EX-99.1 2 adi2q21exhibit991earnings.htm EX-99.1 Document

Exhibit 99.1

Analog Devices Reports Record Revenue and Earnings for the Second Quarter Fiscal 2021

•Revenue of $1.66 billion increased 26% year-over-year with record revenue in the Industrial and Automotive markets
•Operating cash flow of $2.4 billion and free cash flow of $2.2 billion, or 36% of revenue, on a trailing twelve months basis
•Returned over $440 million to shareholders through dividends and share repurchases in the quarter
•Received European Union, Korea, Taiwan, Japan, and Singapore approvals for the Maxim Integrated acquisition and on track to close this summer

WILMINGTON, Mass.--(BUSINESS WIRE)--May 19, 2021--Analog Devices, Inc. (Nasdaq: ADI), a leading global semiconductor company, today announced financial results for its second quarter of fiscal 2021, which ended May 1, 2021.

“ADI delivered record quarterly results that exceeded the high end of our outlook, reflecting the insatiable demand for our products and disciplined operational execution. Revenue increased 26% and gross and operating margins continued to expand, leading to earnings growth of 43%,” said Vincent Roche, President and CEO. “The economic recovery has materialized faster and stronger than initially anticipated, increasing pressure across supply chains globally. Our decision to strategically invest in additional capacity ahead of this demand inflection has enabled us to move with speed and agility to better serve our customers. These investments combined with continued momentum in bookings give us confidence that our second half will be stronger than the first half.”

Roche added, “Semiconductors are the bedrock of the modern digital economy and their importance to accelerating digitalization across all industries has never been more apparent. Our cadre of talented employees continues to push the edge of what is possible and deliver maximum customer impact. I am more optimistic than ever about ADI’s position in this reordered world as we create long-term value for all stakeholders.”







Performance for the Second Quarter of Fiscal 2021

Results Summary(1)
(in millions, except per-share amounts and percentages)
Three Months Ended
May 1, 2021May 2, 2020
Change
Revenue$1,661 $1,317 26 %
Gross margin$1,137 $847 34 %
Gross margin percentage68.4 %64.3 %410 bps
Operating income$520 $344 51 %
Operating margin31.3 %26.1 %520 bps
Diluted earnings per share$1.14 $0.72 58 %
Adjusted Results
Adjusted gross margin$1,177 $891 32 %
Adjusted gross margin percentage70.9 %67.7 %320 bps
Adjusted operating income$694 $501 39 %
Adjusted operating margin41.7 %38.0 %370 bps
Adjusted diluted earnings per share$1.54 $1.08 43 %
Three Months EndedTrailing Twelve Months
Cash GenerationMay 1, 2021May 1, 2021
Net cash provided by operating activities$736 $2,394 
% of revenue44 %39 %
Capital expenditures$(59)$(177)
Free cash flow$677 $2,217 
% of revenue 41 %36 %
Three Months EndedTrailing Twelve Months
Cash ReturnMay 1, 2021May 1, 2021
Dividend paid$(254)$(942)
Stock repurchases(189)(371)
Total cash returned$(443)$(1,313)
(1) The sum and/or computation of the individual amounts may not equal the total due to rounding.







Outlook for the Third Quarter of Fiscal Year 2021

For the third quarter of fiscal 2021, we are forecasting revenue of $1.7 billion, +/- $70 million. At the midpoint of this revenue outlook, we expect reported operating margin of approximately 32.9%, +/-140 bps, and adjusted operating margin of approximately 42.5%, +/-100 bps. We are planning for reported EPS to be $1.23, +/-$0.11, and adjusted EPS to be $1.61, +/-$0.11.

Our third quarter fiscal 2021 outlook is based on current expectations and actual results may differ materially, as a result of, among other things, the important factors discussed at the end of this release. These statements supersede all prior statements regarding our business outlook set forth in prior ADI news releases, and ADI disclaims any obligation to update these forward-looking statements.

The adjusted results and adjusted anticipated results above are financial measures presented on a non-GAAP basis. Reconciliations of these non-GAAP financial measures to their most directly comparable GAAP financial measures are provided in the financial tables included in this press release. See also “Non-GAAP Financial Information” section for additional information.

