NORWOOD, Mass.--(BUSINESS WIRE)--Analog Devices, Inc. (Nasdaq: ADI), a leading global high-performance analog technology company, today provided updated financial guidance for the third quarter of fiscal 2020.
ADI narrowed and raised its financial guidance for the third quarter of fiscal 2020. ADI currently anticipates revenue of approximately $1.45 billion, +/- $30 million. This compares to previous guidance of $1.32 billion, +/- $70 million, provided on May 20, 2020. At the midpoint of this revenue outlook, ADI expects reported EPS to be $0.91, +/- $0.07, and adjusted EPS to be $1.33, +/- $0.05. This compares to previous guidance for reported EPS of $0.72, +/- $0.11, and adjusted EPS of $1.08, +/- $0.11.
The guidance increase is driven by better than expected demand across ADI’s end markets with particular strength in Communications and Industrial. This upside in demand has resulted in less cancellations and higher than anticipated backlog conversion.
While ADI is encouraged by the continued resiliency of its business model, the shape of the economic recovery remains uncertain and near-term visibility is limited. ADI will provide financial guidance for its fourth quarter of fiscal 2020 on its third quarter earnings call on Wednesday, August 19.
Non-GAAP Financial Information
This release includes non-GAAP financial measures that are not in accordance with, nor an alternative to, generally accepted accounting principles (GAAP) and may be different from non-GAAP measures presented by other companies. In addition, these non-GAAP measures are not based on any comprehensive set of accounting rules or principles. These non-GAAP measures have material limitations in that they do not reflect all of the amounts associated with the Company’s results of operations as determined in accordance with GAAP and should not be considered in isolation from, or as a substitute for, the Company’s financial results presented in accordance with GAAP. The Company’s use of non-GAAP measures, and the underlying methodology when including or excluding certain items, is not necessarily an indication of the results of operations that may be expected in the future, or that the Company will not, in fact, record such items in future periods. You are cautioned not to place undue reliance on these non-GAAP measures. Reconciliations of these non-GAAP measures to the most directly comparable financial measures calculated and presented in accordance with GAAP are provided in the financial tables included in this release.
Management uses non-GAAP measures internally to evaluate the Company’s operating performance from continuing operations against past periods and to budget and allocate resources in future periods. These non-GAAP measures also assist management in evaluating the Company’s core business and trends across different reporting periods on a consistent basis. Management also uses these non-GAAP measures as the primary performance measurement when communicating with analysts and investors regarding the Company’s earnings results and outlook and believes that the presentation of these non-GAAP measures is useful to investors because it provides investors with the operating results that management uses to manage the Company and enables investors and analysts to evaluate the Company’s core business. Management also believes that the non-GAAP liquidity measure free cash flow is useful both internally and to investors because it provides information about the amount of cash generated after capital expenditures that is then available to repay debt obligations, make investments and fund acquisitions, and for certain other activities.
The non-GAAP financial measures referenced by ADI in this release include: adjusted income before income taxes, adjusted provision for income taxes, adjusted tax rate, and adjusted diluted earnings per share (EPS).
Adjusted income before income taxes is defined as income before income taxes, determined in accordance with GAAP, excluding: acquisition-related expenses1; restructuring related expense2; and acquisition-related transaction costs3 which are described further below.
Adjusted provision for income taxes is defined as provision for income taxes, determined in accordance with GAAP, excluding tax related items4 which are described further below. Adjusted tax rate represents adjusted provision for income taxes divided by adjusted income before income taxes.
Adjusted diluted EPS is defined as diluted EPS, determined in accordance with GAAP, excluding: acquisition-related expenses1; restructuring related expense2; acquisition-related transaction costs3; and tax related items4 which are described further below.
1Acquisition-Related Expenses: Expenses incurred as a result of current and prior period acquisitions and primarily include expenses associated with the fair value adjustments to inventory, property, plant and equipment and amortization of acquisition related intangibles, which include acquired intangibles such as purchased technology and customer relationships. Expenses also include severance payments, equity award accelerations, and the fair value adjustment associated with the replacement of share-based awards related to the Linear Technology acquisition. We excluded these costs from our non-GAAP measures because they relate to specific transactions and are not reflective of our ongoing financial performance.
2Restructuring-Related Expense: Expenses incurred in connection with facility closures, consolidation of manufacturing facilities, severance, other accelerated stock-based compensation expense and other cost reduction efforts. We excluded these expenses from our non-GAAP measures because apart from ongoing expense savings as a result of such items, these expenses have no direct correlation to the operation of our business in the future.
3Acquisition-Related Transaction Costs: Costs directly related to certain acquisitions, including legal, accounting and other professional fees, as well as integration-related costs. We excluded these costs from our non-GAAP measures because they relate to a specific transaction and are not reflective of our ongoing financial performance.
4Tax-Related Items: Income tax effect of the non-GAAP items discussed above and income tax from certain discrete tax items. We excluded these tax-related items from our non-GAAP measures because they are not associated with the tax expense on our current operating results.
About Analog Devices
Analog Devices (Nasdaq: ADI) is a leading global high-performance analog technology company dedicated to solving the toughest engineering challenges. We enable our customers to interpret the world around us by intelligently bridging the physical and digital with unmatched technologies that sense, measure, power, connect and interpret. Visit http://www.analog.com.
