Maxim Integrated Products, Inc.

Good morning, and welcome to the Analog Devices Third Quarter Fiscal Year 2021 Earnings Conference Call, which is being audio webcast via telephone and over the web. I'd now like to introduce your host for today's call, Mr. Michael Luccarelli, Senior Director of Investor Relations. Sir, the floor is yours.

Thank you, Shelby, and good morning, everybody. Thanks for joining our Third Quarter Fiscal 2021 Conference Call. With me on the call today are ADI CEO Vincent Roche, and ADI CFO, Prashant Mahendra Rajah. For anyone who missed the release, you can find it and relating financial schedules at investor.analog.com. And on to the disclosures. The information we're about to discuss includes four looking statements, which are subject to certain risks and uncertainties, as further described in our earnings release and our most recent 10Q and other periodic reports and materials filed with the SEC. After results could differ materially from these four looking information, as these statements reflect our expectations only as the date of this call. We undertake no obligation to update these statements except as required by law. Our comments today will also include non-GAAP financial measures, which exclude special items. When comparing our results to our historical performance, special items are also excluded from prior rec periods. Reconciliations of these non-GAAP measures to their most directly comparable GAAP measures and additional information about our non-GAAP measures are included in today's earnings release. And with that, I'll turn it over to ADICO, Vincent Roche.

Thank you Mike and a very good morning to everybody. So ADI delivered a second consecutive quarter of record revenue and earnings. Despite the challenging supply environment, our strong performance was driven by continued operational excellence and insatiable demand as semiconductors power the modern digital age. Broadly speaking, the economic recovery continues to take shape with demand still far exceeding supply. We, like many others in our industry, will face a constrained supply environment into 2022. Despite this backdrop, our business continues to achieve record results as our investments and design wins over the last few years are matched with strong demand across our end markets. So looking ahead, the combination of robust bookings, lean inventories, and ongoing capacity additions position ADI to close fiscal 21 on a high note and continue to grow in the next year. So moving to our third quarter results, revenue was $1.76 billion, up 21% year over year. All markets increased sequentially, with industrial and automotive once again achieving records. Gross margin expanded to over 71%, and operating margin over 43%. Adjusted EPS of $1.72 increased 27% year over year. Despite elevated capital spending to increase our capacity, free cash flow over the trailing 12 months was $2.2 billion. This equates to a 34% free cash flow margin, maintaining our position in the top 10% of the S&P 500. So overall, I'm very pleased with our performance and our team's outstanding execution. As you know at ADI, our ethos of innovation and deep customer engagements ensure that we stay ahead of what's possible. We invest more than a billion dollars annually in R&D, focused on strengthening our core franchises and capturing market opportunities presented by secular growth directors, which have accelerated in the economic recovery. Now let me share some recent highlights with you. Our industrial business is our most diverse segment across customers, products and applications and features sticky long product life cycles. Our largest industrial segment instrumentation and test is comprised of automated test equipment, electronic test and measurement and scientific instruments. This is truly a performance driven market that aligns perfectly to our high performance precision signal chain, power management and RF portfolios. Importantly, Instrumentation and test is aligned with all secular growth trends, from connectivity to EVs to sustainability. The growing technology complexity of these applications requires more testers with more advanced performance capabilities. Today, ADI is the leader in communications tests, and we're collaborating with Keysight, for example, to advance the development of ORAN solutions. This partnership will enable the fastest path for designing cost-effective and power-efficient radio units. Looking ahead, we're already beginning to partner with our customers to test emerging 6G technologies. Our innovations in the instrumentation market also have a positive impact on human and planetary health. One particular area is our environmental monitoring business, where there is an increased need for highly reliable and accurate instruments. to improve the standard of living globally. Our market leading portfolio of precision converters enables 10 times greater measurement resolution of fine particulate matter, better identifying trace pollutants. The next largest industrial segment is factory automation. Over the last year, many of our customers are rethinking their factory floors and supply chains to make them more resilient, cost effective and flexible through automation and connectivity. To achieve this, our customers will further automate their businesses with intelligent and connected factories and increase their use of robots and cobots. Specifically, cobots require ADS precision signal chain and power franchises, sensing technologies, and robust wired and wireless connectivity. This new vector of growth increases our SAM opportunity by three times. that of a traditional robot. To that end, our precision motion control business is on track for a record year of design wins, including a recent win at a leading Japanese robotics company for its next generation cobots. In addition, we're leveraging our domain knowledge and system level expertise in a collaboration with Universal Robots to design smaller, smarter, and easier to use robots that help scale tasks safely and transform workforces. Well, turning now to our communications business, 5G is beginning to broaden globally, especially in North America, as carriers look to deploy newly acquired C-band spectrum. And ORAN continues to gain momentum also, with several of the largest European carriers setting ambitious 2025 ORAN deployment targets. This includes Vodafone, where our technologies are very well represented. This quarter, we extended our market-leading position in 5G radio solutions with the introduction of the industry's first software-defined transceiver that includes a fully integrated digital front end. Our innovative radio architecture greatly improves power efficiency, thereby reducing radio weight, size, and carrier expenses. This high level of integration eliminates FPGAs to simplify implementation and facilitate the proliferation of these emerging ORAN networks. Our next generation transceiver platform is already designed in at a major tier one global supplier that is gaining share in these 5G and ORAN deployments across North America as well as Europe. Stepping back, We expect our communications business to return to growth in 2022. We have strong design momentum and our geographic mix has shifted with North America, Europe, and Korea representing our largest sources of revenue. Moving now onto automotive. Over the last two years, we've realigned our business to focus on electrification and the in-cabin human experience. We're seeing the benefits of this strategy as we continue to scale our market leadership in battery management, power management, audio systems, and connectivity. Starting firstly with our battery management systems, or BMS, our wired and wireless portfolios provide unmatched accuracy to deliver market-leading vehicle range and can measure all key battery chemistries, including zero-cobalt LFP. Additionally, our solutions incorporate ASLD functional safety and an ultra-low power continuous monitoring feature that ensures the battery remains stable even while parked, which is a first in the market. In addition, this quarter marked the first time we recognized revenue for our wireless BMS solution as General Motors prepares to ship its first of 30 EV models powered by the Ultium battery platform. And this is just the beginning for this groundbreaking BMS technology as OEMs realize the power of wireless data in scaling their fleets. Turning to audio systems and connectivity, as complexity continues to increase, there's very strong demand for our market-leading audio systems with signal processing, A2B connectivity, and active road noise cancellation. Our solutions offer the highest fidelity performance in the market while reducing vehicle weight, removing nearly 100 pounds per vehicle. During the quarter, two leading OEMs adopted A to B and the top three European vehicle manufacturer implemented A to B as its audio connectivity standard across its entire fleet. In total, A to B is now designed in at over 30 OEMs including 18 of the top 20 global automotive companies. Furthermore, interest in our active road noise cancellation feature continues to intensify. We're designed in at nine OEMs, up from five just a year ago, including Hyundai and a leading EV manufacturer. This added capability can more than double the value of our A to B solution. In all, these are just a few of the countless examples of the tremendous work underway at ADI. We remain focused on delivering breakthrough innovations to stay ahead of our customers' needs. So in closing, I've never been more confident about ADI's future. Over the last decade, we've built an industry-leading portfolio with unparalleled breadth and depth of capabilities. That's aligned with more profitable end markets. And our portfolio and leadership position will only get stronger with the acquisition of Maxim, enabling us to deliver strong returns in the years to come. And so with that, I'll hand you over to Prashant.