Analog Devices, Inc. reports 106% Net Income growth in 2018 and 11.1 pp EBITDA Margin growth from 32.1% to 43.2%
11/20/2018 • About Analog Devices, Inc. (
$ADI) • By InTwits
Analog Devices, Inc. reported FY2018 financial results today. Here are the key drivers of the company's long term financial model:
- Analog Devices, Inc. is a fast growth stock: FY2018 revenue growth was 21.4%, 5 year revenue CAGR was 18.7% at FY2018 ROIC 9.9%
- Analog Devices, Inc. has low CAPEX intensity: 5 year average CAPEX/Revenue was 4.5%. At the same time it's a lot of higher than industry average of 7.6%.
- CAPEX is quite volatile: $622m in FY2018, $345m in FY2017, $253m in FY2016, $215m in FY2015, $241m in FY2014
- In the last 5 years the company invested considerably less than D&A: $918m vs. $1,957m. In FY2018 this situation was still the same: CAPEX was 255 while D&A was 799
- The company has business model with low profitability: ROIC is 9.9%
- It operates with medium-size leverage: Net Debt/EBITDA is 2.1x while industry average is 2.0x
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
The company's Revenue surged on 21.4%. Revenue growth showed slowdown in FY18Q4 - it was 3.6% YoY. Revenue growth happened at the same time with EBITDA margin expansion. EBITDA Margin jumped on 11.1 pp from 32.1% to 43.2% in FY2018.
Gross Margin increased on 8.3 pp from 59.9% to 68.3% in FY2018. SG&A as a % of Revenue decreased on 2.3 pp from 13.5% to 11.2% in FY2018. SG&A as a % of Revenue stuck to a declining trend at -0.97 pp per annum in FY2014-FY2018. Stock Based Compensation (SBC) as a % of Revenue showed almost no change in FY2018. SBC as a % of Revenue grew at 0.36 pp per annum in FY2014-FY2018.
Net Income margin increased on 9.9 pp from 14.2% to 24.1% in FY2018. The efficient tax rate was 8.7% in FY2018 while the average for the last five years was 11.1%.
Investments (CAPEX, working capital and M&A)
In FY2018 Analog Devices, Inc. had CAPEX/Revenue of 4.1%. The company showed almost no change in CAPEX/Revenue from FY2015 to FY2018. For the last three years the average CAPEX/Revenue was 3.9%. During the last 5 years CAPEX as a % of Revenue bottomed in FY2016 at 3.7% and was growing since that time.
Accounts receivable as a % of Revenue decreased on 3.2 pp from 13.5% to 10.3% in FY2018. Inventories as a % of Revenue decreased slightly on 1.3 pp from 10.8% to 9.5% in FY2018. Accounts payable as a % of Revenue increased slightly on 1.7 pp from 11.6% to 13.3% in FY2018.
Analog Devices, Inc. has spent
$53m on M&A in FY2018 which accounts for 0.85% of revenue.
Return on investment
The company operates at good ROE (14.1%) while ROIC is low (9.9%). ROIC increased slightly on 2.0 pp from 7.9% to 9.9% in FY2018. ROE increased on 4.7 pp from 9.5% to 14.1% in FY2018.
Leverage (Debt)
Company's Net Debt / EBITDA is 2.1x and Debt / EBITDA is 2.4x. Net Debt / EBITDA dropped on 2.1x from 4.2x to 2.1x in FY2018. Debt dropped on 19.3% while cash dropped on 22.1%.
Analog Devices, Inc. has good short term financial stability: Interest coverage ratio (ICR) is 7.4x. Analog Devices, Inc. has no short term refinancing risk: cash is higher than short term debt (1,218.8%).
Average interest expence charged on company's debt was 4.0% in FY2018.
Valuation and dividends
The company's trades at EV/EBITDA 14.5x and P/E 22.2x.
The company paid 47.0% of Net Income as dividends in FY2018. Dividends grew on average at 9.1% per annum in the last 5 years).
Management team
Vincent T Roche is a the company's CEO. Vincent T Roche is a founder and has spent 6 years with the company. CEO total compensation was
$11,007,691 in FY2018 which included
$984,615 salary. Analog Devices, Inc.'s CFO Prashanth Mahendra-Rajah has spent 1 year with the company.
Insider ownership is 0.33%. Insider ownership didn't change in 2018.
At the end of financial year the company had 15,800 employees. The number of employees increased on 3.3%. Average revenue per employee in FY2018 was
$392,465 and it jumped on 17.6%.
