semtech investor presentation · this presentation contains “forward-looking statements”within...

SemtechInvestor Presentation

Q2FY2020 | SMTC | www.semtech.com

Investor Presentation | Q2FY2020

www.semtech.com

Forward-Looking Statements

This presentation contains “forward-looking statements” within the meaning of the “safe harbor” provisions of the Private Securities Litigation ReformAct of 1995, as amended, based on Semtech Corporation’s (the “Company’s”) current expectations, estimates and projections about its operations,industry, financial condition, performance, results of operations, and liquidity. Forward-looking statements are statements other than historicalinformation or statements of current condition and relate to matters such as future financial and operational performance, the anticipated impact ofspecific items on future earnings, and the Company’s plans, objectives and expectations. Forward-looking statements involve known and unknown risksand uncertainties that could cause actual results and events to differ materially from those projected. Potential factors that could cause actual resultsto differ materially from those in the forward-looking statements include, but are not limited to, the factors identified under the heading “Risk Factors”in the Company’s Annual Report on Form 10-K for the fiscal year ended January 27, 2019, the Company’s Quarterly Reports on Form 10-Q, in otherfilings with the Securities and Exchange Commission, and in material incorporated therein by reference. Investors are cautioned not to place unduereliance on any forward-looking information contained herein, which reflect management’s analysis only as of the date hereof. Except as required bylaw, the Company assumes no obligation to publicly release the results of any update or revision to any forward-looking statement that may be madeto reflect new information, events or circumstances after the date hereof or to reflect the occurrence of unanticipated or future events, or otherwise.

Investor Presentation | Q2FY2020 | 2

Semtech’s Vision

www.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


Our Strategic Advantages

www.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


Smarter Planet The Internet of Things

Higher Bandwidth

Hyper scale Datacenters

Three Megatrends Driving Growth Opportunities

www.semtech.com Investor Presentation | Q2FY2020 | 5

Greater Mobility

Smartphones & Wearables

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


FY18 FY23

$7B

24% CAGR

$3B

Source: Semtech Internal.

Semtech SAM

Geographically Balanced

www.semtech.com

Communications

Enterprise

Computing

Industrial

High-End Consumer


12%

34%

31%

23%*

7%

50%

7%

18%

18%

Percentage of FY19 net sales

Asia

North America

Korea

Europe

Japan

Source: Company reports and SEC filings.

www.semtech.com

Disruptive Solutions for Diverse End-Markets

Communications(11%*)

Industrial(31%*)

High-End Consumer (26%*)

Enterprise Computing (32%*)


*Percentage of fiscal year 2019 net sales. Source: Company reports and SEC filings.

• 5G/4G/LTE base stations

• Routers and switches

• Cable modems

• IoT, Sensor networks

• Factory automation

• Auto infotainment

• Navigation

• UHD Video, Pro AV

• Data centers

• PON

• FTTH

• Broadband access

• Smartphones

• Tablets

• Wearables

• TVs, set top boxes

• White goods

Diversified Product Groups Provide Sustainable Growth

• Clock & Data Recovery (CDR)

• Physical Media Devices (PMD)

• Professional AV (Pro AV)

SIGNAL INTEGRITY PRODUCTS

43%*

• ESD Protection

• ESD-EMI Filter Devices

• High-Current Lightning Protection

• Low-Capacitance Protection

• Low-Voltage ESD Protection

PROTECTION PRODUCTS

28%*

• LoRa® Long Range Wireless

• Proximity Sensors

• High Reliability

• Wireless Charging

• Neo-Iso™ Switches

WIRELESS & SENSING PRODUCTS

29%*

www.semtech.com

*Percentage of fiscal year 2019 net sales.


Source: Company reports and SEC filings.


Signal Integrity Products Group

Growth Drivers

• Higher data rates driving higher CDR content• 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 2020*Percentage of

Net Sales

Gross

Margin

Target Long-term

Growth Rate1

38% 60%+ 12%+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.


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


Net Sales

Gross

Margin

Target Long-term

Growth Rate1





Wireless & Sensing Products Group


Growth Drivers

• LoRa® technology becoming the defacto LPWAN IoT Solution

• Emerging safety standards around higher power radios

• LoRa Cloud™ services

• Energy harvesting


Net Sales

Gross

Margin

Target Long-term

Growth Rate1



www.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

Today (2019)

Energy

Logistic

Building

Consumer

Unpredicted

Source: IHS + Semtech Internal.


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.

www.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


Source: IHS + Semtech Internal.


