Analog Devices Reports Second Quarter Fiscal 2019 Results with Revenue and EPS at the High-End of Guidance

Analog
Devices, Inc. (Nasdaq: ADI), a leading global high-performance
analog technology company, today announced financial results for its
second quarter of fiscal 2019, which ended May 4, 2019.

“We continue to execute exceptionally well in an uncertain environment,”
said Vincent Roche, President and CEO. “Revenue and EPS came in at the
high-end of our guidance, led by strong growth in our communication
applications across multiple markets. All told, B2B revenue increased
year-over-year for the 12^th consecutive quarter.”

“The world around us remains volatile and uncertain, but when I take a
step back and look past the geopolitical noise, I am confident that the
macrotrends propelling our markets forward are creating unprecedented
demand for the technologies we provide. We remain well-positioned to
continue to deliver sustainable profitable growth and strong shareholder
returns over the long-term.”

Performance for the Second Quarter of Fiscal
2019

Results Summary
(in
millions, except per-share amounts and percentages)

(1) Prior year balances have been restated to reflect the adoption of
the new revenue recognition standard in the first quarter of fiscal 2019.

Outlook for the Third Quarter of Fiscal Year
2019

Our third quarter guidance takes into account the estimated impact on
ADI from the U.S. Government’s recently announced export restrictions on
a large communications company. At this time, we have ceased shipments
of products to that company, and we are currently reviewing our ability
to resume shipments under the recently announced temporary general
license.

For the third quarter of fiscal 2019, we are forecasting revenue of
$1.45 billion, +/- $50 million. At the midpoint of this revenue outlook,
we expect reported operating margins of approximately 29.7%, and
adjusted operating margins of approximately 40.5%. We are planning for
reported EPS to be $0.86, +/- $0.07, and adjusted EPS to be $1.22, +/-
$0.07.

Our third quarter fiscal 2019 outlook is based on current expectations
and actual results may differ materially, as a result of, among other
things, the important factors discussed at the end of this release.
These statements supersede all prior statements regarding our business
outlook set forth in prior ADI news releases, and ADI disclaims any
obligation to update these forward-looking statements.

The adjusted results and adjusted anticipated results above are
financial measures presented on a non-GAAP basis. Reconciliations of
these non-GAAP financial measures to their most directly comparable GAAP
financial measures are provided in the financial tables included in this
press release. See also “Non-GAAP Financial Information” section for
additional information.

Dividend Payment

The ADI Board of Directors has declared a quarterly cash dividend
of $0.54 per outstanding share of common stock. The dividend will be
paid on June 11, 2019 to all shareholders of record at the close of
business on May 31, 2019.

Conference Call Scheduled for Today, Wednesday,
May 22, 2019 at 10:00 am ET

ADI will host a conference call to discuss our second quarter fiscal
2019 results and short-term outlook today, beginning at 10:00 am ET.
Investors may join via webcast, accessible at investor.analog.com, or by
telephone (call 706-634-7193 ten minutes before the call begins and
provide the password “ADI”).

A replay will be available two hours after the completion of the call.
The replay may be accessed for up to two weeks by dialing 855-859-2056
(replay only) and providing the conference ID: 4736779, or by visiting
investor.analog.com.

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 gross margin, adjusted gross margin percentage,
adjusted operating expenses, adjusted operating expenses percentage,
adjusted operating income, adjusted operating margin, adjusted income
before income taxes, adjusted provision for income taxes, adjusted tax
rate, adjusted diluted earnings per share (EPS), free cash flow, and
free cash flow margin.

Adjusted gross margin is defined as gross margin, determined in
accordance with GAAP, excluding certain acquisition-related expenses¹
which are described further below. Adjusted gross margin
percentage represents adjusted gross margin divided by revenue.

Adjusted operating expenses is defined as operating expenses, determined
in accordance with GAAP, excluding: certain acquisition-related
expenses¹; acquisition-related transaction costs²;
and restructuring related expense³ which are
described further below. Adjusted operating expenses percentage
represents adjusted operating expenses divided by revenue.

Adjusted operating income is defined as operating income, determined in
accordance with GAAP, excluding: acquisition-related expenses¹;
acquisition-related transaction costs²; and restructuring
related expense³ which are described further
below. Adjusted operating margin represents adjusted operating income
divided by revenue.

Adjusted income before income taxes is defined as income before income
taxes, determined in accordance with GAAP, excluding: acquisition-related
expenses¹; acquisition-related transaction costs²;
and restructuring related expense³ 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
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;
acquisition-related transaction costs², restructuring
related expense³ and tax related items⁴
which are described further below.