Financial and operational results
FY ended 11/03/2018
Analog Devices, Inc. ($ADI) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 2,865 | 3,435 | 3,421 | 5,108 | 6,201 | 21.4% |
| Gross Profit | 1,830 | 2,259 | 2,227 | 3,062 | 4,233 | 38.3% |
| SG&A | 455 | 479 | 461 | 691 | 696 | 0.7% |
| EBITDA | 894 | 1,053 | 1,238 | 1,639 | 2,681 | 63.5% |
| EBIT | 752 | 831 | 1,028 | 1,055 | 1,882 | 78.3% |
| Interest expence | 35 | 27 | 89 | 251 | 254 | 1.1% |
| Tax | 100 | 113 | 95 | 101 | 143 | 41.4% |
| Net Income | 629 | 697 | 862 | 727 | 1,495 | 105.6% |
| Stock Based Compensation | 29 | 44 | 63 | 104 | 151 | 45.1% |
Balance Sheet
|
|---|
| Cash | 569 | 884 | 921 | 1,048 | 817 | -22.1% |
| Accounts Receivable | 397 | 467 | 478 | 689 | 640 | -7.1% |
| Inventory | 368 | 412 | 377 | 551 | 587 | 6.5% |
| Accounts Payable | 139 | 174 | 171 | 237 | 261 | 10.3% |
| Short Term Debt | 0 | 375 | 0 | 300 | 67 | -77.7% |
| Long Term Debt | 873 | 495 | 1,732 | 7,551 | 6,266 | -17.0% |
Cash flow
|
|---|
| Capex | 178 | 154 | 127 | 204 | 255 | 24.9% |
| Dividends | 454 | 491 | 513 | 602 | 703 | 16.8% |
| Acquisitions | 1,946 | 7 | 83 | 9,633 | 53 | -99.5% |
Ratios
|
|---|
| Revenue growth | 8.8% | 19.9% | -0.4% | 49.3% | 21.4% | |
| EBITDA growth | 3.6% | 17.7% | 17.6% | 32.4% | 63.5% | |
|
|---|
| Gross Margin | 63.9% | 65.8% | 65.1% | 59.9% | 68.3% | 8.3% |
| EBITDA Margin | 31.2% | 30.7% | 36.2% | 32.1% | 43.2% | 11.1% |
| EBIT Margin | 26.3% | 24.2% | 30.0% | 20.7% | 30.3% | 9.7% |
| SG&A, % of revenue | 15.9% | 13.9% | 13.5% | 13.5% | 11.2% | -2.3% |
| SBC, % of revenue | 1.0% | 1.3% | 1.9% | 2.0% | 2.4% | 0.4% |
| Net Income Margin | 22.0% | 20.3% | 25.2% | 14.2% | 24.1% | 9.9% |
| CAPEX, % of revenue | 6.2% | 4.5% | 3.7% | 4.0% | 4.1% | 0.1% |
|
|---|
| ROIC | 13.0% | 13.8% | 15.7% | 7.9% | 9.9% | 2.0% |
| ROE | 13.3% | 14.2% | 16.8% | 9.5% | 14.1% | 4.7% |
| Net Debt/EBITDA | 0.3x | -0.0x | 0.7x | 4.2x | 2.1x | -2.1x |
| Interest expence / Average debt | 4.0% | 3.1% | 6.8% | 5.2% | 4.0% | -1.2% |
People
|
|---|
| Insider ownership | 0.3% | 0.3% | 0.3% | 0.3% | 0.3% | 0.0% |
| Employees | 9,600 | 9,700 | 10,000 | 15,300 | 15,800 | 3.3% |
| Revenue/Employee, th. $ | 298 | 354 | 342 | 334 | 392 | 17.6% |
Analog Devices, Inc. ($ADI) key quoterly financial indicators
| mln. $ | FY18Q1 | FY18Q2 | FY18Q3 | FY18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 1,567 | 1,564 | 1,573 | 1,597 | | 59.2% | 36.2% | 9.7% | 3.6% |
| EBITDA | 640 | 702 | 699 | 715 | | 99.7% | 147.8% | 75.9% | 12.0% |
| Net Income | 293 | 400 | 414 | 433 | | 35.1% | 327.9% | 501.4% | 24.5% |
Balance Sheet
|
|---|
| Cash | 828 | 807 | 773 | 817 | | -83.4% | -85.8% | -15.0% | -22.1% |
| Short Term Debt | 50 | 56 | 23 | 67 | | | -98.7% | | -77.7% |
| Long Term Debt | 7,385 | 6,926 | 6,533 | 6,266 | | 94.1% | -19.2% | -20.3% | -17.0% |
Ratios
|
|---|
| Gross Margin | 68.4% | 68.6% | 68.1% | 68.5% | | 2.5% | 12.8% | 14.6% | 3.2% |
| EBITDA Margin | 40.9% | 44.9% | 44.4% | 44.8% | | 8.3% | 20.2% | 16.7% | 3.4% |
| Net Income Margin | 18.7% | 25.6% | 26.4% | 27.1% | | -3.3% | 17.5% | 21.5% | 4.6% |
Peers in Semiconductors
Below you can find Analog Devices, Inc. benchmarking vs. other companies in Semiconductors industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.
