ADI Guides to Double-Digit Year-over-Year Revenue Increase in
Second Quarter
Analog Devices, Inc. (Nasdaq: ADI), today announced financial
results for its 14-week first quarter of fiscal year 2018, which
ended February 3, 2018.
“We continue to see broad-based momentum across our B2B
markets,” said Vincent Roche, President and CEO. “In our first
quarter, revenue from these markets once again increased
double-digits year-over-year, led by our industrial and wireless
communications sectors.”
“Looking ahead to the second quarter of fiscal 2018, we see
continued strength in our business and are expecting revenue to be
in the range of $1.43 billion to $1.51 billion; sequentially up on
a 13-week basis and a double-digit increase compared to the year
ago quarter.”
“We anticipate a continuation of market share gains thanks to
our comprehensive portfolio and tight alignment with our customers
on the innovations that will have the greatest impact on their
businesses.”
ADI also announced that the Board of Directors has declared a
quarterly cash dividend of $0.48 per outstanding share of
common stock, representing an annual dividend per share of $1.92.
The dividend will be paid on March 20, 2018 to all
shareholders of record at the close of business on March 9,
2018.
Supplemental schedules relating to our first quarter fiscal 2018
financial results are also available on our investor site at
investor.analog.com.
Results for the First Quarter of Fiscal
Year 2018
- Revenue totaled $1.52 billion, down 1%
sequentially and up 54% year-over-year
- GAAP gross margin of 68.2% of revenue;
Non-GAAP gross margin of 71.0% of revenue
- GAAP operating margin of 26.7% of
revenue; Non-GAAP operating margin of 41.7% of revenue
- GAAP diluted EPS of $0.71; Non-GAAP
diluted EPS of $1.42
Please refer to the schedules provided for a summary of revenue
and earnings, selected balance sheet information, and the cash flow
statement for the first quarter of fiscal 2018, as well as the
immediately prior and year-ago quarters and year. Additional
information on revenue by end market is provided on Schedule D.
Outlook for the Second Quarter of
Fiscal Year 2018The following statements are based on
current expectations, and as indicated, are presented on a GAAP and
non-GAAP basis. These statements are forward-looking 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.
GAAP Non-GAAP
Adjustments Non-GAAP Revenue
$1.43B to $1.51B -
$1.43B to $1.51B Gross Margin 68.0% to 68.5%
$44 million (1) 71.0% to 71.5%
Operating Expenses $555 million to $565 million
$125 million (2) $430 million to $440
million Operating Margin Approx. 29% to 31%
$169 million (1), (2) Approx. 41.0% to 42.5%
Interest & Other Expense Approx. $60 million
- Approx. $60 million Tax Rate
Approx. 7% to 9% $6 million to $10
million (3) Approx. 6% to 8%
Earnings per
Share* $0.87 to $1.01 $0.43
(4)
$1.30 to $1.44
* The sum of the individual per share amounts may not equal the
total due to rounding.
(1) Excludes $44 million of costs comprised of the
following:
- $35 million of recurring amortization
of purchased intangible assets
- $8 million of recurring depreciation of
step up value on purchased fixed assets
- $1 million of recurring fair value
adjustment associated with the replacement of share-based awards in
ADI’s acquisition of Linear Technology
(2) Excludes $125 million of costs comprised of the
following:
- $107 million of recurring amortization
of purchased intangible assets
- $8 million of recurring fair value
adjustment associated with the replacement of share-based awards in
ADI’s acquisition of Linear Technology
- $10 million of transaction and
integration related costs associated with ADI’s acquisition of
Linear Technology
(3) Excludes the tax effects of the reconciling adjustments
noted in the two footnotes above.
(4) Includes $0.43, which represents the net impact of the
non-GAAP adjustments noted above on a per share basis consisting
of:
- acquisition-related expenses including
amortization of purchased intangible assets, depreciation of step
up value on purchased fixed assets, and the fair value adjustment
associated with the replacement of share-based awards in ADI’s
acquisition of Linear Technology ($0.42)
- acquisition-related transaction costs
($0.03)
- the effect on income tax of the prior
items (-$0.02)
Conference Call Scheduled for Today, Wednesday, February 28,
2018 at 10:00 am ETADI will host a conference call to discuss
first quarter fiscal 2018 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
706-634-7193 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:
5777769, or by visiting investor.analog.com.
