Stephens 2013 Spring
Investment Conference
June 4 – 5, 2013
Eric Bjornholt,
Vice President and Chief Financial Officer
©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 forwardlooking statements to reflect events, circumstances or new
information occurring after the date thereof.
©June 2013 2013
©February
2
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
©June 2013 2013
©February
3
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
©June 2013 2013
©February
4
$ Million
Annual Net Sales Growth
1700
• 90 consecutive quarters of profitability
1600
1500
1400
1300
1200
1100
1000
900
800
700
600
500
400
300
200
100
0
FY93 FY94 FY95 FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13
©June 2013 2013
©February
5
16-bit Revenue
YTD
FQ3
FQ3
FQ1
YTD
FQ2
FQ1
FY05
©June 2013 2013
©February
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FQ3
YTD
YTD
FQ3
FQ1
FQ2
FQ1
FY13
6
32-bit Revenue
FQ2
YTD
FY09
©June 2013 2013
©February
FY10
FY11
FQ2
YTD
YTD
YTD
FQ3
FQ3
FY12
YTD
YTD
FQ3
FQ3
FY13
7
Analog Yearly Revenue (k$)
$400,000
$350,000
$300,000
$250,000
$200,000
$150,000
$100,000
$50,000
©June 2013 2013
©February
FY13
FY12
FY11
FY10
FY09
FY08
FY07
FY06
FY05
FY04
FY03
FY02
$0
8
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
©June 2013 2013
©February
9
Total MCU (4/8/16/32) Market Share %
%
©June 2013 2013
©February
10
Worldwide 8-Bit Microcontroller
Market Share (Dollars)
1991
No. Rank
1996
Rank
1998
Rank
2001
Rank
2005
Rank
2006-9
Rank
2010
Rank
2012
Rank
Motorola
Intel
Motorola
NEC
Motorola
NEC
Motorola
Hitachi
Motorola
Renesas
Microchip
NEC
Renesas
Microchip
Renesas
Microchip
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Philips
Mitsubishi
NEC
Hitachi
Toshiba
Siemens
TI
Matsushita
National
SGS-Thomson
Ricoh
MHS
IIT
Sharp
Fujitsu
Oki
Zilog
Sony
Philips
ST-Micro
Hitachi
Philips
Mitsubishi
Hitachi
Toshiba
Mitsubishi
Matsushita
Microchip
SGS-Thomson Toshiba
Intel
Siemens
Microchip
TI
Siemens
Fujitsu
Fujitsu
Sanyo
TI
Matsushita
Sony
Atmel
Zilog
Zilog
Sharp
Sharp
Temic
Sony
Sanyo
Intel
National
National
Oki
LG Semi
NEC
Microchip
ST-Micro
Philips
Toshiba
Atmel
Matsushita
Sanyo
Samsung
Mitsubishi
Infineon
Sony
TI
Fujitsu
Sunplus
Zilog
Novatek
Micronas
Microchip
NEC
ST-Micro
Atmel
Toshiba
Philips
Fujitsu
Infineon
Sanyo
Samsung
Matsushita
Sony
Sunplus
Micronas
Novatek
Intel
Holtek
Winbond
ST-Micro
Freescale
Atmel
Renesas
NXP
Cypress
Sony
Fujitsu
Panasonic
Toshiba
Samsung
Datang
Si Labs
Holtek
Infineon
Elan
Winbond
Denso
Atmel
ST-Micro
Samsung
Freescale
NXP
Cypress
Panasonic
Fujitsu
Datang
NEC (1Q)
Sony
Toshiba
Si Labs
JSC
Holtek
Infineon
Sonix
Elan
Atmel
ST-Micro
NXP
Freescale
Samsung
Cypress
Si Labs
Panasonic
Fujitsu
Sony
Toshiba
Holtek
MELFAS
CEC Huada
JSC
Datang
Infineon
Elan
23
Microchip
1
2
©June 2013 2013
©February
Based on dollar shipment volume 1991-2012, Source: Gartner and Microchip
11
Which of the following 8-bit chip families would
you consider for your next embedded project?
