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Analog Devices Reports First Quarter Fiscal 2021 Results at the High End of Guidance

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  • Revenue of $1.56 billion with double digit year-over-year growth across all B2B markets

  • Operating cash flow of $2.1 billion and free cash flow of $1.9 billion, or 33% of revenue, on a trailing twelve months basis

  • Returned over $380 million to shareholders in the first quarter through dividends and share repurchases

  • Increased quarterly dividend by 11%, marking the Company's 18th increase over the last 17 years

Analog Devices, Inc. (Nasdaq: ADI), a leading global high-performance semiconductor company, today announced financial results for its first quarter of fiscal 2021, which ended January 30, 2021.

"ADI delivered strong first quarter results at the high end of our outlook, reflecting the diversity of our business and our alignment to the most important secular growth trends," said Vincent Roche, President and CEO. "Revenue increased 20% year-over-year with growth across all market segments, including a record quarter for our Industrial business. While the economic backdrop remains uncertain, we are confident that a broad-based recovery is underway given continued momentum in ADI’s bookings and lean inventories across the industry."

Roche continued, "ADI remains focused on addressing our customers’ toughest challenges and providing breakthrough solutions, pushing the edge of what is possible. At the same time, we are passionately driven to deliver a positive impact on the world around us, enabling a more connected, safer and sustainable future, while creating value for all stakeholders."

Performance for the First Quarter of Fiscal 2021

Results Summary(1)

(in millions, except per-share amounts and percentages)

Three Months Ended

Jan. 30, 2021

Feb. 1, 2020

Change

Revenue

$

1,558

$

1,304

20

%

Gross margin

$

1,045

$

848

23

%

Gross margin percentage

67.1

%

65.1

%

200 bps

Operating income

$

464

$

273

70

%

Operating margin

29.8

%

21.0

%

880 bps

Diluted earnings per share

$

1.04

$

0.55

89

%

Adjusted Results

Adjusted gross margin

$

1,090

$

893

22

%

Adjusted gross margin percentage

70.0

%

68.5

%

150 bps

Adjusted operating income

$

635

$

481

32

%

Adjusted operating margin

40.7

%

36.9

%

380 bps

Adjusted diluted earnings per share

$

1.44

$

1.03

40

%

Three Months

Ended

Trailing Twelve

Months

Cash Generation

Jan. 30, 2021

Jan. 30, 2021

Net cash provided by operating activities

$

428

$

2,087

% of revenue

27

%

36

%

Capital expenditures

$

(67

)

$

(178

)

Free cash flow

$

361

$

1,909

% of revenue

23

%

33

%

Three Months

Ended

Trailing Twelve

Months

Cash Return

Jan. 30, 2021

Jan. 30, 2021

Dividend paid

$

(229

)

$

(916

)

Stock repurchases

(157

)

(296

)

Total cash returned

$

(386

)

$

(1,212

)

(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 2021

For the second quarter of fiscal 2021, we are forecasting revenue of $1.60 billion, +/- $50 million. At the midpoint of this revenue outlook, we expect reported operating margin of approximately 30.6%, +/-110 bps, and adjusted operating margin of approximately 41.0%, +/-70 bps. We are planning for reported EPS to be $1.06, +/-$0.08, and adjusted EPS to be $1.44, +/-$0.08.

Our second quarter fiscal 2021 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 $0.69 per outstanding share of common stock. The dividend will be paid on March 9, 2021 to all shareholders of record at the close of business on February 26, 2021.

Conference Call Scheduled for Today, Wednesday, February 17, 2021 at 10:00 am ET

ADI will host a conference call to discuss our first quarter fiscal 2021 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: 3567727, 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; acquisition related transaction costs2; restructuring related expense3; and charitable foundation contribution4 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; restructuring related expense3; and charitable foundation contribution4 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; restructuring related expense3; and charitable foundation contribution4 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 items5 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; restructuring related expense3; charitable foundation contribution4; and tax related items5 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 Corporation (Linear) 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 proposed 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.

3Restructuring 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 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.

4Charitable 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.

