ADI - Earnings call transcript Q2 2019

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Operator

Good morning, and welcome to the Analog Devices First [sic] [Second] Quarter Fiscal Year 2019 Earnings Conference Call, which is being audio webcast via telephone and over the web. I’d like to now introduce your host for today’s call, Mr. Michael Lucarelli, Director of Investor Relations. Sir, the floor is yours.

Michael Lucarelli

Thank you, Sheryl, and good morning, everybody. second XXXX our call. joining for quarter conference fiscal Thanks ADI’s call Roche; With the are CEO, Mahendra-Rajah. me on Prashanth today Vincent CFO, and ADI’s

and missed can investor.analog.com. who release, relating it anyone, at financial For schedules the find you

including forward-looking in on We statements discuss, or our our Actual as in of our most to results a to our Now are statements differ materially forward-looking factors, outlook including the earnings These result date information call. reflect new future as XX-Q. this update objectives disclosures. and undertake the we of those information release light of to from statements opinion about includes may recent and obligation discussed statements. in events. these The these various forward-looking of forward-looking no

today results fiscal exclude special measures, historical financial results ADI’s XXXX include the will measures our comments year-over-year comparable GAAP which quarter from items outlook about earnings directly quarter additional about comparing financial information also to and and also When included most of non-GAAP in second short-term and non-GAAP our results. these are measures performance, special release. items. today’s the measures excluded prior are non-GAAP to Reconciliations Our

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

Vincent Roche

Thanks everybody a very much very call. Mike, to on the and good morning

developments. into recap recent get wanted of of my touch I to Before the quarter, briefly I

a large from aware, no doubt company the U.S. it’s Government communications you’re restricting week U.S. As technology. last products announced acquiring and that

a this. of during a and give bit and the particular business this business broad, our at will robust insight impact While section. communications his financial into this through is manage will short-term development impact more least our on anticipated have we’ll global, Prashanth

our highlights. So, now on to

annual markets franchise of of was another of strong The our second ADI and at twelfth gross revenue BXB in outlook. to told, EPS multiple last ability was also really innovate with the Revenue of a again. of quarter increased, by successful segments. high-end revenue was diversity growth growth, our billion and ahead year-over-year to of growth respectively. testament came of consecutive is from once the This quarter our the XX.X% BXB which secular margins from fiscal represents increasing for operating All opportunities. to XX.X% guidance the to quarter our our adjusted led compared and at $X.XX quarter high communications $X.XX, applications Adjusted which across year-over-year end XXXX

we’ve approximately in that Now, cash over during the generated to past than repayments. revenue, XXX% our of cash flow free and we’ve time months, returned period free $X.X billion after XX% more of XX or debt shareholders flow

wireless We before us our move content section to we of opportunities. I’d up these our compared capitalize our on the in like financial ADI’s initiatives around strong to positioning particularly our to previously position to key is opportunity in on the and market, ADI’s to continue massive MIMO discussed and XG strategic Now, markets, call, systems. trends, where their discussion traditional Xx XG

XG There ADI's the namely wireline about but high-single-digit its a are and I’m grown third for years. steady I challenges as by and the and digital business, growth centers wireline and within demand is many of past data. match annually perfect portfolio is profitable. and control, possible on a networks focus fastest-growing and of every primarily comprehensive growth having years, segment data this five content. centers space wireline very to that are The market the every the of namely combined rate ADI networks, two extraordinary data market. fiber, to want power today the to across for consumption Compute, significant expertise. the for data transport for lay It’s today carrier at manage is represents precision, and a business, a the traffic for optical X.X not data business XG comms doubling market. double backhaul wireline carrier and center So, floor it’s other talk years. driven rich exponential market with going The the challenge in IP our optical applications The of company the data our primary around This market growth unsurprisingly driver domain networks new Cloud

