Q4 and Full Year 2013 Results 20 February 2014
Forward looking statement This presentation contains forward-looking statements that reflect management s current views with respect to future events. The words anticipate, believe, estimate, expect, intend, may, plan, project and should and similar expressions identify forward-looking statements. Such statements are subject to risks and uncertainties, including, but not limited to: an economic downturn in the semiconductor and telecommunications markets; changes in currency exchange rates and interest rates, the timing of customer orders and manufacturing lead times, insufficient, excess or obsolete inventory, the impact of competing products and their pricing, political risks in the countries in which we operate or sale and supply constraints. If any of these or other risks and uncertainties occur (some of which are described under the heading Risks and their management in Dialog Semiconductor s most recent Annual Report) or if the assumptions underlying any of these statements prove incorrect, then actual results may be materially different from those expressed or implied by such statements. We do not intend or assume any obligation to update any forward-looking statement, which speaks only as of the date on which it is made, however, any subsequent statement will supercede any previous statement. 2
Agenda Q4 and Full Year 2013 Executive Overview Outlook Business Review Q4 and Full Year 2013 Financial Overview Appendix
Dialog at a glance Q4 2013 - Strong revenue and earnings growth $353m Underlying revenue (Q4 2012 Actual: $268m) +32% 42.9% Underlying gross margin (Q4 2012 Actual: 38.6%) +430bps 21.2% Underlying OPEX % (Q4 2012 Actual: 21.0%) +20bps $0.70 Underlying Diluted EPS (Q4 2012 Actual: $0.45) +410bps +56% (14)% 21.7% Underlying EBIT margin (Q4 2012 Actual: 17.6%) $46.2m Operating cash flow (Q4 2012 Actual: $53.5m) Underlying definition see 2013 Financials and Selected Notes posted on our website 4
Dialog at a glance Full year 2013 - Strong revenue and earnings growth $909m Underlying revenue (FY 2012 Actual: $774m) +18% 40.4% Underlying gross margin (FY 2012 Actual: 38.0%) +240bps 25.0% Underlying OPEX % (FY 2012 Actual: 24.1%) +90bps $1.44 Underlying Diluted EPS (FY 2012 Actual: $1.19) +150bps +21% +111% 15.4% Underlying EBIT margin (FY 2012 Actual: 13.9%) $110.7m Operating cash flow (FY 2012 Actual: $52.4m) Underlying definition see 2013 Financials and Selected Notes posted on our website 5
Agenda Outlook Business Review Q4 and Full Year 2013 Financial Overview Appendix
Q1 2014 Outlook Given our current visibility, we expect 2014 to be another year of good growth As in previous years, revenue performance will be strongly weighted towards the second half of the year. Q1 2014 revenue will reflect the traditional seasonal pattern and deliver year on year growth. We expect revenue for Q1 2014 to be in the range of $200 to $215 million. Gross margin is expected to improve year on year in 2014. In line with the seasonal lower revenue, gross margin in Q1 2014 will decline sequentially but improve on a year on year basis 7
Agenda Business Review Q4 and Full Year 2013 Financial Overview Appendix
The three year view Delivering revenue and earnings growth 1000 Revenue and ASP ($ million and $) 22% ASP CAGR 2011-2013 2.10 1.69 1.96 2.48 2.30 ASP 2.3 2.1 1.9 1.7 Revenue growth in the last three years was well above industry average 31% CAGR 2011-2013 500 0 150 120 90 60 30 0 1.54 527 774 903 FY 2011 FY 2012 FY 2013 80 Total revenue (LHS) Total ASP exc. Power Conversion (RHS) ASP exc. Connectivity and Power Conversion(RHS) Underlying EBIT and Diluted EPS ($ million and $) 32% EBIT CAGR 2011-2012 1.11 1.19 108 +17% +30% 1.44 140 FY 2011 FY 2012 FY 2013 1.5 1.3 1.1 0.9 0.7 0.5 1.5 1.4 1.3 1.2 1.1 1.0 0.9 0.8 0.7 0.6 0.5 R&D investment is keeping us ahead of our competition and supporting future revenue streams Brought exciting innovation to the market and expanded our collaboration with Tier 1 customers with a greater focus on Asian markets Underlying EBIT has almost doubled from 2011 level 9
Growth drivers Differentiated solutions and increasing TAM 1 Substantial increase on size of 2015 TAM TAM growth rate of 42% CAGR TAM expansion coming from recently launched products Bluetooth Smart Multi-touch IC AC/DC & LED ICs (iwatt acquisition) Dialog TAM $2.9B $8.2B Low-Energy Bluetooth $0.5 Dual / Mutil Cell Battery $1.1 Multi Touch $0.8 AC-DC Converter ICs $1.1B LED SSL Driver ICs $0.7B Other Portable $1.3B Other Portable $1.0B Tablet PMICs $0.6B 2 Adding value to our customers with world-class innovation and differentiated solutions Tablet PMICs $0.4B Smartphone PMICs $1.5B Smartphone PMICs $2.3B Source: Dialog, Gartner, 2013 2012 2015 Core Business PMICs Diversification Partnership Acquisition Innovation 10
