fairchild semiconductor - september 2014 investor presentation
DESCRIPTION
September 2014 Investor PresentationTRANSCRIPT
INVESTOR
PRESENTATION
September 2014
2
Notes on Forward Looking Statements
and Non-GAAP Measures • Comments in this presentation other than statements of historical fact may constitute forward looking statements and are
based on Fairchild’s management’s estimates and projections and are subject to various risks and uncertainties
• These risks and uncertainties are described in the Company’s periodic reports and other filings with the Securities and Exchange Commission (see the Risk Factors section) and are available at http://sec.gov and investor.fairchildsemi.com
• Actual results may differ materially from those projected in the forward looking statements
• Some data in this presentation may include non-GAAP measures that we believe provide useful information about the operating performance of our businesses that should be considered by investors in conjunction with GAAP measures that we also provide. You can find a reconciliation of non-GAAP to comparable GAAP measures at the Investor Relations section of our web site at http://investor.fairchildsemi.com
Recent additions to our website at http://investor.fairchildsemi.com
Updated Financials (through current quarter with segment revenue/gross margin breakouts)
• Quarterly Fact Sheet with current quarter highlights
• This investor presentation
3
Fairchild Overview
4
Fairchild Today…
Fairchild Semiconductor
2013 Revenue $1.4B Mobile, Computing, Consumer &
Communications Group
(MCCC)
(38% of 2013 Revenue)
Mobile Power
Switches & Interface
Signal Conditioning
LV MOSFETs
Logic
Comprehensive offering of low voltage solutions (<200V)
Power Conversion, Industrial & Automotive Group
(PCIA)
(52% of 2013 Revenue)
Power Conversion
HV MOSFET & IGBT
SPM
Automotive
Opto
Comprehensive offering of high voltage solutions (>200V)
Standard Products Group
(SPG)
(10% of 2013 Revenue)
Standard discrete & analog
Essential functions for key customers
5
• Energy efficiency, mobility and cloud
mega-trends
• Power silicon content grows faster than
end market sales – premium paid for
efficiency
• Fairchild has deep power system
knowledge to support greater integration
and higher efficiency
• Company focused on delighting all
customers from large OEMs to the ―long
tail‖
Markets That Drive Our Business
6
Building a Great Leadership Team
• Promoting from within in areas of progress
Automotive, Supply Chain, Assembly & Test
• Recruiting & upgrading in areas of weakness
Sales & Marketing, Fab Operations, Engineering
• Opportunistically adding talent
Strategy, Finance
7
Building a Great Company
SALES &
MARKETING
TECHNOLOGY
OPERATIONS
BUSINESS
UNITS
• Solid operations org is key foundation
• Sales & marketing as well as
technology also well in place
• Business units key focus now
8
Our Culture
EXCEL
ENGAGED EMPLOYEE
DELIGHTED CUSTOMER
RESPECT
SPEED
EXPLORE SIMPLIFY
PLAY
DIRECT
WORLD-
CLASS
COMPANY
CHALLENGE
9
Fairchild Strategy
10
Strategy as a Daily Activity
Differentiated Products
Application-Centric
Customer Focus
Product-Centric
BEFORE
Commoditized Technology Approach
NOW
Driving Innovation & Disruption
11
$0
$6
$12
$18
$24
$30
$36 $
B U
SD
MOBILITY
ENERGY
CLOUD
App-Centric vs. Product-Centric Fairchild Addresses 45% of the TAM in 2018
New
strategic
focus
areas
enable
Fairchild to
address
45% of
TAM
$24.6B TAM
2013 2018
Source: TAM – WSTS 2014 Spring Forecast (excluding standard products, such as logic)
Addressable Percentage - Fairchild Internal Data
$32.2B TAM
% of TAM addressed based on product-centric % of TAM with new strategic focus
13%
12
All companies have PRODUCTS
Good companies have STRATEGY
LINKING the two
LEADS TO a
GREAT company
50,000 ft
1,000 ft
13
13
50,000 ft
1,000 ft
CLOUD ENERGY MOBILITY
25vFET 100vFET 600vFET GATE DRIVER MUX INTEGRATED SOLUTION WIRELESS IC DIODE FUEL GAUGE
CHARGER
Systems solutions
that serve the
needs
Technologies that
build the systems
50 product ideas
Power System in
Package,
Sensing Systems,
Intelligent Sensors
Today
Application Themes: Customer Empathy
14
Controller IP
Isolation IP
LV/MV FET IP Packaging IP
Driver IP
Sensor IP
HV FET IP
COMPETITOR
14
Power Systems Landscape
15
Controller IP
Isolation IP
LV/MV FET IP HV FET IP
Sensor IP
Driver IP
Packaging IP
Controller IP
Isolation IP Sensor IP
Driver IP
HV FET IP LV/MV FET IP
15
Power Systems Landscape
16
Megatrend/Insight Datacenter operators care about total cost of operations (i.e. end-end efficiency)
Application
Technology
Fairchild Differentiation
Market Potential $700M in 2018
Strategy to Revenue Datacenter
High Voltage
IGBT
Med Voltage
MODULE
Low Voltage
MODULE
Competitor 1 Competitor 2
Fairchild = End-to-End Solution Provider
Competitor 3
17
Megatrend/Insight Consumers don’t want to think about charging
Application Mobile, Phone, & Tablet
Technology Adaptive, Smart-Charging ICs
Design In 2015 Large Chinese Mobile Customer — Fairchild Total System Solution Fairchild communications protocol enables customers to provide a total system solution, from wall AC adaptor to battery.