primary of upgrading data fiber increasing two data per their increasing to existing By system optical their developing impairments, throughput partnering and next-generation optical optical management Xx, their XXx. more are the power such terabit the Carriers is components ways and signal modules controlling to second. optical signal control data is and with smaller our form and subsystems performance. to are networks in increase optimized are to physical problem second the factor ports of scaled time, Xx, noise critical for this down the coherent throughput, and same overall At by density. modulators, GPS, as some being and managing ADIs of challenge XXX highly that of products So, their form limits. even Precisely to are customers and At opportunity. the lasers, The in systems. speed system network required we’re solve their to throughput, pushing closely factor processing per compensating a our reducing level the than by match speed from customers, gigabits synchronization, XXX cases, data reducing

the to port expense port of and problem Denser of our traffic, optical must increase in a represent impact but center’s on rapid XXX-gig Xx a challenges our center data signal control next-gen not thermal power space an avoid driven customers third. only mitigate throughput, mention, over speed in of growth networks their our optical potential and total XX% every for these data chain ownership. network, precision networks. is Importantly, operating the data and to content cost high existing more largely power by harmful by the carrier part of business, cooling centric create speed that data in also segment increases on This opportunity a and fastest-growing impact solves network’s in control as than the

a our Now, opportunity that’s for power huge portfolio.

We’re µModule namely market. power to market leading technologies our reach franchises, example ADI’s and solutions our leveraging position Switcher and Silent broaden core this customer for and taking optimized for develop

by market traffic these increase. addition to solutions and we continues density In and hot avoid technologies the also and enable downtime solutions, continues products. and port mitigate addressable routers. network to complex to grow our innovative servers optical to power These for power sequencing chain disruptions supply data of highly The customers port swap managing costly as and

the significantly. Now, for for chain market dollar market different. very system, least said that a in the past power combination of the there’s of at as our Since signal with no opportunity, in expand into we’ve wireless and every we dollar power seen LTC, pipeline is wireline a our sell

let lower compensate to are even silicon-based So, in response wireline we and shift solutions. densification closing, the as to these photonics, power opportunity solutions necessary with more we over over and ADI ever with increasing as Prashanth. the performance photonic me market’s to the And inherent of profitable that, challenges the demand. growth And for expect intensify bandwidth long-term continued for control in in control to it hand market expect power as silicon providers

Prashanth Mahendra-Rajah

comments to non-op press second our everyone an with Vince. Good of quarter let morning items release. special My the welcome add revenue which will outlined be adjusted me my you, today in call. on and basis, expenses earnings Thank exception and excludes today's

all pleased we the quarter. the guidance. of In to revenue, are in coming midpoint with results quarter uncertainty, and the face on EPS of to margin, geopolitical above strong second Now, report our operating

usual, cover the P&L. to the As moving I before end will markets

year communications growth The XX% by industrial quarter X% of outweighed continued weakness market, Our decreasing strong which quarter defense while also in mid-single year-over-year, market performed our digits, nicely. aerospace as franchise to and second sales and increased in quarter very the in was grow business. our compared in quarter. XX% strength The ago revenue BXB in sales approximately ongoing growth of Strength wireline expected, the led during represented our driven strong and experienced the year-over-year test double-digit automation to the memory comms wireless, by represented businesses. by anticipated

content And believe remains remains business our the reflect share XG is key in continue early and years well-positioned quarter this higher to as technology Vince We ahead. our and profitably enabler. grow wireline highlighted his just the results Our in a XG. stages section, to ADIs in in

consumer XX% well over And the represented mix of of BMS, year and overall and business in business the momentum year-over-year auto helped power to lowest during units in sales XX% Our XX% weakness mitigate the franchise ago increased compared lastly, the represented our in relatively consumer Strength since flat, vehicle quarter. quarter. XXXX. quarter, the our to which just sales in was

were at mid-point. expense quarter guidance OpEx $XX margin moving revenue segment diluted was all guided one-time the year-over-year with at quarter, to for expense the to at in market year-over-year. in lower came down approximately decreased year-over-year. XX million. decreased basis better As basis. the quarter for higher adjusted sequentially the of related than the Gross at a of X% rate and expected, second quarter. in forecasted And the Tax expenses P&L, what increase this higher due decreased OpEx earnings share And guidance the our points now our up X.XX And was quarter-over-quarter margin primarily the of than Interest came at quarter Non-op to million, $X.XX. the year-over-year, per mix. quarter billion, but stronger primarily in approximately on in from at slightly came XX%. XX.X% to normally sequentially, is a XX.X%, high-end a sequentially told, $XXX Operating in high-end

