Microchip Technology Incorporated · NASDAQ:MCHP

Microchip Technology — Investor Presentation (August 2017)

44 slides from Microchip Technology's investor presentation, August 2017

  1. Slide 1: Microchip 2.0

    Microchip 2.0 Steve Sanghi, CEO Ganesh Moorthy, COO Eric Bjornholt, CFO ©August 2017

  2. Slide 2: Business Update

    Business Update  Net sales for Q2FY18 expected to be up 3% sequentially which would drive Microchip’s first one billion dollar net sales quarter.  Operating profit for Q2FY18 expected to be between 37.5% and 38.25%  Non GAAP EPS for Q2FY18 expected to be between $1.33 to $1.37 per share.  Busine

  3. Slide 3: Microchip 1.0

    MICROCHIP 1.0 1. Consistent growth 2. Perennial market share gains 3. High margin business model 4. Shareholder friendly with consistently increasing dividends and free cash flow 5. Successful M&A strategy ©August 2017 3

  4. Slide 4: Annual Net Sales Growth

    Annual Net Sales Growth 4000 3900 3800 3700 3600 3500 107 consecutive quarters of profitability! 3400 3300 3200 3100 MCU Analog Memory Licensing MMO 3000 2900 2800 2700 2600 2500 $ Million 2400 2300 2200 2100 2000 1900 1800 1700 1600 1500 1400 1300 1200 1100 1000 900 800 700 600 500 400 300 200 100

  5. Slide 5: Total MCU (8/16/32) Market Share %

    Total MCU (8/16/32) Market Share % % ©August 2017 5

  6. Slide 6: Worldwide Microcontroller Market Share

    Worldwide Microcontroller Market Share 2003 2008 2009 2010 2012 2014 2015 2016 No. Rank Rank Rank Rank Rank Rank Rank Rank 1 Renesas Renesas Renesas Renesas Renesas Renesas Renesas Renesas 2 Motorola NEC NEC Freescale Freescale Freescale NXP NXP 3 NEC Freescale Freescale Samsung Infineon ST-Micro ST

  7. Slide 7: Analog Yearly Revenue

    Analog Yearly Revenue (k$) $1,000,000 $950,000 $900,000 $850,000 $800,000 $750,000 $700,000 $650,000 $600,000 $550,000 $500,000 $450,000 $400,000 $350,000 $300,000 $250,000 $200,000 $150,000 $100,000 $50,000 $0 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 ©August 2

  8. Slide 8: Gross Margin % (Non-GAAP)

    (%) ©August 2017 30 35 40 45 50 55 60 65 Q1FY02 www.microchip.com. Q2FY02 Q3FY02 Q4FY02 Q1FY03 Q2FY03 Q3FY03 Q4FY03 Q1FY04 Q2FY04 Q3FY04 Q4FY04 Q1FY05 Q2FY05 Q3FY05 Higher Utilization Q4FY05 Richer Product Mix Q1FY06 Q2FY06 Q3FY06 Q4FY06 Fab 4 Production start Q1FY07 Q2FY07 Q3FY07 Q4FY07 Q1FY08 Q2FY

  9. Slide 9: Expanding Our Solutions Through Acquisitions

    Expanding Our Solutions Through Acquisitions HI-TECH Roving Networks Supertex Development Tools Advanced Silicon Bluetooth® & High-Voltage Analog & Motor Drive Mixed-Signal Products Compiler Embedded Wi-Fi® Products ZeroG Micrel Low-Power Hampshire Embedded LSS Novocell Analog, mixed-signal, Wi-Fi®

  10. Slide 10: Microchip 2.0: Be The Very Best Embedded Control Solutions Company Ever

    Microchip 2.0 Be The Very Best Embedded Control Solutions Company Ever ©August 2017 10

  11. Slide 11: Microchip 2.0

    MICROCHIP 2.0 1. Total System Solution in Embedded Control 2. Leading customer preference to design with our MCUs 3. Multiple growth drivers 4. Record gross margin target with multiple drivers 5. Record low opex target with multiple leverage drivers 6. End market mix skewed to Industrial and Automot

