ANALOG DEVICES INC
For the period ended Mar 12, 2025. Filed Jan 27, 2025.
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Mar 12, 2025 · Filed Jan 27, 2025
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
(Amendment No. )
Filed by the Registrant ☑
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| ☐ | Preliminary Proxy Statement |
| ☐ | Confidential, For Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
| ☑ | Definitive Proxy Statement |
| ☐ | Definitive Additional Materials |
| ☐ | Soliciting Material under §240.14a-12 |
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Letter from our CEO and Chair
Dear Fellow Shareholders,
In my letter to you last year, I pointed out that the true test of the quality of a company’s strategy and execution is not just its performance at the peak of the business cycle, but also in the trough. In 2024, the combination of one of the semiconductor industry’s worst-ever downturns, a turbulent geopolitical landscape, and numerous macroeconomic headwinds created one of the most difficult operating environments in ADI’s 60-year history. But these are the circumstances in which the power of ADI’s business model is most evident.
Our healthy diversity across customers, applications, and products, which allows us to maximize optionality and upside potential in bullish times, also enables resiliency and a strong immune response in the face of bearish periods. This was demonstrated in 2024 when we overcame tremendous downward pressure on revenue to deliver model margins, while continuing to invest vigorously in the extraordinary talent, innovations, go-to-market initiatives, and hybrid manufacturing strategy that form the foundation of our future growth. We begin 2025 well-positioned to leverage our cutting-edge technology portfolio, deep customer relationships, and unparalleled team of technologists to further unlock the potential of the AI-enabled Intelligent Edge and deliver ever stronger financial returns for our shareholders in the years to come.
Fiscal 2024 Results and Strategic Progress
Following a record 2023, revenue declined to $9.4 billion in fiscal 2024, a reflection of the year’s external challenges. Despite the drop in revenue, our innovation premium, combined with strong execution, enabled us to deliver net cash flow from operating activities of $3.9 billion, and free cash flow of more than $3.1 billion, or 41% and 33% of our revenue, respectively. We have delivered on our commitment to return at least 100% of free cash flow since our Maxim acquisition, despite the reduced return in fiscal 2024 as we increased balance sheet cash to extinguish $400 million of debt coming due in 2025. We expect to revert to 100% free cash flow return in fiscal 2025.
Importantly, we continued to invest at a historically high level in research and development during 2024, delivering numerous new products and exciting new platforms that open new market opportunities - from new platforms and solutions that expand our leadership across core franchises in high-speed and precision signal processing, sensing, and power management, to our new CodeFusion™ software development platform and ADI Assure™ Trusted Edge Security Architecture. In line with the need to provide more complete solutions and reduce complexity for our customers, we are delivering increasing levels of integrated functionality that enable our customers to push the edge of their innovation, while accelerating design-to-revenue timelines.
We similarly evolved our direct and indirect go-to-market capabilities in 2024 to better align with our customers’ needs and work processes and ensure that we deliver an easy and enjoyable experience over product lifecycles that span from years to decades. Our revenue opportunity pipeline achieved new high watermarks in 2024 despite the external headwinds we faced, and we are optimistic in our ability to continue to increase our pipeline conversion rates as the business cycle recovers.
We invested $730 million in capital expenditures in 2024 to further increase our supply chain capacity, efficiency, and resiliency, both internally and externally, to ensure we create additional geographic optionality and business cycle flexibility. In total, we have invested $2.7 billion in upgrading our internal manufacturing capabilities and resiliency since acquiring Maxim, achieving our milestones earlier than expected. Notably, we have extended our ongoing collaboration with TSMC to secure additional capacity through Japan Advanced Semiconductor Manufacturing, Inc. (JASM). Now that we have line of sight to the full operationality of our hybrid manufacturing system, we will be tapering capex investments in 2025.
Finally, we have always viewed our talent as the source of our prosperity, and as such, it is the most important investment that we make at ADI. Our people are truly the engine powering our success. We continued investing and ensuring that ADI remains a center of gravity for the world’s best analog, digital, software, algorithmic, and systems talent, adding multiple domains of engineering professionals who are highly motivated to push the boundaries of innovation and deliver breakthroughs for humanity and the planet.
Seizing the Opportunities of the AI-Enabled Intelligent Edge Era
ADI has long targeted our high-performance technology at the most important applications at the intersection of the physical and digital domains, which we term the “Intelligent Edge.” Over the years, ADI has evolved from capturing real-world signals, to converting those signals to data, to transforming data into insights, understanding, and actions. Essentially, ADI is where the world’s most important data is born. Today, the proliferation of digitalization and the availability of increasingly sophisticated AI techniques from edge to cloud, is driving a new era of technological innovation. We believe that these trends will provide significant opportunities for ADI to leverage our strengths in macrotrends such as automation, digital healthcare, digitally controlled energy grids, augmented reality, and emerging areas such as digital biology. From an ADI perspective, our products and solutions at the increasingly intelligent edge should become even more critical as they enable customers to dramatically reduce system latency, bandwidth, and energy consumption, and provide an important layer of cybersecurity. As such, we are investing to strengthen our world-class analog foundation and extend the scope of our capabilities in digital, software, and AI to take full advantage of this wave of opportunity.
