it yet. But, you know, as anxiety builds, and we've seen sometimes situations like that. Think about COVID, and COVID, and we looked at that cycle very, very carefully, the economy stopped. I mean, people were not building end equipment. We were not showing up to factories, so everything stopped.

Speaker Change: Mid to high single digit that was.

Speaker Change: What we've seen on a trailing 12 month basis. So overall that would be my my read into into the second quarter.

Speaker Change: And I think there is nothing I would call specifically versus Q1 other than the continued strength in industrial I think the industrial the signal is now I would say.

Speaker Change: Thanks, Vivek, let's move onto the next caller.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of Stacy <unk> with Bernstein Research. Please proceed with your question.

Speaker Change: Hi, guys. Thanks for taking my questions.

Mike Beckman: Finally, a five month or so we've seen some above industrial seasonality in Q4 typically it goes like mid single digit zone in Q4, I think it went down low single I think by Mike.

Speaker Change: Yes, you said it first thing you didn't see any pull forward, but then you talked about customers wanting to hold more which put it seems like the definition of pull forward and he seemed concerned about the second half I mean I guess my question is if there was pull forward going on would you care.

Haviv Ilan: But then this was, that was this period after that anxiety has built, and we've seen orders, you know, three years worth of orders on our books. And we are not right now there. But we do have to think about what happens if customers get into this anxious mode. And then we need to support them. And to your question, specific one, we are not going to just flood them with stuff that we don't think they need.

Speaker Change: And then.

Speaker Change: Again, an above seasonal industrial <unk> close to that 10% Mark and I don't see right now at least.

Speaker Change: Or would you just would you just like us.

Speaker Change: Our typical plan I always thought it was if you can fulfill it you ship it and it doesn't really matter more than that is that how we should be thinking about.

Speaker Change: Any slowdown there and that's also very.

Speaker Change: Sure.

Speaker Change: I think it's also very intuitive as I said when there is a little bit of anxiety and unknown I think customers want to have a little bit more inventory than less so if I had to call in the second quarter I would expect it to behave very similarly.

Speaker Change: How you are living in this environment right now.

Speaker Change: Even some of the upside that you are seeing clearly, saying.

Haviv Ilan: We have a playbook that we have written over the last several years of what happens in an upcycle. And we'll manage customers according to their demand in a very structured and organized way.

Speaker Change: Yes, Stacy thanks for the question, let me first clarify the first point that you've made maybe.

Speaker Change: Two Q1.

Speaker Change: Little bit of not clear enough I would guess that what we've seen in the first quarter.

Speaker Change: Remember the automotive cycle was the last one to join the pack just kind of a late commerce both on the way up and cover then the down okay. So I do expect it to come in loss, but it was always very very shallow even in Q1 I think we've seen automotive grew.

Speaker Change: The only and signal ive seen in the first quarter and we've seen it across China to grow geography was very consistent.

Unknown Attendee: Stacy, do you have a follow-up? I do, thank you. Maybe the follow-up on that, again, I know it's only been less than a month in the quarter, and we're 23 days in. I think we're, what, about two weeks or so since Liberation Day. Just what have you seen on, I guess, any acceleration in the order rate, you know, during those, you know, kind of two weeks post-tariff versus, say, what you saw exiting Q1? Like, have orders, like, materially accelerated, the pace of orders materially accelerated over the last couple of weeks?

Speaker Change: The return of industrial.

Speaker Change: We've seen that in a broad way across the channel on our online business. It's just been a very very broad nothing that Luke.

Speaker Change: Growing sequentially and I think he'll even growing year over year. So the automotive cycle has been very very shallow kind of.

Speaker Change: Anxious or nothing that looks like a huge orders or whatever just.

Speaker Change: Mid to high single digit that was the.

Speaker Change: And acceleration of the aging trend we saw in Q4, so very consistent.

Speaker Change: What we've seen on a trailing 12 month basis. So overall that would be my my read into into the second quarter.

Speaker Change: With what we've seen in Q4, but accelerated right. So.

Unknown Attendee: or is it.

Speaker Change: Thanks, Vivek, let's move onto the next caller.

Speaker Change: Thats my comment on the first quarter for the second quarter, we have data only for I mean, it's not even been.

Unknown Executive: I'll say a very high-level comment, and Mike, you can use some more color. In general, Stacy, our forecast represents what we're seeing right now. I mean, we, of course, want to give you the best data when we come to this call, and that's our best estimate of what the quarter will do according to what we see right now. Yeah, I think it's difficult to rule out any specific reason, you know, for a given order, but again, as we mentioned before, we have seen since the beginning of the quarter, you know, the linearity so far is about what you'd expect to see from a first and second transition, and also in an environment where you're having end markets that are in recovery.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of Stacy <unk> with Bernstein Research. Please proceed with your question.

Not even a month yet right so.

Speaker Change: Our lead times are very short and the signals, we see right now are nothing that.

Stacy <unk>: Hi, guys. Thanks for taking my questions.

Stacy <unk>: Yeah.

Stacy <unk>: First thing you didn't see any pull forward, but then you talked about customers wanting to hold more was put it seems like the definition of pull forward and he seemed concerned about the second half I mean I guess my question is if there was pull forward going on would you care.

Speaker Change: That.

Speaker Change: Signal is anxiety or something very very weird, but kind of a contingent continuation of the cycle and my guess is and thats when I think about industrial customers running low volume.

Stacy <unk>: Or would you just would you just like us.

Speaker Change: Exposed to all these new I think you would want to have a little bit more than less and Thats also my anecdotal discussion with customers.

Stacy <unk>: Our typical plan I always thought it was if he can fulfill it you ship it and it doesn't really matter more than that is that how we should be thinking about.

Mike Beckman: So, not unusual what we're seeing.

Unknown Executive: With that, I'll move on to the next caller.

Unknown Executive: Thank you. Our next.

Speaker Change: They do have.

Stacy <unk>: How you are living in this environment right now.

Speaker Change: We wish to maybe replenish some of their empty shelf.

Stacy <unk>: Given some of the upside that you are seeing are clearly, saying.

Speaker Change: So I think we are seeing now maybe end demand in industrial cost a little bit okay, and thats, what I would say is.

Unknown Attendee: Yes, thank you and congratulations to Dave on his retirement. Tremendous career and you'll be sorely missed. My question, first question is on some of the activity that you've seen here the last few weeks. Is there any regional disparity here? I mean, I'm, I'm asking the question because obviously, you know, there's variances on the potential tariffs by region.

Speaker Change: Yes, Stacy thanks for the question, let me first clarify the first point that you've made maybe.

Speaker Change: A little bit not clear enough I would guess that what we've seen in the first quarter, okay that dominant signal ive seen in the first quarter than we've seen in the growth agenda to grow geography was very consistent.

Speaker Change: As a typical cycle behavior now when I say, we have to prepare to any scenario that thing can develop.

Speaker Change: Both ways in the second half could turn into.

Speaker Change: The return of industrial.

Speaker Change: I don't know slowdown and just no end demand then we will see that.

Speaker Change: We've seen that in a broad way across the channel on our online business. It's just been a very very broad nothing that looked at.

Speaker Change: In our orders at a certain point of time, we haven't seen it yet but <unk>.

Haviv Ilan: So is that also very consistent with what you typically would Yeah, I'll take that and maybe provide a little bit more color. I think Tim went there and I can provide a little bit more color of what's happening. As we said in the prepared remarks and also in my response to Tim, we are working very closely with our customers because of course, they are reading the situation, they are studying the supply chains and we are a large supplier of them, very broad supplier. And of course, they want to have flexibility. And by the way, the rules are changing every day and they could continue to change.

Speaker Change: Zing Xiety bills and we've seen sometimes.

Speaker Change: Anxious or nothing that looks like huge orders or whatever just.

Speaker Change: Situations like that think about Covid and Covid.

Speaker Change: And acceleration of the aging trend we saw in Q4, so very consistent.

Speaker Change: And we looked at that cycle very very carefully.

Speaker Change: With what we've seen in Q4, but accelerated right. So.

Speaker Change: Economy stopped I mean people haven't we're not building and equipment, we were not showing up to factories. So everything stopped but then this was.

Speaker Change: Thats my comment on the first quarter for the second quarter, we have data only four.

Speaker Change: This period after that anxiety is built and we have seen orders you know three year year with both the border on our books and we are not right now there.

Speaker Change: Not even been.

Speaker Change: Not even a month yet right so.

Speaker Change: Our lead times are very short and the signals, we see right now are nothing that.

Speaker Change: But we do have to think about what happens if customers get into these actions more anxious mode and then we need to support them and to your question specific one we are not going to just flood them with stuff that we don't think they need we have a playbook that we have written over the last several years of what's happened in an up cycle and we will manage customer.