Key Milestones Driving LoRa® Revenue Growth in FY20

Key Milestones Year-end FY19 Year-end FY20*

LoRa-based Gateways1 243,000 500,000

Capacity >1.2 billion nodes > 2 billion nodes

Connected Nodes 87 million 140 million

LoRaWAN™-Based Networks 100 countries >100 countries

LoRa Alliance™ Ecosystem ~500 companies >500 companies

*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.

www.semtech.com

LoRa’s SAM is Limited Only By Your Imagination!

• Forest fires

• Air pollution

• Earthquake sensors

• Avalanche and flooding

• Heating and AC

• Equipment status

• Factory control

SMART ENVIRONMENT & INDUSTRIAL

• Motor bikes

• Cars

• Bicycles

• Kids

• Pets

• Insurance – valuable assets

• Find My Stuff

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


…with many others

www.semtech.comwww.semtech.com Investor Presentation | Q2FY2020 | 17

Financials

www.semtech.com Investor Presentation | Q2FY2020| 18

Long-Term Target Model

1Gross margin, operating expense, and operating margin used in the target operating model are based on non-GAAP measures. 2Free cash flow is equal to cash flow from operations minus 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%

www.semtech.com

$1.38

$1.87 $2.19

$(0.05) $(0.16) $(0.26)

$1.32

$1.72

$1.93

FY17 FY18 FY19

EPS4

Core Product EPS Comcast Warrant

60.4% 61.2% 61.7%

-0.4% -1.1% -1.3%

60.0% 60.1% 60.4%

FY17 FY18 FY19

Gross Margin3,4

Core Product Gross Margin Comcast Warrant

$(5) $(16) $(22)

$550 $604

$649

$544

$588$627

FY17 FY18 FY19

Net Sales ($M)1

Core Product Net Sales Comcast Warrant

Focus On Operational Excellence

1 Fiscal year 2017, 2018 and 2019 net sales include the Comcast Warrant expense of $5.4 million, $16.2 million and $21.5 million, which was previously excluded in non-GAAP net sales for their respective fiscal years.2 Core products net sales include the total product shipments from Semtech’s three business units.3 Fiscal year 2017, 2018 and 2019 gross margins include the Comcast Warrant expense of $5.4 million, $16.2 million and $21.5 million, which was previously excluded in non-GAAP gross margin for their respective fiscal years.4 Core products gross margin and Earnings Per Diluted Share are non-GAAP. Please see the reconciliations to most comparable GAAP measures at the end of this presentation.


Co

re Pro

du

cts2

Co

re Pro

du

cts3

Co

re Pro

du

cts

www.semtech.com

Opera

Provides Strong Operating Leverage

1 Operating margin is a non-GAAP measure. Please see the reconciliation to most comparable GAAP measure at the end of this presentation.


22.6%26.7%

28.8%

-0.8% -2.0% -2.4%

21.8%

24.7%

26.4%

FY17 FY18 FY19

Operating Margin1

Core Product Operating Margin Comcast Warrant

• Focus on key market trends driving Net Sales growth

• Disruptive technology bringing more value to customers

• Value-based OpEx


www.semtech.com

Opera

Provides Strong Free Cash Flow

1 Free cash flow is a percentage of net sales and is a non-GAAP measure. Please see the reconciliation to most comparable GAAP measure at the end of this presentation.


21.6%19.0%

29.2%

-6.0% -6.0%-2.7%

15.6%12.9%

26.5%

FY17 FY18 FY19

Free Cash Flow1

Cash Flow from Operation% CapEx%

• Rapidly expanding profits

• Peer-leading cash conversion cycle

• Enables strategic investments


www.semtech.com

Capital Allocation Focused on Growth & Shareholder Returns

$0

$20

$40

$60

$80

$100

$120

$140

$160

$180

FY16 FY17 FY18 FY19 Q1FY20

Stock Repurchases Debt Investments


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 Q2FY20 was $181 million.

($M)

Source: Company reports and SEC filings

Why Invest in SemtechToday’s Innovation is Driving Future Value

Balanced Growth Story With Significant Upside

www.semtech.com

MultipleGrowth Drivers

Fast Growing Diversified

Analog Company

End Market &Geographically

Diversified

FinanciallyStable


www.semtech.com

GAAP – Non GAAP Reconciliation Tables


www.semtech.com

Use of Non-GAAP Financial InformationIn 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 2017, fiscal year 2018 and fiscal year 2019 will not becomparable to the previous periods presented in the tables below. The Company in previous periods had excluded the recognized cost of the ComcastWarrant from non-GAAP net sales and non-GAAP gross margins because the cost related to a non-routine, non-cash equity award that was providedto Comcast as an incentive to deploy a network based on technology developed by the Company and because the Comcast Warrant would not havehad an ongoing impact on revenues in future periods.