As we celebrate our 60th anniversary in 2025, we have much to be proud of, but we do not take our decades of business success for granted. We are approaching the future with the same passion, hunger, and intensity of our first year. We believe that our primary competitive advantage is the rate at which we learn and adapt to the evolving needs of our markets and customers, and we are working hard to maintain our vibrant innovation and customer-centered culture to deliver tomorrow’s most important breakthroughs at the Intelligent Edge.
VINCENT ROCHEChief Executive Officer and Chair of the Board of Directors
Letter from our Lead Independent Director
Dear Fellow Shareholders,
On behalf of the Board of Directors, I am pleased to present our annual Proxy Statement and provide an update on the Board’s key activities and areas of focus to further unlock long-term value for ADI’s shareholders.
The external challenges of 2024 are well understood - from widespread post-pandemic inventory digestion across our regions and end markets to the ongoing macroeconomic and geopolitical turbulence slowing the pace of the business cycle’s recovery. As ADI navigated these external factors, the Board supported and oversaw management to guide the market-shaping innovations, close customer relationships, and operational excellence that underpin the company’s ability to achieve its strategic goals and deliver on its shareholder commitments.
ADI’s investments across R&D, go-to-market, and operations are targeted to create growth at the AI-enabled Intelligent Edge. The ability to deliver ADI’s innovations reliably and resiliently to customers remains a top business priority in the aftermath of the pandemic. ADI’s hybrid manufacturing investments are critical to helping the company achieve that goal, smartly balancing internal production capabilities with external fab partnerships to position the company to be able to adapt to shifting market conditions with agility.
While overseeing management as they executed this strategy, the Board continued to focus on key governance priorities and enhance the capabilities of the Board. One evolving area of risk oversight is artificial intelligence. The Intelligent Edge is increasingly connected and automated through artificial intelligence at the edge, and the Board is acutely aware of both the opportunities and risks that artificial intelligence at the edge brings and is committed to its oversight responsibilities to address this rapidly growing technology area.
The Board takes its governance role seriously, recognizing the great trust that you, our shareholders, have placed in us. Over the course of the year, ADI reached out to investors representing over 50% of our shares outstanding to ensure transparency and accountability to our shareholders and their goals. It was gratifying to hear that shareholders are pleased with ADI’s governance and management and remain committed to ADI’s strategy. In those conversations, we listened carefully to matters raised and considered this feedback as we further develop and evolve our corporate governance practices.
At the highest level, to strengthen shareholder say in ADI’s governance we adopted amendments to our charter to implement a simple majority vote standard, and are asking shareholders to approve those amendments, as more fully described in this Proxy Statement. Further, we reduced the ownership threshold for shareholders to call a special meeting under our Bylaws to 25% of our outstanding shares, which the Board believes strikes an appropriate balance between enhancing our shareholders’ ability to act on matters important to them and protecting against the risk that a small number of shareholders whose interests may not be shared by a broad base of shareholders could trigger a special meeting, resulting in financial expenses and disruption to our business.
The Compensation and Talent Committee and full Board also advanced several features of our executive compensation practices. To better align executive compensation to industry benchmarks, we reduced the maximum payout factor for ADI executives from 3.0x to 2.5x for bonuses in fiscal year 2025 and beyond. Further, to ensure a long-term focus in executive performance measurement, we moved from a quarterly to an annual assessment and payout structure for fiscal year 2025 executive bonuses and beyond. We also moved to a three-year cumulative target for the determination of performance restricted stock unit grants related to our financial performance.
We also remain focused on ensuring our Board continues to evolve to meet the needs of our business, and in January 2025 we added Andrea F. Wainer as a director. Ms. Wainer brings to our Board deep expertise leading innovative businesses in the diagnostics and pharmaceutical industries, including significant experience with complex commercial and manufacturing operations and continuous improvement.
We remain cautiously optimistic that the gradual business cycle recovery that began in the third quarter of fiscal year 2024 will continue over the course of 2025. Beyond the short-term business cycle, however, the Board and ADI’s management remain confident in the long-term growth potential of our business model, targeted investments, and operational excellence as the AI-enabled Intelligent Edge proliferates across markets. We believe our efforts to deliver that potential, guided by diligent corporate oversight and governance, will help create long-term value for our shareholders.
