Q4 2020 Analog Devices Inc Earnings Call
Good morning, and welcome to be handled book devices third quarter fiscal year Twentytwenty earnings conference call, which is being audio webcast via telephone and over the web I.
I'd now like to introduce your host for today's call Mr., Michael Book Rally Senior director of Investor Relations, Sir the floor is yours.
Thank you Sheryl and good morning, everybody. Thanks for joining our fourth quarter and fiscal 2020 conference call.
With me on the call today are 80, I CEO Vincent Roche in FDIC AFFO per share had dropped Russia.
For anyone who missed the release you can find it and relating financial schedules at Investor day analog Dot com.
Now onto the disclosures the information we're about to discuss includes forward looking statements, including statements related to our objectives outlook on a proposed Mac from transactions.
These forward looking statements are subject to certain risks and uncertainties as from described in our earnings release, our most recent 10-K and other periodic reports on materials filed with the assay sales.
Actual results could differ materially from these forward looking on this forward looking information as these statements reflect our expectations only as a day to 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 excludes special items when comparing our results to our historical performance special items are also excluded from prior periods reconciliations on these non-GAAP measures to their most directly comparable GAAP measures and additional information about it on GAAP measures are included in today's earnings release, Okay with that I'll turn it over to.
FDIC O Vincent Roche Vince.
Thank you Mark on good morning to all I hope that you and your families are healthy on say at this time.
So to do 20 represents of your strategic progress from <unk> in a very highly on certain macro economic environment.
Fortunately, Eddie I was already operating from a position of strength.
Over the last decade, we've created the structurally more profitable business.
We realigned our portfolio to target more durable end markets and become more diverse across customers public summed up the occasions.
During this past year on at the height of the pandemic. This business model prove quite resilient with growth and operating margins troughing at 68% on 37% respectively.
Levels, we previously considered peak.
This resiliency that enables us to sustain a healthy net.
Level of investment guidance any economic backdrop.
We both one other freight to make strategic pivots towards the most attractive investment opportunities that enhance our customer engagement on federal land is secular growth trends such as digital health care.
Clearly the biggest investment decision of 2020 wells or strategic combination with Maxim.
Which will further extend the scale and scope of our semiconductor portfolio, although I'll expand on this in a while.
As I reflect on the immediate challenges over a current environment. We believe there is more easy I can do to leverage our expertise to engineer a more sustainable future.
Make it even more positive impact on the world.
To that end earlier this year, we published our first corporate responsibility report.
And launched the semiconductor industry's first green bond. We also took action in the global fight against COVID-19.
We prioritize production of our health care solutions to support customers and we're partnering with hospitals and biotech startups to develop solutions that leverage our technology.
Other in part because extended beyond our own facilities and capabilities as we've made multimillion dollar donations true the idiotic foundation to support both global and local pandemic response efforts.
Overall, I'm very proud of how we come together, we embraced and learn from this challenging time on continues to execute at a high level to generate from capture value in the market.
Now turning to our results in the fourth quarter revenue was 1.53 billion. Other adjusted EPS was $1.44 above the high end of our outlook.
For the year revenue was 5.6 billion down mid single digits year over year.
This was partially driven by the economic volatility on supply chain disruptions related to the pandemic.
Despite this our cumulative b to B revenue outperformed peers for a third consecutive year.
We actively managed operating expenses delivering.
Delivering operating margins of 40% on adjusted EPS of $4 on 91.
We generated approximately 1.8 billion in free cash flow and 2020.
Well this year is 33% free cash flow margin is just below our long term financial model, we continue to be in the top 10 per cent of companies in the S&P 500.
So now I'd like to provide an update on how we're shaping Eddie I think even more impactful in the future.
During the year, we invested more than $1 billion and on D with over 95% targeted at the most attractive b to b opportunities.
This includes funding new product development to fortify our franchises on drive new vectors of growth as you know we selectively use from a day to complement these organic investments and we've taken a very significant step forward with the pending acquisition Maxim.