Dividend Payment

The ADI Board of Directors has declared a quarterly cash dividend of $0.69 per outstanding share of common stock. The dividend will be paid on June 8, 2021 to all shareholders of record at the close of business on May 28, 2021.

Conference Call Scheduled for Today, Wednesday, May 19, 2021 at 10:00 am ET

ADI will host a conference call to discuss our second quarter fiscal 2021 results and short-term outlook today, beginning at 10:00 am ET. Investors may join via webcast, accessible at investor.analog.com, or by telephone (call 800-859-9560, or 706-634-7193 for international calls, ten minutes before the call begins and provide the password "ADI").

A replay will be available two hours after the completion of the call. The replay may be accessed for up to two weeks by dialing 855-859-2056 (replay only) and providing the conference ID: 2534357, or by visiting investor.analog.com.

Non-GAAP Financial Information

This release includes non-GAAP financial measures that are not in accordance with, nor an alternative to, generally accepted accounting principles (GAAP) and may be different from non-GAAP measures presented by other companies. In addition, these non-GAAP measures are not based on any comprehensive set of accounting rules or principles. These non-GAAP measures have material limitations in that they do not reflect all of the amounts associated with the Company’s results of operations as determined in accordance with GAAP and should not be considered in isolation from, or as a substitute for, the Company’s financial results presented in accordance with GAAP. The Company’s use of non-GAAP measures, and the underlying methodology when including or excluding certain items, is not necessarily an indication of the results of operations that may be expected in the future, or that the Company will not, in fact, record such items in future periods. You are cautioned not to place undue reliance on these non-GAAP measures. Reconciliations of these non-GAAP measures to the most directly comparable financial measures calculated and presented in accordance with GAAP are provided in the financial tables included in this release.


Management uses non-GAAP measures internally to evaluate the Company’s operating performance from continuing operations against past periods and to budget and allocate resources in future periods. These non-GAAP measures also assist management in evaluating the Company’s core business and trends across different reporting periods on a consistent basis. Management also uses these non-GAAP measures as the primary performance measurement when communicating with analysts and investors regarding the Company’s earnings results and outlook and believes that the presentation of these non-GAAP measures is useful to investors because it provides investors with the operating results that management uses to manage the Company and enables investors and analysts to evaluate the Company’s core business. Management also believes that the non-GAAP liquidity measure free cash flow is useful both internally and to investors because it provides information about the amount of cash generated after capital expenditures that is then available to repay debt obligations, make investments and fund acquisitions, and for certain other activities.
The non-GAAP financial measures referenced by ADI in this release include: adjusted gross margin, adjusted gross margin percentage, adjusted operating expenses, adjusted operating expenses percentage, adjusted operating income, adjusted operating margin, adjusted income before income taxes, adjusted provision for income taxes, adjusted tax rate, adjusted diluted earnings per share (EPS), free cash flow, and free cash flow margin percentage.
Adjusted gross margin is defined as gross margin, determined in accordance with GAAP, excluding certain acquisition related expenses1 which are described further below. Adjusted gross margin percentage represents adjusted gross margin divided by revenue.
Adjusted operating expenses is defined as operating expenses, determined in accordance with GAAP, excluding: certain acquisition related expenses1; acquisition related transaction costs2; restructuring related expense3; and charitable foundation contribution4 which are described further below. Adjusted operating expenses percentage represents adjusted operating expenses divided by revenue.
Adjusted operating income is defined as operating income, determined in accordance with GAAP, excluding: acquisition related expenses1; acquisition related transaction costs2; restructuring related expense3; and charitable foundation contribution4 which are described further below. Adjusted operating margin represents adjusted operating income divided by revenue.
Adjusted income before income taxes is defined as income before income taxes, determined in accordance with GAAP, excluding: acquisition related expenses1; acquisition related transaction costs2; restructuring related expense3; and charitable foundation contribution4 which are described further below.
Adjusted provision for income taxes is defined as provision for income taxes, determined in accordance with GAAP, excluding tax related items5 which are described further below. Adjusted tax rate represents adjusted provision for income taxes divided by adjusted income before income taxes.
Adjusted diluted EPS is defined as diluted EPS, determined in accordance with GAAP, excluding: acquisition related expenses1; acquisition related transaction costs2; restructuring related expense3; charitable foundation contribution4; and tax related items5 which are described further below.
Free cash flow is defined as net cash provided by operating activities, determined in accordance with GAAP, less additions to property, plant and equipment, net. Free cash flow margin percentage represents free cash flow divided by revenue.
1Acquisition Related Expenses: Expenses incurred as a result of current and prior period acquisitions and primarily include expenses associated with the fair value adjustments to inventory, property, plant and equipment and amortization of acquisition related intangibles, which include acquired intangibles such as purchased technology and customer relationships. Expenses also include severance payments, equity award accelerations, and the fair value adjustment associated with the replacement of share-based awards related to the Linear Technology


