Analog Devices Reports First Quarter Fiscal 2021 Results at the High End of Guidance

WILMINGTON, Mass.–(BUSINESS WIRE)–Feb 17, 2021–
Analog Devices, Inc. (Nasdaq: ADI), a leading global high-performance semiconductor company, today announced financial results for its first quarter of fiscal 2021, which ended January 30, 2021.
“ADI delivered strong first quarter results at the high end of our outlook, reflecting the diversity of our business and our alignment to the most important secular growth trends,” said Vincent Roche, President and CEO. “Revenue increased 20% year-over-year with growth across all market segments, including a record quarter for our Industrial business. While the economic backdrop remains uncertain, we are confident that a broad-based recovery is underway given continued momentum in ADI’s bookings and lean inventories across the industry.”
Roche continued, “ADI remains focused on addressing our customers’ toughest challenges and providing breakthrough solutions, pushing the edge of what is possible. At the same time, we are passionately driven to deliver a positive impact on the world around us, enabling a more connected, safer and sustainable future, while creating value for all stakeholders.”
Performance for the First Quarter of Fiscal 2021

Results Summary (1)          
(in millions, except per-share amounts and percentages)          
           
  Three Months Ended
  Jan. 30, 2021   Feb. 1, 2020   Change
Revenue $ 1,558     $ 1,304     20 %
Gross margin $ 1,045     $ 848     23 %
Gross margin percentage 67.1 %   65.1 %   200 bps
Operating income $ 464     $ 273     70 %
Operating margin 29.8 %   21.0 %   880 bps
Diluted earnings per share $ 1.04     $ 0.55     89 %
           
Adjusted Results          
Adjusted gross margin $ 1,090     $ 893     22 %
Adjusted gross margin percentage 70.0 %   68.5 %   150 bps
Adjusted operating income $ 635     $ 481     32 %
Adjusted operating margin 40.7 %   36.9 %   380 bps
Adjusted diluted earnings per share $ 1.44     $ 1.03     40 %
           
      Three Months
Ended
  Trailing Twelve
Months
Cash Generation     Jan. 30, 2021   Jan. 30, 2021
Net cash provided by operating activities     $ 428     $ 2,087  
% of revenue     27 %   36 %
Capital expenditures     $ (67 )   $ (178 )
Free cash flow     $ 361     $ 1,909  
% of revenue     23 %   33 %
           
      Three Months
Ended
  Trailing Twelve
Months
Cash Return     Jan. 30, 2021   Jan. 30, 2021
Dividend paid     $ (229 )   $ (916 )
Stock repurchases     (157 )   (296 )
Total cash returned     $ (386 )   $ (1,212 )
           
(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 2021
For the second quarter of fiscal 2021, we are forecasting revenue of $1.60 billion, +/- $50 million. At the midpoint of this revenue outlook, we expect reported operating margin of approximately 30.6%, +/-110 bps, and adjusted operating margin of approximately 41.0%, +/-70 bps. We are planning for reported EPS to be $1.06, +/-$0.08, and adjusted EPS to be $1.44, +/-$0.08.
Our second 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 March 9, 2021 to all shareholders of record at the close of business on February 26, 2021.
Conference Call Scheduled for Today, Wednesday, February 17, 2021 at 10:00 am ET
ADI will host a conference call to discuss our first 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: 3567727, 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 expenses 1</em>; acquisition related transaction costs 2</em>; restructuring related expense 3</em>; and charitable foundation contribution 4 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</em>; acquisition related transaction costs 2</em>; restructuring related expense 3</em>; and charitable foundation contribution 4 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 expenses 1</em>; acquisition related transaction costs 2</em>; restructuring related expense 3</em>; and charitable foundation contribution 4 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 5 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</em>; acquisition related transaction costs 2</em>; restructuring related expense 3</em>; charitable foundation contribution 4; and tax related items 5 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.
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 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.
2 Acquisition 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.
3 Restructuring 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.
4 Charitable 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.
5 Tax 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 high-performance analog technology company dedicated to solving the toughest engineering challenges. We enable our customers to interpret the world around us by intelligently bridging the physical and digital with unmatched technologies that sense, measure, power, connect and interpret. Visit http://www.analog.com.
Forward Looking Statements
This press release contains forward-looking statements, which address a variety of subjects including, for example, our statements regarding 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 Ended
  Jan. 30, 2021   Feb. 1, 2020
Revenue $ 1,558,458     $ 1,303,565  
Cost of sales 513,087     455,423  
Gross margin 1,045,371     848,142  
Operating expenses:      
Research and development 288,150     257,073  
Selling, marketing, general and administrative 185,275     199,280  
Amortization of intangibles 107,648     107,225  
Special charges 438     11,136  
Total operating expenses 581,511     574,714  
Operating income 463,860     273,428  
Nonoperating expense (income):      
Interest expense 42,479     48,813  
Interest income (209 )   (1,940 )
Other, net (15,028 )   338  
  27,242     47,211  
Income before income taxes 436,618     226,217  
Provision for income taxes 48,099     22,343  
Net income $ 388,519     $ 203,874  
       
