- Revenue of $1.32 billion increased sequentially
- B2B revenue increased 3% sequentially led by the communication
and industrial sectors
- Operating cash flow of $2.0 billion and free cash flow of $1.8
billion on a trailing twelve month basis
- Returned over $340 million to shareholders in the second
quarter through dividends and share repurchases
Analog Devices, Inc. (Nasdaq: ADI), a leading global
high-performance analog technology company, today announced
financial results for its second quarter of fiscal 2020, which
ended May 2, 2020.
“During this unprecedented time, ADI has moved with speed and
agility to pivot our supply chain and meet customer demand,
expediting production and shipments of essential products,
including solutions used in medical equipment in the fight against
COVID-19. I’m proud of the way our team has adapted, demonstrating
determination, resilience and unity in the face of this pandemic,”
said Vincent Roche, President and CEO of Analog Devices. “Our
diversification across customers, applications, and markets is
mitigating weaker global business activity. This enabled us to
deliver second quarter results within our original guidance range
and generate solid free cash flow, underscoring the strength and
flexibility of our business model in any economic backdrop.”
Roche continued, “Looking forward, we remain focused on pushing
the limits of innovation to develop leading edge solutions that
deliver maximum impact for our customers. I am confident that ADI
is well positioned to accelerate in the recovery phase and deliver
value for all stakeholders as we continue to solve the toughest
engineering challenges of today and tomorrow.”
Performance for the Second Quarter of
Fiscal 2020
Results Summary(1)
(in millions, except per-share amounts and
percentages)
Three Months Ended
May 2, 2020
May 4, 2019
Change
Revenue
$
1,317
$
1,527
(14)%
Gross margin
$
847
$
1,034
(18)%
Gross margin percentage
64.3
%
67.7
%
(340 bps)
Operating income
$
344
$
470
(27)%
Operating margin
26.1
%
30.8
%
(470 bps)
Diluted earnings per share
$
0.72
$
0.98
(27)%
Adjusted Results
Adjusted gross margin
$
891
$
1,077
(17)%
Adjusted gross margin percentage
67.7
%
70.6
%
(290 bps)
Adjusted operating income
$
501
$
634
(21)%
Adjusted operating margin
38.0
%
41.5
%
(350 bps)
Adjusted diluted earnings per share
$
1.08
$
1.36
(21)%
Three Months Ended
Trailing Twelve Months
Cash Generation
May 2, 2020
May 2, 2020
Net cash provided by operating
activities
$
429
$
1,989
% of revenue
33
%
36
%
Capital expenditures
$
(60
)
$
(224
)
Free cash flow
$
369
$
1,765
% of revenue
28
%
32
%
Three Months Ended
Trailing Twelve Months
Cash Return
May 2, 2020
May 2, 2020
Dividend paid
$
(229
)
$
(828
)
Stock repurchases
(114
)
(504
)
Total cash returned
$
(343
)
$
(1,332
)
(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 2020
For the third quarter of fiscal 2020, we are forecasting revenue
of $1.32 billion, +/- $70 million. At the midpoint of this revenue
outlook, we expect reported operating margins of approximately
26.4%, +/-200 bps, and adjusted operating margins of approximately
38.3%, +/-150 bps. We are planning for reported EPS to be $0.72,
+/-$0.11, and adjusted EPS to be $1.08, +/-$0.11.
Our third 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 June 9, 2020 to all shareholders of record
at the close of business on May 29, 2020.
Conference Call Scheduled for Today,
Wednesday, May 20, 2020 at 10:00 am ET
ADI will host a conference call to discuss our second 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:
4990445, 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 or prior periods. 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: 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 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.
