Analog devices reports record third quarter fiscal 2022 results
Wilmington, mass.--(business wire)--analog devices, inc. (nasdaq: adi), a leading global high-performance analog technology company, today announced financial results for its third quarter of fiscal 2022, which ended july 30, 2022. “adi delivered its sixth consecutive quarter of record revenue, fueling adjusted earnings per share to a new all-time high. these results reflect the agility of our hybrid manufacturing model as well as the essential role our high-performance analog, mixed signal, and power portfolio plays across numerous secular growth trends,” said vincent roche, ceo and chair. “while economic uncertainty is beginning to impact bookings, demand continues to outpace supply, resulting in higher backlog, paving the way for a strong finish to a banner year.” roche continued, “adi’s solutions are enabling the rise of the intelligent edge, which is proliferating at the intersection between the physical and digital worlds. with customers increasingly focused on digitalization, appreciation for adi’s cutting-edge technology is accelerating. this undeniable trend, along with our relentless focus on innovation, gives me great confidence in our ability to drive long-term growth while making a positive societal impact.” performance for the third quarter of fiscal 2022 results summary(1) (in millions, except per-share amounts and percentages) three months ended jul. 30, 2022 jul. 31, 2021 change revenue $ 3,110 $ 1,759 77 % gross margin $ 2,043 1,221 67 % gross margin percentage 65.7 % 69.4 % (370 bps) operating income $ 893 $ 610 47 % operating margin 28.7 % 34.7 % (600 bps) diluted earnings per share $ 1.44 $ 1.35 7 % adjusted results adjusted gross margin $ 2,304 $ 1,259 83 % adjusted gross margin percentage 74.1 % 71.6 % 250 bps adjusted operating income $ 1,557 $ 766 103 % adjusted operating margin 50.1 % 43.6 % 650 bps adjusted diluted earnings per share $ 2.52 $ 1.72 47 % three months ended trailing twelve months cash generation jul. 30, 2022 jul. 30, 2022 net cash provided by operating activities $ 1,248 $ 4,267 % of revenue 40 % 38 % capital expenditures $ (165 ) $ (526 ) free cash flow $ 1,083 $ 3,741 % of revenue 35 % 34 % three months ended trailing twelve months cash return jul. 30, 2022 jul. 30, 2022 dividend paid $ (394 ) $ (1,525 ) stock repurchases (906 ) (4,355 ) total cash returned $ (1,300 ) $ (5,880 ) (1) the sum and/or computation of the individual amounts may not equal the total due to rounding. outlook for the fourth quarter of fiscal year 2022 for the fourth quarter of fiscal 2022, we are forecasting revenue of $3.15 billion, +/- $100 million. at the midpoint of this revenue outlook, we expect reported operating margin of approximately 33.7%, +/-130 bps, and adjusted operating margin of approximately 50.3%, +/-70 bps. we are planning for reported eps to be $1.69, +/-$0.10, and adjusted eps to be $2.57, +/-$0.10. our fourth quarter fiscal 2022 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 $0.76 per outstanding share of common stock. the dividend will be paid on september 8, 2022 to all shareholders of record at the close of business on august 30, 2022. conference call scheduled for today, wednesday, august 17, 2022 at 10:00 am et adi will host a conference call to discuss our third quarter fiscal 2022 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 as follows: participant dial-in (toll free): 1-833-630-1956 international participant dial-in: 1-412-317-1837 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 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 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 an income tax benefit from a discrete tax item related to the consolidation of certain subsidiaries. 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) operates at the center of the modern digital economy, converting real-world phenomena into actionable insight with its comprehensive suite of analog and mixed signal, power management, radio frequency (rf), and digital and sensor technologies. adi serves 125,000 customers worldwide with more than 75,000 products in the industrial, communications, automotive, and consumer markets. adi is headquartered in wilmington, ma. 