Slide 1: Investor & Analyst Day
Investor & Analyst Day Steve Sanghi Chief Executive Officer March 1, 2018 ©March 2018
Slide 2: Forward Looking Statement 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 or future events, including our strategy, growth drivers, industry outlook, industry trends, market si
Slide 3: Agenda
Agenda Overview & Value proposition Steve Sanghi Microsemi Acquisition Steve Sanghi Smart, Connected and Secure Ganesh Moorthy Total Systems Solution Rich Simoncic Financial Metrics Eric Bjornholt ©March 2018 3
Slide 4: Business Update
Business Update March quarter is tracking according to the mid point of guidance. Narrowing March quarter Net sales guidance to be flat to -2%. (previous guidance -3% to +1%). March quarter guidance at mid point up 9% over year ago quarter. Expecting June quarter net sales to be up ~5% seque
Slide 5: Book to Bill Ratio
Book to Bill Ratio 1.15 Highest B to B Prior to letter 1.11 1.11 1.1 1.09 Soft Landing 1.06 1.05 1.05 1.02 CEO B to B Letter 1.0 1 0.95 0.94 0.9 6/16 9/16 3/17 6/17 9/17 2/18 12/16 12/17 ©March 2018 5
Slide 6: Total Backlog History
Total Backlog History Record Backlog Soft Landing ©March 2018 6
Slide 7: Greater China Total
Greater China Total CNY 2018 CNY 2018 CNY 2017 ©March 2018 7
Slide 8: Microchip Total
Microchip Total CNY 2018 CNY 2018 CNY 2017 ©March 2018 8
Slide 9: 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 ©March 2018 9
Slide 10: Annual Net Sales Growth
Annual Net Sales Growth 4000 3900 3800 3700 3600 109 consecutive quarters of profitability! 3500 3400 3300 3200 3100 MCU Analog Memory Licensing MMO 3000 2900 2800 2700 2600 $ Million 2500 2400 2300 2200 2100 2000 1900 1800 1700 1600 1500 1400 1300 1200 1100 1000 900 800 700 600 500 400 300 200 100
Slide 11: 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
Slide 12: Total MCU (8/16/32) Market Share %
Total MCU (8/16/32) Market Share % % ©March 2018 12
Slide 13: 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 $0 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 RR ©
Slide 14: Historical Financial Performance
Historical Financial Performance Revenue ($mm) Gross margin (%) $3,963 61% $3,502 59% 59% 58% 58% $2,161 $2,214 $1,931 2014 2015 2016 2017 2018 1 2014 2015 2016 2017 2018 1 EBITDA ($mm) and margin (%) Free cash flow2 ($mm) 42% 37% 37% 35% 35% $1,216 $1,664 $984 $1,239 $572 $647 $790 $783 $563 $705 2
Slide 15: 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®
Slide 16: Microchip 2.0
Microchip 2.0 Be The Very Best Embedded Control Solutions Company Ever ©March 2018 16
Slide 17: 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 6. End market mix skewed to Industrial and Automotive 7. New LT model with industry lead
Slide 18: Total System Solution Results
Total System Solution Results Parts/Project Growing at 20%+ year over year FQ2017_3 FQ2017_4 FQ2018_1 FQ2018_2 FQ2018_3 FQ2018_4 FQ2017_3 FQ2017_4 FQ2018_1 FQ2018_2 FQ2018_3 FQ2018_4 ©March 2018 18
Slide 19: Revenue by End Market
Revenue by End Market Communi- Defense & cation Aerospace 5% 2% Computing 9% Industrial 35% Consumer 24% Automotive 25% ©March 2018 19
Slide 20: Summary
Summary A consistent revenue grower and market share gainer with multiple growth drivers High margin business model and shareholder friendly Successfully managed soft landing with seasonal March quarter and strong expectation for June quarter with record backlog Premium long-term non-GAAP fi
Slide 21: Thank You!
