Stephens 2013 Spring Investment Conference June 4 – 5, … Investor... · Stephens 2013 Spring...

©June 2013

Stephens 2013 Spring Investment Conference

June 4 – 5, 2013

Eric Bjornholt,

Vice President and Chief Financial Officer

2 ©February 2013 ©June 2013

Safe Harbor Statement

This presentation contains guidance, projections and other forward-looking statements regarding the future financial performance of Microchip. These statements involve predictions and our actual results may vary materially. Please refer to Microchip’s filings with the SEC which identify some important risk factors about the company. This presentation also contains information about Microchip and Microchip’s industry as of a certain date and such data is time-sensitive and subject to change. This information is provided only as of the original date of such information and has not been updated since such date. Microchip does not undertake any obligation to update the existing published information or any forward-looking statements to reflect events, circumstances or new information occurring after the date thereof.


Today’s Agenda

Microchip’s business characteristics 1. Consistent growth 2. Perennial market share gains 3. High margin business model 4. Track record of accretive acquisitions 5. Shareholder friendly with consistently

increasing dividends and free cash flow Current business conditions Opportunity for significant accretion as margins

expand towards business model


Microchip Characteristics

1. Consistent growth 2. Perennial market share gains 3. High margin business model 4. Track record of accretive acquisitions 5. Shareholder friendly with consistently

increasing dividends and free cash flow


0100200300400500600700800900

10001100120013001400150016001700

FY93 FY94 FY95 FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13

Annual Net Sales Growth $

Mill

ion

• 90 consecutive quarters of profitability


16-bit Revenue

FQ1 FQ1

FQ2 FQ2

FQ3 YTD

FQ3 YTD

YTD FQ1

YTD FQ1

YTD FQ3

YTD FQ3

FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13


32-bit Revenue

FQ2 YTD

FQ2 YTD

YTD FQ3

YTD FQ3 YTD

FQ3 YTD FQ3

FY09 FY10 FY11 FY12 FY13


Analog Yearly Revenue (k$)

$0

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

$400,000FY

02

FY03

FY04

FY05

FY06

FY07

FY08

FY09

FY10

FY11

FY12

FY13


Total MCU (4/8/16/32) Market Share %

%


Worldwide 8-Bit Microcontroller Market Share (Dollars)

Based on dollar shipment volume 1991-2012, Source: Gartner and Microchip

1991 1996 1998 2001 2005 2006-9 2010 2012 No. Rank Rank Rank Rank Rank Rank Rank Rank 1 Motorola Motorola Motorola Motorola Motorola Microchip Renesas Renesas 2 Intel NEC NEC Hitachi Renesas NEC Microchip Microchip 3 Philips Philips ST-Micro NEC Microchip ST-Micro Atmel Atmel 4 Mitsubishi Hitachi Philips Microchip NEC Freescale ST-Micro ST-Micro 5 NEC Mitsubishi Hitachi ST-Micro ST-Micro Atmel Samsung NXP 6 Hitachi Toshiba Mitsubishi Philips Atmel Renesas Freescale Freescale 7 Toshiba Matsushita Microchip Toshiba Toshiba NXP NXP Samsung 8 Siemens SGS-Thomson Toshiba Atmel Philips Cypress Cypress Cypress 9 TI Intel Siemens Matsushita Fujitsu Sony Panasonic Si Labs 10 Matsushita Microchip TI Sanyo Infineon Fujitsu Fujitsu Panasonic 11 National Siemens Fujitsu Samsung Sanyo Panasonic Datang Fujitsu 12 SGS-Thomson Fujitsu Sanyo Mitsubishi Samsung Toshiba NEC (1Q) Sony 13 Ricoh TI Matsushita Infineon Matsushita Samsung Sony Toshiba 14 MHS Sony Atmel Sony Sony Datang Toshiba Holtek 15 IIT Zilog Zilog TI Sunplus Si Labs Si Labs MELFAS 16 Sharp Sharp Sharp Fujitsu Micronas Holtek JSC CEC Huada 17 Fujitsu Temic Sony Sunplus Novatek Infineon Holtek JSC 18 Oki Sanyo Intel Zilog Intel Elan Infineon Datang 19 Zilog National National Novatek Holtek Winbond Sonix Infineon 20 Sony Oki LG Semi Micronas Winbond Denso Elan Elan 23 Microchip


Which of the following 8-bit chip families would you consider for your next embedded project?