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 sustained performance; increasing 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, operating leverage, production and inventory levels; expected customer demand and order rates for our products, expected product offerings and the importance of our product offerings and technologies to our customers; our social impact; 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: the uncertainty as to the extent of the duration, scope and impacts of the covid-19 pandemic; political and economic uncertainty, including any faltering in global economic conditions or the stability of credit and financial markets; erosion of consumer confidence and declines in customer spending; unavailability of raw materials, services, supplies or manufacturing capacity; changes in geographic, product or customer mix; changes in export classifications, import and export regulations or duties and tariffs; changes in our estimates of our expected tax 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; unanticipated difficulties or expenditures relating to integrating maxim; uncertainty as to the long-term value of our common stock; 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 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 nine months ended jul. 30, 2022 jul. 31, 2021 jul. 30, 2022 jul. 31, 2021 revenue $ 3,109,880 $ 1,758,853 $ 8,766,237 $ 4,978,718 cost of sales 1,066,738 537,669 3,376,578 1,575,526 gross margin 2,043,142 1,221,184 5,389,659 3,403,192 operating expenses: research and development 431,829 306,617 1,279,510 897,005 selling, marketing, general and administrative 326,942 206,076 929,615 597,963 amortization of intangibles 252,864 107,783 759,707 323,217 special charges, net 138,201 (8,938 ) 244,603 (8,189 ) total operating expenses 1,149,836 611,538 3,213,435 1,809,996 operating income 893,306 609,646 2,176,224 1,593,196 nonoperating expense (income): interest expense 51,189 44,659 152,701 $ 130,204 interest income (1,797 ) (300 ) (2,578 ) $ (799 ) other, net (4,023 ) (6,991 ) (24,636 ) $ (21,090 ) total nonoperating expense (income) 45,369 37,368 125,487 108,315 income before income taxes 847,937 572,278 2,050,737 1,484,881 provision for income taxes 98,952 68,967 238,402 170,146 net income $ 748,985 $ 503,311 $ 1,812,335 $ 1,314,735 shares used to compute earnings per common share - basic 517,011 368,476 521,557 368,834 shares used to compute earnings per common share - diluted 520,550 371,849 525,652 372,457 basic earnings per common share $ 1.45 $ 1.37 $ 3.47 $ 3.56 diluted earnings per common share $ 1.44 $ 1.35 $ 3.45 $ 3.53 analog devices, inc. condensed consolidated balance sheets (unaudited) (in thousands) jul. 30, 2022 oct. 30, 2021 cash & cash equivalents $ 1,524,960 $ 1,977,964 accounts receivable 1,742,646 1,459,056 inventories 1,203,394 1,200,610 other current assets 218,708 740,687 total current assets 4,689,708 5,378,317 net property, plant and equipment 2,180,048 1,979,051 goodwill 26,920,335 26,918,470 intangible assets, net 13,764,444 15,267,170 deferred tax assets 2,297,122 2,267,269 other assets 494,513 511,794 total assets $ 50,346,170 $ 52,322,071 other current liabilities $ 2,441,201 $ 2,253,649 debt, current — 516,663 long-term debt 6,252,839 6,253,212 deferred income taxes 3,764,370 3,938,830 other non-current liabilities 1,249,169 1,367,175 shareholders' equity 36,638,591 37,992,542 total liabilities & equity $ 50,346,170 $ 52,322,071 analog devices, inc. condensed consolidated statements of cash flows (unaudited) (in thousands) three months ended nine months ended jul. 30, 2022 jul. 31, 2021 jul. 30, 2022 jul. 31, 2021 cash flows from operating activities: net income $ 748,985 $ 503,311 $ 1,812,335 $ 1,314,735 adjustments to reconcile net income to net cash provided by operations: depreciation 75,619 50,162 212,635 158,937 amortization of intangibles 503,350 145,989 1,512,250 436,734 stock-based compensation expense 84,874 41,687 242,809 118,683 gain on sale of property, plant, and equipment (4,352 ) (13,557 ) (4,352 ) (13,557 ) non-cash impairment charge 91,953 — 91,953 — cost of goods sold for inventory acquired — — 271,396 — deferred income taxes (82,136 ) (24,286 ) (205,128 ) (72,578 ) non-cash operating lease costs 9,739 8,815 (17,958 ) 16,855 other 3,164 (2,843 ) (7,061 ) (14,965 ) changes in operating assets and liabilities (183,350 ) (79,237 ) (582,813 ) (150,499 ) total adjustments 498,861 126,730 1,513,731 479,610 net cash provided by operating activities 1,247,846 630,041 3,326,066 1,794,345 cash flows from investing activities: additions to property, plant and equipment (164,884 ) (86,341 ) (394,796 ) (212,899 ) other 30,751 38,829 43,761 29,619 net cash used for investing activities (134,133 ) (47,512 ) (351,035 ) (183,280 ) cash flows from financing activities: payments on revolver (400,000 ) — (400,000 ) — proceeds from revolver 400,000 — 400,000 — early termination of debt — — (519,116 ) — dividend payments to shareholders (394,018 ) (254,506 ) (1,154,207 ) (738,114 ) repurchase of common stock (905,973 ) (163,281 ) (1,758,832 ) (509,152 ) proceeds from employee