MICROCHIP Thank You! ©March 2018
Slide 22: Microsemi Acquisition
Microsemi Acquisition Steve Sanghi Chief Executive Officer March 1, 2018 ©March 2018
Slide 23: Forward Looking Statement 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 or future events, including our strategy, growth drivers, industry outlook, industry trends, market si
Slide 24: Microsemi Overview
Microsemi Overview Strong complementary portfolio of Specialized Ethernet, Storage and Optical Networking Microcontrollers, FPGA, Wireless, Timing, Analog and Mixed-Signal products Leadership in Defense, Aerospace, Data Center and Communication markets – ~ 80% of revenue Markets where Microchi
Slide 25: Strategically and Financially Compelling Transaction
Strategically and Financially Compelling Transaction Strengthens Microchip’s presence in Defense, Aerospace, Data Center and Communications markets Expands our Ethernet portfolio to serve Industrial IoT, Enterprise and Carrier markets Adds specialized Microcontrollers to serve the Enterprise S
Slide 26: Over $18B SAM Expansion
Over $18B SAM Expansion Strengthened end market presence Expanded portfolio Specialized solutions >$50bn >$18bn >$32bn >$17bn Analog / mixed signal >$15bn MCU Source: Gartner/Dataquest reports and Microchip and Microsemi management estimates ©March 2018 26
Slide 27: End-Market Diversification
End-Market Diversification Microchip Microsemi Communication Aerospace & Defense Other 5% 2% Computing 9% 9% Industrial Communications 11% 31% Industrial 35% Computing Consumer 20% 24% Aerospace & Defense Automotive 29% 25% $3.9bn $1.8bn Combined Other Aerospace & Defense 3% 11% Industrial Computing
Slide 28: Extensive Combined Portfolio Across End Markets
Extensive Combined Portfolio Across End Markets Mixed Switches High-Rel Enterprise MCUs Analog Interface Memory Power FPGA signal & storage mgmt. Discrete controllers Industrial Automotive Consumer Communication Computing A&D 27% 17% 16% 13% 12% 11% COMBINED CAPABILITIES ©March 2018 28
Slide 29: Highly Profitable Financial Model
Highly Profitable Financial Model * Microchip Microsemi Microchip + Long Term Microsemi Model Revenue ($M) $3,977 $1,875 $5,852 Gross Margin (%) 61.4% 63.2% 62.0% 63% R&D (%) 12.1% 18.5% 14.2% 13% SG&A (%) 9.9% 12.5% 10.7% 9.5% Op Income ($M) $1,567 $603 $2,170 Op Income (%) 39.4% 32.2% 37.1% 40.5%
Slide 30: Synergy and Accretion Expectations
Synergy and Accretion Expectations Transaction is expected to be immediately accretive to our non GAAP earnings per share Short term: Targeting 18% growth in non-GAAP EPS from FY18 to FY19 with accretion from Microsemi (assumes June 2018 close) Microsemi adds ~75 cents of non-GAAP EPS accretio
Slide 31: Transaction Summary and Financing
Transaction Summary And Financing Transaction value of $10.15B Includes assumption of net debt of Microsemi of $1.8B as of 12/31/2017 $68.78 per share in cash to Microsemi stockholders Transaction is being funded through a combination of: $1.6B of cash from combined company balance sheets
Slide 32: Summary
Summary Microsemi adds strong complementary product lines which support the Microchip 2.0 strategy Microsemi’s strength in Defense, Aerospace, Data Center and Communication markets complements Microchip’s strength in Industrial, Automotive and Consumer markets Microsemi adds further operationa
Slide 33: Thank You!
MICROCHIP Thank You! ©March 2018
Slide 34: Smart, Connected and Secure Solutions
Smart, Connected and Ganesh Moorthy President and Secure Solutions Chief Operating Officer ©March 2018
Slide 35: Our Vision
Our Vision Be The Very Best Embedded Control Solutions Company Ever ©March 2018 35
Slide 36: The Tip Of The Iceberg
The Tip Of The Iceberg The News Echo Chamber AI, VR, AR, Autonomous Driving, Big Data, Bitcoin Mining ©March 2018 36
Slide 37: The Rest Of The Iceberg
The Rest Of The Iceberg The Real News AI, VR, AR, Autonomous Driving, Big Data, Bitcoin Mining Tens of thousands of applications Smart, Connected and Secure Industrial Automotive Applications Computing Consumer Communication Defense & Aerospace ©March 2018 37
Slide 38: Smart, Connected and Secure: Alarm System
Smart, Connected and Secure Alarm System ©March 2018 38
Slide 39: Smart, Connected and Secure: Thermostat
Smart, Connected and Secure Thermostat ©March 2018 39
Slide 40: Smart, Connected and Secure: Electric Meter
Smart, Connected and Secure Electric Meter ©March 2018 40
Slide 41: Smart, Connected and Secure: Car Door Lock
Smart, Connected and Secure Car Door Lock ©March 2018 41
Slide 42: Microchip 1.0 → Microchip 2.0
Microchip 1.0 → Microchip 2.0 Product Lines Microchip 1.0 Microchip 2.0 Strong 8-bit and 16-bit MCU Strong 8/16/32-bit MCU and portfolio 32-bit MPU portfolio World class dev tools World class dev tools Emerging Analog portfolio Broad Analog portfolio Strong EEPROM portfolio Strong EE
Slide 43: Providing Total System Solutions
Providing Total System Solutions Power Encryption DC-DC Converters & Supervisors Security LDOs High Voltage I/Os Precision Digital Voltage Potentiometer Reference Motor Drivers Sensors Amplifiers Filters A/D Power Drivers Microcontrollers & Touch Sensing Timing Memory • Proximity/3D • Clocks • EEPRO
Slide 44: Microchip Is Thriving Below The Waterline
Microchip Is Thriving “Below The Waterline” FY10* Q3FY18 RR* Business Revenue ~$1B ~$4B Transformation GM % 57.4% 61.4% OM % 30.3% 39.4% Since MCHP has grown revenue by ~ 300% Increased Gross Margin by ~ 400 bps FY10 Increased Operating Margin by > 900 bps * FY10 = non-GAAP financial results for the
Slide 45: The Tip Of The Iceberg: We Play Here Too
