ADI

ANALOG DEVICES INC

Technology | Mega Cap

$1.72

EPS Forecast

$2,435

Revenue Forecast

Announcing earnings for the quarter ending 2024-10-31 soon
EX-99.1 2 adi2q22exhibit991earnings.htm EX-99.1 Document

Exhibit 99.1

Analog Devices Reports Record Second Quarter Fiscal 2022 Results

•Revenue of $2.97 billion with double digit year-over-year growth across all end markets
•Double digit sequential growth across all B2B end markets
•Increased share repurchases to $776 million and paid $398 million in dividends, returning a total $1.17 billion to shareholders
•Operating cash flow of $3.65 billion and free cash flow of $3.20 billion, or 33% of revenue, on a trailing twelve-month basis

WILMINGTON, Mass.--(BUSINESS WIRE)--May 18, 2022--Analog Devices, Inc. (Nasdaq: ADI), a leading global high-performance analog technology company, today announced financial results for its second quarter of fiscal 2022, which ended April 30, 2022.
“ADI delivered its fifth consecutive quarter of record revenue, illustrating the unprecedented demand for our technologies and our ability to increase output in a challenging supply backdrop. Top line strength combined with successful synergy execution enabled adjusted gross margin, operating margin and EPS to achieve new highs,” said Vincent Roche, CEO and Chair. “Despite increasing geopolitical uncertainty and ongoing supply chain disruptions, we enter the second half from a position of strength with increased capacity and continued bookings momentum.”
Roche continued, “Market leadership in numerous secular mega trends such as automation, electrification, and advanced connectivity is a testament to the depth and breadth of our performance leading analog, mixed signal, and power portfolio. Our solutions enable the intelligent edge, accelerating digitalization across industries. Continued efforts to deepen customer relationships, enhance operational resiliency, and our unrelenting focus on innovation, gives me great confidence in our ability to accelerate long term growth while driving positive societal impact.”


Performance for the Second Quarter of Fiscal 2022
Results Summary(1)
(in millions, except per-share amounts and percentages)
Three Months Ended
Apr. 30, 2022May 1, 2021Change
Revenue$2,972 $1,661 79 %
Gross margin$1,945 1,137 71 %
Gross margin percentage65.4 %68.4 %(300 bps)
Operating income$918 $520 77 %
Operating margin30.9 %31.3 %(40 bps)
Diluted earnings per share$1.49 $1.14 31 %
Adjusted Results
Adjusted gross margin$2,205 $1,177 87 %
Adjusted gross margin percentage74.2 %70.9 %330 bps
Adjusted operating income$1,495 $694 115 %
Adjusted operating margin50.3 %41.7 %860 bps
Adjusted diluted earnings per share$2.40 $1.54 56 %
Three Months EndedTrailing Twelve Months
Cash GenerationApr. 30, 2022Apr. 30, 2022
Net cash provided by operating activities$1,222 $3,649 
% of revenue41 %37 %
Capital expenditures$(119)$(447)
Free cash flow$1,103 $3,202 
% of revenue 37 %33 %
Three Months EndedTrailing Twelve Months
Cash ReturnApr. 30, 2022Apr. 30, 2022
Dividend paid$(398)$(1,386)
Stock repurchases(776)(3,612)
Total cash returned$(1,174)$(4,998)
(1) The sum and/or computation of the individual amounts may not equal the total due to rounding.







Outlook for the Third Quarter of Fiscal Year 2022

For the third quarter of fiscal 2022, we are forecasting revenue of $3.05 billion, +/- $100 million. At the midpoint of this revenue outlook, we expect reported operating margin of approximately 32.2%, +/-130 bps, and adjusted operating margin of approximately 49.5%, +/-70 bps. We are planning for reported EPS to be $1.55, +/-$0.10, and adjusted EPS to be $2.42, +/-$0.10.

Our third quarter fiscal 2022 outlook is based on current expectations and actual results may differ materially, as a result of, among other things, the important factors discussed at the end of this release. These statements supersede all prior statements regarding our business outlook set forth in prior ADI news releases, and ADI disclaims any obligation to update these forward-looking statements.