52%40%

17%16%

15%13%

11%10%10%10%10%

9%7%

6%5%5%

3%3%3%

2%1%1%

Microchip PIC® MCUAtmel AVR

ArduinoFreescale HCxx

STMicro ST6, ST7, ST8TI TMS370, 7000

Renesas H8, R8NXP/Philips P80x, P87x, P89x

Atmel 80xxIntel 80xx, '251

Cypress PSoCSiLabs 80xx

Xilinx PicoBlazeAltera soft core

Zilog Z8, Z80, Z180, eZ80Other

Digi/Rabbit 2000, 3000Parallax

Maxim 80xxInfineon XC800

NEC K0Toshiba

Those Clock Rate Under 100 MHz

N = 764

Source: UBM 2013 Embedded Market Study


Worldwide 16-Bit Microcontroller Market Share (Dollars)


2004 2006 2008 2009 2010 2011 2102 No. Rank Rank Rank Rank Rank Rank Rank 1 Renesas Renesas Renesas Renesas Renesas Renesas Renesas 2 Infineon Infineon Infineon Infineon Infineon Infineon Infineon 3 Freescale Freescale Samsung TI TI TI TI 4 TI Fujitsu TI Samsung Samsung Freescale Freescale 5 NEC TI Freescale Fujitsu Freescale Fujitsu Fujitsu 6 Matsushita Intel Fujitsu Freescale Fujitsu Toshiba Samsung 7 Toshiba Toshiba Toshiba Toshiba Toshiba Samsung Microchip 8 Fujitsu NEC Intel NEC Microchip Microchip Toshiba 9 Intel Sunplus NEC Intel Intel Intel Intel 10 STMicro Sony Sony Microchip Sony Sony INSIDE 11 Oki NXP Panasonic Panasonic JSC Sitronics JSC Sony 12 Sony Micronas NXP Sony Sunplus I Winbond CEC Huada 13 Micronas Winbond Winbond Winbond Winbond Ixys JSC 14 Sunplus Matsushita Microchip Sunplus I NXP Micronas EM Micro 15 Winbond Microchip Micronas Micronas Micronas Seiko Epson Shanghai Fudan 16 Microchip Samsung Sunplus I NXP Sunplus MM Shenzhen St Sunplus 17 Samsung Oki Sunplus MM Sunplus MM Seiko Epson Sunplus Datang 18 Philips National Sharp Seiko Panasonic Rohm Winbond 19 Magnachip Sharp Rohm Sharp Rohm Panasonic Ixys 20 Sharp STMicro Seiko Rohm Seiko Epson



*

* 53%

45%

17%

14%

13%

13%

7%

5%

4%

4%

3%

3%

Microchip PIC24/dsPIC® DSC

TI MSP430

Freescale HC16

STMicro ST9, ST10

Renesas H8/300H, H8S/2000, M16C

Freescale HC12

Intel 8086, '186, '286

AMD 186, '188

Other

Infineon XE166, XC2000, XC166, C166

Maxim

Zilog Z180, Z380

Those clock rate under 100 MHz

N = 690



Worldwide 32-bit Microcontroller Market Share (Dollars)


2010 2011 2012 No. Rank Rank Rank 1 Renesas Renesas Renesas 2 Freescale Freescale Freescale 3 TI TI ST-Micro 4 ST-Micro ST-Micro TI 5 Denso NXP Atmel 6 Fujitsu Denso Denso 7 NXP Atmel Infineon 8 Atmel Fujitsu NXP 9 Toshiba Infineon Toshiba 10 Infineon Toshiba Fujitsu 11 Panasonic Panasonic Panasonic 12 EM Micro EM Micro Microchip 13 Rohm Rohm MELFAS 14 JSC JSC Samsung 15 Shenzhen St Microchip Rohm 16 Huahong Shenzhen St Energy Micro 17 Seiko Epson Huahong CEC Huada 18 Winbond Winbond Nationz 19 Microchip Seiko Epson Shanghai Fudan 20 Samsung Samsung Cypress



33%28%26%

21%19%

17%15%

13%12%

11%10%10%

9%9%

8%8%8%8%8%

7%7%7%

6%5%

4%4%4%

Microchip PIC 32-bit (MIPS)STMicro STM32 (ARM)

