Maxim Integrated Reports Results For The Second Quarter Of Fiscal 2021

Rhea-AI Summary

Maxim Integrated Products reported net revenue of $628 million for Q2 FY2021, reflecting a 1% increase from the previous quarter and a 14% increase year-over-year. Key drivers included strong demand from automotive and industrial sectors, which constituted 63% of total revenue. Diluted EPS stood at $0.68, impacted by $15 million in pre-tax special items. Cash flow from operations was $210 million, with total cash and equivalents rising to $1.8 billion. The company has suspended dividends and stock repurchase due to its merger with Analog Devices.

Positive

• Q2 FY2021 net revenue of $628 million, up 14% YoY.
• Automotive and Industrial sectors reached record revenue, contributing 63% of total revenue.
• Diluted EPS of $0.68, $0.73 excluding special items.
• Total cash and equivalents increased to $1.8 billion.

Negative

• Merger with Analog Devices causing suspension of dividends.
• Open market stock repurchase program suspended.

SAN JOSE, Calif., Jan. 26, 2021 /PRNewswire/ -- Maxim Integrated Products, Inc. (NASDAQ:MXIM) reported net revenue of $628 million for its second quarter of fiscal 2021 ended December 26, 2020, a 1% increase from the $619 million revenue recorded in the prior quarter, and a 14% increase from the same quarter of last year.

"Our strong performance in the December quarter relative to the same quarter last year benefitted from robust demand from automotive, industrial and consumer customers. Automotive and Industrial reached a record revenue level and comprised 63 percent of Maxim's total revenue. In addition, progress toward closure of our merger with Analog Devices is on track," said Tunc Doluca, President and Chief Executive Officer.

Fiscal Year 2021 Second Quarter Results

Based on Generally Accepted Accounting Principles (GAAP), diluted earnings per share in the December quarter was $0.68. The results were affected by $15 million in pre-tax special items which primarily consisted of $9 million in charges related to the upcoming combination with Analog Devices, $3 million in restructuring costs unrelated to the merger, and $7 million of expenses related to prior acquisitions, which were partially offset by $5 million of unrealized other income from private company investments. GAAP earnings per share, excluding special items was $0.73. An analysis of GAAP versus GAAP excluding special items is provided in this press release.

Cash Flow Items

At the end of the second quarter of fiscal 2021, total cash, cash equivalents and short-term investments were $1.8 billion, up $194 million from the prior quarter.

Notable items included:

• Cash flow from operations: $210 million
• Capital expenditures: $16 million

Trailing twelve months free cash flow was $733 million. Free cash flow is a non-GAAP measure and is defined by cash flow from operations less capital expenditures.

Dividend and Stock Repurchase

Per the terms of the Merger Agreement between the Company and Analog Devices, we will not declare dividends that would have been paid in the upcoming months of March, June and September and have suspended our open market stock repurchase program.

Due to the pending merger with Analog Devices, Maxim Integrated will not be hosting a quarterly earnings conference call and has suspended the practice of providing forward-looking guidance. Investors are requested to review our Investor Relations website for the quarterly financial highlights and SEC filings for the latest updates on the pending transaction. 

 