The Tip Of The Iceberg We play in this space too! AI, VR/AR, Autonomous Driving, Big Data, Bitcoin Mining • Google “AIY” – do it yourself AI • Neuromorphic memory technology to enable analog computing for AI • USB hub for VR/AR • Smart Sensors, Connectivity and Security for Autonomous Driving • Data
Slide 46: Microsemi Expands Our Served Available Market
Microsemi Expands Our Served Available Market COMMUNICATIONS Storage AEROSPACE & DEFENSE FPGA Controllers • Broadband Home / CPE & Switches • Actuation & Power • Access Network Management Systems • Cellular Infrastructure High Timing & • Avionics, Engine Systems & • Metro Network Reliability Sync. C
Slide 47: Product Line Innovation
Product Line Innovation ©March 2018
Slide 48: Embedded Market Trends
Embedded Market Trends Relentless innovation Harsh and demanding environments Flexibility through development and manufacturing stages Distributed Intelligence – IoT Energy Efficiency Human Interface Intelligent Sensors Smaller, thinner, higher density packages ©March 2018 48
Slide 49: 8-bit MCU Innovation
8-bit MCU Innovation PIC® & AVR® MCUs Flexibility and Easy to Use Products & Ecosystem Deterministic hardware performance enabled by intuitive graphical tools that enable configurable on-chip Core Independent Peripherals (CIP) Internally connect multiple CIPs together along with on chip Analog p
Slide 50: 16-bit MCU Innovation
16-bit MCU Innovation Precision Motor Control Complex Algorithms Robust Applications Digital Power Conversion Functional Safety, Dual Core Precision, High Temp, Harsh Environment Live Update General Purpose/Low Power Core Independent Peripherals (CIP), eXtreme Low Power (XLP) ©March 2018 50
Slide 51: 32-bit MCU & MPU Innovation
32-bit MCU & MPU Innovation Leading Graphics & Touch Solution in Strong Industrial & MCU & low-cost MPU class of products Automotive focus 5V devices High temp EOL Best in Class Software and Hardware design support Complete Software Framework Mainline Linux support Easy to use SiP / SOM Leader in Se
Slide 52: Analog Power Innovation
Analog Power Innovation Highly integrated Automotive power for in vehicle networking solutions and LED lighting - DEPA Intelligent USB Type-C™ Power High Voltage Technologies Enabling LIDAR for ADAS, enhancing Ultrasound imaging and Optical networking. Advanced Motor drive front ends that
Slide 53: Analog Linear and Mixed-Signal Innovation
Analog Linear and Mixed-Signal Innovation Broad family of ultra-low power analog High speed A/D convertors Market leading smoke & CO detection AC & DC Power measurement Analog & Digital Temp Sensors Precision Voltage References ©March 2018 53
Slide 54: Wired Connectivity Innovation
Wired Connectivity Innovation Strong presence in embedded wired segments Leader in Vehicle infotainment USB, MOST®, Ethernet Strong offering in factory Automation and Industrial Ethernet Automotive Computing Rapid expansion across Industrial Automotive ADAS systems Communication Extensive Automotive
Slide 55: Wireless Connectivity Innovation
Wireless Connectivity Innovation Strong presence in embedded wireless segments Automation of Production & Shipment Leader in Passive Entry, Passive Battery management IoT Start solution for cars, with best In Power Tools (Industrial grade BLE) Automotive in class Security Computing Leading brands of
Slide 56: Security Innovation
Security Innovation TSS Intrusion Secure Key Protection Storage 20+ year track record with secure products Non- intrusive Hardware Attack Encryption Scalable security Defenses solutions from CryptoAuthentication™ Secure Secure secure elements to Field Microchip Boot secure microprocessors Updates RO
Slide 57: Security Innovation
Security Innovation Enterprise Cloud, Gateways & POS • POS terminals • CC-Certified Trusted Platform Modules (TPM) • Certified Root of Trust & authentication modules Cloud Authentication, IoT Nodes (Open Ecosystems) • Strong authentication in large ecosystems Strong authentication in small/medium ec
Slide 58: Human Interface Innovation
Human Interface Innovation User Interface 1D 2D 3D mTouch® Technology maXTouch® GestIC® QTouch® Technology Technology Technology Proximity Touch Pad Free-Space Gesture Buttons Touchscreens Control Sliders Microchip – sole solution provider for all dimensions ©March 2018 58
Slide 59: Clock and Timing Innovation
Clock and Timing Innovation ONE STOP SHOP FOR TIMING NEEDS MEMS & Quartz- Based Solutions Healthcare Cloud Computing Wireless LTE Highly OSCILLATORS EMI Automotive Integrated Reduction CLOCK GENERATORS Data Center CLOCK Smart Devices BUFFERS Field & Online Home Automation Networking Programmable Aut
Slide 60: MEMS Timing Innovation
MEMS Timing Innovation Industry’s most complete MEMS-based timing solutions offering: High reliability (AEC-Q100 certified) Wide operating temperature range (-55⁰C to 125⁰C) Superb shock and vibration resistance High accuracy (±10ppm) Ultra-small size (1.6mm x 1.2mm) Key Applications Autom
Slide 61: Memory Innovation
Memory Innovation TSS EERAM Non-Volatile, Unlimited Endurance Serial SRAM High Performance Flash Memory Low Power, Fast Programming EEPROM High Reliability, Outstanding Quality Reliable Products Definition Reliable Support Design Reliable Supply Production ©March 2018 61
Slide 62: Ecosystem Innovation
Ecosystem Innovation MPLAB® X IDE and Studio design tools Extensive Software Libraries MCC & START Software framework Mainline Linux support 3rd Party Tools & SW WW technical support team Extensive Training programs MASTERS conference Reference designs Communities – AVR® Freaks
Slide 63: What's most important when choosing a microprocessor?
