- Revenue of $1.3 billion, in-line with our expectations for the
first quarter
- Operating cash flow of $2.2 billion and free cash flow of $2.0
billion on a trailing twelve months basis
- Returned over $300 million to shareholders in the first quarter
through dividends and share repurchases
- Increased quarterly dividend by 15%, the high-end of target
range of 7% to 15%
Analog Devices, Inc. (Nasdaq: ADI), a leading global
high-performance analog technology company, today announced
financial results for its first quarter of fiscal 2020, which ended
February 1, 2020.
“ADI’s first quarter results were in-line with our expectations.
Encouragingly, demand across our end markets has stabilized and is
beginning to show signs of improvement as we enter our fiscal
second quarter,” said Vincent Roche, President and CEO. “We are
building on this momentum by executing on our 2020 priorities –
deepening our customer-centricity, deploying our capital
efficiently, and capitalizing on secular trends to expand our
addressable markets and drive diversified growth. Further, we
raised our quarterly dividend by 15%, reflecting the stability of
our cash flows and our optimism regarding ADI’s future.”
Roche continued, “I believe the demand for ADI’s solutions will
be unprecedented as technological innovation underpinned by
ubiquitous sensing, hyper-scale and edge computing, and pervasive
connectivity continues to grow at an exponential pace. Our
diversified business model combined with our leading technology
portfolio position ADI to deliver sustainable long-term growth and
strong shareholder returns in the years ahead.”
Performance for the First Quarter of
Fiscal 2020
Results Summary(1)
(in millions, except per-share amounts and
percentages)
Three Months Ended
Feb. 1, 2020
Feb. 2, 2019
Change
Revenue
$
1,304
$
1,541
(15)
%
Gross margin
$
848
$
1,040
(18)
%
Gross margin percentage
65.1
%
67.5
%
(240 bps)
Operating income
$
273
$
456
(40)
%
Operating margin
21.0
%
29.6
%
(860 bps)
Diluted earnings per share
$
0.55
$
0.95
(42)
%
Adjusted Results
Adjusted gross margin
$
893
$
1,083
(18)
%
Adjusted gross margin percentage
68.5
%
70.3
%
(180 bps)
Adjusted operating income
$
481
$
635
(24)
%
Adjusted operating margin
36.9
%
41.2
%
(430 bps)
Adjusted diluted earnings per share
$
1.03
$
1.33
(23)
%
Three Months Ended
Trailing Twelve Months
Cash Generation
Feb. 1, 2020
Feb. 1, 2020
Net cash provided by operating
activities
$
350
$
2,231
% of revenue
27
%
39
%
Capital expenditures
$
(55)
$
(239)
Free cash flow
$
295
$
1,992
% of revenue
23
%
35
%
Three Months Ended
Trailing Twelve Months
Cash Return
Feb. 1, 2020
Feb. 1, 2020
Dividend paid
$
(199)
$
(799)
Stock repurchases
(106)
(492)
Total cash returned
$
(305)
$
(1,291)
(1) The sum and/or computation of the
individual amounts may not equal the total due to rounding.
Outlook for the Second Quarter of
Fiscal Year 2020
For the second quarter of fiscal 2020, we are forecasting
revenue of $1.35 billion, +/- $50 million. While the effects of the
coronavirus are difficult to estimate and the situation remains
dynamic, we have reduced our revenue guidance by $70 million to
account for its potential impact. At the midpoint of this revenue
outlook, we expect reported operating margins of approximately
26.0%, +/-150 bps, and adjusted operating margins of approximately
37.5%, +/-100 bps. We are planning for reported EPS to be $0.73,
+/-$0.08, and adjusted EPS to be $1.10, +/-$0.08.
Our second quarter fiscal 2020 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 $0.62 per outstanding share of common stock. The
dividend will be paid on March 10, 2020 to all shareholders of
record at the close of business on February 28, 2020.
Conference Call Scheduled for Today,
Wednesday, February 19, 2020 at 10:00 am ET
ADI will host a conference call to discuss our first quarter
fiscal 2020 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 (call 800-859-9560, or
706-634-7193 for international calls, ten minutes before the call
begins and provide the password "ADI").
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:
7263078, 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 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; restructuring related expense2; and
charitable foundation contribution3 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; restructuring related expense2; and charitable
foundation contribution3 which are described further below.
Adjusted operating margin represents adjusted operating income
divided by revenue.
Adjusted income before income taxes is defined as income before
income taxes, determined in accordance with GAAP, excluding:
acquisition-related expenses1; restructuring related expense2; and
charitable foundation contribution3 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;
restructuring related expense2; charitable foundation
contribution3; 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 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 severance payments, equity
award accelerations, and the fair value adjustment associated with
the replacement of share-based awards related to the Linear
Technology 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.