ANALOG DEVICES, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per
share amounts)
Three Months Ended
Six Months Ended
May 2, 2020
May 4, 2019
May 2, 2020
May 4, 2019
Revenue
$
1,317,060
$
1,526,602
$
2,620,625
$
3,067,703
Cost of sales
470,386
492,510
925,809
993,955
Gross margin
846,674
1,034,092
1,694,816
2,073,748
Operating expenses:
Research & development
252,413
285,846
509,486
573,228
Selling, marketing, general and
administrative
141,775
163,128
341,055
330,470
Amortization of intangibles
107,146
107,261
214,371
214,585
Special charges
1,320
8,162
12,456
29,944
Total operating expenses
502,654
564,397
1,077,368
1,148,227
Operating income
344,020
469,695
617,448
925,521
Nonoperating expense (income):
Interest expense
49,985
59,701
98,798
118,429
Interest income
(1,334
)
(2,928
)
(3,274
)
(5,616
)
Other, net
308
4,525
646
4,365
48,959
61,298
96,170
117,178
Income before income tax
295,061
408,397
521,278
808,343
Provision for income taxes
27,365
40,460
49,708
85,400
Net income
$
267,696
$
367,937
$
471,570
$
722,943
Shares used to compute earnings per common
share - basic
368,217
369,246
368,229
368,974
Shares used to compute earnings per common
share - diluted
371,305
373,342
371,784
372,912
Basic earnings per common share
$
0.73
$
0.99
$
1.28
$
1.95
Diluted earnings per common share
$
0.72
$
0.98
$
1.27
$
1.93
ANALOG DEVICES, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(Unaudited)
(In thousands)
May 2, 2020
Nov. 2, 2019
Cash & cash equivalents
$
784,937
$
648,322
Accounts receivable
588,244
635,136
Inventories
590,268
609,886
Other current assets
87,844
91,782
Total current assets
2,051,293
1,985,126
Net property, plant and equipment
1,189,332
1,219,989
Other investments
76,025
77,324
Goodwill
12,253,670
12,256,880
Intangible assets, net
3,928,902
4,217,224
Deferred tax assets
1,553,902
1,582,382
Other assets
297,814
53,716
Total assets
$
21,350,938
$
21,392,641
Other current liabilities
$
1,133,057
$
1,208,965
Debt, current
448,945
299,667
Long-term debt
5,142,223
5,192,252
Deferred income taxes
2,000,644
2,088,212
Other non-current liabilities
1,035,211
894,357
Shareholders' equity
11,590,858
11,709,188
Total liabilities & equity
$
21,350,938
$
21,392,641
ANALOG DEVICES, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Three Months Ended
Six Months Ended
May 2, 2020
May 4, 2019
May 2, 2020
May 4, 2019
Cash flows from operating activities:
Net income
$
267,696
$
367,937
$
471,570
$
722,943
Adjustments to reconcile net income to net
cash provided by operations:
Depreciation
59,261
59,142
119,124
117,435
Amortization of intangibles
144,051
142,233
288,120
284,525
Stock-based compensation expense
35,900
40,229
73,401
76,622
Non-cash portion of special charge
—
—
—
4,367
Deferred income taxes
(21,408
)
(37,495
)
(35,390
)
(21,843
)
Non-cash contribution to charitable
foundation
—
—
40,000
—
Other non-cash activity
1,469
11,736
3,801
18,429
Changes in operating assets and
liabilities
(57,928
)
87,100
(181,937
)
(159,829
)
Total adjustments
161,345
302,945
307,119
319,706
Net cash provided by operating
activities
429,041
670,882
778,689
1,042,649
Percent of revenue
32.6
%
43.9
%
29.7
%
34.0
%
Cash flows from investing activities:
Additions to property, plant and
equipment
(60,161
)
(75,209
)
(115,000
)
(166,202
)
Changes in other assets
(1,391
)
637
(1,284
)
(4,585
)
Net cash used for investing activities
(61,552
)
(74,572
)
(116,284
)
(170,787
)
Cash flows from financing activities:
Proceeds from debt
395,646
—
395,646
—
Payments on revolver
(350,000
)
—
(350,000
)
(75,000
)
Proceeds from revolver
350,000
—
350,000
75,000
Debt repayments
(300,000
)
(250,000
)
(300,000
)
(350,000
)
Dividend payments to shareholders
(228,600
)
(199,501
)
(427,760
)
(377,217
)
Repurchase of common stock
(113,584
)
(101,522
)
(219,614
)
(328,615
)
Proceeds from employee stock plans
14,784
67,678
30,897
86,907
Changes in other financing activities
(3,956
)
(5,575
)
(4,451
)
(6,144
)
Net cash used for financing activities
(235,710
)
(488,920
)
(525,282
)
(975,069
)
Effect of exchange rate changes on
cash
(1,250
)
347
(508
)
217
Net increase (decrease) in cash and cash
equivalents
130,529
107,737
136,615
(102,990
)
Cash and cash equivalents at beginning of
period
654,408
605,864
648,322
816,591
Cash and cash equivalents at end of