increased in onto second dollars for the second or full-year. still million also sales our in comfortably increased quarter, and X% of moving year-over-year, but the normal quarter is and slightly was our inventory target the the range. balance sequentially $XX sequentially, as and sheet, CapEx remain inventory in channel days Now

and as cash business teams. for year-over-year, product CapEx was approximately on remain well the as increase his expect Free higher CapEx to basis, be additional a our especially of outlay. our franchise, additional the at opportunities, XX-month power billion growth We an spend future despite flow $X.X colocation temporarily approximately X%. support X% to This and development trailing of

the returned million debt quarter, million Over repaid our XX free the and In of flow second of million in have our we than XXX XXX% $XXX more and we to $XXX after repurchased dividends, debt, repayments. through buybacks stock. shareholders dividends months, over cash past paid of

context to this Now I some give the before want impacting uncertainty guidance, additional moving outlook. to around quarter's

As the large to company. restrictions Government U.S. a export communications Vince recently announced mentioned,

that Our quarter. guidance third restrictions, revenue ADI estimated impact these from on customer of for no including quarter the remainder the into from takes account the

I a customers, sales. the to general a our say has reviewing or the talk specific ability communications diverse currently temporary shipments of that still more And not The ADI are months, while resume extremely but customers We communication market less do business. license. under will an bit recently we about our mid-single percentage is total only ADI as concentrated, largest over digits trailing represented XX announced

are exception expense now exclude basis which release. So, revenue the in on outlook, with items non-op a of outlined today's non-GAAP onto and the special and

Third of to we expenses be plus million $XX minus automotive quarter and special EPS, or approximately to the year-over-year. improving expect low million. midpoint year. margin $X.XX in for are our decline expected the to Based these quarter XX the approximately excluding in And industrial at Non-op XX% be diluted to are to or on $X.XX. rate single aggregate inputs, items to expected of BXB is range operating of minus projected plus sequentially digits is our expected the we guidance, the decrease revenue At $X.XX, to tax XX.X%. to expect be billion, and communications be XX% third we markets midpoint,

backdrop. successful So, economic long-term. year very have especially outperformance overlay position first uncertain confident was remain it you and overall over made of for that make political with a it to I us the very when continue half an investments will ADI, we the continued and for

back Q&A. it to hand Mike, our start me to Let

Michael Lucarelli

Okay.

for will give to session. Please Q&A After question initial an question. opportunity response, our a our please. to give you first get follow-up we yourself question. Sheryl, Let’s limit one our

Operator

Thank from first Nicolaus. Stifel, you. our [Operator Tore Instructions] question comes And from Svanberg

line is Your open.

Vincent Roche

Tore. morning, Good

Tore Svanberg

you Thank you. could Thank maybe Yes, good was excluding little communications. talk core bit about morning. your you. a hoping business, I

add starting great. but especially be markets a look very if know obviously recovery? and specific are industrial Thank So, you those that’s path situation, there, if a a color auto, you. could at, you that So, of to show I some would

Vincent Roche

sure. Yes, Tore. let with Thanks, Well, start industrial. me

inventory, being targets. see it's inventory industrial levels proxy which very very, the in also, is think for market, stabilized I also true that line So, going normal. business is And to with say often has our what's channel in board. across our customers' We the on a

I improves overall, is think macro when turns, upside see higher a to the lot think improvement and confidence business I CapEx at we rates. as the of deployed

regions results So, much as a for with bit it I we unpack achieved in pretty we it And we solutions a our really pleased I of the the largely you where all steady to Geographically, Hittite major true areas in lot business area, were think processing you, it's in terms to know, come. as the at Asia. good and for say if we're growth particularly, are of performed that industrial weakness and defense share that the there, Europe saw many, the were as we company where up many second of and centered Asia, a a signal little taking see And, fairly coming stable. we're ADI various we combination try the is where to of of so driver fore quarter, aerospace the and the expected. years America, to year-on-year,

out third will we well. here in some think see looking growth stabilization. quarter the a And as little here, So, we're I bit seeing annual