Speaker Change: That you know signal is anxiety or something very very weird, but kind of a contingent continuation of the cycle and my guess is that's when I think about industrial customers running low volume.

Haviv Ilan: They are attacking and thinking about what can they do right now. And of course, if you think about the story about the way our market works, the way cycle times are built for semis, nothing can be fixed immediately, right? Everybody's kind of preparing for what the second half of the year could be and they want to have a very robust and what we like to call a geopolitically dependable capacity supplier on their side. So, I'll go a little bit of more specificity why we think and why we can say that our discussions are going well because we do have flexibility.

Speaker Change: Exposed to all these new I think you would want to have a little bit more than less and Thats also my anecdotal discussion with customers.

Speaker Change: According to the demand.

Stacy: In a very structured and organized way Stacy.

Speaker Change: They do have.

Speaker Change: Stacy do you have a follow up.

Speaker Change: I wish to maybe replenish.

Speaker Change: Thank you maybe to follow up on that again I know, it's only been less than a month in the quarter was 23 days in I think we're what about two weeks herself since our liberation day, just what have you seen on I guess any acceleration in the order rate.

Speaker Change: Some of their empty shelf.

Speaker Change: So I think we are seeing now maybe end demand on industrial cost a little bit okay, and thats, what I would say is.

Speaker Change: As a typical cycle behavior now when I say, we have to prepare to any scenario that thing can develop.

Haviv Ilan: If you think about the, let's just take, for example, our main focus is our China headquartered customers. For the majority of our portfolio, we have already an internal dual flow capability, right? This was put together back in, actually, the Japan earthquake more than a decade ago, that we want to have a disaster recovery framework when a supply chain gets shattered, what customers can do. That's also a very big requirement for customers who buy high volume from TI. That is something that we now have to work immediately on some logistics, because now to optimize potential cost for customers, we have to adapt our manufacturing flow and our logistics in order to get the right part to the right customers.

Speaker Change: During those kind of two weeks post tariff versus say, what you saw exiting Q1 have orders like materially accelerated the pace of orders materially accelerated over the last couple of weeks.

Speaker Change: Both ways the second half could turn into.

Speaker Change: I don't know slowdown and just no end demand then we will see that.

Speaker Change: In our orders at a certain point of time, we haven't seen it yet, but you know what youre.

Speaker Change: Or is it kind of thing.

Speaker Change: I'll say very high level comment and Mike you can add some more color in general safety our forecast represents what we're seeing right now and we of course.

Speaker Change: Zing Xiety bills and we've seen sometimes.

Speaker Change: Situations like that think about Covid and Covid and.

Speaker Change: To give you the best data and when we come to this call and that's our best estimate of what the quarter will do according to what we see right now, yes, I think it's difficult to normal out any specific reason for a given order, but again as we mentioned before.

Speaker Change: And we looked at that cycle very very carefully.

Speaker Change: Economy stopped I mean people haven't we're not building and equipment not showing up to factories. So everything stopped but then this was that for.

Speaker Change: This period after that anxiety is built and we have seen orders you know three year year with both the border on our books and we are not right now.

I have seen since the beginning of the quarter. The linearity. So far is about what you'd expect to see.

Speaker Change: From a versus second transition and also in an environment, where you are having and markets that are in recovery. So not unusual what we've seen so far.

Speaker Change: And now there.

Speaker Change: But we do have to think about what happens if customers get into this <unk> anxious mode, and then we need to support them and to your question specific one we're not going to just flood them with stuff that we don't think they need we have a playbook that we have written over the last several years of what happens in an up cycle and will manage customers.

Haviv Ilan: We have inventory. Sometimes we have from both flavors on our shelves right now, but we just have to make sure that the machine, because we have more than 100,000 customers and they are buying, sometimes hundreds of different parts of customer, we have to make sure that logistically our machine has to adapt and optimize the right path for the customer. We also have external partners, right?

Speaker Change: Alright with that I'll move onto the next caller.

Speaker Change: Thank you.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of tore.

Sandburg: Sandburg with Stifel. Please proceed with your question.

Speaker Change: Yes, Thank you and congratulations to David on his retirement tremendous career and you'll be sorely missed.

Speaker Change: According to the demand.

My question first question is on.

Speaker Change: A very structured and organized way.

Speaker Change: Some of the activity that you've seen here. The last few weeks is there any regional disparity here.

Speaker Change: Stacy do you have a follow up I do think you maybe maybe to follow up on that again I know, it's only been less than a month in the quarter with 23 days and I think we're what about two weeks herself since our liberation day, just what have you seen on I guess any acceleration in the order rate.

Haviv Ilan: So if you think about, I can give a very easy example from our embedded business. Our embedded business is in the process of shifting, you know, manufacturing from foundries in this case in Taiwan to our fab in Lehigh. So by definition, the parts are double, you know, they have a dual flow, one internal, one external. And we just have to, again, get the right wafers to the right customers. That is something that we are busy doing with the customers who need that.

Speaker Change: I'm asking the question because obviously there is.

Speaker Change: <unk> on the potential tariffs by region. So is that also very consistent with what you typically would see.

Speaker Change: During those kind of two weeks post tariff versus say, what you saw exiting Q1 like have orders like materially accelerated the pace of orders materially accelerated over the last couple of weeks.

Yes, I'll take that and maybe provide a little bit more color I think Tim when there and I can provide a little bit more color about what's happening.

Speaker Change: As we said in the prepared remarks and also in my response to the team. We are working very closely with our customers because of course they are reading the situation. They are studying the supply chain then.

Speaker Change: Or is it kind of thing.

Speaker Change: I'll say very high level comment and Mike you can add some more color in general safety. Our forecast represents what we are seeing right now I mean, we of course.

Haviv Ilan: And just a reminder, you know, we are coming from a very deep cycle, way below the trend line. And we have four fabs outside of the US, we have two Japan, one in China, one in Germany. And we have most of the parts that we have running on, you know, in the US also running there, right? So maybe these fabs are not as cost efficient as our 300 millimeter wafer fabs, but they are competitive. And this is where the control of our technology allows us to shift some of our supply into these fabs where needed.

Speaker Change: We are a large supplier of them very broad supplier and of course.

To give you the best data and when we come to this call and that's our best estimate of what the quarter will do according to what we see right now, yes, I think it's difficult to rule out any specific reason for a given order, but again as we mentioned before.

Speaker Change: They want to have flexibility.

Speaker Change: And by the way the rules are changing every day and they could continue to change today.

Speaker Change: Talking and thinking about what can they do right now and of course.

Speaker Change: I have seen since the beginning of the quarter. The linearity. So far is about what you would expect to see.

Speaker Change: If you think about the story about the way our market was the waste cycle times are beautiful semi nothing can be fixed immediately right everybody is kind of preparing for the second half of vehicle would be and they want to have a very robust and what we like to call. It geopolitically dependable capacity supplier.

Speaker Change: From a first or second transition and also in an environment, where you are having and markets that are in recovery. So not unusual what we've seen so far.

Speaker Change: Alright with that I'll move onto the next caller.

Speaker Change: Okay.

Speaker Change: Thank you. Our next question comes from the line of tore.

Speaker Change: Chris <unk> with Stifel. Please proceed with your question.

Haviv Ilan: Obviously, these fabs are underutilized, because at the down cycle, you optimize your capacity, your lower cost rather than to your 200 millimeter wafer fab.

Speaker Change: <unk> side so.

Speaker Change: If you go into the I'll go a little bit more specificity why we think and why we why we can say that our discussions are going well because we do have flexibility.

Speaker Change: Yes, Thank you and congratulations to Dave on his retirement tremendous career and you'll be sorely missed.

Haviv Ilan: So the bottom line, it's a complex execution plan that we have. The teams are engaged, working closely with customers. And we are prepared to navigate the evolving supply chain dynamics into the second quarter, but also into the second half of 2025 into next year.

Speaker Change: My question first question is on.

Speaker Change: If you think about the.

Speaker Change: Some of the activity that you've seen here. The last few weeks is there any regional disparity here.

Speaker Change: Let's just take for example, our main focus with our China headquartered customers.

Speaker Change: For the majority of our portfolio, we have already an internal dual flow capability right before put together backing the actually the Japan earthquake and more than a decade ago that we want to have.

Speaker Change: I'm asking the question because obviously there is.

Speaker Change: Variances.

Speaker Change: Potential parents by region. So is that also very consistent with what you typically would see.

Unknown Executive: Let's move on to the next caller.

Speaker Change: Disaster recovery framework, when when the supply chain gets charter sharp doing what customers can do and Thats also a very big requirement for customers, who buy high volume from Ti. So that is something that we now have to work immediately on some logistics because now to optimize potential cost for customers.

Unknown Attendee: Our next question comes from the line. Hey, guys, thanks for letting me ask a question. And again, I want to pass along the thanks to Dave, you will be missed.

