Common-Size Income Statement
Texas Instruments Inc., common-size consolidated income statement
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
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.