Acquisition and Financial Transactions - The company completed the acquisition of Maxim Integrated Products, Inc. for a total consideration of approximately $28.0 billion in stock[13] - The company's floating rate debt would result in an annual interest expense change of $20.5 million for each 100 basis point increase in interest rates as of October 28, 2023[216] - A hypothetical 100 basis point increase in interest rates would increase the swap payable by approximately $57.0 million, with a corresponding adjustment to the carrying value of the related debt[218] - The company had $6.5 billion in principal amount of senior unsecured notes outstanding as of October 28, 2023, with a fair value of $5.3 billion[219] - An immediate 10% unfavorable movement in foreign currency exchange rates would result in approximately $66.5 million of losses in changes in earnings or cash flows over the course of the year as of October 28, 2023[222] - The fair value of forward exchange contracts as of October 28, 2023 would change to $49,284 after a 10% unfavorable movement in foreign currency exchange rates[225] Market Revenue Trends - Industrial market accounted for 53% of fiscal 2023 revenue, up from 51% in fiscal 2022[31] - Automotive market revenue increased to 24% of total revenue in fiscal 2023, up from 20% in fiscal 2022[31] - Communications market revenue decreased to 13% of total revenue in fiscal 2023, down from 16% in fiscal 2022[31] - Consumer market revenue decreased to 10% of total revenue in fiscal 2023, down from 13% in fiscal 2022[31] Product Portfolio and Engineering - The company has over 13,000 engineers, focusing on deepening customer-centricity and leveraging analog domain expertise[9] - The company's product portfolio includes more than 75,000 SKUs, with analog and mixed-signal products being the largest and most diverse category[21] Strategic Growth and Manufacturing - The company's strategy includes capitalizing on secular growth trends in digitized factories, mobility, digital healthcare, and climate change[10] - The company maintains manufacturing facilities primarily in the United States, Ireland, and Southeast Asia[11] Sales and Distribution - The company's sales channel includes a direct sales force, third-party distributors, and independent sales representatives in over 50 countries[26] - Sales to distributors in 2023 were $7.5 billion net of expected price protection credits and rights of return[233] - The liability balance for price protection credits and rights of return as of October 28, 2023, was $525.4 million, with the majority related to price protection credits[233] - The calculation of price protection credits involves subjective management assumptions about estimates, including contractual terms, historical experience, and future economic conditions[234] - Changes in assumptions about price protection credits can have a material effect on the amount recognized[234] - The company's controls over the calculation of price protection credits were evaluated and tested for appropriateness, completeness, and accuracy[235] - Audit procedures included inspecting contractual terms, testing underlying data, and evaluating significant assumptions used in the estimation of price protection credits[236] - The company's methods and assumptions for estimating price protection credits were compared to historical trends[236] - Sensitivity analyses were performed to assess the impact of significant assumptions on price protection credits[236] - The company's retrospective review analysis of actual price protection credits claimed by distributors was inspected and tested[236] - The company considered new information that could significantly change the estimated future price protection credits[236] Industrial and Automotive Solutions - The company is a leader in industrial automation, offering solutions in condition-based monitoring, industrial robotics, and motion control, with a focus on improving worker safety and manufacturing flexibility[32] - The automotive market focuses on high-performance signal processing solutions for infotainment, electrification, and autonomous applications, with products used in car audio, battery monitoring, and video processing[34] Instrumentation and Measurement - The instrumentation and measurement market includes applications such as automated test equipment, automotive and energy test, and life sciences, with products designed for evolving communications standards and electric vehicle efficiency[32] Aerospace and Defense - The aerospace/defense market requires high-performance ICs that meet rigorous environmental and reliability specifications, with products used in navigation systems, radar systems, and satellite communications[33] Healthcare