Analog Devices One Technology Way P.O. Box 9106 2018 Norwood, MA 02062-9106 ANNUAL REPORT Annual 2018 1-800-262-5643 Report www.analog.com 52780coverX.indd 1 1/16/19 5:02 PM Board of Directors Dear Fellow Shareholders, Ray Stata Bruce R. Evans Neil Novich Fiscal 2018 was a banner year for Analog Devices, marked Our combined sales force has enabled us to broaden and Chairman of the Board Chairman of the Board and Senior Advisor Former Chairman, President by record fi nancial results and a signifi cantly fortifi ed deepen our customer engagement activities. As a result, Analog Devices, Inc. Summit Partners and Chief Executive Offi cer business position. During the year we made stellar progress our opportunity pipeline has signifi cantly expanded as Ryerson Inc. in extending our cutting-edge technology portfolio, we reach more customers directly and cross-sell the Vincent Roche Edward H. Frank, Ph.D. broadening and deepening our customer engagements, combined portfolio. Given the complementarity of the ADI President and Chief Executive Offi cer Co-founder and former Kenton J. Sicchitano Analog Devices, Inc. Chief Executive Offi cer Former Global Managing Partner and integrating Linear Technology (LTC). We enter and LTC product portfolios and customer relationships, we Cloud Parity PricewaterhouseCoopers LLP fi scal 2019 better positioned than ever to grow profi tably are increasingly confi dent in our objective to double LTC’s James A. Champy and gain market share over the long term. revenue growth rate over the next few years. Former Vice President of the Dell/Perot Karen M. Golz Lisa T. Su, Ph.D. Systems business unit of Dell, Inc. Former Global Vice Chair President and Chief Executive Offi cer In short, we have created an industry-leading product Ernst & Young Advanced Micro Devices, Inc. Fiscal 2018 Financial Results portfolio and a team of world-class technologists, with Anantha P. Chandrakasan, Ph.D. Revenue surpassed $6 billion for the fi rst time in our an unparalleled suite of capabilities that range from Dean of the MIT School of Engineering Mark M. Little, Ph.D. over 50-year history. Growth was led by our B2B and Vannevar Bush Professor of Electrical Former SVP, GE Global Research and sensor to cloud, from DC to 100 GHz, and from nanowatts Engineering and Computer Science Chief Technology Offi cer markets comprised of industrial, communications, and to kilowatts. automotive, which, in the aggregate, increased well into GE the double digits year-over-year, more than offsetting Opportunities Ahead weakness in our consumer market. We posted record I believe that we are very well prepared strategically and non-GAAP gross and operating margins of 71% and 42%, operationally to grow and capture new market opportu- respectively, and non-GAAP diluted earnings per share nities in the years ahead. Beyond our own preparedness, increased more than 20% year-over-year.1 our confi dence is grounded in a few externalities: Executive Offi cers Most notably, we generated more than $2 billion of free • An insatiable appetite for data is driving enterprises to cash fl ow, translating to a 35% free cash fl ow margin Vincent Roche Greg Henderson Steve Pietkiewicz reconfi gure their existing business models, and entirely President and Chief Executive Offi cer Senior Vice President, Automotive, Senior Vice President, Power Products and placing ADI among the top 5% of the S&P 500.2 This new models are emerging that were unimaginable just a Communications, and Aerospace enabled us to rapidly reduce our debt by over $1.5 billion Martin Cotter Margaret Seif decade ago. Those enterprises are increasingly turning and Defense and return cash to our shareholders. In 2018, we updated Senior Vice President, Worldwide Sales Chief People Offi cer, Chief Legal Offi cer to us because ADI is where data is born. our capital allocation framework and now plan to return and Digital Marketing Yusuf Jamal and Secretary Senior Vice President, Industrial, 100% of our free cash fl ow after debt payments to • Technology macrotrends such as autonomous and Joseph (John) Hassett Healthcare, Consumer, IoT Solutions Eileen Wynne investors through dividends and share repurchases. electric vehicles, 5G connectivity, Industry 4.0, and Senior Vice President, and Security Vice President and Since 2005, in aggregate, we have returned more than digital healthcare are creating secular tailwinds for ADI. Global Operations and Technology Chief Accounting Offi cer $10 billion through dividends and share repurchases. Prashanth Mahendra-Rajah • ADI’s analog experience and expertise in bridging the Senior Vice President, Finance and physical and digital domains is increasingly critical to Chief Financial Offi cer Business Progress our customers’ business success. Beyond being a strong year fi nancially, it was a year of exceptional business progress for ADI as well. • Our customers are partnering more deeply with us than ever before to leverage the full benefi t of our technology Independent Registered Public Accounting Firm Other Information We made great strides in the integration of LTC in 2018, capabilities and domain expertise to meet the growing Ernst & Young LLP To obtain a free copy of the 2018 Annual Report on Form 10-K, and we enter fi scal 2019 with employees across the innovation demands of their customers. 