Analog Devices, Inc.

Good morning and welcome to the Analog Devices fourth quarter and fiscal year 2022 earnings conference call, which is being audio webcast via telephone and over the web. As a reminder, this event is being recorded. I'd now like to introduce your host for today's call, Mr. Michael Luccarelli, Vice President of Investor Relations and FP&A. Sir, the floor is yours.

Thank you, Betsy, and good morning, everybody. Thanks for joining our fourth quarter fiscal 2022 conference call. With me on the call today are ADI CEO and Chair Vincent Roche and ADI CFO Prashanth Mahendra Rajat. For anyone who missed the release, you can find it in relating financial schedules at investor.analog.com. On to the disclosures. 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 their peer-reviewed reports and other materials follow the SEC. After results could differ materially from the forward-looking information as these statements reflect our expectations only as of 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. Reconciliation 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 ADI CEO and Chair, Vince. Vince?

Thank you, Mike, and good morning to you all. Well, I'm really extremely pleased to share that we delivered another record quarter, capping off what was a banner year for ADI. Our fourth quarter revenue was $3.25 billion, and adjusted EPS was $2.73, and both at the high end of our outlook. For the fiscal year, revenue was $12 billion, up an impressive 26% year-over-year on a combined basis. Our industrial, automotive, and communications markets delivered all-time high revenues, and our consumer business continued to grow despite industry-wide weakness. Adjusted EPS increased by nearly 50% to $9.57. We also delivered on our commitment to return 100% of free cash flow to shareholders in 22 returning $4.6 billion through share repurchases and dividends. These results not only exemplify the strength of our portfolio, but also our deep customer focus and the hard work of our employees to fortify ADI's brand. To that end, in my recent conversations with customers, the message has been very clear. While we're not immune to supply disruptions, ADI's service Quality and support throughout this challenging time continues to be outstanding. Importantly, this sentiment is shared by customers of all sizes and across all markets. As a result, our customers are calling upon ADI to engage in longer term, more strategic collaborations to develop solutions that further empower the intelligent edge. So to ensure we remain at the forefront of technological advancements and customer service, we invested $1.7 billion in R&D and $700 million in CapEx in FY22. Now let me start with R&D. Our investments are targeted at strengthening our foundational high-performance analog franchises, as well as moving up the stack to create more complete solutions for our customers. A prime example is our Apollo platform, which we previewed at our investor day in April. Apollo is a flexible, high-speed signal processing platform with unmatched levels of functionality, integration, and performance, making it ubiquitous for all customers, but especially appealing to those in the broad market. During the quarter, we began sampling this innovative platform with our aerospace, communications, and instrumentation customers and their feedback has been extremely positive. Turning now to the operations side, over the last year, we invested a record amount of CapEx to increase our manufacturing output. And in 2023, we are once again investing aggressively in our U.S. and European factories to significantly expand our capacity. These investments will create a more flexible and cost-effective hybrid manufacturing model by increasing our swing capacity to around 70% of revenue in the coming years. Our R&D and supply chain investments are essential to support our design wind pipeline, which expanded by more than 10% in 22. This growth was led by our automotive energy systems and digital healthcare businesses. Notably, our growth in automotive was underpinned by battery management systems, or BMS, which now has an opportunity pipeline nearing $4 billion. This year, eight new manufacturers designed in our BMS solutions, including two that plan to utilize our wireless platform. Our strong leadership position combined with increasing EV penetration globally gives me great confidence in our future growth prospects. Looking now at some selected design activity in the quarter, in industrial automation, we were designed into an advanced diagnostic system that monitors machine health at a global supplier for energy exploration. Our system solution approach enables an approximate 50% reduction in size and lowers wiring costs meaningfully. In aerospace and defense, we won RF module programs at multiple defense prime contractors. Our modules integrate hundreds of components to simplify the design process for our customers while increasing our content from hundreds to thousands of dollars per system. In industrial instrumentation, we secured wins at two market leaders of next generation high voltage testers for electric vehicles and renewable energy systems. The combination of our high voltage processes and precision technology enables us to deliver accurate, reliable, and efficient testing required to scale the manufacturing of these systems. And lastly, in communications, we expanded our leadership in 5G radio systems with our transceiver portfolio, winning additional share at key suppliers. These new wins position us even better as 5G networks roll out globally especially in India, and ORAN begins to proliferate. Importantly, our design pipeline is beginning to benefit from cross-selling our ADI and Maxim portfolios. This puts us on a path to achieve our target $1 billion in revenue synergies. For example, at a European auto manufacturer, we built upon our strong audio connectivity position to cross-sell our high-speed GMSL technology connecting their advanced driver systems. We're also capturing new opportunities with GMSL in the industrial market. Last quarter, for example, our technology was designed into autonomous order fulfillment systems at one of the largest e-commerce companies. We're also making great inroads with our broader power portfolio, where our opportunity pipeline increased by double digits last year. Our increased breadth is helping us to better match customers' performance and power trade-offs across more applications, expanding our power SAN to nearly $10 billion. For example, at a leading European industrial customer, our position in mid-voltage power for distributed IO control systems enabled us to pull through additional power content and precision signal chain sockets, thereby doubling our content per system. Our expanding pipeline and significant revenue synergy opportunities instills greater diversity and resilience into our business while adding new growth vectors. And taken together, I'm confident in our ability to bend the growth curve and move from our historical mid-single-digit growth rate to our long-term model of 7% to 10%. So in summary, while the macro cross-currents are creating an abundance of uncertainty, ADI has successfully navigated many slowdowns over the course of our 57-year history. The strength of our franchise allows us to invest through business cycles, ensuring we continue to deliver breakthrough innovation, deepen our relevance to our customers, and capture the emerging secular opportunities at the intelligent edge. And so with that, I'll pass you over to Prashant.