Analog devices reports record first quarter fiscal 2023 results
Wilmington, mass.--(business wire)--analog devices, inc. (nasdaq: adi), a global semiconductor leader, today announced financial results for its first quarter fiscal year 2023, which ended january 28, 2023. “adi continues to execute exceptionally well with revenue growth of 21% year-over-year and record earnings per share,” said vincent roche, ceo and chair. “encouragingly, despite the macro uncertainty, demand remains resilient in our industrial and automotive markets, driven by continued momentum across secular growth areas, such as automation and electrification.” roche continued, “looking ahead, pervasive sensing, ai-driven edge computing, and ubiquitous connectivity are enabling new capabilities, applications, and markets at the intelligent edge. adi, the bridge between the physical and digital worlds, is well-positioned to deliver breakthrough innovations that positively impact society and unlock long-term value for all stakeholders.” performance for the first quarter of fiscal 2023 results summary(1) (in millions, except per-share amounts and percentages) three months ended jan. 28, 2023 jan. 29, 2022 change revenue $ 3,250 $ 2,684 21 % gross margin $ 2,124 $ 1,402 51 % gross margin percentage 65.4 % 52.2 % 1,320 bps operating income $ 1,131 $ 365 210 % operating margin 34.8 % 13.6 % 2,120 bps diluted earnings per share $ 1.88 $ 0.53 255 % adjusted results adjusted gross margin $ 2,392 $ 1,931 24 % adjusted gross margin percentage 73.6 % 71.9 % 170 bps adjusted operating income $ 1,659 $ 1,228 35 % adjusted operating margin 51.1 % 45.8 % 530 bps adjusted diluted earnings per share $ 2.75 $ 1.94 42 % three months ended trailing twelve months cash generation jan. 28, 2023 jan. 28, 2023 net cash provided by operating activities $ 1,406 $ 5,025 % of revenue 43 % 40 % capital expenditures $ (176 ) $ (764 ) free cash flow $ 1,230 $ 4,261 % of revenue 38 % 34 % three months ended trailing twelve months cash return jan. 28, 2023 jan. 28, 2023 dividend paid $ (385 ) $ (1,567 ) stock repurchases (655 ) (3,156 ) total cash returned $ (1,040 ) $ (4,723 ) (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 2023 for the second quarter of fiscal 2023, we are forecasting revenue of $3.20 billion, +/- $100 million. at the midpoint of this revenue outlook, we expect reported operating margin of approximately 34.7%, +/-130 bps, and adjusted operating margin of approximately 51.0%, +/-70 bps. we are planning for reported eps to be $1.85, +/-$0.10, and adjusted eps to be $2.75, +/-$0.10. our second quarter fiscal 2023 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 $0.86 per outstanding share of common stock. the dividend will be paid on march 8, 2023 to all shareholders of record at the close of business on february 27, 2023. conference call scheduled for today, wednesday, february 15, 2023 at 10:00 am et adi will host a conference call to discuss our first quarter fiscal 2023 results and short-term outlook today, beginning at 10:00 am et. investors may join via webcast, accessible 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 nonoperating expense (income), 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 revenue 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, and special charges, net3, 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 special charges, net3, which are described further below. adjusted operating margin represents adjusted operating income divided by revenue. adjusted nonoperating expense (income) is defined as nonoperating expense (income), determined in accordance with gaap, excluding: certain acquisition related expenses1, which is described further below. 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 special charges, net3, 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, acquisition related transaction costs2, special charges, net3, 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 revenue 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 debt, 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 fair value adjustments associated with the replacement of share-based awards related to the maxim integrated products, inc. (maxim) 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 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. 3special charges, net: expenses, net, incurred as part of the integration of the acquisition, 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. 