TI Stellaris (ARM)NXP LPC (ARM)Atmel (AVR32)

Atmel SAMxx (ARM)FreescaleKinetis (Cortex-M4/M0)

ArduinoTI OMAP

Atmel AT91xxTI C2000 MCUsTI Sitara (ARM)

Freescale i.MX (ARM)Cypress PSOC 5 (ARM)

Altera Nios II (soft core)RenesasSuperH, H8SX, M32C, M32R

Freescale 68K, ColdFireXilinx Zynq (with dual ARM Cortex-A9)

Xilinx MicroBlaze (soft-core)Intel Atom, Pentium, Celeron, Core 2, Core iXAltera SoC-FPGA (with dual ARM Cortex-A9)

TI Hercules (ARM)Energy Micro EFM32

SiLABS Precision32 (ARM)Freescale PowerPC55xx

Microsemi SmartFusion2 SoC FPGA (Cortex-M3)Freescale PowerPC 5xx, 6xx

Those clock rate are under 100 MHz

N = 810

4%4%

3%3%3%3%3%3%3%3%

2%2%2%2%2%2%2%2%

1%1%1%1%1%1%

0%0%

OtherFreescale PowerPC 7xx, 8xx

Qualcomm (any)Xilinx Virtex-5 (with PowerPC 405)

Microsemi SmartFusion SoC FPGA (Cortex-M3)AMD Fusion, Athlon, Sempron, Turion, Opteron, Geode

Freescale Vybrid (ARM)NVIDIA Tegra

Microsemi FPGA (Cortex-M1, soft)Xilinx Virtex-4 (with PowerPC 405)

Freescale PowerQUICCInfineon XMC4000 (ARM)

BroadcomNEC V850

Cirrus Logic EP73xx, EP93xx (ARM)Marvell

Intel ItaniumFujitsu FM3 (ARM)

AMD Alchemy (MIPS)IBM PowerPC 4xx, 7xx

Infineon TricoreSPARC (any)

Fujitsu FR SeriesAMCC PowerPC 4xx

IDT 32xxxAtmel AT91xx/ATSAMxx (ARM)



Gross Margin % (Non-GAAP*)

30

35

40

45

50

55

60

65

Q1F

Y02

Q2F

Y02

Q3F

Y02

Q4F

Y02

Q1F

Y03

Q2F

Y03

Q3F

Y03

Q4F

Y03

Q1F

Y04

Q2F

Y04

Q3F

Y04

Q4F

Y04

Q1F

Y05

Q2F

Y05

Q3F

Y05

Q4F

Y05

Q1F

Y06

Q2F

Y06

Q3F

Y06

Q4F

Y06

Q1F

Y07

Q2F

Y07

Q3F

Y07

Q4F

Y07

Q1F

Y08

Q2F

Y08

Q3F

Y08

Q4F

Y08

Q1F

Y09

Q2F

Y09

Q3F

Y09

Q4F

Y09

Q1F

Y10

Q2F

Y10

Q3F

Y10

Q4F

Y10

Q1F

Y11

Q2F

Y11

Q3F

Y11

Q4F

Y11

Q1F

Y12

Q2F

Y12

Q3F

Y12

Q4F

Y12

Q1F

Y12

Q2F

Y13

Q3F

Y13

Q4F

Y13

(%) Fab 4 Production start

Higher Utilization Richer Product Mix

Worldwide Financial

Crisis

Record

*Excludes share-based compensation and acquisition-related expenses. A reconciliation of our GAAP to non-GAAAP results is available at www.microchip.com.

