Analog Devices Inc (NASDAQ:ADI) Q3 2019 Earnings Conference Call Transcript

Aug 21, 2019 • 10:00 am ET

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Analog Devices Inc (NASDAQ:ADI) Q3 2019 Earnings Conference Call Transcript

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Presentation
Operator
Operator

Good morning, and welcome to Analog Devices Third Quarter Fiscal Year 2019 Earnings Conference Call, which is being audio webcast via telephone and over the web.

I would like to now, introduce your host for today's call, Mr. Michael Lucarelli, Director of Investor Relations. Sir, the floor is yours.

Executive
Michael Lucarelli

Thank you, Cheryl and good morning everybody. Thanks for joining our third quarter fiscal 2019 conference call. With me on the call today are ADI's CEO, Mr. Roche and ADI's CFO, Prashanth Mahendra-Rajah. Anyone who missed the release, you can find it and relating financial schedules at investor.analog.com.

Now on to the disclosures. The information we're about to discuss, including our objectives and outlook includes forward-looking statements. Actual results may differ materially from these forward-looking statements as a result of various factors, including those discussed in our earnings release and our most recent 10-Q.

These forward-looking statements reflect our opinion as of date of this call. We undertake no obligation to update these forward-looking statements in light of new information or future events. Our comments today about ADI's third quarter fiscal 2019 financial results and short-term outlook will also include non-GAAP financial measures, which excludes special items. When comparing our results to historical performance, special items are also excluded from these prior quarters and year-over-year results. Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures and additional information about the non-GAAP measures, are included in today's earnings release.

I also want to point out that during the third quarter, we improved our method to more accurately estimate the end-market classifications for shipments to distributors. This has opened to some modest changes to historical end-market revenue breakdown, but did not change our total revenue or EPS. We have posted a quarterly end-market lookback based on this improvement method to our Investor website.

Okay. With that, I'll turn it over to ADI's CEO, Vincent Roche. Vince?

Executive
Vincent Roche

Thanks very much, Mike and good morning to you all. Well, in what continues to be a challenging macroeconomic environment, we executed soundly in our third fiscal quarter and delivered solid results. Revenue of $1.48 billion in the third quarter came in above the midpoint of our guidance. Our B2B markets decreased 3% year-over-year, given the weaker macro conditions and performed well relative to the market. This performance is testament to the diversity of our franchise and investing ahead of secular trends to drive ongoing share gains and some expansion.

Operating margins of approximately 41% were above our guidance, as we moved quickly to reduce expenses, given the ongoing market weakness. All told, adjusted EPS was $1.26. Over the past 12 months, we've generated approximately $2 billion in free cash flow or 33% of revenue. And during the same time period, we have returned more than 100% of free cash flow to our shareholders after debt repayments.

Now while there are clearly a number of near-term external challenges we are navigating through, ADI has always been and remains focused on delivering sustainable long-term profitable growth.