Credit Suisse 23rd Annual Technology Conference
Steve Sanghi, Chairman & CEO | microchip.com |
December 4th, 2019 |
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, industry outlook, industry trends, market size and our financial model. These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties that could cause our actual results to differ materially, including, but not limited to: any continued economic uncertainty due to monetary policy, political, trade or other issues in the U.S. or internationally, any unexpected fluctuations or weakness in the U.S. and global economies (including China), changes in demand or market acceptance of our products and the products of our customers; our ability to successfully integrate the operations and employees, retain key employees and customers and otherwise realize the expected synergies and benefits of our acquisitions (including our acquisition of Microsemi Corporation); the impact of current and future changes in U.S. corporate tax laws (including the Tax Cuts and Jobs Act of 2017), foreign currency effects on our business; the mix of inventory we hold and our ability to satisfy short-term orders from our inventory; changes in utilization of our manufacturing capacity and our ability to effectively manage and expand our production levels; competitive developments including pricing pressures; the level of orders that are received and can be shipped in a quarter; changes or fluctuations in customer order patterns and seasonality; the impact of any future significant acquisitions that we may make; our ability to obtain a sufficient supply of wafers from third party wafer foundries and the cost of such wafers, the costs and outcome of any current or future litigation or other matters involving our Microsemi business, intellectual property, customers, or other issues; the costs and outcome of any current or future tax audit or investigation regarding our business or the business of Microsemi, our actual average stock price in the December 2019 quarter and the impact such price will have on our share count; fluctuations in our stock price and trading volume which could impact the number of shares we acquire under our share repurchase program and the timing of such repurchases; disruptions in our business or the businesses of our customers or suppliers due to natural disasters (including any floods in Thailand), terrorist activity, armed conflict, war, worldwide oil prices and supply, public health concerns or disruptions in the transportation system; and general economic, industry or political conditions in the United States or internationally. For a detailed discussion of these and other risk factors, please refer to Microchip's filings on Forms 10- K and 10-Q. You can obtain copies of Forms 10-K and 10-Q and other relevant documents for free at Microchip's website (www.microchip.com) or the SEC's website (www.sec.gov) or from commercial document retrieval services. You are cautioned not to place undue reliance on our forward-looking statements, which speak only as of the date such statements are made. Microchip does not undertake any obligation to publicly update any forward-looking statements to reflect events, circumstances or new information after the date of this presentation or to reflect the occurrence of unanticipated events.
Use of Non-GAAPFinancial Measures: In this presentation, we have included certain non-GAAP financial information. Our non-GAAP adjustments include, where applicable, the effect of share-based compensation, expenses related to our acquisition activities (including intangible asset amortization, inventory valuation costs, severance and other restructuring costs, and legal and other general and administrative expenses associated with acquisitions including legal fees and expenses for litigation and investigations related to our Microsemi acquisition), IT security remediation costs, non-cash interest expense on our convertible debentures, losses on the settlement of debt, and gains and losses related to available-for-sale investments. Our determination of our non-GAAP measures might not be the same as similarly titled measures used by other companies, and it should not be construed as a substitute for amounts determined in accordance with GAAP. There are limitations associated with using non-GAAP measures, including that they exclude financial information that some may consider important in evaluating our performance. Management compensates for this by presenting information on both a GAAP and non-GAAP basis for investors and providing reconciliations of the GAAP and non-GAAP results. Reconciliations of certain of our non-GAAP and GAAP results are available on our website at www.microchip.com/investors.
©December 2019 | 2 |
Q2FY20 Business Results & Q3FY20 Guidance
- Q2FY20 net sales of $1.338B, up 1.1% sequentially and down 6.6% from a year ago quarter.
- Non- GAAP gross margin of 62.24% near a record high.
- Lowest distribution inventory in fifteen years except one quarter (FQ3 2013).
- Record quarterly dividend declared of 36.65 cents per share.
- Issued revised guidance on December 3, 2019 for net sales to be between down 3% to down 7% sequentially (prior guidance was down 2% to down 10% sequentially).