The adjusted results and adjusted anticipated results above are financial measures presented on a non-GAAP basis. Reconciliations of these non-GAAP financial measures to their most directly comparable GAAP financial measures are provided in the financial tables included in this press release. See also “Non-GAAP Financial Information” section for additional information.

Dividend Payment

The ADI Board of Directors has declared a quarterly cash dividend of $0.76 per outstanding share of common stock. The dividend will be paid on June 9, 2022 to all shareholders of record at the close of business on May 31, 2022.

Conference Call Scheduled for Today, Wednesday, May 18, 2022 at 10:00 am ET

ADI will host a conference call to discuss our second quarter fiscal 2022 results and short-term outlook today, beginning at 10:00 am ET. Investors may join via webcast, accessible at investor.analog.com, or by telephone. The participant dial-in for both domestic and international callers will be available ten minutes before the call begins by calling 833-423-0297. International participants may provide the passcode 8334230297.

A replay will be available two hours after the completion of the call. The replay may be accessed for up to two weeks by dialing 855-859-2056 (replay only) and providing the conference ID: 6327355, or by visiting investor.analog.com.

Non-GAAP Financial Information

This release includes non-GAAP financial measures that are not in accordance with, nor an alternative to, generally accepted accounting principles (GAAP) and may be different from non-GAAP measures presented by other companies. In addition, these non-GAAP measures are not based on any comprehensive set of accounting rules or principles. These non-GAAP measures have material limitations in that they do not reflect all of the amounts associated with the Company’s results of operations as determined in accordance with GAAP and should not be considered in isolation from, or as a substitute for, the Company’s financial results presented in accordance with GAAP. The Company’s use of non-GAAP measures, and the underlying methodology when including or excluding certain items, is not necessarily an indication of the results of operations that may be expected in the future, or that the Company will not, in fact, record such items in future periods. You are cautioned not to place undue reliance on these non-GAAP measures. Reconciliations of these non-GAAP measures to the most directly comparable financial measures calculated and presented in accordance with GAAP are provided in the financial tables included in this release.


Management uses non-GAAP measures internally to evaluate the Company’s operating performance from continuing operations against past periods and to budget and allocate resources in future periods. These non-GAAP measures also assist management in evaluating the Company’s core business and trends across different reporting periods on a consistent basis. Management also uses these non-GAAP measures as the primary performance measurement when communicating with analysts and investors regarding the Company’s earnings results and outlook and believes that the presentation of these non-GAAP measures is useful to investors because it provides investors with the operating results that management uses to manage the Company and enables investors and analysts to evaluate the Company’s core business. Management also believes that the non-GAAP liquidity measure free cash flow is useful both internally and to investors because it provides information about the amount of cash generated after capital expenditures that is then available to repay debt obligations, make investments and fund acquisitions, and for certain other activities.
The non-GAAP financial measures referenced by ADI in this release include: adjusted gross margin, adjusted gross margin percentage, adjusted operating expenses, adjusted operating expenses percentage, adjusted operating income, adjusted operating margin, adjusted nonoperating expense (income), adjusted income before income taxes, adjusted provision for income taxes, adjusted tax rate, adjusted diluted earnings per share (EPS), free cash flow, and free cash flow margin percentage.
Adjusted gross margin is defined as gross margin, determined in accordance with GAAP, excluding certain acquisition related expenses1, which are described further below. Adjusted gross margin percentage represents adjusted gross margin divided by revenue.
Adjusted operating expenses is defined as operating expenses, determined in accordance with GAAP, excluding: certain acquisition related expenses1, acquisition related transaction costs2 and special charges, net3, which are described further below. Adjusted operating expenses percentage represents adjusted operating expenses divided by revenue.
Adjusted operating income is defined as operating income, determined in accordance with GAAP, excluding: acquisition related expenses1, acquisition related transaction costs2 and special charges, net3, which are described further below. Adjusted operating margin represents adjusted operating income divided by revenue.
Adjusted nonoperating expense (income) is defined as nonoperating expense (income), determined in accordance with GAAP, excluding: acquisition related expenses1, which is described further below.
Adjusted income before income taxes is defined as income before income taxes, determined in accordance with GAAP, excluding: acquisition related expenses1, acquisition related transaction costs2, and special charges, net3, which are described further below.
Adjusted provision for income taxes is defined as provision for income taxes, determined in accordance with GAAP, excluding tax related items4 , which are described further below. Adjusted tax rate represents adjusted provision for income taxes divided by adjusted income before income taxes.
Adjusted diluted EPS is defined as diluted EPS, determined in accordance with GAAP, excluding: acquisition related expenses1, acquisition related transaction costs2, special charges, net3, and tax related items4, which are described further below.
Free cash flow is defined as net cash provided by operating activities, determined in accordance with GAAP, less additions to property, plant and equipment, net. Free cash flow margin percentage represents free cash flow divided by revenue.
1Acquisition Related Expenses: Expenses incurred as a result of current and prior period acquisitions and primarily include expenses associated with the fair value adjustments to debt, inventory, property, plant and equipment and amortization of acquisition related intangibles, which


