Analog Devices Reports Fiscal Third Quarter 2024 Financial Results
-- Revenue of $2.31 billion, above the midpoint of our outlook with
sequential growth in Industrial, Consumer, and Communications
-- Operating cash flow of $4.0 billion and free cash flow of $2.9 billion
on a trailing twelve-month basis
-- Returned $574 million to shareholders through dividends and repurchases
in the third quarter
WILMINGTON, Mass., Aug. 21, 2024 /PRNewswire/ -- Analog Devices, Inc. (Nasdaq: ADI), a global semiconductor leader, today announced financial results for its fiscal third quarter 2024, which ended August 3, 2024.
"ADI's revenue finished above our guided midpoint with stronger profitability driving earnings per share near the high end of our outlook," said Vincent Roche, CEO and Chair. "As we navigate this business cycle's nascent recovery, our high-performance analog solutions portfolio positions us well to intersect the strong underlying stream of concurrent secular trends. Our innovation and customer-centric ethos will continue to form the foundation for our success and help drive long-term shareholder value."
"Improved customer inventory levels and order momentum, across most of our markets, position us to grow again sequentially in our fourth quarter, increasing our confidence that we are past the trough of this cycle. However, economic and geopolitical uncertainty continues to limit the pace of the recovery" said Richard Puccio, CFO.
Performance for the Third Quarter of Fiscal 2024
Results Summary
(1)
---
(in millions, except per-share amounts and percentages)
Three Months Ended
Aug. 3, 2024 Jul. 29, 2023 Change
Revenue $2,312 $3,076 (25) %
Gross margin $1,311 $1,962 (33) %
Gross margin percentage 56.7 % 63.8 % (710 bps)
Operating income $491 $929 (47) %
Operating margin 21.2 % 30.2 % (900 bps)
Diluted earnings per share $0.79 $1.74 (55) %
Adjusted Results(2)
Adjusted gross margin $1,571 $2,222 (29) %
Adjusted gross margin percentage 67.9 % 72.2 % (430 bps)
Adjusted operating income $952 $1,470 (35) %
Adjusted operating margin 41.2 % 47.8 % (660 bps)
Adjusted diluted earnings per share $1.58 $2.49 (37) %
Three Months Trailing Twelve
Ended Months
Cash Generation Aug. 3, 2024 Aug. 3, 2024
---
Net cash provided by operating activities $855 $3,989
% of revenue 37 % 41 %
Capital expenditures $(154) $(1,041)
Free cash flow(2) $701 $2,948
% of revenue 30 % 30 %
Three Months Trailing Twelve
Ended Months
Cash Return Aug. 3, 2024 Aug. 3, 2024
---
Dividend paid $(456) $(1,767)
Stock repurchases (118) (991)
Total cash returned $(574) $(2,757)
(1) The sum and/or computation of the individual amounts may not equal the total due to rounding.
(2) Reconciliations of 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 the "Non-GAAP Financial Information" section for additional information.
Outlook for the Fourth Quarter of Fiscal Year 2024
For the fourth quarter of fiscal 2024, we are forecasting revenue of $2.40 billion, +/- $100 million. At the midpoint of this revenue outlook, we expect reported operating margin of approximately 22.3%, +/-180 bps, and adjusted operating margin of approximately 41.0%, +/-100 bps. We are planning for reported EPS to be $0.85, +/-$0.10, and adjusted EPS to be $1.63, +/-$0.10.
Our fourth quarter fiscal 2024 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 release. See also the "Non-GAAP Financial Information" section for additional information.
Dividend Payment
The ADI Board of Directors has declared a quarterly cash dividend of $0.92 per outstanding share of common stock. The dividend will be paid on September 17, 2024 to all shareholders of record at the close of business on September 3, 2024.
Conference Call Scheduled for Today, Wednesday, August 21, 2024 at 10:00 am ET
ADI will host a conference call to discuss our third quarter fiscal 2024 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, U.S. 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 financial measures to their most directly comparable GAAP financial measures 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 primary performance measurements 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 free cash flow, a non-GAAP liquidity measure, 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 expenses(1), 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 expenses(1), acquisition related transaction costs(2), and special charges, net(3), 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 expenses(1), acquisition related transaction costs(2), and special charges, net(3), 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 expenses(1), 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 expenses(1), acquisition related transaction costs(2), and special charges, net(3), 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 items(4), 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 expenses(1), acquisition related transaction costs(2), special charges, net(3), and tax related items(4), 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.
