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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Good morning. And welcome to the Analog Devices Third Quarter Fiscal Year 2021 Earnings Conference Call, which is being audio webcast via telephone and over the web. I'd now like to introduce your host for today's call, Mr. Michael Lucarelli, Senior Director of Investor Relations. Sir, the floor is yours.
Thank you, Shelby. And good morning, everybody. Thanks for joining our third quarter fiscal 2021 conference call. With me on the call, today are ADI's CEO, Vincent Roche, and ADI's CFO, Prashanth Mahendra-Rajah. Anyone who missed the release, can find it and relatIng financial schedules at investor.analog.com. And onto the disclosures.
The information we're about to discuss includes forward-looking statements which are subject to certain risks and uncertainties as described in our earnings release, and our most recent 10-Q and other periodic reports and materials follow the SEC. Actual results could differ materially from this forward-looking information as 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 comment today will also include non-GAAP financial measures, which exclude special items. When comparing results to our historical performance, special items are also excluded from prior to last period's. Reconciliations of these non-GAAP measures to the most drastic comparable GAAP measures, and additional information about our non-GAAP are included in today's earnings release. And with that, I'll turn it over to ADI's CEO, Vince Roche. Vince?
Thank you, Mike. And a very good morning to everybody. So, ADI delivered a second consecutive Quarter of record revenue and earnings, despite the challenging supply environments. Our strong performance was driven by continued operational excellence and insatiable demand as semiconductors power the modern digital age.
Broadly speaking, the economic recovery continues to take shape with demand still far exceeding supply. We, like many others in our industry, will face a constrained supply environment into 2022. Despite this backdrop, our business continues to achieve record results as our investments and design win over the last few years are matched with strong demand across our end markets.
So looking ahead, the combination of robust bookings, lean inventories, and ongoing capacity additions position ADI to close Fiscal '21 on a high note and continue to grow in the next year. So moving to our third-quarter results, revenue was $1.76 billion up 21% year-over-year. All markets increased sequentially with industrial and automotive once again, achieving the record. The gross margin expanded to over 71% and the Operating margin over 43%. Adjusted EPS of $1.72 increased 27% year-over-year. Despite elevated capital spending to increase our capacity, free cash flow over the trailing 12 months was $2.2 billion.
This equates to a 34% free cash flow margin, maintaining our position in the top 10% of the S&P 500. Overall, I'm very pleased with our performance and our team's outstanding execution. As you know, at ADI, our ethos of innovation and deep customer engagements ensure that we stay ahead of what's possible. We invest more than a billion dollars annually in R&D focused on strengthening our core franchises and capturing market opportunities presented by sector growth records, which have accelerated the economic recovery. Now, let me share some recent highlights with you.
Our industrial business is our most diverse segment across customers, products, and applications and features sticky long product lifecycles. Our largest industrial segment, instrumentation, and test, is comprised of automated test equipment, electronic test and measurement, and scientific instruments.
This is truly a performance-driven market that aligns perfectly with our high-performance precision Signal Chain, Power management, and RF portfolios. Importantly, instrumentation and text are aligned with all secular growth trends from connectivity to EVs to sustainability. The growing technical complexity of these applications required more testers with more advanced performance capabilities.
Today, ADI is the leader in communications tests. And we're collaborating with Keysight, for example, to advance the development of O-RAN solutions. This partnership will enable the fastest path for the design and cost-effective and power-efficient radio units. Looking ahead, we're already beginning to partner with our customers to test emerging 6G technologies. Our innovations in the instrumentation market also have a positive impact on human and planetary health. One particular area is our environmental monitoring business, where there's an increased need for highly reliable and accurate instruments to improve the standard of living globally.
Our market-leading portfolio of precision converters enables 10 times greater measurement resolution of fine particulate matter, better identifying trace pollution. The next largest industrial segment is factory automation. Over the last year, many of our customers are rethinking their factory flows and supply chains to make them more resilient, cost-effective, and flexible through automation and connectivity.
