Microchip Technology Incorporated · NASDAQ:MCHP
Microchip Technology — Citi's 2022 Global Technology Conference
28 slides from Microchip Technology's conference presentation, Sep 8, 2022
Slide 1: Citi's 2022 Global Technology Conference
Citi’s 2022 Global Technology Conference A Leading Provider of Smart, Connected and Secure Embedded Control Solutions Ganesh Moorthy President & CEO September 8, 2022
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: Corporate Overview
Corporate Overview Leading Total Systems Solutions Provider: • High-performance standard and specialized • Clock and Timing solutions Microcontroller, Digital Signal Controller and • Wireless and Wired Connectivity solutions Microprocessor solutions • FPGA solutions • Mixed-Signal, Analog, Interface
Slide 4: Consistent Revenue Growth
Consistent Revenue Growth 9,000 8,000 127 consecutive quarters of Non-GAAP profitability! 7,000 6,000 $ Million 5,000 4,000 CAGR 16.2% 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
Slide 5: FY22 Revenue By End Market
FY22 Revenue By End Market 14% Industrial 11% 40% Data Center & Computing Automotive Communication Consumer Appliance 17% 18% 5
Slide 6: FQ1 Results (Non-GAAP)
FQ1 Results (Non-GAAP) Record revenue of $1.964 billion; grew 6.5% QoQ and 25.1% YoY ‒ 7 consecutive quarters of record revenue Record gross margin of 67.1%; increased 230 basis points YoY Record operating margin of 45.6%; increased 390 basis points YoY Record earnings per share of $1.37; in
Slide 7: Fiscal 2nd Quarter 2023 Guidance (Non-GAAP)
Fiscal 2nd Quarter 2023 Guidance (Non-GAAP)* Q1 FY23 Q2 FY23 Guide Long Term Actual @ mid-point Model $1,963.6 $2,062.0 FY22 – 26 CAGR of Revenue ($ Million) 6.5% QoQ 5.0% QoQ 10% to 15% 25.1% YoY 25.0% YoY Gross Margins 67.1% 67.5% 67.5% to 68.5% Operating Expenses 21.5% 21.5% 22.5% to 23.5% Operat
Slide 8: Managing A Soft Landing
Managing A Soft Landing We recognize that macro conditions are weakening, although our business remains strong ‒ We expect to be supply constrained throughout 2022 and into 2023 If or when macro weakness catches up to our business, we believe we can achieve a soft landing because: ‒ Strong PSP (≥
Slide 9: Semi Industry Sales YoY Growth Through Cycles
Semi Industry Sales YoY Growth Through Cycles 35% 30% 25% 20% Semi Industry Sales Y/Y Growth Rates 15% 10% 5% 0% -5% -10% -15% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Semi Sales Y/Y % Chg. Semi Sales Y/Y Growth is sourced BOA Global Research, IMF, and SIA 9
Slide 10: Resilient Profitability Through Cycles
Resilient Profitability Through Cycles 35% 70% 30% MCHP LT Non-GAAP Gross Margin Target* 68% 25% 65.7% 66% Microchip NG Gross Margin % 20% 64% Semi Industry Sales Y/Y Growth Rates 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%
Slide 11: Improving Efficiency Through Cycles
Improving Efficiency Through Cycles 35% 50% 30% MCHP LT Non-GAAP Operating Margin Target* 45% 25% 43.5% 38.7% 40% Microchip NG Operating Margin % 37.1% 36.2% 20% 36.1% 35.9% 39.6% Semi Industry Sales Y/Y Growth Rates 15% 32.3% 35% 34.9% 31.8% 31.0% 10% 32.4% 31.6% 30% 30.2% 30.3% 28.6% 5% 25% 0% 20%
Slide 12: Strong Free Cash Flow Generation Through Cycles
Strong Free Cash Flow Generation Through Cycles 35% $2,800 21.6% 30% 10-Year $2,300 25% FCF CAGR $1,800 Microchip Free Cash Flow* 20% Semi Industry Sales Y/Y Growth Rates 15% $1,300 10% $800 5% $300 0% $0 -$200 -5% -10% -$700 -15% -$1,200 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2
Slide 13: Capital Returned – Dividends
Capital Returned – Dividends $200 ‒ 80 consecutive quarters of dividends paid ‒ Dividend increase of ~9% quarter over $150 quarter, or >40% annual increase $ Million $100 $50 $0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2018 2019 2020 2021 2022 2023 Dividend $MMs 13