	CONSOLIDATED STATEMENTS OF INCOME
	(Unaudited)
		Three Months Ended
		December 26, 2020		September 26, 2020		December 28, 2019
		(in thousands, except per share data)
	Net revenues	$                       628,288		$                        619,357		$                       551,070
	Cost of goods sold	211,866		202,343		190,546
	Gross margin	416,422		417,014		360,524
	Operating expenses:
	Research and development	114,802		115,466		111,914
	Selling, general and administrative	80,153		82,954		76,071
	Intangible asset amortization	943		919		756
	Severance and restructuring expenses	3,327		8,813		2,728
	Other operating expenses (income), net	3,532		7,428		(1)
	Total operating expenses	202,757		215,580		191,468
	Operating income	213,665		201,434		169,056
	Interest and other income (expense), net	(3,202)		(7,037)		(17)
	Income before taxes	210,463		194,397		169,039
	Provision for (benefit from) income taxes	26,518		24,883		22,989
	Net income	$                       183,945		$                        169,514		$                       146,050
	Earnings per share:
	Basic	$                             0.69		$                              0.64		$                             0.54
	Diluted	$                             0.68		$                              0.63		$                             0.53
	Shares used in the calculation of earnings per share:
	Basic	267,299		266,831		270,330
	Diluted	270,792		269,529		273,269
	Dividends paid per share	$                                -		$                              0.48		$                             0.48
	SCHEDULE OF SPECIAL ITEMS
	(Unaudited)
		Three Months Ended
		December 26, 2020		September 26, 2020		December 28, 2019
		(in thousands)
	Cost of goods sold:
	Intangible asset amortization	$                           5,569		$                            4,363		$                           3,111
	Merger-related expenses (1)	1,059		1,335		-
	Cost of COVID-19 response programs	565		938		-
	Total	$                           7,193		$                            6,636		$                           3,111
	Operating expenses:
	Merger-related expenses (1)	$                           4,750		$                            6,607		$                                -
	Intangible asset amortization	943		918		756
	Severance and restructuring	3,327		8,813		2,728
	Other operating expenses (income), net (1)	3,531		7,428		(1)
	Total	$                         12,551		$                          23,766		$                           3,483
	Interest and other expense (income), net	$                         (5,131)		$                             (535)		$                         (1,230)
	Total	$                         (5,131)		$                             (535)		$                         (1,230)
	(1) Includes ADI merger-related expenses such as accelerated stock-based compensation expense resulting from the acceleration of certain RSAs and RSUs, and other legal and professional services.

 

	CONSOLIDATED BALANCE SHEETS
	(Unaudited)
		December 26, 2020		September 26, 2020		December 28, 2019
		(in thousands)
	ASSETS
	Current assets:
	Cash and cash equivalents	$                  1,796,961		$                   1,595,089		$                  1,720,194
	Short-term investments	8,879		17,022		63,006
	Total cash, cash equivalents and short-term investments	1,805,840		1,612,111		1,783,200
	Accounts receivable, net	485,773		449,376		348,342
	Inventories	261,476		265,664		223,958
	Other current assets	36,004		29,816		23,797
	Total current assets	2,589,093		2,356,967		2,379,297
	Property, plant and equipment, net	541,013		542,421		571,359
	Intangible assets, net	76,166		82,679		48,509
	Goodwill	562,540		562,540		532,251
	Other assets	114,058		108,920		95,413
	TOTAL ASSETS	$                  3,882,870		$                   3,653,527		$                  3,626,829
	LIABILITIES AND STOCKHOLDERS' EQUITY
	Current liabilities:
	Accounts payable	$                       96,959		$                        86,831		$                       89,449
	Price adjustment and other revenue reserves	180,215		144,255		105,237
	Income taxes payable	35,197		53,655		38,307
	Accrued salary and related expenses	99,057		115,460		94,739
	Accrued expenses	44,969		46,119		32,739
	Total current liabilities	456,397		446,320		360,471
	Long-term debt	994,741		994,381		993,303
	Income taxes payable	362,214		360,164		433,743
	Other liabilities	143,457		141,643		112,803
	Total liabilities	1,956,809		1,942,508		1,900,320
	Stockholders' equity:
	Common stock and capital in excess of par value	43,231		12,461		270
	Retained earnings	1,897,098		1,713,153		1,737,528
	Accumulated other comprehensive loss	(14,268)		(14,595)		(11,289)
	Total stockholders' equity	1,926,061		1,711,019		1,726,509
	TOTAL LIABILITIES & STOCKHOLDERS' EQUITY	$                  3,882,870		$                   3,653,527		$                  3,626,829

 

	CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
	(Unaudited)
		Three Months Ended
		December 26, 2020		September 26, 2020		December 28, 2019
		(in thousands)
	Cash flows from operating activities:
	Net income	$                       183,945		$                         169,514		$                       146,050
	Adjustments to reconcile net income to net cash provided by operating activities:
	Stock-based compensation	31,209		35,730		24,067
	Depreciation and amortization	24,141		24,199		24,087
	Deferred taxes	(1,782)		(1,103)		(2,684)
	Loss from disposal of property, plant and equipment	164		63		113
	Other adjustments	(1,220)		1,867		5,934
	Changes in assets and liabilities:
	Accounts receivable	(36,401)		(44,798)		21,974
	Inventories	4,042		(5,986)		12,005
	Other assets	(9,868)		4,159		(3,377)
	Accounts payable	8,945		(3,423)		3,602
	Price adjustment and other revenue reserves	35,964		(4,461)		15,031
	Income taxes payable	(16,408)		(14,710)		(5,792)
	All other accrued liabilities	(12,232)		1,460		(3,545)
	Net cash provided by operating activities	210,499		162,511		237,465
	Cash flows from investing activities:
	Purchases of property, plant and equipment	(16,485)		(12,728)		(13,670)
	Proceeds from sales of property, plant and equipment	63		4		128
	Proceeds from sales of available-for-sale securities	1,500		-		-
	Proceeds from maturity of available-for-sale securities	6,600		18,425		35,146
	Purchases of investments in privately-held companies	(26)		(84)		(516)
	Proceeds from sale of investments in privately-held companies	14		25		-
	Other investing activities	-		-		(33)
	Net cash provided by (used in) investing activities	(8,334)		5,642		21,055
	Cash flows from financing activities:
	Contingent consideration paid	-		-		(8,000)
	Net issuance of restricted stock units and awards	(18,966)		(17,018)		(7,623)
	Proceeds from stock options exercised	175		2,632		1,338
	Issuance of common stock under employee stock purchase program	18,498		-		18,535
	Repurchase of common stock	-		(9,201)		(107,957)
	Dividends paid	-		(128,147)		(129,810)
	Net cash used in financing activities	(293)		(151,734)		(233,517)
	Net increase (decrease) in cash, cash equivalents and restricted cash	201,872		16,419		25,003
	Cash, cash equivalents and restricted cash
	Beginning of period	$                    1,601,847		$                      1,585,428		$                    1,695,191
	End of period	$                    1,803,719		$                      1,601,847		$                    1,720,194
	Total cash, cash equivalents, and short-term investments	$                    1,805,840		$                      1,612,111		$                    1,783,200
	Cash, cash equivalents and restricted cash:
	Cash and cash equivalents	$                    1,796,961		$                      1,595,089		$                    1,720,194
	Restricted cash in Other assets	6,758		6,758		-
	Total cash, cash equivalents and restricted cash	$                    1,803,719		$                      1,601,847		$                    1,720,194

 