To achieve this, our customers will further automate their businesses with intelligent and connected factories, and increase their use of robots and cobots. Specifically, cobots require ADI's precision signal chain and power franchises sensing technologies, and robust wired and wireless connectivity. This new vector of growth increases our sum opportunity by three times that of a traditional robot.
To that end, our precision motion control business is on track for a record year of design wins, including a recent win at a leading Japanese robotics Company for its next-generation robots. In addition, we are leveraging our domain knowledge and system-level expertise in a collaboration with Universal Robots to design smaller, smarter, and easier-to-use robots that help scale tasks safely and transform workforces. We're turning now to our Communications business.
5G is beginning to broaden globally, especially in North America, as carriers look to deploy newly acquired C-band spectrum and all-round continues to gain momentum also, with several of the largest European carriers setting ambitious 2025 all-round deployment targets. This includes Vodafone where our technologies are very well represented. This quarter we extended our market-leading position in 5G radio solutions with the introduction of the industry's first software-defined transceiver that includes a fully integrated digital front end. Our innovative radio architecture greatly improves power efficiency, thereby reducing radio weight, size, and carrier expenses.
This high level of integration eliminates FPGAs to simplify implementation and facilitate the proliferation of these emerging O-RAN networks. Our next-generation receiver platform is already designed at a major Tier-1 global supplier that is gaining share in this 5 G and O-RAN deployments across North America as well as Europe. Stepping back, we expect our communications business to return to growth in 2022.
We have strong design momentum and our geographic mix has shifted with North America, Europe, and Korea representing our largest sources of revenue. Moving now on to automotive. Over the last 2 years, we've realigned our business to focus on electrification and the in-cabin human experience. We're seeing the benefits of this strategy as we continue to scale our market leadership in battery management, power management, audio systems, and connectivity.
Starting firstly with our battery management systems or BMS, our wired and wireless portfolios provide unmatched accuracy to deliver market-leading vehicle range and can measure all key battery chemistries, including zero-Cobalt LFP. Additionally, our solutions incorporate ASLD functional safety and an ultra-low power continuous monitoring feature that ensures the battery remains stable even while parked, which is a first in the market.
In addition, this quarter marked the first time we recognized revenue for our wireless BMS solution as General Motors prepares to ship its first of 30 EV models powered by the OTM battery platform. And this is just the beginning of this groundbreaking BMS technology as OEMs realized the power of wireless data in scaling their fleets. Turning to audio systems and connectivity.
As complexity continues to increase, there's a very strong demand for our market-leading audio systems with signal processing. A2B connectivity, and active road noise cancellation. Our solutions offer the highest fidelity performance in the market while reducing vehicle weight, removing nearly 100 pounds per vehicle. During quarter 2 leading OEMs adopted A2B and a Top 3 European vehicle manufacturer implemented A2B as its audio connectivity standard across its entire fleet.
In total, A2B is now designed in over 30 OEMs, including 18 of the top 20 global automotive Companies. Furthermore, interest in our active road noise cancellation feature continues to intensify. We're designed in at 9 OEMs, up from 5 just a year ago, including Hyundai and a leading EV manufacturer. The gadget capability can more than doubled the value of our A2B solution. These are just a few of the countless examples of the tremendous work underway at ADI.
We remain focused on delivering breakthrough innovations to stay ahead of our customer's needs. So in closing, I have never been more confident about ADI's future. Over the last decade, we've built an industry-leading portfolio with unparalleled breadth and depth of capabilities that are aligned with more profitable end markets. And our portfolio and leadership position will only get stronger with the acquisition of Maxim, enabling us to deliver strong returns in the years to come. And so with that, I'll hand you over to Prashanth.
Thank you, Vince. Good morning and welcome to our third-quarter earnings call. My comment today with the exception of revenue and non-op expenses will be on an adjusted basis, which excludes special items outlined in today's press release. ADI delivered exceptional third-quarter results, underpinned by our ability to increase production.