period
$
784,937
$
713,601
$
784,937
$
713,601
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
May 2, 2020
May 4, 2019
Revenue
% of revenue*
Y/Y %
Revenue
% of revenue*
Industrial
$
710,760
54%
(8)%
$
771,359
51%
Communications
276,420
21%
(24)%
363,457
24%
Automotive
182,383
14%
(23)%
236,011
15%
Consumer
147,497
11%
(5)%
155,775
10%
Total revenue
$
1,317,060
100%
(14)%
$
1,526,602
100%
Six Months Ended
May 2, 2020
May 4, 2019
Revenue
% of revenue*
Y/Y %
Revenue
% of revenue*
Industrial
$
1,395,113
53%
(7)%
$
1,503,331
49%
Communications
517,253
20%
(27)%
712,014
23%
Automotive
388,630
15%
(19)%
480,268
16%
Consumer
319,629
12%
(14)%
372,090
12%
Total revenue
$
2,620,625
100%
(15)%
$
3,067,703
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
Six Months Ended
May 2, 2020
May 4, 2019
May 2, 2020
May 4, 2019
Gross margin
$
846,674
$
1,034,092
$
1,694,816
$
2,073,748
Gross margin percentage
64.3
%
67.7
%
64.7
%
67.6
%
Acquisition related expenses
44,395
43,255
89,411
88,750
Adjusted gross margin
$
891,069
$
1,077,347
$
1,784,227
$
2,162,498
Adjusted gross margin percentage
67.7
%
70.6
%
68.1
%
70.5
%
Operating expenses
$
502,654
$
564,397
$
1,077,368
$
1,148,227
Percent of revenue
38.2
%
37.0
%
41.1
%
37.4
%
Acquisition related expenses
(111,057
)
(112,824
)
(222,838
)
(222,656
)
Charitable foundation contribution
—
—
(40,000
)
—
Restructuring related expense
(1,320
)
(8,162
)
(12,456
)
(29,944
)
Adjusted operating expenses
$
390,277
$
443,411
$
802,074
$
895,627
Adjusted operating expenses percentage
29.6
%
29.0
%
30.6
%
29.2
%
Operating income
$
344,020
$
469,695
$
617,448
$
925,521
Operating margin
26.1
%
30.8
%
23.6
%
30.2
%
Acquisition related expenses
155,452
156,079
312,249
311,406
Charitable foundation contribution
—
—
40,000
—
Restructuring related expense
1,320
8,162
12,456
29,944
Adjusted operating income
$
500,792
$
633,936
$
982,153
$
1,266,871
Adjusted operating margin
38.0
%
41.5
%
37.5
%
41.3
%
Provision for income taxes
$
27,365
$
40,460
$
49,708
$
85,400
Income tax effect of adjustments above
21,867
22,740
50,147
47,640
Income tax from certain discrete tax
items
—
—
—
12,560
Adjusted provision for income taxes
$
49,232
$
63,200
$
99,855
$
145,600
Income before income taxes
295,061
408,397
521,278
808,343
Effective tax rate
9.3
%
9.9
%
9.5
%
10.6
%
Acquisition related expenses
155,452
156,079
312,249
311,406
Charitable foundation contribution
—
—
40,000
—
Restructuring related expense
1,320
8,162
12,456
29,944
Adjusted income before income taxes
$
451,833
$
572,638
$
885,983
$
1,149,693
Adjusted tax rate
10.9
%
11.0
%
11.3
%
12.7
%
Diluted EPS
$
0.72
$
0.98
$
1.27
$
1.93
Acquisition related expenses
0.42
0.42
0.84
0.84
Charitable foundation contribution
—
—
0.11
—
Restructuring related expense
0.00
0.02
0.03
0.08
Income tax effect of adjustments above
(0.06
)
(0.06
)
(0.13
)
(0.13
)
Income tax from certain discrete tax
items
—
—
—
(0.03
)
Adjusted diluted EPS (1)
$
1.08
$
1.36
$
2.11
$
2.69
(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
May 2, 2020
May 2, 2020
Feb. 1, 2020
Nov. 2, 2019
Aug. 3, 2019
Revenue
$
5,543,987
$
1,317,060
$
1,303,565
$
1,443,219
$
1,480,143
Net cash provided by operating
activities
$
1,989,140
$
429,041
$
349,648
$
657,905
$
552,546
% of Revenue
36
%
33
%
27
%
46
%
37
%
Capital expenditures
$
(224,170
)
$
(60,161
)
$
(54,839
)
$
(51,076
)
$
(58,094
)
Free cash flow
$
1,764,970
$
368,880
$
294,809
$
606,829
$
494,452
% of Revenue
32
%
28
%
23
%
42
%
33
%
ANALOG DEVICES, INC.
RECONCILIATION OF PROJECTED
GAAP TO NON-GAAP RESULTS
(Unaudited)
Three Months Ending August 1,
2020
Reported
Adjusted
Revenue
$1.32 Billion
$1.32 Billion
(+/- $70 Million)
(+/- $70 Million)
Operating margin
26.4%
38.3% (1)
(+/-200 bps)
(+/-150 bps)
Nonoperating expense
~ $47 Million
~ $47 Million
Tax rate
11% to 12%
12% to 13% (2)
Earnings per share
$0.72
$1.08 (3)
(+/- $0.11)
(+/- $0.11)
(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 $22 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.
(ADI-WEB)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200520005128/en/
Investor Contact: Analog Devices, Inc. Mr. Michael Lucarelli Sr.
Director of Investor Relations 781-461-3282
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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