63 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
Slide 64: Which vendor has the best ecosystem for your needs?
64 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
Slide 65: Microsemi Innovation
Microsemi Innovation ©March 2018
Slide 66: Strengthens Our Industrial Market Offering
Strengthens Our Industrial Market Offering Key Industrial Products Key Industrial Applications • Automation • Motor Control • IIoT Industrial FPGA Ethernet • Medical Power & RF • Smart Energy High- Microwave • Oil & Gas Reliability • Building Automation • IP security cameras Clocks & PoE Timing • Au
Slide 67: Access Infrastructure from Core to Last Mile
Access Infrastructure from Core to Last Mile Broadband/ Residential Voice, TW, WiFi Edge / Core Routers OTN, FPGA, 1588, Clocks Wireless/ Microwave Backhaul Access Infrastructure Sync,1588, Carrier Ethernet, FPGA, Ethernet, PHY PHY, Packet Transport FPGA, 1588, RPF, FPGA, Clocks, 1588, PHY, Midspan,
Slide 68: Ethernet as a Platform to Deliver a Comprehensive Solution
Ethernet as a Platform to Deliver a Comprehensive Solution Optical Drivers Clock Mgmt & FPGAs Drivers (Inside Fiber Modules) SoC Timing Network Sync Signal Switching Media Interface / Routing Software Signal PHY Ethernet Integrity Switch Signal boost Layer 2 Switching and Equalization + Layer 1 Phys
Slide 69: Comprehensive Data Center Portfolio for Key Applications
Comprehensive Data Center Portfolio for Key Applications Rack Scale Storage Systems Servers Architecture NVM Storage Custom ASIC Hybrid Cloud Data Protection & Public Cloud Data Center Power Security Private Cloud Connect Ethernet Data Center Network Timing Switching Interconnect Leading Data Center
Slide 70: Storage Leadership Driving Greater Penetration of the Data Center
Storage Leadership Driving Greater Penetration of the Data Center Storage Leadership Penetration of Motherboard & Rack Infrastructure Market Adoption & Success Key Benefits and Focus Clock Tree #1 in SAS Ports Shipped Low Power & Footprints Synthesis, #1 in Storage Systems AES-256 FIPS-197 R
Slide 71: Flash Technology Licensing
Flash Technology Licensing ©March 2018
Slide 72: What do we License?
