President and Chief Executive Officer at Analog Devices
Thank you very much, Mike; and a very good morning to you all. Once again, we delivered record revenue and profits in our fourth quarter, closing out what was a milestone year for ADI. Our success was driven by our industry-leading high performance portfolio and our team's strong operational execution, enabling us to better meet the insatiable demand for our products.
Now stepping back a little, 2021 truly demonstrated the vital importance of semiconductors to the modern digital age. We invested ahead of this inflection, building a comprehensive portfolio to better solve our customers' most complex problems in this ubiquitously sensed and connected world. As we enter 2022, our backlog and bookings remain robust, and we continue to invest in manufacturing capacity, positioning us well for another successful year ahead.
Now moving on to our results. Our fourth quarter revenue was $2.34 billion and EPS was $1.73, both exceeding the midpoint of guidance. And for 2021, our revenue was $7.32 billion and EPS was $6.46. Looking at organic ADI, we delivered new high watermarks on revenue and profits. Industrial and automotive achieved record revenue this year, while consumer returned to annual growth for the first time since 2017. And communications revenue declined as continued strength in wired was offset by weakness in wireless-related to the China market.
In 2021, we generated a record $2.4 billion of free cash flow, equating to a free cash flow margin of approximately 33%. This maintains our position in the top 10% of the S&P 500. In line with our revised capital allocation strategy to return 100% of free cash flow, we returned $3.7 billion to shareholders in 2021 through dividends and share buybacks. It was not only a record year for performance and shareholder returns, but also for investments that positioned us to better capture market opportunities presented by secular growth drivers in our business.
First, we took decisive action to add capacity throughout the year. With more than $340 million in capital expenditures, this is enabling us to better navigate the near-term supply-demand imbalance, while achieving our long-term growth objectives. And in 2022, we're planning to expand our internal manufacturing capacity at our factories in the U.S. and Europe. These additional investments will create more profitable, flexible and resilient manufacturing capabilities at ADI. At our core, we are an innovation-driven enterprise. And together with Maxim, we will invest more than $1.6 billion in R&D annually, to ensure we continue developing solutions that define the edge of possible.
As you know, to complement our organic efforts, we selectively used M&A to expand both our scale and our scope. In 2017, the acquisition of LTC reflected a strategy. Since acquiring the franchise, we delivered on our goal to double its historical growth rate. Equally impressive was our ability to improve on Linear's industry-leading gross margins. More recently, we completed the acquisition of Maxim Integrated. Similar to previous acquisitions, we're combining the best from ADI and Maxim to develop a new operating system that enhances customer engagement and drive long-term profitable growth. And I'm very pleased with the progress that we've made already.
On the customer engagement side, the integration of our field teams has brought a tremendous degree of excitement. The team is already beginning to identify cross-selling opportunities and building out our opportunity pipeline. From an engineering and operations perspective, our teams are coming together at a remarkable speed and we're aligning product and technology roadmaps to help accelerate growth in the years ahead. This combination also strengthens the diversity of our portfolio and enriches our resilient business model. To that end, we now have approximately 75,000 product SKUs and 80% of these products individually account for less than 0.1% of our total revenue.
And the addition of Maxim and provides us with a more comprehensive power portfolio, Maxim's primarily application focused power offerings are highly complementary with ADI's more general purpose or catalog power portfolio. This adds new SAM in all our markets and enhances cross-selling opportunities, accelerating revenue growth in our $2 billion plus power portfolio. Given these investments, we enter 2022 with an unparalleled portfolio of technology and talent, aimed at capitalizing on the secular growth trends across all our markets.
And now, I'd like to share a few examples of how our business is at the heart of these emerging trends. Starting with industrial. 2021 was a better year for our highly diversified and profitable industrial business. With all applications achieving all time highs, our unrivaled high-performance portfolio continues to benefit from the mass digitalization movement across industries. Our largest industrial segments, instrumentation and test, is comprised of automated test equipment, electronic test and measurement and scientific instruments. These applications must combat increasing test times, a system complexity and metrology requirements rise exponentially. For example, processors and memory in data centers are leveraging final no geometries with higher levels of integration, which can double the test time, this challenge is our opportunity. Our innovative purpose-built solutions are bringing test time back to parity, while increasing our content by more than 50%.