Microchip PIC® MCU
Atmel AVR
Arduino
Freescale HCxx
STMicro ST6, ST7, ST8
TI TMS370, 7000
Renesas H8, R8
NXP/Philips P80x, P87x, P89x
Atmel 80xx
Intel 80xx, '251
Cypress PSoC
SiLabs 80xx
Xilinx PicoBlaze
Altera soft core
Zilog Z8, Z80, Z180, eZ80
Other
Digi/Rabbit 2000, 3000
Parallax
Maxim 80xx
Infineon XC800
NEC K0
Toshiba
40%
17%
16%
15%
13%
11%
10%
10%
10%
10%
9%
7%
6%
5%
5%
3%
3%
3%
2%
1%
1%
52%
Those Clock Rate
Under 100 MHz
N = 764
Source: UBM 2013 Embedded Market Study
©June 2013 2013
©February
12
Worldwide 16-Bit Microcontroller
Market Share (Dollars)
2004
No. Rank
2006
Rank
2008
Rank
2009
Rank
2010
Rank
2011
Rank
2102
Rank
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Renesas
Infineon
Freescale
Fujitsu
TI
Intel
Toshiba
NEC
Sunplus
Sony
NXP
Micronas
Winbond
Matsushita
Microchip
Samsung
Oki
National
Sharp
STMicro
Renesas
Infineon
Samsung
TI
Freescale
Fujitsu
Toshiba
Intel
NEC
Sony
Panasonic
NXP
Winbond
Microchip
Micronas
Sunplus I
Sunplus MM
Sharp
Rohm
Seiko
Renesas
Infineon
TI
Samsung
Fujitsu
Freescale
Toshiba
NEC
Intel
Microchip
Panasonic
Sony
Winbond
Sunplus I
Micronas
NXP
Sunplus MM
Seiko
Sharp
Rohm
Renesas
Infineon
TI
Samsung
Freescale
Fujitsu
Toshiba
Microchip
Intel
Sony
JSC Sitronics
Sunplus I
Winbond
NXP
Micronas
Sunplus MM
Seiko Epson
Panasonic
Rohm
Renesas
Infineon
TI
Freescale
Fujitsu
Toshiba
Samsung
Microchip
Intel
Sony
JSC
Winbond
Ixys
Micronas
Seiko Epson
Shenzhen St
Sunplus
Rohm
Panasonic
Renesas
Infineon
TI
Freescale
Fujitsu
Samsung
Microchip
Toshiba
Intel
INSIDE
Sony
CEC Huada
JSC
EM Micro
Shanghai Fudan
Sunplus
Datang
Winbond
Ixys
Seiko Epson
Renesas
Infineon
Freescale
TI
NEC
Matsushita
Toshiba
Fujitsu
Intel
STMicro
Oki
Sony
Micronas
Sunplus
Winbond
Microchip
Samsung
Philips
Magnachip
Sharp
Based on dollar shipment volume 2004-2012, Source: Gartner and Microchip
©June 2013 2013
©February
13
Which of the following 16-bit chip families would
you consider for your next embedded project?
*
53%
Microchip PIC24/dsPIC® DSC
*
TI MSP430
45%
Freescale HC16
17%
STMicro ST9, ST10
14%
Renesas H8/300H, H8S/2000, M16C
13%
Freescale HC12
13%
Intel 8086, '186, '286
AMD 186, '188
7%
5%
Other
4%
Infineon XE166, XC2000, XC166, C166
4%
Maxim
3%
Zilog Z180, Z380
3%
Those clock rate under
100 MHz
N = 690
Source: UBM 2013 Embedded Market Study
©June 2013 2013
©February
14
Worldwide 32-bit Microcontroller
Market Share (Dollars)
2010
No. Rank
2011
Rank
2012
Rank
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Renesas
Freescale
TI
ST-Micro
NXP
Denso
Atmel
Fujitsu
Infineon
Toshiba
Panasonic
EM Micro
Rohm
JSC
Microchip
Shenzhen St
Huahong
Winbond
Seiko Epson
Samsung
Renesas
Freescale
ST-Micro
TI
Atmel
Denso
Infineon
NXP
Toshiba
Fujitsu
Panasonic
Microchip
MELFAS
Samsung
Rohm
Energy Micro
CEC Huada
Nationz
Shanghai Fudan
Cypress
Renesas
Freescale
TI
ST-Micro
Denso
Fujitsu
NXP
Atmel
Toshiba
Infineon
Panasonic
EM Micro
Rohm
JSC
Shenzhen St
Huahong
Seiko Epson
Winbond
Microchip
Samsung
Based on dollar shipment volume 2010-2012, Source: Gartner and Microchip
©June 2013 2013
©February
15
Which of the following 32-bit chip families would
you consider for your next embedded project?