We thank you for your investment in ADI and will continue to earn your trust and deliver the shareholder value that you expect, today and in the future.
STEPHEN M. JENNINGSLead Independent Director andChair of the Nominating andCorporate Governance Committee
Notice of 2025 Annual Meeting of Shareholders
| Items of BusinessThe 2025 Annual Meeting of Shareholders (Annual Meeting) of Analog Devices, Inc. (ADI) will be held at our offices located at 125 Summer Street, Boston, Massachusetts 02110, on Wednesday, March 12, 2025 at 9:00 a.m. local time. At the Annual Meeting, shareholders will consider and vote on the following matters:1.To elect the 11 director nominees named in this Proxy Statement to our Board of Directors, each to serve for a term expiring at the next annual meeting of shareholders; 2.To approve, by a non-binding “say-on-pay” vote, the compensation of our named executive officers, as described in the Compensation Discussion and Analysis, executive compensation tables, and accompanying narrative disclosures in this Proxy Statement; 3.To ratify the selection of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending November 1, 2025; and 4.To approve certain amendments to our Articles of Organization to lower the voting requirement for certain matters from a supermajority to a simple majority standard.The shareholders will also act on any other business that may properly come before the Annual Meeting.Our Board of Directors recommends that you vote FOR each director nominee included in Proposal 1 and FOR each of Proposals 2, 3, and 4. The full text of these proposals is set forth in this Proxy Statement.Please note that we are furnishing proxy materials and access to our Proxy Statement to our shareholders via our website instead of mailing printed copies to each of our shareholders. By doing so, we save costs and reduce our impact on the environment.Beginning on January 27, 2025, we will mail to our shareholders a Notice of Internet Availability of Proxy Materials (Notice), which contains instructions on how to access our proxy materials and vote by proxy. The Notice also contains instructions on how each of our shareholders can receive a paper copy of our proxy materials, including this Proxy Statement, our 2024 Annual Report, and a form of proxy card or voting instruction form. All shareholders who do not receive the Notice, including shareholders who have previously requested to receive paper copies of proxy materials, will receive a paper copy of the proxy materials by mail unless they have previously requested delivery of proxy materials electronically.Shareholders of record at the close of business on the record date of January 3, 2025 are entitled to vote at the Annual Meeting.Your vote is important no matter how many shares you own, and we encourage you to vote promptly whether or not you plan to attend the Annual Meeting.By Order of the Board of Directors, | |
| DATE AND TIMEWednesday, March 12, 2025 9:00 a.m. local timePLACE125 Summer Street Boston, MA 02110RECORD DATEFriday, January 3, 2025 | |
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| How to vote: Your vote is importantVOTE BY PROXY:BY INTERNETGo to www.proxyvote.comYou will need the 16-digit control number that appears on your proxy card or the Notice.BY TELEPHONECall 1-800-690-6903 You will need the 16-digit control number that appears on your proxy card or the Notice.BY MAILMark, sign, date, and mail your proxy card or your voting instruction form. No postage is required if mailed in the United States.VOTE DURING THE ANNUAL MEETING:For details on voting your shares during the Annual Meeting, see Q&A About Annual Meeting and Voting on page 88. | |
| Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders to be Held on March 12, 2025: This Proxy Statement and the 2024 Annual Report are available for viewing, printing, and downloading at https://investor.analog.com/financial-info/annual-reports. | |
| Web links throughout this document are provided for convenience only, and the content on the referenced websites does not constitute a part of this Proxy Statement.The sum and/or computation of individual numerical amounts or percentages disclosed in this Proxy Statement may not equal the total due to rounding. | Forward-Looking StatementsThis Proxy Statement contains forward-looking statements regarding future events and our future results that are subject to the safe harbor created under the Private Securities Litigation Reform Act of 1995 and other safe harbors under the Securities Act of 1933 and the Securities Exchange Act of 1934. All statements other than statements of historical fact are statements that could be deemed forward-looking statements. These statements are based on current expectations, estimates, forecasts, and projections about the industries in which we operate and the beliefs and assumptions of our management. Words such as “expects,” “anticipates,” “targets,” “goals,” “projects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “continues,” “may,” “could” and “will,” and variations of such words and similar expressions are intended to identify such forward-looking statements. In addition, any statements that refer to projections regarding our future financial performance and our long-term financial model, including future free cash flow return and capital strategy; our strategy; anticipated growth and trends in our industry, markets, and businesses; new or improved innovative solutions, products, and technologies, including those related to digital, software, artificial intelligence, and the Intelligent Edge; future investments in research and