Revenue and EPS reached all-time highs for the second straight quarter, with continued gross and Operating margin expansion. If we look at performance by end-market, industrial represented 57% of revenue and increased 3% sequentially and 29% year-over-year. Notably, this business surpassed $1 billion of quarterly revenue for the first time.
We experienced broad-based strength across applications and geographies. All subsegments increased double-digits year-over-year, except healthcare, given the elevated pandemic demand a year ago. Communications represented 16% of revenue and decreased 21% year-over-year, while up 4% sequentially with growth in both wireless and wirelines. As we outlined last quarter, we believe our communications revenue has bottomed and we'll continue to grow as 5G deployments broaden globally, especially in North America.
Automotive represented 16% of revenue and increased 13% sequentially, and 80% year-over-year. Strength was broad-based with double-digit growth across every major application. BMS and A2B remain our fastest-growing applications and both are on track to nearly double in size this year. As Vince shared earlier, ADI has been strategically pivoting resources to focus more aggressively on electrification and the in-cabin human
experience. As part of this strategy, we are licensing select radar IP to a large European Tier-1 auto supplier. This resulted in immediate revenue recognition of 24 million in the quarter. Consumer represented 10% of revenue and increased 16% both sequentially and year-over-year. Our strategy to diversify and grow this business in Fiscal '21 is working, as strength across home entertainment wearables, and wearables more than offset a decline in portables.
And now moving to the P&L, gross margin expanded sequentially and year-over-year, finishing at 71.6% mainly due to the cost savings from the LPC manufacturing optimization and the IP license agreement. OpEx in the quarter was 493 million up modestly sequentially, due to a full quarter of mere increases and continued strong variable comp. This netted an Op margin of 43.6%, which marks the 5th straight quarter of year-over-year Op margin expansion, underscoring the strong leverage in our business.
Non-op expenses were 37 million below our typical quarterly run rate of approximately 43 due to an investment gain. And our tax rate was approximately 12%, which gives us an adjusted EPS at $1.72, including $0.05 of upside attributable to the IP licensing agreement. Moving onto the balance sheet, we finished the quarter with an ending cash balance of 1.5 billion and a net leverage ratio of 1.2 times.
Relative to the second quarter, inventory dollars increased by 16 million, driven entirely by raw materials and the working process. Days of inventory were unchanged at 118 and weeks of channel inventory remain well below the low-end of our seven to eight-week target, as sell-through remains stronger than sell-in. Capex for the quarter was $86 million up meaningfully sequentially, as we continue to add capacity to support our robust and growing order book, which now stretches into Fiscal '22.
We will continue to increase capacity in the fourth quarter resulting in full-year capital intensity above our long-term model of 4%. In turning to free cash flow, we generated more than $2.2 billion over the trailing 12 months, up 23% from a year ago. And this represented a 34% free cash flow margin. Over this same period, we have returned nearly 85% of free cash flow after debt repayments via $970 million in dividends and over $500 million in share repurchases. And now onto the Fourth Quarter outlook:
Revenue is expected to be $1.78 billion, plus or minus $70 million, up sequentially as additional capacity comes online. At the midpoint, excluding the automotive IP licensing revenue, we expect each of our B2B markets to increase sequentially, led by communications and consumers to be up to 5 single digits. Based on the midpoint of the guide, we expect to deliver a record gross margin.
And for operating margins to be 43.7% plus or minus 100 bps. Our tax rate is expected to fall toward the upper end of our range. And based on these inputs, adjusted EPS is expected to be $1.72 plus or minus $0.11. So before moving to the Q&A, I'd like to give a brief update on Maxim. Our discussions with the Chinese Regulatory Authorities have been productive, and we're working towards closing within the initial timeframe.