The numerous customers.
Book, and with a boat or a combination or delighted that we will join forces maxsimil strength in our leadership in the semiconductor industry growth.
Getting a more comprehensive analog mixed signal on power portfolio on further diversifying our business across markets and applications.
On the 10000 beds on her strong the acquisition will solidify any guy as the destination for the world's best analog talent.
We've also been disciplined in our approach to managing our balance sheet. Since we closed the linear acquisition, we've put our leverage ratio on has increased.
We increased our dividend by 40%.
On the repurchase more than $1 billion of shares per Scott will provide further details on our capital allocation outlook for 2021.
Shifting now to customer engagement, our focus has been unwavering as we continued to solve our customers' toughest challenges.
A key strength of EPS <unk> is our standard products portfolio.
With its own carload breadth and depth from D.C. 400 gigahertz from none of what's the kilowatt from censored upload we.
We define the edge of performance.
Our portfolio sold across customers of all sizes on provides recurring revenue for decades.
What is just as important the standard products are the foundation upon which we build more targeted integrated solutions for higher growth vertical applications, such as Fiveg radio systems on automotive battery management.
To that end industries are prioritizing digitalization on connectivity more than ever a new industries are emerging focus on the physical and cyber in many ways. It's semiconductors that are enabling the current virtual economy and Eddie I, where data is born is at the center of this evolution on what.
Other lined with the key secular growth trends.
I'm looking across our segments I'd like to share some highlights with you.
Starting first with industrial this is an incredibly fragmented market with inc. Spending needs as it transitions industry 4.0 on beyond.
We're in a unique position.
Not only solve traditional channel just like precision six processing control on power, but also new emerging challenges like connectivity and safety. For example, our time of flight solution enables safer factory floors by preventing accidents between humans rule book Cooper.
Other connectivity portfolio of deterministic Ethernet.
Secure microwave ora on Fiveg is helping our customers to create ubiquitous connectivity.
Merging their operational and informational technologies to unlock the true value of industry 4.0.
In health care, the pandemic is accelerating the market towards tele medicine on transitioning care into the home to support this.
Systems are being upgraded.
On clinical good patient monitoring is extending outside of the hospital.
We doubled our investment ahead of this trend, bringing to market hundreds of new products and tilting or offerings towards complete system solutions. The result over the last five years, we've grown our customer base by over 20% on their revenues at a double digit rate, even when excluding pandemic related demand.
And we are now increasing on investment from sensing computing and close to help enable the secular shift to health care from anywhere.
In communications, we're the market leader on Fiveg.
A position that will deliver significant growth as fiveg broadens globally and 2020 wouldn't be on.
At the same time.
We view open radio access networks are all run as a disruptive technology that enables carriers to scale and upgrade their networks more quickly on economically and important an important step to help proliferate fiveg into new markets.
On Friday, guys weren't as franchise or on opens up new avenues for growth.
To get ahead of the market, we're further innovating or transceiver on per portfolios to shape the radio of the future.
We're also forming strategic partnerships with ecosystem participants such as income on Marvell.
And this strategy is working last quarter, we announced the collaboration with any sea to enable the first all run installation for records on mobile.
The automotive market is undergoing a revolution with electric vehicles, becoming mainstream area.
Hey, guys at the heart of this movement with over half of the top 10, TV brands using our Vms solution.
And our new wireless BMS offers the same reliability and performance of our word solution.
Net enhancing robustness on Configurability.
General Motors recently announced that they will deploy our wireless dms across their entire OTI on Bethree line.
Since the launch just a few months ago interest from this groundbreaking technology is gaining momentum across the ecosystem.
Looking at automotive more broadly demand for our audio system solutions with signal processing needs to be connectivity on road noise cancellation is intensified.
Our innovative solutions are not only the highest fidelity performance technology in the market, but they also reduce weight.
