ADI
$114.11
Analog Devices
$.50
.44%
Earnings Details
1st Quarter January 2019
Wednesday, February 20, 2019 8:00:00 AM
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Summary

Analog Devices Beats

Analog Devices (ADI) reported 1st Quarter January 2019 earnings of $1.33 per share on revenue of $1.5 billion. The consensus earnings estimate was $1.28 per share on revenue of $1.5 billion. The Earnings Whisper number was $1.32 per share. Revenue grew 1.5% on a year-over-year basis.

The company said it expects second quarter earnings of $1.23 to $1.37 per share on revenue of $1.45 billion to $1.55 billion. The current consensus earnings estimate is $1.31 per share on revenue of $1.52 billion for the quarter ending April 30, 2019.

Analog Devices Inc is engaged in the design, manufacture and marketing of a portfolio of high-performance analog, mixed-signal and digital signal processing integrated circuits used in all types of electronic equipment.

Results
Reported Earnings
$1.33
Earnings Whisper
$1.32
Consensus Estimate
$1.28
Reported Revenue
$1.54 Bil
Revenue Estimate
$1.51 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Analog Devices Reports First Quarter Fiscal 2019 Results with Revenue and EPS at the High-End of Guidance

  • 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

NORWOOD, Mass.--(BUSINESS WIRE)-- 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.

Analog Devices, Inc.
Mr. Michael Lucarelli, 781-461-3282
Director of Investor Relations
investor.relations@analog.com

Source: Analog Devices, Inc.