10-QPeriod: Q3 FY2019

ANALOG DEVICES INC Quarterly Report for Q3 Ended Aug 3, 2019

Filed August 21, 2019For Securities:ADI

Summary

Analog Devices, Inc. (ADI) reported its financial results for the period ending August 2, 2019. For the third quarter of fiscal year 2019, the company saw a decrease in revenue and net income compared to the prior year's quarter. Revenue declined by 5% year-over-year to $1.48 billion, and net income fell by 11% to $362.4 million. Diluted Earnings Per Share (EPS) also decreased by 10% to $0.97. For the first nine months of fiscal year 2019, revenue decreased by 3% to $4.55 billion, while net income saw a smaller decline of 2% to $1.09 billion. Diluted EPS for the nine-month period was $2.90, down 1% from the prior year. The company experienced a decrease in revenue across most end markets, with the exception of Communications, which saw a 7% increase year-over-year for the quarter. Industrial and Consumer segments showed notable declines. Despite the revenue dip, the company maintained a strong gross margin of 67.4% for the quarter. ADI also reported strong operating cash flow, and its liquidity position remained robust with $612.2 million in cash and cash equivalents.

Financial Highlights

56 data points
Beta

Revenue

$1.48B

67.4% Gross Margin

Net Income

$362.37M

24.5% Net Margin

EPS (Diluted)

$0.97

Total Assets

$21.57B

Cash & Equivalents

$612.16M

Free Cash Flow

$494.45M

Financial Statements
Beta
Revenue$1.48B
Cost of Revenue$482.33M
Gross Profit$997.81M
R&D Expenses$280.10M
SG&A Expenses$162.82M
Operating Expenses$551.09M
Operating Income$446.73M
Interest Expense$59.87M
Net Income$362.37M
EPS (Basic)$0.98
EPS (Diluted)$0.97
Shares Outstanding (Basic)369.53M
Shares Outstanding (Diluted)373.08M

Key Highlights

  • 1Revenue for the third quarter decreased by 5% year-over-year to $1.48 billion.
  • 2Net income for the third quarter decreased by 11% year-over-year to $362.4 million.
  • 3Diluted EPS for the third quarter was $0.97, down 10% from the prior year's quarter.
  • 4Revenue from the Communications segment increased by 7% year-over-year for the quarter, driven by demand in the wireless sector.
  • 5Gross margin remained strong at 67.4% for the third quarter, although it decreased slightly from 68.1% in the prior year.
  • 6The company utilized $1.25 billion from a new term loan facility to refinance existing debt, demonstrating active debt management.
  • 7Cash provided by operating activities for the nine-month period was $1.60 billion.

Frequently Asked Questions

The decline in revenue and net income is primarily attributed to a broad-based decrease in demand across key end markets, including Industrial, Automotive, and Consumer segments. This was partially offset by growth in the Communications segment. Additionally, the company noted one less week of operations in the nine-month period of fiscal 2019 compared to fiscal 2018, impacting year-over-year comparisons.

Analog Devices actively manages its debt by refinancing existing facilities. In the third quarter of fiscal 2019, the company entered into a new $1.25 billion unsecured term loan facility, which was used to refinance its then-outstanding 3-year and 5-year term loan facilities. The company also has a $1.25 billion revolving credit facility available for future use. ADI also continues its share repurchase program, with $2.2 billion remaining authorization.

Analog Devices adopted ASU 2014-09 using the full retrospective method, which means prior periods presented in this filing have been restated to be consistent with the new standard. The adoption primarily changed the timing of revenue recognition for sales to certain distributors, moving it to the point of shipment rather than upon resale to end customers. This restatement impacted reported revenue, cost of sales, gross margin, and retained earnings in prior periods but did not materially affect cash flows from operations.

For the third quarter, revenue declined in Industrial (-4%), Automotive (-9%), and Consumer (-18%) markets. The Communications market showed resilience with a 7% increase, driven by demand in the wireless sector. For the nine-month period, Industrial revenue decreased by 5%, Automotive by 8%, and Consumer by 21%, while Communications revenue increased by 23%.