Microchip PIC 32-bit (MIPS)
STMicro STM32 (ARM)
TI Stellaris (ARM)
NXP LPC (ARM)
Atmel (AVR32)
Atmel SAMxx (ARM)
FreescaleKinetis (Cortex-M4/M0)
Arduino
TI OMAP
Atmel AT91xx
TI C2000 MCUs
TI Sitara (ARM)
Freescale i.MX (ARM)
Cypress PSOC 5 (ARM)
Altera Nios II (soft core)
RenesasSuperH, H8SX, M32C, M32R
Freescale 68K, ColdFire
Xilinx Zynq (with dual ARM Cortex-A9)
Xilinx MicroBlaze (soft-core)
Intel Atom, Pentium, Celeron, Core 2, Core iX
Altera 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
Other
Freescale PowerPC 7xx, 8xx
Qualcomm (any)
21%
Xilinx Virtex-5 (with PowerPC 405)
19%
Microsemi SmartFusion SoC FPGA (Cortex-M3)
17%
AMD Fusion, Athlon, Sempron, Turion, Opteron, Geode
15%
Freescale Vybrid (ARM)
13%
NVIDIA Tegra
12%
Microsemi
FPGA
(Cortex-M1,
soft)
11%
Xilinx
Virtex-4
(with
PowerPC
405)
10%
Freescale
PowerQUICC
10%
Infineon XMC4000 (ARM)
9%
Broadcom
9%
NEC V850
8%
8%
Cirrus Logic EP73xx, EP93xx (ARM)
8%
Marvell
8%
Intel Itanium
8%
Fujitsu FM3 (ARM)
7%
AMD Alchemy (MIPS)
7%
IBM PowerPC 4xx, 7xx
7%
Infineon Tricore
6%
SPARC (any)
5%
Fujitsu FR Series
Those clock rate are under 100 MHz
4%
AMCC PowerPC 4xx
4%
IDT 32xxx
4%
Atmel AT91xx/ATSAMxx (ARM)
N = 810
28%
26%
33%
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%
Source: UBM 2013 Embedded Market Study
©June 2013 2013
©February
16
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
©June 2013 2013
©February
17
Gross Margin % (Non-GAAP*)
65
Higher Utilization
Richer Product Mix
Record
60
SST
Acquisition
55
50
(%)
Fab 4 Production start
Worldwide
Financial
Crisis
45
Business
Downturn
40
30
Q1FY02
Q2FY02
Q3FY02
Q4FY02
Q1FY03
Q2FY03
Q3FY03
Q4FY03
Q1FY04
Q2FY04
Q3FY04
Q4FY04
Q1FY05
Q2FY05
Q3FY05
Q4FY05
Q1FY06
Q2FY06
Q3FY06
Q4FY06
Q1FY07
Q2FY07
Q3FY07
Q4FY07
Q1FY08
Q2FY08
Q3FY08
Q4FY08
Q1FY09
Q2FY09
Q3FY09
Q4FY09
Q1FY10
Q2FY10
Q3FY10
Q4FY10
Q1FY11
Q2FY11
Q3FY11
Q4FY11
Q1FY12
Q2FY12
Q3FY12
Q4FY12
Q1FY12
Q2FY13
Q3FY13
Q4FY13
35
*Excludes share-based compensation and acquisition-related expenses. A reconciliation of our GAAP to non-GAAAP results is available at
www.microchip.com.
