Analog Devices, Inc.

Good morning, and welcome to the Analog Devices first quarter fiscal year 2019 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, Director of Investor Relations. Sir, the floor is yours.

Thank you, Cheryl, and good morning, everybody. Thanks for joining our first quarter fiscal 2019 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, Annulating Financial Schedules, at investor.analog.com. Now on to the disclosures. The information we're about to discuss, including our objectives and outlook, includes forward-looking statements. Actual results may differ materially from these forward-looking statements as a result of various factors, including those discussed in our earnings release and in our most recent 10Q. These forward-looking statements reflect our opinion as of the date of this call. We undertake no obligation to update these forward-looking statements in light of new information or future events. Our comments today about ADI's first quarter fiscal 2019 financial results and short-term outlook will also include non-GAAP financial measures, which exclude special items. In comparing our results to our historical performance, special items are also excluded from these prior quarter and year-over-year results. 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. As a reminder, the first quarter of 2018 was a 14-week quarter. In addition, this is the first quarter of our adoption of ASC 606 or sell-in accounting. We have restated our historical financial statements to conform to this standard and posted a two-year quarterly end market look back for revenue on our investor site. All comments during today's call on revenue growth and our commentary during Q&A will exclude this extra week and be on a sell-in basis unless otherwise stated. In addition, as we move to sell-in accounting and further refine LTC's product mapping in the channel, we have adjusted approximately $80 million of annual revenue from communications to consumer. The new mapping does not impact industrial or automotive revenue. Okay, with that, I'll turn it over to ADICO, Vincent Roche. Vincent?

Thank you, Mike, and a very good morning to everybody. The first quarter of fiscal 2019 was another very successful quarter for ADI. In what is a challenging macroeconomic environment, we're executing soundly and delivering strong results. Revenue of 1.54 billion in the first quarter came in at the high end of our guidance, led by our strong year-over-year growth in our B2B markets. This growth was driven predominantly by continued strength in our communications market related to ongoing 4G upgrades and initial 5G deployments. Adjusted operating margins of over 41% were above the midpoint of guidance as we balanced our strategic investments with prudent discretionary spend. All told, adjusted EPS was $1.33, also at the high end of guidance. Over the past 12 months, we have generated over $2.1 billion in free cash flow, or 35% of revenue, which places ADI in the top 5% of the S&P 500. And over that same time period, we've returned more than 100% of free cash flow to our shareholders after debt repayments. Now, while macro uncertainties continue to exist, our strong execution and results enable us to continue to invest in extending our franchise in strategic areas where we see attractive opportunities for future growth. To that end, we're investing record levels of R&D to push the boundaries of innovation and expand the breadth and depth of our franchise. In addition, we've increased our investments in our go-to-market activities to further broaden and deepen our customer reach and our engagements. The strength and resiliency of our business model allows us to innovate regardless of business conditions. This ability is imperative given the long life cycles in our markets, where our average product lifespan is a decade or indeed more. And while some competitors pull back and lose momentum in uncertain times, we plan to continuously invest to build upon our virtuous cycle of innovation-led growth. In my 30 plus year career with ADI, I've never been more confident or excited about our prospects than I am today. The third wave of information and communications technology is creating an inflection in the analog industry. And we've built a product portfolio aimed at favorable macro trends that I believe will provide tailwinds for years to come. Now I'll provide you with some examples of what we're seeing in our B2B market specifically. Today, industrial customers are balancing capex deployments with tariff uncertainty. However, our customers remain focused on digitizing the factory and securing the efficiency and productivity that will fuel their future growth. The move to the digital factory requires more high-performance signal processing and power management, additional sensors, and more robust connectivity. These are all areas where ADI excels. On the automotive front, Vehicle unit growth has stalled recently, but the real growth drivers, electric and autonomous vehicles, are in the nascent stages. Electric vehicles represent only 1% of worldwide sales, but industry reports suggest this will climb to more than 15% over the next decade or so. The powertrain in an electric vehicle opens the opportunity for us to address up to three times the content compared to combustion engines. Today, we enjoy the luxuries of level two autonomous vehicles, but the cars of the future will require higher precision and up to four times more sensors per car to provide the necessary level of safety for a fully autonomous vehicle. And it's not just about radar or cameras. We expect that these cars of the future will require LiDARs and IMUs as well. ADI is uniquely positioned to provide the necessary building blocks across all the sensing modalities, as well as the analog and mixed signal processing, RF and microwave connectivity, algorithms, and power management to make the autonomous vision a reality. In communications, carriers are looking to upgrade both the wireless networks and the optical backbone to deal with the ever-increasing deluge of data being created and transmitted. This additional data intensifies the need for spectral, space, thermal, and cost efficiency. And with our comprehensive portfolio of software-defined mixed signal, RF microwave, and power management technologies, we're creating very compelling solutions for our customers as they upgrade 4G networks and begin the introduction of 5G systems. An important bridge between 4G and 5G is the introduction of massive MIMO radio systems And ADI's software-defined transceiver technology is at their core. These upgrades to massive MIMO systems are just beginning today, and the increase in radio count expands our content opportunity by up to four times when compared to traditional 4G systems. This phase will be followed by network expansions to higher frequencies to increase bandwidth, as well as the upgrade of the optical backhaul and virtualization of the network to more efficiently move the data. This next wave will once again create the opportunity for ADI to address additional content both in the radio as well as in the optical network. We see these upgrades towards 5G as a multi-year cycle that's just beginning and are expected to provide tailwinds to our business well into the future. And lastly, in healthcare, the dual impact of an aging global population and the pressing need to more economically and effectively manage wellness is driving continued investment in our products by our customers. Here, we're complementing our high-end component franchise with highly integrated subsystems, thereby extending our addressable market to capture new levels of value. For example, in digital x-ray, we're creating highly integrated photons-to-bit subsystems that enable our customers to deliver high-fidelity images at lower radiation dosages. Separately, ADI's deep expertise in vital signs monitoring and ultra-low-power electronics enable clinical-grade performance under battery power, allowing us to deliver high-accuracy portable monitoring at virtually any point of use. Now in closing, as the saying goes, a rising tide lifts all ships. The true test of a company's strategy, execution, and value is its performance during a low tide. Now we've chosen a strategy that focuses on innovation, diversity across technologies, markets, and applications, and continuous improvement across every aspect of our performance. And the results speak for themselves. We're confident that our ethos and heritage of innovation leadership and high-performance analog, deep relationships with our customers, and alignment to favorable macro trends positions us to continue to outperform, capture more value, expand our addressable market, and deliver strong results for our shareholders. And so with that, I'll hand it over to Prashanth, who will bring you through more detail.