2Restructuring-Related Expense: Expenses
incurred in connection with facility closures, consolidation of
manufacturing facilities, severance, other accelerated stock-based
compensation expense and other cost reduction efforts. 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.
3Charitable Foundation Contribution: Expenses
incurred in connection with a one time contribution of registered
shares of common stock to the Analog Devices Foundation. We
excluded this expense from our non-GAAP measures because this
expense has 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 income tax from certain discrete
tax items related to the impact of the Tax Cuts and Jobs Act of
2017. We excluded 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 (Nasdaq: ADI) is a leading global
high-performance analog technology company dedicated to solving the
toughest engineering challenges. We enable our customers to
interpret the world around us by intelligently bridging the
physical and digital with unmatched technologies that sense,
measure, power, connect and interpret. 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 expected revenue, operating margin, tax rate,
earnings per share, and other financial results, expected market
trends, market share gains, operating leverage, production and
inventory levels, and expected customer demand and order rates for
our products, expected product offerings, product development and
marketing 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: 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 rate based on current tax law; our ability to
successfully integrate acquired businesses and technologies; the
risk that expected benefits, synergies and growth prospects of
acquisitions may not be fully achieved in a timely manner, or at
all; adverse results in litigation matters; and the risk that we
will be unable to retain and hire key personnel. 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.
(ADI-WEB)
ANALOG DEVICES, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per
share amounts)
Three Months Ended
Feb. 1, 2020
Feb. 2, 2019
Revenue
$
1,303,565
$
1,541,101
Cost of sales
455,423
501,445
Gross margin
848,142
1,039,656
Operating expenses:
Research & development
257,073
287,382
Selling, marketing, general and
administrative
199,280
167,342
Amortization of intangibles
107,225
107,324
Special charges
11,136
21,782
Total operating expenses
574,714
583,830
Operating income
273,428
455,826
Nonoperating expense (income):
Interest expense
48,813
58,728
Interest income
(1,940)
(2,688)
Other, net
338
(160)
47,211
55,880
Income before income tax
226,217
399,946
Provision for income taxes
22,343
44,940
Net income
$
203,874
$
355,006
Shares used to compute earnings per common
share - basic
368,241
368,703
Shares used to compute earnings per common
share - diluted
372,264
372,506
Basic earnings per common share
$
0.55
$
0.96
Diluted earnings per common share
$
0.55
$
0.95
ANALOG DEVICES, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(Unaudited)
(In thousands)
Feb. 1, 2020
Nov. 2, 2019
Cash & cash equivalents
$
654,408
$
648,322
Accounts receivable
584,366
635,136
Inventories
588,503
609,886
Other current assets
83,902
91,782
Total current assets
1,911,179
1,985,126
Net property, plant and equipment
1,206,769
1,219,989
Investments
78,228
77,324
Goodwill
12,257,064
12,256,880
Intangible assets, net
4,073,078
4,217,224
Deferred tax assets
1,567,521
1,582,382
Other
282,988
53,716
Total assets
$
21,376,827
$
21,392,641
Other current liabilities
$
1,022,082
$
1,208,965
Debt, current
748,460
299,667
Long-term debt
4,745,302
5,192,252
Deferred income taxes
2,055,100
2,088,212
Other non-current liabilities
1,116,366
894,357
Shareholders' equity
11,689,517
11,709,188
Total liabilities & equity
$
21,376,827
$
21,392,641
ANALOG DEVICES, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Three Months Ended
Feb. 1, 2020
Feb. 2, 2019
Cash flows from operating activities:
Net income
$
203,874
$
355,006
Adjustments to reconcile net income to net
cash provided by operations:
Depreciation
59,863
58,293
Amortization of intangibles
144,069
142,292
Stock-based compensation expense
37,501
36,393
Non-cash portion of special charge
—
4,367
Deferred income taxes
(13,982)
15,652
Non-cash contribution to charitable
foundation
40,000
—
Other non-cash activity
2,332
6,693
Changes in operating assets and
liabilities
(124,009)
(246,929)
Total adjustments
145,774
16,761
Net cash provided by operating
activities
349,648
371,767
Percent of revenue
26.8
%
24.1
%
Cash flows from investing activities:
Additions to property, plant and
equipment
(54,839)
