10-QPeriod: Q2 FY2015

ANALOG DEVICES INC Quarterly Report for Q2 Ended May 2, 2015

Filed May 19, 2015For Securities:ADI

Summary

Analog Devices, Inc. (ADI) reported strong financial results for the second quarter and first half of fiscal year 2015, driven by robust revenue growth and effective cost management. The company saw significant year-over-year increases in revenue across key end markets, including Industrial, Consumer, and Communications. This growth was largely attributable to the successful integration of the Hittite Microwave Corporation acquisition, which closed in July 2014, and a broad-based increase in demand for its semiconductor products. Profitability also saw a healthy increase, with net income and diluted earnings per share rising in both the quarterly and half-year periods. The company maintained a strong gross margin and effectively managed operating expenses, demonstrating operational efficiency. ADI's balance sheet remains solid, with substantial cash and short-term investments, providing ample liquidity for ongoing operations, potential acquisitions, and shareholder returns through dividends and stock repurchases.

Financial Highlights

56 data points
Beta

Revenue

$821.02M

66.4% Gross Margin

Net Income

$205.34M

25.0% Net Margin

EPS (Diluted)

$0.65

Total Assets

$7.05B

Cash & Equivalents

$636.22M

Free Cash Flow

$294.80M

Financial Statements
Beta
Revenue$821.02M
Cost of Revenue$276.20M
Gross Profit$544.82M
R&D Expenses$154.23M
SG&A Expenses$117.37M
Operating Expenses$295.81M
Operating Income$249.01M
Interest Expense$6.88M
Net Income$205.34M
EPS (Basic)$0.66
EPS (Diluted)$0.65
Shares Outstanding (Basic)312.66M
Shares Outstanding (Diluted)317.05M

Key Highlights

  • 1Total revenue for the three months ended May 2, 2015, increased by 18% year-over-year to $821.0 million, and by 20% for the six months ended May 2, 2015, to $1.6 billion.
  • 2Net income for the quarter grew 10% to $205.3 million, and for the six months, it increased by 13% to $384.1 million.
  • 3Diluted EPS rose 10% to $0.65 for the quarter and 13% to $1.21 for the six-month period.
  • 4The acquisition of Hittite Microwave Corporation, completed in July 2014, is contributing positively to revenue growth, particularly in the Industrial and Communications end markets.
  • 5Gross margin percentage remained strong, increasing slightly to 66.4% for the quarter and 65.8% for the six months.
  • 6Operating income increased by 13% for the quarter and 14% for the six months, reflecting strong revenue growth and margin management.
  • 7The company maintained a healthy cash position, with $636.2 million in cash and cash equivalents and $2.4 billion in short-term investments as of May 2, 2015.

Frequently Asked Questions

The acquisition of Hittite Microwave Corporation, completed on July 22, 2014, is a significant contributor to ADI's recent financial performance. It has driven revenue growth, especially in the Industrial and Communications end markets, and has also influenced gross margin through a mix shift towards higher-margin products. The acquisition has also led to increased amortization expenses related to acquired intangible assets.

ADI has demonstrated effective management of operating expenses. While R&D and Selling, Marketing, General and Administrative (SMG&A) expenses increased due to the Hittite acquisition and ongoing investments, these increases were managed relative to revenue growth. R&D expenses as a percentage of revenue remained consistent, and SMG&A expenses as a percentage of revenue slightly decreased, indicating efficient cost control.

ADI maintains a strong liquidity position with $3.1 billion in cash, cash equivalents, and short-term investments as of May 2, 2015. This liquidity is being used to fund operations, capital expenditures, research and development, dividend payments ($0.40 per share declared for the current quarter), and stock repurchases. The company has approximately $684.3 million remaining under its authorized share repurchase program.

ADI's revenue growth is broad-based across several key end markets. The Industrial segment showed a 20% year-over-year increase for the quarter, followed by Consumer (40%) and Communications (17%). For the six-month period, Industrial revenue grew 21%, Consumer 34%, and Communications 30%. Automotive revenue saw more modest growth.