include acquired intangibles such as purchased technology and customer relationships. Expenses also include fair value adjustments associated with the replacement of share-based awards related to the Maxim Integrated Products, Inc. (Maxim) acquisition. We excluded these costs from our non-GAAP measures because they relate to specific transactions and are not reflective of our ongoing financial performance.
2Acquisition Related Transaction Costs: Costs directly related to the Maxim Integrated Products, Inc. acquisition, including legal, accounting and other professional fees as well as integration-related costs. We excluded these costs from our non-GAAP measures because they relate to a specific transaction and are not reflective of our ongoing financial performance.
3Special Charges, net: Expenses, net, incurred in connection with facility closures, consolidation of manufacturing facilities, severance, other accelerated stock-based compensation expense and other cost reduction efforts or reorganizational initiatives. We excluded these expenses from our non-GAAP measures because apart from ongoing expense savings as a result of such items, these expenses have no direct correlation to the operation of our business in the future.
4Tax Related Items: Income tax effect of the non-GAAP items discussed above and an income tax benefit from a discrete tax item related to the consolidation of certain subsidiaries. We excluded the income tax effect of these tax related items from our non-GAAP measures because they are not associated with the tax expense on our current operating results.

About Analog Devices

Analog Devices, Inc. (Nasdaq: ADI) operates at the center of the modern digital economy, converting real-world phenomena into actionable insight with its comprehensive suite of analog and mixed signal, power management, radio frequency (RF), and digital and sensor technologies. ADI serves 125,000 customers worldwide with more than 75,000 products in the industrial, communications, automotive, and consumer markets. ADI is headquartered in Wilmington, MA. Visit http://www.analog.com.

Forward Looking Statements

This press release contains forward-looking statements, which address a variety of subjects including, for example, our statements regarding sustained performance; increasing demand and supply; expected revenue, operating margin, earnings per share, and other financial results; expected market trends and acceleration of those trends, market share gains, operating leverage, production and inventory levels; capacity investments; expected customer demand and order rates for our products, expected product offerings and the importance of our product offerings and technologies to our customers; and market position. Statements that are not historical facts, including statements about our beliefs, plans and expectations, are forward-looking statements. Such statements are based on our current expectations and are subject to a number of factors and uncertainties, which could cause actual results to differ materially from those described in the forward-looking statements. The following important factors and uncertainties, among others, could cause actual results to differ materially from those described in these forward-looking statements: the uncertainty as to the extent of the duration, scope and impacts of the COVID-19 pandemic; political and economic uncertainty, including any faltering in global economic conditions or the stability of credit and financial markets; erosion of consumer confidence and declines in customer spending; unavailability of raw materials, services, supplies or manufacturing capacity; changes in geographic, product or customer mix; changes in export classifications, import and export regulations or duties and tariffs; changes in our estimates of our expected tax rates based on current tax law; adverse results in litigation matters, including the potential for litigation related to the Maxim acquisition; the risk that we will be unable to retain and hire key personnel, including as a result of labor