We plan on closing no later than the 3rd business day after China approval has been granted. As we shared before, shortly after the close, we will hold a conference call to provide an update on our capital return plans. Once combined, we anticipate having nearly 4 billion of cash on our balance sheet, a leverage ratio well below one, and more than 3 billion of annual free cash flow. I'll now turn it over to Mike to start the Q&A.
Thanks, Prashanth. Let's get to our Q&A session. We ask that you limit yourself to 1 question in order to allow for additional participants on the call this morning. If you have a follow-up question, please re-queue and we will take your questions if time allows. With that, to our first question, please.
If you are listening on a speakerphone, please pick up the handset when asking your question. We'll pause for just a moment to compile the Q&A roster. Your first question is from Vivek Arya of Bank of America Securities.
Thanks for taking my question. Once you mentioned demand far exceeds supply, I was hoping if you could help us quantify that. Are you under-shipping by 5%, 10%? How much of a demand cushion does ADI have right now?
And kind of Part B of that is how much incremental capacity are you planning to bring online in the next year and is that kind of a proxy for what kind of sales growth we should be looking at? Thank you.
Thanks, Vivek. So demand continues to grow across our markets. All end markets are up and our book-to-bill was above 1.2. Supply is also expanding. We grew 4% sequentially in the third quarter, and we're at the midpoint, we're going to be up another 3% for the fourth quarter.
So you look at that math and it says the supply-demand gap is growing or said another way, the backlog is increasing quarter-over-quarter and it now extends well into 2022. Our view is this gap is likely to persist into calendar year '22 given the long lead time it takes to add supply in the industry plus just the broad strength of the demand.
Yeah, I think the second part of that question, Vivek, just a little bit of color. So, we're leering an investment in CapEx to support our growth objectives, particularly on the backend of our operation, assembly, and test.
And we need this capital now to meet the demand, but also in the longer term, we're very, very optimistic about the tailwinds right across our business, from automation to electrification, connectivity, and so on and so forth. The outlook we've just given you supplies feasible and it is certainly the governor, I would say, right now on revenue for the Company.
Thank you.
Thanks, Vivek. We go to the next question, please.
Your next question is from Tore Svanberg of Stifel.
Yes. Thank you. I was hoping you could just elaborate a little bit more on the Maxim merger. You said that you'd still expect it to happen within the timeframe you had announced. I believe you had said the summer of 2021, correct me if that was wrong. And related to that is, again, China the only remaining obstacle before you can close the deal?
Thanks, Tore. So look our confidence in the closing remains unchanged. And as we said in the prepared comments, our discussions with the Chinese Regulatory Authorities have been positive and productive.
And we are working towards closing within the initial timeframe. So China is the only outstanding regulatory approval need at this point in time. And I will remind you as well that all of the other regulatory bodies across the globe have approved our deal without condition, without remedies.
Great. Thank you for that, Vince.
Thanks, Tore. Go to the next questions.
Your next question is from John Pitzer of Credit Suisse.
Good morning, guys. Thanks for letting me ask the question, Vince, I wanted to pick up on your prepared comments about your industrial business. You're now going in the third consecutive quarter of sort of record revenue s in that business.
You have to go back to April of '18 before -- which was the last peak. But -- but the other date -- but fiscal year to date, that business is up about 30% year-over-year, and for a lot of investors, they're concerned that perhaps that represents more cyclical excess than structural sustainability. And so I'm kind of curious as you break apart your industrial business. What do you think is being driven by the " cycle versus stuff that's a little bit more sustainable? "
Yes. Thanks, John (ph). First and foremost, I'd like to remind everybody that ADI's industrial business is built on a foundation of many individual market segments like automation, instrumentation that I talked about, healthcare, our space business, and energy, as it moves to renewables and charging infrastructure, for example, the whole need for grid efficiency and stabilization. So that's the foundation.
It's a highly diverse business. We've got many tens of thousands of customers. And, you know, the lifecycles in the business are 15 years plus. And it's a very, very, very sticky socket that we've got. So, those of you who followed ADI for a long time, remember about a decade ago, we fairly dramatically increased our focus in terms of R&D, go-to-market activities, in ensuring that we could really grow that business.