SST Acquisition

Business Downturn


Non-GAAP Operating Margin

$0

$30,000

$60,000

$90,000

$120,000

$150,000Q

1FY0

7Q

2FY0

7Q

3FY0

7Q

4FY0

7Q

1FY0

8Q

2FY0

8Q

3FY0

8Q

4FY0

8Q

1FY0

9Q

2FY0

9Q

3FY0

9Q

4FY0

9Q

1FY1

0Q

2FY1

0Q

3FY1

0Q

4FY1

0Q

1FY1

1Q

2FY1

1Q

3FY1

1Q

4FY1

1Q

1FY1

2Q

2FY1

2Q

3FY1

2Q

4FY1

2Q

1FY1

3Q

2FY1

3Q

3FY1

3Q

4FY1

3

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

Operating Margin $ Operating Margin %


Broadening Microchip Solutions Through Acquisitions

Hampshire R&E HI-TECH ZeroG SST Adv Silicon Products

Oct ’08 Apr ‘09 Mar ’09 Jan ’10 Apr ‘10 Oct ‘10

Touch Screen Controllers

Security / Life-Safety

ASICs

Development Tools /

Compiler

Low Power Embedded

Wi-Fi

High-Density Flash / IP

Motor Drive Products


Broadening Microchip Solutions Through Acquisitions

MMT LSS Ident Roving Networks SMSC Feb ’11 Oct ‘11 Feb’12 Apr ’12 Aug ‘12

Assembly & Test Capacity

Expansion

High Speed ADC

Gesture Recognition and Proximity

Bluetooth and WiFi Solutions

MOST® USB & Ethernet Wireless Audio PC Controllers

LSS


Accretion from SMSC (Non-GAAP)

• FQ3 EPS accretion 6.5 cents/share • FQ4 EPS accretion 8.5 cents/share • FQ1 2014 accretion 9 to 10 cents/share • FY 2014 accretion 40 to 45 cents/share


SAM Expansion Focus Areas

• eXtreme Low Power • Infotainment in Cars • Touch Sense • Touch Screen • Advanced Graphics • USB Interface • Ethernet Connectivity • Wireless Connectivity • Advanced Analog

• Wireless Audio • Computing Embedded

Controllers • Motor Control • Digital Power Supplies • Energy Efficient Lighting • Energy Harvesting and

Monitoring • Made for iPod and iPhone • Medical Solutions


MCHP Applications in S-Class 26 MCUs / 6 Analog / 6 Memory

Approach Sensors PTC Heater

LED DRL

HID Ballast

Navigation

Throttle Control

HVAC Blower

Light Switch

Airbag

Car Alarm

Engine Control Timer

Parking Assist

Rear View Camera

Garage Door Opener

Door Switch Module

SEE

Analog

Analog

SEE Analog

SEE Cluster (SEE Only)

Adaptive Light (Analog Only)

COMPASS

Mirror Analog SEE

Surround View Camera Analog SEE

Telephone Touch Dialer

DewPoint Controller


MCHP Applications in S-Class 6 MOST / 5 KLEER

Head Unit High

Fond Unit

Digital AudioTuner

Head Phones

Satellite Digital Audio Tuner

Remote Control

TV Tuner

Premium Amplifier


Cash and Investment Balance

$0$200,000$400,000$600,000$800,000

$1,000,000$1,200,000$1,400,000$1,600,000$1,800,000$2,000,000

Q1F

Y07

Q2F

Y07

Q3F

Y07

Q4F

Y07

Q1F

Y08

Q2F

Y08

Q3F

Y08

Q4F

Y08

Q1F

Y09

Q2F

Y09

Q3F

Y09

Q4F

Y09

Q1F

Y10

Q2F

Y10

Q3F

Y10

Q4F

Y10

Q1F

Y11

Q2F

Y11

Q3F

Y11

Q4F

Y11

Q1F

Y12

Q2F

Y12

Q3F

Y12

Q4F

Y12

Q1F

Y13

Q2F

Y13

Q3F

Y13

Q4F

Y13


$2B Dividends Paid

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000Q

1FY0

7Q

2FY0

7Q

3FY0

7Q

4FY0

7Q

1FY0

8Q

2FY0

8Q

3FY0

8Q

4FY0

8Q

1FY0

9Q

2FY0

9Q

3FY0

9Q

4FY0

9Q

1FY1

0Q

2FY1

0Q

3FY1

0Q

4FY1

0Q

1FY1

1Q

2FY1

1Q

3FY1

1**

Q4F

Y11

Q1F

Y12

Q2F

Y12

Q3F

Y12

Q4F

Y12

Q1F

Y13

Q2F

Y13

Q3F

Y13

Q4F

Y13

$0.00

$0.06

$0.12

$0.18

$0.24

$0.30

$0.36

Total Dividend Dividend per Share**Q4FY11 dividend accelerated into Q3FY11


Topics to Cover

The Characteristics of Microchip’s Business 1. Consistent growth 2. Perennial market share gains 3. High margin business model 4. Track record of accretive acquisitions 5. Shareholder friendly with consistently increasing

dividends and free cash flow

Current business conditions Opportunity for significant accretion as margins



Current Business Conditions

March quarter results were better than what we guided during our February 2013 earnings call. Net sales were above the midpoint of our guidance. Non-GAAP gross margin, operating expenses, operating profit and EPS were better than the high end of our guidance.