What do we License? SuperFlash® Cell Generations ESF1 ESF2 ESF3 800-130nm 250 -110nm 90nm and below Process License Design License Design Services ©March 2018 72
Slide 73: Markets and Future for SuperFlash Licensing
Markets and Future for SuperFlash® Licensing Market 2014 SuperFlash® 2014 TAM = $25B 2014 Share MCU 25% Analog 15% SmartCard 55% Others 15% 2014 Served Market = $5B Market 2018 SuperFlash® 2018 TAM = $32.5B 2018 Share MCU 30% Analog 20% SmartCard 60% Others 20% 2018 Served Market = $8.8B Reference f
Slide 74: SuperFlash Enabled Devices
SuperFlash® Enabled Devices >85 Billion Shipped! Annual Shipment Run Rate of >12 Billion BU ©March 2018 74
Slide 75: SuperFlash Technology Leads The Microcontroller Market
SuperFlash® Technology Leads The Microcontroller Market Company Embedded Flash Renesas Electronics MCHP + Internal NXP MCHP + Internal Top 10 MCU Providers Microchip MCHP + Internal Infineon MCHP + Internal STM MCHP + Internal TI MCHP + Internal Cypress/Fujitsu Internal Toshiba MCHP + Internal Samsu
Slide 76: Licensing Business Summary
Licensing Business Summary SuperFlash® technology is the embedded Flash market leader Licensed to Foundries, Fabless Companies, Independent Device Makers (IDMs) & Design Partners Synergistic with our microcontroller technology needs, providing earlier access for our business units Revenue st
Slide 77: Total System Solutions (TSS)
Total System Solutions (TSS) ©March 2018
Slide 78: Power of TSS
Power of TSS Our portfolio of products has quadrupled over the last 6 years creating a powerful platform for embedded system designers TSS approach creates tremendous attach opportunities for Analog, Memory & MCU TSS approach makes our whole solution greater than the sum of the parts TSS may
Slide 79: MCU Integration
MCU Integration SPI USB Type B USB Type B MEM Standard Standard 2-Port USB SPI MEM 2-Port USB Hub Hub Standard 4-Port Smart Hub USB Hub Standard 4-Port MCU MCU USB Hub Scalar Scalar Type A Type A Type A Type A Type A Type A Type A Type A Analog MCU ©March 2018 79
Slide 80: MCU Integration
MCU Integration LCD LCD Display MCP3911 Display Energy Data logging Energy Data logging Measurement & Calibration & Calibration Measurement MCU AFE AFE MCU MCP39F511 Wireless Powerline Modem Wireless Tx/Rx Powerline Modem Tx/Rx Analog Front End MCU + MCU ©March 2018 80
Slide 81: Enduring Competitive Advantage
Enduring Competitive Advantage ©March 2018
Slide 82: Culture – An Enduring Competitive Advantage
Culture – An Enduring Competitive Advantage Strong, practiced guiding values Teamwork trumps prima donnas Shared rewards & sacrifices Non-commissioned salesforce Substantial investment in training Leadership development and succession planning Culture Eats Strategy For Breakfast!! ©March
Slide 83: Microchip's Guiding Values
Microchip’s Guiding Values Quality comes first Customers are our focus Continuous improvement is essential Employees are our greatest strength Products and technology are our foundation Total cycle times are optimized Safety is never compromised Profits and growth provide for everyth
Slide 84: Average % of Time MCHP Practices the Guiding Values
Average % of Time MCHP Practices the Guiding Values ©March 2018 84
Slide 85: Employee Responses Expressed in Mean Scores over time
Employee Responses Expressed in Mean Scores over time 100 90 80 70 60 50 40 30 20 10 0 Quality Customers Improve Employees Products Cycle Time Safety Profits Comm. Partners Ethics 1990 1995 2000 2008 2014 2015 2016 ©March 2018 85
Slide 86: Summary
Summary There is a growing and innovative embedded market that forms the “iceberg below the waterline” Most embedded systems are on a journey to become Smart, Connected and Secure – this is what IoT is!! Our innovation in Smart, Connected and Secure solutions is enabling our clients to create
Slide 87: Thank You!
MICROCHIP Thank You! ©March 2018
Slide 88: Total System Solution
Total System Solution Rich Simoncic Vice President, Analog Power and Interface Division ©March 2018
Slide 89: What's most important when choosing a microprocessor?
What’s most important when choosing a microprocessor? Total System Solutions is important to clients. Total System Solutions 68% 67% 65% is the Ecosystem 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)
Slide 90: Total System Solution
Total System Solution ©March 2018 90
Slide 91: Creating Value for our Clients
Creating Value for our Clients The Product, Function, End Equipment Focus Products/Software/Services IndustryFunctions Building-Block End Equipment(s) TSS (for a specific client) ©March 2018 91
Slide 92: End Equipment and Function Focus
End Equipment and Function Focus FUNCTIONs - interacting elements (software, hardware, services) architected to achieve our clients End Equipment goals. Embedded Wired Wireless Touch and Motor Power Signal Authentication Hardware- Software Networking Connectivity Gesture Control Conversion Chain a
Slide 93: Total System Solution Actual Examples: Automotive
Total System Solution Actual Examples Automotive ©March 2018
Slide 94: Tractor Trailer Tracking
