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Analog Devices Reports First Quarter Fiscal 2019 Results with Revenue and EPS at the High-End of Guidance

Analog Devices, Inc., a leading global high-performance analog technology company, today announced financial results for its first quarter of fiscal 2019, which ended February 2, 2019.

“In what is a challenging macroeconomic environment, the diversity and strong execution of our franchise continued to deliver outstanding financial results for the first quarter,” said Vincent Roche, President and CEO. “Revenue came in at the high-end of our guidance with continued strength in our communications market related to ongoing 4G upgrades and initial 5G deployments. Further, we returned more than $400 million of cash to our shareholders this quarter through share repurchases, which reduced our overall share count, and dividends.”

“In the near term, we continue to execute soundly despite the uncertain macroenvironment. That said, I have never been more confident or excited about the future of ADI’s franchise. Our ethos of innovation combined with deep customer engagements and our alignment with favorable macro trends positions us to continue to take share, expand our addressable market, and deliver strong returns for our shareholders.”

Performance for the First Quarter of Fiscal Year 2019

Results Summary
(In millions, except per share amounts and percentages)

Three Months Ended
Feb. 2, 2019 Feb. 3, 2018
(1), (2)
Change
Revenue $1,541 $1,567 (2)%
Gross margin $1,040 $1,072 (3)%
Gross margin percentage 67.5% 68.4% (90) bps
Operating income $456 $442 3%
Operating margin 29.6% 28.2% 140 bps
Diluted earnings per share $0.95 $0.78 22%
Adjusted Results
Adjusted gross margin $1,083 $1,115 (3)%
Adjusted gross margin percentage 70.3% 71.2% (90) bps
Adjusted operating income $635 $670 (5)%
Adjusted operating margin 41.2% 42.7% (150) bps
Adjusted diluted earnings per share $1.33 $1.49 (11)%

Cash Generation
(in millions, except percentages)

Three months ended
Feb. 2, 2019
Trailing Twelve Months
Feb. 2, 2019
Net cash provided by operating activities $372 $2,425
% of revenue (1) 24% 39%
Capital expenditures $(91) $(283)
Free cash flow $281 $2,143
% of revenue (1) 18% 35%

Cash Return
(in millions)

Three months ended
Feb. 2, 2019
Trailing Twelve Months
Feb. 2, 2019
Dividend paid $178 $714
Stock repurchases $227 $445
Total cash returned $405 $1,159

(1) Prior year balances have been restated to reflect the adoption of the new revenue recognition standard in the first quarter of fiscal 2019.

(2) The first quarter of fiscal 2018 was a 14-week quarter.

Outlook for the Second Quarter of Fiscal Year 2019

For the second quarter of fiscal 2019, we are forecasting revenue of $1.50 billion, +/- $50 million. At the midpoint of this revenue outlook, we expect reported operating margins of approximately 30.8%, and adjusted operating margins of approximately 41.3%. We are planning for reported EPS to be $0.94, +/- $0.07, and adjusted EPS to be $1.30, +/- $0.07.

Our second quarter fiscal 2019 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 $0.54 per outstanding share of common stock. The dividend will be paid on March 12, 2019 to all shareholders of record at the close of business on March 1, 2019.

Conference Call Scheduled for Today, Wednesday, February 20, 2019 at 10:00 am ET

ADI will host a conference call to discuss first quarter fiscal 2019 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: 1974449, or by visiting investor.analog.com.

A supplemental schedule showing quarterly revenue for fiscal 2017 and fiscal 2018 restated to reflect the adoption of the new revenue recognition standard ASC 606 is available on our investor site at 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), and free cash flow.

Adjusted gross margin is defined as gross margin, determined in accordance with GAAP, excluding 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: acquisition-related expenses1, acquisition-related transaction costs2, and restructuring related expense3 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 expenses1, acquisition-related transaction costs2, and restructuring related expense3 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 expenses1, acquisition-related transaction costs2, and restructuring related expense3 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 items4 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 EPS, determined in accordance with GAAP, excluding: acquisition-related expenses1, acquisition-related transaction costs2, restructuring related expense3 and tax related items4 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.

  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 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 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.

  3. Restructuring-Related Expense: Expenses 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 have no direct correlation to the operation of our business in the future.

  4. Tax-Related Items: Tax adjustments associated with the non-GAAP items discussed above, discrete tax items including tax expense or benefit related to prior periods and tax expense or benefit related to the impact of the Tax Cuts and Jobs Act of 2017. 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.

Source: https://www.analog.com/en/index.html

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