shortages; changes in demand for semiconductors; unanticipated difficulties or expenditures relating to integrating Maxim; uncertainty as to the long-term value of our common stock; the diversion of management time on integrating Maxim's business and operations; our ability to successfully integrate acquired businesses and technologies, including Maxim; and the risk that expected benefits, synergies and growth prospects of acquisitions, including our acquisition of Maxim, may not be fully achieved in a timely manner, or at all. For additional information about factors that could cause actual results to differ materially from those described in the forward-looking statements, please refer to our filings with the Securities and Exchange Commission (“SEC”), including the risk factors contained in our most recent Quarterly Report on Form 10-Q and Annual Report on Form 10-K. Forward-looking statements represent management’s current expectations and are inherently uncertain. Except as required by law, we do not undertake any obligation to update forward-looking statements made by us to reflect subsequent events or circumstances.

Analog Devices and the Analog Devices logo are registered trademarks or trademarks of Analog Devices, Inc. All other trademarks mentioned in this document are the property of their respective owners.








ANALOG DEVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share amounts)

Three Months EndedSix Months Ended
Apr. 30, 2022May 1, 2021Apr. 30, 2022May 1, 2021
Revenue$2,972,064 $1,661,407 $5,656,357 $3,219,865 
Cost of sales1,027,544 524,770 2,309,840 1,037,857 
Gross margin1,944,520 1,136,637 3,346,517 2,182,008 
Operating expenses:
   Research and development420,901 302,238 847,681 590,388 
   Selling, marketing, general and administrative305,308 206,612 602,673 391,887 
   Amortization of intangibles253,476 107,786 506,843 215,434 
   Special charges, net46,674 311 106,402 749 
Total operating expenses1,026,359 616,947 2,063,599 1,198,458 
Operating income918,161 519,690 1,282,918 983,550 
Nonoperating expense (income):
   Interest expense49,548 43,066 101,512 $85,545 
   Interest income(563)(290)(781)$(499)
   Other, net(10,069)929 (20,613)$(14,099)
Total nonoperating expense (income)38,916 43,705 80,118 70,947 
Income before income taxes879,245 475,985 1,202,800 912,603 
Provision for income taxes95,972 53,080 139,450 101,179 
Net income$783,273 $422,905 $1,063,350 $811,424 
Shares used to compute earnings per common share - basic522,370 368,823 523,831 369,013 
Shares used to compute earnings per common share - diluted526,264 372,418 528,203 372,762 
Basic earnings per common share$1.50 $1.15 $2.03 $2.20 
Diluted earnings per common share$1.49 $1.14 $2.01 $2.18 



ANALOG DEVICES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)

Apr. 30, 2022Oct. 30, 2021
Cash & cash equivalents$1,737,733 $1,977,964 
Accounts receivable1,608,254 1,459,056 
Inventories1,075,297 1,200,610 
Other current assets212,905 740,687 
  Total current assets4,634,189 5,378,317 
Net property, plant and equipment2,094,148 1,979,051 
Goodwill26,923,756 26,918,470 
Intangible assets, net14,258,728 15,267,170 
Deferred tax assets2,325,317 2,267,269 
Other assets564,514 511,794 
Total assets$50,800,652 $52,322,071 
Other current liabilities$2,326,212 $2,253,649 
Debt, current— 516,663 
Long-term debt6,253,215 6,253,212 
Deferred income taxes3,873,084 3,938,830 
Other non-current liabilities1,248,359 1,367,175 
Shareholders' equity37,099,782 37,992,542 
Total liabilities & equity$50,800,652 $52,322,071 






ANALOG DEVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)

