ANALOG DEVICES INC
For the period ended Jan 19, 2024. Filed Jan 19, 2024.
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Jan 19, 2024 · Filed Jan 19, 2024
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Contents
Highlights
About ADI
Analog Devices, Inc. is a global semiconductor leader that bridges the physical and digital worlds to enable breakthroughs at the Intelligent Edge. ADI combines analog, digital, and software technologies into solutions that help drive advancements in digitized factories, mobility, and digital healthcare, combat climate change, and reliably connect humans and the world.
ADI at a Glance
Background
| Founded: | 1965 |
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| Headquarters: | Wilmington, MA |
| Employees: | ~26,000 |
| Office Locations: | 31 CountriesWorldwide sales, field applications, product development, design, service and technical support |
| Products: | 75,000+ SKUs |
| Customers: | 125,000+ |
| Publicly Listed – Nasdaq: | ADI |
| Design Centers: | ~80 |
| Global Manufacturing: | United States (Massachusetts, Oregon, Washington) | Ireland | Philippines | Malaysia | Thailand |
Fiscal Year 2023 Revenue:$12.3B
ADI’s Extensive Hybrid Manufacturing
& Supply Chain Network
| 2024 Proxy Statement | 1 |
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Our Strategy
Our strategy is focused on our customers’ success. We dedicate our unparalleled technology portfolio, superior engineering and domain expertise, and exceptional end-to-end customer experience to achieve our goals. The end results are deeper, more strategic customer relationships, expanded business opportunities, and stronger and more sustainable growth.
In the fiscal year ended October 28, 2023 (fiscal year 2023), we continued to make progress against our three strategic priorities:
| DeployingCapitalEfficiently | uAnnual R&D investment of approximately $1.7B with approximately 95% targeted on most attractive B2B opportunitiesuExtracted value from M&A to enhance scale and scope, creating a destination for the world’s best talent: Maxim in FY’21, Linear Technology in FY’17, and Hittite in FY’14uDelivered on our commitment to return at least 100% of free cash flow over the long term, distributing $4.6B through share repurchases and dividends |
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| Deepening Customer’s Centricity | uPartnered more deeply with customers to deliver complete solutions and breakthroughs at the Intelligent EdgeuProvided customers with the technical expertise, support, and resources to overcome engineering’s toughest challengesuAccelerated innovation engine to develop cutting-edge technologies designed to help make our world safer, more efficient, and sustainable. Opportunity pipeline value achieved record levels in FY’23 |
| Capitalizingon Secular Trends | uAutomotive: Electrification, In-Cabin Experience, Advanced Driver Assistance System (Autonomous Mobility)uIndustrial: Industry 4.0, Digital Healthcare, Space, Sustainable EnergyuCommunications: Advanced Connectivity and High Performance Computing |
Fiscal Year 2023 Performance Highlights
| $12.3B | 64.0% | 31.1% | $6.55 | $4.8B |
|---|---|---|---|---|
| Revenue | Gross Margins | Operating Margins | Diluted Earnings per Share | Operating Cash Flow |
| ~90% | 72.5% | 48.9% | $10.09 | $3.6B |
| Business-to-Business Revenue | Adjusted Gross Margins* | Adjusted Operating Margins* | Adjusted Diluted Earnings per Share* | Free Cash Flow* |
- See Appendix A for additional information regarding non-GAAP financial measures and reconciliations of non-GAAP financial measures to their most directly comparable GAAP financial measures.
Environment, Social, and Governance
Our Approach
At ADI, we have long held the belief that we can and should be a force for positive change in the world. We believe that our growth over the past few years gives us the opportunity to take an even stronger leadership position in driving the changes that must take place to create a better society and a healthier planet. Environment, Social, and Governance (ESG) principles are at the heart of our work because they are aligned with our stakeholders’ priorities. The efforts we take across ADI to operate with integrity, preserve the environment, slow down and remediate climate change, and drive greater diversity, equity, and inclusion (DE&I), both within our leadership and workforce, are key to our long-term growth and profitability. We believe sustainability means delivering holistic solutions that make a positive, demonstrable impact on the world.
| 2 | Highlights |
ESG Oversight
Our ESG program is led by our CEO, our Leadership Team, as defined below, and appointed roles exclusively dedicated to ESG matters. Our head of ESG and sustainability is a key member of our CEO Strategy Office to ensure our ESG programs and principles are deeply embedded in our business strategy. Management regularly reports to the full Board of Directors on ESG topics, providing updates on key metrics and progress. These ESG updates are intended to keep our Board of Directors abreast of the quickly changing ESG regulatory environment, as well as evolving practices, risk oversight, mitigation strategies, and other relevant ESG topics, including environmental sustainability risks and opportunities, salient human rights risks, and emerging issues such as ethical AI. Our ESG council—comprised of in-house subject matter experts, including Human Resources, Procurement, Environment, Health and Safety, Legal, Risk, and Compliance and Ethics—meets regularly and shares updates, which are shared with the Leadership Team and the Nominating and Corporate Governance Committee on a quarterly basis. These updates highlight program advancements, regulatory updates, and risks.