Tractor Trailer Tracking Micrel Classic Atmel Microchip WINC1500 GSM Radio RN4871 Wi-Fi® Stepper BLE Motor (MQTT) +15V MCP16311 Solar PIC24FJ128GA306 Buck Reg. Cell MCU GPS +5V MCP73871 Li-Ion Cell L-Ion Chg. MCP9700 MIC94066 Temperature H.S. Sw. MCP1603 Buck Reg. MIC94066 SST25VF020B Accelerometer
Slide 95: Automotive Water Pump
Automotive Water Pump Micrel Classic Microchip Atmel 3 phase BLDC MIC28512/3 MCP1700 Motor Sw. Reg LDO MIC4605 x 3 3x MOSFET 85V MOSFET pairs dsPIC33EP6 Driver 24LC16B 4MC504 Serial EE MCU MCP6L04 Op Amp MIC2920A ATA663211 LDO LIN Transceiver ©March 2018 95
Slide 96: Total System Solution Actual Examples: Medical
Total System Solution Actual Examples Medical ©March 2018
Slide 97: Medical Micropump
Medical Micropump Classic Microchip Supertex LDO Charge Pump MCP1711 MCP1252 Step Up Battery Controller Controller HV9150 MCP73834 PIC16F1719 LV to HV Piezoelectric EEPROM Clamping Converter 11AA010 Switch Pump HV513 Thermistor IC MCP9700 OLED Display ©March 2018 97
Slide 98: Nebulizer
Nebulizer Classic Microchip Atmel MCP7940M MCP2221A PIC16F1718 SHA204A Battery MCP4728 24AA512 ©March 2018 98
Slide 99: Total System Solution Actual Examples: Computing/Data Communication
Total System Solution Actual Examples Computing/Data Communication ©March 2018
Slide 100: GigE Switch
GigE Switch Micrel Classic Microchip Atmel ATECC508A ATSAMA5D33 Crypto Element MPU DSC1101 125 MHz MEMS PL902171 Oscillator Jitter Blocker KSZ9477 MIC826 7-Port Gigabit Reset Switch Generator MIC25041 3.3V Buck MCP1826 2.5V Regulator Linear Regulator MCP1826 1.8V Linear Regulator MIC23303 Switching
Slide 101: Base Station
Base Station Micrel Classic Microchip MIC5219 MCP16301 WINC1500 SST Wi-Fi® Radio Buck 5V Regulator Regulator Atmel SPI UART PIC32MX170F512 SPI Main CPU PIC32MX795F512 Ethernet Bridge BASE STATION FIRMWARE Radio SQI RMII MCP1700 MCP1700 Regulator SST26VF064B Regulator LAN8720A SQI Flash Font Storage
Slide 102: Microsemi Enterprise Reference Design
Microsemi Enterprise Reference Design Microsemi SST Classic Microchip SST Micrel Micrel ©March 2018 © 2017 Microsemi Corporation. CONFIDENTIAL 102
Slide 103: Total System Solution Actual Examples: Industrial
Total System Solution Actual Examples Industrial ©March 2018
Slide 104: Industrial IOT Gateway
Industrial IOT Gateway Micrel Classic Microchip SST Analog Block Atmel Temp Sensor SMSC CAN Block Temp PIC32 MCU ADC Sensor SAM MCU Digital I/O Block Temp Sensor 4-port USB Block Temp USB Sensor GPIO Bridge USB HUB Main compute board USB HUB Embedded Controller USB HUB ©March 2018 104
Slide 105: LED Agricultural Light
LED Agricultural Light Micrel Classic Microchip HV9910C MCP9700 HV9910C Supertex LED Ballast Light Temp Sensor HV9910C LED Ballast Engine LEDHV9910C Ballast In DMX PWM1 LED Ballast HV9910C 1 DMX Buffers LED Ballast Out Light PWM2 HV9910C PIC16F18854 LEDHV9910C Ballast Engine Buttons Microcontroller
Slide 106: Total System Solution Actual Examples: Consumer
Total System Solution Actual Examples Consumer ©March 2018
Slide 107: Sport Headset
Sport Headset Classic Microchip ISSC MIC UART USB IS2021 GPIO Connector Bluetooth® USB 5V Audio Keys 5V Switch Circuit LEDs GPIO NTC 1 Li-ion PIC10F220T Battery x 2 NTC 2 NTC Temp Sensing ©March 2018 107
Slide 108: Camera Accessory Unit
Camera Accessory Unit ISSC Atmel Micrel SMSC Classic 12V Microchip MIC28511 USB to 12V to 5V 5V DSC6011 Camera Oscillator USB2533i USB to MCP1725 3.3V USB Hub Acc 1 3.3V USB to AT30TS74 Acc 2 Temp Sens ATSAMD21 MCU UCS2113 Accessory Switches GPIO 5V USB Power Input Controller MIC4478 and Fan MIC2025
Slide 109: Audio System
Audio System Micrel Classic Microchip PIC32MX110 F016B KSZ9031RNX FPGA Gb Ethernet MIC2104 MCU Sw. Ctlr MIC23153 Capacitive PIC24FJ256 Buttons Sw. Reg MCU (Touch) MIC2875 Sw. Reg dsPIC33FJ6 TC4426 Audio 4GP206 MOSFET Drv Speakers MIC2253 Sw. Reg DSP PIC12LF1572 MCU MCP9700 (Housekeeping) Temp Sensor
Slide 110: Total System Solution Leading Indicators
Total System Solution Leading Indicators ©March 2018
Slide 111: Total System Solution Revenue Multiplier
Total System Solution Revenue Multiplier 4 Revenue Multiple by Application in Design 3.1X 3 1.7X 2 1X 1 0 1 Part 3 Parts >4 Parts More Parts/Application = Higher Revenue and Profit ©March 2018 111
Slide 112: Total System Solution Results
Total System Solution Results Parts/Project in Design Growing at 20%+ year over year FQ2017_3 FQ2017_4 FQ2018_1 FQ2018_2 FQ2018_3 FQ2018_4 FQ2017_3 FQ2017_4 FQ2018_1 FQ2018_2 FQ2018_3 FQ2018_4 ©March 2018 112
Slide 113: Total System Solution Projects Greater Than One Product Family
Total System Solution Projects Greater Than One Product Family % of Projects with more than 1 Product Family in Design Growing at 40%+ year over year FQ2017_3 FQ2017_4 FQ2018_1 FQ2018_2 FQ2018_3 FQ2018_4 ©March 2018 113
Slide 114: Total System Solution
Total System Solution Total System Solution is a co-created combination of: Hardware Software Services That best meet the client’s goals of: Increasing their revenue Reducing their cost Managing their risk Which results in accelerated revenue and earnings growth for Microchip ©March 2018
Slide 115: Thank You!
