Analog Devices(ADI) - 2024 Q1 - Quarterly Report

PART I — FINANCIAL INFORMATION This section presents the unaudited condensed consolidated financial statements for the quarterly period ended February 3, 2024, highlighting a significant year-over-year decline in revenue and net income Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements for the quarterly period ended February 3, 2024, including key statements and accompanying notes Condensed Consolidated Statements of Income (Unaudited) | Indicator | Three Months Ended Feb 3, 2024 (in millions) | Three Months Ended Jan 28, 2023 (in millions) | | :--- | :--- | :--- | | Revenue | $2,512.7 | $3,249.6 | | Gross Margin | $1,473.9 | $2,124.3 | | Operating Income | $586.0 | $1,130.8 | | Net Income | $462.7 | $961.5 | | Diluted Earnings Per Share | $0.93 | $1.88 | Condensed Consolidated Balance Sheet Highlights (Unaudited) | Indicator | As of Feb 3, 2024 (in millions) | As of Oct 28, 2023 (in millions) | | :--- | :--- | :--- | | Cash and cash equivalents | $1,303.6 | $958.1 | | Inventories | $1,553.2 | $1,642.2 | | Total Assets | $48,388.5 | $48,794.5 | | Total Debt (Current + Long-term) | $6,446.0 | $6,401.5 | | Total Shareholders' Equity | $35,548.1 | $35,565.1 | Condensed Consolidated Statements of Cash Flows (Unaudited) | Indicator | Three Months Ended Feb 3, 2024 (in millions) | Three Months Ended Jan 28, 2023 (in millions) | | :--- | :--- | :--- | | Net cash provided by operating activities | $1,138.8 | $1,406.3 | | Net cash used for investing activities | ($219.1) | ($176.1) | | Net cash used for financing activities | ($574.2) | ($1,030.4) | - The first quarter of fiscal 2024 included 14 weeks of operations, compared to 13 weeks in the first quarter of fiscal 2023[16] - Subsequent to the quarter's end, on February 20, 2024, the Board of Directors declared a cash dividend of $0.92 per share, payable on March 15, 2024, totaling approximately $456.2 million[48] Note 7 – Revenue Revenue for the quarter was $2.51 billion, a 23% decrease year-over-year, with the Industrial market remaining the largest segment despite a decline, and Automotive showing growth Revenue by End Market (YoY) | End Market | Revenue (Q1'24, in millions) | % of Revenue | YoY Change | | :--- | :--- | :--- | :--- | | Industrial | $1,196.8 | 48% | (31)% | | Automotive | $739.2 | 29% | 9% | | Communications | $302.6 | 12% | (37)% | | Consumer | $274.1 | 11% | (22)% | | Total | $2,512.7 | 100% | (23)% | Revenue by Sales Channel | Channel | Revenue (Q1'24, in millions) | % of Revenue | | :--- | :--- | :--- | | Distributors | $1,535.2 | 61% | | Direct customers | $939.9 | 37% | | Other | $37.5 | 1% | Note 6 – Commitments and Contingencies The company is involved in a putative class action lawsuit related to its acquisition of Maxim Integrated Products, Inc., currently under appeal in the Delaware Supreme Court - A class action lawsuit related to the Maxim acquisition is under appeal in the Delaware Supreme Court, with arguments heard on February 14, 2024[26] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses a 23% year-over-year revenue decrease to $2.51 billion, attributed to broad-based demand decline, and a 52% decline in net income, while maintaining sufficient liquidity Results of Operations Revenue decreased 23% YoY to $2.51 billion, driven by declines in Industrial and Communications, while gross margin percentage dropped due to lower factory utilization, leading to a 52% decrease in net income Key Financial Metrics (Q1'24 vs Q1'23) | Metric | Q1 2024 (in millions) | Q1 2023 (in millions) | % Change | | :--- | :--- | :--- | :--- | | Revenue | $2,512.7 | $3,249.6 | (23)% | | Gross Margin % | 58.7% | 65.4% | (670 bps) | | Operating Income | $586.0 | $1,130.8 | (48)% | | Net Income | $462.7 | $961.5 | (52)% | | Diluted EPS | $0.93 | $1.88 | (51)% | - The decrease in gross margin percentage was primarily due to lower utilization of factories resulting from decreased customer demand and an unfavorable product mix[59] - Special charges of $16.1 million were recorded in Q1 2024 related to a business reorganization effort to align costs with weaker market demand[64] Liquidity and Capital Resources As of February 3, 2024, the company held $1.3 billion in cash and cash equivalents, with $1.14 billion from operations, and continues its capital return program through dividends and share repurchases - The company's principal source of liquidity was $1.3 billion of cash and cash equivalents as of February 3, 2024[72] Working Capital Metrics | Metric | Feb 3, 2024 (in millions) | Oct 28, 2023 (in millions) | | :--- | :--- | :--- | | Accounts receivable | $1,196.7 | $1,469.7 | | Days sales outstanding | 52 | 52 | | Inventory | $1,553.2 | $1,642.2 | | Days cost of sales in inventory | 151 | 143 | - As of February 3, 2024, the company had $544.4 million of outstanding borrowings under its commercial paper program and was in compliance with all debt covenants[77][78][79] - An additional $2.0 billion remains available for repurchase under the current authorized stock repurchase program[81] - The company expects capital expenditures for fiscal 2024 to be between approximately $600 million and $800 million[82] PART II — OTHER INFORMATION This section covers legal proceedings, risk factors, equity security sales, and controls and procedures Item 1. Legal Proceedings This section refers to Note 6 of the financial statements, detailing a pending class action lawsuit related to the Maxim Integrated Products acquisition, currently under appeal - Information on legal proceedings is detailed in Note 6, Commitments and Contingencies, concerning a lawsuit related to the Maxim acquisition[88][26] Item 1A. Risk Factors The company states that it is subject to various risks that could adversely affect its business, referring to its Annual Report on Form 10-K for a detailed description - There are no new risk factors presented; the company refers to the risk factors disclosed in its 2023 Annual Report on Form 10-K[89] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During the first quarter of fiscal 2024, the company repurchased a total of 1,030,078 shares of its common stock at an average price of $173.47 per share Issuer Purchases of Equity Securities (Q1 2024) | Period | Total Shares Purchased | Average Price Paid Per Share | Approx. Dollar Value Remaining in Program (in billions) | | :--- | :--- | :--- | :--- | | Oct 29, 2023 - Feb 3, 2024 | 1,030,078 | $173.47 | $1.96 | Item 4. Controls and Procedures Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of February 3, 2024, with no material changes to internal control over financial reporting - The CEO and CFO concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of February 3, 2024[85] - No material changes in internal control over financial reporting occurred during the quarter[86]