and Energy Management - The healthcare market is evolving with a focus on preventative care and chronic condition management, with products used in ultrasound systems, X-ray equipment, and remote patient monitoring[34] - The energy management market is driven by global electrification efforts, with products used in electric vehicle charging infrastructure, renewable energy, and power transmission systems[34] Communications and Consumer Markets - The communications market benefits from the development of broadband and wireless infrastructures, with products used in cellular base stations, satellite broadband, and data center networking[34] - The consumer market addresses demand for high-quality entertainment systems, with products used in portable devices and prosumer audio/video equipment[36] Intellectual Property and Innovation - The company holds approximately 4,842 U.S. patents and 416 pending U.S. patent applications as of October 28, 2023, with a focus on technological innovation and intellectual property protection[45] Sustainability and Environmental Goals - The company aims to achieve carbon neutrality by 2030 and net zero emissions by 2050, with a water recycling rate target of at least 50% in manufacturing facilities by 2025[46] Workforce and Employee Engagement - The company has approximately 26,000 employees as of October 28, 2023, with 13,000 in engineering roles. The workforce is 60% male and 40% female, while senior leadership is 73% male and 27% female. The voluntary employee turnover rate for fiscal 2023 was 7.6%[55] - The company's latest employee survey in fiscal 2022 had a participation rate of over 83%, indicating strong employee satisfaction in areas such as purpose, respectful treatment, and commitment to diversity/inclusion[57] - The company's compensation philosophy includes a combination of fixed and variable pay, including base salary, bonuses, performance awards, and equity compensation[56] - The company's ESG Report 2022 details sustainability efforts, operations efficiency, employee engagement, and governance, with initiatives to drive continuous improvements in diversity and inclusion[54] Cybersecurity and Risk Management - The company has not experienced a material security breach in the last three years and has not incurred any net expenses from such breaches[52]

Financial Data and Key Metrics Changes - Fourth quarter revenue was $2.7 billion, with a year-over-year decline of 16% and a sequential decline of 12% [7][18] - Fiscal year 2023 revenue reached $12.3 billion, marking a 2% increase from the previous year, with EPS of $10.09, up 5% [7][17] - Operating margins for the fourth quarter were 44.7%, while gross margins were 70.2%, down from 73.6% the previous year [17][20] - The company returned a record $4.6 billion to shareholders in 2023, exceeding its 100% free cash flow return target [7] Business Line Data and Key Metrics Changes - Industrial sector represented 50% of quarterly revenue, declining 20% year-over-year and 19% sequentially, but achieved a 6% increase for the full year [18] - Automotive sector accounted for 27% of quarterly revenue, up 14% year-over-year, marking 12 consecutive quarters of double-digit growth [19] - Communications sector represented 13% of quarterly revenue, down 32% year-over-year, while Consumer sector represented 11% of quarterly revenue, down 28% year-over-year [19] Market Data and Key Metrics Changes - The company noted broad-based weakness across markets and geographies due to inventory adjustments and macroeconomic conditions [24][25] - Lead times for 95% of products are now normalized, with significant improvements in order rates and a reduction in cancellations [35][36] Company Strategy and Development Direction - The company is focused on maintaining operating margins in the low 40s while making strategic investments to capitalize on future market recovery [9][10] - The design win pipeline has expanded by double digits, with expectations of revenue synergy acceleration in 2025 [10] - The company plans to reduce CapEx significantly in fiscal 2024, down to between $600 million and $800 million, without compromising long-term growth [26][51] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate the current downturn, citing strong expense management and a diversified business model [8][9] - The inventory overhang is expected to persist through the first half of the fiscal year, but management anticipates a recovery in the second half [24][46] Other Important Information - The company ended the quarter with approximately $1 billion in cash and cash equivalents, with a net leverage ratio of 0.9x [21] - Operating cash flow for the year was $4.8 billion, with free cash flow at $3.6 