Good morning, and welcome to the Analog Devices First Quarter Fiscal Year 2021 Earnings Conference Call, which is being audio webcast via telephone and over the web. I'd now like to introduce your host for today's call, Mr. Mike Lucarelli, Senior Director of Investor Relations. Sir, the floor is yours..

Thank you, Cheryl, and good morning, everybody. Thanks for joining our first quarter fiscal 2021 conference call. With me on the call today are ADI's CEO, Vincent Roche and ADI's CFO, Prashanth Mahendra-Rajah. For anyone who missed the release, you can find it and relating financial schedules at investor.analog.com. Now onto the disclosures.

The information we're about to discuss includes forward-looking statements, including statements relating to our objectives, outlook and the proposed Maxim transaction.

These forward-looking statements are subject to certain risks and uncertainties, as further described in our earnings release and our most recent 10-Q and other periodic reports and materials filed with the SEC.

Actual results could differ materially from these forward-looking statements as these statements reflect our expectations only as of the date of this call. We undertake no obligation to update these statements, except as required by law. Our comments today will also include non-GAAP financial measures, which exclude special items.

When comparing our results to our historical performance, special items are also excluded from prior periods. Reconciliations of these non-GAAP measures to their most directly comparable GAAP measures and additional information about our non-GAAP measures are included in today's earnings release.

And with that, I'll turn it over to ADI's CEO, Vincent Roche.

Vince?.

Thanks very much Mike, and good morning to you all. So I'll start my remarks with a review of our results before providing insights into how we're shaping a more connected, safer and sustainable future. The first quarter we delivered strong results that came in at high end of our outlook. Revenue was $1.56 billion and increased 20% year-over-year.

The strength was broad based, the growth across all end markets highlighted by a record quarter for our industrial business. We delivered gross margin of 70% and op margin of nearly 41%. All told, we produced adjusted earnings per share of $1.44.

Over the trailing 12 months, we generated $1.9 billion free cash flow equating to 33% free cash flow margin placing us in the top 10% of S&P 500. So overall I'm very pleased with our team's performance this quarter.

Now I'd like to discuss how we're advancing our mission of engineering good for the planet, social health and economic prosperity which in turn will create long-term sustainable value for our shareholders.

Awareness of the world's environmental degradation and climate change specifically is growing tremendously with a global called action building momentum. Semiconductors, as the bedrock of the modern digital economy have a major role to play in improving our standard of living while protecting our planetary health.

At ADI, our technology sit at the intersection of our customers and societies most pressing challenges and we're uniquely positioned to drive positive impact. Our industry leading portfolio with its breadth of capabilities defines the edge of performance and inherently delivers sustainable benefit.

With each generation of chip designed, we increase efficiency while enhancing the performance of our customers systems. This portfolio supports customers of all sizes and spans industries that are aligned with key secular trends. So today, I'll focus on where ADI is entering goods across the automation, electrification and connectivity sectors.

Firstly, the automation of human routines, factory floors and supply chains is critical to our future and the pandemic has further accelerated this paradigm. The World Economic Forum is predicting that by 2025 over half of all tasks will be performed by machines at first in human history.

To support this trend, our industrial customer base is boosting deployments of robots and cobots. Over the next five years the global robot installed base is expected to increase by about 60%. With industrial motors currently consuming 25% of all the world's electricity.

We urgently need to deploy technologies that not only deliver speed and accuracy, safety and flexibility. But also energy savings. Now let me share a few examples of how our technologies are meeting these challenges in automation. So firstly, variable speed drives can reduce motor energy consumption by up to 40% in a robot.

Our precision signal chain isolation and power management technologies together increase response time and improve power conversion. Secondly, our time of flight sensing technology allows robots to sense and interpret the world around them. So our customers can deploy more robots per square foot and improve workers safety.

Thirdly, our OtoSense condition-based monitoring solution presciently identifies motor inefficiencies enabling customers to proactively optimize and repair machinery. This avoids costly downtime and lowers energy consumption by 10%.