Three Months EndedSix Months Ended
Apr. 30, 2022May 1, 2021Apr. 30, 2022May 1, 2021
Cash flows from operating activities:
  Net income$783,273 $422,905 $1,063,350 $811,424 
  Adjustments to reconcile net income to net cash provided by operations:
       Depreciation71,851 52,466 137,016 108,775 
       Amortization of intangibles504,255 145,701 1,008,900 290,745 
       Stock-based compensation expense70,996 40,358 157,935 76,996 
       Cost of goods sold for inventory acquired— — 271,396 — 
       Deferred income taxes(88,341)(21,017)(122,992)(48,292)
       Non-cash operating lease costs(35,520)— (27,697)8,040 
       Other(654)2,431 (10,225)(12,122)
       Changes in operating assets and liabilities(84,054)93,517 (399,463)(71,263)
   Total adjustments438,533 313,456 1,014,870 352,879 
Net cash provided by operating activities1,221,806 736,361 2,078,220 1,164,303 
Cash flows from investing activities:
  Additions to property, plant and equipment(118,779)(59,170)(229,912)(126,558)
  Other5,186 (1,526)13,010 (9,210)
Net cash used for investing activities(113,593)(60,696)(216,902)(135,768)
Cash flows from financing activities:
  Early termination of debt— — (519,116)— 
  Dividend payments to shareholders(397,544)(254,429)(760,189)(483,608)
  Repurchase of common stock(776,840)(188,814)(852,860)(345,871)
  Proceeds from employee stock plans11,582 23,752 20,054 43,672 
  Other14,617 (94)26,657 2,399 
Net cash used for financing activities(1,148,185)(419,585)(2,085,454)(783,408)
Effect of exchange rate changes on cash(12,694)1,073 (16,095)4,229 
Net (decrease) increase in cash and cash equivalents(52,666)257,153 (240,231)249,356 
Cash and cash equivalents at beginning of period1,790,399 1,048,063 1,977,964 1,055,860 
Cash and cash equivalents at end of period$1,737,733 $1,305,216 $1,737,733 $1,305,216 





ANALOG DEVICES, INC.
REVENUE TRENDS BY END MARKET
(Unaudited)
(In thousands)

The categorization of revenue by end market is determined using a variety of data points including the technical characteristics of the product, the “sold to” customer information, the "ship to" customer information and the end customer product or application into which our product will be incorporated. As data systems for capturing and tracking this data and our methodology evolves and improves, the categorization of products by end market can vary over time. When this occurs, we reclassify revenue by end market for prior periods. Such reclassifications typically do not materially change the sizing of, or the underlying trends of results within, each end market.
Three Months Ended
April 30, 2022May 1, 2021
Revenue
% of Revenue1
Y/Y%Revenue
% of Revenue1
Industrial$1,501,111 51%54%$975,706 59%
Automotive
633,926 21%145%258,943 16%
Communications473,074 16%70%278,650 17%
Consumer363,953 12%146%148,108 9%
Total revenue$2,972,064 100%79%$1,661,407 100%
Six Months Ended
April 30, 2022May 1, 2021
Revenue
% of revenue1
Y/Y %Revenue
% of revenue1
Industrial$2,847,838 50%55%$1,833,198 57%
Automotive
1,184,927 21%134%505,748 16%
Communications885,450 16%58%560,904 17%
Consumer738,142 13%131%320,015 10%
Total revenue$5,656,357 100%76%$3,219,865 100%
1) The sum of the individual percentages may not equal the total due to rounding.