Non-GAAP Financial
InformationThis release includes non-GAAP financial
measures that are not in accordance with, nor an alternative to,
generally accepted accounting principles and may be different from
non-GAAP measures used by other companies. In addition, these
non-GAAP measures are not based on any comprehensive set of
accounting rules or principles.
Schedules E and F of this press release provide the
reconciliation of the Company’s historical non-GAAP measures to
their most comparable GAAP measures.
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 following item is excluded from our non-GAAP gross
margin, non-GAAP operating expenses, non-GAAP operating income,
non-GAAP operating margin, and non-GAAP diluted earnings per
share:
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 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.
The following items are excluded from our non-GAAP operating
expenses, non-GAAP operating income, non-GAAP operating margin, and
non-GAAP diluted earnings per share:
Acquisition-Related Transaction Costs: Costs directly related to
the Linear Technology 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.
Restructuring-Related Expense: These expenses are incurred in
connection with facility closures, consolidation of manufacturing
facilities, severance, and other cost reduction efforts. We
excluded these expenses from our non-GAAP measures because apart
from ongoing expense savings as a result of such items, these
expenses and the related tax effects have no direct correlation to
the operation of our business in the future.
The following item is excluded from our non-GAAP other
expense and non-GAAP diluted earnings per share:
Amortization of Deferred Financing Costs: In the third quarter
of fiscal 2016, in connection with the Linear Technology
acquisition, the Company obtained bridge financing commitments and
incurred financing fees which were to be amortized into interest
expense over the term of the bridge financing commitments. In the
first quarter of fiscal 2017, the Company replaced a portion of the
bridge financing commitments with proceeds from the issuance of
$2.1 billion of senior unsecured notes. As a result, the Company
accelerated $7.2 million of the unamortized bridge financing
commitment fees into interest expense. We excluded these costs from
our non-GAAP measures because they are not reflective of our
ongoing financial performance.
The following items are excluded from our non-GAAP provision
for income taxes and non-GAAP diluted earnings per share:
Tax-Related Items: Tax adjustments associated with the non-GAAP
items discussed above. In the fourth quarter of 2017, the Company
recorded a $10 million tax expense associated with a prior period
tax liability. In the first quarter of fiscal 2018, in relation to
the provisional impact of the Tax Cuts and Jobs Act of 2017, the
Company recorded a provisional discrete tax charge of $687 million
related to the mandatory deemed repatriation tax on foreign
earnings and recorded a provisional discrete tax benefit of $640
million from remeasuring its US tax liabilities at the lower 21%
statutory tax rate. We excluded these tax-related items from our
non-GAAP measures because they are not associated with the tax
expense on our current operating results.
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.
In addition, the Company’s non-GAAP measures may not be comparable
to the non-GAAP measures reported by other companies. 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.
About Analog DevicesAnalog Devices (Nasdaq: ADI) is the
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 StatementsThis press release contains
forward-looking statements, which address a variety of subjects
including, for example, our statements regarding expected revenue,
earnings per share, gross margin, operating expenses, interest and
other expense, tax rate, and other financial results, expected
market share gains, operating leverage, production and inventory
levels, expected market trends, and expected customer demand and
order rates for our products and expected benefits and synergies of
the acquisition of Linear Technology Corporation (“Linear
Technology”), including expected growth rates of the combined
companies, expected product offerings, product development,
marketing position and technical advances resulting from the
transaction. 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: 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 our estimates of our expected tax rate based on
current tax law, including current interpretations of the Tax Cuts
and Jobs Act of 2017; higher than expected or unexpected costs
associated with or relating to the acquisition of Linear Technology
and the integration of the businesses; the risk that expected
benefits, synergies and growth prospects of the acquisition may not
be fully achieved in a timely manner, or at all; the risk that
Linear Technology’s business may not be successfully integrated
with Analog Devices’; the risk that we will be unable to retain and
hire key personnel; and the risk that disruption resulting from the
acquisition may adversely affect our business and relationships
with our customers, suppliers or employees. 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.