MICROCHIP Thank You! ©March 2018
Slide 116: Financials and Investor Value Proposition
Financials and Investor Eric Bjornholt Chief Financial Officer Value Proposition ©March 2018
Slide 117: Microchip Financial Attributes
Microchip Financial Attributes • Microchip is a consistent revenue grower and market share gainer • Strong track record of accretive acquisitions • One of the premium business models in the semiconductor industry • Consistently high and improving gross margins • Disciplined management of operating e
Slide 118: Accomplishments and Targets
Accomplishments and Targets 17.9% 18.6% 21.1% 18.2% 9-yr CAGR 9-yr CAGR 9-yr CAGR 9-yr CAGR Revenue* Gross Margin* Operating Income* Adjusted EBITDA 109 62.5% 22.5% 40% 9% Quarters of Gross Margin* Operating Expense* Operating Income* Long-term Consecutive Target Target Target Cash tax rate Profitab
Slide 119: 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®
Slide 120: Microchip's Business Transformation
Microchip’s Business Transformation FY10* Q3FY18 RR* Business Revenue ~$1B ~$4B Transformation GM % 57.4% 61.4% OM % 30.3% 39.4% Since MCHP has grown revenue by ~ 300% Increased Gross Margin by ~ 400 bps FY10 Increased Operating Margin by > 900 bps * FY10 = non-GAAP financial results for the fiscal
Slide 121: Annual Non-GAAP Net Sales
Annual Non-GAAP Net Sales $4,000 $3,500 17.9% CAGR $3,000 Millions of Dollars $2,500 $2,000 $1,500 $1,000 $500 $0 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 *FY18E * FY18 represents Q1 – Q3 FY18 actual results plus midpoint of Q4 guidance ©March 2018 121
Slide 122: Revenue by Geography
Revenue by Geography Q4FY18* 16.9% 18.1% 39.6% 25.4% Americas Europe Greater China Asia Q4FY17 Q3FY18 18.2% 19.1% 18.2% 17.4% 37.6% 25.1% 41.5% 22.9% Americas Europe Americas Europe Greater China Asia Greater China Asia *Forecast ©March 2018 122
Slide 123: Split of Revenue – Direct and Distribution
Split of Revenue – Direct and Distribution Q4FY18* 45.4% 54.6% Direct Distribution Q4FY17 Q3FY18 43.6% 56.4% 46.3% 53.7% Direct Distribution Direct Distribution *Forecast ©March 2018 123
Slide 124: Annual Non-GAAP Gross Profit
Annual Non-GAAP Gross Profit $2,500 $2,000 Millions of Dollars 18.6% CAGR $1,500 $1,000 $500 $0 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 *FY18E * FY18 represents Q1 – Q3 FY18 actual results plus midpoint of Q4 guidance ©March 2018 124
Slide 125: Operating Expenses
Operating Expenses $1,000 30.00% $800 28.00% Millions of Dollars $600 26.00% $400 24.00% $200 22.00% $0 20.00% FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 *FY18E Op Ex $ Op Ex as a % of Revenue * Based on the midpoint of Q4 FY18 guidance. Revenue used in the calculations is non-GAAP. ©March 2018 12
Slide 126: R&D Expenses
R&D Expenses $600 16.00% $500 15.00% Millions of Dollars $400 14.00% $300 13.00% $200 12.00% $100 11.00% $0 10.00% FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 *FY18E R&D Ex $ R&D as a % of Revenue * Based on the midpoint of Q4 FY18 guidance. Revenue used in the calculations is non-GAAP. ©March 2018
Slide 127: Selling, General and Administrative Expenses
Selling, General and Administrative Expenses $480 17.00% $420 16.00% $360 15.00% Millions of Dollars $300 14.00% $240 13.00% $180 12.00% $120 11.00% $60 10.00% $0 9.00% FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 *FY18E SG&A Ex $ SG&A as a % of Revenue * Based on the midpoint of Q4 FY18 guidance. R
