- Revenue of $1.54 billion led by strong
growth in the communications market
- Operating Cash Flow of $2.4 billion and
Free Cash Flow of $2.1 billion on a trailing twelve months
basis
- Returned over $400 million to
shareholders in the first quarter through dividends and share
repurchases
- Increased quarterly dividend by 12.5%
and updated dividend growth target to 7% to 15% annually
Analog Devices, Inc. (Nasdaq: ADI), a leading global
high-performance analog technology company, today announced
financial results for its first quarter of fiscal 2019, which ended
February 2, 2019.
“In what is a challenging macroeconomic environment, the
diversity and strong execution of our franchise continued to
deliver outstanding financial results for the first quarter,” said
Vincent Roche, President and CEO. “Revenue came in at the high-end
of our guidance with continued strength in our communications
market related to ongoing 4G upgrades and initial 5G deployments.
Further, we returned more than $400 million of cash to our
shareholders this quarter through share repurchases, which reduced
our overall share count, and dividends.”
“In the near term, we continue to execute soundly despite the
uncertain macroenvironment. That said, I have never been more
confident or excited about the future of ADI’s franchise. Our ethos
of innovation combined with deep customer engagements and our
alignment with favorable macro trends positions us to continue to
take share, expand our addressable market, and deliver strong
returns for our shareholders.”
Performance for
the First Quarter of Fiscal Year 2019
Results
Summary
(In millions, except per share amounts and percentages)
Three
months ended Feb. 2, Feb. 3, 2019
2018 (1), (2)
Change Revenue $ 1,541 $ 1,567
(2)% Gross margin $ 1,040 $ 1,072 (3)% Gross margin percentage
67.5% 68.4% (90) bps Operating income $ 456 $ 442 3% Operating
margin 29.6% 28.2% 140 bps Diluted earnings per share $ 0.95 $ 0.78
22%
Adjusted Results Adjusted gross margin $ 1,083 $ 1,115
(3)% Adjusted gross margin percentage 70.3% 71.2% (90) bps Adjusted
operating income $ 635 $ 670 (5)% Adjusted operating margin 41.2%
42.7% (150) bps Adjusted diluted earnings per share $ 1.33 $ 1.49
(11)%
Cash
Generation
(in millions, except percentages)
Three months ended
Trailing Twelve Months Feb. 2, Feb. 2,
2019 2019 Net cash provided by operating activities $
372 $ 2,425 % of revenue (1) 24% 39% Capital expenditures $ (91) $
(283) Free cash flow $ 281 $ 2,143 % of revenue (1) 18% 35%
Cash
Return
(in millions)
Three months ended Trailing Twelve
Months Feb. 2, Feb. 2, 2019 2019
Dividend paid $ 178 $ 714 Stock repurchases $ 227 $ 445 Total cash
returned $ 405 $ 1,159
(1) Prior year balances have been restated to reflect the
adoption of the new revenue recognition standard in the first
quarter of fiscal 2019.(2) The first quarter of fiscal 2018 was a
14-week quarter.
Outlook for the Second Quarter of
Fiscal Year 2019
For the second quarter of fiscal 2019, we are forecasting
revenue of $1.50 billion, +/- $50 million. At the midpoint of this
revenue outlook, we expect reported operating margins of
approximately 30.8%, and adjusted operating margins of
approximately 41.3%. We are planning for reported EPS to be $0.94,
+/- $0.07, and adjusted EPS to be $1.30, +/- $0.07.
Our second quarter fiscal 2019 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 $0.54 per outstanding share of common stock.
The dividend will be paid on March 12, 2019 to all
shareholders of record at the close of business on March 1,
2019.
Conference Call Scheduled for Today,
Wednesday, February 20, 2019 at 10:00 am ET
ADI will host a conference call to discuss first quarter fiscal
2019 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 706-634-7193 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:
1974449, or by visiting investor.analog.com.
A supplemental schedule showing quarterly revenue for fiscal
2017 and fiscal 2018 restated to reflect the adoption of the new
revenue recognition standard ASC 606 is available on our investor
site at 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), and free cash flow.
Adjusted gross margin is defined as gross margin, determined in
accordance with GAAP, excluding 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: acquisition-related
expenses1; acquisition-related transaction costs2; and
restructuring related expense3 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
restructuring related expense3 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; acquisition-related transaction
costs2; and restructuring related expense3 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 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 EPS, determined in accordance
with GAAP, excluding: acquisition-related expenses1;
acquisition-related transaction costs2, restructuring related
expense3 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.
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.
2Acquisition-Related Transaction Costs: Costs
directly related to the Linear Technology 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.
3Restructuring-Related Expense: Expenses
incurred in connection with facility closures, consolidation of
manufacturing facilities, severance, 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.