Importantly, these technologies that improve motor efficiency and robotic control can save almost one gigaton of annual CO2 emissions, the equivalent of 330 million residential homes. In total, automation is a key component of our industrial business supporting tens of thousands of customers.

We expect this accelerated digitalization to drive continued growth in 2021 and beyond. Now I'll turn to electrification and discuss the important role ADI is playing as consumer demand for greener transportation accelerates.

The World Economic Forum predicts that by 2030 there will be approximately 215 million electric vehicles on the road up exponentially from about 7 million today. ADI's solutions are embedded across all phases of the electric vehicle journey from supporting EV infrastructure to forming and managing the vehicle battery.

So I'll share now how our technologies are impacting this ecosystem. First, the shift to renewable energy sources drives great environmental benefits. But also creates new obstacles in distribution, transmission and stability. This requires a smart grid which can vividly monitor and adjust performance.

Our control and sensing technologies are critical to ensuring the grid parameters remain stable and prevent shutdowns. This shift also requires energy storage systems to mitigate intermittency issues, related to variable user demand.

Here our high accuracy monitoring and efficient power conversion technologies help extend systems battery life by more than 30%. Turning to the battery which is the most expensive vehicle part. Our Battery Management System or BMS enables up to 20% more miles per charge than our competition.

As the market leader, over half of the top 10 electric vehicle brands use ADI's BMS technology today. In addition, last fall we introduced the industry's first wireless BMS platform. This is all the benefits of our wired solution by lowering vehicle weights and enabling the scalable battery architecture, paving the way for reuse and storage systems.

GM's Ultium platform uses our wireless BMS technology which is expected to be deployed across 30 different models by 2025. Interest in our wireless BMS technology is rising and last quarter, we recorded our second OEM design win. Importantly, the environmental impact from our BMS capabilities is notable.

In 2020 alone, vehicles equipped with ADI's BMS technologies prevented approximately 70 million tons of carbon dioxide when entering the atmosphere. Our solutions utilized at the battery formation stage enabled more current density thereby shrinking our customer's equipment footprint by up to four times and reducing per channel costs by nearly half.

Our technology makes it possible for factories to recycle more than 80% of the energy used during the formation back into the power grid. Based on today's production levels, energy recycling during formation reduces CO2 output by about 1 million tons annually.

So all told, electrification not only represents highly valuable market with long-term revenue growth opportunities. But one that will be critical to the preservation of our precious natural ecosystem. So finally, let me turn to connectivity.

In the face of the pandemic, connectivity has been the foundation that is sustaining and powering our society and the economy and while the communications market is not known historically for its sustainability benefits.

This ability to stay connected and productive from anywhere has also had a positive impact on the environment, a clear proof point is the reduction of global carbon emissions by a record 7% in 2020. By 2030, forecast suggest mobile traffic will increase by about 17-fold.

This exponential increase in wireless data combined with pervasive cloud computing puts IP traffic on pace to double every two and a half years. And ADI is playing a critical role in building out the next generation infrastructure to support this exponential increase in data.

From capturing the signal at the base station air interface to transferring the information to the data center while substantially decreasing power.

So ADI has invested ahead and reshaped the 5G radio architecture, our software defined transceivers with complementary precision signal chain and power technologies are vital to enabling the 5G massive manual architecture.

When comparing 5G to 4G, our solutions help deliver a 90% decrease in energy per bit at the air interface by decreasing the channel count by 10x while maintaining the radio size and terminal performance. With the exponential upswing in data generation. Our customers are upgrading their optical infrastructure from 100 to 400 gigabits per second.

Our precision signal chain technologies help enable these optical modules maintain constant power while operating at four times the data rate. And with the customers looking to increase to 1 terabit and beyond ADI's opportunity will continue to expand. Capturing and transporting data efficiently is important.

But computing in data centers is the primary source of energy consumption in the connectivity ecosystem. Currently, data centers generate more than 130 million tons of CO2 per year globally. So this is where the transition from 12 to 48 volt power distribution can reduce power loss and increase compute density.

Our 48 volt to core micromodules power and power system monitoring solutions are enabling this transition and according to Alphabet, this approach and approved data center energy efficiency by 30%.