Moving nearly 100 pounds from an average vehicle.
We've also identified opportunities to attach or mtc portfolio with our eight to be platform to deliver both data on power up to 50 watts by combining all these capabilities recruiting deeper customer relationships flow.
Increasing or some per audio system.
Turning to consumer no. This is a market that has had its fair share of challenges over the last few years for 80 day. However.
We believe that the business has bottomed and Twentytwenty recent design wins across a diverse customer base for new and emerging applications like Hearables Wearables high end audio and video solutions put consumer on a multi year growth trajectory.
So in closing.
This was clearly an unprecedented year for us. So we're optimistic that a broad based recovery is underway, but I acknowledge that the recovery remains dependent on the economic impact of pandemic with that said.
I'm encouraged by our momentum and we expect Twentytwenty one to be a growth year for the company.
We've seen an improvement across nearly all of our end markets on our portfolio strategically aligned with favorable secular growth trends a position that gets only stronger with Maxim.
In my 30 years, plus at 80, I I've never been more confident about our prospects than I am today.
And so with that I'm going to turn over to push on whom take us through the financial details.
Thank you Vince Good morning, everyone. Let me add my welcome to our year end earnings call as usual, except for revenue and non op expenses my comments on the piano and our outlook will be on a non-GAAP or adjusted basis, which excludes special items outlined in today's press release.
Let me start with a brief recap of Twentytwenty [noise].
The heightened uncertainty and significant disruption due to the pandemic certainly created a very volatile year.
Revenue of 5.6 billion was down 6% year over year.
However, we saw sequential improvement throughout the year and our revenue was up 14% in the second half compared to the first.
Margins finished at 69% down slightly year over year, but we entered 2020 one within our long term financial model.
Op margins landed at 40% as we prudently managed our discretionary spend.
All told full year adjusted EPS was $4.91.
Now turning to the fourth quarter.
Revenue of 1.53 billion up 5% sequentially, marking the third consecutive quarter of growth there.
This exceeded the high end of our outlook driven mainly by stronger than anticipated growth in automotive.
And if we look at the individual segments in the fourth quarter industrial which represented 53% of revenue was up 5% sequentially and up 9% year over year.
We saw growth across nearly all of our major applications.
Notably automation, which makes up approximately 20% of industrial group for the first time in two years.
For the year industrial revenue was about flat underscoring the diversification across customers and applications in this business.
In the fourth quarter communications, which represented 20% of revenue.
It's down 14% sequentially. However.
However, the segment was up 19% year over year, driven by double digit growth in both wireless and wireline.
Importantly, our growth was not aided by customer pull in activity related to geopolitical tensions.
And for the year Communications revenue was down 8% year over year. However, excluding while we sales that were impacted in 19 and 20 by entity lift restrictions. Our revenue grew modestly a testament to our strong positions in fiveg and optical control for carrier networks and.
Data center.
In the fourth quarter, automotive, which represented 15% of revenue was up over 40% sequentially and up modestly year over year.
While we exit the year with revenue above pre pandemic levels. It was still down mid teens for the year due to lower vehicle production.
And finally in the fourth quarter consumer, which represented 11% of revenue finished up 12% sequentially yes.
Down 17% year over year as.
As Vince mentioned, we believe we are positioned to grow in 21 and beyond after three years of declines.
Moving on to the rest of the piano for the fourth quarter gross margin was 70% up 160 bips year over year on.
Capex was 431 million up 7% sequentially as we reinstated merit and experienced higher variable compensation.
Op margins finished at 41.7 per cent up nearly 300 bips year over year.
Non op expense was 44 million down both sequentially and year over year, driven by lower interest expense.
And our tax rate was lower than usual at approximately 10% on adjusted EPS was $1.44.
If we shift to the balance sheet and cash flow inventory dollars on our balance sheet declined modestly sequentially and inventory days finished at 121 down from 125 days in the third quarter.