And the last years have shown that we've been getting market share across the board there. So I think there were a lot of programs that were stalled last year, so there's a certain amount of catch-up there. But I do think that the breadth of the portfolio that we know has the investments we've been making in terms of customer engagement, R&D activities, and the secular trends that we've got all these concurrent secular drivers are propelling that business beyond the market.
I'll add one thing, John. You're right. As you've seen in our prepared comments, all the markets did increase double-digits year-over-year. Of our 6 applications that Vince outlined, 2 are still below pre-peak levels. We do think Fiscal '21 marks a record for all of them and we don't see why they won't hit another record in '22 given the strong trends that Vince outlined. And with that, we'll go to our next question.
Your next question is from Stacy Rasgon of Bernstein Research.
Hi guys. Thanks for taking my questions. I had a question about the pricing environment. Given just the tight supply and the shortage situation, we're starting to see some hints of some of your peers starting to take prices up. And I was curious what you guys are seeing in the pricing environment. Are you seeing that? Are you able to actually do that? Are you trading your own pricing environment down more conservatively?
Yes. Thanks for the question, Stacy. So I would say that for the results that we printed, pricing is net-neutral. We're passing on cost increase so that we're not impacting margins, but we've made a decision not to take advantage of our customers by structurally increasing pricing in this environment.
Our long-term model is unchanged and that is 70% plus. So the goal really is to drive the revenue growth and make the trade-offs that are necessary to drive that revenue growth. Focusing on delivering on the top margin and the free cash flow.
So you'll see, if you back out the IP license impact, we had a 71.2% gross margin in the third quarter. And while we don't guide to gross margins, if you impute it from the guide that we gave you, the fourth quarter is going to probably be a record for ADI in terms of gross margins.
Got it. That's helpful. Thank you.
Thank Stacy. Next question.
Your next question is from Toshiya Hari of Goldman Sachs.
Hi guys. Good morning. Thanks for taking the question. I wanted to ask about the comms business. Vince, you talked about 2022 being a growth year, and you talked about North America, Europe, and Korea being the key drivers for you guys going forward.
How should we think about the shape of the recovery going forward? Is it going to be a fairly gradual recovery? Could it be sort of a V-shaped recovery over the next couple of quarters? And when you talk about the return to growth in '22, what's sort of implicit assumption are you making for China? Thank you.
Okay. Thanks. We're going to split that into 2. Let me just quickly talk about what happened and then I'll let Vince speak too more broadly. In the second quarter, as a reminder, we did call the bottom on comms and said that we would grow on a sequential basis. We delivered that in the third quarter and we are on track to deliver that for the fourth quarter. So we believe we're really well-positioned for strong growth into Fiscal '22.
And between the two sub-segments there, wire demand remains strong and we expect that to continue as both carriers and data centers continue to do the upgrades to their networks. And wireless, it's always lumpy, growth in the past quarter was really driven by the rest of the world. North America.
We do think China bottomed in the third quarter. So that should also represent some growth momentum for us as we go forward. And then I'll hand off to Vince to kind of speak more broadly about what we're seeing.
Yes, Toshiya, why do I have the confidence I have about 2022 being a strong growth year? So maybe I can unpack that a bit for you. So I think our comms' revenue mix is seeing a benefit from the rest of the world beginning to emerge in 5G. So today, the rest of the world outside of China is 3x in terms of the term. So that's number 1.
If you look at then the geographies of North America, the auction to C-band auction's complete. Revenue's really just beginning here. And all the indications are that 5G revenue here will accelerate in 2022 and indeed beyond. Europe, it's -- I would say, a step behind, but we're beginning to see good signs of life in that region but I think it'll be a more elite 2022 driver. We've talked several times in various calls here about O-RAN, what's happening, but we're beginning to see revenue.