(ADI-WEB)
Analog Devices, First Quarter, Fiscal 2018
Schedule
A
Revenue and Earnings Summary (Unaudited) (In thousands,
except per-share amounts) Three Months
Ended 1Q 18 4Q 17
1Q 17 Feb. 3,2018
Oct. 28,2017 Jan.
28,2017 Revenue $ 1,518,624 $ 1,541,170 $ 984,449
Year-to-year change 54.3 % 53.6 % 27.9 % Quarter-to-quarter change
(1.5 )% 7.5 % (1.9 )% Cost of sales (1) 483,434
535,145 335,945
Gross margin 1,035,190 1,006,025 648,504 Gross margin percentage
68.2 % 65.3 % 65.9 % Year-to-year change (basis points) 230 (110 )
390 Quarter-to-quarter change (basis points) 290
1,180 (50 ) Operating
expenses: R&D (1) 288,597 273,746 183,954 Selling, marketing
and G&A (1) 176,908 185,721 130,659 Amortization of intangibles
107,019 98,348 18,160 Special charges 57,318
— 49,463 Total operating
expenses 629,842 557,815 382,236 Total operating expenses
percentage 41.5 % 36.2 % 38.8 % Year-to-year change (basis points)
270 530 210 Quarter-to-quarter change (basis points)
530 (370 ) 790 Operating
income 405,348 448,210 266,268 Operating income percentage 26.7 %
29.1 % 27.0 % Year-to-year change (basis points) (30 ) (650 ) 170
Quarter-to-quarter change (basis points) (240 )
1,550 (860 ) Other expense
66,494 66,546
32,959 Income before income tax 338,854 381,664
233,309 Provision for income taxes 70,682 34,014 16,180 Tax rate
percentage 20.9 % 8.9 %
6.9 % Net income (2) $ 268,172 $
347,650 $ 217,129 Shares used
for EPS - basic 369,093 368,043 308,786 Shares used for EPS -
diluted 374,189 372,053 313,076 Earnings per common share -
basic $ 0.72 $ 0.94 $ 0.70 Earnings per common share - diluted $
0.71 $ 0.93 $ 0.69 Dividends paid per share $
0.45 $ 0.45 $ 0.42
(1) Includes stock-based compensation expense as follows:
Cost of sales $ 4,221 $ 3,684 $ 1,944 R&D $ 19,728 $ 16,546 $
7,021 Selling, marketing and G&A $ 13,953 $ 12,119 $ 7,564 (2)
Under the two-class method, earnings per share is calculated using
net earnings allocable to common shares, which is derived by
reducing net income by the income allocable to participating
securities. Net income allocable to common shares used in the basic
and diluted earnings per share calculation was $266,929 and
$345,886 for the three months ended February 3, 2018 and October
28, 2017. There was no net income allocated to participating
securities in the three months ended January 28, 2017.
Analog Devices, First Quarter, Fiscal 2018
Schedule
B
Selected Balance Sheet Information (Unaudited) (In
thousands)
1Q 18 4Q 17
1Q 17 Feb. 3,2018
Oct. 28,2017 Jan.
28,2017 Cash & short-term investments $ 827,550 $
1,047,838 $ 6,317,066 Accounts receivable, net 709,761 688,953
472,511 Inventories (1) 559,720 550,816 365,586 Other current
assets 80,715 63,731
78,570 Total current assets 2,177,746 2,351,338
7,233,733 PP&E, net 1,115,417 1,107,304 628,924 Investments
65,093 57,410 48,690 Goodwill 12,224,141 12,217,455 1,677,399
Intangible assets, net 5,182,355 5,319,425 529,516 Other
88,563 88,362
85,109 Total assets $ 20,853,315
$ 21,141,294 $ 10,203,371 Deferred
income on shipments to distributors, net $ 529,532 $ 473,972 $
356,666 Other current liabilities 657,016 822,360 454,960 Debt,
current 50,000 300,000 — Long-term debt 7,384,856 7,551,084
3,805,400 Deferred income taxes 981,866 1,674,683 103,244 Other
non-current liabilities (2) 902,266 157,655 176,670 Shareholders'
equity 10,347,779 10,161,540
5,306,431 Total liabilities & equity
$ 20,853,315 $ 21,141,294
$ 10,203,371
(1) Includes $5,270, $5,373, and $2,553
related to stock-based compensation in 1Q18, 4Q17, and 1Q17,
respectively.(2) 1Q18 includes $691 million related to the one-time
transition tax related to the Tax Cuts and Jobs Act of 2017.