ADI Corporate & ESG Recognition
We are proud that our commitments are routinely recognized around the globe, including most recently with the following recognition:
| uCarbon Clean 200 | uBusiness Intelligence Group Sustainability Leadership Award 2023 | uInvestor Business Daily’s 100 Best ESG Companies of 2022 |
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| u2022 JUST Capital Workforce Equity and Mobility Ranking | u2022 Forbes World’s Most Female Friendly Companies | uGlobal 100 Most Sustainable Corporations by Corporate Knights 2022 |
| u2023 JUST Capital 100 | u50/50 Women on Boards-3+ Women on Company Boards 2022 | uWall Street Journal’s 250 Best-Managed Companies of 2022 |
Recent Highlights
| uENVIRONMENT AND SOCIAL | ||
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| uPublished our 2022 ESG ReportuMapped our ESG Report to GRI (Core Option), SASB, TCFD and the U.N.’s Sustainable Development Goals uReported program updates to CDP Climate Change and Water Security, EcoVadis, and KnowTheChainuPublished online our most recent EEO-1 reports uSet a new target to reduce overall water withdrawn for our operations by 50% normalized to production output by 2027 | uContinued to innovate and develop solutions with meaningful environmental benefits for our customers, including our Battery Management Solutions, Energy Storage Systems, precision monitoring for enabling industrial transformation, and leveraging our intelligent sensing systems to continue towards our environmental commitmentsuRemained signatories to the U.N. Global Compact and their campaign, Business Ambition for 1.5°CuAchieved ISO 14001 and ISO 45001 certification across all manufacturing sites globally | uContinued to support STEM education programs, including through our collaboration with University of Massachusetts Lowell to create an RF/Microwave Learning LabuProvided community grants and matched employee donations to support 1,300+ unique organizations through the Analog Devices FoundationuAchieved 7.2% absolute reduction in Scope 1 and 2 emissions versus 2019 baselineuDisclosed Scope 3 emissions, in line with our commitment to be Net Zero by 2050 or sooner |
| GOVERNANCE | ||
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| uContinued to expand the capabilities of the Board of Directors by adding Mr. Stephen M. Jennings, who brings deep corporate governance and strategic experience to our Board of Directors and Dr. Peter B. Henry, who brings foreign affairs, global economics, and international finance experience to our Board of DirectorsuEnhanced the evaluation process of our Board of Directors and its committees, including leveraging the assistance of a third-party facilitator, to align with best governance practicesuUnanimously appointed Mr. Jennings as Lead Independent Director to continue the Board of Directors’ practice of having a strong and effective independent partner to our CEO and Chair | uEngaged with shareholders representing approximately 33% of our total shares outstanding, with a focus on ESG and compensation practicesuRefreshed the charter of our management-led cross-functional Cybersecurity Steering Committee to more clearly define its purpose and responsibilities, including overseeing security governance, promoting and supporting cybersecurity best practices, reviewing and prioritizing cyber risks, monitoring potential cyber incidents, and establishing key mitigation initiativesuSpecifically delegated oversight of cybersecurity matters to the Audit Committee | uEnhanced our product diversion compliance programs by expanding our proactive monitoring and review processes to inhibit prohibited resale of our products and formed a team focused on gray market mitigation efforts uEnhanced our global data privacy and compliance programs, by expanding global compliance trainings, further harmonizing policies and procedures, updating data protection notices to all global employees, implementing enhanced due diligence for third-party partners, and expanding our ethics hotline capabilities |
| 2024 Proxy Statement | 3 |
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People and Culture
| ADI’s collaborative culture, internally and with customers and ecosystem partners, is the cornerstone of the breakthrough solutions we provide. As a values driven destination for the brightest minds, we’re home to a diverse array of insatiably curious and technical people who engineer good for our planet and society. We are committed to continuous learning and innovation in our technology and as a company, and that spirit drives us to keep building a great place to work around the world together. | MARIYA TRICKETTChief People Officer |
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ADI’s talent strategy underscores our commitment to our employees. We believe that talent is our greatest asset and innovation thrives when people of different identities, cultures, backgrounds, and experiences collaborate. We strive to ensure that all employees reach their ambitions, are critically focused on enhancing the infrastructure necessary to support employee engagement, accelerate growth and development, and promote equity among all employees.
Talent Priorities
We invest in our people so that we can develop the next generation of technology that betters our world. We care about our employees, offering competitive benefits and compensation, as well as fulfilling career opportunities. To this end, we continuously look for ways to evolve our programs and practices to enhance employee satisfaction.