Free cash flow 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.

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.

²Acquisition-Related Transaction Costs: Costs
directly related to the Linear Technology acquisition, 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.

³Restructuring-Related Expense: Expenses
incurred in connection with facility closures, consolidation of
manufacturing facilities, severance, 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.

⁴Tax-Related Items: Tax adjustments associated
with the non-GAAP items discussed above, discrete tax items including
tax expense or benefit related to prior periods, tax expense or benefit
related to the impact of the Tax Cuts and Jobs Act of 2017, and
uncertain tax positions. 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.

Forward Looking Statements

This press release contains forward-looking statements, which address
a variety of subjects including, for example, our statements regarding
expected revenue, operating margin, earnings per share, and other
financial results, expected market trends, market share gains, operating
leverage, production and inventory levels, and expected customer
demand and order rates for our products 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: 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
estimates of our expected tax rate based on current tax law; higher than
expected or unexpected costs associated with or relating to the
acquisition of Linear Technology and the integration of the businesses;
the risk that expected benefits, synergies and growth prospects of the
acquisition may not be fully achieved in a timely manner, or at all; the
risk that Linear Technology’s business may not be successfully
integrated with Analog Devices’; the risk that we will be unable to
retain and hire key personnel; and the risk that disruption resulting
from the acquisition may adversely affect our business and
relationships with our customers, suppliers or employees. 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
(“SEC”), 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.

Analog Devices and the Analog Devices logo are registered trademarks or
trademarks of Analog Devices, Inc. All other trademarks mentioned in
this document are the property of their respective owners.

(ADI-WEB)

For more information, please contact: Mr. Michael Lucarelli,
Director of Investor Relations, Analog Devices, Inc. 781-461-3282
(phone); investor.relations@analog.com
(email).

ANALOG DEVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF
INCOME
(Unaudited)
(In thousands, except per
share amounts)

(2) Balances have been restated to reflect the full retrospective
adoption of Accounting Standards Update (ASU) 2014-09, Revenue from
Contracts with Customers.

ANALOG DEVICES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In
thousands, except share and per share amounts)

(1) Balances have been restated to reflect the full retrospective
adoption of Accounting Standards Update (ASU) 2014-09, Revenue from
Contracts with Customers.

ANALOG DEVICES, INC.
CONDENSED CONSOLIDATED STATEMENT OF
CASH FLOWS
(Unaudited)
(In thousands)

(1) Balances have been restated to reflect the full retrospective
adoption of Accounting Standards Update (ASU) 2014-09, Revenue from
Contracts with Customers.

ANALOG DEVICES, INC.
REVENUE TRENDS BY END MARKET
(Unaudited)
(In
thousands)

The categorization of revenue by end market is determined using a
variety of data points including the technical characteristics of the
product, the “sold to” customer information, the “ship to” customer
information and the end customer product or application into which our
product will be incorporated. As data systems for capturing and tracking
this data evolve and improve, the categorization of products by end
market can vary over time. When this occurs we reclassify revenue by end
market for prior periods. Such reclassifications typically do not
materially change the sizing of, or the underlying trends of results
within, each end market.

(1) Balances have been restated to reflect the full retrospective
adoption of Accounting Standards Update (ASU) 2014-09, Revenue from
Contracts with Customers.
*The sum of the individual percentages
may not equal the total due to rounding.

ANALOG DEVICES, INC.
RECONCILIATION OF GAAP TO NON-GAAP
RESULTS
(Unaudited)
(In thousands, except per
share amounts)

(1) Balances have been restated to reflect the full retrospective
adoption of Accounting Standards Update (ASU) 2014-09, Revenue from
Contracts with Customers.
(2) The sum of the individual per share
amounts may not equal the total due to rounding.

ANALOG DEVICES, INC.
RECONCILIATION OF NET CASH PROVIDED
BY OPERATING ACTIVITIES TO FREE CASH FLOW
(Unaudited)
(In
thousands)

(1) Balances have been restated to reflect the full retrospective
adoption of Accounting Standards Update (ASU) 2014-09, Revenue from
Contracts with Customers.

ANALOG DEVICES, INC.
RECONCILIATION OF PROJECTED GAAP TO
NON-GAAP RESULTS
(Unaudited)

(1) Includes $157 million of adjustments related to acquisition related
expenses as previously defined in the Non-GAAP Financial Information
section of this press release.
(2) Includes $22 million of tax
effects associated with the adjustment for acquisition related expenses
above.
(3) Includes $0.36 of adjustments related to the net impact
of $0.42 of acquisition related expenses and $0.06 of tax effects on
those acquisition related expenses.

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