Q1 2021 Analog Devices Inc Earnings Call
Good morning, and welcome to the analog devices first quarter fiscal year 'twenty 'twenty, One earnings conference call, which is being audio webcast via telephone and over the web.
Like to now introduce your host for today's call Mr. Michael Lucarelli Senior director of Investor Relations, Sir the floor is yours.
Thank you Cheryl and good morning, everybody. Thanks for joining our first quarter of fiscal 'twenty and 'twenty One conference call.
With me on the call today are a D. I C O Vincent Roche and Adi's CFO for shock Mahan driver Shah for anyone who missed the release you can find it and relating financial schedules at Investor day analog Dot com.
On to the disclosures you're.
The information we're about to discuss includes forward looking statements, including statements related to our objectives outlook and the proposed maximum transaction.
These forward looking statements are subject to certain risks and uncertainties. As further described in 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.
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 strong 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 C O visit Roche Vince.
Thanks, very much Mike and good morning to wall. So I'll start my remarks with a review of our results before providing insights into how we are shipping more connected and safer and sustainable future.
The first quarter, we delivered strong results that came on at the high end of our outlook revenue was 1.56 billion.
The increased 20 per cent year over year, the strength was broad based with growth across all end markets highlighted by a record quarter for our industrial business.
We delivered gross margin of 70 per cent and op margin of nearly 41%. All told we produced adjusted earnings per share with over 44.
Over the trailing 12 months, we generated $1 $9 billion of free cash flow equating to a 33% free cash flow margin.
Racing us on the top 10% of the S&P 500.
So overall I'm very pleased with our team's performance this quarter.
Now I'd like to discuss how we are advancing our mission of engineering good for the planets, social health and economic prosperity, which in turn will create long term sustainable value for our shareholders.
Awareness of the world's environmental degradation on climate change specifically is growing tremendously with a global call to action building momentum.
Semiconductors.
The bedrock of the modern digital economy have a major role to play in improving our standard of living while protecting our planetary hub.
On Adi our technology sit at the intersection of our customers and the societies, most pressing challenges and we're uniquely positioned to drive positive impact.
Our industry, leading portfolio with its breadth of capabilities to find the edge of performance and inherently deliver sustainable benefits with each generation of chip design, we increase efficiency, while enhancing the performance of our customer systems.
This portfolio supports customers of all sizes and spans industries that are aligned with key secular trends.
Good day I'll focus on where are you guys engineering, good 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 as part of that.
The World Economic Forum is predicting that by 2025 over half of all tasks will be performed by machines a force in human history.
To support this trend.
Our industrial customer base is boosting deployments of robots on cobalt.
Over the next five years, the global robot installed base is expected to increase by about 60%.
With industrial Motors currently consuming 25 per cent of all of the world's electricity.
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 heart technologies on meeting these challenges and automation.
So firstly variable speed drives can reduce motor energy consumption by up to 40% and a robot.
Our precision signal chain isolation on power management technologies, together increased response time and improve power conversion.
Secondly, our time of flight sensing technology allows robots to sense on interpret the world around them. So our customers can deploy more robust per square foot on the prove worker safety.
Thirdly.
Our auto since condition based monitoring solution recently identified motor inefficiencies in there.
I believe customers to proactively optimize on repair machinery.
This avoids costly downtime and lowers energy consumption by 10%.
Importantly, these technologies that improve motor efficiency on robotic control can save almost one gigaton of annual C. O two emissions the equivalent of 330 million residential homes.
In total automation is a key component of our industrial businesses supporting tens of thousands of customers.
We expect this accelerated digitalization to drive continued growth in 'twenty and 'twenty, one and beyond.
Yeah.
Now I'll turn to electrification and discuss the important role it 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.
Exponentially from about 7 billion today.
<unk> solutions are embedded across all phases of the electric vehicle journey from supporting EV infrastructure to forming on managing the visco bathroom.
So I'll share how our technologies are impacting this ecosystem.
First the shift to renewable energy sources drives great environmental benefits, but also creates new obstacles and distribution transmission and stability.
This requires the smart grid, which can digitally monitored from the just performance.
Our control and sensing technologies.
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 are high accuracy monitoring and efficient power conversion technologies.
Extend systems battery life by more than 30 per cent.
Turning to the battery, which is the most expensive vehicle park.
Our battery management system on BMS enables up to 20% more miles per charge on our competition.
As the market leader.
Over half of the top 10 electric vehicle brands.
Hey, guys BMS technology today.
In addition.