(1)Acquisition 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.
(2)Acquisition Related Transaction Costs: Costs directly related to the Maxim 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.
(3)Special Charges, net: Expenses, net, incurred as part of the integration of Maxim, 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.
(4)Tax Related Items: Income tax effect of the non-GAAP items discussed above, an income tax benefit from a discrete item related to a federal corporate income tax relief claim 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, Inc.
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 FY23 and approximately 26,000 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 (X).
Forward Looking Statements
This press release contains forward-looking statements, which address a variety of subjects including, for example, our statements regarding financial performance; customer inventory rationalization; economic uncertainty, geopolitical conditions, demand and other market conditions, business cycles, and supply chains; capital expenditures and investments; expected revenue, operating margin, nonoperating expenses, tax rate, earnings per share, and other financial results; expected market and technology trends and acceleration of those trends; market size, market share gains, market position, and growth opportunities; expected product solutions, offerings, technologies, capabilities, and applications, including those that may incorporate, or be based upon, software or artificial intelligence technology; the value and importance of, and other benefits related to, our product solutions, offerings, and technologies to our customers, including those that may incorporate, or be based upon, software or artificial intelligence technology; future dividends and share repurchases; and other future events. 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: economic, political, legal and regulatory uncertainty or conflicts; changes in demand for semiconductor products; manufacturing delays, product and raw materials availability and supply chain disruptions; products that may be diverted from our authorized distribution channels; changes in export classifications, import and export regulations or duties and tariffs; our development of technologies and research and development investments; our future liquidity, capital needs and capital expenditures; our ability to compete successfully in the markets in which we operate; our ability to recruit and retain key personnel; risks related to acquisitions or other strategic transactions; security breaches or other cyber incidents; adverse results in litigation matters; reputational damage; changes in our estimates of our expected tax rates based on current tax law; risks related to our indebtedness; unanticipated difficulties or expenditures related to integrating Maxim Integrated Products, Inc.; 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; and uncertainty as to the long-term value of our common stock. 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, 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 Nine Months Ended
Aug. 3, 2024 Jul. 29, 2023 Aug. 3, 2024 Jul. 29, 2023
Revenue $2,312,209 $3,076,495 $6,983,952 $9,589,055
Cost of sales 1,000,970 1,114,880 3,018,737 3,358,553
Gross margin 1,311,239 1,961,615 3,965,215 6,230,502
Operating expenses:
Research and development 362,671 423,751 1,108,960 1,253,600
Selling, marketing, general and administrative 257,213 334,113 791,420 984,648
Amortization of intangibles 187,754 250,719 567,030 756,882
Special charges, net 12,282 23,539 34,399 46,675
Total operating expenses 819,920 1,032,122 2,501,809 3,041,805
Operating income 491,319 929,493 1,463,406 3,188,697
Nonoperating expense (income):
Interest expense 85,179 69,346 239,423 193,051
Interest income (26,432) (8,794) (50,870) (32,198)
Other, net 9,581 (5,880) 13,841 (8,373)
Total nonoperating expense (income) 68,328 54,672 202,394 152,480