Speaker Change: Yes, I'll take that and maybe provide a little bit more color I think Tim when there and I can provide a little bit more color about what's happening.

Speaker Change: As we said in the prepared remarks and also in my response to the team. We are working very closely with our customers because of course they are reading the situation. They are studying the supply chain then.

Haviv Ilan: My first is just on the China for China strategy. So, if you look at your global footprint and versus your peers, clearly, you guys are really well positioned from the ability to serve different geographies with different capacity. But maybe just one on your China facility, if you were to look at demand that is coming from China specifically, can you meet all that demand with your China facility in country? Or could you help me just understand how much of that demand you can meet with that facility? Is that something that you could entirely support with your footprint there?

Speaker Change: We are a large supplier of them very broad supplier and of course.

Speaker Change: <unk>.

Speaker Change: We have to adapt our manufacturing flow in our logistics in order to get the right part to the right customers, Okay, and we have inventory, sometimes we have inventory from both flavors on our on our shelves right now, but we just have to make sure that the machine because we have more than 100000 customers.

Speaker Change: They want to have flexibility.

Speaker Change: And by the way the rules are changing every day and they could continue to change today.

Speaker Change: Talking and thinking about what can they do right now and of course.

Speaker Change: If you think about that I worry about the way all our market was the waste cycle times are beautiful semi nothing can be fixed immediately right everybody is kind of preparing for the second half of the could be and they want to have a very robust and what we like to call a geopolitically dependable capacity supplier.

Speaker Change: They are buying.

Speaker Change: Sometimes hundreds of different parts of the customer we have to make sure that theyre logistically, our machine is to adapt and optimize the right path.

Haviv Ilan: Yeah, let me, you know, I think I said before that I think customers, they don't ask for domestic manufacturing plan, they ask us for, you know, a dependable capacity footprint. And that's what we have, you know, look, the tariff could change three more times in the next two weeks. Okay. And that's something that we can't forecast and also know our customers. But I will say that when we look at our footprint of manufacturing between the US and between Asia and Europe, and also look at the at the work we do with our external partners and foundries, we are well positioned.

Speaker Change: For the customer.

Speaker Change: We also have external partner advisory if you think about I can give you a very easy example from our embedded business our embedded business.

Speaker Change: And our site so.

Speaker Change: If you go into the I'll go a little bit of most specificity why we think and why we why we can say that our discussions are going well because we do have flexibility.

Speaker Change: Is in the process of shifting.

Speaker Change: <unk> manufacturing from foundries discussing Taiwan too.

Speaker Change: If you think about the.

Speaker Change: Our fab in Lehigh so by definition that powers our R. W.

Speaker Change: Let's just take for example, a main focus of China headquartered customers.

Speaker Change: Have a dual flow one internal and external.

Speaker Change: For the majority of our portfolio, we have already an internal dual flow capability right. This was put together backing the activity the Japan earthquake and more than a decade ago that we want to have.

Speaker Change: And we just have to again.

Speaker Change: Wafers to the right customers that is something that we obviously are doing with our customers will need that.

Speaker Change: And just a reminder.

Speaker Change: Disaster recovery framework, when when the supply chain gets charter sharp doing what customers can do and that's also a very big requirement for customers, who buy high volume from Ti. So that is something that we now have to work immediately on some logistics because now to optimize potential cost for customers.

Speaker Change: Forming a very deep.

Haviv Ilan: The issue is not the capacity size, the issue is how quickly you can get your logistics and also the cycle time of starting new wafers, landing at customers to optimize, you know, the cost of the supply. I think TI is very, very well prepared for that. So when you have a part that is already running on the board, and it's already qualified, and all you need to do is right now ship it, you know, instead of from Dallas, from Japan, that's not a big deal. Okay. It works in the system. It is dual qualified, it's just a matter of cycle time of starting wafers and getting the supply in front of our customers.

Speaker Change: And cycle way.

Speaker Change: Below the trend line.

Speaker Change: And we have four fabs outside of the U S. We have two in Japan, one in China wanting.

Speaker Change: In Germany.

Speaker Change: And we have most of the part that we have running on <unk>.

Speaker Change: <unk>.

Speaker Change: We have to adapt our manufacturing flow in our logistics in order to get the right part to the right customers, Okay, and we have inventory, sometimes we have inventory from both flavors on our on our shelves right now, but we just have to make sure that the machine because we have more than 100000 customers.

Speaker Change: In the U S also running there right. So maybe to report these fabs are not as cost efficient as our 300 millimeter wafer fabs that they are competitive and this is where the control of our technology allows us to shift some of our supply.

Speaker Change: We felt very needed obviously these underutilized because of the down cycle you optimize your capacity.

Speaker Change: They are buying sometimes hundreds of different parts of the customer we have to make sure that they logistically our machine is to adapt and optimize the right path.

Speaker Change: Sure cost rather than $2 200 millimeter wafer fab so the bottom line.

Haviv Ilan: So that's the kind of, you know, challenges we deal with. It is going well. Our team is working 24 seven on it. And I'm very pleased with our reaction time and the urgency that the team is showing.

Speaker Change: Complex.

Speaker Change: For the customer.

Speaker Change: Execution.

Speaker Change: We also have external partner advisory if you think about I can give you a very easy example from our embedded business our embedded business.

Speaker Change: The plan that we have the teams that are engaged working closely with customers and we are prepared to navigate evolving supply chain dynamics.

Haviv Ilan: I will say on the China supply, in general, you know, we have a decent supply in China, we also have a large AT facility over there. And in general, I think the footprint that TI has is very, very, is a good answer to what our customers in China need. But beyond that, you know, what our customers need worldwide.

Speaker Change: <unk> is in the process of shifting.

Speaker Change: Into the second quarter, but also into the second half of 'twenty five into next year.

Speaker Change: <unk> manufacturing from foundries discussing Taiwan too.

Speaker Change: Thanks, Tori, let's move onto the next caller please.

Speaker Change: Our fab in Lehigh so by definition the parts are all.

Speaker Change: Thank you Aaron.

Speaker Change: Our next question comes from the line of Tom O'malley with Barclays. Please proceed with your question.

Speaker Change: <unk>.

Speaker Change: Do all flow and one internal and external and we just have to again the right way for us with the right customers that is something that we obviously are doing with the customers who need that and just a reminder.

Speaker Change: Hey, guys. Thanks for letting me ask a question and again I don't want to pass along thanks to Dave.

Rafael Lizardi: You have a follow-up, Tom? Yes, super helpful. This may be a silly question, but I just want to understand too, because in your filings, you talk about front end and back end manufacturing at your different facilities. When you're doing production of a certain chip in a geography, is the back end always associated with that same foundry? Or are you shipping that to different places before it meets the end customer? Okay, where is the back end done? Is it pretty much aligned with your foundry footprint just because they're listed similarly in the filings?

Speaker Change: You'll be missed my first is just on the China for China strategy. So.

Speaker Change: If you look at your global footprint versus your peers. Clearly you guys are really well positioned from the ability to serve different geographies with different capacity, but maybe just one on your your China facility. If you were to look at demand that is coming from China, specifically can you meet all that demand with your <unk>.

Speaker Change: We are coming from a very deep.

Speaker Change: And cycle way.

Speaker Change: Below the trend line and we have four fabs outside of the U S. We have two in Japan, and one in China wanting.

Speaker Change: In a in Germany.

Speaker Change: And we have most of the part that we have running on.

Speaker Change: China facility in country or could you help me just understand how much of that demand you could meet with that facility is that something that you could entirely support with your footprint there.

Speaker Change: In the U S also running there right. So maybe to report these fabs are not as cost efficient as our 300 millimeter wafer fabs that they are competitive and this is where the control of our technology allows us to shift some of our supply.

Rafael Lizardi: I just wanted to The short answer is no, but I'll let Rafael, we have full flexibility, but Rafael, maybe you can comment. Yeah, no, so there's almost unlimited amount of permutations of how this, the fabs and the ATs and processes in between bump and probe, if you will, that happens. So, a fab can be, a wafer can be fabbed in the United States and then be assembled and tested, be assembled in Malaysia and then tested in Taiwan, for example. So, it's not all in one geography. And some of that, by the way, can be changed immediately.

Speaker Change: Yes, let me know.

Speaker Change: I think I've said before that I think customers they don't ask for domestic.

Speaker Change: We felt very needed obviously these underutilized because of the down cycle you optimize your capacity.

Speaker Change: And.

Speaker Change: The manufacturing plan they ask us.

Speaker Change: For dependable capacity footprint and Thats, what we have.

Speaker Change: Recall, rather than two years 200 millimeter wafer fab so the bottom line.

Speaker Change: Look the tariff could change three more times in the next two weeks, okay, and thats something that.

