PRASHANTH MAHENDRA-RAJAH, CFO Analog Devices, Inc. (ADI) Company Presentation Raymond James Conference, March 2021 ©2021 Analog Devices, Inc. All rights reserved.
Forward Looking Statements; Non-GAAP Reconciliations ► This presentation contains forward-looking statements, which address a variety of subjects including, for example, our statements regarding our proposed acquisition of Maxim Integrated Products, Inc. (“Maxim”); the impact of the COVID-19 pandemic on our business, financial condition and results of operations; expected revenue, operating margin, tax rate, earnings per share, and other financial results; expected market trends, market share gains, operating leverage, production and inventory levels; expected customer demand and order rates for our products and expected product offerings; product development; and marketing position. Statements that are not historical facts, including statements about our beliefs, plans and expectations, are forward-looking statements. Such statements are based on our current expectations and are subject to a number of factors and uncertainties, which could cause actual results to differ materially from those described in the forward-looking statements. The following important factors and uncertainties, among others, could cause actual results to differ materially from those described in these forward- looking statements: the uncertainty as to the extent of the duration, scope and impacts of the COVID-19 pandemic; political and economic uncertainty, including any faltering in global economic conditions or the stability of credit and financial markets; erosion of consumer confidence and declines in customer spending; unavailability of raw materials, services, supplies or manufacturing capacity; changes in geographic, product or customer mix; changes in export classifications, import and export regulations or duties and tariffs; changes in our or Maxim’s estimates of our respective expected tax rates based on current tax law; our ability to successfully integrate Maxim’s businesses and technologies; the risk that the expected benefits and synergies of the proposed transaction and growth prospects of the combined company may not be fully achieved in a timely manner, or at all; adverse results in litigation matters, including the potential for litigation related to the proposed transaction; the risk that we or Maxim will be unable to retain and hire key personnel; the risk associated with the timing of the closing of the proposed transaction, including the risk that the conditions to the transaction are not satisfied on a timely basis or at all or the failure of the transaction to close for any other reason or to close on the anticipated terms, including the anticipated tax treatment; the risk that any regulatory approval, consent or authorization that may be required for the proposed transaction is not obtained or is obtained subject to conditions that are not anticipated; unanticipated difficulties or expenditures relating to the transaction, the response of business partners and retention as a result of the announcement and pendency of the transaction; uncertainty as to the long-term value of our common stock; the diversion of management time on transaction-related matters; our ability to successfully integrate acquired businesses and technologies; and the risk that expected benefits, synergies and growth prospects of acquisitions may not be fully achieved in a timely manner, or at all. For additional information about factors that could cause actual results to differ materially from those described in the forward-looking statements, please refer to our filings with the Securities and Exchange Commission, including the risk factors contained in our most recent Quarterly Report on Form 10-Q and Annual Report on Form 10-K. Forward-looking statements represent management’s current expectations and are inherently uncertain. Except as required by law, we do not undertake any obligation to update forward-looking statements made by us to reflect subsequent events or circumstances. ► Non-GAAP Reconciliations—This presentation includes non-GAAP financial measures that have been adjusted in order to provide investors with useful information regarding our results of operations, business trends and financial goals. Reconciliations of these non-GAAP measures to their most directly comparable GAAP measures can be found in the appendix. 2
ADI Powerfully Bridges the Physical and Digital Worlds Power RF Converters Amplifiers Physical World Digital World Power 3 Currently, 10% of enterprise-generated data is processed outside the cloud, and by 2025, this amount is expected to grow to 75%1 ... ADI will be a critical partner in the collection, curation, and communication of our customers’ edge data 1. Source: https://gartner.com/smarterwithgartner/what-edge-computing-means-for-infrastructure-and-operations-leaders/
ADI at a Glance Principal locations Other locations Corporate Headquarters located in Wilmington, MA >$5.6 billion >$1.8 billion (33% margin) >125,000 ~16,000 across 30 countries 1965 >$1 billion ~3,600 US ~$58 billion People Recognition FY20 Revenue FY20 FCF End Customers Employees Founded FY20 R&D Patents Market Cap * Market cap figure is as of 2/23/21. Free Cash Flow is a non-GAAP measure and is defined as net cash provided by operating activities determined in accordance with GAAP, less additions to property, plant, and equipment, net. Free Cash Flow margin percentage represents free cash flow divided by revenue. See the appendix for a reconciliation of these adjusted measures to their most comparable GAAP measures. End Customer, Employee, and Patent numbers are as of October 31, 2020. Innovation Recognition 4 A leading global high-performance analog technology company Forbes America’s Best Employers List The Boston Globe’s Top Places to Work 2020 Shingo Accreditation Derwent Top 100 Global Innovator
$5.6B FY20 Revenue 5 End-Market Breakdown Industrial Aerospace and Defense Energy Factory Automation Healthcare Instrumentation Consumer Hearable & Wearable Devices High-End Audio & Video Portables Communications Wired/Optical Networking Wireless Automotive Electrification Infotainment Autonomous Mobility Source: 2020 10-K.