5Tax Related Items: Income tax effect of the non-GAAP items discussed above. We excluded the income tax benefit/provision effect of these tax related items from our non-GAAP measures because they are not associated with the tax expense on our ongoing 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 our proposed acquisition of Maxim Integrated Products, Inc. ("Maxim"); the impact of the COVID-19 pandemic on our business, financial condition and results of operations; 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; expected customer demand and order rates for our products and 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 or Maxim’s estimates of our respective expected tax rates based on current tax law; our ability to successfully integrate Maxim’s businesses and technologies; the risk that the expected benefits and synergies of the proposed transaction and growth prospects of the combined company may not be fully achieved in a timely manner, or at all; adverse results in litigation matters, including the potential for litigation related to the proposed transaction; the risk that we or Maxim will be unable to retain and hire key personnel; the risk associated with the timing of the closing of the proposed transaction, including the risk that the conditions to the transaction are not satisfied on a timely basis or at all or the failure of the transaction to close for any other reason or to close on the anticipated terms, including the anticipated tax treatment; the risk that any regulatory approval, consent or authorization that may be required for the proposed transaction is not obtained or is obtained subject to conditions that are not anticipated; unanticipated difficulties or expenditures relating to the transaction, the response of business partners and retention as a result of the announcement and pendency of the transaction; uncertainty as to the long-term value of our common stock; the diversion of management time on transaction-related matters; our ability to successfully integrate acquired businesses and technologies; and the risk that expected benefits, synergies and growth prospects of acquisitions 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 Ended

Jan. 30, 2021

Feb. 1, 2020

Revenue

$

1,558,458

$

1,303,565

Cost of sales

513,087

455,423

Gross margin

1,045,371

848,142

Operating expenses:

Research and development

288,150

257,073

Selling, marketing, general and administrative

185,275

199,280

Amortization of intangibles

107,648

107,225

Special charges

438

11,136

Total operating expenses

581,511

574,714

Operating income

463,860

273,428

Nonoperating expense (income):

Interest expense

42,479

48,813

Interest income

(209

)

(1,940

)

Other, net

(15,028

)

338

27,242

47,211

Income before income taxes

436,618

226,217

Provision for income taxes

48,099

22,343

Net income

$

388,519

$

203,874

Shares used to compute earnings per common share - basic

369,203

368,241

Shares used to compute earnings per common share - diluted

373,106

372,264

Basic earnings per common share

$

1.05

$

0.55

Diluted earnings per common share

$

1.04

$

0.55

ANALOG DEVICES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands)

Jan. 30, 2021

Oct. 31, 2020

Cash & cash equivalents

$

1,048,063

$

1,055,860

Accounts receivable

826,964

737,536

Inventories

618,640

608,260

Other current assets

131,074

116,032

Total current assets

2,624,741

2,517,688

Net property, plant and equipment

1,129,214

1,120,561

Other investments

91,720

86,729

Goodwill

12,282,751

12,278,425

Intangible assets, net

3,535,475

3,650,280

Deferred tax assets

1,466,489

1,503,064

Other assets

309,720

311,856

Total assets

$

21,440,110

$

21,468,603

Other current liabilities

$

1,277,537

$

1,364,986

Debt, current

399,220

Long-term debt

4,747,347

5,145,102

Deferred income taxes

1,862,068

1,919,595

Other non-current liabilities

1,066,192

1,040,975

Shareholders' equity

12,087,746

11,997,945

Total liabilities & equity

$

21,440,110

$

21,468,603

ANALOG DEVICES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

Three Months Ended

Jan. 30, 2021

Feb. 1, 2020

Cash flows from operating activities:

Net income

$

388,519

$

203,874

Adjustments to reconcile net income to net cash provided by operations:

Depreciation

56,309

59,863

Amortization of intangibles

145,044

144,069

Stock-based compensation expense

36,638

37,501

Deferred income taxes

(27,275

)

(13,982

)

Non-cash contribution to charitable foundation

40,000

Other non-cash activity

(14,553

)

2,332

Changes in operating assets and liabilities

(156,741

)

(124,009

)

Total adjustments

39,422

145,774

Net cash provided by operating activities

427,941

349,648

Percent of revenue

27

%

27

%

Cash flows from investing activities:

Proceeds from other investments

18,566

Additions to property, plant and equipment

(67,388

)

(54,839

)

Cash paid for asset acquisition

(22,522

)

Payments for acquisitions, net of cash acquired

(2,428

)

Changes in other assets

(1,299

)

107

Net cash used for investing activities

(75,071

)

(54,732

)

Cash flows from financing activities:

Dividend payments to shareholders

(229,179

)

(199,160

)

Repurchase of common stock

(157,057

)

(106,030

)

Proceeds from employee stock plans

19,920

16,113

Changes in other financing activities

2,493

(495

)

Net cash used for financing activities

(363,823

)

(289,572

)

Effect of exchange rate changes on cash

3,156

742

Net (decrease) increase in cash and cash equivalents

(7,797

)