Speaker Change: Complex.

Speaker Change: Execution.

Speaker Change: The plan that we have the teams that are engaged working closely with customers and we are prepared to navigate evolving supply chain dynamics.

Speaker Change: We cant forecast and also nor our customers, but I will say that when we look at our footprint of manufacturing between the U S.

Speaker Change: Into the second quarter, but also into the second half of 'twenty five into next year.

Haviv Ilan: Some of that can take time, but a lot of that is actually, can be moved pretty quickly. Yeah, I think the most important point is there are things that can happen immediately and the things that take a little bit of a longer time. So, if you think about them in order of. The easiest thing to do is just to route, and that's a logistic comment I had, to route the right part to the right customer. That's an IT thing. Again, we are a massive supplier, okay? We run well above 10 billion units a year, sorry, a quarter, to our customers.

Speaker Change: Asia and Europe and also look at the.

Speaker Change: Thanks, Tori, let's move onto the next caller please.

Speaker Change: Ed.

Speaker Change: The work, we do with our external partners. The foundries, we are well positioned the issue has not been the capacity side. The issue is how quickly.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of Tom O'malley with Barclays. Please proceed with your question.

Speaker Change: Hey, guys. Thanks for letting me ask a question and again I don't want to pass along thanks to Dave.

Speaker Change: You can get your logistics and also the cycle time of starting new wafers, the lending at customers to optimize.

Speaker Change: He will be missed my first is just on the China for China strategy. So.

Speaker Change: The cost.

Speaker Change: If you look at your global footprint versus your peers. Clearly you guys are really well positioned from the ability to serve different geographies with different capacity, but maybe just one on your your China facility. If you were to look at demand that is coming from China, specifically can you meet all that demand with your churn.

The supply I think Ti is very very well prepared for that so when you have a part of it is already running on the board and it's already called qualified and all you need to do it right now ship it instead of from Dallas from Japan that is not a big deal okay.

Haviv Ilan: So that's not something you can do manually on an Excel sheet, right? So logistics and IT has to be put together, and we are.

Haviv Ilan: The second thing that you are doing is just on the AT. AT is a very easy permutation to Rafael's point, and it's very simple to take a wafer from a certain fab and run it quickly on a new assembly and test factory just because the cycle time is lower. And of course, when we go to the base layer, the chip, the chip just has longer cycle time, and this is where we are gathering information from our customers so we can solve their problems as soon as possible.

Speaker Change: Walked in the system.

Speaker Change: It is dual quantified is just the matter of cycle time will starting wafers and getting the supply in both of our customers. So that's the kind of <unk>.

Speaker Change: The facility in country or could you help me just understand how much of that demand you can meet with that facility is that something that you could entirely support with your footprint there.

Challenges we deal with.

Speaker Change: Yes, let me know.

Speaker Change: I've said before that I think customers they don't ask for domestic.

Speaker Change: It is.

Speaker Change: Going well.

Speaker Change: Our team is working 24, 708, and I am very pleased with our reaction time and the urgency that the team is showing.

Speaker Change: Manufacturing plant.

Speaker Change: Ask us.

Speaker Change: For dependable capacity footprint and Thats, what we have.

Speaker Change: We'll say.

Speaker Change: On the China supply in General you know, we have a decent fab in <unk>.

Unknown Executive: Let's move on to the next caller, please.

Speaker Change: In China, we also have.

Unknown Attendee: Thank you. Our next question comes from the line of... Great, thanks for taking my question.

Speaker Change: Look the tariff could change three more times in the next two weeks, okay, and thats something that.

Speaker Change: A large.

Speaker Change: Facility over there and in general I think the footprint at Ti has is very very.

Speaker Change: We cant forecast and also nor our customers, but I will say that when we look at our footprint of manufacturing between the U S and between Asia and Europe and also look at the.

Unknown Attendee: I wonder if you could talk to us about the breakup between in growth between pricing and volume, specifically as it relates to tariffs. Was there anything that helped For example, you know, this new tariff, you're passing the price along and so you see price benefit either in the Q1 results or in the Q2 guidance, anything that we can quantify? No, I can I can. That's an easy answer. It's based on just stripping more volume to customers. That's what we're seeing, the recovery of the cycle. Do you have a follow-up, Will?

Speaker Change: It's a good answer.

Speaker Change: To what our customers in China needs, but beyond that what our customers need worldwide.

Tom O'malley: Follow up Tom.

Speaker Change: Ed.

Speaker Change: Yes Super helpful. This may be a silly question, but I just want to understand it just because it's in your filings you talk about front end and back end manufacturing at your different facilities when youre doing production of a certain chip in a geography is the backend always associated with that same foundry or are you shipping that to different places before it meets the end.

Speaker Change: The work.

What can we do with our external partners. The foundries, we are well positioned the issue is not on the capacity side. The issue is how quickly.

Speaker Change: You can get your logistics and also the cycle time of starting new wafers, the lending at customers to optimize.

Speaker Change: The cost of.

Speaker Change: The end customer, Okay, where is the backend done is it pretty much aligned with your foundry footprint just because they are listed similarly in the filings I just wanted to understand a little better.

Speaker Change: The supply I think Ti is very very well prepared for that so when you have a part that is already running on the board and it's already qualified and all you need to do it right now ship it instead of from Dallas from Japan.

Speaker Change: The short answer is no, but I'll, let Rafael we have full flexibility about Rockwell and maybe you can comment yes, no. So there.

Haviv Ilan: I wonder if you could give us an update on the competition in China. I think some people observed greater competition there. One of your somewhat smaller competitors in analog and embedded through similar product profile, perhaps a bit more narrow, but similar product profile, talked about no longer competing in standard products in China, and instead they're selling dice and having customers, you know, assemble, test, support, etc., which seems like a strange approach, but they said that the Chinese are becoming more intense or more capable competitors now, and I wonder if you could update that, update us relative to what you see.

Speaker Change: Not a big deal okay.

Speaker Change: It walks in the system.

Almost.

Speaker Change: It is dual quantified is just the matter of cycle time will starting wafers and getting the supply in both of our customers. So that's the kind of.

Speaker Change: Limited amount of permutations of how this.

Speaker Change: The fabs in the eighties and processes in between.

Speaker Change: <unk> Pro if you will.

Speaker Change: As you know.

Speaker Change: That happens so.

Speaker Change: <unk> challenges.

Speaker Change: Our fab can be wafer can be fab in the United States, and then B assemble and test assemble in Malaysia, and then tested in Taiwan for example.

Speaker Change: Deal with.

Speaker Change: It is.

Speaker Change: Going well.

Speaker Change: Our team is working 24, seven and eight and I'm very pleased with our reaction time and the urgency that the finish.

Speaker Change: Showing.

Speaker Change: So it's not all in one geography, and some of that by the way can be changed immediately some of that can take time, but lot of that is actually can be moved pretty quickly I think the most important point is there are things that can happen immediately and the things that have taken a little bit of a longer time. So if you think about them in order of.

Speaker Change: I will say.

Speaker Change: On the China supply in General you know, we have a decent fabien solving.

Speaker Change: In China, we also have.

Speaker Change: Large.

Speaker Change: Facility over there and in general I think the footprint. It has is very very.

Haviv Ilan: Thank you. Yeah, thanks for the question. This is something that we've been watching, as you know, for years. This is not a 2025 phenomenon. As I said before, and we said many times, The competition in China is intensifying. And by the way, and I was in China just last quarter, okay, no discussion on trade, it was all about supply and, you know, expanding positions on board and designing. So just a regular visit across more than 20 customers. And in general, the competition is intensifying across the board. It's in general purpose, but it's also in a more application specific part.

Speaker Change: The easiest thing to do is just to route and Thats. The logistic comment I have had throughout the right part the right customer Thats a nice.

Speaker Change: It's a good answer.

Speaker Change: What our customers in China needs, but beyond that what our customers need worldwide.

Speaker Change: Again, we are not we are a.

Tom O'malley: Follow up Tom.

Speaker Change: A massive supplier, okay, we run well.

Tom O'malley: Yes Super helpful. This maybe a silly question, but I just want to understand too because if in your filings you talk about front end and back end manufacturing at your different facilities when youre doing production of a certain chip in a geography is the backend always associated with that scene foundry or are you shipping that to different places before it meets the end.

Speaker Change: Well above 10 billion units a year, sorry at quarter to our customers.

Speaker Change: So that's not something you can do manually in an excel sheet right, though logistics and it has to be put together and we are the second thing that we're doing is just on the on the <unk>. It is a very easy.

Speaker Change: Permutation thoroughfares point and <unk>.

Tom O'malley: The end customer, Okay, where is the backend done is it pretty much aligned with your foundry footprint just because they are listed similarly in the filings I just wanted to understand a little better.