Corporation (Linear) acquisition. We excluded these costs from our non-GAAP measures because they relate to specific transactions and are not reflective of our ongoing financial performance.
2Acquisition Related Transaction Costs: Costs directly related to the proposed Maxim Integrated Products, Inc. acquisition, including legal, accounting and other professional fees as well as integration-related costs. We excluded these costs from our non-GAAP measures because they relate to a specific transaction and are not reflective of our ongoing financial performance.
3Restructuring Related Expense: Expenses incurred in connection with facility closures, consolidation of manufacturing facilities, severance, other accelerated stock-based compensation expense and other cost reduction efforts or reorganizational initiatives. We excluded these expenses from our non-GAAP measures because apart from ongoing expense savings as a result of such items, these expenses have no direct correlation to the operation of our business in the future.
4Charitable Foundation Contribution: Expenses incurred in connection with a one time contribution of registered shares of common stock to the Analog Devices Foundation. We excluded this expense from our non-GAAP measures because this expense has no direct correlation to the operation of our business in the future.
5Tax Related Items: Income tax effect of the non-GAAP items discussed above. We excluded the income tax benefit/provision effect of these tax related items from our non-GAAP measures because they are not associated with the tax expense on our ongoing operating results.

About Analog Devices

Analog Devices (Nasdaq: ADI) is a leading global semiconductor company dedicated to solving the toughest engineering challenges. We enable our customers to interpret the world around us by intelligently bridging the physical and digital with unmatched technologies that sense, measure, power, connect and interpret. Visit http://www.analog.com.

Forward Looking Statements

This press release contains forward-looking statements, which address a variety of subjects including, for example, our statements regarding our proposed acquisition of Maxim Integrated Products, Inc. (“Maxim”); the impact of the COVID-19 pandemic on our business, financial condition and results of operations; expected revenue, operating margin, tax rate, earnings per share, and other financial results; expected market trends, market share gains, operating leverage, production and inventory levels; expected customer demand and order rates for our products and expected product offerings; product development; and marketing position. Statements that are not historical facts, including statements about our beliefs, plans and expectations, are forward-looking statements. Such statements are based on our current expectations and are subject to a number of factors and uncertainties, which could cause actual results to differ materially from those described in the forward-looking statements. The following important factors and uncertainties, among others, could cause actual results to differ materially from those described in these forward-looking statements: the uncertainty as to the extent of the duration, scope and impacts of the COVID-19 pandemic; political and economic uncertainty, including any faltering in global economic conditions or the stability of credit and financial markets; erosion of consumer confidence and declines in customer spending; unavailability of raw materials, services, supplies or manufacturing capacity; changes in geographic, product or customer mix; changes in export classifications, import and export regulations or duties and tariffs; changes in our or Maxim’s estimates of our respective expected tax rates based on current tax law; our ability to successfully integrate Maxim’s businesses and technologies; the risk that the expected benefits and synergies of the proposed transaction and growth prospects of the combined company may not be fully achieved in a timely manner,


