Analog Devices, Inc.
CEO : Mr. Vincent T. Roche
Quarterly earnings growth(YoY,%)
| Period | Revenue | Operating Income | EPS | Release Date |
|---|---|---|---|---|
| 2024 Q4 | -10.1% YoY | -10.2% | -3.0% | 2024-11-26 |
Richard Puccio says,
Fiscal 2024 Financial Summary
- Revenue: Over $9.4 billion, a decline from the record fiscal 2023, influenced by inventory digestion and sluggish demand.
- Gross Margin: 67.9%, reflecting lower revenue, factory utilization, and mix headwinds.
- Operating Margin: 40.9% due to lower operating expenses.
- Earnings Per Share (EPS): $6.38.
Q4 2024 Results
- Revenue: $2.44 billion, a 6% sequential increase and a 10% year-over-year decline.
- Operating Margin: 41.1% with gross margin flat at 67.9%.
- EPS: $1.67, surpassing the midpoint of the outlook.
- Non-operating expenses: $55 million, tax rate at 12.1%.
Sector Performance
- Industrial: 44% of Q4 revenue, up 2% sequentially but down 21% year-over-year.
- Automotive: 29% of Q4 revenue, up 4% sequentially, down 2% year-over-year.
- Communications: 11% of Q4 revenue, up 4% sequentially, down 18% year-over-year.
- Consumer: 16% of Q4 revenue, up 22% sequentially and 31% year-over-year.
Financial Position and Cash Flow
- Cash and Investments: $2.4 billion with a net leverage ratio of 1.2.
- Inventory: Increased by approximately $20 million with days of inventory at 167.
- Operating Cash Flow: Over $1 billion for the quarter, $3.8 billion for fiscal 2024.
- Free Cash Flow: More than $3.1 billion or 33% of revenue.
- Shareholder Returns: $2.4 billion, including $1.8 billion in dividends and $600 million in repurchases.
Guidance for Q1 Fiscal 2025
- Revenue: Expected to be $2.35 billion, plus or minus $100 million, indicating year-over-year growth.
- Operating Margin: Anticipated at approximately 40%, plus or minus 100 basis points.
- EPS: Expected to be $1.53, plus or minus 10 cents.
- Tax Rate: Forecasted at 12 to 14%.
Strategic Outlook
- CapEx: Anticipated to normalize to 4 to 6% of revenue in fiscal 2025.
- Investment Tax Credits: Expected tailwinds from US and European CHIPS Acts.
- Free Cash Flow Returns: Commitment to return 100% of free cash flow in fiscal 2025 after addressing macroeconomic uncertainties.
Vincent Roche says,
2024 Financial Performance Overview
- Fiscal 2024 revenue finished at $9.4 billion with earnings per share of $6.38.
- The operating margin reached an impressive 41% for the year.
- Free cash flow margin improved to 33%, up from 29% in fiscal 2023.
- Post-pandemic inventory digestion and challenging macroeconomic conditions were notable headwinds.
- The company executed disciplined strategies to overcome external challenges.
Research and Development (R&D) Investments
- The company launched the CodeFusion Studio software development platform, enhancing programming environments.
- Introduced ADI Assure Trusted Edge Security Architecture for enhanced cybersecurity capabilities.
- Double-digit growth in the design win pipeline highlighted the success in R&D investments.
- Aimed to achieve $1 billion in revenue synergies by 2027, driven by Maxim revenue synergies pipeline.
Market and Segment Insights
- Industry 4.0: Rapid growth in sensor-to-cloud automation solutions and expanded content per robot.
- Instrumentation and Test: Leadership position in AI-related SoC with significant content per tester.
- Healthcare: Success in the surgical robotics market and continuous glucose monitoring space.
- Aerospace and Defense: Expected double-digit revenue growth due to increased defense budgets.
Automotive and Energy Storage Developments
- Battery Management Systems (BMS): Substantial pipeline growth among OEMs and electrical grid storage systems.
- Record design win pipeline and increased content across all vehicle types: combustion engines, hybrids, and EVs.
- GMSL and A2B connectivity and power franchises set to continue growth with new high watermarks achieved.
Future Outlook and Strategic Initiatives
- Continued focus on developing mixed signal and digital capabilities to enhance product offerings.
- Expansion of field engineering experts to provide world-class support and enhance customer engagement.
- Optimistic about fiscal 2025 with anticipated growth in BMS revenues and continued market expansion.
| Fiscal Year | Revenue ($B) | Earnings Per Share ($) | Operating Margin (%) | Free Cash Flow Margin (%) |
|---|---|---|---|---|
| 2024 | 9.4 | 6.38 | 41 | 33 |
| 2023 | – | – | – | 29 |
Q & A sessions,
Automotive Sector Outlook
- Bookings in the automotive sector showed improvement toward the end of Q3 and continued into Q4.
- China showed strong demand, reflecting EV volume growth, share gains, and content growth.
- The U.S. market returned to sequential growth, driven by the BMS and wireless BMS portfolio.
- However, there was broad weakness in other geographical areas.
- Design win activity in 2024 provides confidence for BMS growth in fiscal year 2025.
Industrial Sector and Channel Inventory Management
- Q4 results were negatively impacted by a decision to reduce channel inventory, affecting the industrial business significantly.
- Strengths were noted in ADAS, instrumentation, and test sectors, with a return to sequential growth in automation.
- Industrial growth was seen for two consecutive quarters after a trough in Q2 2024.
- Under-shipping demand for the past 18 months suggests potential 20% growth as normalization occurs.
Pricing Stability and Gross Margin
- Pricing remains stable, focusing on high-end performance valued by customers, with ASPs above the industry average.
- Volume discounts are offset with price increases on older products.
- Q4 gross margin was lower than expected due to product mix, notably the strength in consumer and automotive sectors.
- Q1 2025 is expected to see slightly lower gross margin due to seasonality and factory shutdowns.
- Anticipated revenue of $2.7 billion is needed to achieve targeted 70% gross margin, with improvement expected in the back half of 2025.
Market Recovery and Growth Expectations
- Industrial recovery is expected to lead in 2025, bolstered by healthy inventories and emerging AI demand.
- Consumer sector benefits from a diversified portfolio and normalized inventory.
- Communications sector suffered a 30% decline in 2024 but is showing demand improvement, especially in wireline and AI infrastructure.
- Automotive sector anticipates growth in BMS and functional power solutions in 2025.
Software and Data Center Business Developments
- Introduction of CodeFusion Studio, an open-source development environment aimed at integrating ADI technology into customer systems.
- Release of the ADI Assure platform for enhanced cybersecurity from hardware to cloud.
- Continued investment in software to drive innovation and customer engagement.
- Data center business focuses on high-end power solutions and optical control solutions, with traction in the ecosystem with processor and data center companies.
No bad stock 