Channel inventories fell slightly and remains below our 17th we target as we saw strong sell through trends across all geographies.
We plan to return to our target inventory model as we progress through 21.
In the quarter cash flow from operations was $673 million up 2% year over year.
Given the pandemic, we continue to be judicious with our Capex spending only 30 million this quarter or two per cent of revenue.
We do anticipate capex to normalize to around 4% of revenue from 2021.
And for the full year, we generated over 1.8 billion of free cash flow.
We returned 1.1 billion to shareholders through dividends and share buybacks or about 80% of free cash flow after debt repayments.
This was below our target as we paused our share buyback program at the height of the pandemic and then were restricted following the maximum announcement as a result, our cash position increased to over 1 billion.
During the quarter, we used 450 million of our cash flow to retire our 2020 one notes.
Total debt ended the year at approximately 5.1 billion.
Resulting in a leverage ratio of 1.6 on a trailing 12 month basis.
Recently, we reinstated our share buyback program, which has 1.9 billion left in authorization or approximately 4% of shares outstanding.
Given our low leverage we do not plan to reduce debt further in 21.
For context over the last three years, we've decreased our debt by approximately $3 billion.
This stronger balance sheet provides us with the flexibility to improve on our 100% free cash flow return and increase shareholder value over the long term through.
Through a combination of reinvestment in the business continued dividend increases greater and more consistent share buybacks and targeted acquisitions.
So now let's look at our first quarter outlook.
Revenue is expected to be 1.5 billion, plus or minus 70 million.
At the midpoint of guidance, we expect beat to be revenue in the aggregate to increase high teens year over year.
Op margins are expected to be approximately 40% at the midpoint down sequentially due to higher variable comp and annual merit.
Interest expense is also expected to be down slightly sequentially.
For 2021, we anticipate a tax rate between 12 and 14%.
And based on these inputs first quarter adjusted EPS is expected to be $1.30, plus or minus 10 cents.
I'll wrap up with a brief update on our pending acquisition of Maxim.
In September we received clearance from the Federal Trade Commission.
In the U.S. regarding our merger.
Followed by the overwhelming shareholder support of the combination from both 80 I ENMAX from shareholders.
We also submitted an initial applications for regulatory clearance in China and the E U.
I'm very encouraged by our progress and we remain on track to close the acquisition in the summer of 2021.
We are excited about this complementary combination and together, we expect that we will capture additional growth in the years ahead.
So with that let me turn it back over to Mike to lead the Queuing Inc.
Thanks push on let's get to our Q and a session. We ask that you limit yourself to one question in order to allow time for additional participants on the call. This morning.
If you have a follow up question. Please re queue re queue and we will take your question. If time allows for that we have our first question. Please.
And for those participating by telephone dialing in if you have a question. Please press star and the number one on your phone. If your question has been answered can you wished even from the queue. Please press the pound key if you are on the Shibani speakerphone. Please pick up the handset when you were asking your question.
Well pause for just a moment to compile the acuity roster.
Other first question comes from the day carrier from Bank of America. Please.
Go ahead your line is open.
Hi, Thanks for taking my question and congratulations on on the strong execution, especially the free cash flow generation on bench. My question is on the demand environment on both near term and what two cents for the next calendar year. So in the near term, which end markets do you feel on back to normal.
On the it's the true below.
Trendline, because when I look at the on January outlook on up 15% or so you had on here obviously against you know from some easier comps on your certainty starting the year on on a very strong node, but just how should we think about on the overall year in terms of the puts and takes for the different end markets industrial auto.
On consumer any broad color just near term and then for kind of under 21, I think would be ready has had to kind of frame on more on a far far and you are going to focus on thank you sure. Thanks for your questions a day.
Sorry.
Nearly as you said overall demand is better I think is what was a very good balance between.
Supply and demand inventories are I'd say very very well balance other customers as best we can so.
Right now the we're seeing very strong trends in automotive and industrial.
While we expected columns is a little softer for a big for a day of Twentytwenty.