or at all; adverse results in litigation matters, including the potential for litigation related to the proposed transaction; the risk that we or Maxim will be unable to retain and hire key personnel; the risk associated with the timing of the closing of the proposed transaction, including the risk that the conditions to the transaction are not satisfied on a timely basis or at all or the failure of the transaction to close for any other reason or to close on the anticipated terms, including the anticipated tax treatment; the risk that any regulatory approval, consent or authorization that may be required for the proposed transaction is not obtained or is obtained subject to conditions that are not anticipated; unanticipated difficulties or expenditures relating to the transaction, the response of business partners and retention as a result of the announcement and pendency of the transaction; uncertainty as to the long-term value of our common stock; the diversion of management time on transaction-related matters; our ability to successfully integrate acquired businesses and technologies; and the risk that expected benefits, synergies and growth prospects of acquisitions may not be fully achieved in a timely manner, or at all. For additional information about factors that could cause actual results to differ materially from those described in the forward-looking statements, please refer to our filings with the Securities and Exchange Commission (“SEC”), including the risk factors contained in our most recent Quarterly Report on Form 10-Q and Annual Report on Form 10-K. Forward-looking statements represent management’s current expectations and are inherently uncertain. Except as required by law, we do not undertake any obligation to update forward-looking statements made by us to reflect subsequent events or circumstances.


Analog Devices and the Analog Devices logo are registered trademarks or trademarks of Analog Devices, Inc. All other trademarks mentioned in this document are the property of their respective owners.








ANALOG DEVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share amounts)

Three Months EndedSix Months Ended
May 1, 2021May 2, 2020May 1, 2021May 2, 2020
Revenue$1,661,407 $1,317,060 $3,219,865 $2,620,625 
Cost of sales524,770 470,386 1,037,857 925,809 
Gross margin1,136,637 846,674 2,182,008 1,694,816 
Operating expenses:
   Research and development302,238 252,413 590,388 509,486 
   Selling, marketing, general and administrative206,612 141,775 391,887 341,055 
   Amortization of intangibles107,786 107,146 215,434 214,371 
   Special charges311 1,320 749 12,456 
Total operating expenses616,947 502,654 1,198,458 1,077,368 
Operating income519,690 344,020 983,550 617,448 
Nonoperating expense (income):
   Interest expense43,066 49,985 85,545 98,798 
   Interest income(290)(1,334)(499)(3,274)
   Other, net929 308 (14,099)646 
43,705 48,959 70,947 96,170 
Income before income taxes475,985 295,061 912,603 521,278 
Provision for income taxes53,080 27,365 101,179 49,708 
Net income$422,905 $267,696 $811,424 $471,570 
Shares used to compute earnings per common share - basic368,823 368,217 369,013 368,229 
Shares used to compute earnings per common share - diluted372,418 371,305 372,762 371,784 
Basic earnings per common share$1.15 $0.73 $2.20 $1.28 
Diluted earnings per common share$1.14 $0.72 $2.18 $1.27 



ANALOG DEVICES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)


May 1, 2021Oct. 31, 2020
Cash & cash equivalents$1,305,216 $1,055,860 
Accounts receivable814,135 737,536 
Inventories641,202 608,260 
Other current assets142,247 116,032 
  Total current assets2,902,800 2,517,688 
Net property, plant and equipment1,160,586 1,120,561 
Other investments94,033 86,729 
Goodwill12,282,465 12,278,425 
Intangible assets, net3,393,546 3,650,280 
Deferred tax assets1,448,018 1,503,064 
Other assets306,769 311,856 
Total assets$21,588,217 $21,468,603 
Other current liabilities$1,452,378 $1,364,986 
Debt, current1,324,451 — 
Long-term debt3,823,595 5,145,102 
Deferred income taxes1,833,520 1,919,595 
Other non-current liabilities987,169 1,040,975 
Shareholders' equity12,167,104 11,997,945 
Total liabilities & equity$21,588,217 $21,468,603 






ANALOG DEVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)