6,086

Cash and cash equivalents at beginning of period

1,055,860

648,322

Cash and cash equivalents at end of period

$

1,048,063

$

654,408

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

Jan. 30, 2021

Feb. 1, 2020

Revenue

% of revenue*

Y/Y %

Revenue

% of revenue*

Industrial

$

855,454

55

%

24

%

$

687,685

53

%

Communications

281,049

18

%

16

%

241,804

19

%

Automotive

245,250

16

%

19

%

205,712

16

%

Consumer

176,705

11

%

5

%

168,364

13

%

Total revenue

$

1,558,458

100

%

20

%

$

1,303,565

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

Jan. 30, 2021

Feb. 1, 2020

Gross margin

$

1,045,371

$

848,142

Gross margin percentage

67.1

%

65.1

%

Acquisition related expenses

44,997

45,016

Adjusted gross margin

$

1,090,368

$

893,158

Adjusted gross margin percentage

70.0

%

68.5

%

Operating expenses

$

581,511

$

574,714

Percent of revenue

37.3

%

44.1

%

Acquisition related expenses

(110,300)

(111,782)

Acquisition related transaction costs

(15,236)

Charitable foundation contribution

(40,000)

Restructuring related expense

(438)

(11,136)

Adjusted operating expenses

$

455,537

$

411,796

Adjusted operating expenses percentage

29.2

%

31.6

%

Operating income

$

463,860

$

273,428

Operating margin

29.8

%

21.0

%

Acquisition related expenses

155,297

156,798

Acquisition related transaction costs

15,236

Charitable foundation contribution

40,000

Restructuring related expense

438

11,136

Adjusted operating income

$

634,831

$

481,362

Adjusted operating margin

40.7

%

36.9

%

Provision for income taxes

$

48,099

$

22,343

Income tax effect of adjustments above

22,796

28,280

Adjusted provision for income taxes

$

70,895

$

50,623

Income before income taxes

436,618

226,217

Effective tax rate

11.0

%

9.9

%

Acquisition related expenses

155,297

156,798

Acquisition related transaction costs

15,236

Charitable foundation contribution

40,000

Restructuring related expense

438

11,136

Adjusted income before income taxes

$

607,589

$

434,151

Adjusted tax rate

11.7

%

11.7

%

Diluted EPS

$

1.04

$

0.55

Acquisition related expenses

0.42

0.42

Acquisition related transaction costs

0.04

Charitable foundation contribution

0.11

Restructuring related expense

0.00

0.03

Income tax effect of adjustments above

(0.06)

(0.08)

Adjusted diluted EPS*

$

1.44

$

1.03

* 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

Jan. 30, 2021

Jan. 30, 2021

Oct. 31, 2020

Aug. 1, 2020

May 2, 2020

Revenue

$

5,857,949

$

1,558,458

$

1,526,295

$

1,456,136

$

1,317,060

Net cash provided by operating activities

$

2,086,780

$

427,941

$

672,598

$

557,200

$

429,041

% of Revenue

36

%

27

%

44

%

38

%

33

%

Capital expenditures

$

(178,241

)

$

(67,388

)

$

(29,888

)

$

(20,804

)

$

(60,161

)

Free cash flow

$

1,908,539

$

360,553

$

642,710

$

536,396

$

368,880

% of Revenue

33

%

23

%

42

%

37

%

28

%

ANALOG DEVICES, INC.

RECONCILIATION OF PROJECTED GAAP TO NON-GAAP RESULTS

(Unaudited)

Three Months Ending May 1, 2021

Reported

Adjusted

Revenue

$1.60 Billion

$1.60 Billion

(+/- $50 Million)

(+/- $50 Million)

Operating margin

30.6%

41% (1)

(+/-110 bps)

(+/-70 bps)

Nonoperating expense

~ $44 Million

~ $44 Million

Tax rate

11% to 13%

11% to 13% (2)

Earnings per share

$1.06

$1.44 (3)

(+/- $0.08)

(+/- $0.08)

(1) Includes $166 million of adjustments related to acquisition related expenses and acquisition related transaction costs as previously defined in the Non-GAAP Financial Information section of this press release.
(2) Includes $23 million of tax effects associated with the adjustments for acquisition related expenses and acquisition related transaction costs noted above.
(3) Includes $0.38 of adjustments related to the net impact of $0.44 of acquisition related expenses and acquisition related transaction costs, as well as $0.06 of tax effects on those items.

(ADI-WEB)

View source version on businesswire.com: https://www.businesswire.com/news/home/20210217005157/en/

Contacts

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