adi-20240203

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 10-Q

(Mark One)


☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended February 3, 2024


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No. 1-7819

Analog Devices, Inc.

(Exact name of registrant as specified in its charter)

Massachusetts

04-2348234

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

One Analog Way,

Wilmington,

01887

(Address of principal executive offices)

(Zip Code)

(781) 935-5565

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock $0.16 2/3 par value per share	ADI	Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☑

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

As of February 3, 2024 there were 495,908,150 shares of common stock of the registrant, $0.16 2/3 par value per share, outstanding.

PART I — FINANCIAL INFORMATION


ITEM 1.			Financial Statements

ANALOG DEVICES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(in thousands, except per share amounts)


	Three Months Ended
	February 3, 2024		January 28, 2023
Revenue	$	2,512,704	$	3,249,630
Cost of sales	1,038,763		1,125,289
Gross margin	1,473,941		2,124,341
Operating expenses:
Research and development	391,427		414,095
Selling, marketing, general and administrative	290,078		326,284
Amortization of intangibles	190,332		253,142
Special charges, net	16,140		—
Total operating expenses	887,977		993,521
Operating income:	585,964		1,130,820
Nonoperating expense (income):
Interest expense	77,141		60,453
Interest income	(9,169)		(10,829)
Other, net	4,574		7,723
Total nonoperating expense (income)	72,546		57,347
Income before income taxes	513,418		1,073,473
Provision for income taxes	50,691		111,999
Net income	$	462,727	$	961,474

Shares used to compute earnings per common share – basic	495,765		507,121
Shares used to compute earnings per common share – diluted	498,741		511,184

Basic earnings per common share	$	0.93	$	1.90
Diluted earnings per common share	$	0.93	$	1.88

See accompanying notes.

ANALOG DEVICES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(in thousands)


	Three Months Ended
	February 3, 2024		January 28, 2023
Net income	$	462,727	$	961,474
Foreign currency translation adjustments	385		2,499

Change in fair value of derivative instruments designated as cash flow hedges, net	8,020		25,467
Changes in pension plans, net actuarial gain/loss and foreign currency translation adjustments, net	(1,388)		452
Other comprehensive income	7,017		28,418
Comprehensive income	$	469,744	$	989,892

See accompanying notes.

ANALOG DEVICES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(in thousands, except share and per share amounts)


	February 3, 2024		October 28, 2023
ASSETS
Current Assets
Cash and cash equivalents	$	1,303,560	$	958,061

Accounts receivable	1,196,721		1,469,734
Inventories	1,553,221		1,642,214



Prepaid expenses and other current assets	362,375		314,013
Total current assets	4,415,877		4,384,022
Non-current Assets

Net property, plant and equipment	3,281,937		3,219,157
Goodwill	26,913,134		26,913,134
Intangible assets, net	10,871,054		11,311,957
Deferred tax assets	2,172,174		2,223,272

Other assets	734,288		742,936
Total non-current assets	43,972,587		44,410,456
TOTAL ASSETS	$	48,388,464	$	48,794,478
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Accounts payable	$	398,107	$	493,041


Income taxes payable	410,013		309,046
Debt, current	499,322		499,052
Commercial paper notes	544,444		547,224

Accrued liabilities	1,071,480		1,352,608
Total current liabilities	2,923,366		3,200,971
Non-current Liabilities
Long-term debt	5,946,673		5,902,457
Deferred income taxes	2,975,815		3,127,852

Income taxes payable	415,535		417,076

Other non-current liabilities	579,002		581,000
Total non-current liabilities	9,917,025		10,028,385

Shareholders’ Equity
Preferred stock, $1.00 par value, 471,934 shares authorized, none outstanding	—		—
Common stock, $0.16 2/3 par value, 1,200,000,000 shares authorized, 495,908,150 shares outstanding (496,261,678 on October 28, 2023)	82,653		82,712
Capital in excess of par value	25,253,256		25,313,914
Retained earnings	10,393,449		10,356,798
Accumulated other comprehensive loss	(181,285)		(188,302)
Total shareholders’ equity	35,548,073		35,565,122
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	48,388,464	$	48,794,478

See accompanying notes.