All told, ADI is part of the ecosystem enabling greater efficiency and wireless and wired data capture transmission and of course computing and our solutions of customers to scale their investments and build next generation networks economically and resourcefully.

So stepping back, I'm incredibly proud of the progress we've made on our mission to engineer good but a lot remains yet to be done. We're focused on partnering with our customers to develop increasingly innovative technologies that create successful business outcomes in rich people's lives and leave a greater impact on our world.

And so with that, I'll hand it over to Prashanth..

Thank you, Vince. Let me add my welcome to our first quarter earnings call. My comments today with the exception of revenue and non-op expenses will be on an adjusted basis which exclude special items outlined in today's press release. ADI delivered strong first quarter with results at the high end of our outlook.

Revenue increased 20% nearing an all-time high, operating margin expanded to 40.7% in line with our long-term model and adjusted EPS grew 40%. We saw tremendous breadth this quarter with all market segments growing year-over-year. The first time in over three years.

And B2B revenue increased 2% sequentially and 22% year-over-year with double-digit growth across each end market. Industrial represented 55% of revenue during the quarter increased 5% sequentially and 24% year-over-year. This represented a record quarter for industrial with broad based strength across applications, customers and geographies.

Specifically demand across our automation instrumentation and energy businesses accelerated this quarter. Communications which represented 18% of revenue during the quarter decreased 10% sequentially but increased 16% year-over-year. Both wireless and wireline revenue grew double-digit despite zero revenue from Huawei this quarter.

Automotive which represented 16% of revenue increased 7% sequentially and 19% year-over-year. With the industry aggressively ramping up production we saw double-digit year-over-year across all applications. BMS exhibited the highest growth, a trend we expect to continue given our growing design pipeline.

And lastly, consumer which represented 11% of revenue increased 2% sequentially and 5% year-over-year. We saw strong growth in hearables, wearables and home entertainment. This quarter's inflection puts us on track to return to full year growth in 2021.

And now for the rest of the P&L, gross margin which is seasonally weaker in the first quarter finished flat sequentially at 78%. We anticipate our first quarter's gross margin will be the trough for the year as we benefit from a strong top line, improving utilization and capturing the majority of the LTC cost savings.

OpEx in the quarter was $456 million up sequentially and year-over-year due mainly to variable compensation. Op margins finished at 40.7% above the guided midpoint. Non-op expenses were $27 million and better than our outlook due to an investment gain. Our tax rate for the quarter was approximately 12%.

So all told, adjusted EPS came in above the high end of guidance at $1.44. This included a $0.04 benefit from an investment gain that was not in our prior outlook. Moving onto balance sheet and cash flow, inventory dollars increased modestly while inventory days finished at 119, down from 121 in the fourth quarter.

Channel inventory as measured in weeks was flat sequentially and remained well below our seven-to-eight-week target. CapEx in the quarter increased to $67 million or roughly 4% of sales. We're working judiciously to add CapEx to meet this record demand anticipate that CapEx will run slightly above our long-term target of 4% for fiscal 2021.

Turning to cash flow, over the trailing 12 months we generated $1.9 billion or 33% of revenue. You'll recall that during the last year, we paused our share repurchase program for few quarters due to the pandemic and our proposed Maxim acquisition. Therefore in 2020, we returned 80% of free cash flow to shareholders after debt repayments.

This quarter, we've reinstated our share repurchase program and given our current 1.5 leverage ratio we're committed to returning 100% of free cash flow for the year. Looking at the first quarter, we executed nearly $160 million of repo and we also announced an 11% increase to our quarterly dividend at $0.69 per share.

Which marks our 18th increase over the last 17 years? Before moving onto guidance, I want to provide some context on the current state of supply. A sharper than expected recovery in the economy coupled with a lean inventory backdrop is fueling unprecedented demand for semiconductors and putting stress on the global supply chain.

While the industry at large is aggressively working to meet this historic demand. It's more than likely we'll be operating in a constrained supply environment for the balance of the year. At ADI, we're confident in our ability to outperform in times like this.