Three Months EndedSix Months Ended
May 1, 2021May 2, 2020May 1, 2021May 2, 2020
Cash flows from operating activities:
  Net income$422,905 $267,696 $811,424 $471,570 
  Adjustments to reconcile net income to net cash provided by operations:
       Depreciation52,466 59,261 108,775 119,124 
       Amortization of intangibles145,701 144,051 290,745 288,120 
       Stock-based compensation expense40,358 35,900 76,996 73,401 
       Deferred income taxes(21,017)(21,408)(48,292)(35,390)
       Non-cash contribution to charitable foundation— — — 40,000 
       Other non-cash activity2,431 1,469 (12,122)3,801 
       Changes in operating assets and liabilities93,517 (57,928)(63,223)(181,937)
   Total adjustments313,456 161,345 352,879 307,119 
Net cash provided by operating activities736,361 429,041 1,164,303 778,689 
   Percent of revenue44 %33 %36 %30 %
Cash flows from investing activities:
  Proceeds from other investments— — 18,566 — 
  Additions to property, plant and equipment(59,170)(60,161)(126,558)(115,000)
  Cash paid for asset acquisition— — (22,522)— 
  Payments for acquisitions, net of cash acquired— — (2,428)— 
  Changes in other assets(1,526)(1,391)(2,826)(1,284)
Net cash used for investing activities(60,696)(61,552)(135,768)(116,284)
Cash flows from financing activities:
  Proceeds from debt— 395,646 — 395,646 
  Payments on revolver— (350,000)— (350,000)
  Proceeds from revolver— 350,000 — 350,000 
  Debt repayments— (300,000)— (300,000)
  Dividend payments to shareholders(254,429)(228,600)(483,608)(427,760)
  Repurchase of common stock(188,814)(113,584)(345,871)(219,614)
  Proceeds from employee stock plans23,752 14,784 43,672 30,897 
  Changes in other financing activities(94)(3,956)2,399 (4,451)
Net cash used for financing activities(419,585)(235,710)(783,408)(525,282)
Effect of exchange rate changes on cash1,073 (1,250)4,229 (508)
Net increase in cash and cash equivalents257,153 130,529 249,356 136,615 
Cash and cash equivalents at beginning of period1,048,063 654,408 1,055,860 648,322 
Cash and cash equivalents at end of period$1,305,216 $784,937 $1,305,216 $784,937 





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
May 1, 2021May 2, 2020
Revenue% of revenue*Y/Y %Revenue% of revenue*
Industrial$972,177 59%36%$716,364 54%
Communications276,960 17%—%276,575 21%
Automotive257,586 16%42%181,211 14%
Consumer154,684 9%8%142,910 11%
Total revenue$1,661,407 100%26%$1,317,060 100%
Six Months Ended
May 1, 2021May 2, 2020
Revenue% of revenue*Y/Y %Revenue% of revenue*
Industrial$1,828,140 57%30%$1,405,224 54%
Communications557,786 17%8%517,872 20%
Automotive503,501 16%30%386,618 15%
Consumer330,438 10%6%310,911 12%
Total revenue$3,219,865 100%23%$2,620,625 100%
*The sum of the individual percentages may not equal the total due to rounding.





ANALOG DEVICES, INC.
RECONCILIATION OF GAAP TO NON-GAAP RESULTS
(Unaudited)
(In thousands, except per share amounts)