200 Clarendon Street Corporate Governance Guidelines, Code of Business Conduct organization unifi ed and working towards the common Boston, MA 02116 and Ethics, or additional information, visit investor.analog.com goal of delivering long-term profi table growth. Key Markets or write to: Transfer Agent Analog Devices, Inc. Our R&D teams have synergized product roadmaps ADI’s diversity in products and markets is one of our Computershare Investor Services Investor Relations and combined development activities, and are busily signifi cant strengths, providing long-term stability and a P.O. Box 505000 One Technology Way redefi ning the possible in analog, mixed-signal, power, launch pad for future growth. I’d like to outline just a few Louisville, KY 40233 P.O. Box 9106 and sensors to ensure we deliver leading-edge, impactful of the opportunities on which we are focused. (877) 282-1168 (U.S.) Norwood, MA 02062-9106 (781) 575-2715 (Outside U.S.) solutions for our customers. Email: [email protected] To manage the explosion in data and its effi cient move- http://www.computershare.com/investor ment, wireless and wireline networks will undergo a Annual Meeting revolution in the near term and, indeed, for many years to Shareholder Inquiries Stock Trading Analog Devices will hold its Annual Shareholders’ Meeting at 9:00 a.m. (local time) on Wednesday, March 13, 2019, at 1 The non-GAAP fi nancial measures included in this letter to shareholders come. For example, in the wireless communications Shareholders of record should Analog Devices’ common exclude certain items. Please refer to Page 103 of this Annual Report for sector, 5G is emerging and will enable up to 20 times the contact Computershare with stock trades on The Nasdaq 125 Summer Street, Boston, MA. additional information regarding these non-GAAP fi nancial measures and inquiries about their holdings, Global Select Market under reconciliations of these non-GAAP fi nancial measures to their most directly dividends, transfers of the symbol ADI. comparable GAAP fi nancial measures. Analog Devices, the Analog Devices logo, and Ahead of What’s Possible are 2 ownership, address changes, Free cash fl ow is defi ned as cash provided by (used in) operating activities, registered trademarks of Analog Devices, Inc. All other marks are trademarks less capital expenditures. Please refer to Page 104 of this Annual Report for a or account consolidations. of their respective owners. reconciliation of free cash fl ow to net cash provided by operating activities. 552780coverX.indd2780coverX.indd 2 11/16/19/16/19 55:02:02 PMPM data throughput when compared to 4G systems. ADI’s And fi nally, inhealthcare , the convergence of burgeon- strong position in more advanced 4G systems will continue ing sector economic challenges and the need for more to fuel growth in the near term and positions us well to sophisticated diagnostics technologies position us for collaborate with our customers to enable them to make strong growth. For example, in digital x-ray imaging, we the leaps necessary to deploy 5G networks. are leveraging our heritage of high-end signal processing components to create highly integrated “photons to bits” Much of the innovation in these 5G systems is taking place sub-subsystems that dramatically simplify our customers’ in the radio subsystem where ADI enjoys a leadership design challenges while enabling them to deliver increas- position. Here, the signal processing and thermal ingly high image fi delity at lower radiation dosages. management challenges are amplifi ed by the fact that physical space is constrained to that of prior generations. In response, customers are using new beam-steered, Closing Thoughts multiple antenna (massive MIMO) implementations Our strong success over the past fi ve-plus decades has to drive higher spectral effi ciency. Massive MIMO been guided by a consistent set of beliefs. Firstly, superior represents a signifi cant growth opportunity for ADI as innovation drives superior results. We focus on markets our comprehensive portfolio of software-defi ned, that value our innovation. Secondly, technology and mixed-signal, algorithmic, RF & microwave, and power business diversity create a broad array of opportunity and management technologies enable us to solve these greater resilience. And thirdly, we maniacally focus on immense radio challenges. continuously improving every aspect of our performance. Our 15,000+ employees are dedicated to expanding our In the industrial sector, our customers are deploying new capabilities and creating innovative solutions for our sensing modalities and communications technologies, customers each and every day.