Analog Devices, First Quarter, Fiscal 2018
Schedule
C
Cash Flow Statement (Unaudited) (In thousands)
Three Months Ended 1Q 18 4Q
17 1Q 17 Feb. 3,2018
Oct. 28,2017 Jan.
28,2017 Cash flows from operating activities: Net Income
$ 268,172 $ 347,650 $ 217,129 Adjustments to reconcile net income
to net cash provided by operations: Depreciation 56,415 56,298
34,379 Amortization of intangibles 142,050 133,438 19,947
Stock-based compensation expense 37,902 32,349 16,529 Cost of goods
sold for inventory acquired — 42,040 — Other non-cash activity
6,762 7,748 13,071 Deferred income taxes (691,496 ) (62,344 )
(7,055 ) Changes in operating assets and liabilities
568,883 150,173 28,594
Total adjustments 120,516
359,702 105,465 Net cash provided by
operating activities 388,688
707,352 322,594 Percent of revenue
25.6 % 45.9 % 32.8 %
Cash flows from investing activities: Purchases of
short-term available-for-sale investments — — (326,908 ) Maturities
of short-term available-for-sale investments — 1 1,844,380 Sales of
short-term available-for-sale investments — — 287,601 Additions to
property, plant and equipment (63,222 ) (65,215 ) (28,337 )
Payments for acquisitions, net of cash acquired — — (1,036 ) Change
in other assets (1,278 ) (2,717 )
(5,946 ) Net cash (used for) provided by investing
activities (64,500 ) (67,931 )
1,769,754 Cash flows from financing
activities: Proceeds from derivative instruments — — 3,904 Proceeds
from debt — — 2,072,306 Debt repayments (420,000 ) (350,000 ) —
Payments for deferred financing fees — — (5,625 ) Dividend payments
to shareholders (166,719 ) (166,857 ) (129,683 ) Repurchase of
common stock (7,930 ) (10,598 ) (3,106 ) Proceeds from employee
stock plans 37,812 28,058 34,432 Contingent consideration payment —
(1,764 ) — Change in other financing activities 8,811
(517 ) 2,221 Net cash
(used for) provided by financing activities (548,026
) (501,678 ) 1,974,449 Effect of
exchange rate changes on cash 3,550
1,526 (666 ) Net (decrease)
increase in cash and cash equivalents (220,288 ) 139,269 4,066,131
Cash and cash equivalents at beginning of period
1,047,838 908,569 921,132
Cash and cash equivalents at end of period $
827,550 $ 1,047,838 $
4,987,263
Analog Devices, First Quarter, Fiscal
2018
Schedule
D
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
evolve and improve, 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 Feb.
3,2018 Oct. 28,2017
Jan. 28,2017 Revenue %
* Q/Q % Y/Y %
Revenue Revenue Industrial $ 743,623
49% 4% 87% $ 715,146 $ 396,784
Automotive 252,170 17% 5% 76% 240,026 142,962 Consumer 238,506 16%
(24)% (12)% 312,826 270,293 Communications 284,325 19% 4%
63% 273,172 174,410
Total Revenue $
1,518,624 100% (1)% 54% $
1,541,170 $ 984,449 ____________ * The
sum of the individual percentages does not equal the total due to
rounding.
Analog Devices, First Quarter, Fiscal 2018
Schedule
E
Reconciliation of Non-GAAP to GAAP Revenue and Earnings Measures
(In thousands, except per-share amounts) (Unaudited)
See "Non-GAAP Financial Information" in this press release for a
description of the items excluded from our non-GAAP measures.
Three Months Ended 1Q 18
4Q 17 1Q 17 Feb.
3,2018 Oct. 28,2017 Jan.
