Microchip Technology Incorporated · NASDAQ:MCHP

Microchip Technology — Bernstein 39th Annual Strategic Decisions Conference 2023

30 slides from Microchip Technology's conference presentation, May 31, 2023

  1. Slide 1: Bernstein 39th Annual Strategic Decisions Conference 2023

    Bernstein 39th Annual Strategic Decisions Conference 2023 A Leading Provider of Smart, Connected and Secure Embedded Solutions Ganesh Moorthy, President & CEO May 31, 2023

  2. 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

  3. Slide 3: Our Purpose

    Our Purpose Empowering innovation which enhances the human experience by delivering smart, connected and secure technology solutions 3

  4. 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

  5. Slide 5: Microchip 3.0 – 18 Months Later

    Microchip 3.0 – 18 Months Later 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 Diversif

  6. Slide 6: Net Sales Growth

    Net Sales Growth 9,000 130 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 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23

  7. 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

  8. 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

  9. 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

  10. Slide 10: Microchip Portfolio of Data Center Solutions

    Microchip Portfolio of Data Center Solutions Storage & Compute Infrastructure Timing & Synchronization Thermal Management • RAID-on-Chip Controllers (ROCs) • PCIe® Clock and Timing • Temperature Sensors • I/O Controllers (IOCs) • Data center NTP & PTP Sync • Current/Power Sensors • PCIe Switching &

  11. Slide 11: Microchip 3.0 – 18 Months Later

    Microchip 3.0 – 18 Months Later 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 Diversif

  12. Slide 12: 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 12 Source: Microchip internal estimates

  13. 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

  14. Slide 14: 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

  15. Slide 15: 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

  16. Slide 16: Resilient Profitability Through Cycles

    Resilient Profitability Through Cycles 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% 58% 58.2% 57.2% 57.6% 0% 56%

  17. Slide 17: Improving Efficiency Through Cycles

    Improving Efficiency Through Cycles 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% 31.0% 37.1% 10% 32.4% 31.6% 30

  18. Slide 18: Strong Cash Generation Through Cycles

    Strong Cash Generation Through Cycles 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 2009 2010 2011 2012 2013 2014

  19. Slide 19: Microchip 3.0 – 18 Months Later

    Microchip 3.0 – 18 Months Later 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 Diversif

  20. Slide 20: Return on Invested Capital (ROIC), S&P 500

    Return on Invested Capital (ROIC), S&P 500 100 80 60 40 MCHP 76th Percentile 20 0 -20 -40 Source: FactSet calculated as (Net Income/ Average Return on Invested Capital)*100 20

  21. Slide 21: Microchip 3.0 – 18 Months Later

    Microchip 3.0 – 18 Months Later 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 Diversif

  22. Slide 22: Adjusted EBITDA Margin

    Adjusted EBITDA Margin $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 % 22 Adjusted EBITDA is as defined in the Company’s Amended and Restated Credit Agreement dated as of Decembe

  23. Slide 23: Adjusted Free Cash Flow Per Share

    Adjusted Free Cash Flow Per Share $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 fiscal year ending March 31. Adj. FCF i

  24. Slide 24: Free Cash Flow as % of Revenue, S&P 500

    Free Cash Flow as % of Revenue, S&P 500 90% 70% 50% MCHP 88th Percentile 30% 10% -10% -30% -50% Source: FactSet – Free cash flow is defined as Net Cash flow from operating activities – Capital expenditures 24

  25. Slide 25: Net Leverage

    Net Leverage 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 25 Net leverage define as net debt divided by TTM adjusted EBITDA.

  26. Slide 26: 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 26

  27. Slide 27: Cash Returns as % of Revenue, S&P 500

    Cash Returns as % of Revenue, S&P 500 80% 70% 60% 50% 40% 30% MCHP 77th Percentile 20% 10% 0% Source: FactSet. 27 Cash returns as a % of Revenue = ((FY Dividend paid + FY Share Buy Back) / FY Total Revenue)

  28. Slide 28: Compelling Valuation

    Compelling Valuation Premium Performance at a Significant Discount • 5 Year Revenue CAGR of 10%-15%*; 16.4% CAGR over last 30 years 18x EV/EBITDA (NTM) • TTM non-GAAP gross margin of 17x 16.9x PHLX 67.8% and non-GAAP operating 16x TXN 16.2x 15.9x margins of 46.9% 15x ADI • TTM Adj. EBITDA of $4.3B 1

  29. Slide 29: 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

  30. Slide 30: Thank You

    THANK YOU A Leading Provider of Smart, Connected and Secure Embedded Control Solutions

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