Prashanth Mahendra-Rajah
Executive Vice President, Finance and Chief Financial Officer at Analog Devices
Thank you, Vince. Let me add my welcome to our fourth quarter earnings call. My comments today, with the exception of revenue, will be on an adjusted basis, which excludes special items outlined in today's press release.
We closed fiscal 2022 as our second consecutive year of record revenue and profits. We delivered sequential growth each quarter, achieving a new all-time high of $12 billion in revenue; gross margins of 73.6% increased 270 basis points due to favorable product mix, stronger utilization and cost synergies; operating margin of 49.4% increased 700 basis points, reflecting strong execution on opex synergies and adjusted EPS increased nearly 50% to $9.57. For the fourth quarter, revenue was $3.25 billion, finishing at the high end of our outlook.
As I cover the performance by end market, both for the quarter and full year, my growth comments are on an adjusted combined basis, where applicable. Industrial, our most diverse and profitable end market hit another all-time high and represented 51% of quarterly revenue. Growth was broad-based with each major application increasing sequentially and year-over-year.
For the year, industrial expanded 29% with growth in each business. Notably, digital healthcare was up over 30% and has now achieved seven straight record years. This consistent success in healthcare underscores the breadth of our ICs and subsystem solutions in a key secular growth market, where such performance is critical.
Automotive, which represented 21% of quarterly revenue, achieved another record year, growing both sequentially and year-over-year. For the year, auto was up 31%, a favorable mix of premium vehicles, our growing BMS, GMSL, A2B and functional safe power franchises, combined with enhanced value capture drove significant growth compared to SAAR. Together, these franchises of BMS, GMSL, A2B and functional safe power represent over $1 billion of automotive revenue.
Communications, which represented 15% of quarterly revenue, achieved another record quarter with strong sequential growth in wireline, while our wireless business was about flat. For the year, comms grew 27%. In wireless, our strong position in radio signal chains is enabling the 5G roll out globally. And in wireline, our optical and power portfolios benefited from the continued demand for bandwidth.
Lastly, consumer represented 13% of quarterly revenue and was up modestly sequentially and flat year-over-year. Despite a challenging year for the broader industry, consumer finished up 8%. This growth is a testament to how we have diversified our consumer business and the innovation premium our products command. Today, approximately 30% of revenue is derived from long life cycle prosumer applications, including next-gen conferencing systems, professional AV and home theater, while the remaining revenue in consumer relates to the faster-growing wearables and hearables, as well as premium smartphones.
Now I'll move down the P&L for the fourth quarter. Gross margin was 74%, up 310 basis points year-over-year driven by favorable product mix and synergy capture. Opex was $744 million, down slightly sequentially due to the realization of additional synergies. And operating margin increased 800 basis points year-over-year, finishing at a record 51.1%, as we exited the year with roughly $350 million of synergies realized across opex and cost of goods in our run rate. This incredible pace of synergy capture would not have been possible without the dedication of our integration office and the cross-functional teams that supported them. Non-op expenses were $57 million, and the tax rate was 12.2%. All told, adjusted EPS came in at $2.73, up 58% year-over-year.
Moving on to the balance sheet. We ended the quarter with approximately $1.5 billion of cash and equivalents and our net leverage ratio continues to remain below 1. Days of inventory increased to 140, while channel inventory was once again below our target range of seven weeks to eight weeks.
Let me provide some additional details on our inventory. But first, during these uncertain times, we believe it is prudent to temporarily hold more finished goods on our balance sheet instead of shipping into the channel. This provides us with enhanced flexibility to better align supply with end customer demand across regions and markets.
Second, raw material and WIP are increasing, as we begin to rebuild our die bank. Over the last couple of years, our die bank was drastically reduced and in some cases, sits 50% below optimal levels. Die bank inventory is highly cost efficient and it's critical for customer service, as it can be used for different markets and customers. We believe higher inventory is crucial to reducing lead times, as we look to return to our four week to eight week target service level over time. Given these actions, we expect inventory to increase in the near term before trending back down, as we balance die bank rebuild with finished goods depletion.
Moving to cash flow items, capex was $305 million for the quarter and $699 million for the year or 6% of revenue. As we outlined at our Investor Day, we expect elevated capex through 2023 at around high single digits, as a percentage of revenue.
For fiscal 2022, we generated $3.8 billion of free cash flow or 31% of revenue. This is lower than normal given our higher capital intensity and one-time transaction and restructuring costs. These near-term headwinds were not unexpected when we outlined our long-term free cash flow target at our Investor Day, and we remain committed to growing free cash flow to 40% of revenue.
As a reminder, we target 100% free cash flow return. We aim to grow our dividend at a 10% CAGR through the cycle with the remaining cash used for share count reduction. And during the year, we returned more than 100% of free cash flow to shareholders. We repurchased $3.1 billion in shares, reducing share count by nearly 4%, while paying $1.5 billion of dividends.
So let me close with a brief update on the current operating backdrop. As we noted last quarter, the uncertain and slowing macroeconomic environment has had some impact on demand. However, after a couple of months of slowing orders, we saw bookings stabilize during the quarter at what we'd consider relatively normal levels for entering our first quarter. Not surprisingly, bookings remain the strongest in the industrial and auto, while communications and consumer are weaker. We're guiding first quarter revenue to $3.15 billion, plus or minus $100 million.
Given this environment, we thought it might be helpful to be a little more prescriptive in our outlook by market. So in the first quarter, we expect auto to be up slightly sequentially; industrial about flat; comms to decline by mid-single digits; and consumer to be down double digits sequentially. At the midpoint of our outlook, revenue will be up high teens year-over-year and our B2B markets increasing over 20%.
Op margins are expected to be 50% plus or minus 70 bps. Tax rate is expected to be between 12% to 14%. And based on these inputs, adjusted EPS should be $2.60 plus or minus $0.10.
So stepping back, we are well positioned in the near term, but the environment remains highly variable and dynamic. ADI like the rest of the industry is not immune to a softer macro environment, and thus, we remain cautious, yet optimistic.
Longer term, we have over a year of backlog and continued momentum in our pipeline. We also have high flexibility with our hybrid manufacturing model and several opex levers in our toolkit to support our industry-leading margins and maintain robust cash returns to shareholders.
So let me now pass it back to Mike for the Q&A.