ANALOG DEVICES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(Unaudited)

(in thousands)


	Three Months Ended February 3, 2024
				Capital in				Accumulated Other
	Common Stock			Excess of		Retained		Comprehensive
	Shares	Amount		Par Value		Earnings		Loss








BALANCE, OCTOBER 28, 2023	496,262	$	82,712	$	25,313,914	$	10,356,798	$	(188,302)

Net income						462,727
Dividends declared and paid - $0.86 per share						(426,076)

Issuance of stock under stock plans and other	676	113		49,706
Stock-based compensation expense				69,815
Other comprehensive income								7,017
Common stock repurchased	(1,030)	(172)		(180,179)
BALANCE, FEBRUARY 3, 2024	495,908	$	82,653	$	25,253,256	$	10,393,449	$	(181,285)


	Three Months Ended January 28, 2023
				Capital in				Accumulated Other
	Common Stock			Excess of		Retained		Comprehensive
	Shares	Amount		Par Value		Earnings		Loss







BALANCE, OCTOBER 29, 2022	509,296	$	84,880	$	27,857,270	$	8,721,325	$	(198,152)

Net income						961,474
Dividends declared and paid - $0.76 per share						(385,452)
Issuance of stock under stock plans and other	617	103		41,135
Stock-based compensation expense				75,041
Other comprehensive income								28,418
Common stock repurchased	(4,061)	(677)		(653,880)
BALANCE, JANUARY 28, 2023	505,852	$	84,306	$	27,319,566	$	9,297,347	$	(169,734)

See accompanying notes.

ANALOG DEVICES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands)


	Three Months Ended
	February 3, 2024		January 28, 2023
Cash flows from operating activities:
Net income	$	462,727	$	961,474
Adjustments to reconcile net income to net cash provided by operations:
Depreciation	84,348		85,321
Amortization of intangibles	440,903		502,177

Stock-based compensation expense	69,815		75,041



Deferred income taxes	(102,149)		(146,354)

Other	4,684		9,732
Changes in operating assets and liabilities	178,504		(81,086)
Total adjustments	676,105		444,831
Net cash provided by operating activities	1,138,832		1,406,305
Cash flows from investing activities:



Additions to property, plant and equipment	(222,978)		(176,158)



Other	3,877		102
Net cash used for investing activities	(219,101)		(176,056)
Cash flows from financing activities:








Proceeds from commercial paper notes	2,779,494		—
Payments of commercial paper notes	(2,782,274)		—
Repurchase of common stock	(180,351)		(654,557)
Dividend payments to shareholders	(426,076)		(385,452)
Proceeds from employee stock plans	49,819		41,238

Other	(14,844)		(31,588)
Net cash used for financing activities	(574,232)		(1,030,359)

Net increase in cash and cash equivalents	345,499		199,890
Cash and cash equivalents at beginning of period	958,061		1,470,572
Cash and cash equivalents at end of period	$	1,303,560	$	1,670,462

See accompanying notes.

ANALOG DEVICES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED FEBRUARY 3, 2024 (UNAUDITED)

(all tabular amounts in thousands except per share amounts and percentages)

Note 1 – Basis of Presentation

In the opinion of management, the information furnished in the accompanying condensed consolidated financial statements reflects all normal recurring adjustments that are necessary to fairly state the results for these interim periods and should be read in conjunction with Analog Devices, Inc.’s (the Company) Annual Report on Form 10-K for the fiscal year ended October 28, 2023 (fiscal 2023) and related notes. The results of operations for the interim periods shown in this report are not necessarily indicative of the results that may be expected for the fiscal year ending November 2, 2024 (fiscal 2024) or any future period.

The Company has a 52-53 week fiscal year that ends on the Saturday closest to the last day in October. Fiscal 2024 is a 53-week fiscal year and fiscal 2023 was a 52-week fiscal year. The additional week in fiscal 2024 is included in the first quarter ended February 3, 2024. Therefore, the first quarter of fiscal 2024 included 14 weeks of operations and the first quarter of fiscal 2023 included 13 weeks of operations.

Note 2 – Shareholders' Equity

As of February 3, 2024, the Company had repurchased a total of approximately 206.2 million shares of its common stock for approximately $14.7 billion under the Company's share repurchase program. As of February 3, 2024, an additional $2.0 billion remains available for repurchase of shares under the current authorized program. The Company also repurchases shares in settlement of employee tax withholding obligations due upon the vesting of restricted stock units/awards or the exercise of stock options as well as for the Company's employee stock purchase plan. Future repurchases of common stock will be dependent upon the Company's financial position, results of operations, outlook, liquidity and other factors deemed relevant by the Company.