I I bit little that's of of shape the the a If here. business. kind sector talk automotive think the about So, industrial for just

was than SAAR. units, our performance revenue better a did build on very in And much modest we So, see channel. than

was little by we're our know, vehicles. to systems of But And The there. position when driven accounting electric you we see did we the growth performance POA management in a As growing battery report Street. days these for on bit

for also, think better I'm is did business very say example. our pleased power I to SAAR, board. the power across that We improving than in

the our sold. power we ramp of growth better than in also, performance, to continue gradually vehicles infotainment AXB unit solutions our And sector when at here. So, in did look the terms

two-thirds infotainment, at business. look SAAR-exposed overall represented applications, you And if more steady-state of think digits. example, that I were about So, high-single they applications, for down the

think balanced. the any in particular portfolio that outgrow We've coming help got is onboard I to very new many us weaknesses things SAAR.

Michael Lucarelli

Tore, I'll point. add one

about kind stabilization. asked You of

already are market. industrial the seeing We stabilization in

the quarter what of in I year-over-year we is, excited better expect is third about decline second a versus think it kind results. quarter we're our

follow-up? basis. So, X% about you we in the third have Do it the think declined a gets We quarter. in better second on a year-over-year quarter

Tore Svanberg

Yes. color. Really helpful. Thank you for that

about a the of their follow-up, company customer if As a communication potential at customers? long maybe requalify how we would look to like you. for it talking that that ADI take we're here, all some business Thank with

Vincent Roche

in very we're the great a company Well, all across think I with major here, We're good I very, would OEMs Tore. situation as various penetration. covered say, a well

all In high historically OEMs. across various penetration the fact,

yet [indiscernible] up So, by XG conversation I think is generally the I saying a begin. is start that speaking, technology that really should to

come probably we're time-frame. really at And it think any going in I Japan in trials begin in to earnest Korea volume. is seeing that's time, the in but and yet in this point XXXX to

know company than deployments to ban. matter a and I in puts think guess And to specific I navigate lot terms if And is relationships, the rather have well-positioned. no we you of OEM happens terms happen a and still it's of takes, in the of carrier they here trade of uncertainty question what when So, happen. China,

I this as a the globally got the across months. in and point happen all a we're lot So, if. the to of at our dollar various know than more, I X, when deployments said, But terms a OEMs in OEMs the we've over X time. next of in case good it's think And we're think, in content position going I rather position

Michael Lucarelli

move our Thank caller next please. to We’ll you.

Operator

you. Thank

from Vivek Bank Arya from comes caller America. of next Our

Your open. is line

Vivek Arya

Is sounding more And somewhat what Thanks you on sound at more little Good optimistic and all you that they a Huawei peers? for it have, your are of industrial looking peers product from question. optimistic know profitability my hearing sounding some company-specific your the your interesting are tariff situation all despite cycles? it's good we some Vince, these taking macro job How maintaining somewhat morning. downbeat. than the some of than headwinds. more who and are on are this comments

Vincent Roche

more as I company. good and in over peers just the are big company, I and It's a at generally our a on, think than we've tests question, ever Vivek. And we and customer think aerospace decade. been. a say, companies which we lab little customers, equipment-type terms are engagements focused big, across It's are, Yes. little bit automation share deployment been talked about we of part speaking a We, a a I R&D have last the both as now position a board, defense, think in better of earlier and who I've than large,

and customers. and many tremendous there's of of thousands So, with engagement focus many, tens

I as strength also bringing fold of the the increased we So, with franchise of into our LTC of signal the well, think things but terms in LT. power set processing,

So, think has things the or here. last position endogenous share largely positioned done it. it's take intrinsic decade those over that combination we've to things It's all of I the us

So, I think strength LTC our customer of the and of combination relationships at franchise, our the this point. strength it's with

Vivek Arya

it. Got

Michael Lucarelli

a Do follow-up, Vivek? you have

Vivek Arya

Thank Yes. you.