Last fall, we introduced the industry's first wireless BMS platform. This is all of the benefits of our word solution by lowering vehicle weights and enabling a scalable battery architecture.
I think the way for reuse and storage systems.
G M. <unk> platform uses our wireless BMS technology, which is expected to be deployed across 30 different models by 20 to 25.
Interest in our wireless BMS technology is rising and last quarter, we recorded our second OEM design wins.
Importantly.
The environmental impacts from our Vms capabilities is notable in 'twenty 'twenty alone vehicles equipped with <unk> Vms technologies prevented approximately 70 million tons of carbon dioxide.
The ethisphere.
Our solutions utilized that's the battery formation stage enabled more current density, thereby shrinking our customers' equipment footprint by up to four times on.
Reducing per channel costs by nearly half.
Our technology makes it possible from factories to recycled more than 80% of the energy used during the formation back into the power grid.
Based on todays production levels energy recycling during formation reduces C O two output.
About 1 million tons annually.
So all told.
Electrification not only represents a highly valuable market with long term revenue growth opportunities.
But one that will be critical to the preservation of our precious industrial ecosystem.
So finally, let me turn to connectivity.
In the face of the pandemic connectivity has been the foundation that is sustaining empowering our society and the economy.
And while the communications market is not known historically for sustainability benefits.
This ability to stay connected and productive from anywhere is also had a positive impact on the environment.
Clear proof point.
Is the reduction of global carbon emissions by a record 7% in 2020.
By 2030.
Forecasts suggest mobile traffic will increase by about 17 fold.
This exponential increase in wireless data combined with pervasive cloud computing.
But so I could traffic on pace to double every two and a half years and day.
I was playing a critical role.
And 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 datacenter one substantially decreasing power.
So are you guys invested ahead and reshaped the five day radio architecture.
Our software defined transceivers with complementary precision signal chain and power technologies.
Our vital to enabling five G massive mimo architecture.
When comparing <unk> to <unk>.
Our solutions help deliver a 90 per cent decrease in energy per bit at the air interface by decreasing the channel count per tenex, while maintaining the radio size on terminal performance.
With the exponential upswing in data generation.
Our customers are upgrading their optical infrastructure from 100 to 400 gigabit per second our precision signal chain technologies help enable these optical modules maintain constant power while operating at four times the decoration.
And with the customer is looking to increase to one terabits on beyond Adi's opportunity will continue to expand.
Capturing and transporting data efficiently is important but computing and data centers as the primary source of energy consumption in the connectivity ecosystem.
Currently datacenters generate more than 130 million tons of seal two per year globally.
So this is where the transition from 12 to 48 volt power distribution.
On reduced Carlos on the increase compute density.
Our 48 volt CT micro modules power and power system monitoring solutions are enabling this transition.
And according to alphabet. This approach can improve data center energy efficiency by 30%.
All told <unk> part of the ecosystem, enabling greater efficiency in wireless and wired data capture transmission and of course computed under solutions of customers to scale their investments and build next generation networks economically and resource.
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 enrich people's lives and leave a greater impact on our world.
So with that I'll hand, it over to per shot.
Thank you Vincent.
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 a strong first quarter with results at the high end of our outlook.
Revenue increased 20% nearing an all time high operating margin expanded to 47% in line with our long term model and adjusted EPS grew 40%.
We saw tremendous breath this quarter with all market segments growing year over year. The first time in over three years.
And b to B revenue increased 2% sequentially and 22% year over year.
With double digit growth across each end market.
Industrial represented 55 per cent 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 digits, 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 growth across all applications BMS exhibited the highest growth.
And 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 Terribles, 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 70%.
We anticipate our first quarter gross margin will be the trough for the year as we benefit from our 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 47% 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 force cent benefit from an investment gain that was not in our prior outlook.
Moving on to 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 remains well below our seven to eight week target.
Capex in the quarter increased to $67 million or roughly 4% of sales.
We are working judiciously to add Capex to meet this record demand and anticipate that Capex will run slightly above our long term target of 4% for fiscal 'twenty and 'twenty one.
Turning to cash flow.
Over the trailing 12 months, we generated $1 9 billion or 33% of revenue.
Youll recall that during the last year, we paused our share repurchase program for a few quarters due to the pandemic and our proposed maximum acquisition.
Therefore in 2020, we returned 80 per cent of free cash flow to shareholders after debt repayments.
This quarter, we 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 <unk> 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 our 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 will 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 what 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 comps.
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 eight cents.
So in summary, I'm encouraged by the near term trends, we're seeing across our end markets.
