Maxim Integrated Business Model Update September 5, 2017

Transcription

1 Maxim Integrated Business Model Update September 5, 2017

2 Safe Harbor This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements include, without limitation, the Company s projections and statements regarding revenue, gross margin, earnings per share, capital expenditures and other financial and business metrics. These statements involve risks and uncertainties that could cause actual results to differ materially from expectations. Please refer to the Company s Annual Report on Form 10-K for the fiscal year ended June 24, 2017 for a description of some of the risk factors that could cause actual results to differ materially from such forward-looking statements. All forward-looking statements included in this presentation are made as of the date hereof and based on the information available to the Company as of the date hereof. The Company assumes no obligation to update any forward-looking statement. 2

3 Topics 1 Business Strategy Update Tunç 2 Financial Model Update Bruce 3 Q&A 3

4 FY17 Financial Results Financial Metric FY16 FY17 Change Revenue $2.2B $2.3B +5% Gross Margin 61.9% 65.2% +330bps Operating Margin 27.5% 32.7% +520bps Operating Income $603M $751M +25% Earnings Per Share $1.63 $ % Note: All measures exclude Special Items 4

5 Strategic Priorities 1 Growth Achieve market CAGR Grow all markets 2 Profitability Grow our SMB revenue Take advantage of manufacturing tailwinds Grow OpEx at half rate of revenue 3 Stability Avoid dependence on any single market or customer Weigh ROI of new projects against risk 5

6 Targeted Applications in Key Markets Automotive Industrial Data Center Mobility Power Interface RF Power Signal Chain Interface Micros Security Sensors Power Optical Power Audio Sensors 6

7 1. Maxim Solutions for Automotive Power Management USB Charging Remote Tuner Serial Link Infotainment Serial Link Power Advanced Driver Assistance Auto Body Electronics Power LED Lighting Electric Powertrain Battery Management (EV/Hybrids) 7

8 Continued Support for Above-Market Automotive Growth Lifetime Revenue from Design Wins, FY13 FY17 CAGR Battery Mgmt Systems ADAS Infotainment Auto Body Electronics Korea China Americas Europe Rest of Asia Japan 0% 50% 0% 50% 8

9 2. Enable the Factory of the Future Enterprise Planning Level Process Control Level IO-Link Comms connect the outermost branches of the factory to the network Small footprint, efficient power management $700M market in Power and Comms growing at 10% CAGR Sensors & Actuators Field Level PLC Control Level Industrial Interfaces IO Links Maxim Communications and Power Management Served Market 9

10 Industrial and Automotive Growth Diversifying Revenue FY12 FY17 All other 30% markets 49% Automotive Improving revenue stability and profitability Note: Due to nature of our general purpose products, estimates by Major Markets are imprecise Industrial 10

11 3. 100G Intra-Data Center Optical Market Growing at 20% CAGR Rack-to-Rack and Within-Rack Communication Maxim s Differentiation 1. Proprietary IP cores for low power 2. Unique architecture lowers heat and cost 3. Digital tuning optimizes performance, improves module yields Serving Virtually All Cloud-Data Center Customers 11

12 Capture the Broad Market FY12 29% Distribution FY17 42% Distribution Added 4 new distribution partners Enhanced field support in Europe, Americas, China and Rest of Asia Improving website collateral for unassisted design wins 12

13 Long-Term Growth Expectations by End Market Automotive Up in low teens Infotainment, ADAS & electric vehicles 13

14 Long-Term Growth Expectations by End Market Automotive Up in low teens Infotainment, ADAS & electric vehicles Industrial Up high-single digits Factory automation & broad market business 14

15 Long-Term Growth Expectations by End Market Automotive Up in low teens Infotainment, ADAS & electric vehicles Comms & Data Center Up mid-single digits Data Center optical connectivity & power Industrial Up high-single digits Factory automation & broad market business 15

16 Long-Term Growth Expectations by End Market Automotive Up in low teens Infotainment, ADAS & electric vehicles Industrial Up high-single digits Factory automation & broad market business Comms & Data Center Up mid-single digits Data Center optical connectivity & power Consumer Flat to up Product diversification 16