We've talked before about Rakuten in Japan, that business continues to accelerate. And European carriers are looking right in to make it also an important part of their 5G offering. I mentioned during the prepared remarks as well that Vodafone is a major player there and we happen to be very well represented in their systems.
And I'm also having conversations with customers about the use of 5G and O-RAN beyond the classical consumer market. So it's early days, but the characteristics of flexibility, scalability, quicker time-to-market, cost savings, and so on, are enabling private Networks to be configured in factory environments, for example. So that's all still on the comm, but that gives you a sense of our confidence in 2022 and beyond.
Thanks, Toshiya.
Thank you. We'll go to the next question.
Your next question is from Ambrish Srivastava of BMO.
Hey, thank you. Good morning, folks. I have a question about Maxim. And so my investment case for ADI has not been Maxim and you have a very sticky shareholder base who have been with you before Maxim, but I get this question a lot, so I think it's a fair question to ask. If Maxim was not to go through, what do you think about capital allocation?
Do you then go back to the playbook and say you would be changing how you think about capital allocation or you would continue on the M&A path and look at other opportunities? Thank you.
So, in response to this, let me just remind everyone what the capital allocation policy is today because I think that we have a very shareholder-friendly capital allocation policy. This is, that first call is really to invest in the business and that, although not a traditional definition, we do consider that organically kind of how we spend our R&D, and that is heavily pointed towards the B2B markets.
And then we think about inorganic really more as it helps the technology portfolio or finds other ways to help us become more important to customers. But our commitment is to return 100% of free cash flow to customers. So, we are at 1.2 level leverage today. We do not need to reduce debt.
So on a -- in an environment, despite the confidence that we have in the Maxim deal closing in an environment where that was not to have happened, would not look for us to really be changing that view of having all our incremental free cash flow go return to shareholders either through buybacks or through dividend.
And as a reminder, I think over the past 3 years, we've averaged about a 10% increase in our dividend. So a very healthy commitment for our fixed income-focused investors as well as the repo. I think we're on track this year for an all-time high in terms of our repo activity. Back to the M&A, I'm going to hand that one to Vince to talk more about the alternatives there.
Yes. So as you know, you've seen over the years, we've always acquired very, very high-quality assets, and that will remain to be our view on things in the years ahead as well.
Okay. Thank you.
Thanks. Ambrish. Next caller.
Your next question is from Blayne Curtis of Barclays.
Hey, good morning. Thanks for taking the question. Just curious if you looked at the B2B guidance, it's fairly flat, as I think industrial probably is flat given the slug segment guidance you gave. I'm just kind of curious as you look at this. Obviously, you had strong comments on the bookings. Is that gap really supply or are you starting to see demand tends to start to settle out at this level?
That is purely clearly supplied. I think I mentioned in maybe the first or second question that book-to-bill for the quarter was over 1.2 and that's across all markets. So we are seeing very strong interest in products across all markets.
Mike indicated in one of the other Q&A that they were likely to have the industrial markets hit an all-time high collectively for a calendar for Fiscal year '21 and expect that to continue to be on track to another record in FY '22. So very much a supply-constrained environment.
Thanks and I just want to follow up on the gross margin, Prashanth. So you indicated the gross margin would be up and I think that's with the license impact as well. So you saw a benefit from the linear.
I was curious how much more there is of that as a benefit. And then maybe just talk about utilizations and another pulling gross margin as you look over the next couple of quarters.
Yes. So I presume you're asking with respect to the guidance. So in the fourth quarter, and we're not guiding gross margins, but we're pretty confident we are going to hit a new record for gross margins that are coming from the LTC synergies, I think we hit the final phase of closing down the manufacturing operation in California.
We still have an opportunity as soon as the supply environment allows us to get some additional savings out of Asia because we haven't closed that facility up because we have no time to shift the tools to their new location.
Utilization is also going to provide some level of increase. I would say the mix is a bit of a headwind into the Fourth Quarter. And Fourth Quarters typically have some level of challenges in terms of a holiday shutdown. So, we need to manage through that, which can provide a little bit of headwind for us as well that we got to work ourselves around.
