Analog Devices, Inc.

Good morning, and welcome to the Analog Devices First Quarter Fiscal Year 2025 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, Vice President of Investor Relations and Division Controller of Data Center Energy and Power. Sir, the floor is yours.

Thank you, Daniel, and good morning, everybody. Thanks for joining our first quarter fiscal 2025 conference call. With me on the 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. Information we're about to discuss includes forward-looking statements, which are subject to certain risks and assertions as further described in earnings release and other periodic reports and other materials following the SEC. After results could differ materially from the forth 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. 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. These excluded special items. When comparing our results to historical performance, special items are also excluded from prior periods. Reconciliations, all these non-GAAP measures to the most directly comparable GAAP measures and additional information about our non-GAAP measures are included in today's earnings release. All references to earnings per share on a fully diluted basis. And with that, I'll turn it over to ADIC's own chair, Vincent Roche.

Thanks very much, Mike, and a very good morning to you all. Well, first quarter revenue profitability and earnings per share all finished above the midpoint of our outlook. And while we continue to operate in a challenging macro and geopolitical environment. Our first quarter results and outlook for double-digit year-over-year growth in our second quarter builds my confidence that 2025 will be a year of growth. Our track record of resilience and profitability through cycles, combined with our strong balance sheet, supports our longstanding robust capital return program. I'm delighted to share that we've increased our dividend for the 21st consecutive year and that over just the past five years, we have returned more than $16 billion, or roughly 15% of our current market cap, to shareholders through dividends and share repurchases. Turning now to our operating environment, the magnitude and duration of this most recent semiconductor cycle has surprised many of us. But we believe ADI has entered and is well positioned for sustained recovery. Throughout the cycle, we invested diligently to enhance and leverage our hybrid manufacturing model to support the dynamic needs of our customers, both big and small. We work closely with our customers to be responsive to their evolving business needs and map factory starts to true end demands. As a result, inventory levels have largely normalized and our partnership approach with our customers throughout the volatility of the past several years has enabled us to balance supply and real demand. While the macro backdrop will continue to influence the pace of our recovery, the signals we monitor from lean channel inventories to gradual bookings improvements over the past 18 months support our view that we've passed the cyclical trough and the tide has turned in our favor. Throughout the cycle, we've been busily deepening our customer engagements and accelerating our pipeline growth and conversion. Many of the design wins I've shared on recent calls are now contributing to growth. And let me give you some examples. For example, In industrial automation, the shift towards decentralized intelligence to enable modular manufacturing is driving significant growth in software defined connectivity solutions. Our software configurable IO products that double channel density and reduce power consumption by 40% have been installed across all major automation suppliers. Revenue from these wins has begun ramping as the automation market begins to recover and will provide a durable revenue stream over the next decade. Within the growing surgical robotic segment, increasing levels of content from across our portfolio and in particular, our high precision solutions are being deployed in next generation surgical systems. And additionally in healthcare, The growing interest in a data driven approach to health and wellness is creating a convergence of the clinical and consumer markets and driving demand for higher performance vital signs monitoring in consumer wearables. Our suite of high performance sensors, signal chains and efficient power solutions and wins at leaders in these markets position us for double digit growth this year. Within the automatic testing equipment market, the growth of AI has significantly increased our signal chain and power content. In some cases, by up to 300% across memory test systems. Customers are leveraging our solutions to increase channel density and throughput, while reducing power demands by up to 30% per system. In light of increased hyperscaler CapEx, we expect our 2025 memory and high performance compute test revenue to achieve strong growth. In our broad aerospace and defense portfolio, our modules, which support ASPs often into the hundreds of thousands of dollars, are expected to lead double digit growth in this industrial subsector in 2025. In addition, We're anticipating growth this year from newer design wins in Aurifant power in the military and commercial satellite sectors. In automotive, the convergence of trends ranging from autonomy to electrification to immersive in-cabin experiences continue to drive robust demand for many of our solutions. For example, our GMSL portfolio is outpacing the growth of advanced driver assistance systems. and is positioned to reach yet another record-breaking year in 2025. Since acquiring this video connectivity technology in 2021, our revenue has nearly tripled. We're also anticipating continued record-setting revenue from our A to B and functionally safe power franchises, which share similar growth trajectories. Lastly, in electric vehicles, BMS is poised to return to growth in 25 after a challenging prior year. Part of this growth is coming from our higher content wireless solution wins with key OEMs ramping in America and Europe. In communications, our growth is predominantly being driven by robust CapEx investments to support AI infrastructure build-outs. Our high-precision electro-optical controller is now shipping in a 1.6 terabit optical module for AI systems based on industry-leading GPUs. On the power side of the data center, we're delivering high-voltage power path protection systems, which are on a strong growth trajectory, and we'll begin shipping our vertical power solutions later in this year. Finally, in consumer, design wins secured in recent years at multiple customers across numerous applications, including premium handsets, hearables, wearables, and gaming systems, began to drive robust diversified growth in the second half of fiscal 24. With even more content in upcoming launches, we expect a strong year ahead and beyond in consumer. Collectively, we anticipate these combined cyclical and idiosyncratic trends to return us to a solid growth path this year. So in closing, the relatively favorable position in which we find ourselves coming out of one of the worst downturns the industry has ever experienced is not by chance, but rather a reflection of our fiscal and operational discipline, commitment to the success of our customers and our investments for the long term. And while I'm excited about our prospects for 2025, I'm even more excited about the longer-term opportunities across numerous concurrent secular growth areas, including automation, digital healthcare, electrification, automotive data center, and many, many more. A common request from our customers across our many diversified applications is that we help them tame the increasing complexity by bringing more complete solutions to them, a reflection of our robust technology stack and stellar customer reputation. In stepping up to our customers' challenge, we continue to push the edges by investing vigorously in our world-class analog, mixed signal, and power portfolios, and integrate higher levels of supporting digital and software into our solutions to meet our customers at the application layer. And so with that, I'd like to pass the call over to Rich.