Speaker Change: Very simple to take our wafer form of southern <unk> and run it and quick.

Haviv Ilan: I will tell you our largest competitor on a 77 gigahertz chip in China is a Chinese, you know, competitor. That's where we fight. And that's where we, and I won't call that a general purpose part. Okay, that's a very, very unique, large die size for chains of transmit and receive running at a very high frequency. This is not a general purpose, but very application specific, very complex. And we are not surprised. We've seen those folks working for more than 20 years. Five years and just very, very good companies. And very aggressive, very urgent, moving fast.

Speaker Change: Quickly.

Speaker Change: On a new assembly and test factories, just because of the cycle time is lower and of course, there is when we go through the base layer. The chip the chip just as long as the cycle time and this is where we are.

Rafael Lizardi: The short answer is no, but I'll, let Rafael we have full flexibility about Rockwell and maybe you can comment yes, no. So there is.

Tom O'malley: Almost.

Tom O'malley: Limited amount of permutations of how this.

Speaker Change: Gathering information from our customers.

Tom O'malley: The fabs in the eighties and process is in between.

Speaker Change: So we can solve there.

Speaker Change: As soon as possible.

Tom O'malley: <unk> Pro if you will.

Tom O'malley: Thanks, Tom let's move on to the next caller. Please.

Tom O'malley: That happened so.

Speaker Change: Thank you. Our next question comes from the line of William <unk>, which was securities. Please proceed with your question.

Tom O'malley: Our fab can be wafer can be fab in the United States and then B assemble and test said, we assemble in Malaysia, and then tested in Taiwan for example.

William: Thanks for taking my question.

I Wonder if you could talk to us about.

Tom O'malley: It's not all in one geography, and some of that by the way can be changed immediately some of that can take time, but a lot of that is actually can be moved pretty quickly I think the most important point is there are things that can happen immediately and the things that have taken a little bit of a longer time. So if you think about them in order of.

William: The breakup between.

Haviv Ilan: And I like to call it our conditioning room, because that's where you can strengthen your muscles, your muscle of competitiveness, of urgency. China is the best landscape to do that. I think we can compete on both. And even now, and especially now, when we show the scale and power of TI, we have a lot of options for our customers, not only the breadth of the product, the high level of quality. The number one discussion point I had a quarter ago is about supply. And the fact that we had inventory, and we have capacity is super important for our customers.

William: Growth between pricing and volume.

William: Specifically as it relates to tariffs was there anything that help.

William: For example.

William: New tariff, you're passing the price along and so you see some.

Tom O'malley: The easiest thing to do just to route and Thats. The logistic comment I have had throughout the right part the right customers and I think again, we are not we are in.

William: This benefit either in the Q1 results or in the Q2 guidance anything that we can quantify.

Tom O'malley: Massive supplier, Okay, we run well.

William: No I can I can that's an easy answer.

Tom O'malley: Well above 10 billion units a year, sorry, a quarter to our customers.

William: Skipping more volume per customer.

William: That's what we are seeing a recovery of the cycle.

Tom O'malley: So that's not something you can do manually in an excel sheet right. So logistics and it has to be put together and we are and the second thing that you are doing is just on the on the <unk>. It is a very easy.

Haviv Ilan: They are feeling, they are always the Chinese, or the China market is always a little bit ahead in the phase of any cycle, any recovery. We saw it on the way up in COVID, and the way down, and now we see it on the way up. They always like almost the early indicator. And that was the discussion. It was all about how can we get more quicker, and also a lot of thanks to the level of support of TI, simply having inventory for them ready to go with very short lead times.

William: Follow up will.

William: I am.

Speaker Change: I Wonder if you could give us an update on the competition in China I think.

Tom O'malley: Permutation thoroughfares point and.

Speaker Change: Some people have observed greater competition, there one of your somewhat smaller competitors in analog and embedded or similar product profile, perhaps a bit more narrow, but similar product profile talked about no longer competing in standard products in China and instead.

Tom O'malley: Simple to take our wafer from southern Fob and run it quicker.

Tom O'malley: Quickly.

Tom O'malley: On a new assembly and test factories, just because of the cycle time is lower and of course, there is when we go through the base layer. The chip the chip just as long as the cycle time and this is where we are in.

Speaker Change: They are selling dice and having customers.

Tom O'malley: Gathering information from our customers.

Haviv Ilan: So that would be my high level comment on the competition. I think we need to assume that the competition will continue to intensify. I will say that our competitive advantages, especially on the breadth of the portfolio, the fact that we can solve many problems on the boards, you can solve it with one company rather than with 20. And the fact that we have this diverse supply chain or diverse manufacturing plan, which is geopolitically dependable for their China business, but also for their export business is super important. I think it will continue to stay important at this time.

Tom O'malley: So we can solve there.

Speaker Change: Assemble test.

Tom O'malley: As soon as possible.

Speaker Change: Support et cetera, which seems like a strange approach, but they said that the Chinese are becoming more intense and more capable competitors now and I wonder if you could update that.

Speaker Change: Thanks, Tom let's move on to the next caller. Please.

Speaker Change: Thank you. Our next question comes from the line of William <unk>, which was securities. Please proceed with your question.

William: Thanks for taking my question.

Speaker Change: Date us relative to what you see thank you.

Speaker Change: I Wonder if you could talk to us about.

Speaker Change: Yes. Thanks for the question. This is something that we've been watching US you know four years. This is not a 2025 phenomenon.

William: The breakup between.

Speaker Change: Growth between pricing and volume.

Speaker Change: As I said before and we said it many times.

Speaker Change: The competition in China is intensifying and by the way.

Speaker Change: Specifically as it relates to tariffs was there anything that helped.

Speaker Change: I was in China at this last quarter, Okay. No discussion on trade if it was all about supply and <unk>.

Speaker Change: For example.

Speaker Change: This new tariff you're passing the price along and so you see some price benefit either in the Q1 results or in the Q2 guidance anything that we can quantify.

Unknown Executive: Okay, we'll move on to our last caller.

Unknown Attendee: Thank you. Our last Great, thank you.

Speaker Change: Spending positions on boards and designing so.

Speaker Change: Just a regular visit across more than 20 customers and in general the competition is intensifying across the board. It's in general purpose, but its also in a more application specific but I will tell you our largest competitor.

Speaker Change: No I can I can that's an easy answer.

Rafael Lizardi: I wonder if you could talk about the share repurchases in the quarter, they I saw that 600 million plus number, you've got a billion seven of trailing free cash and $5 billion dividend. I know the free cash is getting better. But can you just talk about, you know, what drives the timing of your buybacks? And, you know, how much you know, are you willing to take on more debt to buy back more? Thank you.

Speaker Change: Based on the stripping more volume per customer.

Speaker Change: That's what we are seeing a recovery of the cycle.

Speaker Change: I have a follow up will.

Speaker Change: On our 77 gigahertz chip in China the.

Speaker Change: I am.

Speaker Change: Chinese correct.

Speaker Change: Competitor, where we fight and that's where we and I won't call that the general purpose park, Okay, Thats, a very very unique.

Speaker Change: I Wonder if you could give us an update on the competition in China I think.

Speaker Change: Some people have observed greater competition, there one of your somewhat smaller competitors in analog and embedded or similar product profile, perhaps a bit more narrow, but similar product profile talked about no longer competing in standard products in China and instead.

Rafael Lizardi: Yeah, you know, our objective when it comes to buybacks, and in general, just cash return, is to return all free cash flow via dividends and repurchases. But you got to recognize that there's times to build and drain cash. So if you look at our cash balance, for example, we're at a very comfortable $5 billion. And our balance sheet is really strong with that. But a year ago, it was $10 billion. And that's because we had so much more of our CAPEX ahead of us. Right now, we're at 70%. We're 70% through the elevated investment. So we're in the approaching the last innings of the elevated CAPEX period.

Speaker Change: Large die size.

Speaker Change: For.

Speaker Change: Change will transmit and receive running at very high frequency. This is not.

Speaker Change: I know a purpose built very application specific very complex.

Speaker Change: And we are not surprised we've seen the folks that are working for more than five years and just very very good companies.

Speaker Change: They are selling dice and having customers.

Speaker Change: Assemble test.

Speaker Change: And very aggressive very urgent moving fast and.

Speaker Change: Support et cetera, which seems like a strange approach, but they said that the Chinese or the <unk>.

Speaker Change: I would like to call it our conditioning room, because thats, where you can frankly real muscle your muscle of competitiveness of urgency.

Speaker Change: Coming more intent to more capable competitors now and I Wonder if you could.

China is the best landscape to do that.

Speaker Change: I think we can compete on both.

Speaker Change: Update us relative to what you see thank you.

Speaker Change: And even now and especially now when we certainly show the scale and power of <unk>, we have a lot of options for our customers not only the breadth of the product the high level of quality. The number one discussion point I had a quarter ago is about supply and in fact that we had inventory and we have capacity is super important for our customer.

