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SemtechInvestor Presentation
Q2FY2021 | SMTC | semtech.com
Investor Presentation | Q2FY2021
semtech.com
Forward-Looking Statements
This presentation contains “forward-looking statements” within the meaning of the “safe harbor” provisions of the Private SecuritiesLitigation Reform Act of 1995, as amended, based on Semtech Corporation’s (the “Company’s”) current expectations, estimates andprojections about its operations, industry, financial condition, performance, results of operations, and liquidity. Forward-lookingstatements are statements other than historical information or statements of current condition and relate to matters such as futurefinancial and operational performance, the anticipated impact of specific items on future earnings, and the Company’s plans, objectivesand expectations. Forward-looking statements involve known and unknown risks and uncertainties that could cause actual results andevents to differ materially from those projected. Potential factors that could cause actual results to differ materially from those in theforward-looking statements include, but are not limited to, the factors identified under the heading “Risk Factors” in the Company’sAnnual Report on Form 10-K for the fiscal year ended January 26, 2020, the Company’s Quarterly Reports on Form 10-Q, in other filingswith the Securities and Exchange Commission, and in material incorporated therein by reference. Investors are cautioned not to placeundue reliance on any forward-looking information contained herein, which reflect management’s analysis only as of the date hereof.Except as required by law, the Company assumes no obligation to publicly release the results of any update or revision to any forward-looking statement that may be made to reflect new information, events or circumstances after the date hereof or to reflect theoccurrence of unanticipated or future events, or otherwise.
Investor Presentation | Q2FY2021 | 2
Investor Presentation | Q2FY2021 | 3
Semtech’s Vision
semtech.com
To be the global leader in analog, mixed signal platforms and advanced algorithms that enable architectural and performance differentiation
• Achieve leadership positions in our target product segments
• Deliver revenue growth exceeding the high performance analog sector
• Attain the high end of Semtech’s stated target operating model
Investor Presentation | Q2FY2021 | 4
Our Strategic Advantages
semtech.com
1. Flexible Architectures2. Applications Knowledge3. Customer Partnerships4. Disrupt Markets
ALGORITHM DESIGNInterface to Analog
1. Circuit Innovation2. Package Innovation3. Patents4. Partnerships
HIGH PERFORMANCEAnalog/Mixed Signal Design
1. Disrupt Systems2. Push Technology Envelope3. Application-Specific
Standard Products
ARCHITECTURAL DISRUPTION Through Systems Knowhow
Investor Presentation | Q2FY2021 | 5
Smarter Planet The Internet of Things
Higher Bandwidth
Hyperscale and Cloud Datacenters
Three Megatrends Driving Growth Opportunities
semtech.com
Greater Mobility
Smartphones & Wearables
Investor Presentation | Q2FY2021 | 6
Powering The Data Center Revolution
Data Center CDR Platforms
• High B/W Connectivity• Low Cost • Path To > 400Gbps
The DNA of IoT
• Long Range• Low Power• Low Cost
LoRa® Platform
Enabling Next Generation Mobility
• Small Form Factor• Low Capacitance• High Energy
Protection Z-Platform
Key Platforms Expected to Drive SAM Growth
semtech.com
FY18 FY23
$7B
24% CAGR
$3B
Source: Semtech Internal.
Semtech SAM
Investor Presentation | Q2FY2021 | 7
Geographically Balanced
semtech.com
Communications
EnterpriseComputing
Industrial
High-End Consumer
12%
34%
31%
23%*
7%
50%
7%
18%
18%
Percentage of FY20 net salesAsia
56%
North America
15%
Korea14%
Europe9%
Japan6%
Source: Company reports and SEC filings.
semtech.com
Disruptive Solutions for Diverse End-Markets
Investor Presentation | Q2FY2021 | 8
*Percentage of fiscal year 2020 net sales. Beginning in Q1FY21,the Company began reporting net sales by three end markets compared to four previously. For a reconciliation table of these changes, please contact Investor Relations at [email protected].
Source: Company reports and SEC filings.