4Tax-Related Items: Tax adjustments
associated with the non-GAAP items discussed above, discrete tax
items including tax expense or benefit related to prior periods and
tax expense or benefit 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, 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: 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 our estimates of our expected tax rate based on
current tax law; higher than expected or unexpected costs
associated with or relating to the acquisition of Linear Technology
and the integration of the businesses; the risk that expected
benefits, synergies and growth prospects of the acquisition may not
be fully achieved in a timely manner, or at all; the risk that
Linear Technology’s business may not be successfully integrated
with Analog Devices’; the risk that we will be unable to retain and
hire key personnel; and the risk that disruption resulting from the
acquisition may adversely affect our business and relationships
with our customers, suppliers or employees. 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)
For more information, please contact: Mr. Michael
Lucarelli, Director of Investor Relations, Analog Devices, Inc.
781-461-3282 (phone); investor.relations@analog.com (email).
ANALOG DEVICES, INC. CONDENSED CONSOLIDATED
STATEMENTS OF INCOME (Unaudited) (In thousands,
except per share amounts) Three Months
Ended February 2, 2019 February 3, 2018 (2)
Revenue $ 1,541,101 $ 1,566,870 Cost of sales (1) 501,445
495,187 Gross margin $ 1,039,656 $ 1,071,683 Operating
expenses: Research and development (1) 287,382 288,597 Selling,
marketing, general and administrative (1) 167,342 176,908
Amortization of intangibles 107,324 107,019 Special charges
21,782 57,318 583,830 629,842 Operating income 455,826
441,841 Nonoperating expense (income): Interest expense 58,728
68,030 Interest income (2,688) (2,092) Other, net (160)
556 55,880 66,494 Income before income taxes
399,946 375,347 Provision for income taxes 44,940
82,107 Net income $ 355,006 $ 293,240 Shares used to compute
earnings per share - basic 368,703 369,093 Shares
used to compute earnings per share - diluted 372,506
374,189 Basic earnings per common share $ 0.96 $ 0.79 Diluted
earnings per common share $ 0.95 $ 0.78 Dividends declared and paid
per share $ 0.48 $ 0.45 (1) Includes stock-based compensation
expense as follows: Cost of sales $ 5,084 $ 4,221 Research and
development $ 18,925 $ 19,728 Selling, marketing, general and
administrative $ 12,384 $ 13,953 (2) Balances have been
restated to reflect the full retrospective adoption of Accounting
Standards Update (ASU) 2014-09, Revenue from Contracts with
Customers.
ANALOG DEVICES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(in thousands except share and per share amounts)
February 2, 2019 November 3, 2018 (1) Cash and cash
equivalents $ 605,864 $ 816,591 Accounts receivable 713,730 639,717
Inventories (2) 593,211 586,760 Other current assets 72,375
69,058 Total current assets 1,985,180
2,112,126 Net property, plant and equipment 1,181,735 1,154,328
Investments 78,127 68,583 Goodwill 12,253,891 12,252,604 Intangible
assets, net 4,631,697 4,778,192 Deferred tax assets (3) 1,634,719
1,725 Other 62,929 62,868 Total assets $ 21,828,278 $
20,430,426 Other current liabilities 849,955 984,748 Debt,
current - 67,000 Long-term debt 6,234,517 6,265,674 Deferred income
taxes (3) 2,288,615 982,469 Other non-current liabilities 869,754
862,362 Shareholders' equity 11,585,437 11,268,173
Total liabilities and equity $ 21,828,278 $ 20,430,426
(1) Balances have been restated to reflect the full
retrospective adoption of Accounting Standards Update (ASU)
2014-09, Revenue from Contracts with Customers.(2) Includes $6,694
and $7,128 related to stock-based compensation at February 2, 2019
and November 3, 2018, respectively.(3) Includes $1,655,129 and
$1,324,103 in deferred tax assets and deferred income taxes,
respectively, at Feb. 2, 2019 related to the adoption of ASU
2016-16, Income Taxes, which requires recognition of the income tax
consequences of an intra-entity transfer of an asset, other than
inventory, when the transfer occurs.
ANALOG DEVICES, INC. CONDENSED CONSOLIDATED
STATEMENT OF CASH FLOWS (Unaudited) (in
thousands) Three Months Ended February
2, 2019 February 3, 2018 (1) Cash flows from
operating activities: Net Income $ 355,006 $ 293,240 Adjustments to
reconcile net income to net cash provided by operations:
Depreciation 58,293 56,415 Amortization of intangibles 142,292
142,050 Stock-based compensation expense 36,393 37,902 Non-cash
portion of special charge 4,367 - Deferred income taxes 15,652
(677,603) Other non-cash activity 6,693 6,762 Changes in operating
assets and liabilities (246,929) 529,922 Total
adjustments 16,761 95,448 Net cash provided by
operating activities 371,767 388,688 Cash flows from
investing activities: Additions to property, plant and equipment
(90,993) (63,222) Change in other assets (5,222)
(1,278) Net cash used for investing activities (96,215)
(64,500) Cash flows from financing activities: Proceeds from
revolver 75,000 - Payments on revolver (75,000) - Debt repayments
(100,000) (420,000) Dividend payments to shareholders (177,716)
(166,719) Repurchase of common stock (227,093) (7,930) Proceeds
from employee stock plans 19,229 37,812 Changes in other financing
activities (569) 8,811 Net cash used for financing
activities (486,149) (548,026) Effect of exchange
rate changes on cash (130) 3,550 Net decrease in cash
and cash equivalents (210,727) (220,288) Cash and cash equivalents
at beginning of period 816,591 1,047,838 Cash and
cash equivalents at end of period $ 605,864 $ 827,550
(1) Balances have been restated to reflect the full
retrospective adoption of Accounting Standards Update (ASU)
2014-09, Revenue from Contracts with Customers.