Speaker Change: Yes. Thanks for the question. This is something that we've been watching US you know four years. This is not a 2025 phenomenon and as I've said before and we've said many times the.

Rafael Lizardi: So we felt more comfortable operating at lower levels of cash. But you know, having $5 billion of cash still gives us plenty of room. And on your question on debt, we've taken debt before. We still have plenty of room on our balance sheet to take on more debt as it makes sense, when it makes sense.

Speaker Change: The competition in China is intensifying and by the way and I was in China, just last quarter. Okay no.

Speaker Change: <unk>.

Speaker Change: Trade it was all about supply and.

Speaker Change: They are filling the day they are always the Chinese the China market is always a little bit ahead ahead in the face of any cycle any recovery, we saw it on the way.

Speaker Change: Pending positions on boards and designing so just a regular visit across more than 20 customers.

Speaker Change: In general the competition is intensifying across the board. It's in general on purpose, but its also in a more application specific but I would tell you our largest competitor.

Unknown Attendee: Jody, you have a follow-up?

Unknown Attendee: Yeah, I do. And thank you for that. Yeah, thanks for the question.

Speaker Change: And Colby then they're way down in line with it on the way up they always like almost the the early indicator and.

Speaker Change: On the 77 gigahertz chip in China, the Chinese Guy.

Speaker Change: That was the discussion was all about how can we get more quicker and also a lot of things to the level of support of Ti simply having.

Speaker Change: Competitor, where we fight and that's where we and I won't call that the general purpose parked okay. That's a very very unique.

Speaker Change: Inventory for them ready to go.

Speaker Change: With very short lead time, so that would be my high level comment on the competition I think we need to assume that the competition will continue to intensify I will say that.

Speaker Change: Large die size.

Speaker Change: For sure.

Speaker Change: <unk> <unk> transmit and receive running at the very high frequency. This has not been.

Speaker Change: Our purpose built very application specific very complex.

Haviv Ilan: And I first start with and reiterate that there's a lot still changing. It's a dynamic environment. And our customers are looking at their supply chains, and they're working and we're working with them to understand and help support their needs. And as you've mentioned, we have the flexibility to navigate, you know, those evolving dynamics.

Speaker Change: Competitive advantages, especially on the breadth of the portfolio effect.

Speaker Change: And we're not surprised we've seen the folks that are working for more than five years and just very very good companies.

Speaker Change: Because we can solve many problems on the boards of Conservative one company rather than with 20.

Speaker Change: And very aggressive very urgent moving fast and I would like to call. It our conditioning room, because thats, where you can frankly real muscle your muscle of competitiveness of urgency.

And the fact that we have this diverse supply chain or diverse manufacturing plant, which you've geopolitically dependable folder, China business, but also for their export business is super important I think it will continue the same potent.

Rafael Lizardi: And in terms of how that Who pays that? Really, the question is, are you able to be competitive? And with our competitive advantages, the flexibility that we have, our geopolitically dependable footprint, we do have the ability to be competitive and to support our customers where they are.

Speaker Change: China is the best landscape to do that.

Speaker Change: I think we can compete on both.

Speaker Change: At this time.

Speaker Change: Okay, we'll move on to our last caller.

Speaker Change: And even now and especially now when we felt we show the scale and power of Ti, we have a lot of options for our customers not only the breadth of the product the high level of quality. The number one discussion point I had in the quarter ago is about supply and the fact that we had inventory and we have capacity is super important for our customer.

Speaker Change: Thank you. Our last question comes from the line of Joe Moore with Morgan Stanley. Please proceed with your questions.

Haviv Ilan: Haviv, do you have anything to add? Yeah, just the last point, Joe, and this is where we just need to let the quarter play out. And so many things can change in the next few weeks, and I actually expect them to change, right? So it's very hard to answer the question. I would just say that the way we learn about what our customers need is through their orders, through their backlog. And of course, if we see a change, if we would see a change, we will let you know, but that's the only way for us to gauge demand is what our customers are asking us to do.

Joe Moore: Great. Thank you I Wonder if you could talk about the.

Speaker Change: The share repurchases in the quarter. They saw that 600 million plus number you've got a 1 billion, 7% trailing free cash and $5 billion dividend I know the free cash is getting better but can you just talk about what drives the timing of your buybacks and how much are you willing to take on more debt to buy back more thank you.

Speaker Change: They are feeling today.

Speaker Change: Always the Chinese the China market is always a little bit ahead ahead in the phase of any cycle any recovery, we saw it on the way.

Speaker Change: <unk> been Colgate and the way down and how we see it on the way up they always like almost the the early.

Joe Moore: Yes.

Joe Moore: Our objective when it comes to.

Haviv Ilan: And our objective is to serve them, serve them well at high quality and deliver the parts they want, not only right now in second quarter, but also towards the second half of the year and also next year.

Speaker Change: Later and that was the discussion was all about how can we get more quicker and also a lot of things to the level of support of Ti simply having.

Joe Moore: Do buybacks I mean, I'll just cash.

Joe Moore: Return is to return all free cash flow via dividends and repurchases, but you got to recognize that there is times to build and drained cash. So if you look at our cash balance for example, we're at a very comfortable $5 billion.

Haviv Ilan: Okay, so with that, let me wrap up with what we've said previously. At our core, we are engineers, and technology is the foundation of our company. But ultimately, our objective and best metric to measure progress and generate value for our owners is the long-term growth of free cash flow per share.

Speaker Change: Inventory for them ready to go.

Speaker Change: With very short lead time, so that would be my high level comment on the competition I think we need to assume that the competition will continue to intensify I will say that our.

Joe Moore: And our balance sheet is really strong with that.

Joe Moore: A year ago, it was a $10 billion and thats because we had so much more of our Capex ahead of US right now we're at 70% we're 70% through.

Unknown Executive: Thank you, everyone, for joining the call.

Speaker Change: Our competitive advantages, especially on the breadth of the portfolio.

Unknown Executive: Congratulations to Dave and have a great evening.

Speaker Change: We can solve many problems on the boards of Conservative one company rather than with 20 <unk>.

Joe Moore: They kind.

Unknown Executive: This concludes today's conference. You may disconnect.

Joe Moore: Elevated investments so we're in the approaching the last innings of the elevated Capex period. So we felt more comfortable.

Speaker Change: And the fact that we have this diverse supply chain or diverse manufacturing plant, which are geopolitically dependable folder, China business, but also for their export business is super important I think it will continue the St Bolton.

Operating at lower levels of cash, but having $5 billion I'll catch it still gives us plenty of room.

Speaker Change: Sure.

Speaker Change: At this time.

Joe Moore: And.

Speaker Change: Okay, we'll move onto our last caller.

Joe Moore: And on your question on debt, we've taken that before we still have plenty of room on our balance sheet to take on more debt as it makes sense when it makes sense Jody or a follow up.

Speaker Change: Thank you. Our last question comes from the line of Joe Moore with Morgan Stanley. Please proceed with your questions.

Joe Moore: Great. Thank you I Wonder if you could talk about the.

Jody: Yes, I do.

Joe Moore: Share repurchases in the quarter. They saw that 600 million plus number you've got a 1 billion, 7% trailing free cash and $5 billion dividend I know the free cash is getting better but can you just talk about.

Speaker Change: Thank you for that.

Jody: Sure.

Jody: With regards to the Chinese tariffs.

Jody: I've talked to some of the customers and people don't seem to have clarity on what exactly the tariff rate is and yet I think the tariff is already being charged like do you have clarity on that our people immediately paying those tariffs.

Joe Moore: What drives the timing of your buybacks.

Joe Moore: And how much are you willing to take on more debt to buy back more thank you.

Jody: Is there is there just any way to sort of tell how much impact there is or is that something where the actual tariff is kind of calculated later.

Joe Moore: Yes.

Joe Moore: Our objective when it comes to.

Joe Moore: Do buybacks I mean, I'll just cash.

Jody: What are the mechanics of this being implemented so rapidly.

Joe Moore: Return is to return all free cash flow via dividends and repurchases, but you got to recognize that there's times to build then drain cash. So if you look at our cash balance for example, we're at a very comfortable $5 billion.

Jody: Yes, thanks for the question.

Jody: Let's start with and reiterate that although there's a lot still changing it's a dynamic environment and our customers are looking at their supply chains, and they're working and we're working with them to understand and help support their needs and as we've mentioned we have the flexibility.

Joe Moore: And our balance sheet is really strong with that but a year ago. It was a $10 billion and thats because we had so much more of our Capex ahead of US right now we're at 70% we're 70% through.

Jody: To navigate evolving dynamics in terms of how that.