billion, representing 29% of revenue [22] Q&A Session Summary Question: Inventory and Order Metrics - Management noted that inventory digestion is accelerating, with a reduction in cancellations and improved bookings, providing confidence in future performance [30] Question: Pricing Environment - Management indicated that pricing for existing products remains stable, with new product generations capturing more value [39] Question: OpEx and Gross Margins - Management expects gross margins to fall below 70% in the first half of the year, with OpEx projected to decrease slightly [42][43] Question: Industrial Sector Performance - Management acknowledged that the industrial sector has faced broader weakness, impacting revenue, but expects inventory adjustments to lead to recovery [46] Question: CapEx Strategy - Management explained the reduction in CapEx is a strategic decision based on current demand, while still planning to double internal capacity by 2025 [51][52] Question: Inventory Reduction Plans - Management plans to reduce inventory by approximately $200 million over the next three quarters, with sell-in to the channel being lower than sell-through [55]

Summary of Analog Devices, Inc. Conference Call Company Overview - **Company**: Analog Devices, Inc. (NASDAQ: ADI) - **Industry**: Semiconductor, specifically high-performance mixed-signal RF analog semiconductor chips - **Key Areas**: Power management, signal chain processing, industrial, automotive, and communications infrastructure - **Revenue Composition**: 90% of total revenues from diversified sectors [2][9] Core Insights and Arguments - **Cyclical Dynamics**: - The company experienced a peak in growth around Q3 FY '22, followed by order deceleration and increased cancellations, indicating a negative cyclical inflection for both ADI and the broader industry [4][5] - An inventory overhang is expected to take approximately six months to correct, with a return to normalized growth patterns anticipated in FY '25 [5][6] - **Financial Performance**: - Projected peak-to-trough revenue decline of around 18%, similar to the last cyclical downturn in 2018-2019 [7] - Operating margins expected to remain strong at low 40% during the downturn, compared to previous cycles [8] - **Growth Strategy**: - The company has a diversified portfolio across critical market sectors, with over 100,000 customers and 75,000 product SKUs [9][10] - Continuous investment in R&D, exceeding $1.7 billion annually, to drive innovation and meet customer needs [12] - Target revenue growth rate of 7% to 10% per year, with earnings projected at $15 per share by fiscal '27 [11][14] - **Market Trends**: - Significant secular tailwinds in industrial, advanced communications, and automotive sectors, particularly in electrification and digitalization [12][13] - The automotive sector is expected to grow, driven by increased silicon usage in vehicles, with a focus on electric vehicles [13][68] Important but Overlooked Content - **Power Management Portfolio**: - The company is working to unlock synergies from acquisitions, particularly with Maxim, aiming for $1 billion in revenue synergies by fiscal '27 [18][20] - The power management segment is seen as a significant growth opportunity, with ongoing efforts to integrate it with the mixed-signal portfolio [14][17] - **Manufacturing Strategy**: - ADI operates a hybrid manufacturing model, fabricating 50% of its silicon internally and sourcing the rest from partners like TSMC [22][23] - The company has increased CapEx significantly, with plans to invest about $1 billion in FY '24, focusing on maintaining high utilization rates [23][25] - **Sector-Specific Insights**: - Digital healthcare has been a strong growth area, with revenues around $1 billion and double-digit growth over the past several years [55] - The aerospace and defense sectors are currently supply-limited rather than demand-limited, indicating strong future growth potential [58] - Wireless communications infrastructure is expected to face challenges due to high interest rates affecting carrier investments [59] - **Automotive Segment**: - In-cabin technologies now account for approximately 40-45% of total automotive revenue, with strong growth in electrification and connectivity [66][68] - New onboard charging applications using silicon carbide are anticipated to drive significant future revenue growth [70] - **Digital Signal Processing (DSP)**: - ADI maintains a strong position in DSP, integrating it with mixed-signal solutions to enhance product offerings and increase ASP [72][75] This summary encapsulates the key points discussed during the conference call, highlighting the company's strategic direction, market dynamics, and financial outlook.