Shares used to compute earnings per common share – basic 369,203     368,241  
Shares used to compute earnings per common share – diluted 373,106     372,264  
       
Basic earnings per common share $ 1.05     $ 0.55  
Diluted earnings per common share $ 1.04     $ 0.55  
ANALOG DEVICES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
 
  Jan. 30, 2021   Oct. 31, 2020
Cash & cash equivalents $ 1,048,063     $ 1,055,860  
Accounts receivable 826,964     737,536  
Inventories 618,640     608,260  
Other current assets 131,074     116,032  
Total current assets 2,624,741     2,517,688  
Net property, plant and equipment 1,129,214     1,120,561  
Other investments 91,720     86,729  
Goodwill 12,282,751     12,278,425  
Intangible assets, net 3,535,475     3,650,280  
Deferred tax assets 1,466,489     1,503,064  
Other assets 309,720     311,856  
Total assets $ 21,440,110     $ 21,468,603  
       
Other current liabilities $ 1,277,537     $ 1,364,986  
Debt, current 399,220      
Long-term debt 4,747,347     5,145,102  
Deferred income taxes 1,862,068     1,919,595  
Other non-current liabilities 1,066,192     1,040,975  
Shareholders’ equity 12,087,746     11,997,945  
Total liabilities & equity $ 21,440,110     $ 21,468,603  
ANALOG DEVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
 
  Three Months Ended
  Jan. 30, 2021   Feb. 1, 2020
Cash flows from operating activities:      
Net income $ 388,519     $ 203,874  
Adjustments to reconcile net income to net cash provided by operations:      
Depreciation 56,309     59,863  
Amortization of intangibles 145,044     144,069  
Stock-based compensation expense 36,638     37,501  
Deferred income taxes (27,275 )   (13,982 )
Non-cash contribution to charitable foundation     40,000  
Other non-cash activity (14,553 )   2,332  
Changes in operating assets and liabilities (156,741 )   (124,009 )
Total adjustments 39,422     145,774  
Net cash provided by operating activities 427,941     349,648  
Percent of revenue 27 %   27 %
Cash flows from investing activities:      
Proceeds from other investments 18,566      
Additions to property, plant and equipment (67,388 )   (54,839 )
Cash paid for asset acquisition (22,522 )    
Payments for acquisitions, net of cash acquired (2,428 )    
Changes in other assets (1,299 )   107  
Net cash used for investing activities (75,071 )   (54,732 )
       
Cash flows from financing activities:      
Dividend payments to shareholders (229,179 )   (199,160 )
Repurchase of common stock (157,057 )   (106,030 )
Proceeds from employee stock plans 19,920     16,113  
Changes in other financing activities 2,493     (495 )
Net cash used for financing activities (363,823 )   (289,572 )
Effect of exchange rate changes on cash 3,156     742  
       
Net (decrease) increase in cash and cash equivalents (7,797 )   6,086  
Cash and cash equivalents at beginning of period 1,055,860     648,322  
Cash and cash equivalents at end of period $ 1,048,063     $ 654,408  

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
  Jan. 30, 2021   Feb. 1, 2020
  Revenue   % of revenue*   Y/Y %   Revenue   % of revenue*
Industrial $ 855,454     55 %   24 %   $ 687,685     53 %
Communications 281,049     18 %   16 %   241,804     19 %
Automotive 245,250     16 %   19 %   205,712     16 %
Consumer 176,705     11 %   5 %   168,364     13 %
Total revenue $ 1,558,458     100 %   20 %   $ 1,303,565     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 Ended
  Jan. 30, 2021   Feb. 1, 2020
       