Jody: Who pays that are you is really the question is are you able to be competitive and with our competitive advantages. The flexibility that we have are geopolitically dependable footprint, we do have the ability to be competitive and to support our customers where they are to be the only thing that is just the.

Joe Moore: They kind of elevated investment so we're in the approaching the last innings of.

Joe Moore: The elevated capex period, so we felt more comfortable.

Joe Moore: The last point, Joe and this is where we need to we just need to let the quarter play out.

Joe Moore: Operating at lower levels of cash, but having $5 billion I'll catch it still gives us plenty of room.

Speaker Change: So many things can change in the next few weeks and I actually expect them to change right. So it's very hard to to answer. The question I would just say that the way we learn about what our customers needed through their through their order through their backlog.

Joe Moore: And.

Joe Moore: And on your question on debt, we've taken that before we still have plenty of room on our balance sheet to take on more debt as it makes sense when it makes sense, Joe you have a follow up.

Speaker Change: Of course, if we see a change we would see a change we will let you know, but thats the only way for us to gauge demand is botox.

Joe Moore: Yes, I do.

Joe Moore: Thank you for that.

Joe Moore: Sure.

Speaker Change: And what they're asking us to do.

Joe Moore: With regards to the Chinese tariffs.

Our.

Speaker Change: Jack Davis to serve them well, it's high quality and deliver that possibly want not only right now in second quarter, but also towards the second half of the year and over the next year.

Joe Moore: I've talked to some of the customers and people don't seem to have clarity on what exactly the tariff rate is and yet I think the tariff is already being charged like do you have clarity on that our people immediately paying those tariffs.

Speaker Change: Okay. So with that let me wrap up with what we've said previously at our core we are engineers and technology are the foundation of our company, but ultimately our objective and best metric to measure progress and generate value for our owners.

Joe Moore: Is there is there just any way to sort of tell how much impact there is or is that something where the actual tariff is kind of calculated later.

Joe Moore: What are the mechanics of this being implemented so rapidly.

Speaker Change: Is the long term growth of free cash flow per share.

Joe Moore: Yes, thanks for the question.

Joe Moore: Let's start with and reiterate that although there's a lot still changing it's a dynamic environment and our customers are looking at their supply chains, and they're working and we're working with them to understand and help support their needs and as <unk> mentioned, we have the flexibility.

Thank you everyone for joining the call and congratulations to Dave and have a great evening. Thank you.

Speaker Change: Thank you. Thank you. This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation.

Joe Moore: To navigate the evolving dynamics in terms of how that.

Joe Moore: Who pays that are you is really the question is are you able to be competitive and with our competitive advantages. The flexibility that we have are geopolitically dependable footprint, we do have the ability to be competitive and to support our customers where they are to be the only thing to add is just the.

Joe Moore: The last point in that industry, where we need to we just need to let the quarter play out.

Joe Moore: So many things can change in the next few weeks and I actually expect them to change right. So it's very hard to answer the question I would just say that the way we learn about what our customers needed through their through their orders to the backlog.

Joe Moore: Of course, if we see a change we would see a change we will let you know, but thats the only way for us to gauge demand is what our customers are asking us to do.

Joe Moore: Our.

Joe Moore: Active to serve them fill them well, it's high quality and deliver the possibly want not only write down in second quarter, but will put toward the second half of the even over the next year.

Joe Moore: Okay. So with that let me wrap up with what we've said previously at our core we are engineers and technology is the foundation of our company, but ultimately our objective and best metric to measure progress and generate value for our owners.

Joe Moore: Is the long term growth of free cash flow per share.

Speaker Change: Thank you everyone for joining the call and congratulations to Dave and have a great evening. Thank you.

Speaker Change: Thank you. This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation.

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Speaker Change: Welcome to the Texas instruments first quarter 2025 earnings conference call.

Speaker Change: Dave Paul and I am joined by our Chief Executive Officer of Evil on and our Chief Financial Officer. Raphael was already in addition, Mike Beckman has joined us.

Speaker Change: As you May know I will be retiring and Mike will replace me as vice President of Investor Relations.

Mike Beckman: Mike has worked at Ti for nearly two decades and has worked directly with me in Investor Relations for five years, Mike will moderate today's call and with that let me turn it over to Mike. Thanks, Dave I'm looking forward to the opportunity for any of you who missed the release you can find it on our website at Ti Dot Com Slash IR. This call has been.

Mike Beckman: 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.

Speaker Change: 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.

Mike Beckman: Today, we will provide the following updates.

Mike Beckman: First <unk> will start with a quick overview of the quarter, including insight into first quarter revenue results and some details of what we're seeing with respect to our end markets.

Mike Beckman: Next he'll share how we are approaching the overall market environment and provide guidance for second quarter 2025.

Mike Beckman: Lastly, Raphael will cover the financial results and give an update on capital management.

Steve: With that let me turn it over to Steve.

Steve: Thanks, Mike Let me start with a quick overview of the first quarter.

Revenue came in at $4 1 billion, an increase of 2% sequentially and an increase of 11% year over year.

Steve: Analog revenue grew 13% year over year and embedded processing was about flat and both segments grew sequentially.

Steve: Our other segment grew 23% from the year ago quarter.

Steve: Now I'll provide some insight into our first quarter revenue by end market.

Steve: We continue to see recovery across our end markets with industrial showing broad recovery across sectors and geographies.

Steve: We believe customer inventories are at low levels across all end markets.

Similar to last quarter I will focus on sequential performance.

It is more informative at this time.

Steve: First the industrial market increased upper single digits after seven consecutive quarters of sequential decline.

Steve: The automotive market increased low single digits.

Steve: Personal electronics declined mid teens in line with typical seasonal trends.

Steve: Enterprise systems grew mid single digits and communications equipment was up about 10%.

Steve: Before I go through our second quarter guidance, let me take a minute to frame how we are approaching the current environment.

Steve: It is a time of high uncertainty in the world is tariffs and geopolitics are disrupting global supply chains, and creating unpredictable economic conditions.

Steve: Adding to that semiconductors are highly visible as it is broadly understood that people and economies are increasingly dependent on chips.

Steve: To navigate in this environment, we will continue to rely on our three key ambitions.

Steve: We will act like owners will own the company for decades.

Steve: We will adapt and succeed in a world that is ever changing.

Steve: And we will be a company that we are proud to be part of and would be proud to have as a neighbor.

Steve: These guiding ambitions are not new.

Steve: It served us well for decades, and they are enormously valuable in times like these.

Steve: We look at the current environment in two important categories.

Steve: One where we are in the phase of the semiconductor cycle.

Steve: <unk>, providing geopolitically dependable capacity and navigating in a world that is changing.

Steve: To help understand where we are in the cycle. We spent some time looking at previous events, including y2k.

Steve: The global financial crisis, and the COVID-19 pandemic, while no two scenarios are identical. These recent examples help inform our decisions as we prepare for a range of market scenarios.

Steve: What may be unique right now.

Steve: That we are at the bottom of the semiconductor cycle and customer inventories are at low levels across all end markets.

Steve: So relative to where we are Easter. He says it is important to have capacity and inventory in times like these and we are well positioned.

Steve: In addition, geopolitically dependable capacity will matter more and it is increasingly critical and valuable to our customers we.

Steve: We have flexibility and are prepared to navigate the evolving supply chain dynamics.

Steve: Translating all of these to second quarter guidance I would like to make three points.

Steve: First we remain cautious as there are many things still changing and we are working with our customers to understand and support their needs as such potential impact on our customers suppliers and Ti is unclear and will likely evolve.

Steve: And at this time, we don't see near term impact to second quarter, and we expect <unk> revenue in the range of $4.17 billion to $4 $5 3 billion in.

Steve: And earnings per share to be in the range of $1 21 to $1 47.

Steve: Finally, we will have to see what happens in second half 2025, and going into 2026, and we are prepared for a range of scenarios, we are and will remain flexible to navigate especially in the immediate term.

Rafael Lizardi: With that let me turn it over to Rafael to review profitability and capital management.

Rafael Lizardi: Thanks, Habib and good afternoon, everyone as Habib mentioned first quarter revenue was $4 1 billion.

Gross profit in the quarter was $2 3 billion or 57% of revenue sequentially gross profit margin decreased 90 basis points.

Rafael Lizardi: Operating expenses in the quarter were $989 million.

Rafael Lizardi: <unk>, 6% from a year ago and about as expected.

Rafael Lizardi: Trailing 12 month basis operating expenses were $3 8 billion or 24% of revenue.

Rafael Lizardi: Operating profit was $1 3 billion in the quarter or 33% of revenue and was up 3% from the year ago quarter.

Rafael Lizardi: Net income in the quarter was $1 2 billion.

Rafael Lizardi: Or $1 28 per share earnings per share included a <unk> <unk> benefit not in our original guidance.