  12. Slide 12: Microchip 2.0

    MICROCHIP 2.0 1. Total System Solution in Embedded Control 2. Leading customer preference to design with our MCUs 3. Multiple growth drivers 4. Record gross margin target with multiple drivers 5. Record low opex target with multiple leverage drivers 6. End market mix skewed to Industrial and Automot

  13. Slide 13: Keypad

    Keypad Micrel Classic Microchip MIC2297 LED MCP1700 SST Boost Backlight Regulator Supply PWM LCD Analog KEY FIRMWARE EBI/PMP Driver Driver SPI PIC24FJ1024GA610 SPI SPI GPIO Radio SQI GPIO GPIO SQI LCD Display PIC12LF1552 SST26VF064B SQI Flash Proximity Power Font Storage Management ©August 2017 13

  14. Slide 14: Automotive PEPS System

    Automotive PEPS System Micrel Classic Microchip MCP2025 LIN Atmel 25LC640 Transceiver EEPROM MCP2025 LIN ATA6570 Transceiver CAN Transceiver w/ Partial VBAT MIC5353 Networking LDO MIC94355 Ripple Blocker ATA5279 PIC32MK1024GP100 LF Coil Driver ATA5781 32-BIT MCU W/ ECC Base Station RF Receiver ©Augu

  15. Slide 15: Card Reader

    Card Reader Micrel Classic Microchip Atmel LAN8740A WINC1500 SMSC Ethernet WiFi PHY SST MIC4690 Sw. Reg PIC32 Controller Graphics PIC32MZ2048 MIC5209 MCU LDO SST26VF032 Flash ©August 2017 15

  16. Slide 16: Laser Printer

    Laser Printer SMSC Classic Microchip Atmel MCP39F501 SST Energy Meter PIC16LF1503 SST25VF040B Power Rail Flash Memory Controller USB2534 Customer USB Hub PIC10F220 ASIC Safety MXT144U Controller Capacitive Panel Touch Touch Display Heating Controller Element Fuser AT24C01D Serial EEPROM ©August 2017

  17. Slide 17: LoRa Gateway

    LoRa Gateway Micrel Classic Microchip Atmel SST ISSC MIC45205 BM71 Power Bluetooth Supply PIC32MZ2048 ATECC508A SST26VF064 Crypto MCU LoRa Radio Serial Flash Gateway PIC24 DSC1001 MRF24WN MEMS WiFi Ocsillator MIC5248 KSZ8061 LDO Eth Phy ©August 2017 17

  18. Slide 18: Microchip 2.0

    MICROCHIP 2.0 1. Total System Solution in Embedded Control 2. Leading customer preference to design with our MCUs 3. Multiple growth drivers 4. Record gross margin target with multiple drivers 5. Record low opex target with multiple leverage drivers 6. End market mix skewed to Industrial and Automot

  19. Slide 19: Which 8-bit chip families would you consider?

    19 Which of the following 8-bit chip families would you consider for your next embedded project? Microchip PIC 46% 39% Atmel AVR 43% 34% STMicroelectronics ST6, ST7, ST8 18% 19% Freescale HC 13% 17% TI TMS370, 7000 13% 10% Intel 80xx, '251 11% 10% NXP/Philips P80x, P87x, P89x 10% 13% Atmel 80xx 10%

  20. Slide 20: Which 16-bit chip families would you consider?

    20 Which of the following 16-bit chip families would you consider for your next embedded project? Microchip PIC24 / dsPIC 45% 38% TI MSP430* 42% 43% STMicroelectronics ST9, ST10* 22% 21% Freescale HC16 15% 19% Intel 8086, '186, '286 11% 11% Renesas RL78 11% 12% Freescale HC12 10% 12% Renesas R8C 9%