development; future supply chain capacity, efficiency, and resiliency, including statements related to our future hybrid manufacturing capabilities; the effects of business, economic, political, legal, and regulatory impacts or conflicts upon our global operations; recruiting or retaining our key personnel; changes to our compensation programs; our future liquidity, capital needs, and capital expenditures; our future market position, expected competitive changes in the marketplace, and changes in demand and supply for our products; the importance of our product offerings and technologies to our customers; our ability to pay dividends or repurchase stock; our ability to service our outstanding debt; our expected tax rate; environment, social, and governance related goals, commitments, and progress towards such goals and commitments; and other characterizations of future events or circumstances are forward-looking statements. The following important factors and uncertainties, among others, could cause actual results to differ materially from those described in these forward-looking statements: economic, political, legal, and regulatory uncertainty or conflicts; changes in demand for semiconductor products; manufacturing delays, product and raw materials availability, and supply chain disruptions; from the diversion of products from our authorized distribution channels; changes in export classifications, import and export regulations, or duties and tariffs; our development of technologies and research and development investments; our future liquidity, capital needs, and capital expenditures; our ability to compete successfully in the markets in which we operate; our ability to recruit and retain key personnel; risks related to acquisitions or other strategic transactions; security breaches or other cyber incidents; risks related to the use of artificial intelligence in our business operations, products, and services; adverse results in litigation matters; reputational damage; changes in our estimates of our expected tax rates based on current tax law; risks related to our indebtedness; the discretion of our Board of Directors to declare dividends and our ability to pay dividends in the future; factors impacting our ability to repurchase shares; and uncertainty as to the long-term value of our common stock. For additional information about factors that could cause actual results to differ materially from those described in the forward-looking statements, please refer to our filings with the Securities and Exchange Commission (SEC), including the risk factors contained in our most recent Annual Report on Form 10-K. Forward-looking statements represent management’s current expectations and are inherently uncertain. Except as required by law, we do not undertake any obligation to update forward-looking statements made by us to reflect subsequent events or circumstances. |
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Table of Contents
| Proxy Summary | 1 | |
|---|---|---|
| Board of Directors | 8 | |
| Proposal 1 — Election of Directors | 8 | |
| Election Process | 8 | |
| Director Criteria, Qualifications, and Experience | 9 | |
| Director Biographies | 12 | |
| Determination of Independence | 18 | |
| Director Candidates | 19 | |
| Corporate Governance | 20 | |
| Board Policies and Practices | 20 | |
| Board and Committee Structure | 22 | |
| Oversight by Our Board | 28 | |
| Other Governance Matters | 34 | |
| Director Compensation | 36 | |
| Annual Director Compensation | 36 | |
| Fiscal Year 2024 Director Compensation | 37 | |
| Stock Ownership Guidelines for Non-Employee Directors | 38 | |
| Equity Award Grant Date Policy for Non-Employee Directors | 38 | |
| Management Team | 39 | |
| Executive Compensation | 42 | |
| Proposal 2 — Advisory Approval of the Compensation of ADI’s Named Executive Officers | 42 | |
| Compensation Discussion and Analysis | 43 | |
| Compensation and Talent Committee Report | 62 | |
| Compensation and Talent Committee Interlocks and Insider Participation | 63 | |
| Compensation Tables | 64 | |
| CEO Pay Ratio | 75 | |
| Pay Versus Performance | 76 | |
| Audit Matters | 79 |
| Proposal 3 — Ratification of the Selection of Ernst & Young LLP as Independent Registered Public Accounting Firm for the Company’s Fiscal Year Ending November 1, 2025 | 79 | |
| Overview | 79 | |
|---|---|---|
| Independent Registered Public Accounting Firm Fees | 80 | |
| Audit Committee’s Pre-Approval Policy and Procedures | 81 | |
| Audit Committee Report | 81 | |
| Beneficial Ownership of Common Stock | 82 | |
| Security Ownership of Certain Beneficial Owners | 82 | |
| Security Ownership of Directors and Executive Officers | 83 | |
| Delinquent Section 16(a) Reports | 84 | |
| Equity Award Program Description | 84 | |
| Securities Authorized for Issuance under Equity Compensation Plans | 86 | |
| Proposal 4 — Approval of Amendments to our Articles of Organization | 87 | |
| Q&A About Annual Meeting and Voting | 88 | |
| Additional Information | 92 | |
| Other Matters | 92 | |
| Shareholder Proposals for Inclusion in Proxy Statement | 92 | |
| Shareholder Director Nominations for Inclusion in Proxy Statement | 92 | |
| Shareholder Proposals and Director Nominations Not Included in Proxy Statement | 92 | |
| Householding of Annual Meeting Materials | 93 | |
| Appendix A: Amended and Restated Articles of Organization | A-1 | |
| Appendix B: Reconciliation of GAAP Measures to Non-GAAP Measures | B-1 | |
| Helpful Resources | ||
The text of this filing, as the company filed it with the SEC, without its images or exhibits. This is not investment advice.