While we're mindful of the ongoing macroeconomic uncertainty we are optimistic that a broad based recovery is underway.
And with Maxim expected to close this summer 'twenty 'twenty, one will be a transformative year for Adi.
Let me now pass it back to Mike to start our Q&A. Thanks.
Thanks for shop.
The Q&A session.
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With that Sheldon with my first question. Please.
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Our first question comes from Joseph <unk> from Credit Suisse. Please go ahead. Your line is open.
Yeah. Good morning, guys I appreciate the question and congratulations on the strong results for Sean 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 up 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 or what are the puts and takes as we go throughout the balance of the year.
Yes. Thank you for the question John So on.
The way to think about Opex is that if you if you recall in the proxy we identified debt last year in the first half we had a particularly low bonus payout as a reflection of the macroeconomic environment.
In the first half of this year youre 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 our variable costs for the which is.
Packaging, both the first and the second the second quarter compares are.
In addition, we have the merit increase or debt. If you remember we put that merit increase in several months later than normal as a result of the the pandemic last year. So you are beginning to see that on a on a full year run rate basis in first quarter that will carry into second quarter. So beyond the these com.
Related items Opex is really at a steady level, we are not requiring any additional investment at the opex level to support the demand that we're generating.
Perfect. Thank you guys.
Thanks, John Lewis next question.
Thank you. Our next question comes from Andrew <unk> from BMO Capital markets. Please go ahead. Your line is open.
Alright. Thank you very much for sure on that 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 that you're experiencing and.
Pass along pricing to their customers and more importantly does it change your approach is there a structural change that you see happening if youre trying to you talked about capex trending a little bit higher.
Additionally, with haptics plays in the Bakken and then.
And I just wanted to get a better sense of how things change from here on on on the supply chain from for Adi.
Okay. Okay. So there's a lot packed into that question on British let me Yeah, Let me take a couple of pieces of it.
So we are producing and shipping at record levels and second quarter outlook is going to be a record we have enough capacity to meet the guide.
Additional 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 are in the process of deploying into our internal facilities to support that.
What we're doing to help alleviate that situation is if we had been consistently building inventory since last summer to deplete what was pulled down during the pandemic shutdowns.
We are adding additional supply both internally and I mentioned the capital that we're deploying which is mostly going to the backend and then externally. We've we've gone out on acquired additional wafers from our partners.
So the I think the answer to your question on Capex is that it's mostly for test and then.
On the capacity side, where we can get additional capacity from our partners, who are doing that but even with this additional capacity, it's very likely that the strength of demand is going to outplace outpaced supply for some period of time. So I think we will be chasing demand at least through the balance of this of this year from a <unk>.
Capital deployment standpoint.
Some of that you know as we guide as a 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 two to four or maybe just a hair below if revenue continues to to cook along here.
Yeah, just on the on the lead time question on Bruce So we entered our first quarter.
With what we would've called 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.
You know, while we see some hotspots, we're really talking about is a few weeks of extension in different places.
Remind you too that we run this company we run our.
Manufacturing plans the.
Operating plans are run to P. O S rather than P. O way. So what we're seeing right now is a good balance between Pos and poa, but.
For Sean said, we're preparing for a quite a bit of upside during this year.
We've pretty substantially increase the capex in our backend.
Okay. Thanks operations.
<unk>.
Go to next question please.
Our next question comes from Stacy Glasscock first.
<unk> Research. Please go ahead your line is open.
Hi, guys. Thanks for taking my question I wanted to ask about com, So it's down sequentially and year over year, I guess sai into Q2.
Is that the trough for the year for Com and you'd think that comp segment overall can grow year over year for the full year 2021.
Yeah.
Do you want to take that one okay I'll take the first part of that test Stacy So let's break comes into wired and wireless on the on the Wired. We're looking for continued growth as carriers and data centers or upgrading networks.
On the wireless we had we've said that day that the U S deployment of five G was always going to be a second half.
Event and our view on that has not changed what we have seen is a.
A bit more of a slowdown in China as they are digesting kind of a five G that they've 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 in the second half with the global five G in terms of our.
Our view on whether we can grow comps on a year over year basis, given given the significant headwind we have from Huawei going to zero, that's a tough ask yeah, I think as well.
Thanks, everybody.
You know the three year CAGR for Comms has been 7% index with the very very significant headwind in China. So.
You know I think when you when you look at Adi on the Comms business is tremendously diverse many many hundreds of customers <unk> is a critical part wireline is an increasingly critical part.
So I'm very very hard to predict on a lumpy lumpy business, but our expectation is that when you aggregate.