Gross margin $ 1,045,371     $ 848,142  
Gross margin percentage 67.1 %   65.1 %
Acquisition related expenses 44,997     45,016  
Adjusted gross margin $ 1,090,368     $ 893,158  
Adjusted gross margin percentage 70.0 %   68.5 %
       
Operating expenses $ 581,511     $ 574,714  
Percent of revenue 37.3 %   44.1 %
Acquisition related expenses (110,300)     (111,782)  
Acquisition related transaction costs (15,236)      
Charitable foundation contribution     (40,000)  
Restructuring related expense (438)     (11,136)  
Adjusted operating expenses $ 455,537     $ 411,796  
Adjusted operating expenses percentage 29.2 %   31.6 %
       
Operating income $ 463,860     $ 273,428  
Operating margin 29.8 %   21.0 %
Acquisition related expenses 155,297     156,798  
Acquisition related transaction costs 15,236      
Charitable foundation contribution     40,000  
Restructuring related expense 438     11,136  
Adjusted operating income $ 634,831     $ 481,362  
Adjusted operating margin 40.7 %   36.9 %
       
Provision for income taxes $ 48,099     $ 22,343  
Income tax effect of adjustments above 22,796     28,280  
Adjusted provision for income taxes $ 70,895     $ 50,623  
       
Income before income taxes 436,618     226,217  
Effective tax rate 11.0 %   9.9 %
Acquisition related expenses 155,297     156,798  
Acquisition related transaction costs 15,236      
Charitable foundation contribution     40,000  
Restructuring related expense 438     11,136  
Adjusted income before income taxes $ 607,589     $ 434,151  
Adjusted tax rate 11.7 %   11.7 %
       
Diluted EPS $ 1.04     $ 0.55  
Acquisition related expenses 0.42     0.42  
Acquisition related transaction costs 0.04      
Charitable foundation contribution     0.11  
Restructuring related expense 0.00     0.03  
Income tax effect of adjustments above (0.06)     (0.08)  
Adjusted diluted EPS* $ 1.44     $ 1.03  
 
* 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. 30, 2021   Jan. 30, 2021   Oct. 31, 2020   Aug. 1, 2020   May 2, 2020
Revenue $ 5,857,949     $ 1,558,458     $ 1,526,295     $ 1,456,136     $ 1,317,060  
Net cash provided by operating activities $ 2,086,780     $ 427,941     $ 672,598     $ 557,200     $ 429,041  
% of Revenue 36 %   27 %   44 %   38 %   33 %
Capital expenditures $ (178,241 )   $ (67,388 )   $ (29,888 )   $ (20,804 )   $ (60,161 )
Free cash flow $ 1,908,539     $ 360,553     $ 642,710     $ 536,396     $ 368,880  
% of Revenue 33 %   23 %   42 %   37 %   28 %
ANALOG DEVICES, INC.
RECONCILIATION OF PROJECTED GAAP TO NON-GAAP RESULTS
(Unaudited)
 
  Three Months Ending May 1, 2021
  Reported   Adjusted
Revenue $1.60 Billion   $1.60 Billion
  (+/- $50 Million)   (+/- $50 Million)
Operating margin 30.6%   41% (1)
  (+/-110 bps)   (+/-70 bps)
Nonoperating expense ~ $44 Million   ~ $44 Million
Tax rate 11% to 13%   11% to 13% (2)
Earnings per share $1.06   $1.44 (3)
  (+/- $0.08)   (+/- $0.08)

(1) Includes $166 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.
(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)
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CONTACT: Investor Contact:
Analog Devices, Inc.
Mr. Michael Lucarelli
Sr. Director of Investor Relations
781-461-3282
investor.relations@analog.comMedia Contacts:
Teneo
Ms. Andrea Calise
917-826-3804
andrea.calise@teneo.comTeneo
Ms. Megan Fenton
917-860-0356
megan.fenton@teneo.com
KEYWORD: MASSACHUSETTS UNITED STATES NORTH AMERICA
INDUSTRY KEYWORD: SEMICONDUCTOR ENGINEERING TECHNOLOGY OTHER TECHNOLOGY MANUFACTURING HARDWARE
SOURCE: Analog Devices, Inc.
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PUB: 02/17/2021 08:00 AM/DISC: 02/17/2021 08:01 AM
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