Thank from goes is we no after What you. to way place. following takes out your I de-risk kind all What So, assume sure follow-up, kind Huawei for Huawei that, wanted for zero means, the Should Huawei Hopefully, let's just purpose kind ban actually of assume of perspective? should level from of that? kind make Huawei. that recordkeeping, there set the what – this right? the we right are resolved. So, the But a to of to to ban we on it the is just more stays of just quarters? July quarter Huawei model gets assume in

Prashanth Mahendra-Rajah

Yes. Sure.

if I is, likely to are sell continuing – to QX, take largely in customer-agnostic. from quarter, subsequent shipments. more that then that your presumed would several And it's be the for that, that we quarters. think But no times, current ban mentioned for Vince stays you let's has assume So, as we've place, assumption prohibited we customer

It's We the carriers. have very all XG. in we of situation what a high share in different had than

of So, necessary other to enable to where shifts of that wireless infrastructure and quite providing that happens, depending demand XG. in do we the deployment continuing carriers, the as XG deployment and to expect deployment growth to technology on well the continue

Vivek Arya

Alright. Thanks, Prashanth.

Michael Lucarelli

question please. our go next We’ll to

Operator

Thank you.

Our next Kumar Jaffray. Piper question comes from Harsh from

Your open. line is

Michael Lucarelli

How Harsh. are Hi, you?

Harsh Kumar

echo Thank turbulent and congratulations this want well, was the as I in you. Huawei time I to up fantastic that ZTE share. expectation was banned this, getting want follow take Hi, question. my saw the and job to and Last good. we step dance the song rather environment. would Vivek's on up

up if business hear the about saying I So, question, that and including Huawei, you're think others, take are share much think Is way what banned, that in that basically, than might is I correct the that's step that the Huawei. customer if with ZTE, the do less to you you be it? perhaps you suggesting correctly, impact would and direct

Vincent Roche

Potentially, yes.

and on are government handle time. timing at But really release now they of this various the the there options. carriers, reflect point how it think how the on depends in to I Chinese things, decide they when XG

have of our But standard. And there view the second well-positioned favorite. a favorites. have XG in I They've I it, got They technology the probably portfolio. carriers are we the way we options. to favorite, different think the first options. think terms conforms all And are

than had. fact, many radio are we're systems coverage content, more in the things with the highly of doing, XG, more particularly differentiated, ever we've In in

said, be But is of And lot comments, rollout deployed. here. reasonable in as this help timing trade certainly question ban the rather So, – look, if gets will it system XG it think if really a in my unquestionable. will of a a I irrespective, than is earlier the I lifted period time this

So, yes.

Michael Lucarelli

customers when Yes. shipments actual to put of from The picked second, additional Harsh, so And our who we Two all came just was number guidance were we kind we to other One ship to, And together, secondary how put by so up that's I'll standpoint. think customer. the the impact there's our guidance. secondary third that bit looked little customer. a of the or together customer. on additional too, unpack that share the the say, was things impact competitors would demand of neutralizes zero. to factors. up impact with three at kind a And that be, that we we kind

So customer to really, going outlook. it's that about zero all our in

Harsh Kumar

guys talk be my impact sell mitigated, selling the Fair point? there Huawei that bunch companies. sell Would enough. of are then helpful. is as semiconductor Very A but not a And saying, are tell follow-up, and so bit directly a because all if distri chance just Or they're companies a the they you this to us And you through – is moved distri. perhaps trying lot to it recently. well, for is prohibited through happened other shipments also all around but whole we've I'm full confused of impact very at to from Huawei, saying well? they to little mitigated partial could some been

Vincent Roche

like say [indiscernible] be information as confused as is confusing. I'd The it No, everybody. and flow often can we're

very more of as clearly interpretation to I the said bring for and ban fullest future. days, But what's weeks to right Huawei foreseeable the the the be in Mike won't coming is extent coming to lot a upholding will shipping the be our that the now, anything ban, clarity So, ban. we actually out what's think will we the

Michael Lucarelli

channel customer. And on avoidance revenue to to doubt, of in we the go of have no for that we the guidance communications our midpoint expect this

Harsh Kumar

Very helpful. guys. Thanks Understood.