We produce.
Better than mid single digit growth for that business.
I am sorry was that a longer long term statements that didn't sound like that was up year over over the next few years I think Stacy we will produce something better than mid single digit growth on that business.
Stacy I think what push on says we don't think we will grow this year fiscal 'twenty, one due to I'll say, the Huawei headwinds as they go to zero and lower channel count in China, but then pivoting to Vince it 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 with that and with that.
Didn't used to talk about double digit growth, though in this business.
We we did Stacy I think the world has changed over the past two years are quite a bit.
To grow double digit share it could.
There's obviously I cant.
But on I think as we look today with the pressures Youre seeing geopolitically those are the things we didn't know two years ago.
I think high single digits.
Reasonable expectation of the early stages of five G I think being able to grow.
<unk> digits.
But.
You know, we're working off of a bigger.
Numerator at this point in time, so I think if we can produce something in the high single digits will be will be on very very good shape.
Got it thank you guys.
Thanks Stacy.
Share all over the next question question.
Pardon me. Our next question comes from tore Svanberg from Stifel. Please go ahead. Your line is open.
Thank you and congratulations on the results.
Vince you talked about a second design win for your wireless BMS solution or second OEM using that technology could you elaborate a little bit on 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 on or.
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 you know I.
I think between now on the end of 2023 say.
We should expect four to five Oems to adopt the technology, we have a strong pipeline, but also remember.
We have a very strong wire wired portfolio and BMS. So we've got those two.
Those two tailwind is working for us, but I think over time, it'll be kind of a hybrid between wired and wireless, but clearly why we're less as the.
Is the bright star at this point in time.
Our expectation is that we'll have at least a handful of Oems using this technology by the start of 'twenty putting forth.
Very helpful. Thank you.
Thanks Corey.
And our next question comes from Vivek Arya from Bank of America. Please go ahead. Your line is from.
Thanks for taking my question Vince I wanted to talk about fiscal 'twenty, one and the sustainability of growth so you're starting to head off.
Very strong 20%.
And in Q1, and Q2 outlook, how should we think about the second half of that debt do you want to talk about the fiscal year on the calendar year.
Each market do you think right now are overheated because of whatever reasons, which are kind of on the mine.
In line with demand and which ones can actually accelerate going into the second half or just how should we think about how the segment mix changes as you go towards the second half on half the year. Thank you.
Thanks for your question so you're on.
Typically <unk> is the low point for Adi, we had a reasonably strong force Q compared to kind of normal patterns.
But I will stress is still a tremendous amount of uncertainty out there.
You know I don't want to get into the business.
Making.
On a strong speculative predictions here, but.
We can only guide one quarter on time, particularly in this.
Yes.
Our weighted 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.
It was down we had two consecutive down years in 19 and 20.
But.
We produced a record quarter.
First we expect.
Ongoing strength in the business.
You know one thing I'm very very pleased about is that the most diverse parts 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 multiyear tailwind and the automate the automation part.
Hum.
You know I think right now there is in automotive.
There's a big push to electric vehicles.
I see that as I said on the prepared remarks.
That is.
Expect it to grow by 2030 from kind of $7 million deployed electric vehicles per day to over 200 million by <unk>.
You know 2030.
And we talked a lot last quarter about the strength.
Our covenant electronics business active noise cancellation.
<unk>.
R H b.
Russ deployment on all that two provides good tailwind for the company going ahead.
As we've just in the route.
We can the first half of <unk>.
'twenty, one, but really I think that's about the timing of deployments on.
My expectation is that that business will snap back in the second half of 'twenty, one and continue into 'twenty two.
Last but not least our consumer business is shown on a couple of sequential growth quarters.
And.
We no longer have the overhang of one big socket in one big customer so with the diversity of our business.
We're addressing more applications, we've a stronger product portfolio than we had say three years ago.
I think we're on a growth track in that business and we're certainly off to a very very good start. So we believed the 'twenty was the bottom of that business on <unk>.
Certainly the signals are that is the case.
Thank you.
Thanks Vivek.
Thank you. Our next question comes from Toshi Hari from Goldman Sachs. Please go ahead. Your line is open.
Hey, good morning, Thanks, so much for taking the question.
Vince you guys talked about growing capacity both internally.
As well as externally with your with your foundry partners, how should we think about the step up in your capacity again, both both internal and external over the next couple of quarters.
On the magnitude at which you can grow capacity for the overall business and then 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.