Market Potential $3.8B in 2018
Strategy to Revenue Wall to Battery (W2B)
18
Megatrend Reduce vehicle CO2 emissions through electrification
Insight 48V Technology allows OEMs to reduce losses and provides better return ($ spent / CO2 reduction)
Application of Focus Mild hybrid
Technologies High-performance power modules SPM®
Design In 2015 3 Tier 1, 4 OEM in 3 continents
Market Potential $2.1B in 2018
Strategy to Revenue Automotive
19
Megatrend/Insight Autonomous machine control
Application Industrial internet of things and wearables, from drones, robotic vacuums to technical clothing
Technology MTi family: 3D motion hardware and software modules
Target Customer Broad industrial applications and wearables
Market Potential $1.4B* in 2018
Strategy to Revenue Motion Tracking
* Does not include Smart Phone applications
20
Marketing & Sales Overview
21
Sales Overview
• Foundation — New sales strategy
• People — New leaders, skills, mindset
• Deployment — New growth opportunities
• Execution — New customer engagement model
22
Foundation New Sales Strategy
• DEMAND CREATION - Design In/Win — shift coverage to R&D
- System approach — understand the application
- Customer empathy — fill a latent need, solve a problem
• CLOSER TO CUSTOMERS - Proximity — quick response
- Adaptive — fragmented customer base
- Agile — early engagement with emerging customers
• ACCOUNTABILITY - Revenue accountability moved to design origin
- Pay on results — new sales bonus on design-in, revenue growth
23
• NEW SKILLS – VALUE ADDED TO CUSTOMERS
- More technical sales – EE
- More Field Applications Engineers (FAE) – FAE as application experts
• NEW MINDSET – PROACTIVE, DRIVE DEMAND
- More field-based people, less operations
- Relationship-builders
People New Leaders, Skills, Mindset
JOSEPH KARIM Americas VP
22 years Atmel, Intersil, ADI
ANDY LAI China VP 22 years
ADI, NSC, TI
ANDREAS HAMMER EMEA VP 16 years SiLabs, TI
JOSEPH NOTARO Motion Tracking VP
22 years STM
WEI LI Taiwan GM
20 years Lucent, Maxim
• RAISING THE BAR – NEW LEADERSHIP TEAM
24
Resources Best Deployed
• Increase investment on most significant markets
- China
- Germany
- Silicon Valley
• Shift resources to most promising opportunities
- Generated revenue vs. transacted revenue locations
- Invest where the growth will be vs. where revenue is today
- Aligned company focus segments
• Expand customer base
- More in fragmented markets: (i.e. Industrial, Auto)
- Emerging segments and customers: (i.e. Wearables)
- Mass market
25
Resources Go-to-Market
ASSIGNED
ACCOUNTS
MASS MARKET
LONG TAIL
Growth
Potential
• Biggest growth opportunity
• Focus, depth — 80% of resources
• Demand creation
• More customers
• Leveraging distribution
• More engineers
• Leverage the web & catalog distributors
• Build brand awareness
26
New Customer Engagement
• CUSTOMERS DRIVE PRODUCT DEFINITION - System expertise provides unique insight - FAE conduit of customer pain points
• INCREASE COMPLETE RECEIVED VALUE
- Product to solution, design expertise - Supply chain excellence - No EOL policy
• RELATIONSHIPS MAKE A DIFFERENCE
- Attention to every customer - Focus on customer empathy
28
Marketing Overview
• New Brand
• New Go-to-Market
• Success
• Customer Count
29
Why Reposition The Brand?