Three Months EndedSix Months Ended
May 1, 2021May 2, 2020May 1, 2021May 2, 2020
Gross margin$1,136,637 $846,674 $2,182,008 $1,694,816 
  Gross margin percentage68.4 %64.3 %67.8 %64.7 %
      Acquisition related expenses40,711 44,395 85,709 89,411 
Adjusted gross margin$1,177,348 $891,069 $2,267,717 $1,784,227 
  Adjusted gross margin percentage70.9 %67.7 %70.4 %68.1 %
Operating expenses$616,947 $502,654 $1,198,458 $1,077,368 
  Percent of revenue37.1 %38.2 %37.2 %41.1 %
      Acquisition related expenses(109,903)(111,057)(220,203)(222,838)
      Acquisition related transaction costs(23,008)— (38,244)— 
      Charitable foundation contribution— — — (40,000)
      Restructuring related expense(311)(1,320)(749)(12,456)
Adjusted operating expenses$483,725 $390,277 $939,262 $802,074 
  Adjusted operating expenses percentage29.1 %29.6 %29.2 %30.6 %
Operating income$519,690 $344,020 $983,550 $617,448 
  Operating margin31.3 %26.1 %30.5 %23.6 %
      Acquisition related expenses150,614 155,452 305,912 312,249 
      Acquisition related transaction costs23,008 — 38,244 — 
      Charitable foundation contribution— — — 40,000 
      Restructuring related expense311 1,320 749 12,456 
Adjusted operating income$693,623 $500,792 $1,328,455 $982,153 
  Adjusted operating margin41.7 %38.0 %41.3 %37.5 %
Provision for income taxes$53,080 $27,365 $101,179 $49,708 
      Tax related items22,983 21,867 45,780 50,147 
Adjusted provision for income taxes$76,063 $49,232 $146,959 $99,855 
Income before income taxes475,985 295,061 912,603 521,278 
  Effective tax rate11.2 %9.3 %11.1 %9.5 %
      Acquisition related expenses150,614 155,452 305,912 312,249 
      Acquisition related transaction costs23,008 — 38,244 — 
      Charitable foundation contribution— — — 40,000 
      Restructuring related expense311 1,320 749 12,456 
Adjusted income before income taxes$649,918 $451,833 $1,257,508 $885,983 
  Adjusted tax rate11.7 %10.9 %11.7 %11.3 %
Diluted EPS$1.14 $0.72 $2.18 $1.27 
      Acquisition related expenses0.40 0.42 0.82 0.84 
      Acquisition related transaction costs0.06 — 0.10 — 
      Charitable foundation contribution— — — 0.11 
      Restructuring related expense0.00 0.00 0.00 0.03 
      Tax related items(0.06)(0.06)(0.12)(0.13)
Adjusted diluted EPS*$1.54 $1.08 $2.98 $2.11 
* 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 MonthsThree Months Ended
May 1, 2021May 1, 2021Jan. 30, 2021Oct 31, 2021Aug. 1, 2020
Revenue$6,202,296 $1,661,407 $1,558,458 $1,526,295 $1,456,136 
Net cash provided by operating activities$2,394,100 $736,361 $427,941 $672,598 $557,200 
% of Revenue39 %44 %27 %44 %38 %
Capital expenditures$(177,250)$(59,170)$(67,388)$(29,888)$(20,804)
Free cash flow$2,216,850 $677,191 $360,553 $642,710 $536,396 
% of Revenue36 %41 %23 %42 %37 %




ANALOG DEVICES, INC.
RECONCILIATION OF PROJECTED GAAP TO NON-GAAP RESULTS
(Unaudited)

Three Months Ending July 31, 2021
Reported
Adjusted
Revenue$1.7 Billion $1.7 Billion
(+/- $70 Million)(+/- $70 Million)
Operating margin32.9% 42.5% (1)
(+/-140 bps)(+/-100 bps)
Nonoperating expense~ $43 Million~ $43 Million
Tax rate11% to 13%11% to 13% (2)
Earnings per share$1.23 $1.61 (3)
(+/- $0.11)(+/- $0.11)

(1) Includes $163 million of adjustments related to acquisition related expenses and acquisition related transaction costs as previously defined in the Non-GAAP Financial Information section of this press release. This excludes acquisition related transaction costs that are contingent upon closing of the proposed Maxim Integrated Products, Inc. acquisition as we cannot reasonably predict the timing of this transaction.
(2) Includes $23 million of tax effects associated with the adjustments for acquisition related expenses and acquisition related transaction costs noted above.
(3) Includes $0.38 of adjustments related to the net impact of $0.44 of acquisition related expenses and acquisition related transaction costs, as well as $0.06 of tax effects on those items.

(ADI-WEB)

For more information, please contact:

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

Media Contacts:
Teneo
Ms. Andrea Calise
917-826-3804
andrea.calise@teneo.com

Teneo
Ms. Megan Fenton
917-860-0356
megan.fenton@teneo.com