01—Abstract
Summary
Summary of the 10-K filed November 27, 2018. Cited figures are marked; the original filing is the authoritative source.
Analog Devices, Inc. (ADI) reported strong revenue growth of 21% in fiscal year 2018, reaching $6.2 billiona, primarily driven by the acquisition of Linear Technology Corporation (Linear) in March 2017 and robust demand across its key end markets, particularly Industrial and Communications.
The company's strategic focus on high-performance analog and mixed-signal integrated circuits positions it well for emerging technology trends like 5G, autonomous vehicles, and smart healthcare. Despite the significant debt incurred from the Linear acquisition, ADI demonstrated improved profitability, with net income more than doubling year-over-year to $1.5 billion and diluted EPS rising to $3.97b.
The company also reinstated its share repurchase program in August 2018, signaling confidence in its financial position and commitment to returning value to shareholders. ADI's diversified revenue streams by end market and geography, coupled with a strong gross margin of 68.3%c, highlight its resilience and strategic execution.
02—Key points
Key Highlights
- Revenue grew 21% to $6.2 billion in FY2018, significantly boosted by the acquisition of Linear Technology Corporation and strong demand in Industrial and Communications sectors.
- Net income more than doubled to $1.5 billion in FY2018, with diluted EPS increasing to $3.97.
- Gross margin improved to 68.3% in FY2018, up from 59.9% in FY2017, partly due to favorable acquisition accounting adjustments and product mix.
- The company reinstated its share repurchase program in August 2018 with an additional authorization of $2.0 billion.
- Industrial sector remains the largest revenue contributor at 50% of total revenue, followed by Communications (20%), Automotive (16%), and Consumer (14%).
- The company successfully managed its debt obligations following the acquisition, with progress made on principal repayments.
- Research and Development (R&D) expenses increased by 20% in FY2018, with a significant portion attributed to the Linear acquisition, underscoring ADI's commitment to innovation.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2018, Analog Devices kept $0.24.
- Revenue$6.22B100.0%
- Cost of revenue−$1.97B31.7%
- Gross profit$4.25B68.3%
- Operating costs−$2.35B37.8%
- Operating income$1.90B30.5%
- Interest, other & tax−$392.6M6.3%
- Net income$1.51B24.2%
Where FY2018 revenue went
$6.22B- Cost of revenue: $1.97B, 32% of revenue
- Net income: $1.51B, 24% of revenue
- R&D: $1.17B, 19% of revenue
- SG&A: $695.5M, 11% of revenue
- Other operating costs: $490.2M, 7.9% of revenue
- Interest, other & tax: $392.6M, 6.3% of revenue
Kept 24% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2018filed November 27, 2018Financial Statements
FY2018 against FY2017
| Line item | FY2018FY2017 | Change |
|---|---|---|
| Revenue | $6.22B$5.25B | +18.6% |
| Cost of Revenue | $1.97B$2.08B | −5.0% |
| Gross Profit | $4.25B$3.17B | +34.2% |
| R&D Expenses | $1.17B$968.13M | +20.3% |
| SG&A Expenses | $695.54M$690.53M | +0.7% |
| Operating Expenses | $2.35B$2.01B | +17.2% |
| Operating Income | $1.90B$1.16B | +63.4% |
| Interest Expense | $253.59M$250.84M | +1.1% |
| Net Income | $1.51B$805.38M | +87.1% |
| EPS (Basic) | $4.05$2.32 | +74.6% |
| EPS (Diluted) | $4.00$2.29 | +74.7% |
| Shares Outstanding (Basic) | 370.43M346.37M | +6.9% |
| Shares Outstanding (Diluted) | 374.94M350.48M | +7.0% |
05—Questions
Frequently Asked Questions
What was the primary driver of Analog Devices' revenue growth in FY2018?
The primary driver of Analog Devices' revenue growth in fiscal year 2018 was the acquisition of Linear Technology Corporation in March 2017, which significantly expanded its product portfolio and market reach. Additionally, strong demand across key end markets, particularly the Industrial and Communications sectors, contributed to the substantial revenue increase.
How did the acquisition of Linear Technology Corporation impact Analog Devices' financial performance?
The acquisition of Linear Technology Corporation positively impacted ADI's financial performance. It led to a significant increase in revenue in fiscal year 2018. While the acquisition incurred substantial debt, the company demonstrated improved profitability, with net income and diluted EPS more than doubling year-over-year. The integration also contributed to a higher gross margin.
What is Analog Devices' strategy for future growth?
Analog Devices' strategy for future growth is centered on its core strength in high-performance analog, mixed-signal, and digital signal processing technologies. The company aims to capitalize on emerging trends in markets such as automotive (including autonomous driving), 5G communications, industrial automation (Industry 4.0), and advanced healthcare solutions. Continued investment in R&D to drive innovation and expand its product portfolio is also a key element of its growth strategy.
How is Analog Devices managing the debt incurred from the Linear acquisition?
Analog Devices is actively managing the debt incurred from the Linear acquisition. The company has made significant principal repayments on its term loans. While the debt load remains substantial, its improved profitability and cash flow generation from operations provide the means to service these obligations. The company also maintains a revolving credit facility for additional liquidity.
06—Continue