Michael Lucarelli

for thanks take one. the questions. Harsh, the next We’ll

Operator

Thank you.

from question JPMorgan. Sur Harlan next from comes Our

open. is Your line

Harlan Sur

the on off initiatives new Can understand A&D doing to been potential the And well for us actually for been and on. modernization, budget for has then helped defense the has Good focus A&D has morning. a on basis? year-over-year ground team? right, help real how aircraft, just spending team. modernization has it's The maybe you systems, quite missile broad-based, growing year kick Thank the team. been obviously my taking you for question. some defense how been budget this a And so tailwind

Prashanth Mahendra-Rajah

saw Harlan, but Yes. I share well. and much don't defense been one in we of segment has was the terms I doing the industrial. us growth sort will it items of that the of substantial, year-over-year at the numbers, we decline of on aerospace aerospace. results, overall, pretty other our a talk offset in year-over-year And for specific call in second level some of north helped it was the that XX% The quarter particularly basis

from that We record you've meant. are benefiting military budgets those

it's space also can of a So, lot bring our advantage. areas. all application combination new Hittite that exploration across areas, the helps of radars, technologies The take communications, the UAVs, with we

for been So, for to we for it's is quarters a pay modernization us. great defense continued growth that business to come. of several dividends And and going see ADI

Michael Lucarelli

Yes. of business industrial very sales, to set XX% within the that our is XX%. it's And level on call, but diverse just

health across So, about XX%, that about and XX%, industrial, smaller is is of about of, remind automation care it, instrumentation defense I'll just to and remainder everyone XX% just aerospace customers. a is a it industrial, about XX% XX% call bunch of is is I'll

it's a follow-up, you us. Harlan? business diverse a for Do So, industrial have within very

Harlan Sur

insights. Yes. Appreciate the

see to near networking targeted optical XXX-gig of fundamentals to hyperscalers. kind digestion the the especially you've around within in in for on opportunities wireline of cloud data XXX-gig some within centers term? starting Are control. capacity the guys signal some quarters, the that improve in the past of processing believe at couple and So, I starting sort insights business, comms seen by though well-known over on weakness optical, really appreciate you the new of

Michael Lucarelli

Yes.

Our the In been wireline last quarter, quarter was year-over-year. mid-single it business growing. digits the about before has And grew XX% that year-over-year.

impacting it think I So, is some.

I'll a been had growth business us grow and has wireline for us. But by growing. faster. wireline has [it market It's been the much overshadowed wireless, that for been to] within steady the Our quite say, optical

Vincent Roche

Yes.

the centers experiencing as think kind of the But largely as is XXX And XXX-gig. long-haul, metro that's I we're still are well today in centers. both the data fastest growth data gig-based.

to going here. to see fact, and we're to few So, every aggressive into move as the an need X.X data in this XXX-gig, beyond continue coming years, double years over into continues and terabit

think the our And I So, across a we're seeing portfolio. mixture. strength in board it's

Harlan Sur

much. you Thank very

Michael Lucarelli

please. caller Next

Operator

Deutsche our And Seymore from from Ross next Bank. question comes

open. is line Your

Ross Seymore

guys. me Thanks for letting Hi my ask questions.

First, you're guys quarter But few gave I on had an improvement year-over-year. a outperforming. automotive inflection you performing business color point measure. with been in you know, back underperforming of And kind think the from view that some with going solid sign any Vince, the years. you those drivers least by a or a you one for flat of now, congratulations of Is do bigger-picture of cetera. this It's to at a BMS, being that on perspective, outperforming? can you like quarter this peers just as forward, Or go even line in regard? et