Continuing to experience very strong bookings activity. Inventory is within the target range at 116 days, but our internally

produced inventory is a bit high and our inventory purchased from third-party foundries is low. We expect these inventory balances to be better balanced by the end of the June quarter.

After a record low distribution inventory at the end of December, distributors built 3 days of inventory in the March quarter and it seems that distributors will build some additional inventory in June. Microchip recognizes distributor revenue on a sell-through basis worldwide.


Total Inventory (Disti/MCHP)

020406080

100120140160180200220Q

1FY0

7Q

2FY0

7Q

3FY0

7Q

4FY0

7Q

1FY0

8Q

2FY0

8Q

3FY0

8Q

4FY0

8Q

1FY0

9Q

2FY0

9Q

3FY0

9Q

4FY0

9Q

1FY1

0Q

2FY1

0Q

3FY1

0Q

4FY1

0Q

1FY1

1Q

2FY1

1Q

3FY1

1Q

4FY1

1Q

1FY1

2Q

2FY1

2Q

3FY1

2Q

4FY1

2Q

1FY1

3Q

2FY1

3Q

3FY1

3Q

4FY1

3

Day

s

Disti MCHP

Purchase Accounting


Topics to Cover

The Characteristics of Microchip’s Business 1. Consistent growth 2. Perennial market share gains 3. High margin business model 4. Track record of accretive acquisitions 5. Shareholder friendly with consistently increasing

dividends and free cash flow

Current business conditions Opportunity for significant accretion as margins



MCHP Updated Financial Guidance

Previous Updated (05/02/2013) (06/04/2013) Q1FY14 Guidance Q1FY14 Guidance June 30, 2013 June 30, 2013 Net Sales ($MM Non-GAAP) $438.7 – 456.0 $447.35 - $460.25

Gross Margin* 56.5% - 57.0% 56.75% - 57.25%

Operating Expenses* (% of Sales) 27.75% - 28.25% 27.25% - 28.0%

Operating Profit 28.25% - 29.25% 28.75% - 30.0%

EPS (Non-GAAP*) $0.50 – 0.54 $0.52 – 0.56

EPS (GAAP) $0.30 – 0.34 $0.32 – 0.36 * Excludes share-based compensation, acquisition related charges, non-recurring items and adoption of ASC Subtopic 470-20. The Q4 FY13 GAAP and non-GAAP EPS includes a benefit of ~ 3 cents for the reinstatement of the R&D tax credit. A reconciliation of our GAAP to non-GAAAP results is available at www.microchip.com.

http://www.microchip.com/


MCHP Financial Information Consolidated

Q1FY14 Actual Guidance Long-Term Mar. 31, 2013 June 30, 2013 Model

Net Sales ($MM Non-GAAP) $430.1 $447.35 – 460.25

Gross Margin* 56.4% 56.75% - 57.25% ~ 60% ± .5%

Operating Expenses* (% of Sales) 28.6% 27.25% - 28.0% ~ 27.5% ± .5%

Operating Profit 27.8% 28.75% - 30.00% ~ 32.5% ± .5%

EPS (Non-GAAP*) $0.52 $0.52 – 0.56

EPS (GAAP) $0.28 $0.32 – 0.36 * Excludes share-based compensation, acquisition related charges, non-recurring items and adoption of ASC Subtopic 470-20. The Q4 FY13 GAAP and non-GAAP EPS includes a benefit of ~ 3 cents for the reinstatement of the R&D tax credit. A reconciliation of our GAAP to non-GAAAP results is available at www.microchip.com.

Actual Guidance

http://www.microchip.com/


Summary

Microchip is a consistent revenue grower Microchip is a perennial market share gainer Microchip has consistently maintained a high margin business

model Microchip has shown a consistent track record of accretive

acquisitions Microchip is shareholder friendly with consistently increasing

dividends and free cash flow Current business conditions are showing very strong bookings Investors have an opportunity for significant EPS accretion as

margins expand towards the long term business model

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