Maxim Integrated Products, Inc.

Good morning, and welcome to the Analog Devices Second Quarter Fiscal Year 2024 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 Lucerelli, Vice President of Investor Relations and FP&A. Sir, the floor is yours.

Thank you, Gigi, and good morning, everybody. Thanks for joining our Second Quarter Fiscal Year 2024 Conference Call. Moving on to call today are ADI CEO and Chair Vincent Roche and ADI CFO Rich Puccio. For anyone who missed the release, you can find it and related financial schedules at investor.analog.com. On to the disclosures. The information we're about to discuss includes forward-looking statements, which are subject to certain risks and uncertainties as further described in earnings release, and are paired up with reports and other materials followed by the SEC. After results could differ materially from the forward-looking information as these statements reflect our expectations only at the date of this call. We undertake no obligation to update the statements except as required by law. References to gross margin, operating and non-operating expenses, operating margin, tax rate, EPS, and free cash flow in our comments today will be on a non-GAAP basis, which excludes special items. When comparing our results to our historical performance, special items are also excluded from prior periods. Reconciliation of these non-GAAP measures to the most directly comparable GAAP measures and additional information about our non-GAAP measures are included in today's release. And with that, I'll turn it over to ADIC own chair, Vince.

Thanks very much, Mike. Good morning and a big welcome to you all. So in the second quarter, a strong focus on execution resulted in revenue of $2.16 billion, with profitability and earnings per share finishing above the high end of our outlook. With 2Q now behind us, we believe we've passed the low point of this cycle, notably global manufacturing PMIs. which are highly correlated with our core business are improving, customer inventories are stabilizing, and our bookings have improved for a third consecutive quarter. Our growing optimism remains guarded, however, as short-term economic and geopolitical uncertainty persists. As such, we will continue to manage the near-term with great discipline as we fund and execute against our longer-term strategic priorities to drive increasing levels of value for all of our stakeholders. So with that framing, I'd like to share some examples with you of how we are continuing to strengthen ADI's high performance franchise across all markets and creating unique growth drivers that will be additive to what we hope will be a strong cyclical recovery. For example, in healthcare, we have exciting wins in areas such as the rapidly expanding surgical robotics market where the performance of our precision signal processing and connectivity solutions is critical. And in the fast-growing continuous glucose monitoring space, we've won multiple opportunities across several customers. Our unique digitally-enabled analog front-end solutions increase the accuracy and power efficiency of sensors and extend battery life from days to weeks. In industrial automation, The growth of the digital factory is accelerating upgrades to higher bandwidth, deterministic industrial ethernet that can support up to 10 times the number of edge devices across the factory floor. We believe our leadership position with key customers will create a durable revenue stream beginning next year that can grow to several hundreds of millions of dollars as deployments ramp over time. Turning to automotive, our solid performance is being driven by the proliferation of higher content vehicles that use more power management, more connectivity, and an increasing number of sensor platforms that open new signal processing opportunities for ADI. The increasing content per vehicle is a pervasive trend across all vehicle types, combustion engines, hybrids, and full EVs. For example, in advanced safety, We've increased our GMSL design wins from 12 to 15 of the top 20 OEMs and expanded our engagements at two European and one Korean OEM who intend to deploy our high-performance, high-bandwidth connectivity solution across a larger share of their fleets. We've also seen strong attach for our functionally safe power, which is used with sensors and displays in ADAS systems. and recently increased share at the leading global car manufacturer. In electrification, we've expanded our battery management system share at leading Chinese OEMs and more than doubled our BMS share in upcoming European OEM model launches. And two manufacturers intend to deploy our higher content wireless solutions starting next year. Now, I'd like to use the rest of my prepared comments today to share our perspectives on the role that artificial intelligence is playing and will play at ADI in the future. This technology has clearly reached a tipping point and our AI opportunity spans from sensor to cloud. While we've been adding algorithmic and software intelligence to our products now for decades, we've expanded the scope and pace of our investments in recent years. Today, we are increasingly leveraging AI in and around our products as well as in our operations to more fully meet our customers' needs and extend our industry leadership. We're deploying AI internally to help accelerate engineering development, enhance manufacturing efficiency, and create a better customer experience. But the majority of our activities are centered around product portfolio innovations that position us to take advantage of AI's enormous potential. We see this business opportunity coming in two distinct waves. The first wave, focused on infrastructure, is now underway and, as we all know, is growing very rapidly. In order to tackle the intensified energy and processing demands of AI compute systems, data center customers are investing in new vertical power architectures. As we highlighted previously, our vertical power technology, which can reduce power losses by up to 35% compared to existing architectures, is gaining traction with hyperscalers. We continue to leverage our heterogeneous integration expertise to create more efficient, smaller vertical power solutions that deliver more value and enable us to capture more share in this nascent space. Power-efficient computing, though, is just one challenge the AI ecosystem faces. Data must also be transported efficiently, securely, and at much, much greater speeds. This is driving wireline customers to upgrade connectivity infrastructure, sparking a transition to 800 gigabit and 1.6 terabit optical modules. At the electro-optical interface, Our ability to provide high performance solutions that integrate analog, digital and memory in a reduced form factor is indeed a key differentiator. Our high precision controller was recently designed into a 1.6 terabit optical module used in the next gen AI systems of the high performance compute leader. In industrial, AI is fueling extraordinary demand for high bandwidth memory and high performance compute. This in turn, is driving a new growth vector for our instrumentation and test business, particularly in SOC and memory test. We're working with key players globally to enable faster digital scan speeds, higher channel density, and the improved energy efficiency necessary to scale production of AI systems. The significantly greater amount of ADI content in these systems is positioning our high-performance compute and memory test sectors for record revenues in the near to midterm. The opportunity ahead for ADI is to compound the impact of this first wave by bringing application-specific AI models and high-performance compute right down to the physical edge, creating greater system value with added improvements in latency, power efficiency, security, and costs. So let me share some examples of how we are working to amplify this second wave. For example, in acoustic systems, we are combining our application-specific algorithms with ultra-low energy processing hardware to enrich our audio platform offerings. We're also developing a mixed signal processor with embedded neural networks that enable a system to learn and adapt to the highly variable nature of sound in real time. Excitingly, we have strong traction with multiple customers in this area. Now, in the same vein, we're leveraging our rich domain expertise with our growing processing capabilities to enhance our advanced connectivity platform in next-generation 5G radios. For example, we've implemented the first AI-enabled technology, combining an energy-efficient real-time neural network with an AI-assisted development tool to give customers the ability to solve their linearization challenges in a fraction of the time. In our power management platform, we're using AI to address the arduous challenge of tuning power trees for volatile consumption patterns in data centers. Our solutions reduce complexity for power engineers and compress the time required from weeks to hours, helping to lower costs and, of course, accelerate time to market. ADI is always operated at the physical edge where the world's most important real data is born. As multimodal AI becomes more pervasive at the edge and the diversity of sensor types is used to unearth deeper insights, we expect to see an explosion of demand that will accelerate growth for our broad signal chain as well as power portfolios. In short, ADI's AI future looks bright across the continuum of sensor to cloud. So in closing, I'm very proud of how our team has executed in one of the largest downturns the semiconductor industry has seen. More importantly, I've never been more excited about how we're positioned for the future and what it holds for ADI. And so with that, I'm going to hand it over to Rich.