Our flexible hybrid manufacturing model, healthy balance sheet inventory and diversified product and customer base position us well. In addition, we're working to secure additional capacity from our external partners and ramping our internal operations to increase output. Now let me provide our second quarter outlook.

Revenue is expected to be $1.6 billion plus or minus $50 million. At the midpoint, this guidance reflects would be record revenue. We expect double-digit year-over-year growth for automotive, industrial and consumer market but we do see a decline in our comms.

Based on the midpoint of guidance, op margin is expected to be 41% plus or minus 70 bps and our tax rate is expected to be between 11% and 13%. Based on these inputs, adjusted EPS will be $1.44 plus or minus $0.08.

So in summary I'm encouraged by the near-term trend we're seeing across our end markets and while we're mindful of the ongoing macroeconomic uncertainty. We're optimistic that a broad-based recovery is underway and with Maxim expected to close this summer. 2021 will be a transformative year for ADI. Let me now pass it back to Mike to start our Q&A..

Thanks Prashanth. Let's go to the Q&A session. We ask that limit yourself to one question in order to allow for additional participants on the call this morning. If you have a follow-up question please requeue and we'll take your question, if time allows. With that, Cheryl can we have our first question please..

[Operator Instructions] our first question comes from John Pitzer from Credit Suisse. Please go ahead. Your line is open..

Good morning, guys. Appreciate the question and congratulations on the strong results. Prashanth, I just want to talk a little bit about how the model unfolds from here. I mean clearly you talked about already hitting the gross margin trough for the year. But you're guiding EPS sort of flattish on op revenue.

I'm just kind of curious how should we be thinking about OpEx from current run rate levels and specifically, is there incremental OpEx needed because of the tight supply situation? What are the puts and takes as we go throughout the balance of the year?.

Thank you for the question, John. Way to think about OpEx is that, if you recall in the Proxy, we identified that last year in the first half we had a particularly low bonus payout as reflection of the macroeconomic environment. In the first half of this year you're going to see the opposite effect of that. So on average it's a normal bonus payout.

But you do see a significant upswing in a variable comp for which is impacting both the first and the second quarter compares. In addition, we have the merit increase if you remember we put that merit increase in several months later than normal as a result of the pandemic last year.

So you're beginning to see that on a full year run rate basis in first quarter and then it will carry in second quarter. So beyond these comp related items OpEx is really at a steady level. We're not requiring any additional investment at the OpEx level to support the demand that we're generating..

Perfect. Thank you, guys..

Thanks. We'll have our next question..

Thank you. Our next question comes from Ambrish Srivastava from BMO Capital Markets. Please go ahead. Your line is open..

Prashanth and Vince, I just wanted to get back to the current constrained supply condition that the industry is facing.

So could you please comment on your lead times and then what are you seeing in the cost increases as you're experiencing and are you able to pass along pricing through the customers and more importantly, does it change your approach? Is there a structural change that you see happening? Prashanth, you talked about CapEx running a little bit higher.

Where does that additional CapEx going? Is back end, front end? And I just wanted to get a better sense of how things change from here on the supply chain front for ADI? Thank you..

Okay, so there's a lot packed into that question, Ambrish. Let me take a couple pieces of it. So we're producing and shipping at record levels and second quarter outlook is going to be a record. We have enough capacity to meet to the guide.

But significant additional upside versus that guide will depend on what we're able to procure both from an external wafer standpoint as well as the capital that we're in the process of deploying into our internal facilities to support that.

What we're doing to help alleviate that situation is we have been consistently building inventory since last summer to deplete what was pulled down during the pandemic shutdowns.

We're adding additional supply both internally and I mentioned the capital that we're deploying which is mostly going to the back end and then externally we've gone out and acquired additional wafers from our partners. I think the answer to your question on CapEx is that is mostly for test and then, on the capacity side.

Where we can get additional capacity from our partners, we're doing that. But even with this additional capacity it's very likely that the strength of demand is going to outpace supply for some period of time. So I think we will be chasing demand at least for the balance of this year.