- Revised guidance for non-GAAP diluted EPS to be between $1.19 and $1.30 per share (prior guidance $1.12 to $1.32 per share)
©December 2019 | 3 |
Microchip Total Billings + Backlog: FQ3'19, FQ4'19 & FQ1'20
©December 2019 | 4 |
Microchip Total Billings + Backlog: FQ2'20 Added
©December 2019 | 5 |
Microchip Total Billings + Backlog: FQ3'20 Added
©December 2019 | 6 |
Six Megatrends
5G | Data Centers | ADAS/Autonomous |
Driving |
IoT | Electric Vehicles | AI/Machine Learning |
©December 2019 | 7 |
Microchip in 5G
5G Infrastructure | 5G Enabled Markets | |
Radio & Small Cell
Precision Oscillators
Network Synchronization
SAW Filters
Power over Ethernet
Ethernet Switch/PHY
FPGA
Security
AC-DC,DC-DC
Baseband
Precision Oscillators
Network Synchronization
FPGA
Security
AC-DC,DC-DC
X-Haul
Ethernet PHYs w/ Security & Timing OTN / Ethernet Fronthaul Processors Precision Oscillators
Network Synchronization
FPGA
Security
AC-DC,DC-DC
©December 2019
Edge Compute | Medical Devices | |
FPGA / MPU / MCU | FPGAs | |
Flash/Storage Controllers | MPU / MCU | |
PCIe Switch | SAW Filters | |
Network Synchronization | Security | |
FPGA | AC-DC,DC-DC | |
Security | ||
AC-DC,DC-DC |
8
Automotive
Ethernet, PCIe ®
FPGA / MPU / MCU
SAW Filters
Timing
Security
AC-DC,DC-DC
Industry 4.0
Ethernet,
FPGA
MPU / MCU
SAW Filters
Timing
Security
AC-DC,DC-DC
Smart Home
MPU / MCU
SAW Filters
Security
AC-DC,DC-DC
Microchip in IoT
Smart Factory
Sensor & Actuators | AI/Machine Learning | ||
Environmental sensors | Object Detection/ | ||
Motor Control | Identification | ||
Machine Vision | Predictive Maintenance | ||
Precision Analog/Power | Human Safety / OSHA | ||
Security/Authentication | |||
Data Protection/Encryption | |||
Time Sensitive | |||
Hardware Root of Trust | |||
Networking | |||
Secure Boot/Firmware Update | |||
Secure Provisioning | EtherCAT ® | Clock/Timing | |
LoRa | 5G | ||
Asset Management | 10Base T1S | Power over | |
Ethernet | Ethernet | ||
LoRa® | |||
Switches | CoaXPress® | ||
Battery Management |
Smart Home / Smart Building
Voice & HMI | Wireless | |||
Voice/Audio Chips | Wi-Fi® | |||
Touch Screens | LoRa | |||
Capacitive Touch Buttons | Bluetooth ® | |||
Graphics | zigbee ® | |||
Proximity Detection | ||||
AI/Machine Learning | ||||
Security/Authentication | ||||
Facial Recognition | ||||
Data Protection/Encryption | Predictive Maintenance | |||
Hardware Root of Trust | ||||
Secure Boot/Firmware Update | Sensor & Actuators | |||
Secure Provisioning | ||||
Environmental Sensors | ||||
Motor Control | ||||
Camera Systems | ||||
Precision Analog/Power |
Smart City / Smart Utility
Connectivity | Sensor & Actuators | |
LoRa | Environmental Sensors | |
Power over Ethernet | Motor control | |
DALI, DMX, 5G | GPS/ Micropositioning | |
Flow Meters | ||
Lighting | Electric Meters | |
Precision Analog/Power | ||
Lighting Control | ||
Coordination | ||
AI/Machine Learning | ||
Security/Authentication | ||
Object Recognition/ | ||
Data Protection/Encryption | ||
Identification | ||
Hardware Root of Trust | Predictive Maintenance | |
Secure Boot/Firmware Update | Advertisement Signage | |
Secure Provisioning | Road Signage | |
Waste Management |
©December 2019 | 9 |
Microchip in Data Center
Simplified IT
Wireless Maintenance
Graphical/Touch Displays
Front/Rear Panel I/O
System Management
Temp Sensing
Power/Current Sensing
Predictive Fan Control
BMC Lite/BMC Companion
GPIO Expansion
Power Conversion | ||||
Digital Server Power Supply | Security/Authentication | Timing & Sync Solutions | ||
AC-DC,DC-DC, PFC | Data Protection/Encryption | Network Synchronization | ||
DEPA Controllers | ||||
Hardware Root of Trust | NTP & PTP Grand Masters | |||