4tax related items: income tax effect of the non-gaap items discussed above and certain other income tax benefits associated with prior periods. we excluded the income tax effect of 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, inc. (nasdaq: adi) is a global semiconductor leader that bridges the physical and digital worlds to enable breakthroughs at the intelligent edge. adi combines analog, digital, and software technologies into solutions that help drive advancements in digitized factories, mobility, and digital healthcare, combat climate change, and reliably connect humans and the world. with revenue of more than $12 billion in fy22 and approximately 25,000 people globally working alongside 125,000 global customers, adi ensures today’s innovators stay ahead of what’s possible. learn more at www.analog.com and on linkedin and twitter. forward looking statements this press release contains forward-looking statements, which address a variety of subjects including, for example, our statements regarding sustained performance; demand and supply; expected revenue, operating margin, earnings per share, and other financial results; expected market trends and acceleration of those trends, market share gains, long-term growth; expected customer demand for our products; expected product offerings, capabilities, and applications and the importance of our product offerings and technologies to our customers; and market position. statements that are not historical facts, including statements about our beliefs, plans and expectations, are forward-looking statements. such statements are based on our current expectations and are subject to a number of factors and uncertainties, which could cause actual results to differ materially from those described in the forward-looking statements. the following important factors and uncertainties, among others, could cause actual results to differ materially from those described in these forward-looking statements: political and economic uncertainty, including any faltering in global economic conditions or the stability of credit and financial markets; erosion of consumer confidence and declines in customer spending or cancellations of orders for our products; unavailability of raw materials, services, supplies or manufacturing capacity; disruptions to our manufacturing operations or our ability to execute our business strategy; 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 rates based on current tax law; adverse results in litigation matters, including the potential for litigation related to the maxim acquisition; the risk that we will be unable to retain and hire key personnel including as a result of labor shortages; changes in demand for semiconductors; the uncertainly as to the extent of the duration, scope, and impacts of the covid-19 pandemic; attempted or actual security breaches and other cybersecurity incidents that disrupt our operations; unanticipated difficulties or expenditures relating to integrating maxim; uncertainty as to the long-term value of our common stock; the discretion of our board of directors to declare dividends and our ability to pay dividends in the future; factors impacting our ability to repurchase shares; the diversion of management time on integrating maxim's business and operations; our ability to successfully integrate acquired businesses and technologies, including maxim; and the risk that expected benefits, synergies and growth prospects of acquisitions, including our acquisition of maxim, 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 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. 28, 2023 jan. 29, 2022 revenue $ 3,249,630 $ 2,684,293 cost of sales 1,125,289 1,282,296 gross margin 2,124,341 1,401,997 operating expenses: research and development 414,095 426,780 selling, marketing, general and administrative 326,284 297,365 amortization of intangibles 253,142 253,367 special charges, net — 59,728 total operating expenses 993,521 1,037,240 operating income 1,130,820 364,757 nonoperating expense (income): interest expense 60,453 51,964 interest income (10,829 ) (218 ) other, net 7,723 (10,544 ) total nonoperating expense (income) 57,347 41,202 income before income taxes 1,073,473 323,555 provision for income taxes 111,999 43,478 net income $ 961,474 $ 280,077 shares used to compute earnings per common share - basic 507,121 525,291 shares used to compute earnings per common share - diluted 511,184 530,142 basic earnings per common share $ 1.90 $ 0.53 diluted earnings per common share $ 1.88 $ 0.53 analog devices, inc. condensed consolidated balance sheets (unaudited) (in thousands) jan. 28, 2023 oct. 29, 2022 cash & cash equivalents $ 1,670,462 $ 1,470,572 accounts receivable 1,629,870 1,800,462 inventories 1,522,942 1,399,914 other current assets 338,226 267,044 total current assets 5,161,500 4,937,992 net property, plant and equipment 2,524,655 2,401,304 goodwill 26,913,134 26,913,134 intangible assets, net 12,763,229 13,265,406 deferred tax assets 2,267,178 2,264,888 other assets 604,824 519,626 total assets $ 50,234,520 $ 50,302,350 current liabilities $ 2,433,677 $ 2,442,655 long-term debt 6,543,250 6,548,625 deferred income taxes 3,477,044 3,622,538 other non-current liabilities 1,249,064 1,223,209 shareholders' equity 36,531,485 36,465,323 total liabilities & shareholders' equity $ 50,234,520 $ 50,302,350 analog devices, inc. condensed consolidated statements of cash flows (unaudited) (in thousands) three months