©June 2013 2013
©February
18
Q1FY07
Q2FY07
Q3FY07
Q4FY07
Q1FY08
Q2FY08
Q3FY08
Q4FY08
Q1FY09
Q2FY09
Q3FY09
Q4FY09
Q1FY10
Q2FY10
Q3FY10
Q4FY10
Q1FY11
Q2FY11
Q3FY11
Q4FY11
Q1FY12
Q2FY12
Q3FY12
Q4FY12
Q1FY13
Q2FY13
Q3FY13
Q4FY13
Non-GAAP Operating
Margin
$150,000
40.0%
$120,000
35.0%
$90,000
30.0%
$60,000
25.0%
$30,000
20.0%
$0
15.0%
Operating Margin $
©June 2013 2013
©February
Operating Margin %
19
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
©June 2013 2013
©February
20
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
©June 2013 2013
©February
21
Broadening Microchip Solutions
Through Acquisitions
LSS
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
©June 2013 2013
©February
22
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
©June 2013 2013
©February
23
SAM Expansion Focus Areas
•
•
•
•
•
•
•
•
•
eXtreme Low Power
Infotainment in Cars
•
•
Wireless Audio
•
•
•
•
Motor Control
•
•
Made for iPod and iPhone
Touch Sense
Touch Screen
Advanced Graphics
USB Interface
Ethernet Connectivity
Wireless Connectivity
Advanced Analog
©June 2013 2013
©February
Computing Embedded
Controllers
Digital Power Supplies
Energy Efficient Lighting
Energy Harvesting and
Monitoring
Medical Solutions
24
MCHP Applications in S-Class
26 MCUs / 6 Analog / 6 Memory
Surround View Camera
Telephone Touch Dialer
Cluster (SEE Only)
Garage Door Opener
Navigation
HVAC Blower
PTC Heater
Mirror
Airbag
SEE
Analog
SEE
Analog
SEE
SEE
Analog
Analog
COMPASS
Car Alarm
Approach Sensors
Rear View Camera
SEE
Analog
Throttle Control
Engine Control Timer
Adaptive Light (Analog Only)
Parking Assist
HID Ballast
LED DRL
©June 2013 2013
©February
DewPoint Controller
Light Switch
Door Switch Module
25
MCHP Applications in S-Class
6 MOST / 5 KLEER
TV Tuner
Digital AudioTuner
Fond Unit
Head Unit High
©June 2013 2013
©February
Satellite Digital Audio Tuner
Head Phones
Premium Amplifier
Remote Control
26
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
©June 2013
©September
2012
27
$0
©June 2013
©September
2012
28
Q4FY13
Q3FY13
Q2FY13
Q1FY13
Q4FY12
Q3FY12
Q2FY12
Q1FY12
Q4FY11
Q3FY11
Q2FY11
Q1FY11
Q4FY10
Q3FY10
Q2FY10
Q1FY10
Q4FY09
Q3FY09
Q2FY09
Q1FY09
Q4FY08
Q3FY08
Q2FY08
Q1FY08
Q4FY07
Q3FY07
Q2FY07
Q1FY07
Cash and Investment Balance
$2,000,000
$1,800,000
$1,600,000
$1,400,000
$1,200,000
$1,000,000
$800,000
$600,000
$400,000
$200,000
$2B Dividends Paid
$70,000
$0.36
$60,000
$0.30
$50,000
$0.24
$40,000
$0.18
$30,000
$0.12
$20,000
$0.06
$0
$0.00
Q1FY07
Q2FY07
Q3FY07
Q4FY07
Q1FY08
Q2FY08
Q3FY08
Q4FY08
Q1FY09
Q2FY09
Q3FY09
Q4FY09
Q1FY10
Q2FY10
Q3FY10
Q4FY10
Q1FY11
Q2FY11
Q3FY11
**Q4FY11
Q1FY12
Q2FY12
Q3FY12
Q4FY12
Q1FY13
Q2FY13
Q3FY13
Q4FY13
$10,000
Total Dividend
©June 2013
©September
2012
Dividend per Share
**Q4FY11 dividend
accelerated into
Q3FY11
29
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
expand towards business model
©June 2013 2013
©February
30
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.
©June 2013 2013
©February
31
Q1FY07
Q2FY07
Q3FY07
Q4FY07
Q1FY08
Q2FY08
Q3FY08
Q4FY08
Q1FY09
Q2FY09
Q3FY09
Q4FY09
Q1FY10
Q2FY10
Q3FY10
Q4FY10
Q1FY11
Q2FY11
Q3FY11
Q4FY11
Q1FY12
Q2FY12
Q3FY12
Q4FY12
Q1FY13
Q2FY13
Q3FY13
Q4FY13
Days
Total Inventory (Disti/MCHP)
220
200
Purchase
Accounting
180
160
140
120
100
80
60
40
20
0
Disti
©June 2013 2013
©February
MCHP
32
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
expand towards business model
©June 2013 2013
©February
33
MCHP Updated
Financial Guidance
Previous
(05/02/2013)
Q1FY14 Guidance
June 30, 2013
Updated
(06/04/2013)
Q1FY14 Guidance
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
$0.32 – 0.36
* Excludes share-based compensation, acquisition related charges, non-recurring items and adoption of ASC Subtopic 470-20.
The Q4 FY13 GAAP and non-GAAP EPS includes a benefit of ~ 3 cents for the reinstatement of the R&D tax credit.
A reconciliation of our GAAP to non-GAAAP results is available at www.microchip.com.
©June 2013 2013
©February
34
MCHP Financial Information
Consolidated
Actual
Actual
Mar. 31, 2013
Guidance
Q1FY14
Guidance
June 30, 2013
Long-Term
Model
Net Sales
($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.
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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
©June 2013 2013
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Thank You!
©June 2013