	ANALYSIS OF GAAP VERSUS GAAP EXCLUDING SPECIAL ITEMS DISCLOSURES
	(Unaudited)
		Three Months Ended
		December 26, 2020		September 26, 2020		December 28, 2019
		(in thousands, except per share data)
	Reconciliation of GAAP gross profit to GAAP gross profit excluding special items:
	GAAP gross profit	$                     416,422		$                      417,014		$                     360,524
	GAAP gross profit %	66.3%		67.3%		65.4%
	Special items:
	Intangible asset amortization	5,569		4,363		3,111
	Merger-related expenses (1)	1,059		1,335		-
	Cost of COVID-19 response programs	565		938		-
	Total special items	7,193		6,636		3,111
	GAAP gross profit excluding special items	$                     423,615		$                      423,650		$                     363,635
	GAAP gross profit % excluding special items	67.4%		68.4%		66.0%
	Reconciliation of GAAP operating expenses to GAAP operating expenses excluding special items:
	GAAP operating expenses	$                     202,757		$                      215,580		$                     191,468
	Special items:
	Merger-related expenses (1)	4,750		6,607		-
	Intangible asset amortization	943		918		756
	Severance and restructuring	3,327		8,813		2,728
	Other operating expenses (income), net (1)	3,531		7,428		(1)
	Total special items	12,551		23,766		3,483
	GAAP operating expenses excluding special items	$                     190,206		$                      191,814		$                     187,985
	Reconciliation of GAAP net income to GAAP net income excluding special items:
	GAAP net income	$                     183,945		$                      169,514		$                     146,050
	Special items:
	Intangible asset amortization	6,512		5,281		3,867
	Merger-related expenses (1)	5,809		7,942		-
	Cost of COVID-19 response programs	565		938		-
	Severance and restructuring	3,327		8,813		2,728
	Other operating expenses (income), net (1)	3,531		7,428		(1)
	Interest and other expense (income), net	(5,131)		(535)		(1,230)
	Pre-tax total special items	14,613		29,867		5,364
	Other income tax effects and adjustments (2)	(1,616)		(4,272)		317
	GAAP net income excluding special items	$                     196,942		$                      195,109		$                     151,731
	GAAP net income per share excluding special items:
	Basic	$                           0.74		$                            0.73		$                           0.56
	Diluted	$                           0.73		$                            0.72		$                           0.56
	Shares used in the calculation of earnings per share excluding special items:
	Basic	267,299		266,831		270,330
	Diluted	270,792		269,529		273,269
	(1) Includes ADI merger-related expenses such as accelerated stock-based compensation expense resulting from the acceleration of certain RSAs and RSUs, and other legal and professional services.
	(2) Includes tax effect of pre-tax special items and miscellaneous tax adjustments.

 

Non-GAAP Measures

To supplement the consolidated financial results prepared under GAAP, Maxim Integrated uses non-GAAP measures which are adjusted from the most directly comparable GAAP results to exclude special items related to the cost of COVID-19 response programs; ADI merger-related expenses; intangible asset amortization; severance and restructuring; other operating expenses (income), net; interest and other expense (income), net; and other income tax effects and adjustments. We defined free cash flow as net cash provided from operations less gross capital expenditures. Management uses these non-GAAP measures internally to make strategic decisions, forecast future results and evaluate Maxim Integrated's current performance. Many analysts covering Maxim Integrated use non-GAAP measures as well. Given management's use of these non-GAAP measures, Maxim Integrated believes these measures are important to investors in understanding Maxim Integrated's current and future operating results as seen through the eyes of management. In addition, management believes these non-GAAP measures are useful to investors in enabling them to better assess changes in Maxim Integrated's core business across different time periods. These non-GAAP measures are not in accordance with or an alternative to GAAP financial data and may be different from non-GAAP measures used by other companies. Because non-GAAP financial measures are not standardized it may not be possible to compare these financial measures with other companies' non-GAAP financial measures, even if they have similar names. The non-GAAP measures displayed in the table above include the following:

GAAP Gross Profit Excluding Special Items

The use of GAAP gross profit excluding special items allows management to evaluate the gross margin of the Company's core businesses and trends across different reporting periods on a consistent basis, independent of special items including intangible asset amortization, ADI merger-related expenses and cost of COVID-19 response programs. In addition, it is an important component of management's internal performance measurement and reward process as it is used to assess the current and historical financial results of the business, for strategic decision making, preparing budgets and forecasting future results. Management presents GAAP gross profit excluding special items to enable investors and analysts to evaluate our revenue generation performance relative to the direct costs of revenue of Maxim Integrated's core businesses.

