Analog Devices, Inc.

And welcome to the Analog Devices second quarter fiscal year 2022 earnings conference call, which is being audio webcast via telephone and over the web. I'd like to now introduce your host for today's call, Mr. Michael Luccarelli, Vice President of Investor Relations. Sir, the floor is yours.

Thank you, Katrina, and good morning, everybody. Thanks for joining our second quarter fiscal 2022 call. With me on the call today are ADI CEO and Chair, Vincent Roche, and ADI CFO, Prashant Mahendra Bajaj. 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 the earnings release and our periodic reports and other materials following the SEC. After results could differ materially from the forelooking information as these statements reflect our expectations as of the date of this call. You are going to take 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. In 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 also included in today's earnings release. And with that, I'll turn it over to ADI CEO and Chair, Vincent Rose. Vince?

Thank you, Mike, and a very good morning to you all. Well, I'm very pleased to report that ADI delivered another quarter of record revenue, profitability, and earnings driven by continued insatiable demand for our products, strong operational execution, and accelerated synergy capture. Moreover, amidst a dynamic macro environment, we're operating from a position of remarkable strength supported by our record backlog, robust bookings, and ongoing capacity expansions, which position us favorably as we enter the second half. Now moving to a summary of our results, revenue was $2.97 billion above the high end of our outlook and up 28% year-over-year on a pro forma basis. Strength was broad-based with all segments of double digits year over year. Impressively, adjusted gross margin expanded to 74% and operating margin to 50%. Adjusted EPS was $2.40, exceeding the high end of outlook and increasing over 50% from the year-ago period. Overall, I'm very excited with our performance and our team's outstanding execution. Today I'd like to reinforce what was shared at our investor day around how our markets are evolving and how we're investing to solve more of our customers' problems while also improving on our business model that's both rich with growth opportunities and indeed resiliency. The next wave in the evolution of the ICT sector is the nascent intelligent edge revolution. It'll be characterized by ubiquitous sensing, hyperscale computing, and pervasive connectivity pushing processing and intelligence closer to the edge. Semiconductors are the bedrock enabling this next wave. And ADI, where data is born, is at the center of this revolution. At our core, we're an innovation-driven enterprise over the last decade through both robust organic investments and strategic M&A. We've built the industry's broadest and highest performance analog, mixed signal, and power portfolio. Our offerings span from microwave to bits, nanowatts to kilowatts, sensor to cloud, and increasingly from components to subsystems. Our vast arsenal of technologies, along with the deep level of engagement and support we provide our customers, has earned us the number one positions in analog, mixed signal, RF, and high performance power. This coupled with our focus on customer success awards ADI with an innovation premium that is reflected in our ASPs that are more than three times the industry average and also industry-leading gross margins. The growing scope of our customers' products is dramatically expanding in complexity and pressuring their product development teams and innovation cycles. To meet these challenges and deliver the next waves of disruptive innovations, we're investing over $1.6 billion in R&D annually. These investments strengthen our broad market franchise and enable us to expand our SAM in vertical applications where more complete solutions are necessary. We achieve this by integrating our core analog technologies with increasing levels of digital algorithms and software. Now let's look at how our technology is intersecting with our markets. Industries like transportation, energy, telecoms, manufacturing, and healthcare are prioritizing digitalization. This is driving new generations of applications and fueling a host of concurrent secular growth trends. And I'd like to touch on just a few now. Starting with automotive, here ADI is the market leader in battery management systems, for example, for EVs. Our battery management systems, or BMS, solutions offer customers the highest levels of accuracy, reliability, safety, and security. Our wireless BMS solution offers all the benefits of wired, but also enables rapid battery pack configurability and cost-effective scaling of our customers' EV fleets. This innovative solution continues to gain traction in the market and adds to our content per system by up to two times. Moving to communications, where ADI is the market leader in radio signal chains for 5G, with a majority share across the ecosystem. Our latest generation transceiver includes a fully integrated digital front end and grows our SAM by 2X. This innovative radio architecture reduces system cost and weight and improves power efficiency. Further, the flexibility of these software-defined solutions allows them to be used across traditional 5G networks, as well as in emerging Open RAN and LEO satellite networks. Lastly, healthcare. We have a number one position with dominant share in medical imaging, for example. Subsystems like our Photons to Bits module are used by the top CT players in the world. Our solution delivers the highest fidelity images while decreasing radiation dosage. And in the process, it allows us to capture four times the sun compared to offering just components alone. In addition to expanding our innovation edge across the secular trends to amplify growth, the maximum combination creates a $1 billion revenue synergy opportunity for us over the next five years. The first opportunity arises from customer cross-selling. leveraging our complementary relationships to pull through our extended portfolio. Second is fusing together the new product roadmaps of these two premier analog portfolios to push the boundaries of what's possible. And third is power management. Here the combination with Maxon increases our breadth of power capabilities, creates a more cost competitive portfolio, and adds to our engineering talent pool. As a result, we unlock $4 billion of additional power set and look to double our power revenue in the years ahead. The proliferation of the intelligent edge and our revenue synergy opportunity gives me great confidence that we can bend the growth curve upwards, moving from our historical mid-single digits growth rate to our new model of 7% to 10%. Now I'd like to speak a little to the unique resiliency of our business. The diversity of our portfolio is a source of great strength. We ship 75,000 product schemes, which support thousands of applications to over 125,000 customers. Notably, 80% of our revenue is derived from products that individually contribute no more than 0.1% of total revenue. And the longevity of our products is unmatched. On average, our products have lifespans of a decade or more, effectively delivering recurring revenue streams for decades. It's these characteristics that create a high barrier to entry and an enduring business model. Finally, we utilize a geographically diverse hybrid manufacturing strategy to tame the complexity and fragmentation of the analog market. This strategy provides us with a broad array of technology and packaging necessary to create innovative solutions from seven nanometers to seven micrometers. At the same time, this model creates a diverse network of internal and external partners to best manage our operations through economic cycles. As we mentioned at our investor day, we're investing in our internal manufacturing operations to build a more robust and cost-effective model. To that end, we're doubling the capacity of our internal factories and adding significant capital to our product test operations. These investments will grow our output this year and into 2023 and increase our swing capacity across our network to over 70% of revenue. So in closing, ADI is a leader in innovating at the edge, and I believe that our best days are still ahead of us as we drive increased value for our customers, shareholders, and society. And with that, I'm going to pass it over to Prashant to take you through the financial details. Thank you, Vince.