Rafael Lizardi: Let me now comment on our capital management results, starting with our cash generation cash.

Rafael Lizardi: Cash flow from operations was $849 million in the quarter and $6 2 billion on a trailing 12 month basis.

Rafael Lizardi: <unk> expenditures were $1 1 billion in the quarter and $4 7 billion over the last 12 months.

Rafael Lizardi: Free cash flow on a trailing 12 month basis was $1 7 billion.

Rafael Lizardi: In the quarter, we paid $1 2 billion in dividends and repurchased $653 million of our stock.

Total we've returned $6 $4 billion to our owners in the past 12 months.

Rafael Lizardi: Our balance sheet remained strong with $5 billion of cash and short term investments at the end of the first quarter.

Rafael Lizardi: In the quarter, we repaid $750 million of debt total debt outstanding is $12 95 billion weighted average coupon of 393%.

Rafael Lizardi: Inventory at the end of the quarter was $4 7 billion.

Rafael Lizardi: Up $160 million from the prior quarter and days were 240 down one day sequentially.

Rafael Lizardi: For second quarter, we now expect our effective tax rate to be about 12% to 13%.

Rafael Lizardi: 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 reach of our channels and diverse and long lived positions.

Rafael Lizardi: We will continue to strengthen disadvantages 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 Mike.

Mike Beckman: Thanks, Rafael operator, you can now open the line 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.

Speaker Change: Thank you again, we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.

Speaker Change: Confirmation tone will indicate your line is in the question queue. You May press Star two if you remove yourself from the queue for participants using speaker equipment. It may be necessary to pick up the handset before pressing the star keys, one moment, please while we poll for questions.

Speaker Change: Our first question comes from the line of Timothy Arcuri with UBS. Please proceed with your question.

Timothy Arcuri: Thanks, so much.

Timothy Arcuri: So the guidance up 7%, that's even better than normal seasonal I know this is a hard question to answer but is there any way for you to know how much of this is pull ins ahead of the tariffs I mean is there any way your discussions with customers any of the tonality that's changed thanks.

Timothy Arcuri: Yeah.

Tim: Tim Thanks for the question.

Tim: So first before I talk about our approach into the second quarter, just as I said in my prepared remarks, we're looking at too.

Tim: Different categories of change in front of US one is relevant as it related to the cycle and the cycle.

Tim: We saw in Q1.

Tim: Continued recovery I think we mentioned before I think in the lagged in the previous call that we have three markets now growing year over year and recovering towards the PEO personnel electronics market, the enterprise and comm.

Tim: It's very obvious to us now that industrial.

<unk>.

Tim: <unk> is really joining the pack and it's a large market for us we felt that we have seen some evidence in Q4, but based on what we've seen in Q1 I think this is a real recovery rather than.

Tim: The way I see it right now.

Tim: Related to tariffs at least not for their first quarter right.

Tim: And the cycle.

Tim: Is it a bottom because we are seeing more and more evidence from customers that they are really really short on their own inventory.

Sometimes a few days of inventory, we have seen that AIDS in phenomena orders within the quarter turns as we call it.

Tim: Strengthening in Q4, it continued to do the same in <unk>.

Tim: So more and more evidence and signals that across all channels all geographies a recovery of.

Tim: The industrial market.

Tim: Thus the automotive market was always correcting a very shallow manner. So you can kind of say that the markets are now well pointing free.

Tim: Trade challenges all up into the right.

Tim: When you look at the second quarter.

Tim: I think we have to say a very cautious as we said about the forecast. So we are seeing that many things are still changing it's a very very dynamic environment and I'd say sometime by the day.

Tim: And there is a potential impact on our customers and our suppliers and also now on our revenues. So it feels it is unclear and it will evolve, but designing to call and we spent a lot of time on looking at past examples understanding where the cycle is in looking at the data we have in front of us.

Tim: We don't see an immediate near term impact of course, the customers wouldn't tell us why we see the orders come again.

Tim: But I would guess that.

At times like these when there is a lot.

<unk> anxiety and <unk>.

Tim: Do you want to have a little bit of more inventory on yourselves. The OLED. So my guess is more in may.

Tim: Maybe why we are seeing.

Tim: I'd call it a season, maybe a little bit.

Tim: We typically see a typical seasonal second quarter.

Tim: Forecast.

Tim: And.

Tim: Mike you have looked at some more data on the second quarter, maybe you can add a little bit more information on what we're seeing specifically for the second quarter, yes, yes, so quarter to date the revenue linearity, we've seen as startup about as we'd expect.

Tim: That shouldn't be too surprising just given the low inventory levels across the customer base and it also we see diversity across the end markets and geographies, so consistent with what <unk> shared.

Tim: You'll follow up Tim.

Tim: Is there a way to handicap sort of what your exposure is in China to these.

Speaker Change: Retaliatory tariffs I know you report, 19% as companies into China, but there's probably some added exposure from other companies that are that are domiciled beyond China that are building product in China, and I guess can you offset some of that by having product on consignment do you have a lot of inventory on consignment in China.

Tim: To sort of offset some of that thanks.

Speaker Change: Yes, and again <unk>.

Tim: I've said in.

Speaker Change: In my prepared remarks, we are providing.

Speaker Change: Providing geopolitically dependable capacity to our customers and we are working.

Speaker Change: Every hour, we'd been right now to navigating.

Speaker Change: The changing world. So as you said, we have a lot of capability I think it is important to start and focus first on.

Speaker Change: On our China headquarters cut.

Speaker Change: Customers.

Speaker Change: As I said, it's a little bit.

Speaker Change: It was 19% of our revenue last year I think it was 20% in Q1 are aligned with the JV with our GDP show So nothing very special here.

Speaker Change: I think we've said many times is an important market and our customers. We have long term relationship with them right the value of the value of our product breadth they value our quality, but also value our scale and service real points. They are part of the service. We provide is having inventory on hand, some of it consigned that some of it very close to their manufacturing.

Speaker Change: So all of that is part of the way we serve our customers and have been serving them for years, especially in the last several years, where we've taken more customers direct.

Speaker Change: In China and worldwide now.

Speaker Change: You also remember the thing that these guys. They want to be they are and want to continue to be an even further grow the global player.

Speaker Change: Making.

Speaker Change: And equipment that are sold into China, but they're also making <unk>.

Speaker Change: And equipment that are sold worldwide. Then again this is where our geopolitically dependable capacity.

Speaker Change: Very important and valuable this is where our immediate focus is right now.

Speaker Change: And this is where I am sure. We will have some photo have questions on that I'll, just say at a high level, we do have flexibility.

Speaker Change: It's a case by case, but we are working.

Speaker Change: With the customers everyone has different requirements of how we can support them on an immediate basis.

Speaker Change: And alleviate some of their concerns on what's going to happen in the second half of 'twenty five or even into 2026.

Speaker Change: Thanks, Tim let's move onto the next caller please.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of zinc area with Banc of America Securities. Please proceed with your question.

Thanks, So much I just wanted to say, thanks, and best wishes to Dave and its next adventures and also good wishes to Mike.

Speaker Change: For my first question.

Speaker Change: Maybe for Rob So inventory was up again and I think on the last call. You suggested that factory loadings would go down so it seemed like maybe they did not.

Speaker Change: So how much was the gross margin benefit from that and then how are you thinking about the direction of <unk>.

Speaker Change: Loadings and the pace of gross margins from here.

Speaker Change: Yeah sure. Let me give you a few pieces of information on that.

Speaker Change: Gross margin did better than expected most of that was due to higher revenue.

Speaker Change: And a greater mix of industrial in the quarter, but also our loadings were down versus fourth quarter, but they were higher than originally expected. The base case that we originally had and that was of course revenue.

Speaker Change: Did better than the midpoint and what we're seeing as I've described the current environment with customers running very lean on inventory and demand being pretty strong and agents et cetera.

Speaker Change: On a forward looking basis, our base case right now at the midpoint, we expect.

Speaker Change: Factory loadings to increase slightly.

Speaker Change: In the second quarter and gross margin to be up.

Speaker Change: Versus the first quarter, so first quarter to second quarter gross margin up.

Speaker Change: You have a follow up.

Speaker Change: Yes. Thank you.

Speaker Change: For Q2.

Speaker Change: You mentioned that it is perhaps right in.

The range of seasonality or perhaps at the upper end I know it tends to be a stronger quarter for you or other calculator business. When you look at your core segments could you help us get a feel for what is going to be better or lower than the 7% or so sequential rate, but it is by industrial and automotive market.

Speaker Change: Humor market, sorry about that it's by analog and embedded just so we get a better feel for what is driving Q2 to be at the upper end of seasonality. Despite all the macro and tariff related headwinds. Thank you.

Vivek: Sure Vivek.

Vivek: First I would say when we are in a normal environment and we are in an up cycle.