17 Financial Model Update

18 Current Financial Performance Old Model Current Model Q417 Results Revenue Growth 3 to 5 Pts Above Market 50% Above Market +6% YoY Gross Margin 61 64% ~65% 67.2% Operating Margin 30%+ ~35% 35.8% Free Cash Flow Margin % of Revenue 25 30% 30 35% 31.5% Note: All measures exclude Special Items 18

19 Gross Margin Surpassed 65% Target 70% 67% 64% Previous Target 67% 61% 58% 55% Q4 FY14 Q4 FY15 Q4 FY16 Q4 FY17 Note: Measures exclude Special Items 19

20 Lower Costs Through Flexible Manufacturing FY12 FY17 Process Flow Internal San Jose Internal Oregon Internal Internal San Antonio External Foundry Internal Oregon External San Antonio External Foundry Maxim s Proprietary Process Combine advanced foundry capabilities & Maxim s proprietary processes 20

21 Depreciation CapEx Gap: Tailwind for Gross Margin % of Revenue 12% 10% CapEx Depreciation 8% 6% 4% Depreciation will decline to CapEx 2% 0% FY12 FY13 FY16 FY17 FY18 Note: Depreciation excludes accelerated depreciation Measures exclude Special Items 21

22 Improving Customer Revenue Diversification FY12 FY17 Broad-based 59% customers 69% Top 10 customers 22

23 Tailwinds Drive Gross Margin Higher Improved utilization of existing Oregon fab Flexible foundry capacity Depreciation decline towards CapEx Grow in SMB customer base Improving Pricing Environment 67 70% Gross Margin Performance 23

24 Maintain Tight Controls on Operating Expenses Efficient spending, focused R&D effort Quarterly OpEx [$M] $230 $215 $200 $185 Portfolio Mgmt and Spending Controls $170 Q4 FY14 Note: Measures exclude Special Items Q4 FY15 Q4 FY16 Expect to grow OpEx at less than half the revenue growth rate Q4 FY17 24

25 Operating Margin Surpassed 35% 40% 35% Previous Target New Target Range 30% 25% 20% Q4 FY14 Q4 FY15 Q4 FY16 Q4 FY17 Note: Measures exclude Special Items 25

26 Higher Profitability & Lower CapEx Drive Free Cash Flow Raising free cash flow margin target: >35% of revenue Free Cash Flow [$M] $750 Free Cash Flow % of Revenue 40% $700 $650 35% 30% New Target Old Target Range $600 25% $550 FY14 FY15 FY16 FY17 Note: Measures exclude Special Items Free Cash Flow = Cash Flow from Operations Gross Capital Expenditures 20% FY14 FY15 FY16 FY17 26

27 Return of Cash to Shareholders $250 Dividends & Share Repurchases $0.34 Quarterly Cash Dividend Per Share $0.33 $200 $150 $100 $50 Buyback Dividend $0.32 $0.30 $0.28 $0.26 $0.24 $ % +8% +8% +7% +10% $0 FY11 Q4 FY13 Q4 FY15 Q4 FY17Q4 Board approved new share repurchase authorization of $1B beginning FY18 Q1 $0.20 FY11 Q4 FY13 Q4 FY15Q4 FY17 Q4 Quarterly dividend increased 9% to $0.36 per share, beginning FY18 Q1 27

28 Stronger Long-Term Business Model Current Model New Model Revenue Growth 50% Above Market At Market Gross Margin ~65% 67 70% Operating Expense, % of Revenue ~30% Grow at ½ Revenue Rate Operating Margin ~35% 37 40% Tax Rate 15% 14% CapEx, % of Revenue 1 3% 1 3% Free Cash Flow Margin, % of Revenue 30 35% >35% Cash to Shareholders, % of Free Cash Flow 80% 80% Note: All measures exclude Special Items Long-term target: $3.50 Free Cash Flow per share 28

29 Why Invest in Maxim? FCF Multiple at a Discount to our Peers 41.8x 23.8x 24.6x 19.9x 21.0x 17.4x 18.0x 14.6x 0.84x 1.03x 1.14x 1.21x 1.37x 1.42x 2.40x FACTOR A MXIM B C D E F G Note: Data as of June 30, 2017 First Call consensus mean estimates; Measures exclude Special Items FCF Yield = FCF (CY2016E) / Market Capitalization; Competitors: ADI, CRUS, IDTI, MPWR, SLAB, SMTC, TXN 29

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31 Empowering Design Innovation