Overall, I believe Twentytwenty one I think this on the left is going to be.
On the growth year for 80 eye on for the industry and you know my conviction has become even stronger.
Since the last earnings call here, we find on things a little for you if I go through a couple of the market segments.
Yeah, that's true we've clearly seen a broadening of demands on if you look at a 2020. The first off was clearly both to healthcare aerospace and defense and automatic test equipment.
Strength in both areas and you know the strength as persistence and deeper.
System from the second part on the year.
And I think the second half actually saw good.
Good strength to merge and factory.
Factory automation process automation, there more horizontal business.
So you know we believe that that strength will continue into the first quarter and beyond.
Automotive as you will have seen we had a strong upsurge there as well and other.
The business in fact is no back to pre cope with levels.
On the bookings continue to remain strong in the area.
And if I look at just the sub segments within to give you a filler.
Electrification is strong silver Vms solutions.
We're on the fifth generation, though on Vms product solutions are doing particularly well.
And our infotainment business, which is.
Which has emerged be on high fidelity rendering of audio and video.
Uh Huh are each of these solutions are emerging with grip strength given the pipeline that we've been moving over the last several years really.
And you will have seen nor does it was well the act of road noise cancellation solutions are running again on top of a thoughtful.
On so if I look at a on a.
Maybe comes a little bit here so.
Twentytwenty was strong actually across both wireless and wired.
Actually both were up in the in the fourth quarter of high teens year over year.
So you know if we we extract from away where we had the the restrictions.
You know Twentytwenty was strong across all the rest of the customers and sector grew on a jury during 2000 twentys. So.
Ah I think 21 will be about deployment of Fiveg, which is a big big part of that vision story I expect it will move more global.
On China.
Particularly with deployments in North America.
On a bunch of reports as well you know consumer has been on the on the downward for the other for several years, but you know we believe now that we've reached the bottom as we had expected and Twentytwenty [noise].
And you know given the.
Diversity of applications that were no addressing wrote a book customers.
We feel good about that was in both the portable as well as the more professional.
Solutions that we serve also so.
Hopefully that answers your question completely out of it.
Thanks for that I keep on our next question.
Thank you and our next question comes from Trade Center from Stifel. Please go ahead. Your line is open.
Yes. Thank you on congratulations on the results and.
And then so I was hoping you could zoom in on a little bit more on comps on on Fiveg.
Talked about old ran.
Obviously.
He has a very flexible approach with the Safari software defined radio was just hoping you could talk a little bit about how how that architecture plays into the role of Orion and just maybe some more comments on fiveg generally thank you.
So if I look at.
What's what's happening in the in the business, maybe I'll take a shorter term view on the slightly longer term view.
And.
Yes to your question on hold on as well.
So what we're seeing is that.
In the business in General you know.
As I said on the.
The answer to the last question there comes in general for US have seen strength in both wireless and wireline technologies optical work.
Particularly in the <unk> and the word area.
On the you know what we're seeing is obviously a more aggressive deployment of these massive mimo day systems, where our channel count continues to increase which gives you a.
A lot more content per reveal.
And I would also say that our portfolio has never been longer given the investments we've been making up for several years on.
Customer share has never been higher with the with the key Oems are more balanced in terms on the span of technologies and products that were supply.
So I think I think its important member Fiveg. He is on the is on the early stages of a multi year, probably depute run here.
I think 2020, one would be characterized by the.
The deployment of Fiveg more globally be on China, I expect America to be per.
Primary driver probably towards the second half of 2021.
For Fiveg and.
You know we've also we've seen a lot of interest.
Allergies for all run.
We're working with equal partners in that area, you will have seen on.
Also the the first announcement, we've had public to your book the use of our technologies, our radio technologies with the records on mobile in Japan through our partnership with any C. So.
I think it's a classic.
Classical fiveg being deployed for consumer applications, we will continue rapidly over the next three years, but I'm also beginning to see you know the early stages of adoption of Fiveg.