Prashanth Mahendra-Rajah

set level let in me we half. Ross, Vince So, how first did talk broadly. more let the And then kind of

really a we POA channel run revenue POS a we the but report on on a – on we basis. basis, run that our remember first, business So, our

was quarter, the So, just digits, in low but second down single units. very much better POS versus slightly,

that and SAAR. bit AXB. other build Vince within power of to see modest that the in did got And little we strong and in we've cabin some exposed electronics that, very certainly helped So, a growth. channel. BMS, But performance mentioned businesses the

about because a forward business saw to half look manage we first really to we as channel this headwind talk in the start we in a inflection more business what's that. about our the the we And high been XXXX, behind expect talking half second So, again the some provide POS over going of that little of conviction. do is basis. probably and in a year, we auto Vince now on build for year optimism remains that to bit a maybe that that have But I'll let that the

Vincent Roche

off growing And we the be tailing been think that's still know more in is now largely very R&D still we from withdrew stabilize doing that's come a MEMS It's a we ship support. infotainment some begin get very where that business the more of the if for for overall you vehicles we're to the sensing us. I – seen I products. more And commoditized go electric better and our penetration for seeing If the, years, think, strong. going some better company, Ross, SAAR. to sensor significant of back business year-on-year our But a the we've at business very of month, and very, small convinced several that, by as We growth business remains areas look there. several. BMS, very, and I company.

the at call emerging like it, X IMUs, power we these the and sure market to and doing in virtually new, demands that are is we that In need comparison, little our that X, We LT as And the been Level business, as compared increasingly a capitalizing to capitalizing for we as like, all in been well image long can as Level really are high-end quality the important solutions I – mentioned terms for business products modalities business above. at these new have in the you'd on upside of LIDAR, X when portfolio large. better advanced equipment radar sensing make need, that R&D earlier term. and fact, the meet if line from emerging when supply well. take bit systems Level portfolio that so the that you we've systems well here LTC,

business of business traction. new in modalities stronger our our think things getting side the abating. is I are the on stronger the So, of largely product And – terms these has been and sensor headwind from

So, of story for that's automotive the kind you. in

Michael Lucarelli

have follow-up, Ross? you Do a

Ross Seymore

I from occurring is and aspect it's and And any any just specifically you. comms focused of difficult about been pivot to are color occur? have area. that far. might inventory customer? all are afterwards on would appreciating the but that think that people Thank was enough have actually pre-buying the the pre-buying might inventory what thus on buffer specifically you could back One the And the in and the ends, in channel are now-banned the appreciated. snapback not be there ban if pre-buying I side So, details concerned things the any how even that to want viewing on Yes. call to you've know discern, given the you that is uncertainty investors other I

Vincent Roche

in the area, across are I architectures. these new the board, OEMs Ross, in communications think inventory general, advanced all the

I inventory the are good things untoward anomalous. very there. or well see And anything think think is I balanced. very, balance in don't I

Michael Lucarelli

before before to ban even thought sequentially. – in ban was our business say we came I'll going Ross. place; Yes, we the that communications grow expect

share think I board. big of was So, good our pre-buying a given ours, worry don't across the

has there. probably Now on And a that Kind obviously some you changed. of for to sequentially. we think it's not year-over-year up slightly. grow going only context basis, And help it's

Vincent Roche

Yes.

it's sold like a about as of terms of I well inventories think way rather portfolio, the more to question think when than inventory we that in this ADI's really balance, of have the most if.

that's I think for to all generic core businesses BXB ADI. these

Ross Seymore

Thanks guys.

Michael Lucarelli

Alright, please. our we’ll next to go caller

Operator

Stein is from question William SunTrust. from next Our

Your line open. is

William Stein

taking for thanks Great, my questions.

expect ship First, impact, if any the wondering there's we been orders analyzed I'm if might have from or additional you've in stop speculated press. that

look that surveillance For in companies like example, exposure I might but think right, be that not these be getting I'm potentially customers. HikVision. have if China could to I it's wondering you they an pronounced

Prashanth Mahendra-Rajah

it's emphasize of Well, the ADI I and very the good would diverse. is question. business broad that a rest

be will against our from will kind customers communications be among impacts. most we concentrated, companies that shocks large of having number but of the analysis these political of certainly provide business, the diversity sell identified, So, great there some that unlike as the we our macro have franchise to is and to which more may do, insulation

William Stein

within the for business? And the that's traditional of trends business between Can and helpful. specifically for the can? and the split the really about the more if handset your posted I more you. in you just quarter, part business volatile Thank One talk consumer both guidance, prosumer the