• IoT, Sensor networks• Factory automation• Auto infotainment• Navigation• UHD Video, Pro AV
• Hyperscale and cloud data centers• 5G/4G/LTE base stations• PON/FTTH• Routers and switches• Broadband access
• Smartphones• Tablets• Wearables• TVs, PCs, set top boxes• White goods
Industrial (33%*)High-End Consumer (29%*)Infrastructure (38%*)
Investor Presentation | Q2FY2021 | 9
Diversified Product Groups Provide Sustainable Growth
• Clock & Data Recovery (CDR)• Physical Media Devices (PMD)• Professional AV (Pro AV)
SIGNAL INTEGRITY PRODUCTS
40%*
• ESD Protection• ESD-EMI Filter Devices• High-Current Lightning Protection• Low-Capacitance Protection• Low-Voltage ESD Protection
PROTECTION PRODUCTS
29%*
• LoRa® Long Range Wireless• Proximity Sensors• High Reliability• Wireless Charging• Neo-Iso® Switches
WIRELESS & SENSING PRODUCTS
31%*
semtech.com
*Percentage of fiscal year 2020 net sales. Source: Company reports and SEC filings.
semtech.com Investor Presentation | Q2FY2021 | 10
Signal Integrity Products Group
Growth Drivers• Higher data rates driving higher CDR content
• Hyperscale and Cloud Data Center: 100G, 200G & 400G• PON: 2.5G & 10G• Wireless Base Station: 10G, 25G & 100G
• Video Broadcast: 3G to 12G• Pro AV: proliferation of video displays; disruptive, tipping point
Q1 2021*Percentage of Net Sales
Gross Margin
Target Long-term GrowthRate145% 60%+ 10%+
1 Represents the Company’s long-term target that assumes execution of our strategy and is forward looking and subject to uncertainties and risksand actual results may vary and could be material. Nothing in this presentation should be represented that it will be achieved. The Company undertakes no duty to update its goals or targets.
Source: Company reports and SEC filings.
semtech.com Investor Presentation | Q2FY2021 | 11
Protection Products Group
Growth Drivers• Shrinking process geometries demand off-chip protection• Emerging high-speed interfaces driving increase in SAM• Broader adoption of high-speed interfaces across
industrial, automotive and communications platforms
Q1 2021*Percentage of Net Sales
Gross Margin
Target Long-term GrowthRate130% 50%+ 5%+
1 Represents the Company’s long-term target that assumes execution of our strategy and is forward looking and subject to uncertainties and risksand actual results may vary and could be material. Nothing in this presentation should be represented that it will be achieved. The Company undertakes no duty to update its goals or targets.
Source: Company reports and SEC filings.
semtech.com Investor Presentation | Q2FY2021 | 12
Wireless & Sensing Products Group
*Source: Company reports and SEC filings.
Growth Drivers• LoRa® technology becoming the de facto LPWAN IoT Solution• Emerging safety standards around higher power radios• LoRa Cloud™ Services• Energy harvesting
Q1 2021*Percentage of Net Sales
Gross Margin
Target Long-term GrowthRate125% 60%+ 20%+
1 Represents the Company’s long-term target that assumes execution of our strategy and is forward looking and subject to uncertainties and risksand actual results may vary and could be material. Nothing in this presentation should be represented that it will be achieved. The Company undertakes no duty to update its goals or targets.
semtech.com
LPWAN Market Is A Large and Rapidly Growing Opportunity
100MillionU
/year
1 BillionU
/year
IoT Market Expected to Be Dominated by Low Power Wide Area Network (LPWAN) Segment
Five Year Horizon
FY20
Energy
Logistic
Building
Consumer
Unpredicted
Source: IHS and Semtech Internal.
Investor Presentation | Q2FY2021 | 13
1 Represents the Company’s long-term target that assumes execution of our strategy and is forward looking and subject to uncertainties and risksand actual results may vary and could be material. Nothing in this presentation should be represented that it will be achieved.
semtech.com
LoRa® Fills LPWAN Technology Gap
Sensors, Actuators and TagsLowest Power and Lowest Cost
Mission Critical Outdoor Use Case Higher Power
Video / Voice Consumer IoT
Wi-FiBLE
High
Bandwidth
Low
Short Range Long
Cellular
Investor Presentation | Q2FY2021 | 14
Source: IHS and Semtech Internal.
semtech.com Investor Presentation | Q2FY2021 | 15
Key Milestones Driving LoRa® Revenue Growth
*Source: Company internal and assumes execution of our strategy and are forward looking statements and subject to uncertainties and risks and actual results may vary and could be material and nothing in this presentation should be represented that it will be achieved. The Company undertakes no duty to update its goals or targets.