And two more deterministically critical missions like health care.
Factory automation and so on and so forth so.
I think if you look over the long term story. This is going to continue their growth Maria.
We have more content weve got a stronger position with our customers.
And we continue to push the boundaries of technology here to enable our customers to.
Something to do with the complexity, that's increasing exponentially.
On the more rapid.
Innovation cycles with our software defined radio systems.
Thanks.
Our next question please.
Thank you. Our next question comes from John Pitzer from Credit Suisse. Your line is open.
Yeah. Good morning, guys congratulation on the solid results. Thanks from me ask the question a modeling question for Sean Sean If you look at the quarter just reported the October quarter incremental op margins were perhaps lower than I would have expected I'm, assuming that's variable comp coming back into the model.
As you guys continue to do better on the top line, but I'd be curious as you look into the January quarter, how we should be thinking about opex, just given how funky a year calendar year 20 was because cobot had both some puts and some takes on the opex expense one.
Yes. Thank you for the question John So let me let me let.
Let me handle that in two pieces, let's talk on gross margins and then opex. So for the quarter just past, 70% gross margins, we had pretty considerable upside from automotive.
And so we have some some mix headwind with that kind of explosive growth in automotive. It is a it's below the corporate average in terms of margins as we think about gross margins for the coming quarter for for the first quarter.
We were passing through the holiday period. So we're going to have a little bit of continued pressure on utilization as a as we have some of our some of our fabs will be shut down for the for the holiday period, but expect that to improve as the year progresses, and we bring in the remaining 50 million of cost reductions from the.
The shutdown of the two LTC facilities in the balance of 2021 on the Opex side, you're exactly right. We've designed our variable comp system to really act as a shock absorber as a flywheel. So in 2020, when we had the great deal of uncertainty that operating the way.
It shouldn't it unwound. In addition, we made a decision as a leadership team to delay implementing Merrick in 2020, and we brought that back into place just this past quarter. So you'll see headwind from those from both of those decisions.
Into the first quarter and I mentioned that in my guidance. So it's both in my prepared remarks.
It's both a full quarter from Eric and better variable compensation.
Thank you.
Thanks, John share will go to our next question.
Thank you. Our next question comes from Ambrish Srivastava.
From BMO your line is open.
Hi, Thank you very much Vince I want it to zoom in on the industrial business. This business has been.
It really doesn't then compared to the past cycles per.
For yourself as well as some of your larger peer so the question really is.
Just help us understand.
And you gave us a number 20 per cent per automation, but if you.
Help us understand the business segments that are contributing to how you're able to.
You are able to kind of plow true what we have seen a pretty pretty disastrous on Q2, Q and then let maxim.
We all understand the complementary part or.
The other two parts on the automotive can you just help us understand how does the industrial business benefit from.
The nexsan business that you'd be bolting on thank you.
Yes so.
Since on bridge, Yeah, first and foremost.
You know, it's it's been a fairly tricky time in terms of trying to predict GBP book, we've come out of the year with tremendous strength first half of the year from <unk>. It was a book.
Aerospace and defense health care.
And.
The automatic test equipment sector as well so that's continued by the way through a through the second half.
We're building upon that in the.
With the hopes are urged to second half is the.
The expansion of growth in factory automation, which is particularly on the fourth quarter began to see.
Very very good surge, which we expect to continue by the way, albeit off of.
I'll say somewhat depressed base.
As economic expansion really takes route I believe from Twentytwenty one.
So oh so.
This business from a you know industrial knows more than half of the company's revenue.
The crop of products there is stronger than it has ever been in the history of the company.
Focus.
You know a decade ago, we decided this was really the route from the company on we're beginning to really see.
See done.
Demonstrated in our results versus our competition, we're gaining market share I think that's important so we cover more customers with more market share, but our product portfolio. So you know with industry 4.0 coming on board healthcare book.