From a capital deployment standpoint, some of that as we guide as percentage of revenue some of that is dependent on how strong the year continues to rollout. So when I say slightly above 4%. It could come down to 4% or maybe just a hair below if revenue continues to cripple on here..

Yes, just on the lead time question, Ambrish. So we entered our first quarter with what we've recalled normal lead times. But during the quarter and into the early part of this quarter we've seen lead times extend which I think is pretty consistent with the industry at large. So while we see some hot spots.

We're really talking about is few weeks of extension in different places. Let me remind you too that, we run this company. We run our manufacturing plants; the operating plants are run to POS rather than POA. So what we're seeing right now is a good balance between POS and POA.

But as Prashanth said, we're preparing for quite a bit of upside during this year and we've pretty substantially increased the CapEx in our backend..

Thanks Ambrish. Go to next question, please..

Our next question comes from Stacy Rasgon from Bernstein Research. Please go ahead. Your line is open..

I wanted to ask about comm. So it's down sequentially and year-over-year I guess into Q2.

Is that the trough for the year for comm.? And do you think the comms segment overall can grow year-over-year for the full year 2021?.

You want to take that, Vince? Okay, I'll take the first part of that, Stacy. So let's break comms into wired and wireless. On the wired, we're looking for continued growth as carriers and data centers are upgrading networks.

On the wireless, we said that, that the US deployment of 5G was always going to be a second half event and our view on that has not changed. What we have seen is a bit more of a slowdown in China as they're digesting kind of the 5G that they deployed and the channel counts are a bit lower.

So we do think comms troughs in second quarter and then begins to pick up in the second half with the global 5G. In terms of our view on whether we can grow comms on a year-over-year basis. Given the significant headwind we have from Huawei going to zero, that's a tough ask..

Yes, I think as well, I'll remind everybody that the three-year CAGR for comms has been 7% and that's with that's very, very significant headwind in China. I think when you look at ADI in the comms business it's tremendously diverse. Many, many hundreds of customers. 5G is a critical part. Wireline is an increasingly critical part.

So very, very hard to predict in a lumpy business. But our expectation is that, when you have CAGR [indiscernible] we produce better than mid single-digit growth for that business..

I'm sorry, was that a long-term statement? That didn't sound like that was this year..

Over the next few years I think Stacy. We will produce something better than mid single-digit growth in that business..

Yes, Stacy what Prashanth says we don't think it will grow this year in fiscal 2021 due to, I will say the Huawei headwinds, as they go to zero and lower channel count in China. But then pivoting to Vince, over the long-term we should grow - we've been growing 7%. There's no reason to go - going forward we can't grow at least in line to that..

Didn't you used to talk about double-digit growth in this business?.

We did Stacy. I think the world has changed over the past two years quite a bit. Could it grow double-digit? Sure it could. There's no reason it can't. But I think as we look today with the pressures, you're seeing geopolitically those are things we didn't know two years ago..

I think high single digits is a reasonable expectation. The early stages of 5G, I think being able to grow at double digits pretty plausible but we're working off a bigger numerator at this point in time. So I think if we can produce something in the high single digits. We'll be in very, very good shape..

Got it. Thank you, guys..

Thanks Stacy. Cheryl, next question..

Our next question comes from Tore Svanberg from Stifel. Please go ahead. Your line is open..

Vince, you talked about second design win for your wireless BMS solution or second OEM using that technology.

Could you elaborate a little bit on how quickly this technology is going to penetrate the auto market? Could you potentially get to six, seven OEMs embracing this technology this year and or next?.

Well that's certainly our expectation. I think in terms of getting to market. The latter part of this year we'll see the start of production. And I think between now and the end of 2023 say, we should expect four to five OEMs to adopt that technology. With a strong pipeline, but also remember we have a very strong wired portfolio in BMS.

So we've got those two tailwinds working for us. But I think overtime it will be kind of hybrid between wired and wireless. But clearly wireless is the bright star at this point in time and our expectation is, that we'll have at least a handful of OEMs using this technology by start of 2024..

Very helpful. Thank you..

Thanks Tore..