Financial Data and Key Metrics - Revenue for Q3 2023 was nearly $3.1 billion, driven by growth in Industrial and Automotive markets [6] - Gross margin remained strong at 72.2%, while operating margin was 47.8% [6][18] - EPS for the quarter was $2.49, within the guidance range [18] - Cash position at the end of the quarter was over $1.1 billion, with a net leverage ratio of 0.8 [19] - Free cash flow over the trailing 12 months was $3.7 billion, representing 29% of revenue [19] Business Line Performance - Industrial segment represented 53% of revenue, down 7% sequentially but up 4% year-over-year, led by sustainable energy and aerospace & defense [16] - Automotive segment represented 24% of revenue, down modestly sequentially but up 15% year-over-year, driven by battery management and in-cabin connectivity solutions [16][17] - Communications segment, representing 12% of revenue, decreased double digits both sequentially and year-over-year due to inventory correction [17] - Consumer segment, representing 10% of revenue, was up 15% sequentially but down 21% year-over-year [18] Market Performance - Industrial market saw double-digit growth in sustainable energy and aerospace & defense [16] - Automotive market continued to show strong growth, particularly in battery management systems and in-cabin connectivity solutions [16][17] - Communications market faced challenges due to inventory adjustments, particularly in wireless and wireline segments [17][38] - Consumer market performed better than expected sequentially but remains under pressure year-over-year [18] Company Strategy and Industry Competition - The company is focused on long-term growth driven by secular trends such as electrification, sustainable energy, and digital healthcare [7][8][41] - ADI is leveraging its leadership in battery management systems (BMS) and expanding into power conversion solutions for electric vehicles [13][14] - The company is investing in grid modernization and energy storage systems, with technologies used in 60% of energy storage systems globally [11][12] - ADI is also developing silicon carbide-based smart switches for bidirectional onboard charging, which could double content opportunity per EV powertrain [14] Management Commentary on Operating Environment and Future Outlook - Management expects the current inventory correction to last two to three quarters, with a return to growth thereafter [26][27] - The company is strategically undershipping to help normalize customer inventory levels, particularly in Asia and China [19][60] - Gross margins are expected to remain above 70% on a trailing 12-month basis, supported by the hybrid manufacturing model and swing capacity [22][33] - Q4 2023 revenue guidance is $2.7 billion, plus or minus $100 million, with all markets expected to be down sequentially [20] Other Important Information - The company is reducing utilization and external wafer purchases to manage inventory levels [21] - ADI has returned nearly $5 billion to shareholders over the trailing 12 months through buybacks and dividends [19][23] - The company expects CapEx to decline in 2024 after reaching a high watermark in 2023 [19] Q&A Session Summary Question: Inventory Correction and Recovery Timeline [25] - Management believes the inventory correction will last two to three quarters, with recovery expected in the next few quarters [26][27] Question: Q1 Seasonality and Gross Margins [30] - Q1 is expected to be down mid-single digits seasonally, with gross margins likely to remain above 70% [32][33] Question: Communications Market Outlook [37] - The wireline segment is expected to recover in early 2024, while wireless faces headwinds due to slower 5G deployments [38][39] Question: Auto Market and Potential UAW Strike Impact [55] - The automotive market is expected to perform relatively better than industrial, with no significant impact anticipated from potential UAW strikes [56][57] Question: Inventory Management and Lead Times [59] - The company is strategically undershipping to reduce channel inventory, with 85% of products now available within 13 weeks [60][63] Question: Pricing and Inventory Days [65] - Pricing is expected to remain stable, with no significant cost reductions expected from foundries [67] - Inventory days are expected to decrease, but not return to pre-pandemic levels of 120 days [68] Question: Undershipment Quantification [70] - The company is undershipping both through the channel and direct customers to help normalize inventory levels [71][72]