GAAP Operating Expenses Excluding Special Items

The use of GAAP operating expenses excluding special items allows management to evaluate the operating expenses of the Company's core businesses and trends across different reporting periods on a consistent basis, independent of special items including intangible asset amortization; ADI merger-related expenses severance and restructuring, and other operating expenses (income), net. In addition, it is an important component of management's internal performance measurement and reward process as it is used to assess the current and historical financial results of the business, for strategic decision making, preparing budgets and forecasting future results. Management presents GAAP operating expenses excluding special items to enable investors and analysts to evaluate our core business and its direct operating expenses.

GAAP Provision for Income Taxes Excluding Special Items

The use of a GAAP provision for income taxes excluding special items allows management to evaluate the provision for income taxes across different reporting periods on a consistent basis, independent of special items. Special items include the tax impact of pre-tax special items, significant tax audit settlements, significant prior year tax reserve adjustments, significant tax legislation, and significant non-recurring and period specific tax items, which vary in size and frequency.

GAAP Net Income and GAAP Net Income per Share Excluding Special Items

The use of GAAP net income and GAAP net income per share excluding special items allow management to evaluate the operating results of Maxim Integrated's core businesses and trends across different reporting periods on a consistent basis, independent of special items including intangible asset amortization; ADI merger-related expenses; cost of COVID-19 response programs; severance and restructuring; other operating expenses (income), net; interest and other expense (income), net; and other income tax effects and adjustments. In addition, they are important components of management's internal performance measurement and reward process as it is used to assess the current and historical financial results of the business, for strategic decision making, preparing budgets and forecasting future results. Management presents GAAP net income and GAAP net income per share excluding special items to enable investors and analysts to understand the results of operations of Maxim Integrated's core businesses and to compare our results of operations on a more consistent basis against that of other companies in our industry.

"Safe Harbor" Statement

Except for historical information, this press release may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including but not limited to the Company's belief that progress toward closure of its merger with Analog Devices is on track.  These statements involve risk and uncertainty. Actual results could differ materially from those forecasted, based upon, among other things, general market and economic conditions, regulatory approvals, market developments that could adversely affect the growth of the mixed-signal analog market, product mix shifts, the loss of all or a substantial portion of our sales to one or more of our large customers, customer cancellations and price competition, as well as other risks described in the Company's Annual Report on Form 10-K for the fiscal year ended June 27, 2020 (the "Form 10-K"). The Form 10-K may be found at https://www.sec.gov/Archives/edgar/data/743316/000074331620000025/0000743316-20-000025-index.htm.

All forward-looking statements included in this news release are made as of the date hereof and based on the information available to the Company as of the date hereof. The Company assumes no obligation to update any forward-looking statement except as required by law.

About Maxim Integrated

Maxim Integrated, an engineer's engineering company, exists to solve the designer's toughest problems in order to empower design innovation. Our broad portfolio of high-performance semiconductors, combined with world-class tools and support, delivers essential analog solutions including efficient power, precision measurement, reliable connectivity and robust protection along with intelligent processing. Designers in application areas such as automotive, communications, consumer, data center, healthcare, industrial and IoT trust Maxim to help them quickly develop smaller, smarter and more secure designs. Learn more at https://www.maximintegrated.com.

Contact
Kathy Ta
Vice President, Investor Relations
(408) 601-5697

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SOURCE Maxim Integrated Investor Relations

FAQ

What are Maxim Integrated's Q2 FY2021 earnings results?

Maxim Integrated reported net revenue of $628 million and diluted EPS of $0.68 for Q2 FY2021.

How did Maxim Integrated's revenue compare year-over-year?

The company experienced a 14% increase in revenue compared to the same quarter last year.

What impact did the merger with Analog Devices have on Maxim Integrated?

The merger has led to the suspension of dividends and the open market stock repurchase program.

What drove the revenue growth for Maxim Integrated in Q2 FY2021?

Robust demand from automotive and industrial sectors was a key factor, contributing to record revenue.

What was Maxim Integrated's cash flow from operations in Q2 FY2021?

The cash flow from operations for Q2 FY2021 was $210 million.