Power Modules | ||||
Secure Boot/Firmware Update | PCIe ® Gen4/5 Generators/Buffers | |||
PWM/POL Controllers | ||||
Secure Provisioning | Atomic Clocks | |||
PMIC | ||||
Authenticated Devices | GNSS Security | |||
LDO/Switchers | ||||
Secure Debug | Crystal & MEMS Oscillators | |||
©December 2019 | 10 |
Storage & Compute Infrastructure
IO Controllers and Host Bus Adapters
RAID IO Controllers and RAID Adapters
SAS Expanders
PCIe Switches, Fabrics, and Retimers
Tachyon IO Controllers
Universal Backplane Management
Storage End Point Solutions
Flashtec™ SSD Controllers
Performance & Mainstream
Flashtec NVRAM Drives
Memory Infrastructure
Smart Memory Controllers
CXL/GenZ Controllers &
Bridges
Data Center Interconnect
Terabit Ethernet PHYs & OTN
Processors w/ Security &
400GE/FlexE
Microchip in Electric Vehicles
Electric Motor
Motor Control
Motor Position Sensing
Silicon Carbide
Temp Sensing
Regenerative Braking System
Inverter
Pedal Inductive
Sensing
DC/DC Converter
Silicon Carbide MOSFETs
Temp Sensing
MCU Control
©December 2019
eSound
DSP Processing
Networking
Power Monitoring
Temp Sensing
Thermal System/Compressor
Motor Control
Temp
Sensing
Networking
Battery Management System
Networking
Thermal Management
Power / Current Monitoring
On-Board AC Charger
Vehicle Charging Communication
Temp Sensing
Silicon Carbide
MCU Control
11
Microchip in ADAS & Autonomous Driving
Lane Keep Assist
Lane Departure
Front Collision
Avoidance
Pedestrian Detection
Blind Spot Detection
Adaptive Cruise
Control
Sensor Processing
MCUs, MPUs & FPGAs
Oscillators
Memory
Power Management
Amplifiers
ADC & DAC
Thermal Management
Back up Camera | Adaptive Lighting |
Surround View Camera | LED Matrix Lighting |
Autonomous Parking | Automatic Emergency Braking |
Parking Sensors | Traffic Sign |
Recognition | |
Tire Pressure Management | Hands on Steering Wheel |
Rain Sensor | Detection |
Vehicle Computer/ | ||
Communications | ||
ADAS Controller | ||
LIN | ||
PCIe ® Switch & Retimers | ||
CAN& CANFD Controllers | ||
FPGA & MPUs | ||
802.3 Ethernet controllers | ||
Power Management | ||
10Base-T1S Ethernet TRx | ||
Ethernet | ||
100Base-T1S Ethernet TRx | ||
Security/Trust Anchor | ||
Network Synchronization | ||
MEMS Clock | ||
Security/Trust Anchor | ||
CoaXPress ® | Memory |
©December 2019 | 12 |
Microchip in AI/Machine Learning
Smart Embedded Vision
FPGA: Performance / watt
MCU: Broad portfolio
Analog: Broad portfolio
Security: Best in class
Medical Vision Physical Security Machine Vision
Preventive Maintenance
MCU: Broad portfolio
Analog: Broad portfolio
Security: Best in class
Power Grid | HVAC |
©December 2019
ML Training & Inference
PCIe ® switch: Low latency, high port count
Storage controller: Market leading portfolio
FPGA: Compute on the Edge
Network connectivity: Terabit Ethernet PHYs
Analog, Power, Security
Data Center | Automotive |
Audio, Gesture Recognition and Control
memBrain™ Silicon IP
Audio processing Touch solutions MCU: Broad portfolio Analog: Broad portfolio Security: Best in class
Automotive | Smart City | Smart Home |
13
Annual End Market Demand*
Millions of Dollars
$6,000 | ||||||||||
$5,500 | ||||||||||
$5,000 | ||||||||||
$4,500 | ||||||||||
$4,000 | 19.8% CAGR | |||||||||
$3,500 | ||||||||||
$3,000 | ||||||||||
$2,500 | ||||||||||
$2,000 | ||||||||||
$1,500 | ||||||||||
$1,000 | ||||||||||
$500 | ||||||||||
$0 | ||||||||||
FY09 | FY10 | FY11 | FY12 | FY13 | FY14 | FY15 | FY16 | FY17 | FY18 | FY19 |
- End market demand is defined as the net dollar amount of our products, licensing revenue and other services delivered to our direct (non-distributor) customers and by our distributors to their customers.
