Texas Instruments Inc. (NASDAQ:TXN)

The financial data displays notable trends in cost structure, profitability, and expense management over the five-year period ending December 31, 2024.

Cost of Revenue and Gross Profit

The cost of revenue as a percentage of total revenue initially declined from 35.9% in 2020 to 31.24% in 2022, indicating improved cost efficiency. However, this trend reversed in subsequent years, increasing sharply to 41.86% by 2024. Correspondingly, gross profit margin rose to a peak of 68.76% in 2022 before decreasing to 58.14% in 2024, reflecting the higher cost of revenue and resulting in compressed gross profitability in the later years.

Research and Development (R&D) Expenses

R&D expenses relative to revenue decreased modestly from 10.58% in 2020 to 8.34% in 2022, suggesting a temporary reduction in investment in innovation or product development. However, R&D spending increased markedly thereafter, reaching 12.52% by 2024, indicating a renewed or intensified focus on research activities despite the profitability pressures.

Selling, General and Administrative (SG&A) Expenses

SG&A costs followed a pattern similar to R&D expenses. Starting at 11.22% of revenue in 2020, these expenses decreased to 8.51% in 2022, then rose again to 11.47% by 2024. This change suggests fluctuating management cost control or strategic shifts in sales and administrative efforts over the period.

Special Charges

Acquisition charges were significant in 2020 and 2021, at 1.37% and 0.77% of revenue respectively, then were absent in following years, indicating either a halt in acquisition activity or completion of such expenses. Restructuring charges/other costs fluctuated, with a notable increase to 1.28% in 2022, absence in 2023, and a positive adjustment of 0.79% in 2024, showing irregular impact from restructuring or unusual items on operating results.

Operating Profit

Operating profit margin improved steadily from 40.76% in 2020 to 50.63% in 2022, benefiting from lower costs and expenses. From 2023 onwards, it declined sharply to 34.94% by 2024, reflecting the combined effects of rising costs and higher expenses, resulting in diminished operational profitability.

Other Income and Expenses

Net other income and expenses showed variability but improved in later years, rising to 3.17% of revenue by 2024. This contributed a modest positive impact on profitability, offsetting some cost pressures.

Interest and Debt Expense

Interest and debt expenses decreased from 1.31% in 2020 to 1.00% in 2021, indicating reduced debt costs or improved financing terms. However, these expenses rose significantly in 2023 and 2024, reaching 3.25% of revenue, suggesting increased debt levels, higher interest rates, or both, which negatively affected net profitability.

Income Before Taxes and Net Income

Income before income taxes improved from 41.61% to a peak of 50.09% in 2022 before declining to 34.86% in 2024. The provision for income taxes as a percentage of revenue rose in 2021 and 2022 but decreased thereafter. Net income followed a similar trajectory, peaking at 43.68% in 2022 and falling to 30.68% by 2024, illustrating the overall decline in the company’s profitability during the last two years.

Overall, the data reveal an initial phase of improving margins and cost control through 2022, followed by a period of rising costs, increased expenses, and reduced profitability through 2024. The increased costs related to revenue generation, higher R&D and SG&A expenses, combined with elevated interest expenses, appear to have materially pressured operating and net income margins in the most recent years.