You know, the foundation for our gross margins being where they are, It's the number 1 innovation. We produced the best performing solutions between the physical and digital worlds and we got a premium. We got very, very well paid for doing that.
Also, the diversity of our products and customer portfolios, 125,000 customers with I think I've said this before, 85% of our sales come from products that individually contributed less than 0.1%. And the pricing environment, as we said earlier on the call, has been very, very stable, very steady.
Thanks, Blayne, for that two-part, one-part question. We'll go to the next caller, please.
Your next question is from Harlan Sur of JPMorgan.
Good morning and congratulations on the strong results in quarterly execution. Channel inventories continue to remain below your target 7 to the 8-week range. You guys can also monitor direct customer inventories at least for those that are on consignment programs. Any signs that customers have been able to build inventories?
I mean, it seems unlikely because the entire value chain appears to be sort of hand-to-mouth from a chip supply perspective, but I wanted to get your views. And when do you believe customers will be in a position to start to build that inventory? I'm assuming the soonest is sometime in calendar '22, but I wanted to get your views as well.
Yes. Thank you, Harlan Sur. I'll take that. So first, a couple of comments on inventory. Inventory on our balance sheet is up year-over-year and sequentially, but that is exclusively due to raw materials and width. We can't keep a finished good in stock. So when it's produced, it either goes to the customer or it goes into the channel, and then it goes out of the channel immediately.
So we are struggling to build finished goods inventory both in ADI warehouses as well as in our channel partners. Roughly, let's say a significant amount of our auto business is on consignment which gives us good visibility for that direct business as to what's happening there. And that is also we are seeing that demand pull through pretty quickly and no opportunity for those auto customers to build the inventory within their warehouses, but that's on our books.
So it's still very much hand-to-mouth and the focus that we have as we've talked throughout this call and in the prepared remarks is on increasing our capacity or ability to supply by making some significant investments in capacity. I don't see this balance coming into some sense of normalcy until sometime in calendar year '22.
Okay, thank you.
All right. We'll have our last question, please.
Your next question is from William Stein of Trust Securities
Great, thanks for taking my question. You just talked about inventory not coming to some level of ability to rebuild anything until sometime in '22, you talked about the supply debate about lasting. We're well into '22, which put you up to the bill, etc. When we look out to the next quarter, the January quarter, typically, that's a sequentially down quarter in automotive, industrial, consumer, and for the whole business as well.
But given these supply constraints of this very significant backlog, should we think about that seasonality as different in the coming year? Should we expect maybe some visibility to sequential growth for the next several quarters? Thank you.
Yeah, I think the way to answer that would be to say that seasonality in today's environment is a bit of a meaningless concept because revenue growth is really dictated completely by supply. So the print for Q1 is likely to be driven by what more capacity we can get online over the fourth quarter to allow us.
Again now we've got a couple of things we need to work through in the first quarter that would be a little bit of an offset. And first, there's the holiday season. So we do need to adjust factory capacity for that. And fourth quarter is the key quarter for the consumer; that's when they build for the holiday season.
So there's always going to be a little bit of seasonality impact for the consumer just because they don't need it in our fiscal first quarter as that is the holiday period. So maybe that's where I will finish. Mike, anything you want to add to that?
Yeah, sure. I guess if you look back, you're right. We talk about seasonality not being as meaningful now, but just give you a bit of a history lesson. If you look past over the past 10 years, you're right, our B2B markets, I would say in good times, which I would call now good times, it's usually flatted down slightly in 1Q and consumer, I will say in good and even normal times it down 5% or maybe more in 1Q.
And with that, I want to thank everyone for joining the call this morning. A copy of the transcript will be available on our website. And all reconciliations and additional information can also be found in the Quarterly Results section. Thanks again for joining and your continued interest in ADI.
This concludes today's Analog Devices Conference Call. You may now disconnect.