ANALOG DEVICES, INC.
RECONCILIATION OF GAAP TO NON-GAAP RESULTS
(Unaudited)
(In thousands, except per share amounts)
Three Months EndedSix Months Ended
Apr. 30, 2022May 1, 2021Apr. 30, 2022May 1, 2021
Gross margin$1,944,520 $1,136,637 $3,346,517 $2,182,008 
  Gross margin percentage65.4 %68.4 %59.2 %67.8 %
      Acquisition related expenses260,748 40,711 789,363 85,709 
Adjusted gross margin$2,205,268 $1,177,348 $4,135,880 $2,267,717 
  Adjusted gross margin percentage74.2 %70.9 %73.1 %70.4 %
Operating expenses$1,026,359 $616,947 $2,063,599 $1,198,458 
  Percent of revenue34.5 %37.1 %36.5 %37.2 %
      Acquisition related expenses(260,904)(109,903)(523,104)(220,203)
      Acquisition related transaction costs(8,537)(23,008)(21,429)(38,244)
      Special charges, net(46,674)(311)(106,402)(749)
Adjusted operating expenses$710,244 $483,725 $1,412,664 $939,262 
  Adjusted operating expenses percentage23.9 %29.1 %25.0 %29.2 %
Operating income$918,161 $519,690 $1,282,918 $983,550 
  Operating margin30.9 %31.3 %22.7 %30.5 %
      Acquisition related expenses521,652 150,614 1,312,467 305,912 
      Acquisition related transaction costs8,537 23,008 21,429 38,244 
      Special charges, net46,674 311 106,402 749 
Adjusted operating income$1,495,024 $693,623 $2,723,216 $1,328,455 
  Adjusted operating margin50.3 %41.7 %48.1 %41.3 %
Nonoperating expense (income)38,916 43,705 80,118 70,947 
      Acquisition related expenses 2,288 — 4,587 — 
Adjusted nonoperating expense (income)$41,204 $43,705 $84,705 $70,947 
Income before income taxes$879,245 $475,985 $1,202,800 $912,603 
     Acquisition related expenses519,364 150,614 1,307,880 305,912 
     Acquisition related transaction costs 8,537 23,008 21,429 38,244 
     Special charges, net46,674 311 106,402 749 
Adjusted income before income taxes$1,453,820 $649,918 $2,638,511 $1,257,508 
Provision for income taxes$95,972 $53,080 $139,450 $101,179 
Effective tax rate10.9 %11.2 %11.6 %11.1 %
     Tax related items95,828 22,983 210,217 45,780 
Adjusted provision for income taxes$191,800 $76,063 $349,667 $146,959 
Adjusted tax rate13.2 %11.7 %13.3 %11.7 %
Diluted EPS$1.49 $1.14 $2.01 $2.18 
      Acquisition related expenses0.99 0.40 2.48 0.82 
      Acquisition related transaction costs0.02 0.06 0.04 0.10 
      Special charges, net0.09 0.00 0.20 0.00 
      Tax related items(0.18)(0.06)(0.40)(0.12)
Adjusted diluted EPS*$2.40 $1.54 $4.33 $2.98 
* The sum of the individual per share amounts may not equal the total due to rounding.


ANALOG DEVICES, INC.
RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES TO FREE CASH FLOW
(Unaudited)
(In thousands)
Trailing Twelve MonthsThree Months Ended
Apr. 30, 2022Apr. 30, 2022Jan. 29, 2022Oct. 30, 2021Jul. 31, 2021
Revenue$9,754,778 $2,972,064 $2,684,293 $2,339,568 $1,758,853 
Net cash provided by operating activities$3,648,986 $1,221,806 $856,413 $940,726 $630,041 
% of Revenue37 %41 %32 %40 %36 %
Capital expenditures$(447,030)$(118,779)$(111,133)$(130,777)$(86,341)
Free cash flow$3,201,956 $1,103,027 $745,280 $809,949 $543,700 
% of Revenue33 %37 %28 %35 %31 %




ANALOG DEVICES, INC.
RECONCILIATION OF PROJECTED GAAP TO NON-GAAP RESULTS
(Unaudited)
Three Months Ending July 30, 2022
ReportedAdjusted
Revenue$3.05 Billion $3.05 Billion
(+/- $100 Million)(+/- $100 Million)
Operating margin32.2% 49.5% (1)
(+/-130 bps)(+/-70 bps)
Nonoperating expense~ $50 Million~ $50 Million
Tax rate13%-14%13%-14% (2)
Earnings per share$1.55 $2.42 (3)
(+/- $.10)(+/- $.10)

(1) Includes $520 million of adjustments related to acquisition related expenses and $6 million of adjustments related to acquisition related transaction costs as previously defined in the Non-GAAP Financial Information section of this press release.
(2) Includes $71 million of tax effects associated with the adjustments for acquisition related expenses and acquisition related transaction costs noted above.
(3) Includes $0.87 of adjustments related to the net impact of acquisition related expenses and acquisition related transaction costs, as well as the tax effects on those items.

(ADI-WEB)

For more information, please contact:

Investor Contact:
Analog Devices, Inc.
Mr. Michael Lucarelli
Vice President of Investor Relations and FP&A
781-461-3282
investor.relations@analog.com

Media Contact:
Analog Devices, Inc.
Mr. Michael Schneider
Chief Communications Officer
973-868-1000
corpcomm@analog.com