28,2017 GAAP Gross Margin $
1,035,190 $ 1,006,025 $ 648,504
Gross Margin Percentage 68.2 % 65.3
% 65.9 % Acquisition-Related Expenses 43,776
85,974 2,178
Non-GAAP Gross Margin
$ 1,078,966 $ 1,091,999
$ 650,682 Gross Margin Percentage
71.0 % 70.9 % 66.1 %
GAAP Operating Expenses $ 629,842
$ 557,815 $ 382,236 Percent of
Revenue 41.5 % 36.2 % 38.8
% Acquisition-Related Expenses (117,978 ) (107,736 ) (18,232
) Acquisition-Related Transaction Costs (8,736 ) (15,108 ) (8,011 )
Restructuring-Related Expense (57,318 ) — (49,463 )
Non-GAAP Operating Expenses $ 445,810
$ 434,971 $ 306,530
Percent of Non-GAAP Revenue 29.4 % 28.2
% 31.1 % GAAP Operating
Income/Margin $ 405,348 $ 448,210
$ 266,268 Percent of Revenue 26.7
% 29.1 % 27.0 %
Acquisition-Related Expenses 161,754 193,710 20,410
Acquisition-Related Transaction Costs 8,736 15,108 8,011
Restructuring-Related Expense 57,318 — 49,463
Non-GAAP Operating Income/Margin $ 633,156
$ 657,028 $ 344,152
Percent of Non-GAAP Revenue 41.7 %
42.6 % 35.0 % GAAP Other
Expense (Income) $ 66,494 $ 66,546
$ 32,959 Percent of Revenue 4.4
% 4.3 % 3.3 % Amortization of
Deferred Financing Costs — — (7,214 )
Non-GAAP
Other Expense $ 66,494 $
66,546 $ 25,745 Percent of
Non-GAAP Revenue 4.4 % 4.3 %
2.6 % GAAP Provision for Income Taxes
$ 70,682 $ 34,014 $
16,180 Tax rate % 20.9 % 8.9
% 6.9 % Income Tax on Non-Discrete Tax Items
Above 11,981 28,619 9,452 Income Tax of Prior Period Tax
Liabilities — (10,148 ) — Income Tax One-Time Transitional Tax
(687,061 ) — — Income Tax on Deferred Tax Recalibration 639,698
— —
Non-GAAP Provision for Income Taxes
$ 35,300 $ 52,485
$ 25,632 Non-GAAP Tax rate % 6.2
% 8.9 % 8.1 % GAAP Diluted
EPS $ 0.71 $
0.93 $ 0.69 Acquisition-Related
Expenses 0.43 0.52 0.07 Acquisition-Related Transaction Costs 0.02
0.04 0.03 Restructuring-Related Expense 0.15 — 0.16 Amortization of
Deferred Financing Costs — — 0.02 Income Tax Effect of Above Items
(0.03 ) (0.08 ) (0.03 ) Impact of Adjustments of Prior Period Tax
Liabilities — 0.03 — Impact of Toll Tax 1.84 — — Impact of Deferred
Tax Recalibration (1.71 ) — —
Non-GAAP Diluted EPS (1) $ 1.42
$ 1.45 $
0.94
(1) The sum of the individual per share
amounts may not equal the total due to rounding.
Analog Devices, First Quarter, Fiscal 2018
Schedule
F
Reconciliation of Free Cash Flow to Net Cash Flows Provided by
Operating Activities (Unaudited) (In thousands)
Three Months Ended 1Q 18
4Q 17 1Q 17 Feb.
3,2018 Oct. 28,2017
Jan. 28,2017 Net cash provided by operating
activities $ 388,688 $ 707,352 $ 322,594 % of Revenue 25.6 % 45.9 %
32.8 % Capital expenditures (63,222 ) (65,215 )
(28,337 ) Free cash flow $ 325,466
$ 642,137 $ 294,257 % of Revenue
21.4 % 41.7 % 29.9 %
View source
version on businesswire.com: http://www.businesswire.com/news/home/20180228005265/en/
Analog Devices, Inc.Mr. Michael Lucarelli, 781-461-3282Senior
Manager of Investor Relationsinvestor.relations@analog.com
Analog Devices (NASDAQ:ADI)
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