Prashanth Mahendra-Rajah

Yes.

down So, said going XXXX. XX% consumer in to originally XX% to be that we is

high now the is Our really that. end of at forecast

expect down be XX% to We year-over-year.

in the to see weakness continue We market. portables some

We are to the But it's the macro in GDP. seeing trying a weakness the and we assess to think And how really little similar that prosumer environments much bit to kind BXB align of business. behind such, the of business and unanticipated And right worst us closer we're that is driven by should growth long-term do that for really is now. of prosumer. our

Michael Lucarelli

we’ll we a Sheryl more last provide to our Yes. stability and equal about be so going size, business Alright, to business From us the exit business to portables our please. year, consumer prosumer standpoint, some as this go as forward. in for expect to our to we question

Operator

you. Thank

from Ambrish from Our BMO. Srivastava last question comes

open. is line Your

Ambrish Srivastava

squeezing de-risking based me high terms answer us to right And very that thinking exposure should none for you I customers the the earlier gave assume but a to and start X, Is number, up model, – much for the that single of then the as we your you in in to X then question to Should impact down the then should well? to of you the just the sure make model in. of and I other an quarters OpEx be terms think trailing be on to way thank – Hi, digit? customer slack XX-month about then get maybe road? we the understood large wanted X model, the next X, and quarters, you pick Prashanth. we thinking

Michael Lucarelli

I'll Ambrish. Hi, question. answer your of the part first

the were on XX largest was saying I this weeks quarter. most We we in I have trailing couple customers the within remarks our did say, So, digit of at would think shipments, months. prepared pretty a in mid-single clear comms

would put in So in after And XQ, ban repeat X the quarter. lifted. forward that doesn't repeat until that next going won't is I

Ambrish Srivastava

the OpEx? the And should we how trajectory, about think OpEx

Prashanth Mahendra-Rajah

Look, the invest to continue we're to OpEx is going business. the in

change how But we're Of a I meaningful look OpEx. wouldn't at course, our where to make going cost. think appropriate, to the about we discretionary

variable of chock lever the that is first compensation. The a decline revenue absorbs our

of that committed for technologies and several to by will, products going – come impacted decline to to that, But today out. revenue. investing be years course, market we're that in So, beyond we're

Vincent Roche

demand for at way unprecedented. the I that Ambrish, absolutely to is our think technologies the look it, is

there, aggressive the our keeping of expenditures that our sure on long-term our ago we to get little mentioned R&D that we the get engagements. have also, customers. we the We make prize particularly to to capital we what future, have business, term in eye eye customer funding So, a we're are products the sure, terms faster we know need here. think our our we're so company's the same ramped making I on our supply long to the while in the critical and LT keeping is the with to opportunity on And side market all to programs that of fund place the

Michael Lucarelli

Do a follow-up, you have Ambrish?

Ambrish Srivastava

you clarifications. for all do. I the Thank

period? you Just the up you current a color quick I you. one then. be And industrial. In mentioned, guide, to Vince, your quarter should gave should of expect year-over-year the auto on that in the – we then Thank that BXB think,

Michael Lucarelli

Yes. also, growth out say, ramping. quarter I actually we Ambrish, about, we the comments. first gave should is some the to to Q&A BMS in down the think what Vince off. but better flat And year-over-year. than would Auto than to be say would thing I be Industrial doing year-over-year, say, down also year-on-year, remarks, about industrial will other be would much and and better are it second units but how the probably there slightly should communications, I discussed talked up power about AXB

a guide low get So, as to for that of help that combination. single-digit you BXB should kind

Ambrish Srivastava

Awesome. Thank you.

Michael Lucarelli

will A to talk website. guys you Okay. for on all transcript will available this our we'll you website. With also Thank the copy be you, that, on you, us available thank be And Ambrish, the everyone, morning. of and reconciliations thank and soon. joining

Operator

call. concludes conference This Analog today's Devices

You now disconnect. may

Analog Devices (ADI) 22 May 192019 Q2 Earnings call transcript