1 Includes both macrocell and picocell gateways.
KeyMilestones
Year-endFY19
Year-endFY20
Year-end FY21 Goals*
Q1FY21
LoRa-basedGateways1
243,000 642,000 >1,000,000 >800,000
Capacity >1.2 billion nodes 2.5 billion nodes >2.5 billion nodes >2.5 billion nodes
Connected Nodes 87 million 135 million 180 million 145 million
LoRaWAN®-basedNetworks
>70 countries 91 countries >100 countries 92 countries
LoRa Alliance®Ecosystem
~500 companies >500 companies >500 companies >500 companies
semtech.com
LoRa® SAM is Limited Only By Your Imagination!
• Forest fires• Air pollution• Earthquake sensors• Avalanche and flooding• Heating and AC• Equipment status• Factory control• Occupancy management
SMART ENVIRONMENT & INDUSTRIAL
• Motor bikes• Cars• Bicycles • Pets• Insurance – valuable assets• Find My Stuff• Contact tracing• Distance tracking
TRACKING• Irrigation control• Environment sensing• Animal tracking• Animal sensing
– ovulation, birth
AGRICULTURE
SMART CITY
• Smart parking• Traffic sensors and control• Street lighting• Infrastructure monitoring• Trash and waste containers• Public events
–location services• Advertising displays
SMART METERING
• Electric• Water • Gas • Infrastructure
and production
SECURITY & SMART HOME• Smoke detectors• Security systems• Smart appliances• Heating control and
monitoring
Investor Presentation | Q2FY2021 | 16
…with many others
semtech.com Investor Presentation | Q2FY2021 | 17
Financials
semtech.com Investor Presentation | Q2FY2021 | 18
Long-Term Target Model
1Gross margin, operating expense, and operating margin used in the target operating model are based on non-GAAP measures. Please see the reconciliations to the most comparable GAAP measures at the end of this presentation.2Free cash flow is equal to cash flow from operations minus net capital expenditures.
SEMTECH METRIC SEMTECH OPERATING TARGET
Net Sales Growth Three Points Above Industry Growth
Non-GAAP Gross Margin1 58%-63%
Non-GAAP Operating Expense1 Half the Rate of Net Sales Growth
Non-GAAP Operating Margin1 32%-36%
CapEx ~4% of Net Sales
Free Cash Flow Margin2 25%-30%
semtech.com
$1.87 $2.19
$1.52
$(0.16) $(0.26)
$1.72
$1.93
$1.52
FY18 FY19 FY20
EPS4
Core Products Comcast Warrant
$(16) $(22)$-
$604 $649 $548
$588$627
$548
FY18 FY19 FY20
Net Sales ($M)1
Core Products Comcast Warrant
Focus On Operational Excellence
1 Fiscal year 2018 and 2019 net sales include the Comcast Warrant expense of $16.2 million and $21.5 million, which was previously excluded in non-GAAP net sales for their respective fiscal years.2 Core products include the total product shipments from Semtech’s three business units.3 Fiscal year 2018 and 2019 gross margins include the Comcast Warrant expense of $16.2 million and $21.5 million, which was previously excluded in non-GAAP gross margin for their respective fiscal years.4 Gross margin and earnings Per Diluted Share are non-GAAP (without regard to the Comcast.) Please see the reconciliations to most comparable GAAP measures at the end of this presentation.
Investor Presentation | Q2FY2021 | 19
Core Products 2
61.2% 61.7% 61.8%
-1.1% -1.3%
60.1% 60.4% 61.8%
FY18 FY19 FY20
Gross Margin3,4
Core Products 2
Core Products 2
semtech.com
Opera
Provides Strong Operating Leverage
Investor Presentation | Q2FY2021 | 20
26.7% 28.8%
22.8%
-2.0% -2.4%
24.7%26.4%
22.8%
FY18 FY19 FY20
Operating Margin1,2
Core Products Comcast Warrant
• Focus on key market trends driving Net Sales growth
• Disruptive technology bringing more value to customers
• Value-based OpEx
1 Fiscal year 2018 and 2019 operating margin includes the Comcast Warrant expense of $16.2 million and $21.5 million, which was previously excluded in non-GAAP operating margin for their respective fiscal years.2Operating margin is a non-GAAP measure (without regard to the Comcast warrant.) Please see the reconciliation to most comparable GAAP measure at the end of this presentation.