Moving towards digitalization Tele medicine.
These are these all bode really well.
For the long term.
On where you know where it was maxim on value to us well industrial actually is really a focus is primarily about precision signal processing and power management of Maxim.
Very long percentage in those two areas, which we will deploy to.
Even greater effect across the spectrum of sensor to flow.
You know the.
The raw signal that the sensing the signal capture signal processing.
Connectivity and debt.
Bodes very well for it so I'm excited about getting more capability to bring to more customers.
They require to.
So vigorous lots of problems.
The complexity is growing in terms of their needs.
The analog scale is becoming scarcer on scarcer. So we bring more of that school to bear to solve more problems in a more complete way for our customers. So I think that's the way to think about it on.
Okay. Thank you thanks Ambrish.
Your next question please sheryl.
Thank you. Our next question comes from CJ Muse from Evercore. Your line is open.
Yeah. Good morning. Thank you for taking the question. Another question on the industrial side of.
The business is growing 9% year.
Year on year on October yet.
For the last two years essentially flat and so curious.
It sounds like automate.
Automation growing for the first time in two years. He is a real positive signals. So what kind of love to hear your thoughts on as we come out of this and debt make what that business segment growth could look like I'm, considering some of the growth sectors that you're investing in like health care as well as perhaps some of the more tried and true machinery.
Typical industrial businesses begin to recover thank you.
Yes, so if I look at it thanks CJ if.
If you look out over the longer term so industrial automation has been really on its way down for the last two and a half years.
And you know some of that was driven by the true tensions.
Obviously with.
The automotive sector will in a human Saar was dropping anyway in 2009 teams of pandemic crush them on there.
Even more so in 2020 so.
Automotive is a is a big big consumer of sophisticated factory automation system. So.
That's a that's on improving it.
I think on both the long term prospects for the business, but you know given.
Given the the vectors the market vectors the technology vectors that we've got.
My sense is if you think over the longer term here.
You know integrates the demand over three five year approved my sense is this business can grow in the mid to high single digit levels for you guys.
Thanks DJ.
Go next question please.
Our next question comes from two Shia Hari from Goldman Sachs. Your line is open.
Good morning, Thanks for taking the question then so I wanted to follow up on the automotive business.
Both in terms of your Q4 performance as well as the outlook into fiscal year 2001.
Just on sort of a clarification on Q4, you guys grew 40%, 40% plus sequentially. I think you were guiding that business to be up in the low teens. So obviously, a very big beat in the quarter was that essentially a function of higher volume across your customers in there for a beat across most of your customers on and most of it.
The applications or were there any specific standouts.
In the quarter I guess more importantly into fiscal year 21 on when you think about your automotive business and the potential for growth there versus.
The rate of recovery in the overall global automotive industry, what kind of outperformance would you expect on top of on top of automotive production. It appears as though you guys talk about you know.
M.S. and and active noise cancellation in particular, but are there any specific drivers that you're most excited about thank you. Thank you. So let me let me try to unpack that for you.
So yeah in fourth quarter, we were up 2% year over year and actually with strength across all the applications.
But you know.
Even though our property management solutions were down year on year, we did better than the other market large and our position has gained strength the new offerings that we have.
On the on the sure performance that we bring that nobody else.
Kevin can match in terms of the.
The other sends a signal processing, so I think that just looking at.
You know the prognostications on for electrification will do in the electric vehicle area.
I think that's a growth trend for decades Duncan will have two decades. So we feel good about that given our position I.
I think also.
If you just look at the fourth quarter I talked previously about.
Our signal processing plant from high performance signal processing platform based on our DSP are eight to be technology road noise cancellation.
Or it could be alone was up 70% in the year. So we've been talking about other long time, but no. The revenues are really coming home to roost in that area.
Look at one Q you know.
Typically that the automotive business for heavy eyes down seasonally, but we believe that it will be on so the strength that we've been seeing coming through the fourth quarter here will continue into the first and beyond.