And our next question comes from Vivek Arya from Bank of America. Please go ahead. Your line is open..

Vince, I wanted to talk about just fiscal 2021 and the sustainability of growth. So you're starting the year of very strong, right? 20% growth rates in Q1 and the Q2 outlook.

How should we think about the second half of other - do you want to talk about the fiscal year or the calendar year? Which markets do you think right now are over heated because of whatever reasons which are kind of only - which are in line with demand and which ones can actually accelerate going into the second half? Just how should we think about how the segment mix changes as you go towards the second half of the year? Thank you..

Thanks for your question. Typically 1Q is the low point for ADI. We had a reasonably strong first Q compared to kind of normal pattern. But I want to stress there's still a tremendous amount of uncertainty out there. And I don't want to get into the business of making strong speculative predictions here.

But we can only kind of guide one quarter at a time particularly in this varying market. But if I look at the markets and just kind of peel the story back a little bit for you. So our industrial business which represents about half of the company's revenue was down we had two consecutive down years in 2019 and 2020.

But we produced the record quarter in the first. We expect ongoing strength in that business and one thing I'm very, very pleased about is that the most diverse part of our industrial business is automation and I think given the strength of our opportunity pipeline, the new products we've got coming to market.

I expect to see a multi-year tailwind in the automation part. I think right now in automotive there's a big push to electric vehicles and I see that as I said in the prepared remarks that is expected to grow by 2030 from kind of 7 million deployed electric vehicles today to over 200 million by 2030.

And we talked a lot last quarter about the strength of our cabin electronics business, active noise cancelation, premium audio, our A2B bus deployments and all that through provides good tailwinds for the company going ahead. Comms as we've just narrated weak in the first half of 2021.

But really, I think that's about the timing of deployments and my expectation is that, that business would snuck back in the second half of 2021 and continue into 2022. Last but not least, our consumer business has shown our couple of sequential growth quarters and we no longer have the overhang of one big socket and one big customer.

So with the diversity of our business. We were addressing more applications, we've a stronger product portfolio than we've had say three years ago. I think we're on a growth track of that business and we're certainly off to a very, very good start. So we believe that 2020 was bottom of that business and certainly the signals are that is the case..

Thank you..

Thanks Vivek..

Thank you. Our next question comes from Toshiya Hari from Goldman Sachs. Please go ahead. Your line is open..

Vince, you guys talked about growing capacity both internally as well as externally with your foundry partners.

How should we think about the step up in your capacity, again both internal and external, over the next couple of quarters? The magnitude at which you can grow capacity for the overall business? And secondly, a couple of your peers have talked about signing long-term contracts with customers.

Is that something that ADI is thinking about or considering? Thank you..

Well, I think what you've got to remember is that first and foremost we're producing and shipping products at record levels. 2Q will be an all-time record for the company, so we're certainly keeping ahead. Our investments are keeping ahead of these revenue levels, obviously.

Like most of our peers in the industry, there are supply constraints in parts of the business, so we're not able to meet all of the demand, particularly in auto, which has been very, very well-publicized. And the constraints continue across the front end in wafer procurement and also the backend.

But I want to remind you, too, we produce about half our silicon inside ADI, and the other half we procure with external partners. So I think something else worth noting is that we've been building inventory since last summer in terms of die stock and finished goods, which was heavily depleted during the pandemic shutdown.

So, as I said, internally we're ramping up our own manufacturing operations and we've been successful in acquiring additional wafers from our external partners. So I think that's the best I can give you in terms of the atmosphere that we're working within.

We're certainly keeping CapEx deployments ahead of where we think the revenue could be this year based on the demand patterns we now see..

Toshi, I would expect that our guide for each of the subsequent quarters is going to be partly influenced by what we're able to supply.

So as I said earlier, I think we're going to be chasing demand for the rest of this fiscal year, and we will use our guidance range to inform how we think - what we can build to base on our ability to get capacity third parties as well as increase capacity internally..

And then the long-term contracts, is that something that comes up in conversations or not really?.

I think it depends. We do have long-term contracts, but we're doing that on a more strategic basis than tactical, let's say..