Factory automation is one of our largest industrial segments. I believe, we're at a tipping point in the Industry 4.0, as customers are looking to add sensing, edge processing and connectivity to make their supply chains more robust, efficient, and of course, flexible. ADI precision signal chain and power franchises, sensing technologies and robust wired and wireless connectivity are critical to enabling these efforts. Looking ahead, we have an enormous opportunity to connect Maxim's rich power portfolio, which is under-represented in the industrial sector today, with ADI's strong position.
Shifting now to Automotive. In a year dominated by chip shortage headlines, we achieved record revenue as consumers and manufacturers are embracing electric vehicles and an enhanced in-vehicle experience. These two areas need additional semiconductor content and align very well with the strengths of both ADI and Maxim. In electric vehicles, our market-leading wired and wireless battery management systems or BMS offer customers the highest levels of accuracy, reliability and safety, as well as flexibility to scale across all battery chemistries, including the more environmentally friendly zero-Cobalt LFP. Our BMS position is further strengthened with Maxim, we now sell to seven of the top 10 EV manufacturers, and our increased technology and product scale enables us to address new SAM. Our efficiency is also critical in electric vehicles to better optimize performance and range. Here Maxim's strong and growing power management capabilities complement our portfolio.
Now inside the vehicle automakers are enhancing the in-cabin experience. ADI's market leading audio systems with signal processing, A2B connectivity and active road noise cancellation continues to gain traction. In 2021, our A2B franchise was designed in at five major OEMs. And since its launch in 2016, we've shipped over 50 million A2B nodes, and we expect this to double within the next three years. With Maxim, our in-cabin connectivity offerings, expand to include their industry-leading GMSL franchise, which is critical in architecting advanced driver assistance systems.
Turning to communications. 2021 was an uneven year, as strength in wired was offset by weakness in the China wireless market. Encouragingly as we look to 2022, the proliferation of 5G is gaining momentum globally, especially in North America. In the wireless markets, ADI is the leader with more than double the market share of our closest competitor. This year, we introduced the industry's first software defined radio transceiver, that includes a fully-integrated digital front-end. This next generation transceiver platform, enables us to defend and extend our position in traditional 5G and emerging O-RAN networks. Additionally Maxim's power portfolio will support our goal to increase our power attach rate in the wireless market.
In our wired business, we grew again this year as data centers and networking became increasingly vital to accelerating digitalization. Maxim more than doubles our exposure to data centers and adds new growth vectors with its power management solutions for cloud processors and accelerators. And momentum is building with a strong pipeline across traditional customers, as well as hyperscalers.
Finally, moving on to consumer. Our business delivered double-digit growth this year, as we executed on our strategy to diversify our customers, products and applications. Maxim further builds on these efforts, bringing additional power, audio and sensing capabilities and adding new applications like fast charging and gaming. Given the strong pipeline and design wins for our signal processing solutions, across hearables, wearables and professional audio, video, combined with our power management capabilities, I'm confident that we're on the path for continued growth.
Now I'd like to focus on ESG just a little, which is now an integral part of our business strategy. Broadly speaking, I believe semiconductors can play a major role in improving our standard of living, while also protecting our planetary health. For example, ADI's technology is critical to optimizing global energy efficiency, from EVs and charging stations to sustainable energy and smart grids. We're not only investing in these applications, but they represent a meaningful and growing portion of ADI's revenue today. So we've made substantial progress on our ESG initiatives in 2021, including a commitment to increase the use of sustainable energy for 100% of our organic ADI manufacturing activities by 2025, up from 50% today. Actions like these will help us achieve our goal of Carbon Neutrality by 2030 and Net Zero Emissions by 2050. We launched the Ocean and Climate Innovation Accelerator consortium focused on the critical role of oceans in combating climate change. And we've enhanced our disclosure and transparency on ESG topics, especially around diversity, equity and inclusion. In the year ahead, we look to extend our ESG initiatives across the combined company, and of course, make further progress toward our goals.
So in closing, I'd like to thank our employees and partners who worked tirelessly throughout this past year, helping ADI achieve these historic results. We're off to a strong start in 2022, with continued robust demand and line of sight to capacity additions. And I've never been more optimistic about ADI's future. Our industry-leading position is stronger with Maxim, as we expand our capabilities to capitalize on emerging secular drivers, positioning us for faster growth in the years ahead.
And with that, I'll hand you over to Prashanth.