Analog Devices, Inc. (NASDAQ: ADI), a leading global high-performance analog technology company, today announced financial results for its second quarter of fiscal 2022, which ended April 30, 2022.
“ADI delivered its fifth consecutive quarter of record revenue, illustrating the unprecedented demand for our technologies and our ability to increase output in a challenging supply backdrop. Top line strength combined with successful synergy execution enabled adjusted gross margin, operating margin and EPS to achieve new highs,” said Vincent Roche, CEO and Chair. “Despite increasing geopolitical uncertainty and ongoing supply chain disruptions, we enter the second half from a position of strength with increased capacity and continued bookings momentum.”
Roche continued, “Market leadership in numerous secular mega trends such as automation, electrification, and advanced connectivity is a testament to the depth and breadth of our performance leading analog, mixed signal, and power portfolio. Our solutions enable the intelligent edge, accelerating digitalization across industries. Continued efforts to deepen customer relationships, enhance operational resiliency, and our unrelenting focus on innovation, gives me great confidence in our ability to accelerate long term growth while driving positive societal impact.”
Performance for the Second Quarter of Fiscal 2022
Results Summary(1)
(in millions, except per-share amounts and percentages)
| Three Months Ended | |||
| Apr. 30, 2022 | May 1, 2021 | Change | |
| Revenue | $2,972 | $1,661 | 79% |
| Gross margin | $1,945 | $1,137 | 71% |
| Gross margin percentage | 65.4% | 68.4% | (300 bps) |
| Operating income | $918 | $520 | 77% |
| Operating margin | 30.9% | 31.3% | (40 bps) |
| Diluted earnings per share | $1.49 | $1.14 | 31% |
| Adjusted Results | |||
| Adjusted gross margin | $2,205 | $1,177 | 87% |
| Adjusted gross margin percentage | 74.2% | 70.9% | 330 bps |
| Adjusted operating income | $1,495 | $694 | 115% |
| Adjusted operating margin | 50.3% | 41.7% | 860 bps |
| Adjusted diluted earnings per share | $2.40 | $1.54 | 56% |
Cash Generation
| Three Months Ended | Trailing Twelve Months | |
| Apr. 30, 2022 | Apr. 30, 2022 | |
| Net cash provided by operating activities | $1,222 | $3,649 |
| % of revenue | 41% | 37% |
| Capital expenditures | $(119) | $(447) |
| Free cash flow | $1,103 | $3,202 |
| % of revenue | 37% | 33% |
Cash Return
| Three Months Ended | Trailing Twelve Months | |
| Apr. 30, 2022 | Apr. 30, 2022 | |
| Dividend paid | $(398) | $(1,386) |
| Stock repurchases | (776) | (3,612) |
| Total cash returned | $(1,174) | $(4,998) |
(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 2022
For the third quarter of fiscal 2022, we are forecasting revenue of $3.05 billion, +/- $100 million. At the midpoint of this revenue outlook, we expect reported operating margin of approximately 32.2%, +/-130 bps, and adjusted operating margin of approximately 49.5%, +/-70 bps. We are planning for reported EPS to be $1.55, +/-$0.10, and adjusted EPS to be $2.42, +/-$0.10.
Our third quarter fiscal 2022 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 $0.76 per outstanding share of common stock. The dividend will be paid on June 9, 2022 to all shareholders of record at the close of business on May 31, 2022.
Conference Call Scheduled for Today, Wednesday, May 18, 2022 at 10:00 am ET
ADI will host a conference call to discuss our second quarter fiscal 2022 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. The participant dial-in for both domestic and international callers will be available ten minutes before the call begins by calling 833-423-0297. International participants may provide the passcode 8334230297.
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: 6327355, 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 nonoperating expense (income), 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 expenses 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 costs; and special charges, net3 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; acquisition related transaction costs; and special charges, net3 which are described further below. Adjusted operating margin represents adjusted operating income divided by revenue.
Adjusted nonoperating expense (income) is defined as nonoperating expense (income), determined in accordance with GAAP, excluding: acquisition-related expenses, which is described further below.
Adjusted income before income taxes is defined as income before income taxes, determined in accordance with GAAP, excluding: acquisition-related expenses; acquisition related transaction costs2; and special charges, net3 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 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 costs; special charges, net3; and tax related items 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.
- 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 debt, 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 fair value adjustments associated with the replacement of share-based awards related to the Maxim Integrated Products, Inc. (Maxim) 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.
- Acquisition Related Transaction Costs: Costs directly related to the 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.
- Special Charges, net Expenses, net, 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.
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Tax-Related Items: Income tax effect of the non-GAAP items discussed above and an income tax benefit from a discrete tax item related to the consolidation of certain subsidiaries. We excluded the income tax effect of these tax related items from our non-GAAP measures because they are not associated with the tax expense on our current operating results.