Semtech, the Semtech logo, LoRa and LoRa Cloud are registered marks of Semtech Corporation or its affiliates. All other trademarks and trade namesmentioned 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


www.semtech.com

Reconciliation of GAAP to Non-GAAP Results

Gross Profit Operating Expense Operating Income & Free Cash Flow

Source: Semtech Earnings Press Releases.


Gross Profit

(in thousands)

January 27, January 28, January 29,

2019 2018 2017

GAAP gross profit 377,022$ 351,971$ 324,862$

Adjustments to GAAP gross profit:

Stock-based compensation expense 1,639 1,478 1,591

Fair value adjustment related to acquired inventory - - -

Non-GAAP gross profit 378,661$ 353,449$ 326,453$

Net sales 627,196$ 587,847$ 544,272$

GAAP gross profit % 60.1% 59.9% 59.7%

Non-GAAP gross profit % 60.4% 60.1% 60.0%

Twelve Months Ended

Operating Expense

(in thousands)


2019 2018 2017

GAAP Operating Expenses 278,545$ 283,235$ 240,781$

Adjustments to GAAP gross profit:

Stock-based compensation (50,719) (30,240) (23,841)

Intangible amortization (26,649) (27,867) (25,301)

Gain (loss) on disposition of business operationgs - - 25,513

Transaction and integration related (2,777) (3,810) (3,574)

Restructuring charges (695) (6,301) (2,282)

Environmental and other reserves (74) (460) (2,693)

Litigation cost net of recoveries 6,137 (2,183) 1,054

Changes in the fair value of contingent earn-out obligations 9,419 (3,892) (2,012)

Non-GAAP Operating Expenses 213,187$ 208,482$ 207,645$

Net sales 627,196$ 587,847$ 544,272$

GAAP operating expense % 44.4% 48.2% 44.2%

Non-GAAP operating expense % 34.0% 35.5% 38.2%

Twelve Months Ended

Operating Income

(in thousands)


2019 2018 2017

Non-GAAP gross profit 378,661$ 353,449$ 326,453$

Non-GAAP operating expenses 213,187 208,482 207,645

Non-GAAP operating income 165,474$ 144,967$ 118,808$

GAAP operating income % 15.7% 11.7% 15.4%

Non-GAAP operating income % 26.4% 24.7% 21.8%

Free Cash Flow

(in thousands)


2019 2018 2017

Cash Flow from Operations 183,563$ 111,485$ 117,612$

Net Capital Expenditures (17,052) (35,461) (32,920)

Free Cash flow 166,511$ 76,024$ 84,692$

Twelve Months Ended

Twelve Months Ended

www.semtech.comwww.semtech.com

Reconciliation of GAAP to Non-GAAP Net Income


Source: Semtech Earnings Press Releases.


2019 2018 2017

Supplemental Information

(in thousands)

GAAP net income 63,056$ 36,426$ 54,661$

Adjustments to GAAP net income:

Stock-based compensation expense 52,358 31,718 25,432

Intangible amortization and impairments 26,649 27,867 25,301

Transaction and integration related expenses 2,777 3,810 4,926

Restructuring 695 6,301 2,282

Environmental and other reserves and charges 74 460 2,693

Litigation cost net of recoveries (6,137) 2,183 (1,054)

Changes in the fair value of contingent earn-out obligations (9,419) 3,892 2,012

Investment Impairment, net of offsets 30,000 4,000 (25,513)

Investment gain (1,288) (4,385) (413)

Total Non-GAAP Adjustments Before Taxes 95,709 75,846 35,666

Associated tax effect (26,474) 3,477 (2,816)

Equity in net losses of equity method investments 126 254 -

Total of supplemental information net of taxes 69,361 79,577 32,850

Non-GAAP net income 132,417$ 116,003$ 87,511$

Diluted GAAP earnings per share 0.92$ 0.54$ 0.83$

Adjustments per above 1.01$ 1.18$ 0.50$

Diluted non-GAAP earnings per share 1.93$ 1.72$ 1.32$

Weighted average number of shares:

Diluted 68,481 67,605 66,109

Twelve Months Ended

SMTC | www.semtech.comCopyright 2019

Semtech, LoRa® and LoRa Cloud™ are trademarks of Semtech Corporation. Investor Presentation | Q2FY2020 | 28

Appendix


www.semtech.com

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 Acquisition

DataComm/Video CDN

Cycleo Acquisition

Wireless Solutions France

Fortune Magazine’sFastest 100 Growing

Companies+

100 Best Small Companies in America

both list Semtech

Initial

PublicOffering

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

www.semtech.com

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


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