Source: Semtech Internal.
semtech.com
Opera
Provides Strong Free Cash Flow
Investor Presentation | Q2FY2021 | 21
19.0%
29.3%
21.7%
-6.0%-2.8% -2.7%
12.8%
26.5%
17.1%
FY18 FY19 FY20
Free Cash Flow
Cash Flow from Operation% CapEx%
• Rapidly expanding profits
• Peer-leading cash conversion cycle
• Enables strategic investments
Source: Semtech Internal.
semtech.com
Capital Allocation Focused on Growth & Shareholder Returns
$0
$20
$40
$60
$80
$100
$120
$140
$160
$180
FY18 FY19 FY20 FY21 YTD
Stock Repurchases Debt Investments
Investor Presentation | Q2FY2021 | 22
Repurchase Stock Opportunistically1
• Authorization Increased by $250M (May 2018)
Invest For Growth • Strategic Acquisitions• Minority Investments
1 Outstanding stock repurchase authorization amount at the beginning of Q2FY21 was $81 million.
($M)
Source: Company reports and SEC filings
Investor Presentation | Q2FY2021 | 23
Why Invest in SemtechToday’s Innovation is Driving Future Value
Balanced Growth Story With Significant Upside
semtech.com
MultipleGrowth Drivers
Fast Growing Diversified
Analog Company
End Market &Geographically
Diversified
FinanciallyStable
semtech.com
GAAP – Non GAAP Reconciliation Tables
Investor Presentation | Q2FY2021 | 24
semtech.com
Use of Non-GAAP Financial Information
In this presentation references are made to certain financial information calculated on a basis other than in accordance with accounting principlesgenerally accepted in the United States (GAAP). These non-GAAP measures are provided as additional insight into on-going financial performance andare provided in addition to, and not as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. Areconciliation of these non-GAAP financial measures to the most comparable GAAP measures is provided at the end of this presentation.
This presentation also contains market statistics and industry data that are subject to uncertainty and are not necessarily reflective of marketconditions. Although Semtech believes that these statistics and data are reasonable, they have been derived from third party sources and have notbeen independently verified by Semtech.
As noted in its fiscal year 2019 quarterly earnings releases, the Company will no longer adjust prior-period non-GAAP performance metrics of net salesand gross margin to exclude the cost of the Comcast Warrant as the Comcast Warrant fully vested in the first quarter of fiscal year 2019. Accordingly,the Company’s non-GAAP performance previously reported in prior fiscal periods for fiscal year 2018 and fiscal year 2019 will not be comparable tothe previous periods. The Company in previous periods had excluded the recognized cost of the Comcast Warrant from non-GAAP net sales and non-GAAP gross margins because the cost related to a non-routine, non-cash equity award that was provided to Comcast as an incentive to deploy anetwork based on technology developed by the Company and because the Comcast Warrant would not have had an ongoing impact on revenues infuture periods.
Semtech, the Semtech logo and LoRa registered trademarks, and LoRa Cloud is a trademark, of Semtech Corporation or its affiliates. All othertrademarks and trade names mentioned may be marks and names of their respective companies.
Actual results may vary and could be material. Nothing in this presentation should be represented that it will be achieved and the Companyundertakes no duty to update its goals or targets
Investor Presentation | Q2FY2021 | 25
semtech.com
Reconciliation of GAAP to Non-GAAP Results
Gross Profit Operating Expense Operating Income & Free Cash Flow
Source: Semtech Earnings Press Releases.
Investor Presentation | Q2FY2021 | 26
Gross Profit(In Thousands) January 26, January 27, January 28,
2020 2019 2018
Gross Profit - GAAP 336,684$ 377,022$ 351,971$ Share-based compensation 1,928 1,639 1,478
Adjusted Gross Profit (Non-GAAP) 338,612 378,661 353,449
Net Sales 547,512$ 627,196$ 587,847$ GAAP Gross Profit % 61.5% 60.1% 59.9%Non-GAAP Gross Profit % 61.8% 60.4% 60.1%
Fiscal Year EndedOperations Expenses(In Thousands) January 26, January 27, January 28,
2020 2019 2018
Operating cost and expense- GAAP 284,675$ 271,523$ 285,350$ Share-based compensation (50,121) (43,697) (32,355) Intangible amortization (16,546) (26,649) (27,867) Transaction and integration related, including debt refinance costs (691) (2,777) (3,810) Restructuring and other reserves (4,621) (769) (6,761) Litigation cost net of recoveries (1,340) 6,137 (2,183) Changes in the fair value of contingent earn-out obligations 2,345 9,419 (3,892)
Adjusted Operating cost and expense (Non-GAAP) 213,701 213,187 208,482
Net Sales 547,512$ 627,196$ 587,847$ GAAP Operating Expense % 52.0% 43.3% 48.5%Non-GAAP Operating Expense % 39.0% 34.0% 35.5%
Fiscal Year EndedOperating Income(In Thousands) January 26, January 27, January 28,
2020 2019 2018Non-GAAP Gross Profit 338,612$ 378,661$ 353,449$ Non-GAAP Operating Expenses 213,701 213,187 208,482 Non-GAAP Operating Income 124,911 165,474 144,967
GAAP Operating Income % 9.5% 16.8% 11.3%Non-GAAP Operating Income % 22.8% 26.4% 24.7%
Free Cash Flow January 26, January 27, January 28,(In Thousands) 2020 2019 2018
Cash Flow from Operations 118,616$ 183,563$ 111,485$ Net Capital Expenditures (23,056) (17,052) (35,461) Free Cash Flow 95,560 166,511 76,024
Fiscal Year Ended
Fiscal Year Ended
During the fourth quarter of fiscal year 2020, management identified certain immaterial errors related to share-based compensation expense of market-based awards granted during fiscal years 2018, 2019 and 2020. The Company concluded that the impact of the errors was not material and have corrected the consolidated financial statements and all other financial information presented in this presentation.