Income before income taxes 422,991 874,821 1,261,012 3,036,217
Provision for (benefit from) income taxes 30,759 (2,198) 103,811 220,068
Net income $392,232 $877,019 $1,157,201 $2,816,149
Shares used to compute earnings per common share - basic 496,338 500,018 496,077 503,951
Shares used to compute earnings per common share - diluted 498,794 503,503 498,689 507,804
Basic earnings per common share $0.79 $1.75 $2.33 $5.59
Diluted earnings per common share $0.79 $1.74 $2.32 $5.55
ANALOG DEVICES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
Aug. 3, 2024 Oct. 28, 2023
Cash, cash equivalents and short-term investments $2,545,699 $958,061
Accounts receivable 1,127,158 1,469,734
Inventories 1,427,936 1,642,214
Other current assets 342,143 314,013
Total current assets 5,442,936 4,384,022
Net property, plant and equipment 3,395,748 3,219,157
Goodwill 26,909,775 26,913,134
Intangible assets, net 9,997,707 11,311,957
Deferred tax assets 2,105,430 2,223,272
Other assets 766,778 742,936
Total assets $48,618,374 $48,794,478
Other current liabilities $1,779,935 $2,154,695
Debt, current 899,251 499,052
Commercial paper notes 547,443 547,224
Long-term debt 6,655,723 5,902,457
Deferred income taxes 2,743,015 3,127,852
Other non-current liabilities 802,898 998,076
Shareholders' equity 35,190,109 35,565,122
Total liabilities & shareholders' equity $48,618,374 $48,794,478
ANALOG DEVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Three Months Ended Nine Months Ended
Aug. 3, 2024 Jul. 29, 2023 Aug. 3, 2024 Jul. 29, 2023
Cash flows from operating activities:
Net income $392,232 $877,019 $1,157,201 $2,816,149
Adjustments to reconcile net income to net cash
provided by operations:
Depreciation 92,358 86,204 265,530 251,785
Amortization of intangibles 437,949 501,488 1,318,325 1,505,201
Stock-based compensation expense 64,051 82,970 192,262 227,113
Deferred income taxes (105,218) (151,283) (269,566) (431,393)
Other 10,456 16,362 23,826 19,130
Changes in operating assets and liabilities (36,801) (270,306) 114,134 (757,645)
Total adjustments 462,795 265,435 1,644,511 814,191
Net cash provided by operating activities 855,027 1,142,454 2,801,712 3,630,340
Cash flows from investing activities:
Purchases of short-term investments (14,784) (438,901)
Additions to property, plant and equipment, net (153,886) (324,574) (565,053) (785,070)
Other (3,396) (2,173) 10,710 (2,254)
Net cash used for investing activities (172,066) (326,747) (993,244) (787,324)
Cash flows from financing activities:
Proceeds from debt - 1,087,856
Early termination of debt - (65,688)
Proceeds from commercial paper notes 2,326,091 2,392,874 7,709,492 2,646,509
Payments of commercial paper notes (2,326,883) (2,101,799) (7,709,273) (2,101,799)
Repurchase of common stock (117,980) (686,510) (520,712) (2,494,018)
Dividend payments to shareholders (456,485) (430,467) (1,338,703) (1,251,121)
Proceeds from employee stock plans 52,019 45,990 116,355 113,002
Other 6,614 (64,158) (5,512) (11,227)
Net cash used for financing activities (516,624) (844,070) (660,497) (3,164,342)
Net increase (decrease) in cash and cash equivalents 166,337 (28,363) 1,147,971 (321,326)
Cash and cash equivalents at beginning of period 1,939,695 1,177,609 958,061 1,470,572
Cash and cash equivalents at end of period $2,106,032 $1,149,246 $2,106,032 $1,149,246
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
August 3, 2024
July 29, 2023
Revenue % of Revenue(1) Y/Y%
Revenue % of Revenue(1)
Industrial $1,058,704 46 % (37) % $1,683,843 55 %
Automotive 670,304 29 % (8) % 727,315 24 %
Communications 266,599 12 % (26) % 358,520 12 %
Consumer 316,602 14 % 3 % 306,817 10 %
Total revenue $2,312,209 100 % (25) % $3,076,495 100 %
Nine Months Ended
August 3, 2024
July 29, 2023
Revenue % of Revenue(1) Y/Y %
Revenue % of Revenue(1)
Industrial $3,252,757 47 % (38) % $5,252,078 55 %
Automotive 2,082,869 30 % (3) % 2,146,320 22 %
Communications 811,150 12 % (36) % 1,273,265 13 %
Consumer 837,176 12 % (9) % 917,392 10 %
Total revenue $6,983,952 100 % (27) % $9,589,055 100 %