(90,993)
Changes in other assets
107
(5,222)
Net cash used for investing activities
(54,732)
(96,215)
Cash flows from financing activities:
Proceeds from revolver
—
75,000
Payments on revolver
—
(75,000)
Debt repayments
—
(100,000)
Dividend payments to shareholders
(199,160)
(177,716)
Repurchase of common stock
(106,030)
(227,093)
Proceeds from employee stock plans
16,113
19,229
Changes in other financing activities
(495)
(569)
Net cash used for financing activities
(289,572)
(486,149)
Effect of exchange rate changes on
cash
742
(130)
Net increase (decrease) in cash and cash
equivalents
6,086
(210,727)
Cash and cash equivalents at beginning of
period
648,322
816,591
Cash and cash equivalents at end of
period
$
654,408
$
605,864
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 evolve and improve, 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
Feb. 1, 2020
Feb. 2, 2019
Revenue
% of revenue*
Y/Y %
Revenue
% of revenue*
Industrial
$
684,862
53%
(7)%
$
733,432
48%
Communications
239,928
18%
(31)%
347,016
23%
Automotive
205,330
16%
(16)%
244,062
16%
Consumer
173,445
13%
(20)%
216,591
14%
Total revenue
$
1,303,565
100%
(15)%
$
1,541,101
100%
*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 Ended
Feb. 1, 2020
Feb. 2, 2019
Gross margin
$
848,142
$
1,039,656
Gross margin percentage
65.1
%
67.5
%
Acquisition related expenses
45,016
43,495
Adjusted gross margin
$
893,158
$
1,083,151
Adjusted gross margin percentage
68.5
%
70.3
%
Operating expenses
$
574,714
$
583,830
Percent of revenue
44.1
%
37.9
%
Acquisition related expenses
(111,782)
(113,832)
Charitable foundation contribution
(40,000)
—
Restructuring related expense
(11,136)
(21,782)
Adjusted operating expenses
$
411,796
$
448,216
Adjusted operating expenses percentage
31.6
%
29.1
%
Operating income
$
273,428
$
455,826
Operating margin
21.0
%
29.6
%
Acquisition related expenses
156,798
157,327
Charitable foundation contribution
40,000
—
Restructuring related expense
11,136
21,782
Adjusted operating income
$
481,362
$
634,935
Adjusted operating margin
36.9
%
41.2
%
Provision for income taxes
$
22,343
$
44,940
Income tax effect of adjustments above
28,280
24,900
Income tax from certain discrete tax
items
—
12,560
Adjusted provision for income taxes
$
50,623
$
82,400
Income before income taxes
226,217
399,946
Effective tax rate
9.9
%
11.2
%
Acquisition related expenses
156,798
157,327
Charitable foundation contribution
40,000
—
Restructuring related expense
11,136
21,782
Adjusted income before income taxes
$
434,151
$
579,055
Adjusted tax rate
11.7
%
14.2
%
Diluted EPS
$
0.55
$
0.95
Acquisition related expenses
0.42
0.42
Charitable foundation contribution
0.11
—
Restructuring related expense
0.03
0.06
Income tax effect of adjustments above
(0.08)
(0.07)
Income tax from certain discrete tax
items
—
(0.03)
Adjusted diluted EPS (1)
$
1.03
$
1.33
(1) 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
Months
Three Months Ended
Feb. 1, 2020
Feb. 1, 2020
Nov. 2, 2019
Aug. 3, 2019
May 4, 2019
Revenue
$
5,753,529
$
1,303,565
$
1,443,219
$
1,480,143
$
1,526,602
Net cash provided by operating
activities
$
2,230,981
$
349,648
$
657,905
$
552,546
$
670,882
% of Revenue
39
%
27
%
46
%
37
%
44
%
Capital expenditures
$
(239,218)
$
(54,839)
$
(51,076)
$
(58,094)
$
(75,209)
Free cash flow
$
1,991,763
$
294,809
$
606,829
$
494,452
$
595,673
% of Revenue
35
%
23
%
42
%
33
%
39
%
ANALOG DEVICES, INC.
RECONCILIATION OF PROJECTED
GAAP TO NON-GAAP RESULTS
(Unaudited)
Three Months Ending May 2,
2020
Reported
Adjusted
Revenue
$1.35 Billion
$1.35 Billion
(+/- $50 Million)
(+/- $50 Million)
Operating margin
26.0%
37.5% (1)
(+/-150 bps)
(+/-100 bps)
Nonoperating expense
~ $48 Million
~ $48 Million
Tax rate
9% to 11%
10% to 12% (2)
Earnings per share
$0.73
$1.10 (3)
(+/- $0.08)
(+/- $0.08)
(1) Includes $157 million of adjustments
related to acquisition related expenses as previously defined in
the Non-GAAP Financial Information section of this press
release.
(2) Includes $21 million of tax effects
associated with the adjustment for acquisition related expenses
above.
(3) Includes $0.36 of adjustments related
to the net impact of $0.42 of acquisition related expenses and
$0.06 of tax effects on those acquisition related expenses.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200219005249/en/
Investor Contact: Analog Devices, Inc. Mr. Michael Lucarelli,
781-461-3282 Sr. Director of Investor Relations
investor.relations@analog.com
Media Contacts: Teneo Ms. Andrea Calise, 917-826-3804
andrea.calise@teneo.com
Teneo Ms. Megan Fenton, 917-860-0356 megan.fenton@teneo.com
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