  21. Slide 21: Which 32-bit chip families would you consider?

    21 Which of the following 32-bit chip families would you consider for your next embedded project? SiLABS Precision32 (ARM) 5% STMicro STM32 (ARM) 30% Qualcomm (any) 5% Microchip PIC 32-bit (MIPS) 20% Energy Micro EFM32 4% Microsemi SmartFusion2 SoC FPGA (Cortex-M3) 4% Xilinx Zynq (with dual ARM Cort

  22. Slide 22: What's most important when choosing a microprocessor?

    22 What’s most important when choosing a microprocessor? 68% 67% 65% 25% 26% 27% 7% 8% 8% The chip itself The ecosystem surrounding the chip The chip's supplier/vendor (software, tools, support, etc.) 2017 (N = 719) 2015 (N = 960) 2014 (N = 1304) 2017 Embedded Markets Study © 2017 Copyright by Aspen

  23. Slide 23: Which vendor has the best ecosystem?

    23 Which vendor has the best ecosystem for your needs? (Unaided Open End) Microchip or Atmel (Microchip) 14% Texas Instruments (TI) 14% ST Microelectronics 11% NXP/Freescale/Qualcom 11% Xilinx 5% Intel, Intel Altera 5% ARM 4% Digi-Key 4% Cypress Semiconductor 2% Renesas 2% Arrow 2% 2017 (N = 328) Un

  24. Slide 24: Multiple Growth Drivers

    Multiple Growth Drivers 1. Microcontroller market growth and share gains 2. Analog growth and attach opportunity 3. Wireless and Wired Connectivity – IoT 4. Security 5. Automotive Networking, HMI, Access Control, Lighting and Body Electronics 6. Technology licensing ©August 2017 24

  25. Slide 25: Gross Margin Drivers

    Gross Margin Drivers 1. Increasing Fab utilization 2. Savings from Micrel Fab closure 3. Increasing back end plants utilization 4. Porting Atmel products to Microchip assembly/test technology 5. Transfer of Micrel and Atmel’s U.S. test areas to Thailand 6. Stable to rising pricing environment 7. Ric

  26. Slide 26: Operating expense leverage drivers

    Operating expense leverage drivers 1. Synergy in roadmaps on MCU, analog, wireless and memory 2. Convergence of Microchip and Atmel to common process technology platforms 3. Synergy in common development of IP libraries 4. Synergy in development of tools ecosystem 5. Synergy in marketing - trade sho

  27. Slide 27: Dividends and Share Buy-backs Returned to Shareholders

    $10,000 $20,000 $30,000 $40,000 $50,000 $60,000 $70,000 $80,000 $90,000 $100,000 $0 ©August 2017 Q1FY07 Q2FY07 Q3FY07 Q4FY07 Q1FY08 Q2FY08 Q3FY08 Q4FY08 Q1FY09 Q2FY09 Q3FY09 Q4FY09 Q1FY10 Q2FY10 Q3FY10 Q4FY10 Q1FY11 Q2FY11 Q3FY11 Total Dividend Q4FY11 Q1FY12 Q2FY12 Q3FY12 Q4FY12 Q1FY13 Q2FY13 Q3FY13

  28. Slide 28: Revenue by End Market

    Revenue by End Market Communi- Defense & cation Aerospace 5% 2% Computing 9% Industrial 35% Consumer 24% Automotive 25% ©August 2017 28

  29. Slide 29: Industrial

    Industrial (35% of Sales) ©August 2017 29

  30. Slide 30: Automotive

    Automotive (25% of sales) ©August 2017 30

  31. Slide 31: Consumer

    Consumer (24% of sales) ©August 2017 31

  32. Slide 32: Computing

    Computing (9% of sales) ©August 2017 32

  33. Slide 33: Communications

    Communications (5% of sales) ©August 2017 33

  34. Slide 34: Defense and Aerospace

    Defense and Aerospace (2% of sales) ©August 2017 34

  35. Slide 35: Financial Results, Guidance and Long-Term Model

    Financial Results, Guidance and Long-Term Model Actual Results Q1 FY17 Q2 FY17 Q3 FY17 Q4 FY17 Q1 FY18 Net Sales $844.0 $873.8 $881.2 $902.7 $972.1 Gross Profit $471.1 $499.9 $509.7 $534.7 $587.2 Gross Margin 55.8% 57.2% 57.8% 59.2% 60.4% Operating Expense $240.0 $233.6 $220.6 $213.6 $222.9 Operatin

