Semtech Investor Presentation€¦ · Investor Presentation | Q2FY2021 | 8 *Percentage of fiscal...

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


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


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


Smarter Planet The Internet of Things

Higher Bandwidth

Hyperscale and Cloud Datacenters

Three Megatrends Driving Growth Opportunities

semtech.com

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

semtech.com

FY18 FY23

$7B

24% CAGR

$3B

Source: Semtech Internal.

Semtech SAM


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


*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].


• 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%*)


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.



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


Gross Margin





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


Gross Margin



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.


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


Source: IHS and Semtech Internal.


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


…with many others


Financials


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


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.


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


26.7% 28.8%

22.8%

-2.0% -2.4%

24.7%26.4%

22.8%

FY18 FY19 FY20

Operating Margin1,2


• 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.


semtech.com

Opera

Provides Strong Free Cash Flow


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


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


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


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


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


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 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


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



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

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