Analog Devices, Inc.

Good morning, and welcome to the Analog Devices Third Quarter Fiscal Year 2022 Earnings Conference Call, which is being audio webcast via telephone and over the web. I'd like now to introduce your host for today's call, Mr. Michael Lucerelli, Vice President of Investor Relations in FP&A. Sir, the floor is yours.

Thank you, Matt, and good morning, everybody. Thanks for joining our Third Quarter Fiscal 2022 Call. With me on the call today are ADI CEO and Chair Vincent Roche and ADI CFO Prashant Mahendra Rajah. For anyone who missed the release, you can find it and related financial schedules at investor.analog.com. Now 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 our earnings release and our periodic reports and other materials following the SEC. Actual 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 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 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. Please note, we've also published our annual ESG report last quarter titled Future Forward. You can find it on the IR webpage. And with that, I'll turn the call over to ADI CEO and Chair Vince. Vince?

Thank you, Mike, and good morning to you all. Well, I'm pleased to share that we executed very well amidst a dynamic macro backdrop. We delivered another quarter of record results driven by continued operational excellence, strong financial discipline, and resilient demand for our diverse portfolio of innovation-rich products. Revenue is $3.1 billion, up 24% year-over-year on a combined basis, and above the midpoint of our outlook. Strength was broad-based with double-digit growth in every end market. Our third quarter profitability reflects ADI's innovation premium, and strong operating leverage with gross and operating margins of 74 and 50% respectively. Adjusted earnings per share of 252 finished at the high end of our outlook, marking another new high. I'm exceptionally pleased with our results, and I want to thank our employees for their continued hard work and dedication to our success, and importantly, to the success of our customers. At ADI, innovation is ingrained in our culture, fueled by an unwavering commitment to robust R&D investments. Over the last 12 months, we've invested over $1.7 billion in R&D. A key facet to our innovation-driven success is our dedication to extensive and deep customer engagements, which enables us to collaborate with them in solving their toughest problems. Now I'd like to share some recent customer highlights, In automotive, we reinforced our market-leading position in BMS with wins at two premium European auto manufacturers. One of these wins was with our wireless BMS solution. This marks the fourth OEM to adopt wireless BMS as customer interest continues to build for this unique technology. In sustainable energy, we announced a design win with Enel Group on the quantum edge device used to digitally monitor electric grids. ADI's unmatched precision measurement capabilities are critical to creating a more resilient and flexible grid to help advance efficient electrification globally. In healthcare, the recently released wireless hospital monitoring system by GE Healthcare in Europe uses ADI solutions across signal chain, power, RF MCUs, and sensors. This wearable system enables wireless continuous monitoring to detect patient deterioration earlier helping to improve outcomes. Today I'd like to profile our $1.5 billion-plus consumer franchise, a business that plays an important role in our long-term profitable growth strategy. Given the recent negative data points surrounding the consumer and market, one may wonder why highlight this market now. But that's just the reason our consumer business is built differently. In the third quarter, we posted our seventh consecutive growth quarter. And while we are not immune to macro slowdown, we have aligned this business to the high end of the market where performance really matters and into applications where our differentiation is truly valued. The composition of our consumer franchise is indeed unique. Approximately 30% of our revenue comes from long lifecycle prosumer applications. including next-generation conferencing systems, professional audio-video, and home theater. The remaining revenue in consumer relates to portables, including fast-growing wearables and hearables, as well as premium smartphones. Taking a step back, over the last five years plus, we have reconfigured our consumer business to increase diversity across customers, products, and applications to better drive growth and limit volatility while enhancing profitability. The addition of Maxim further enhances our diversity and expanded our portfolio. Over this time, we've increased our product SKUs to just over 10,000 and expanded our customer count to more than 3,000. Importantly, the composition of this business is quite similar to our B2B markets, with no single product contributing more than a couple of percentage points to total ADI sales. The velocity of innovation in the consumer market is appealing. It allows us to accelerate technology developments and commercialize solutions quickly at scale. Over time, we take these breakthrough solutions into other markets to create new waves of growth and drive strong profitability and cash flow. For example, we have leveraged our consumer audio expertise into the automotive market. This capability was demonstrated at our investor day where we showcased an electric vehicle with Dolby Atmos that uses our Shark DSP and software that was first proven in the consumer business. Additionally, we've also leveraged R&D investments from our core franchises into the consumer market. To that end, Our high precision converters and industrial instrumentation, for example, have been repurposed to solve similar challenges for stabilization in smartphone cameras and pressure sensing in wearables. Not only have we created a highly diverse and profitable business, but also one that is aimed at key growth drivers that position us to grow at a high single digit rate over the long term. For example, our prosumer growth has been revitalized as companies implement future work plans that encompass more immersive enterprise video conferencing. Here the breadth of our portfolio across DSP, analog, mixed signal, and power management enables us to solve the entire customer challenge from high bandwidth connectivity to video resolution and sound quality. And turning now a moment to the portables market, In hearables, we ship into the majority of premium wireless stereo earbuds. Our newest offerings include software augmented hearing algorithms and optimized power that reduces size and improves audio fidelity while increasing our value per system by over three times. In wearables, we're a leader in personal wellness products with our sensing solutions designed into over 50% of products today. There is a convergence of these personal wellness products and clinical-grade vital signs monitoring solutions that could unlock new opportunities for ADI. And in premium smartphones, we're expanding our share and content at key customers, which is providing us additional diversification and stimulating new growth vectors. An emerging opportunity is the metaverse, ADI's breadth of hardware, software algorithms, and domain expertise gives us an ability to provide complete subsystem solutions. While we're still in the early days, of course, momentum is building, and we have design wins in multiple next generation AR, VR headsets. Across all these consumer applications, power management is becoming ever more critical. Customers are adding more features into smaller spaces, while consumers are demanding longer battery life. Maxim doubled the size of our low power portfolio and increased our consumer power sum by over a billion dollars. We're already beginning to see the cross-sell benefits of our complimentary customer bases and synergistic portfolios with wins in both wearables and conferencing systems. So in summary, I'm very encouraged with the strides we've taken to reignite growth in our consumer business and with a record opportunity pipeline and significant synergy potential, I believe we're in a position to deliver consistent growth over the long term. Now before passing over to Prashant, I'd like to make some comments on the current business environment. Obviously, the macro backdrop is dynamic, and it's clear that we're at an inflection point. Economic conditions are beginning to impact demand, With orders showing, orders slowing later in the quarter and cancellations increasing slightly, Prashanth will provide additional details on these dynamics in his remarks. ADI successfully navigated macro challenges many, many times before in our 57-year history. We've created the premier analog franchise with an unmatched diversity of products, customers, and applications. And we've invested in a hybrid manufacturing model that better adapts to demand fluctuations. These characteristics instill a resiliency into our business to mitigate market weaknesses, sustain profitability, and enable investment in our business through economic cycles to focus on playing our long game. And with that, I'll hand it over to Prashant.