• Brand history: older company & commodity sales Stagnation in customer growth & revenue
• A new Fairchild brand Energize employees
Attract top-notch engineering & sales talent
Grow relationships with design engineers
• Long-Tail customers create innovative products
30
Old brand identity
2013
31
New Brand Identity
2014
32
New Branding ―Xiantong‖ in China
• Historical significance
• Strong awareness
• Positive connotation
33
New Go-to-Market Website: Optimized for Long-Tail Lead Generation
• SHIFT commodity sales content to
value-added content
• MOVE design engineers through
the entire buying journey
34
New Go-to-Market Success Via Power Seminars in 2014
• 3x new customer leads
• Scalability
Live streaming to remote locations
Post-seminar engagement
• Wider awareness
New prospects
Social media & community
Boston, MA – May 1
Taichung, Taiwan – May 15
Beijing, China – May 20
Shenzhen, China – May 22
San Jose, CA – June 3
35
New Go-to-Market Success Via Accelerating Customer Acquisition
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
# of CustomerLocations
Source: Fairchild Internal Data
36
Finance Overview
37
Highlights of the Quarter – Q2 2014
Sales were $372m, up 8% QoQ and 4% higher than a year ago
Industrial & appliance demand remained seasonally strong…design wins in leading Asian appliance makers and solar inverters
Automotive sector demand was up 9% QoQ and 14% YoY…great pipeline of business opportunities in the power train
Mobile demand was up QoQ…design wins at leading Asian reference designs and major mobile platforms
Distribution POS was up 8% QoQ and channel inventory was roughly flat in $ resulting in about a 1 week reduction to 9 weeks of
inventory. Fairchild maintains one of the leanest inventory positions in the industry
Gross margin was up 3 points to 33.4% which was better than forecast due primarily to higher factory loadings in Q1, better
product mix and strong manufacturing execution
OPEX was $98m or up $1.4m QoQ due to the annual merit increase and equity vesting offset by one-time benefit cost reductions
Free cash flow was $70m in Q2. Net cash was higher QoQ at $120m despite repurchasing $69m in stock
Repurchased 5m shares in Q2 or 4% of outstanding stock…plan to buyback another $100m in the next 2 – 4 quarters
Utilization increased in Q2…plan to reduce factory loadings in Q3 to tightly control inventories
Lead times remain short and supply chain is well positioned to support turns business
38
Q3 Forward Guidance Provided at Q2 Earnings Call
• Sales expected to be $370 – 385m
• Gross margin expected to be 34 – 25% due primarily to higher sales &
factory utilization as well as better product mix
• R&D and SG&A forecast at $97 to 99m
• Adjusted tax rate forecast to be between 15% +/-3%
39
Adjusted Revenue & GM%
40
Adjusted EPS
41
4 Qtr Rolling Adjusted EPS
42
Balance Sheet Improvement
Disciplined Asset Management
• Q2 balance sheet summary:
• Cash and investments exceed debt by $120m
• Internal inventory increased to 87 DOI…still lean at <90 days but we plan to reduce factory loadings in Q3 to tightly control inventories
• DSO decreased QoQ to 36 days
• Days of payables increased QoQ to 46 days
• FCF was $70m
• Primary focus remains investing in our business and enhanced buyback
• Repurchased $69m of stock or 5m shares to reduce share count by 4% in Q2
• Plan to buyback another $100m of stock in the next 2 – 4 quarters
43
Free Cash Flow
44
4 Qtr Rolling FCF % Revenue
45
Debt Composition
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1997 1999 2001 2007 2008 2009 2010 2011 2012 2013
Drawn Revolver Term Loan Convert High Yield
46
Net Debt & Interest Trend
0
0.01
0.02
0.03
0.04
0.05
0.06
0.07
0.08
0.09
-700
-600
-500
-400
-300
-200
-100
0
100
200
300
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Q1 '14
Net Cash Interest % of Revenue
47
Follow us on Twitter @ twitter.com/fairchildSemi
View product and company videos, listen to podcasts and comment on our
blog @ www.fairchildsemi.com/engineeringconnections
Visit us on Facebook @ www.facebook.com/FairchildSemiconductor
THANK YOU