>10yrs Avg Product Age ~45K Products Revenues Are Incredibly Sticky & Highly Diverse 6 ~80% of ADI revenue is derived from products that individually contribute 0.1% or less FY20 Revenue by ProductFY20 Revenue by Product Age ~50% of ADI revenue is derived from products 10 years or older >20yrs 10-20 yrs 5-9yrs <5yrs
Our Priorities are Driving ADI’s Long-term Success 7 Deepening customer-centricity • Strengthening customer engagement: customers enhancing software focus, leaving more of the increasingly complex hardware challenges to ADI • Partnering more deeply with customers to deliver complete solutions • Accelerating innovation engine to develop cutting-edge technologies… opportunity pipeline value achieved record levels in FY20 Deploying capital efficiently Capitalizing on secular trends to expand addressable markets & drive diversified growth • R&D investment of $1B+ with >95% targeted to attractive B2B • Extracting value from M&A to enhance scale & scope, creating destination for world’s best analog talent: Maxim in FY211, LTC in FY17 & Hittite in FY15 • Return 100% of FCF via dividends & buybacks with 7-15% dividend CAGR outlook 1 2 3 • Automotive: Vehicle Electrification, Cabin Digitalization, Autonomous Mobility • Industrial: Industry 4.0, Digital Health, Space • Communications: Next-Gen Wireless (5G), Data Center • Consumer: Consumer IoT Strategic Priorities Focus Areas 1. ADI’s acquisition of Maxim Integrated Products, Inc. has not yet closed and is subject to customary closing conditions, including receipt of certain non-U.S. regulatory approvals.
ADI is a Top Tier Firm in a Top Tier Industry 8 1. ADI’s operating income, operating margin and free cash flow margin are presented on an adjusted basis and exclude special items. Please refer to the appendix for a reconciliation of these adjusted measures to their most comparable GAAP measures. ADI’s CAGR reflects the time period beginning in fiscal 2015 and ending in fiscal 2020. Philadelphia Semi Index and S&P 500 Index data sourced from Bloomberg. 2. Figures represent ADI’s fiscal 2020. Top 10% of S&P 500 Companies ADI Philadelphia Semi Index S&P 500 Index ADI Philadelphia Semi Index S&P 500 Index Operating Margin FCF MarginSales Operating Income 5 Year Revenue & Adjusted Operating Income CAGR1 Adjusted Operating & FCF Margins1,2 10% 11% 4% 14% 12% 3% 40% 27% 17% 33% 21% 14%
ADI Has a Track Record of Delivering for Shareholders Source: SOX, NASDAQ, S&P 500 annualized return percentages sourced from Bloomberg. Return calculation period is 12/1/93 to 2/23/219 Compounded Annualized Stock Return Since SOX Inception 16% 13% 12% 10% ADI SOX NASDAQ S&P 500
Analog & Mixed Signal Converter, amplifier, interface Power Management Voltage regulator, PMIC, supervisory Radio Frequency RF, microwave, mmWave Digital & Sensors DSP, MEMS, optical, MCU Enhancing Scale & Scope with Proposed Maxim Integrated Acquisition High performance analog portfolio DC to 100GHz nanowatts to kilowatts, sensor to cloud Note: Pie charts by product represent illustrative relative size. Data center included in communications; computing included in consumer. 1. Based on FY19 reported financials for Analog Devices and trailing twelve months ending September 28, 2019 for Maxim Integrated Global high-performance analog technology provider 10,000+ Engineers ~$1.5B R&D investment1 Premier signal processing & power management franchise 10
People & Society 2020 Progress on Our Mission to “Engineer Good” 11 Climate • Significant progress against emission reduction targets… committed to reach net-zero no later than 2050 • First semiconductor company to issue a green bond – proceeds targeted toward green initiatives • Developing solutions with meaningful environmental benefits, such as battery management solutions, energy storage systems and more efficient communication networks • Expanded training & development programs & established employee- led networks to drive inclusion & engagement • Shifted production focus to healthcare technologies, supporting the medical community during COVID-19 • Supported global & local COVID-19 relief efforts with multi-million donations, including the Massachusetts General Hospital’s Vaccine & Immunotherapy Center Disclosure & Oversight • Published inaugural Corporate Responsibility Report… prepared in accordance with the Global Reporting Initiative • Reviewing evolving ESG disclosure frameworks (TCFD & SASB) to enhance transparency • Aligned sustainability activities & reporting with UN Sustainable Development Goals • Revised our Board practices for risk oversight to include cybersecurity at the Board level & ESG under the Nominating & Corp Gov Committee “Engineering Good” to protect & regenerate the environment, empower people & impact through engagement
GAAP to Non-GAAP Reconciliation 14 FY 20 FY 20 Revenue $5,603,056 Revenue $5,603,056 GAAP Gross Margin $3,690,478 Net Cash Provided by Operating Activities $2,008,487 GAAP Operating Expenses $2,192,234 % of Revenue 36% GAAP Operating Income $1,498,244 Capital Expenditures $165,692 GAAP Operating Margin 27% Free Cash Flow $1,842,795 Acquisition Related Expenses $623,635 Free Cash Flow % of Revenue 33% Restructuring Related Expenses $52,337 Acquisition Related Transaction Costs $20,098 Charitable Foundation Contribution $40,000 Adjusted Operating Income $2,234,314 Adjusted Operating Margin 40% Fiscal 2020 numbers are as reported. All dollar amounts are shown in 000s.
GAAP to Non-GAAP Reconciliation 15 FY 15 FY 20 GAAP Operating Income $830,841 GAAP Operating Income $1,498,244 Other Operating Expense $223,672 Acquisition Related Expenses $623,635 Acquisition Related Expenses $96,937 Restructuring Related Expenses $52,337 Acquisition Related Transaction Costs $10,016 Acquisition Related Transaction Costs $20,098 Stock Based Compensation $4,277 Charitable Foundation Contribution $40,000 Adjusted Operating Income $1,165,743 Adjusted Operating Income $2,234,314 FY 15 FY 20 CAGR Revenue $3,435,092 $5,603,056 10% Adjusted Operating Income $1,165,743 $2,234,314 14% Fiscal 2020 numbers are as reported. All dollar amounts are shown in 000s.