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
Aug. 3, 2024 Jul. 29, 2023 Aug. 3, 2024 Jul. 29, 2023
Gross margin $1,311,239 $1,961,615 $3,965,215 $6,230,502
Gross margin percentage 56.7 % 63.8 % 56.8 % 65.0 %
Acquisition related expenses 259,296 260,557 778,821 787,383
Adjusted gross margin $1,570,535 $2,222,172 $4,744,036 $7,017,885
Adjusted gross margin percentage 67.9 % 72.2 % 67.9 % 73.2 %
Operating expenses $819,920 $1,032,122 $2,501,809 $3,041,805
Percent of revenue 35.5 % 33.5 % 35.8 % 31.7 %
Acquisition related expenses (188,882) (254,719) (571,504) (770,071)
Acquisition related transaction costs - (1,837) (7,069)
Special charges, net (12,282) (23,539) (34,399) (46,675)
Adjusted operating expenses $618,756 $752,027 $1,895,906 $2,217,990
Adjusted operating expenses percentage 26.8 % 24.4 % 27.1 % 23.1 %
Operating income $491,319 $929,493 $1,463,406 $3,188,697
Operating margin 21.2 % 30.2 % 21.0 % 33.3 %
Acquisition related expenses 448,178 515,276 1,350,325 1,557,454
Acquisition related transaction costs - 1,837 7,069
Special charges, net 12,282 23,539 34,399 46,675
Adjusted operating income $951,779 $1,470,145 $2,848,130 $4,799,895
Adjusted operating margin 41.2 % 47.8 % 40.8 % 50.1 %
Nonoperating expense (income) $68,328 $54,672 $202,394 $152,480
Acquisition related expenses 2,150 2,150 6,450 11,593
Adjusted nonoperating expense (income) $70,478 $56,822 $208,844 $164,073
Income before income taxes $422,991 $874,821 $1,261,012 $3,036,217
Acquisition related expenses 446,028 513,126 1,343,875 1,545,861
Acquisition related transaction costs - 1,837 7,069
Special charges, net 12,282 23,539 34,399 46,675
Adjusted income before income taxes $881,301 $1,413,323 $2,639,286 $4,635,822
Provision for (benefit from) income taxes $30,759 $(2,198) $103,811 $220,068
Effective income tax rate 7.3 % (0.3) % 8.2 % 7.2 %
Tax related items 64,036 160,500 188,995 317,591
Adjusted provision for income taxes $94,795 $158,302 $292,806 $537,659
Adjusted tax rate 10.8 % 11.2 % 11.1 % 11.6 %
Diluted EPS $0.79 $1.74 $2.32 $5.55
Acquisition related expenses 0.89 1.02 2.69 3.04
Acquisition related transaction costs - 0.01
Special charges, net 0.02 0.05 0.07 0.09
Tax related items (0.13) (0.32) (0.38) (0.63)
Adjusted diluted EPS* $1.58 $2.49 $4.71 $8.07
* 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
Three Months Ended
Twelve
Months
Aug. 3, 2024 Aug. 3, 2024 May 4, 2024 Feb. 3, 2024 Oct. 28,
2023
Revenue $9,700,436 $2,312,209 $2,159,039 $2,512,704 $2,716,484
Net cash provided by operating activities $3,989,006 $855,027 $807,853 $1,138,832 $1,187,294
% of Revenue 41 % 37 % 37 % 45 % 44 %
Capital expenditures $(1,041,446) $(153,886) $(188,189) $(222,978) $(476,393)
Free cash flow $2,947,560 $701,141 $619,664 $915,854 $710,901
% of Revenue 30 % 30 % 29 % 36 % 26 %
ANALOG DEVICES, INC.
RECONCILIATION OF PROJECTED GAAP TO NON-GAAP RESULTS
(Unaudited)
Three Months Ending November 2, 2024
Reported Adjusted
Revenue
$2.4 Billion
$2.4 Billion
(+/-$100 (+/-$100
Million) Million)
Operating margin 22.3 % 41.0 %(1)
(+/-180 bps) (+/-100 bps)
Nonoperating expenses ~ $60 Million ~ $60 Million
Tax rate 10% - 12% 11% -13% (2)
Earnings per share $0.85
$1.63 (3)
(+/-$0.10) (+/-$0.10)
(1) Includes $450 million of adjustments related to acquisition related expenses as previously defined in the Non-GAAP Financial Information section of this press release.
(2) Includes $59 million of tax effects associated with the adjustment for acquisition related expenses noted above.
(3) Includes $0.78 of adjustments related to the net impact of acquisition related expenses and the tax effects on those items.
For more information, please contact:
Investor Contact:
Analog Devices, Inc.
Mr. Michael Lucarelli
Vice President, Investor Relations and FP&A
781-461-3282
investor.relations@analog.com
Media Contact:
Analog Devices, Inc.
Ms. Ferda Millan
Global PR & External Communications
Ferda.Millan@analog.com
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SOURCE Analog Devices, Inc.
