Texas Instruments Inc. (NASDAQ:TXN) Q4 2014 Earnings Conference Call - Final Transcript

Jan 26, 2015 • 05:30 pm ET


Texas Instruments Inc. (NASDAQ:TXN) Q4 2014 Earnings Conference Call - Final Transcript


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Good day. And welcome to the Texas Instruments 4Q 2014 and 2014 Year-End Earnings Conference Call. At this time, I'd like to turn the conference over to Dave Pahl. Please go ahead, sir.

Dave Pahl

Thank you and good afternoon and thank you for joining our fourth quarter and year-end 2014 earnings conference call. As usual Kevin March, TI's Chief Financial Officer is with me today. For any of you who missed the release, you can find it and relevant non-GAAP reconciliations on our web at ti.com/ir. This call is being broadcast live over the web and can be accessed through TI's website. A replay will be available through the web.

(Forward-looking Cautionary Statements) Before I review the quarter, let me provide some information that's important to your calendar. We plan to hold a call on February 4, at 10:00 AM Central time to update our capital management strategy. Similar to what we've done for the last two years on this topic, Kevin March will provide insight into our strategy, and also answer some of the most frequently asked questions.

Turning to our earnings update, the fourth quarter marked another quarter of strong progress. Our core businesses of analog and embedded processing grew again with combined revenue up 13% from a year ago. Revenue of $3.27 billion came in at the middle of the expected range that we communicated to you in October.

Earnings per share were $0.76 and included a $0.05 benefit for the reinstatement of the federal research tax credit, and a $0.02 benefit from gains on sales of assets. Without these two items, our earnings would have been in the middle of our expected range. In the fourth quarter, our cash flow from operations was $1.3 billion.

We believe that free cash flow growth, especially on a per-share basis is most important to maximizing shareholder value in the long term. Free cash flow for the year was $3.5 billion, up 18% from a year ago. Free cash flow was 27% of revenue consistent with our targeted range of 20% to 30%. This is a 3 percentage point increase -- an improvement from a year-ago period.

We believe this reflects our improved product portfolio and the efficiencies of our manufacturing strategy, which includes our growing 300 mm output and the opportunistic purchase of assets ahead of demand. We also believe that free cash flow will be valued only if it's returned to shareholders or productively invested in the business.

In 2014, we've returned $4.2 billion

Dave Pahl

of cash to investors through a combination of stock repurchases and dividends. In the fourth quarter, TI revenue grew 8% from a year ago with growth in both analog and embedded processing. Analog revenue grew 14% from a year ago led by Power Management. High Volume Analog and Logic, High Performance Analog and Silicon Valley Analog also grew. This is the sixth quarter in a row of year-over-year growth for analog.

Embedded processing revenue grew 11% from a year ago, due to growth in processors, microcontrollers