Top companies by Revenue growth, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| NanoFlex Power Corp ($OPVS) | | | | 72.5% | 354.8% |
| MoSys, Inc. ($MOSY) | | -18.4% | 37.2% | 46.8% | 87.7% |
| SMART Global Holdings, Inc. ($SGH) | | | -16.9% | 42.5% | 69.3% |
| Micron Technology, Inc. ($MU) | | -1.0% | -23.4% | 63.9% | 49.5% |
| Adesto Technologies Corporation ($IOTS) | | 4.3% | 1.6% | 27.6% | 48.8% |
| |
|---|
| Median (67 companies) | 54.6% | 8.5% | 5.2% | 10.9% | 4.7% |
|---|
| Analog Devices, Inc. ($ADI) | | 19.9% | -0.4% | 49.3% | 21.4% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| CEVA, Inc. ($CEVA) | 90.2% | 90.9% | 91.6% | 92.1% | 89.8% |
| NVE Corporation ($NVEC) | 77.9% | 80.3% | 76.1% | 78.5% | 79.0% |
| Rambus, Inc. ($RMBS) | 85.9% | 84.7% | 80.1% | 79.9% | 76.8% |
| Universal Display Corporation ($OLED) | 76.0% | 64.2% | 83.9% | 80.8% | 75.5% |
| Intermolecular, Inc. ($IMI) | 48.3% | 57.4% | 66.5% | 67.5% | 70.3% |
| |
|---|
| Median (65 companies) | 45.3% | 47.0% | 47.2% | 48.6% | 50.4% |
|---|
| Analog Devices, Inc. ($ADI) | 63.9% | 65.8% | 65.1% | 59.9% | 68.3% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| NVE Corporation ($NVEC) | 58.8% | 66.0% | 61.8% | 65.6% | 65.1% |
| Micron Technology, Inc. ($MU) | 31.7% | 35.0% | 25.4% | 47.9% | 65.0% |
| NXP Semiconductors N.V. ($NXPI) | 25.7% | 41.5% | 21.6% | 46.2% | 49.9% |
| Texas Instruments Incorporated ($TXN) | 39.7% | 42.0% | 43.5% | 46.7% | 48.6% |
| Intel Corp ($INTC) | 42.8% | 41.0% | 35.2% | 41.7% | 45.7% |
| |
|---|
| Median (66 companies) | 9.6% | 11.3% | 9.2% | 10.7% | 9.8% |
|---|
| Analog Devices, Inc. ($ADI) | 31.2% | 30.7% | 36.2% | 32.1% | 43.2% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Alpha and Omega Semiconductor Limited ($AOSL) | 3.0% | 6.6% | 6.5% | 12.2% | 42.2% |
| Renesola Ltd. ($SOL) | 3.5% | 0.0% | 0.0% | 78.0% | 41.7% |
| First Solar, Inc. ($FSLR) | 7.6% | 4.0% | 7.9% | 17.5% | 33.0% |
| Sigma Designs Inc ($SIGM) | 11.0% | 6.5% | 6.2% | 14.1% | 29.3% |
| Micron Technology, Inc. ($MU) | 19.0% | 24.8% | 46.9% | 23.3% | 29.2% |
| |
|---|
| Median (66 companies) | 3.6% | 4.0% | 3.6% | 4.7% | 4.6% |
|---|
| Analog Devices, Inc. ($ADI) | 6.2% | 4.5% | 3.7% | 4.0% | 4.1% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| SMART Global Holdings, Inc. ($SGH) | | | 2.5% | 21.5% | 51.7% |
| Texas Instruments Incorporated ($TXN) | 25.1% | 29.8% | 34.9% | 43.1% | 47.5% |
| Micron Technology, Inc. ($MU) | 18.8% | 15.8% | 0.8% | 21.5% | 42.9% |
| Applied Materials Inc ($AMAT) | 15.8% | 15.2% | 19.0% | 31.2% | 36.4% |
| NVIDIA Corporation ($NVDA) | 9.2% | 13.3% | 13.1% | 27.3% | 35.3% |
| |
|---|
| Median (73 companies) | 5.0% | 3.8% | 1.4% | 3.2% | 3.0% |
|---|
| Analog Devices, Inc. ($ADI) | 13.0% | 13.8% | 15.7% | 7.9% | 9.9% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| MACOM Technology Solutions Holdings, Inc. ($MTSI) | 25.4x | 3.3x | 3.0x | 7.2x | 98.6x |
| Inphi Corporation ($IPHI) | | -6.4x | 4.5x | 33.7x | 32.2x |
| JinkoSolar Holding Company Limited ($JKS) | 4.2x | 3.3x | 4.1x | 11.0x | 8.2x |
| Lattice Semiconductor Corporation ($LSCC) | -1.8x | | 6.5x | 19.0x | 3.9x |
| Renesola Ltd. ($SOL) | 7.0x | 35.0x | 123.6x | 2.3x | 3.3x |
| |
|---|
| Median (45 companies) | -0.6x | -0.3x | -0.0x | 0.4x | 0.3x |
|---|
| Analog Devices, Inc. ($ADI) | 0.3x | -0.0x | 0.7x | 4.2x | 2.1x |