Oh, well you know what I think what you got to remember is that first and foremost we are producing and ship on shipping product at record levels <unk> will be an all time record for the company. So we're we're certainly keeping our investments are keeping ahead of these revenue levels.
Yeah.
You know 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 the demand, particularly in auto which has been very very well.
Syed.
And the constraints continue across the front end.
In wafer procurements.
And also the backend, but I will remind you too we produce about half our silicon inside Adi on 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 Diestock in finished goods.
Which was heavily depleted during the pandemic shutdown so.
As I said internally, we're ramping up our own manufacturing operations.
We've been successful in acquiring.
Additional wafers from our external partners.
So.
I think that's a that's the best I can give you in terms of the atmosphere that we're working with them, we're certainly keeping capex capex deployments.
Of of where we think the revenue could be this year based on the demand patterns we know.
Toshi I would 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.
As I said earlier I think we're gonna be chasing.
Chasing demand for the rest of this fiscal year, and we will use our our guidance range to inform how we think.
What we can what we can build two based on our ability to get capacity third parties as well as increased capacity internally.
And then the long term contracts is that something that comes up in conversations or not really.
I think it depends you we do have long term contracts, but we're doing that on a more strategic basis than the tactic.
Tactical let's say.
Got it thank you so much.
Thanks to share.
Our next question comes from Craig <unk> from Morgan Stanley. Please go ahead. Your line is open.
Oh, yes. Thank you any update on just the linear cross selling synergies and efforts in a little while back you kind of talked about the pipeline, but just how you're seeing that kind of unfold in any particular.
Markets or product segments that you're seeing the most traction along those lines.
Yeah. So.
Craig was 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 debt since we acquired LT.
And overall.
When I look at the for example power of the mixed signal portfolio as well as the battery.
Management side of things.
We have more than $500 million worth of new revenue go 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 and wireless as well as our data center and cloud.
In automotive, we're strongly attaching to our infotainment business.
You know the autonomous radar systems.
And the strongest.
George in terms of growth in industrial for the for the LP portfolio the additional cash.
Cross selling is instrumentation test on micro modules generally speaking across the board, we're seeing very very strong demand for those products. So.
I think all of that said.
You know we had expected that we would double the OTC growth to from kind of 3% to 4% historically.
To high single digits on a five year period.
That's quite similar to how we viewed our opportunity with Hittite at the beginning on what also has materialized. So.
That's the story in terms of the markets on the expected growth.
Yeah.
I appreciate the color thanks Vince.
Sure I can remember the last question. Please.
Thank you. Our last question comes from C. J Muse from Evercore. Please go ahead. Your line is open.
Yes. Good morning, Thank you for taking the question.
I guess 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 it factory automation turned positive for the first time on quite a while year on year, yet we still you know cigna.
Significantly below the Q3 <unk> levels. So I was hoping we could level set where we are today on.
On 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 'twenty, one and 'twenty, two particularly around factory automation A&D and instrumentation.
Yes, I'd say I mean, just Mike can give you some numerical color I'll just give you a top headline here so.
You know what we're seeing as I said in the prepared remarks is an acceleration on the market in general, but we're still well below the previous peak.
And given the pipeline of opportunity that we've got the technologies on the products that we've got I think the long term trends are going to be very very strong.
Accelerations of course by the.
The obvious need for resilience and driven by automation as a result of the pandemic, but Mike you might want to share 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 it back a bit we have six application areas within industrial only two.
Two of them are above previous peaks. So there's a lot more room for upside across all the verticals, but you. Even if you look back on previous peaks are 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 that's been said, it's a long term growth market automation and industrial and you're starting to see that business turn late last year.
Here into this year and I think that continues hopefully into 'twenty 'twenty two.
Maybe just to close on that T. J, we've been net we've been gaining share in industrial and we've been gaining share over the last couple of years, while the market Hasnt been a strong now youre going to see the compounding effect of a growing market with the benefit on 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 health care is about C. J is worth noting debt.
It still remains.
Considerably above pre COVID-19 levels, we obviously got a booster Inc.
The COVID-19 the upsurge in COVID-19 on it.
Again, I think this has been growing on kind of 10% for the for the past five or seven years.
I think a multi growth from multi year growth market.
We're beginning to see also the acceleration of demand.
As a result of the pandemic getting.
Our health care capabilities to anywhere so to speak so I think look we look across industrial zone area, where we've been.
I'd say steering a lot of our R&D over the over the last decade or so.
It's kind of a long burn business, but we're seeing the benefits now in terms of <unk>.
Growth of our technology.
Our customer engagements.
Alright.
Thanks P 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.
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