Got it. Thank you so much..

Thanks, Toshiya..

Our next question comes from Craig Hettenbach from Morgan Stanley. Please go ahead. Your line is open..

Any update on just the linear cross selling synergies and efforts? I know a little while back you talked about the pipeline, but just how you're seeing that kind of unfold? And any particular markets for product segments that you're seeing the most traction along those lines?.

Yes, so, Craig, there's a couple of ways to look at this. Obviously, the battery side of things is very, very strong. We've more than doubled the size of that since we acquired LT.

And overall, when I look at, for example, power, the mixed signal portfolio, as well as the battery management side of things, we have more than $500 million worth of new revenue going into production this year, and that's just the beginning.

So in terms of areas where we're winning, we've got notable wins in communications, in wireless as well as and data center and cloud. In Automotive, we're strongly attaching to our infotainment business, the autonomous radar systems.

And the strongest surge in terms of growth in industrial for the LT portfolio, the additional cross selling is instrumentation tests and micromodules generally speaking across the board. We're seeing very, very strong demand for those products.

So I think all that said, we had expected that we would double the LTC growth from 3% to 4% historically to high single digits in a five-year period. And that's quite similar to how we viewed our opportunity with Hittite at the beginning and what also has materialized. So that's the story in terms of the markets and the expected growth..

Got it. Appreciate the color. Thanks, Vince..

Cheryl, can we have our last question, please?.

Thank you. Our next question comes from C. J. Muse from Evercore. Please go ahead. Your line is open..

I guess, Vince, to follow-up on that last question and to kind of go back to what you talked about a quarter ago. I think you said factory automation turned positive for the first time in quite a while year-on-year yet was still significantly below the Q3, 2018 levels. So I was hoping we could level set where we are today in your industrial bucket.

And as you think about where you are relative to prior peak, what kind of acceleration in growth should we be able to see in 2021 and 2022 particularly around factory automation, A&D and instrumentation?.

I'd say I mean, just Mike can give you some numerical color. I'll just give you a couple headline here. So what we're seeing, as I said in the prepared remarks, is an acceleration of the market in general, but we're still well below the previous peak.

And given the pipeline of opportunities that we've got, the technologies and the products that we've got, I think the long-term trends are going to be very, very strong, accelerated of course by the obvious need for resilience and driven by automation as a result of the pandemic.

But, Mike, you might want to add?.

Yes, sure. C. J., you're right. If you look at our Industrial business, we did just achieve a record quarter and we're guiding to another record quarter. So I'll clarify that. But what's interesting is if you peel back a bit, we have six application areas within industrial. Only two of them are above previous peaks.

So there's a lot more room for upside across all the verticals. But even if you look back at previous peaks, there's still four application areas we still have more room to run before we hit those peaks. Automation being one of those as well.

So I think, as Vince said, it's a long-term growth market, automation and industrial, and you're starting to see that business turn late last year into this year. And I think that continues hopefully into 2022..

Maybe just to close on that, C. J., we've been gaining share in industrial, and we've been gaining share over the last couple of years while the market hasn't been as strong. Now you're going to see the compounding effect of a growing market with the benefits of the share that we've picked up.

So I think you will see significant outperformance for ADI's industrial business versus our peers over the balance of this year..

I think healthcare as well, C.J., is worth noting that it still remains considerably above pre-COVID levels. We obviously got a boost during the upsurge in COVID-19. And again, I think this has been growing at 10% for the past five or seven years.

I think, a multi-year growth market, and we're beginning to see also the acceleration of demand as a result of the pandemic getting healthcare capabilities to anywhere so to speak. So I think - we look across industrial as an area where we've been, I'd say, steering a lot of our R&D over the last decade or so.

It's kind of a long burn business, but we're seeing the benefits now in terms of strength of our technology pipe and our customer engagements..

Thank you..

All right. Thanks, C.J., and thanks, everyone, for joining us this morning. A copy of the transcript will be available on the website. Thanks for joining the call and your continued interest in Analog Devices. Have a good day..

This concludes today's Analog Devices' conference call. You may now disconnect..