Maxim Integrated Business Model Updates21.q4cdn.com/176677460/files/doc_presentations/2017/... · 2017-09-05 · Korea Lifetime Revenue from Design Wins, FY13 FY17 CAGR. 2. Enable

Maxim Integrated Business Model UpdateSeptember 5, 2017

Safe Harbor

2

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.

Topics

3

1 Business Strategy Update Tunç

2 Financial Model Update Bruce

3 Q&A

FY17 Financial Results

4

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 $2.12 +30%

Note: All measures exclude Special Items

Strategic Priorities

5

• Achieve market CAGR

• Grow all markets

Growth1• Grow our SMB revenue

• Take advantage of manufacturing tailwinds

• Grow OpEx at half rate of revenue

Profitability2• Avoid dependence on any

single market or customer

• Weigh ROI of new projects against risk

Stability3

Targeted Applications in Key Markets

6

Automotive Industrial Data Center Mobility

Power

Interface

RF

Power

Optical

Power

Signal Chain

Interface

Micros

Security

Sensors

Power

Audio

Sensors

1. Maxim Solutions for Automotive

7

Battery Management (EV/Hybrids)

Infotainment

Auto Body Electronics

Electric Powertrain

AdvancedDriverAssistancePower

Serial Link

USB ChargingPower Management Remote Tuner Serial Link

Power

LED Lighting

Continued Support for Above-Market Automotive Growth

8

0% 50%

Auto BodyElectronics

Infotainment

ADAS

Battery MgmtSystems

0% 50%

Japan

Rest of Asia

Europe

Americas

China

Korea

Lifetime Revenue from Design Wins, FY13 FY17 CAGR

2. Enable the Factory of the Future• 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

9

Enterprise Planning Level

Process Control Level

PLC Control Level

Field Level

Sensors & Actuators

Maxim Communications and Power Management Served Market

Industrial Interfaces

IO Links

Industrial and Automotive Growth Diversifying Revenue

10

Note: Due to nature of our general purpose products, estimates by Major Markets are imprecise

FY12 FY17

Automotive

Industrial

All other markets30% 49%

Improving revenue stability and profitability

3. 100G Intra-Data Center Optical Market Growing at 20% CAGR

11

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

Capture the Broad Market

12

Added 4 new distribution partners

Enhanced field support in Europe, Americas, China and Rest of Asia

Improving website collateral for unassisted design wins

FY12 FY17

29% Distribution

42% Distribution

Long-Term Growth Expectations by End Market

13

Automotive Up in low teens

Infotainment, ADAS & electric vehicles


14



Industrial Up high-single digits

Factory automation & broad market business


15





Comms & Data CenterUp mid-single digits

Data Center optical connectivity & power


16





Comms & Data CenterUp mid-single digits

Data Center optical connectivity & power

ConsumerFlat to up

Product diversification

Financial Model Update

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%

Current Financial Performance

18


↔

Gross Margin Surpassed 65% Target

55%

58%

61%

64%

67%

70%

Q4FY14

Q4FY15

Q4FY16

Q4FY17

Previous Target

67%

19

Note: Measures exclude Special Items

Lower Costs Through Flexible Manufacturing

Internal

FY12

External Foundry

FY17

ExternalSan

Antonio

InternalOregon

InternalSan

Antonio

Combine advanced foundry capabilities & Maxim’s proprietary processes

20

Internal OregonInternal

San Jose

External Foundry

Process Flow

Maxim’s Proprietary

Process

Depreciation – CapEx Gap: Tailwind for Gross Margin

21

0%

2%

4%

6%

8%

10%

12%

FY12 FY13 FY16 FY17 FY18

CapEx

Depreciation

Depreciation will decline to CapEx

Note: Depreciation excludes accelerated depreciationMeasures exclude Special Items

% of Revenue

Improving Customer Revenue Diversification

22

FY12 FY17

Broad-based customers

Top 10 customers

59% 69%

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

23

67 – 70% Gross Margin Performance

Maintain Tight Controls on Operating ExpensesEfficient spending, focused R&D effort

Expect to grow OpEx at less than half the revenue growth rate

Quarterly OpEx [$M]


$170

$185

$200

$215

$230

Q4FY14

Q4FY15

Q4FY16

Q4FY17

Portfolio Mgmt and Spending Controls

24

Operating Margin Surpassed 35%

20%

25%

30%

35%

40%

Q4FY14

Q4FY15

Q4FY16

Q4FY17

New Target Range

25

Previous Target


New Target

Old Target Range

$550

$600

$650

$700

$750

FY14 FY15 FY16 FY17

Higher Profitability & Lower CapEx Drive Free Cash Flow

26

Raising free cash flow margin target: >35% of revenue

Free Cash Flow [$M] Free Cash Flow % of Revenue

Note: Measures exclude Special ItemsFree Cash Flow = Cash Flow from Operations – Gross Capital Expenditures

20%

25%

30%

35%

40%

FY14 FY15 FY16 FY17

$0.20

$0.22

$0.24

$0.26

$0.28

$0.30

$0.32

$0.34

FY11 Q4 FY13 Q4 FY15Q4 FY17 Q4

27

$0

$50

$100

$150

$200

$250

FY11 Q4 FY13 Q4 FY15 Q4 FY17Q4

Dividends & Share Repurchases

Dividend

Buyback

+9%

+8%

+8%

Board approved new share repurchase authorization of $1B beginning FY18 Q1

$0.33

+7%

+10%

Quarterly dividend increased 9%to $0.36 per share, beginning FY18 Q1

Quarterly Cash Dividend Per Share

Return of Cash to Shareholders

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%

Stronger Long-Term Business Model

28


Long-term target: $3.50 Free Cash Flow per share

Why Invest in Maxim?

14.6x17.4x 18.0x

19.9x 21.0x23.8x 24.6x

41.8x

A MXIM B C D E F G

29

1.03xFACTOR

1.14x 1.37x 1.42x 2.40x

FCF Multiple at a Discount to our Peers

Note: Data as of June 30, 2017 First Call consensus mean estimates; Measures exclude Special ItemsFCF Yield = FCF (CY2016E) / Market Capitalization; Competitors: ADI, CRUS, IDTI, MPWR, SLAB, SMTC, TXN

0.84x 1.21x

Empowering Design Innovation

Maxim Integrated Business Model Updates21.q4cdn.com/176677460/files/doc_presentations/2017/... · 2017-09-05 · Korea Lifetime Revenue from Design Wins, FY13 FY17 CAGR. 2. Enable

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