Analog Devices Inc (NASDAQ:ADI) Q2 2018 Earnings Conference Call - Final Transcript

May 30, 2018 • 10:00 am ET


Analog Devices Inc (NASDAQ:ADI) Q2 2018 Earnings Conference Call - Final Transcript


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Good morning, and welcome to the Analog Devices Second Quarter Fiscal Year 2018 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 Lucarelli, Director of Investor Relations. Sir, the floor is yours.

Michael Lucarelli

Thank you, Jennifer. Good morning, everybody. Thanks for joining our second quarter 2018 conference call. With me on the call today are ADI's CEO, Vincent Roche and ADI's CFO, Prashanth Mahendra-Rajah. For anyone who missed the release, you can find it and related financial schedules at This conference call is being webcast live, and a recording will be archived in the Investors section of our website.

(Forward-Looking Cautionary Statements)

Okay. So with that, I'll turn it over to ADI's CEO, Vincent Roche.

Vincent Roche

Thanks, Mike, and good morning, everyone. Well, the second quarter of fiscal 2018 was remarkable for ADI. We posted non-GAAP diluted earnings per share above the high end of our guidance and set a new high watermark in free cash flow generation, and I'm pleased to share some perspective on our results with you now. So revenue in the second quarter came in just above the high end of our guidance as strength across our B2B markets, especially in the industrial and communication sectors, offset the expected decline in consumer.

Our results were also supported by our Linear Tech franchise, which posted a record revenue quarter. Gross and operating margin expanded substantially compared to the year ago quarter, driving a more than 40% increase year-over-year in our non-GAAP diluted earnings per share.

This execution resulted in record free cash flow in the quarter, and our combined company adjusted free cash flow margins over the trailing 12 months continue to place us in the highest tier of the S&P 500.

Now before we go deeper into our financial performance, I'd like to take this opportunity to provide investors with a deeper perspective on some of our key technology and market trends and ADI's strategy relative to them. I've spoken before about the dawn of the third wave of Information and Communications Technology or ICT, which is characterized by ubiquitous sensing, hyperscale and edge computing and pervasive connectivity.

In this world, digital systems increasingly rely on real-world information to make mission-critical decisions, and the accuracy and the integrity of this information is becoming more and more important. Simultaneously, the actual challenge of identifying and extracting signals in the presence of increasing levels of noise is becoming harder.

Now I believe that this is creating an inflection in the analog industry, and it's enabling ADI to play a critical role in generating and communicating high-quality information to leverage our cutting-edge innovation and solutions to tackle our customers' hardest problems from sensor to cloud, microwave to bits and nanowatts to kilowatts.

It's our ability to sense, measure, interpret, power and connect these two worlds that is helping to enable autonomous machines, natural human to machine interaction and future important technologies, such as virtual