HM.
Just the areas that I feel really enthusiastic about that weve been steering investments increasingly towards over the last three years or so.
I've talked already about the on the electric vehicle market on the.
We think about that as an opportunity.
Battery formation, the battery deployment battery so so.
Where we're growing share on those key markets and we continue to innovate on space and create.
Create more lewis between ourselves and our competition.
As the problems that our customers on solving become more and more challenging so.
We brought a wireless vms or quite recently, which we've announced a partnership with.
Well that is on leave stuff that is a new rule.
Dimension.
The automotive sector.
Oh I've talked about it from savings on really hate to be road noise cancellation, and you know we manage to grow the business.
On Twentytwenty, despite the really really compressed SAR.
The thing I should point out is that Oh well.
Phil on the early innings of attaching our power franchise.
On the automotive.
Critical applications in which we play.
And that's all still ahead of US we are.
We feel good about that.
In areas like sales.
The.
You know the radars little vision book safety systems, and just in the car on General However is an area, where we've made excellent progress I think.
You know getting design design wins now, we're turning them to revenue.
Thanks Toshiya. Thank you good net.
Next question please.
Thank you. Our next question comes from Blayne Curtis from Barclays. Please go ahead. Your line is open.
Hey, good morning, Thanks for taking my question I, just want to revisit answer on the Com you talked about longer term drivers like Iran, but just kind of curious.
Indeed in the January.
I think there there's been a positive thing kind of phase one phase two in China, just kind of curious your perspective, it seems like it might be down a little bit in January just curious when you when you think com or could see a recovery on any perspective on timing of of China coming back.
Yeah I'll just quickly on your I think colleges down sequentially I mean, a big reason why calms down sequentially on one Q is the wildlight bandwidth, while at a low single digit customer call. It two or 3% of sales that will be zero on so that will be a headwind into our first quarter and you're right on the timing of next next round of trying to find you double on these are TBD.
I think when they do happen it'll be a great.
Business for Us and will continue to grow on that market, but it's very hard to call when that market will turn back on some time likely in the first half of 21, but really on share to pinpoint. It today, when that's going to be given all the geopolitical tensions out there I think Vince did a good job talking about how it's not just about China. The good thing as you move to 21, it's more global Fiveg in North America, just start taking off.
Europe, Japan Korea, it's really starting to broaden out and less about China, China still will be on the biggest market, but really global fiveg deployment should do better year on year and 21.
Thanks, Bill our last question please.
Thank you and our last question comes from Ross Seymore from Deutsche Bank. Please go ahead. Your line is open.
Hi, guys. Thanks for sneaking me in just trying to wrap up with a little bit in the linear iridium demand can you just talk about that the book.
Things that you've seen how many of the concerns that your customers have had in the past about supply disruptions on all those sorts of things that it seems like things have gone away given your commentary on channel inventory, but just wanted to get a kind of what's your book to Bill was and how the linear already played out through the October quarter. Please.
Great. Thanks for the question. So let me give you a couple a couple of data points here.
The other that we started the quarter out strong in August which was up from July and then we had a pretty normal September.
Bookings remain solid so far I think a you know where you know a book to Bill is that parity, where we're going into the first quarter with debt with very normal backlog coverage for for our outlook.
The they all of that is reflected in the guide that we have I did make a comment about.
Inventory in the channel. So maybe that's also worth making sure people understand that we are below our seven to eight week model and then we're going to kind of build ourselves back into that model over the course of 2021. So that should also provide a little bit of a little bit tailwind as we go through 2021.
Thank you.
Alright. Thank.
Thanks, Ross and thanks, everyone for joining us today and it is this morning, a copy of the transcript will be available on our website and all available reconciliations any additional information can also be found in the quarter results section of our IR website.
Thanks for joining us and your continued interest analog devices, however, and as a good holiday.
This concludes today's analog devices conference call you may now disconnect.
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