ended jan. 28, 2023 jan. 29, 2022 cash flows from operating activities: net income $ 961,474 $ 280,077 adjustments to reconcile net income to net cash provided by operations: depreciation 85,321 65,165 amortization of intangibles 502,177 504,645 stock-based compensation expense 75,041 86,939 cost of goods sold for inventory acquired — 271,396 deferred income taxes (146,354 ) (34,651 ) non-cash operating lease costs (2,646 ) 7,823 other 12,378 (9,571 ) changes in operating assets and liabilities (81,086 ) (315,410 ) total adjustments 444,831 576,336 net cash provided by operating activities 1,406,305 856,413 cash flows from investing activities: additions to property, plant and equipment (176,158 ) (111,133 ) other 102 7,824 net cash used for investing activities (176,056 ) (103,309 ) cash flows from financing activities: early termination of debt — (519,116 ) dividend payments to shareholders (385,452 ) (362,645 ) repurchase of common stock (654,557 ) (76,019 ) proceeds from employee stock plans 41,238 8,471 other (31,588 ) 12,041 net cash used for financing activities (1,030,359 ) (937,268 ) effect of exchange rate changes on cash — (3,401 ) net increase (decrease) in cash and cash equivalents 199,890 (187,565 ) cash and cash equivalents at beginning of period 1,470,572 1,977,964 cash and cash equivalents at end of period $ 1,670,462 $ 1,790,399 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 revenue within, each end market. three months ended january 28, 2023 january 29, 2022 revenue % of revenue1 y/y% revenue % of revenue1 industrial $ 1,690,202 52% 26% $ 1,340,284 50% automotive 718,165 22% 29% 557,634 21% communications 487,986 15% 18% 412,754 15% consumer 353,277 11% (5)% 373,621 14% total revenue $ 3,249,630 100% 21% $ 2,684,293 100% 1) 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. 28, 2023 jan. 29, 2022 gross margin $ 2,124,341 $ 1,401,997 gross margin percentage 65.4 % 52.2 % acquisition related expenses 267,514 528,614 adjusted gross margin $ 2,391,855 $ 1,930,611 adjusted gross margin percentage 73.6 % 71.9 % operating expenses $ 993,521 $ 1,037,240 percent of revenue 30.6 % 38.6 % acquisition related expenses (258,059 ) (262,200 ) acquisition related transaction costs (2,563 ) (12,891 ) special charges, net — (59,728 ) adjusted operating expenses $ 732,899 $ 702,421 adjusted operating expenses percentage 22.6 % 26.2 % operating income $ 1,130,820 $ 364,757 operating margin 34.8 % 13.6 % acquisition related expenses 525,573 790,814 acquisition related transaction costs 2,563 12,891 special charges, net — 59,728 adjusted operating income $ 1,658,956 $ 1,228,190 adjusted operating margin 51.1 % 45.8 % nonoperating expense (income) $ 57,347 $ 41,202 acquisition related expenses 2,288 2,299 adjusted nonoperating expense (income) $ 59,635 $ 43,501 income before income taxes $ 1,073,473 $ 323,555 acquisition related expenses 523,285 788,515 acquisition related transaction costs 2,563 12,891 special charges, net — 59,728 adjusted income before income taxes $ 1,599,321 $ 1,184,689 provision for income taxes $ 111,999 $ 43,478 effective tax rate 10.4 % 13.4 % tax related items 81,843 114,389 adjusted provision for income taxes $ 193,842 $ 157,867 adjusted tax rate 12.1 % 13.3 % diluted eps $ 1.88 $ 0.53 acquisition related expenses 1.02 1.49 acquisition related transaction costs 0.01 0.02 special charges, net — 0.11 tax related items (0.16 ) (0.22 ) adjusted diluted eps* $ 2.75 $ 1.94 * 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. 28, 2023 jan. 28, 2023 oct. 29, 2022 jul. 30, 2022 apr. 30, 2022 revenue $ 12,579,290 $ 3,249,630 $ 3,247,716 $ 3,109,880 $ 2,972,064 net cash provided by operating activities $ 5,025,293 $ 1,406,305 $ 1,149,336 $ 1,247,846 $ 1,221,806 % of revenue 40 % 43 % 35 % 40 % 41 % capital expenditures $ (764,333 ) $ (176,158 ) $ (304,512 ) $ (164,884 ) $ (118,779 ) free cash flow $ 4,260,960 $ 1,230,147 $ 844,824 $ 1,082,962 $ 1,103,027 % of revenue 34 % 38 % 26 % 35 % 37 % analog devices, inc. reconciliation of projected gaap to non-gaap results (unaudited) three months ending april 29, 2023 reported adjusted revenue $3.2 billion $3.2 billion (+/- $100 million) (+/- $100 million) operating margin 34.7% 51.0% (1) (+/-130 bps) (+/-70 bps) nonoperating expense ~ $50 million ~ $50 million tax rate 10% - 12% 11% - 13% (2) earnings per share $1.85 $2.75 (3) (+/- $0.10) (+/- $0.10) (1) includes $519 million of adjustments related to acquisition related expenses and $4 million of adjustments related to acquisition related transaction costs as previously defined in the non-gaap financial information section of this press release. (2) includes $71 million of tax effects associated with the adjustments for acquisition related expenses and acquisition related transaction costs noted above. (3) includes $0.90 of adjustments related to the net impact of acquisition related expenses and acquisition related transaction costs, as well as the tax effects on those items. (adi-web)