stock plans 9,960 11,676 30,013 55,348 other (28,376 ) (447 ) (1,718 ) 1,952 net cash used for financing activities (1,318,407 ) (406,558 ) (3,403,860 ) (1,189,966 ) effect of exchange rate changes on cash (8,080 ) (486 ) (24,175 ) 3,742 net (decrease) increase in cash and cash equivalents (212,774 ) 175,485 (453,004 ) 424,841 cash and cash equivalents at beginning of period 1,737,734 1,305,216 1,977,964 1,055,860 cash and cash equivalents at end of period $ 1,524,960 $ 1,480,701 $ 1,524,960 $ 1,480,701 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 july 30, 2022 july 31, 2021 revenue % of revenue1 y/y% revenue % of revenue1 industrial $ 1,555,070 50% 55% $ 1,006,383 57% automotive 659,090 21% 127% 290,182 16% communications 490,732 16% 69% 290,391 17% consumer 404,988 13% 136% 171,897 10% total revenue $ 3,109,880 100% 77% $ 1,758,853 100% nine months ended july 30, 2022 july 31, 2021 revenue % of revenue1 y/y % revenue % of revenue1 industrial $ 4,402,912 50% 55% $ 2,841,665 57% automotive 1,844,017 21% 132% 794,739 16% communications 1,376,182 16% 62% 850,153 17% consumer 1,143,126 13% 132% 492,161 10% total revenue $ 8,766,237 100% 76% $ 4,978,718 100% 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 nine months ended jul. 30, 2022 jul. 31, 2021 jul. 30, 2022 jul. 31, 2021 gross margin $ 2,043,142 $ 1,221,184 $ 5,389,659 $ 3,403,192 gross margin percentage 65.7 % 69.4 % 61.5 % 68.4 % acquisition related expenses 260,628 37,945 1,049,991 123,653 adjusted gross margin $ 2,303,770 $ 1,259,129 $ 6,439,650 $ 3,526,845 adjusted gross margin percentage 74.1 % 71.6 % 73.5 % 70.8 % operating expenses $ 1,149,836 $ 611,538 $ 3,213,435 $ 1,809,996 percent of revenue 37.0 % 34.8 % 36.7 % 36.4 % acquisition related expenses (259,648 ) (109,434 ) (782,752 ) (329,637 ) acquisition related transaction costs (5,417 ) (18,326 ) (26,846 ) (56,570 ) special charges, net (138,201 ) 8,938 (244,603 ) 8,189 adjusted operating expenses $ 746,570 $ 492,716 $ 2,159,234 $ 1,431,978 adjusted operating expenses percentage 24.0 % 28.0 % 24.6 % 28.8 % operating income $ 893,306 $ 609,646 $ 2,176,224 $ 1,593,196 operating margin 28.7 % 34.7 % 24.8 % 32.0 % acquisition related expenses 520,276 147,379 1,832,743 453,290 acquisition related transaction costs 5,417 18,326 26,846 56,570 special charges, net 138,201 (8,938 ) 244,603 (8,189 ) adjusted operating income $ 1,557,200 $ 766,413 $ 4,280,416 $ 2,094,867 adjusted operating margin 50.1 % 43.6 % 48.8 % 42.1 % nonoperating expense (income) 45,369 37,368 125,487 108,315 acquisition related expenses 2,288 — 6,875 — adjusted nonoperating expense (income) $ 47,657 $ 37,368 $ 132,362 $ 108,315 income before income taxes $ 847,937 $ 572,278 $ 2,050,737 $ 1,484,881 acquisition related expenses 517,988 147,379 1,825,868 453,290 acquisition related transaction costs 5,417 18,326 26,846 56,570 special charges, net 138,201 (8,938 ) 244,603 (8,189 ) adjusted income before income taxes $ 1,509,543 $ 729,045 $ 4,148,054 $ 1,986,552 provision for income taxes $ 98,952 $ 68,967 $ 238,402 $ 170,146 effective tax rate 11.7 % 12.1 % 11.6 % 11.5 % tax related items 100,685 20,686 310,902 66,466 adjusted provision for income taxes $ 199,637 $ 89,653 $ 549,304 $ 236,612 adjusted tax rate 13.2 % 12.3 % 13.2 % 11.9 % diluted eps $ 1.44 $ 1.35 $ 3.45 $ 3.53 acquisition related expenses 1.00 0.40 3.49 1.22 acquisition related transaction costs 0.01 0.05 0.05 0.15 special charges, net 0.26 (0.02 ) 0.46 (0.02 ) tax related items (0.19 ) (0.06 ) (0.59 ) (0.18 ) adjusted diluted eps* $ 2.52 $ 1.72 $ 6.85 $ 4.70 * 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 jul. 30, 2022 jul. 30, 2022 apr. 30, 2022 jan. 29, 2022 oct. 30, 2021 revenue $ 11,105,805 $ 3,109,880 $ 2,972,064 $ 2,684,293 $ 2,339,568 net cash provided by operating activities $ 4,266,791 $ 1,247,846 $ 1,221,806 $ 856,413 $ 940,726 % of revenue 38 % 40 % 41 % 32 % 40 % capital expenditures $ (525,573 ) $ (164,884 ) $ (118,779 ) $ (111,133 ) $ (130,777 ) free cash flow $ 3,741,218 $ 1,082,962 $ 1,103,027 $ 745,280 $ 809,949 % of revenue 34 % 35 % 37 % 28 % 35 % analog devices, inc. reconciliation of projected gaap to non-gaap results (unaudited) three months ending october 29, 2022 reported adjusted revenue $3.15 billion $3.15 billion (+/- $100 million) (+/- $100 million) operating margin 33.7% 50.3% (1) (+/-130 bps) (+/-70 bps) nonoperating expense ~ $50 million ~ $50 million tax rate 13%-14% 13%-14% (2) earnings per share $1.69 $2.57 (3) (+/- $.10) (+/- $.10) (1) includes $518 million of adjustments related to acquisition related expenses and $5 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 $0.88 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)