semtech.com
Reconciliation of GAAP to Non-GAAP Net Income
Investor Presentation | Q2FY2021 | 27
Source: Semtech Earnings Press Releases.
Supplmental InformationIn Thousands January 26, January 27, January 28,
2020 2019 2018GAAP net income attributable to common shareholders 31,871 69,639 34,649
Adjustments to GAAP net income attributable to common shareholders:Share-based compensation 52,049 45,336 33,833 Intangible amortization 16,546 26,649 27,867 Transaction and integration related 691 2,777 3,810 Restructuring and other reserves 4,621 769 6,761 Litigation cost net of recoveries 1,340 (6,137) 2,183 Changes in the fair value of contingent earn-out obligations (2,345) (9,419) 3,892 Impairment on investments 1,211 30,000 4,000 Investment gain - (1,288) (4,385) Loss on early extinguishment of debt 514 -
Total Non-GAAP adjustments before taxes 74,627 88,687 77,961 Associated tax effect (3,701) (26,035) 3,139 Equity in net losses of equity method investments (109) 126 254 Total of supplemental information net of taxes 70,817 62,778 81,354
Non-GAAP net income 102,688$ 132,417$ 116,003$
Diluted GAAP earnings per share 0.47$ 1.01$ 0.51$ Adjustments per above 1.05 0.92 1.21
Diluted non-GAAP earnings per share 1.52$ 1.93$ 1.72$
Weighted-average share count - Diluted 67,523 68,481 67,605
Fiscal Year Ended
SMTC | www.semtech.comCopyright 2020
Semtech, LoRa® and LoRa Cloud™ are trademarks of Semtech Corporation. Investor Presentation | Q2FY2021 | 28
Appendix
Investor Presentation | Q2FY2021 | 29
semtech.com Investor Presentation | Q2FY2021 | 30
Acquisitions Have Contributed to Diversification & Growth
CompanyFounded
High Reliability Power products
for military
Power Managementexpanded with
ECI AcquisitionCalifornia
Wireless & Sensing product launch with
XEMICS AcquisitionSwitzerland
Gennum AcquisitionDataComm/Video CDN
Cycleo AcquisitionWireless Solutions France
Fortune Magazine’sFastest 100 Growing
Companies+
100 Best Small Companies in America
both list Semtech
InitialPublic
Offering
Power Management
product launchLambda
AcquisitionTexas
Advanced Communications
product line launchAcapella
AcquisitionEngland
Best Financially Managed
SemiconductorCompany Award
Global SemiconductorAlliance
Sierra MonolithicsAcquisition
SerDes SolutionsCalifornia
1960 1967 1990 1995 1998 2006 2006 2013 2015
Shenzhen Design
ApplicationsCenter Opened
2005 2015
EnVervAcquisition
Smart Grid SolutionsCalifornia
Triune SystemsAcquisition
Wireless Power and Isolated Switch Solutions Texas
Mohan Maheswaran, CEO +
New Management Team Appointed
Over 2 billion units/year shipped
2012 20132010 2017 2018
AptoVisionAcquisition
Pro AV SolutionsCanada
IC InterconnectAcquisition
Protection Platforms Colorado
TrackNet AcquisitionAsset Tracking
Switzerland