Microchip Technology Incorporated · NASDAQ:MCHP
Microchip Technology — Credit Suisse Annual Technology Conference 2020
18 slides from Microchip Technology's conference presentation, December 2020
Slide 1: Investor Presentation
Investor Presentation A Leading Provider of Smart, Connected and Secure Embedded Solutions Steve Sanghi/Ganesh Moorthy/Eric Bjornholt December 2020
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: Q3FY21 Guidance and Investor Update
Q3FY21 Guidance and Investor Update • The strong bookings activity in the September 2020 quarter has continued in the December 2020 quarter • Called FQ1/FQ2 FY21 as bottom of the business cycle for Microchip • Q3FY21 net sales guidance on November 5, 2020 of flat to up 5% sequentially, with record n
Slide 4: Microchip 2.0
Microchip 2.0 • Total System Solutions in Embedded Control • Leading customer preference to design with our MCUs and associated Analog components • Multiple growth drivers across six Megatrends • Diversified end market mix with Industrial, Data centers, Automotive and Communications, Consumer and Ae
Slide 5: Providing Total System Solutions
Providing Total System Solutions Power Management RFICs MMICs DC-DC Converters Encryption Supervisors & Ref. & Precision LDOs, Battery Mgt. High Voltage Digital Security Voltage Discretes & Modules I/Os Potentiometer Reference Motor Sensors Drivers Amplifiers Filters A/D Voice & Audio Processing Pow
Slide 6: Electric Vehicle Charger
Electric Vehicle Charger AC input Main Relay AC-DC DC-DC HV9901 Converter Relay Driver MIC4604 Power Monitoring Lock Actuator -12 +12 +5 +3.3V Control Pilot MCU32 Proximity Pin MIC4812 UNG LED Driver SAME53 TCG MCP2200 Fan Debug Interface Controller APID CPG KSZ8851 Ethernet Clocks MSLD Security ECC
Slide 7: Revenue By End Market
Revenue By End Market* 12% 28% Industrial 13% Data Center & Computing Automotive Communication 14% Consumer 18% Aerospace & Defense 15% * End market classification is based on management estimates for the fiscal year ending March 31, 2020 Microchip Proprietary and Confidential
Slide 8: Six Megatrends
Six Megatrends 5G Internet of Things Datacenter Electric Vehicles Artificial Intelligence/Machine Learning ADAS/Autonomous Vehicles 8
Slide 9: Financial Results and Guidance
Financial Results and Guidance* Actual Results Q1FY17 Q2FY17 Q3FY17 Q4FY17 Q1FY18 Q2FY18 Q3FY18 Q4FY18 Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20 Q3FY20 Q4FY20 Q1FY21 Q2FY21 Net Sales $844.0 $873.8 $881.2 $902.7 $972.1 $1012.1 $994.2 $1002.3 $1216.8 $1513.3 $1416.0 $1329.8 $1322.6 $1337.8 $1287.4 $13
Slide 10: Revising Long term Non-GAAP Operating Model
Revising Long term Non-GAAP Operating Model* Current New Model Model Gross Margin % 63.0% 65.0% Operating Expense % 22.5% 23.0% Operating Profit % 40.5% 42.0% * Microchip does not utilize a GAAP long-term model. Non-GAAP results exclude share-based compensation, acquisition related charges, and othe
Slide 11: Drivers of Gross Margin Expansion
Drivers of Gross Margin Expansion • Eliminating factory underutilization charges as our manufacturing activities ramp up • Cost effectively expanding into our existing clean room space • Insourcing of Assembly activities • Currently 45% of volume – target to get to > 60% of volume • Insourcing of Fi
Slide 12: Operating Expense Drivers
Operating Expense Drivers • Investments in R&D across our strategic product lines to drive high margin revenue growth • Investments in technical support activities to drive a high-level of design wins focused on Total System Solutions and the six Megatrends in the semiconductor industry • Investment
Slide 13: Net Leverage Ratio
Net Debt*, Adjusted EBITDA** & Net Leverage $12,000.0 6.00 • Paid down $10,000.0 5.00 $331.1M of debt in $ Million – Debt & EBITDA FQ2 $8,000.0 4.00 • Cumulative Debt Net Leverage Ratio paydown of $2.95B $6,000.0 3.00 over last 9 quarters $4,000.0 2.00 • EBITDA increased due to tight $2,000.0 1.00 e
Slide 14: Long-term Cash Return Strategy
Long-term Cash Return Strategy • High profit business model and low capital intensity generates significant free cash flow • Using substantially all free cash flow beyond dividends to de-lever and achieve investment grade rating • Plan to use a combination of dividend growth and stock buyback to ret
Slide 15: Summary
Summary • A consistent revenue grower with multiple growth drivers across six Megatrends of the industry • Q3FY21 guidance for net sales to be flat to up 5% sequentially • Paid down $2.95 billion of debt over the last nine quarters and substantially all cash generation beyond dividend payments will
Slide 16: Thank You
SO Thank You SMART | CONNECTED | SECURE
Slide 17: Appendix
SO Appendix SMART | CONNECTED | SECURE
Slide 18: Q3FY21 debt transaction
Q3FY21 debt transaction • We recently announced a debt transaction that is closing on December 1st • $1.086 billion of 2025, 2027 and 2037 bonds were exchanged for: • New 2024 convertible bond of $665.5 million – low coupon (0.125%), capped call (up 75%) • Cash - $434.9 million including accrued int
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