Slide 14: Capital Returned – Dividends + Share Buybacks
Capital Returned – Dividends + Share Buybacks $450 ‒ Active $4B share buyback program 60% $400 ‒ Targeting to return 100% of FCF after we achieve 50% $350 1.5x Leverage Ratio $300 40% $ Million $250 30% $200 $150 20% $100 10% $50 $0 0% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2
Slide 15: Microchip Organic Growth Strategy
Microchip Organic Growth Strategy Focus on Total System Solutions (TSS) ‒ Diversified portfolio of Smart, Connected and Secure Solutions ‒ Software, firmware, reference designs to speed customer’s time to market Provide solutions in Megatrend growth areas ‒ Drives growth ≥ 2X corporate growth Ou
Slide 16: Empowering Innovation
Empowering Innovation Consumer Industrial Space Sustainability Automotive Medical Data Center Defense Communication Infrastructure Aviation 16
Slide 17: 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 Potentiometer Reference Motor Sensors Drivers Amplif
Slide 18: Megatrends
Megatrends Industrial 5G IoT/Edge Computing Computing Data Centers Automotive Electric Vehicle Communications AI/Machine Learning Consumer ADAS/Autonomous Driving 18
Slide 19: Megatrends
Megatrends Industrial 5G IoT/Edge Computing Computing Data Centers Automotive E-Mobility Communications Sustainability Consumer ADAS/Autonomous Driving 19
Slide 20: Microchip in Sustainability
Microchip in Sustainability Energy Generation, Storage and Efficient Energy and Water Use Distribution • Smart Agriculture (targeted irrigation & • Solar Power Systems fertilization) • Wind Turbines • High Efficiency Power Supplies • Alternative Energy such as Biomass • Solar Inverters Energy/Fuel •
Slide 21: Environmental Stewardship
Environmental Stewardship Waste Water Energy GHG Reduction Management Consumption Emissions and Reuse 21
Slide 22: Microchip 3.0
Microchip 3.0 Elite long-term non-GAAP Sustained growth from 5-year Organic Revenue business model of organic efforts focused on CAGR of 10% - 15% using 67.5% - 68.5% Gross Margin TSS and Megatrends FY21 as baseline 44% - 46% Operating Margin Adjusted EBITDA Margin Diversified end-market mix Investm
Slide 23: Summary
Summary • Consistent long-term growth from durable end markets • Outstanding and improving gross and operating margins • Strong FCF generation resulting in rapid net leverage reduction and increasing capital return Compelling valuation relative to peer group! 23
Slide 24: Thank You
Thank You 24 SMART | CONNECTED | SECURE & MicrocHiIP
Slide 25: Appendix
SO Appendix SMART | CONNECTED | SECURE
Slide 26: Non-GAAP Reconciliation
Non-GAAP Reconciliation FY 12 FY 13 FY 14 FY 15 FY 16 FY 17 FY 18 FY 19 FY 20 FY 21 FY 22 FY 23** Net Sales, as reported* $ 1,383.2 $ 1,581.6 $ 1,931.2 $ 2,147.0 $ 2,173.3 $ 3,407.8 $ 3,980.8 $ 5,349.5 $ 5,274.2 $ 5,438.4 $ 6,820.9 $ 8,050.8 Distributor revenue recognition adjustment - 24.8 - 13.6 4
Slide 27: Non-GAAP Reconciliation
Non-GAAP Reconciliation FY 12 FY 13 FY 14 FY 15 FY 16 FY 17 FY 18 FY 19 FY 20 FY 21 FY 22 FY 23 Net cash provided by operations, as reported $ 412.0 $ 459.4 $ 676.6 $ 721.2 $ 744.4 $ 1,059.5 $ 1,419.6 $ 1,674.8 $ 1,543.8 $ 1,916.5 $ 2,842.7 $ 3,281.6 Capital expenditures (62.4) (50.8) (113.1) (149.5
Slide 28: Adjusted EBITDA
Adjusted EBITDA* FY 12 FY 13 FY 14 FY 15 FY 16 FY 17 FY 18 FY 19 FY 20 FY 21 FY 22 FY 23 Net income, as reported $ 336.7 $ 127.4 $ 395.3 $ 369.0 $ 324.1 $ 164.6 $ 255.4 $ 355.9 $ 570.6 $ 349.4 $ 1,285.5 $ 2,073.6 Discontinued operations, net - - - - - 6.0 - - - - - - Noncontrolling interests - - - (
Microchip Technology — Citi's 2022 Global Technology Conference on 6ix