| Empower Innovation and Learning | Empowering our teams to innovate and learn across every level and function | Teams across departments come together to deliver experiences that quicken onboarding, build managerial skills, and ready employees for more complex roles. We prioritize on-the-job experiences as a way to build skills and drive learning.To deepen our bench of leadership, we have focused on developing enterprise leaders through our Enterprise Leadership Program, as well as aligning on success criteria for leadership roles. Understanding capabilities and encouraging mobility are keys to a robust and diverse leadership bench.We also work closely with our business unit leaders and human resources team to provide training that addresses technical skills, ADI’s development processes, and tools used throughout the organization in order for new team members to become productive quickly. More advanced training opportunities are available for team members that are looking to deepen or broaden their skill set. |
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| Amplify Culture through Employee Experiences | Role modeling values and behaviors and listening and responding to employee feedback | We are intensely focused on amplifying our cultural attributes that drive our growth. We have launched focused culture programming, grounded in our values and behaviors, in support of achieving our vision and sustaining high performing teams. Throughout the year, we conduct employee surveys and listening activities to gain feedback and learn more about ADI’s strengths as a workplace and opportunities for improvement. This enables us to take action and provide employees the tools they need to grow and prosper. |
| Foster Inclusion and Promote Equal Opportunity | Taking a holistic approach to equity and inclusion | We are launching a series of identity-based learning modules to help build cultural competency across the organization. Beginning with modules on neurodiversity, we are helping employees gain the knowledge needed to more effectively engage across their differences and unlock their collective potential.We also remain committed to building leadership teams that reflect the diversity of our employees and the communities we serve. To support this ambition, we tailor development programs to meet the needs of historically marginalized communities. |
| Build the Workforce of the Future | Evolving our workforce skills to drive innovation and sustain a competitive advantage | Our engineering team members continue to run a Software Engineering Reskilling Program, specifically designed to address ADI’s evolving talent needs by expanding the skills of our technical workforce in the software domain.We hired new key leaders having software and other leading technology experience and skills. Further, to enable ADI to become a system-level solutions provider, our learning and development team has created multiple training programs to expose our team members to new system level development processes and information about industry best practices. For example, our digital design verification program supports our initiative to develop digital components such as microprocessors and digital switches. In addition, we offer multiple software programs to enable team members to broaden their skill sets to address our customers’ growing need for integrated software solutions, including a robust data science, engineering, and analytics program to advance our understanding of the complex problems faced by our customers.We are committed to employee growth and development, as well as building high-performing teams. This means providing essential trainings that prepare employees to lead teams today and grow the business tomorrow. Programs such as our Leading ADI Forward program are designed to help our leaders build relationships and drive our strategic vision throughout the organization. |
| 4 | Highlights |
Diversity, Equity, and Inclusion
We are committed to cultivating an inclusive culture, implementing business practices that counteract systemic inequities, and engaging with the communities around us to create a better, more just world. Through structural and cultural change, we aim to ensure that employees of all identities and cultures have an equal opportunity to grow and succeed at ADI.
| Addressing Inequity Through a Holistic and Global Approach | uWe continue to transform the way we operate so inclusion and equity remain an integrated part of how we do business. This means redesigning our talent practices to address systemic barriers and building a culture that confronts bias.uAt a high level, our focus is on programs that target societal and organizational practices. From a societal perspective, we are establishing new partnerships and launching programs that increase access to STEM education for communities that are historically denied access. From an organizational perspective, we are revising our processes to mitigate bias and customizing our training programs to accelerate the development of underrepresented communities. |
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| Engaging and Empowering Employees | uWe have a growing list of Employee Networks that are a driving force behind our evolving culture. Comprised of over 3,200 members, our Networks foster community, build allyship, accelerate professional development, and impact organizational policy. Each has a formalized leadership team and structure, which includes an executive sponsor and annual goals.uEmployee Network members are directly involved in the design of specialized hiring initiatives and the development of identity-based learning modules. This ensures that programs designed to address underrepresentation are co-created with individuals who represent those communities. |
| Building Educational and Professional Partnerships | uWe continue to expand our outreach and support higher education, including engagement with one of the Historically Black Colleges and Universities (HBCU) that includes sponsoring a research project enabling students dedicated time to explore and innovate.uIn addition, we continue our outreach to professional associations that serve underrepresented communities. We host educational talks and focus on skill building as a way to increase candidate capabilities and foster greater brand and STEM awareness. |
| Enhancing and Supporting Diversity | uWe recognize that employees of different identities encounter different systemic and cultural challenges. Understanding these unique experiences allows us to create impactful learning programs that build community, drive performance, and advance gender and racial equity.uOne example is Elevate, our flagship leadership development series for women. Employees in this program build new skills and expand their global networks through an exciting combination of action learning, mentorship, and sponsorship. The program places an emphasis on enhancing business insight, increasing customer focus, developing strategic mindsets, and improving situational adaptability. The program cohorts were thoughtfully assembled to include representation from technical, sales, and corporate functions across Asia, Europe, and North America. |
| Ensuring Governance and Oversight | uThe Nominating and Corporate Governance Committee oversees ADI’s ESG policies, goals, and programs and receives quarterly updates on our progress against stated targets, as well as updates on topics such as stakeholder value, risks and opportunities, regulatory preparedness, ESG ratings, and key ESG focus areas. In addition, management regularly reports to our full Board of Directors on ESG topics, providing an update on key metrics and progress. Our Leadership Team, which includes our executive officers and any Senior Vice President reporting to the CEO, is engaged collectively on a semi-annual basis, and individual leaders provide ongoing sponsorship of core DEI initiatives, such as our partnership with an HBCU and a secondary school outreach program. |
| 2024 Proxy Statement | 5 |
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