Slide 128: Annual Non-GAAP Operating Income
Annual Non-GAAP Operating Income $1,600 $1,400 $1,200 Millions of Dollars 21.1% CAGR $1,000 $800 $600 $400 $200 $0 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 *FY18E * FY18 represents Q1 – Q3 FY18 actual results plus midpoint of Q4 guidance ©March 2018 128
Slide 129: Annual Non-GAAP Net Income and Diluted EPS Growth
Annual Non-GAAP Net Income and Diluted EPS Growth $1,400 $7.00 $1,300 $1,200 $6.00 $1,100 $1,000 $5.00 Millions of Dollars $900 $800 $4.00 $700 $600 $3.00 $500 $400 $2.00 $300 $200 $1.00 $100 $0 $0.00 FY12 FY13 FY14 FY15 FY16 FY17 *FY18E Non-GAAP Net Income $ Non-GAAP Diluted EPS * FY18 represents Q
Slide 130: 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
Slide 131: 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 Q2 FY18 Q3 FY18 Net Sales $844.0 $873.8 $881.2 $902.7 $972.1 $1,012.1 $994.2 Gross Profit $471.1 $499.9 $509.7 $534.7 $587.2 $617.8 $610.6 Gross Margin 55.8% 57.2% 57.8% 59.2% 60.4% 61.0% 61.4% Ope
Slide 132: Highly Profitable Financial Model
Highly Profitable Financial Model * Microchip Microsemi Microchip + Long Term Microsemi Model Revenue ($M) $3,977 $1,875 $5,852 Gross Margin (%) 61.4% 63.2% 62.0% 63% R&D (%) 12.1% 18.5% 14.2% 13% SG&A (%) 9.9% 12.5% 10.7% 9.5% Op Income ($M) $1,567 $603 $2,170 Op Income (%) 39.4% 32.2% 37.1% 40.5%
Slide 133: EBITDA
EBITDA $1,750 $1,500 Millions of Dollars $1,250 18.2% CAGR $1,000 $750 $500 $250 $0 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 *FY18E * FY18 represents Q1 – Q3 FY18 actual results plus Q4 estimate based on midpoint of financial guidance ©March 2018 133
Slide 134: EBITDA and Net Leverage – Atmel Acquisition through the Current Quarter
EBITDA and Net Leverage – Atmel Acquisition through the Current Quarter $500 3.50 $450 3.15 $400 2.80 Millions of Dollars $350 2.45 $300 2.10 $250 1.75 $200 1.40 $150 1.05 $100 0.70 $50 0.35 $0 0.00 Q1FY17 Q2FY17 Q3FY17 Q4FY17 Q1FY18 Q2FY18 Q3FY18 *Q4FY18E EBITDA $ Net Leverage * EBITDA as calculate
Slide 135: ~$5B Returned to Shareholders
~$5B Billion Returned to Shareholders $400 $1.50 ~ $3.5B in dividends and ~$1.4B in share buy-backs! $350 $1.48 $300 $1.45 Millions of Dollars $250 $1.43 $200 $1.40 $150 $1.38 $100 $1.35 $50 $1.33 $0 $1.30 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 *FY18E Annual Dividends Paid Annual Dividends $ P
Slide 136: Total Inventory
Total Inventory* (Distributor and Microchip) 220 200 180 160 140 120 Days Inventory Days Target 100 Microchip 115 – 120 Distributor 30 – 40 80 Total 145 – 160 60 40 20 0 Q1FY09 Q2FY09 Q3FY09 Q4FY09 Q1FY10 Q2FY10 Q3FY10 Q4FY10 Q1FY11 Q2FY11 Q3FY11 Q4FY11 Q1FY12 Q2FY12 Q3FY12 Q4FY12 Q1FY13 Q2FY13 Q3FY
Slide 137: Capital Expenditures
Capital Expenditures $250 15.00% $200 12.00% Millions of Dollars $150 9.00% $100 6.00% $50 3.00% $0 0.00% FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 *FY18E Cap Ex Cap Ex as a % of Revenue * Based on the midpoint of Q4 FY18 guidance. Revenue used in the calculations is non-GAAP. ©March 2018 137
Slide 138: Financial Summary
Financial Summary • Microchip is a consistent revenue grower and market share gainer • Long-term business outlook is very positive driven by Microchip 2.0 • One of the premium business models in the semiconductor industry • Consistently high and improving gross margins • Disciplined management of op
Slide 139: Thank You!
MICROCHIP Thank You! ©March 2018