Note 3 – Accumulated Other Comprehensive (Loss) Income

The following table provides the changes in accumulated other comprehensive (loss) income (AOCI) by component and the related tax effects during the first three months of fiscal 2024.


	Foreign currency translation adjustment		Unrealized holding gains (losses) on derivatives		Pension plans		Total
October 28, 2023	$	(72,544)	$	(102,043)	$	(13,715)	$	(188,302)
Other comprehensive income before reclassifications	385		6,795		(1,904)		5,276
Amounts reclassified out of other comprehensive income	—		2,699		516		3,215
Tax effects	—		(1,474)		—		(1,474)
Other comprehensive income	385		8,020		(1,388)		7,017

February 3, 2024	$	(72,159)	$	(94,023)	$	(15,103)	$	(181,285)

The amounts reclassified out of AOCI into the Condensed Consolidated Statements of Income and the Condensed Consolidated Statements of Shareholders' Equity with presentation location during each period were as follows:


	Three Months Ended
Comprehensive (Loss) Income Component	February 3, 2024		January 28, 2023		Location
Unrealized holding (gains) losses on derivatives:
Currency forwards	$	(71)	$	(1,059)	Cost of sales
	(69)		(447)		Research and development
	(891)		(1,297)		Selling, marketing, general and administrative

Interest rate derivatives	3,730		3,727		Interest expense

	2,699		924		Total before tax
	(848)		(802)		Tax

	$	1,851	$	122	Net of tax

Amortization of pension components included in the computation of net periodic pension cost:




Actuarial losses	$	516	$	370	Net of tax

Total amounts reclassified out of AOCI, net of tax	$	2,367	$	492

Note 4 – Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per share:


	Three Months Ended
	February 3, 2024		January 28, 2023
Net income	$	462,727	$	961,474



Basic shares:
Weighted-average shares outstanding	495,765		507,121
Earnings per common share basic:	$	0.93	$	1.90
Diluted shares:
Weighted-average shares outstanding	495,765		507,121
Assumed exercise of common stock equivalents	2,976		4,063
Weighted-average common and common equivalent shares	498,741		511,184
Earnings per common share diluted:	$	0.93	$	1.88
Anti-dilutive shares related to:
Outstanding stock-based awards	214		322

Note 5 – Special Charges, Net

Liabilities related to special charges, net are included in Accrued liabilities and Other non-current liabilities in the Condensed Consolidated Balance Sheets. The activity is detailed below:


Accrued Special Charges	Global Repositioning Actions		Q4 2023 Plan















































Balance at October 28, 2023	$	36,981	$	110,446
Employee severance and benefit costs	—		11,977

Severance and benefit payments	(4,420)		(87,013)


Balance at February 3, 2024	$	32,561	$	35,410













Accrued liabilities	$	9,425	$	35,410
Other non-current liabilities	$	23,136	$	—

Note 6 – Commitments and Contingencies

On March 17, 2022, Walter E. Ryan and Ryan Asset Management, LLC, purported stockholders of Maxim Integrated Products, Inc. (Maxim), filed a putative class action in the Court of Chancery of the State of Delaware (C.A. No. 2022—0255) against the Company and the former directors of Maxim. The complaint alleges breaches of fiduciary duties by the individual defendants in connection with Maxim’s agreement, as part of the merger negotiations with the Company, to suspend Maxim dividends for up to four quarters prior to the closing of the Company's acquisition of Maxim. The complaint further alleges that the Company aided and abetted those alleged breaches of fiduciary duties. The plaintiffs seek damages in an amount to be determined at trial, plaintiffs’ costs and disbursements, including reasonable attorneys’ and experts’ fees, costs and other expenses. On May 2, 2023, the Court of Chancery entered an order dismissing the action in its entirety and with prejudice. On May 9, 2023, the plaintiffs filed a Motion for Reargument, which the Court denied on May 30, 2023. On June 21, 2023, the plaintiffs filed a Notice of Appeal to the Delaware Supreme Court. The appeal is fully briefed, and the Delaware Supreme Court heard argument on February 14, 2024. The Company believes that it and the other defendants have meritorious arguments in response to the appeal and defenses to the underlying allegations; however, the Company is currently unable to determine the ultimate outcome of this matter or determine an estimate, or a range of estimates, of potential losses, if any.

