Microchip Technology Incorporated · NASDAQ:MCHP
Microchip Technology — Shareholder Meeting (August 2023)
31 slides from Microchip Technology's shareholder meeting presentation, Aug 22, 2023
Slide 1: 2023 Shareholders’ Meeting Presentation
2023 Shareholders’ Meeting Presentation A Leading Provider of Smart, Connected and Secure Embedded Solutions Ganesh Moorthy President & CEO August 22, 2023
Slide 2: Safe Harbor
SAFE HARBOR Forward Looking Statement Safe Harbor: During the course of this presentation, we will make projections or other forward-looking statements regarding the future financial performance of the company (including our guidance) or future events, including our strategy, growth drivers, industr
Slide 3: Our Purpose
Our Purpose Empowering innovation which enhances the human experience by delivering smart, connected and secure technology solutions 3
Slide 4: Empowering Innovation In Diverse, Durable Markets
Empowering Innovation In Diverse, Durable Markets Consumer Industrial Space Sustainability Automotive Medical Data Center Defense Communication Infrastructure Aviation 4
Slide 5: Microchip 3.0
Microchip 3.0 Sustained revenue growth 5-year Organic Revenue from organic efforts CAGR of 10% - 15% using focused on TSS and FY21 as baseline Megatrends 5 Source: Microchip internal estimate
Slide 6: Net Sales Growth
Net Sales Growth • FQ1’24 Net Sales = $2.29B • 16.6% YoY growth 9,000 131 Consecutive Quarters of Non-GAAP Profitability! 8,000 7,000 6,000 16.4% CAGR $ Million 5,000 4,000 3,000 2,000 1,000 0 FY93 FY94 FY95 FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY
Slide 7: Providing Total System Solutions
Providing Total System Solutions Portfolio of Hardware, Software and Services Power Management RFICs MMICs DC-DC Converters Encryption Supervisors & Ref. & High Voltage Precision LDOs, Battery Mgt. Digital Security I/Os Voltage Discretes & Modules Potentiom eter Reference Motor Sensors Drivers Am pl
Slide 8: Market Megatrends
Market Megatrends Industrial 5G AI/ML IoT/Edge Computing Computing AI/ML Data Centers Automotive E-Mobility Communications Sustainability Consumer AI/ML ADAS/Autonomous Driving 8
Slide 9: Revenue By Megatrend
Revenue By Megatrend 2.0% 5G 5.2% IoT 12.0% 12.3% Data Center EV 14.2% ADAS 55.0% 17.5% Sustainability 66.0% 2.1% Other 2.4% 1.2% - AI/ML 3.2% 3.1% 3.8% FY21 Revenue from Megatrends grew FY23 at 2X the rate Microchip grew! 9 Source: Microchip internal estimate
Slide 10: Microchip 3.0
Microchip 3.0 Sustained revenue growth Elite long-term non-GAAP 5-year Organic Revenue from organic efforts business model of CAGR of 10% - 15% using focused on TSS and 67.5% - 68.5% Gross Margin FY21 as baseline 44% - 46% Operating Margin Megatrends Diversified end-market mix creates consistent and
Slide 11: Revenue By End Market
Revenue By End Market FY22 Durable End Markets FY23 14% 12% 11% 11% 40% 41% 17% 17% 18% 19% Industrial Data Center & Computing Automotive Communication Consumer Appliance 11 Source: Microchip internal estimates
Slide 12: Microchip Total System Solutions in HKMC IONIQ 6
Microchip Total System Solutions in HKMC IONIQ 6 88 products spanning Mixed Signal MCU‘s, Analog, Networking, Touch Control and Memory EV Dedicated Application Mood Lamp Module (ISELED) Power Window Switch HVAC - HVAC Display OHCL Power Seat Switch - Air Purifier - PTC Heater eCall Sun-roof - Dust S
Slide 13: Commercial Aviation Total System Solutions
Commercial Aviation Total System Solutions Representative Microchip Content >$100k/aircraft Primary Flight Computer Throttle Control System (PFC) (TCS) Air Supply Control System (ASCS) Control Display Unit (CDU) Remote Electronics Unit (REU) Generator Control Unit (GCU) Smart Video Display Unit (SVD
Slide 14: Semi Industry Sales YoY Growth Through Cycles
Semi Industry Sales YoY Growth Through Cycles 35% 30% 25% Semi Industry Sales Y/Y 20% Growth Rates 15% 10% 5% 0% -5% -10% -15% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Semi Sales Y/Y % Chg. Semi Sales Y/Y Growth is sourced from SIA CY2022 est. annual global sal
Slide 15: Resilient Profitability Through Cycles
Resilient Profitability Through Cycles FQ1’24 Non GAAP GM % = 68.4% 35% 70% MCHP LT Non-GAAP Gross Margin Target* 30% 68% 67.8% 25% 66% Semi Industry Sales Y/Y Growth Rates Microchip NG Gross Margin % 20% 64% 62.0% 62.8% 15% 60.4% 60.9% 62% 60.1% 58.8% 61.1% 61.9% 10% 60% 57.4% 58.1% 5% 57.9% 58.8%
Slide 16: Improving Efficiency Through Cycles