Revenue Performance - Revenue for the three months ended July 29, 2023, was $3,076,495, a decrease of 1% compared to $3,109,880 for the same period in 2022[58]. - Revenue for the nine months ended July 29, 2023, was $9,589,055, an increase of 9% compared to $8,766,237 for the same period in 2022[59]. - The Industrial end market contributed $1,629,201 in revenue for the three months ended July 29, 2023, a 4% increase year-over-year[61]. - The Automotive end market saw a revenue increase of 15%, reaching $747,554 for the three months ended July 29, 2023[61]. - Revenue from the Consumer end market decreased by 21% to $319,236 for the three months ended July 29, 2023[61]. - Total revenue from distributors for the three months ended July 29, 2023, was $1,904,496, accounting for 62% of total revenue[63]. Profitability Metrics - Gross margin percentage for the three months ended July 29, 2023, was 63.8%, down from 65.7% in the same period of the prior year[65]. - Gross margin percentage for the nine months ended July 29, 2023, increased to 65.0% from 61.5% in the same period of the prior year[65]. - Net income for the three months ended July 29, 2023, was $877,019, representing a 17% increase from $748,985 in the same period of 2022[58]. - Operating income increased by $36.2 million (4%) in the three-month period and $1,012.5 million (47%) in the nine-month period ended July 29, 2023, compared to the prior fiscal year[71][72]. - Net income increased by $128.0 million (17%) in the three-month period and $1,003.8 million (55%) in the nine-month period ended July 29, 2023, compared to the prior fiscal year[77][78]. - The company reported a diluted EPS of $1.74 for the three months ended July 29, 2023, a 21% increase from $1.44 in the same period of 2022[58]. Expenses Overview - R&D expenses decreased by $8.1 million (2%) in the three-month period and $25.9 million (2%) in the nine-month period ended July 29, 2023, compared to the prior fiscal year[66]. - SMG&A expenses increased by $7.2 million (2%) in the three-month period and $55.0 million (6%) in the nine-month period ended July 29, 2023, compared to the prior fiscal year[68]. - Nonoperating expenses increased by $9.3 million in the three-month period and $26.9 million in the nine-month period ended July 29, 2023, primarily due to higher interest expenses[72][73]. - Special charges, net decreased by $114.7 million (83%) in the three-month period and $197.9 million (81%) in the nine-month period ended July 29, 2023, compared to the prior fiscal year[70]. - Amortization expenses remained relatively flat at $250.7 million in the three-month period and $756.9 million in the nine-month period ended July 29, 2023[69]. Cash Flow and Financial Position - Cash and cash equivalents totaled $1,149.2 million as of July 29, 2023, with approximately $253.9 million held in the United States[79]. - Net cash provided by operating activities for the nine months ended July 29, 2023, was $3,630,340, compared to $3,326,066 for the same period in 2022, maintaining a consistent 38% of revenue[80]. - Cash used for investing activities increased to $(787,324) in the nine months ended July 29, 2023, from $(351,035) in the prior year, primarily due to higher capital expenditures[82]. - Cash used for financing activities decreased to $(3,164,342) from $(3,403,860) year-over-year, attributed to higher net proceeds from commercial paper issuance and lower debt repayments[83]. - Accounts receivable decreased by $184,219 (10%) to $1,616,243 as of July 29, 2023, while inventory increased by $309,399 (22%) to $1,709,313[84]. - Total debt obligations as of July 29, 2023, amounted to $6,517,077, with various notes maturing from 2024 to 2051[85]. Future Outlook and Strategic Initiatives - The company expects to continue developing innovative technologies and processes for new products, viewing R&D as critical for future growth[67]. - Capital expenditures for fiscal 2023 are expected to be between 7% to 9% of revenue, reflecting plans to expand internal manufacturing capacity[89]. - A cash dividend of $0.86 per share was declared on August 22, 2023, expected to total approximately $428.6 million, with future dividends dependent on financial conditions[90]. - The company has authorized a stock repurchase program totaling $16.7 billion, with $2.6 billion remaining available for repurchase as of July 29, 2023[88]. - Current liabilities increased to $2,831.0 million as of July 29, 2023, compared to $2,442.7 million at the end of fiscal 2022, due to higher commercial paper notes and income taxes payable[84].

Analog Devices, Inc. (NASDAQ:ADI) Q2 2023 Earnings Conference Call May 24, 2023 10:00 AM ET Company Participants Michael Lucarelli - VP, IR & FP&A Vincent Roche - CEO & Chair Prashanth Mahendra-Rajah - CFO Conference Call Participants Vivek Arya - Bank of America Securities Tore Svanberg - Stifel Ambrish Srivastava - BMO Capital Markets Joseph Moore - Morgan Stanley Chris Danely - Citi Ross Seymore - Deutsche Bank William Stein - Truist Securities Operator Good morning, and welcome to the Analog Devices Sec ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Form 10-Q (Mark One) ☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended April 29, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File No. 1-7819 Analog Devices, Inc. (Exact name of registrant as specified in its charter) Massachusetts 04-2348234 (State or other jurisdictio ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Form 10-Q (Mark One) ☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended January 28, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File No. 1-7819 Analog Devices, Inc. (Exact name of registrant as specified in its charter) Massachusetts 04-2348234 (State or other jurisdict ...