©December 2019 | 14 |
Annual Non-GAAP Net Income & Diluted EPS Growth
$2,000 | |
$1,800 | |
Dollarsof | $1,600 |
$1,400 | |
$1,000 | |
$1,200 | |
Millions | $800 |
$600 | |
$400 $200 $0
©December 2019
$10.00 | |||||||
$9.00 | |||||||
23.0% Net Income CAGR | $8.00 | ||||||
$7.00 | |||||||
19.4% EPS CAGR | |||||||
$6.00 | |||||||
$5.00 | |||||||
$4.00 | |||||||
$3.00 | |||||||
$2.00 | |||||||
$1.00 | |||||||
$0.00 | |||||||
FY12 | FY13 | FY14 | FY15 | FY16 | FY17 | FY18 | FY19 |
Non-GAAP Net Income $ | Non-GAAP Diluted EPS | ||||||
15 |
Non-GAAP Financial Results, Guidance & Long-Term Model*
Actual Results | ||||||||||||||||
Q1 FY17 | Q2 FY17 | Q3 FY17 | Q4 FY17 | Q1 FY18 | Q2 FY18 | Q3 FY18 | Q4 FY18 | Q1 FY19 | Q2 FY19 | Q3 FY19 | Q4 FY19 | Q1 FY20 | Q2 FY20 | |||
Net Sales | $844.0 | $873.8 | $881.2 | $902.7 | $972.1 | $1,012.1 | $994.2 | $1,002.3 | $1,216.8 | $1,513.3 | $1,416.0 | $1,329.8 | $1,322.6 | $1,337.8 | ||
Gross Profit | $471.1 | $499.9 | $509.7 | $534.7 | $587.2 | $617.8 | $610.6 | $618.4 | $756.7 | $933.7 | $881.1 | $826.9 | $820.1 | $832.7 | ||
Gross Margin | 55.8% | 57.2% | 57.8% | 59.2% | 60.4% | 61.0% | 61.4% | 61.7% | 62.2% | 61.7% | 62.2% | 62.2% | 62.0% | 62.2% | ||
Operating Expenses | $240.0 | $233.6 | $220.6 | $213.6 | $222.9 | $227.3 | $218.9 | $222.8 | $283.2 | $354.5 | $351.1 | $342.8 | $341.6 | $341.9 | ||
Operating Income | $231.1 | $266.3 | $289.1 | $321.2 | $364.3 | $390.5 | $391.7 | $395.6 | $473.5 | $579.3 | $530.0 | $484.1 | $478.5 | $490.8 | ||
Operating Margin | 27.4% | 30.5% | 32.8% | 35.6% | 37.5% | 38.6% | 39.4% | 39.5% | 38.9% | 38.3% | 37.4% | 36.4% | 36.2% | 36.7% | ||
Net Income | $194.0 | $219.6 | $246.5 | $276.9 | $319.1 | $344.1 | $341.2 | $351.3 | $405.8 | $454.6 | $405.6 | $370.4 | $357.6 | $365.7 | ||
Diluted EPS | $0.84 | $0.94 | $1.05 | $1.16 | $1.31 | $1.41 | $1.36 | $1.40 | $1.61 | $1.81 | $1.66 | $1.48 | $1.41 | $1.43 | ||
EBITDA | $264.1 | $298.8 | $321.3 | $356.5 | $395.6 | $422.5 | $425.9 | $429.6 | $537.5 | $574.0 | $556.3 | $544.4 | $537.1 | $540.2 | ||
Q3 FY20 Guidance | Updated on 12/3/19 | Original from 11/5/19 | Long Term Model Including Microsemi | |||||||||||||
Net Sales | $1,244 - $1,298 | $1,204 - $1,311 | ||||||||||||||
Gross Margin | 63.0% | |||||||||||||||
Gross Margin % | 61.0% - 61.4% | 61.0% - 61.4% | ||||||||||||||
Operating Expense % | 26.4% to 27.4% | 26.2% to 28.0% | Operating Expenses | 22.5% | ||||||||||||
Operating Margin | 33.6% to 35.0% | 33.0% to 35.2% | ||||||||||||||
Operating Margin | 40.5% | |||||||||||||||
Diluted EPS | $1.19 - $1.30 | $1.12 - $1.32 |
- Amounts above are reflected in millions of dollars except for diluted EPS and percentages. Microchip does not utilize a GAAP long-term model. All figures are Non-GAAP except for net sales. Figures prior to Q4 FY19 and are measured off of end market demand (instead of GAAP net sales). In Q4 FY19, based on discussions with the SEC, Microchip changed to providing Non-GAAP guidance based on GAAP revenue. Excludes share-based compensation, acquisition related charges, and other items. A reconciliation of our GAAP to non-GAAAP results is available at www.microchip.com.
©December 2019 | 16 |
Summary
- A consistent revenue grower with multiple growth drivers across six megatrends of the industry
- High margin business model and shareholder friendly
- Revised guidance to narrow the range and improve the mid point of the net sales and non-GAAP diluted EPS guidance
- Premium long-termnon-GAAP financial model of 63% gross margin, 22.5% operating expenses and 40.5% operating income
©December 2019 | 17 |
Thank You!
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Microchip Technology Incorporated published this content on 04 December 2019 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 04 December 2019 18:14:06 UTC