Improving Efficiency Through Cycles FQ1’24 Non GAAP OM % = 48.1% 35% 50% 46.9% 30% MCHP LT Non-GAAP Operating Margin Target* 45% 25% Trough Non-GAAP Operating Margin Semi Industry Sales Y/Y Growth Rates 40% Microchip NG Operating Margin % 20% 36.1% 35.9% 39.6% 38.7% 35% 15% 34.9% 32.3% 31.8% 36.2% 3
Slide 17: Strong Cash Generation Through Cycles
Strong Cash Generation Through Cycles FQ1’24 Adj. FCF $776M = 33.9% 35% 30% 23.4% $3,150 10-Year $2,650 25% ADJ. FCF* $2,150 Semi Industry Sales Y/Y Growth Rates Adj. Microchip Free Cash Flow* 20% CAGR $1,650 15% $1,150 ($ in millions) 10% $650 5% $150 0% -5% -$350 -10% -$850 -15% -$1,350 2007 2008
Slide 18: Microchip 3.0
Microchip 3.0 Sustained revenue growth Elite long-term non-GAAP 5-year Organic Revenue from organic efforts business model of CAGR of 10% - 15% using focused on TSS and 67.5% - 68.5% Gross Margin FY21 as baseline 44% - 46% Operating Margin Megatrends Diversified end-market mix Investment in inventor
Slide 19: Return on Invested Capital (ROIC), S&P 500
Return on Invested Capital (ROIC), S&P 500 90.00 70.00 50.00 MCHP 76th Percentile 30.00 10.00 -10.00 -30.00 -50.00 Source: FactSet calculated as (Trailing Twelve Months of Net Income / Average Return on Invested Capital)*100 19
Slide 20: Microchip 3.0
Microchip 3.0 Sustained revenue growth Elite long-term non-GAAP 5-year Organic Revenue from organic efforts business model of CAGR of 10% - 15% using focused on TSS and 67.5% - 68.5% Gross Margin FY21 as baseline 44% - 46% Operating Margin Megatrends Adjusted EBITDA Margin Diversified end-market mix
Slide 21: Adjusted EBITDA Margin
Adjusted EBITDA Margin FQ1’24 EBITDA Margin $1.17B = 51.2% $4,500.0 55.0% $4,000.0 $3,500.0 50.0% $3,000.0 45.0% $2,500.0 $2,000.0 40.0% $1,500.0 $1,000.0 35.0% $500.0 $0.0 30.0% FY19 FY20 FY21 FY22 FY23 Adj. EBITDA Adj EBITDA % 21 Adjusted EBITDA is as defined in the Company’s Amended and Restated
Slide 22: Adjusted Free Cash Flow Per Share
FQ1’24 Adjusted Adjusted Free Cash Flow Per Share FCF/Share = $1.41 $3,000 $5.40 $2,500 $4.50 $2,000 $3.60 $1,500 $2.70 $1,000 $1.80 $500 $0.90 $0 $0.00 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 Adjusted Free Cash Flow $M * Microchip adj. free cash flow (adj. FCF) is based on fisca
Slide 23: Free Cash Flow as % of Revenue, S&P 500
Free Cash Flow as % of Revenue, S&P 500 80% 60% MCHP 92nd 40% Percentile 20% 0% -20% -40% -60% Source: FactSet – Free cash flow is defined as Trailing Twelve Months Net Cash flow from operating activities – Capital expenditures 23
Slide 24: Net Leverage
Net Leverage FQ1’24 Net Leverage Ratio = 1.29X 6.0x 5.0x 4.77x 4.46x 4.0x 3.71x Net Leverage 3.0x 2.32x 2.0x 1.45x 1.0x 0.0x FY19 FY20 FY21 FY22 FY23 24 Net leverage define as net debt divided by TTM adjusted EBITDA.
Slide 25: Accelerating Free Cash Flow Returned
Accelerating Free Cash Flow Returned TARGETING 100% OF FREE CASH $1,800.0 FLOW RETURNED BY THE 100% QUARTER ENDING MARCH 2025 $1,600.0 $1,400.0 80% $1,200.0 60% $1,000.0 $800.0 40% $600.0 $400.0 20% $200.0 $0.0 0% FY19 FY20 FY21 FY22 FY23 Dividends Buyback Cash Returns % of FCF 25
Slide 26: Cash Returns as % of Revenue, S&P 500
Cash Returns as % of Revenue, S&P 500 80% 70% 60% 50% 40% 30% MCHP 78th Percentile 20% 10% 0% Source: FactSet. 26 Cash returns as a % of Revenue = ((TTM Dividend paid + TTM Share Buy Back) / TTM Total Revenue)
Slide 27: Microchip 3.0
Microchip 3.0 Sustained revenue growth Elite long-term non-GAAP 5-year Organic Revenue from organic efforts business model of CAGR of 10% - 15% using focused on TSS and 67.5% - 68.5% Gross Margin FY21 as baseline 44% - 46% Operating Margin Megatrends Adjusted EBITDA Margin Diversified end-market mix
Slide 28: Culture – An Enduring Competitive Advantage
Culture – An Enduring Competitive Advantage • Strong, practiced guiding values • Teamwork trumps prima donnas • Shared rewards and sacrifices • Non-commissioned sales force • Substantial investment in training • Investment in leadership development and succession planning • Servant leadership Cultur
Slide 29: Environmental Stewardship
Environmental Stewardship Waste Water Energy GHG Reduction Management Consumption Emissions and Reuse 29
Slide 30: Microchip’s Winning Formula
Microchip’s Winning Formula Grow revenue Generate significant ~10% - 15% Extend our strong cash and increase organically while foundation built on capital returned to significantly culture and owners to 100% of expanding gross and sustainability Adj. Free Cash Flow operating margins Deliver Differen
Slide 31: Thank You!
Thank You! A Leading Provider of Smart, Connected and Secure Embedded Control Solutions
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