Note 7 – Revenue

Revenue Trends by End Market

The following table summarizes revenue by end market. The categorization of revenue by end market is determined using a variety of data points including the technical characteristics of the product, the “sold to” customer information, the “ship to” customer information and the end customer product or application into which the Company’s product will be incorporated. As data systems for capturing and tracking this data and the Company's methodology evolves and improves, the categorization of products by end market can vary over time. When this occurs, the Company reclassifies revenue by end market for prior periods. Such reclassifications typically do not materially change the sizing of, or the underlying trends of results within, each end market.


	Three Months Ended
	February 3, 2024						January 28, 2023
	Revenue		% of Revenue*		Y/Y%		Revenue		% of Revenue*
Industrial	$	1,196,832	48	%	(31)	%	$	1,740,780	54	%
Automotive	739,158		29	%	9	%	680,637		21	%
Communications	302,573		12	%	(37)	%	477,266		15	%
Consumer	274,141		11	%	(22)	%	350,947		11	%


Total revenue	$	2,512,704	100	%	(23)	%	$	3,249,630	100	%










* The sum of the individual percentages may not equal the total due to rounding.

Revenue by Sales Channel

The following table summarizes revenue by channel. The Company sells its products globally through a direct sales force, third party distributors, independent sales representatives and via its website. Distributors are customers that buy products with the intention of reselling them. Direct customers are non-distributor customers and consist primarily of original equipment manufacturers. Other customers include the U.S. government, government prime contractors and certain commercial customers for which revenue is recorded over time.


	Three Months Ended
	February 3, 2024				January 28, 2023
Channel	Revenue		% of Revenue*		Revenue		% of Revenue*
Distributors	$	1,535,210	61	%	$	2,011,323	62	%
Direct customers	939,975		37	%	1,195,534		37	%
Other	37,519		1	%	42,773		1	%
Total revenue	$	2,512,704	100	%	$	3,249,630	100	%









* The sum of the individual percentages may not equal the total due to rounding.

Note 8 – Fair Value

Assets and Liabilities Recorded at Fair Value on a Recurring Basis

The tables below, set forth by level, present the Company’s financial assets and liabilities, excluding accrued interest components that were accounted for at fair value on a recurring basis as of February 3, 2024 and October 28, 2023. The tables exclude cash on hand and assets and liabilities that are measured at historical cost or any basis other than fair value. As of February 3, 2024 and October 28, 2023, the Company held $721.4 million and $642.1 million, respectively, of cash that is excluded from the tables below.


	February 3, 2024
	Fair Value Measurement at Reporting Date Using:
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Total
Assets
Cash equivalents:
Available-for-sale:
Government and institutional money market funds	$	512,453	$	—	$	512,453
Corporate obligations (1)	—		69,755		69,755














Other assets:
Forward foreign currency exchange contracts (2)	$	—	$	4,044	4,044
Deferred compensation plan investments	89,267		—		89,267

Total assets measured at fair value	$	601,720	$	73,799	$	675,519
Liabilities

Forward foreign currency exchange contracts (2)	$	—	$	11,282	$	11,282
Interest rate derivatives (3)	—		37,074		37,074
Total liabilities measured at fair value	$	—	$	48,356	$	48,356

(1)The amortized cost of the Company's investments classified as available-for-sale as of February 3, 2024 was $69.8 million.

(2)The Company has master netting arrangements by counterparty with respect to derivative contracts. See Note 9, Derivatives, in these Notes to Condensed Consolidated Financial Statements for more information related to the Company's master netting arrangements.

(3)The carrying value of the related debt was adjusted by an equal and offsetting amount. The fair value of interest rate derivatives is estimated using a discounted cash flow analysis based on the contractual terms of the derivatives. See Note 9, Derivatives, in these Notes to Condensed Consolidated Financial Statements.


	October 28, 2023
	Fair Value Measurement at Reporting Date Using:
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Total
Assets
Cash equivalents:
Available-for-sale:
Government and institutional money market funds	$	315,980	$	—	$	315,980

SEC Form 10-Q filed by Analog Devices Inc.