  36. Slide 36: Non-GAAP Net Sales

    Non-GAAP Net Sales $4,000,000 $3,750,000 $3,500,000 $3,250,000 $3,000,000 $2,750,000 17.6% CAGR $2,500,000 $2,250,000 $2,000,000 $1,750,000 $1,500,000 $1,250,000 $1,000,000 $750,000 $500,000 $250,000 $0 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 *RR FY18 * Run rate for FY18 represent Q1 FY18 actua

  37. Slide 37: Non-GAAP Gross Profit

    Non-GAAP Gross Profit $2,500,000 $2,250,000 $2,000,000 $1,750,000 18.2% CAGR $1,500,000 $1,250,000 $1,000,000 $750,000 $500,000 $250,000 $0 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 *RR FY18 * Run rate for FY18 represent Q1 FY18 actual results multiplied by four ©August 2017 37

  38. Slide 38: Non-GAAP Operating Income

    Non-GAAP Operating Income $1,500,000 $1,250,000 $1,000,000 20.4% CAGR $750,000 $500,000 $250,000 $0 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 *RR FY18 * Run rate for FY18 represent Q1 FY18 actual results multiplied by four ©August 2017 38

  39. Slide 39: Non-GAAP Net Income and Diluted EPS Growth

    Non-GAAP Net Income and Diluted EPS Growth $1,400,000 $7.00 $1,300,000 $1,200,000 $6.00 $1,100,000 $1,000,000 $5.00 $900,000 $800,000 $4.00 $700,000 $600,000 $3.00 $500,000 $400,000 $2.00 $300,000 $200,000 $1.00 $100,000 $0 $0.00 FY12 FY13 FY14 FY15 FY16 FY17 *RR FY18 Non-GAAP Net Income $ Non-GAAP

  40. Slide 40: Free Cash Flow as a % of Revenue

    Free Cash Flow as a % of Revenue $1,400,000 42.0% $1,300,000 39.0% $1,200,000 36.0% $1,100,000 33.0% $1,000,000 30.0% $900,000 27.0% $800,000 24.0% $700,000 21.0% $600,000 18.0% $500,000 15.0% $400,000 12.0% $300,000 9.0% $200,000 6.0% $100,000 3.0% $0 0.0% FY12 FY13 FY14 FY15 FY16 FY17 * RR FY18 Fr

  41. Slide 41: EBITDA

    EBITDA $1,750,000 $1,500,000 $1,250,000 17.6% CAGR $1,000,000 $750,000 $500,000 $250,000 $0 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 *RR FY18 * Run rate for FY18 represent Q1 FY18 actual results multiplied by four ©August 2017 41

  42. Slide 42: EBITDA and Net Leverage

    EBITDA and Net Leverage $500,000 3.50 $450,000 3.15 $400,000 2.80 $350,000 2.45 $300,000 2.10 $250,000 1.75 $200,000 1.40 $150,000 1.05 $100,000 0.70 $50,000 0.35 $0 0.00 Q1FY17 Q2FY17 Q3FY17 Q4FY17 Q1FY18 Q2FY18 fcst EBITDA $ Net Leverage * EBITDA as calculated in accordance with Microchip’s Credit

  43. Slide 43: Summary

    Summary  A consistent revenue grower and market share gainer with multiple growth drivers  High margin business model and shareholder friendly  Currently strong business conditions with September quarter revenue guidance expected to be up approximately 3% sequentially and 14.6% year-over-year  S

  44. Slide 44: Thank You!

    MICROCHIP Thank You!

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