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
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
February 2, 2019 February 3, 2018 (1) Revenue
% of revenue Y/Y % Revenue
% of revenue Industrial $ 728,122 47% (7)% $ 781,317
50% Automotive 259,484 17% (2)% 263,575 17% Consumer 208,334 14%
(21)% 264,510 17% Communications 345,161 22%
34% 257,468 16% Total revenue $ 1,541,101
100% (2)% $ 1,566,870 100%
(1) Balances have been restated to reflect the full
retrospective adoption of Accounting Standards Update (ASU)
2014-09, Revenue from Contracts with Customers.
ANALOG DEVICES, INC. RECONCILIATION OF GAAP
TO NON-GAAP ADJUSTED RESULTS (Unaudited) (In
thousands, except per share amounts) Three Months
Ended Feb. 2, 2019 Feb. 3, 2018 (1) Gross
margin $ 1,039,656 $ 1,071,683 Gross margin percentage 67.5% 68.4%
Acquisition related expenses 43,495 43,776
Adjusted gross margin $ 1,083,151 $ 1,115,459 Adjusted gross
margin percentage 70.3% 71.2% Operating expenses $ 583,830 $
629,842 Percent of revenue 37.9% 40.2% Acquisition related expenses
(113,832) (117,978) Acquisition related transaction costs - (8,736)
Restructuring related expense (21,782)
(57,318) Adjusted operating expenses $ 448,216 $ 445,810
Adjusted operating expenses percentage 29.1% 28.5% Operating
income $ 455,826 $ 441,841 Operating margin 29.6% 28.2% Acquisition
related expenses 157,327 161,754 Acquisition related transaction
costs - 8,736 Restructuring related expense 21,782
57,318 Adjusted operating income $ 634,935 $ 669,649
Adjusted operating margin 41.2% 42.7% Provision for income
taxes $ 44,940 $ 82,107 Income tax on non discrete tax items above
24,900 11,981 Income tax one time transitional tax 7,500 (687,061)
Income tax on deferred tax recalibration 5,060
639,698 Adjusted provision for income taxes $ 82,400 $ 46,725
Income before income taxes $ 399,946 $ 375,347 Effective tax
rate 11.2% 21.9% Acquisition related expenses 157,327 161,754
Acquisition related transaction costs - 8,736 Restructuring related
expense 21,782 57,318 Adjusted income before
income taxes $ 579,055 $ 603,155 Adjusted tax rate 14.2%
7.7% Diluted EPS $ 0.95 $ 0.78 Acquisition related expenses
0.42 0.43 Acquisition related transaction costs - 0.02
Restructuring related expense 0.06 0.15 Income tax on non discrete
tax items above (0.07) (0.03) Income tax one time transitional tax
(0.02) 1.84 Income tax on deferred tax recalibration (0.01)
(1.71) Adjusted diluted EPS (2) $ 1.33 $ 1.49
(1) Balances have been restated to reflect the full
retrospective adoption of Accounting Standards Update (ASU)
2014-09, Revenue from Contracts with Customers.(2) 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. 2, Feb. 2, Nov. 3, Aug.
4, May 5, 2019 2019 2018
2018 2018 Revenue (1) $ 6,198,920 $ 1,541,101 $
1,536,128 $ 1,558,189 $ 1,563,502 Net cash provided by operating
activities $ 2,425,440 $ 371,767 $ 714,441 $ 620,738 $ 718,494 % of
revenue 39% 24% 47% 40% 46% Capital expenditures $ (282,647) $
(90,993) $ (86,004) $ (51,750) $ (53,900) Free cash flow $
2,142,793 $ 280,774 $ 628,437 $ 568,988 $ 664,594 % of revenue 35%
18% 41% 37% 43%
(1) Balances have been restated to reflect the full
retrospective adoption of Accounting Standards Update (ASU)
2014-09, Revenue from Contracts with Customers.
ANALOG DEVICES, INC. RECONCILIATION OF
PROJECTED GAAP TO NON-GAAP ADJUSTED RESULTS (Unaudited)
Three months ending May 4, 2019 Reported
Adjusted Revenue
$1.5 billion(+/- $50 million)
$1.5 billion(+/- $50 million)
Operating Margin
30.8%
(+/- 100 bps)
41.3% (1)
(+/- 70 bps)
Tax rate 14% to 16% 14% to 16% (2) Earnings per share
$ 0.94(+/- $0.07)
$ 1.30 (3)(+/- $0.07)
(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 $23 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/20190220005285/en/
Analog Devices, Inc.Mr. Michael Lucarelli, 781-461-3282Director
of Investor Relationsinvestor.relations@analog.com
Analog Devices (NASDAQ:ADI)
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