low Profitability high Strategic direction 4 pillars Diversifying growth drivers and pursuing further innovation 1 Extending our portfolio of products for portable platforms 2 Adding ultra-low power audio, new power management functionality, short range wireless connectivity and A/DC power conversion Broader and deeper at our customer base Developing companion PMICs with leading and emerging application processor vendors to address broader customer base through their sales eco system More products in higher growth segments Diversifying across more platforms for custom PMIC at larger accounts 3 Continuous innovation Innovation on low power differentiating power-saving technologies, fuel gaging, fast charging together with advanced packaging development low Growth high 4 Strategic focus on fast growing China smartphone and tablet market Leveraging current technologies and establishing innovative partnerships within Greater China 11
Agenda Q4 and Full Year 2013 Financial Overview Appendix
Q4 2013 - Highest revenue on record 27% YoY revenue growth in H2 2013 IFRS revenue Q4 2013 $352 million 31% increase over Q4 2012 61% sequential increase over Q3 2013 IFRS revenue H2 2013 $571 million up 27% on H2 2012 72% sequential increase over H1 2013 Full year IFRS revenue ($ million) 1000 41% Revenue CAGR 2008-2013 800 600 400 200 87 162 218 296 527 +17% 774 903 Quarterly IFRS revenue ($ million) 0 2007 2008 2009 2010 2011 2012 2013 47% Q4 Revenue CAGR 2008-2013 400 360 320 280 240 200 160 120 80 40 0 352 268 219 180 180 172 166 160 152 141 116 98 78 61 69 80 88 59 32 34 44 52 36 45 14 14 25 35 Q1 Q2 Q3 Q4 2007 2008 2009 2010 2011 2012 2013 13
Delivering year on year gross margin improvement Q4 2013 Underlying gross margin of 42.9% 430 bps improvement over Q4 2012 % 45 40 Underlying gross margin 40.0 42.9 Q4 2013 IFRS gross margin of 42.1% 340bps improvement over Q4 2012 35 37.3 37.5 38.2 38.6 38.2 37.9 30 % 45 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 In line with the seasonal lower revenue Q1 2014 gross margin will decline sequentially but improve on a year on year basis 40 IFRS gross margin 39.5 39.0 37.8 Underlying gross margin 40.1 40.4 38.0 Gross margin is expected to improve year on year in FY 2014 35 30 FY 2011 FY 2012 FY 2013 FY 2011 FY 2012 FY 2013 14
Investing in R&D for future growth Underlying FY 2013 OPEX% at 25% including the first time consolidation of iwatt into the business Investing in future growth Maintaining SG&A efficiency Underlying full year OPEX % of revenue 30 25.0 24.1 25.0 16.3 15.9 17.0 8.7 8.2 8.0 0 FY 2011 FY 2012 FY 2013 OPEX % of revenue R&D % of revenue SG&A % of revenue % 40 35 30 25 20 15 10 5 0 Underlying FY 2013 OPEX% for traditional Dialog was in line with FY 2012 Further efficiencies in SG&A and increasing investment in R&D to support future revenue streams Underlying full year OPEX % excluding Power Conversion % of revenue) % 30 35 30 24.1 24.2 25 15.9 16.6 20 15 8.0 7.6 10 0 FY 2012 FY 2013 OPEX % of revenue R&D % of revenue SG&A % of revenue 5 15
Operating Profit (EBIT) Underlying EBIT up 62% on Q4 2012 Q4 Underlying EBIT(*) of $76.4 million or 21.7% of revenue Impact of higher revenue and gross margin improvement FY 2013 Underlying EBIT of $139.6 million or 15.4% of revenue Up 30% on FY 2012 150bps increase over FY 2012 FY 2013 IFRS EBIT of $102.7 million or 11.4% of revenue Up 13% on FY 2012 40bps decrease from FY 2012 90 80 70 60 50 40 30 20 10 0 150 140 130 120 110 100 90 80 70 60 50 40 30 20 10 0 Underlying EBIT and EBIT % ($ million) Underlying EBIT and EBIT % ($ million) 13.9% 107.5 17.6% 47.2 15.4% 139.6 +62% 21.7% 91.0 76.4 Q4 2012 Q4 2013 IFRS EBIT and EBIT % ($ million) 11.8% 11.4% 102.7 FY 2012 FY 2013 FY 2012 FY 2013 16
Net Income Q4 2013 Underlying net income up 54% on Q4 2012 Q4 2013 Underlying Net Income of $52.1 million, 54% above Q4 2012 Net income 48% Diluted EPS growth in Q4 FY 2013 Underlying Net Income of $97.6 million, up 22% on FY 2012 Effective tax rate at 30.7% (2012:27.4%) Q4 Underlying EPS ($ ) FY Underlying EPS ($) Basic Diluted Basic Diluted 2 1 1 1 1 1 0 0 0 +20% +21% +52% +56% 1.49 1.44 1.24 1.19 0.79 0.70 0.52 0.45 Q4'12 Q4'13 Q4'12 Q4'13 FY'12 FY'13 FY'12 FY'13 17
Cash from operations doubled in 2013 Strong free cash flow generation $186 million cash & cash equivalents balance at 31 December 2013 Including $10 million early debt repayment Net debt $103.6 million Net debt/ebitda 0.7x 400 350 300 250 200 150 100 50 0 Cash and cash equivalents balance ($ million) 304 279 312 319 347 iwatt acquisition 157 186 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 $250 Cash Flow Bridge from Q3 13 ($ million) $46.2 million cash inflow from operations in Q4 2013 FY 2013 cash inflow from operations more than double FY 2012 at $110.7 million $200 $150 157.1 82.9 26.4 10.3 2.2 8.5 10.0 3.4 186.0 $77.5 million free cash flow in FY 2013 excluding iwatt consideration $100 18
Inventory value and DIO reduction Reduction of 40 days in DIO on Q3 2013 Inventory value at the end of Q4 2013 was: Down 18% on Q3 2013 Down 22% on Q4 2012 In Q1 2014 we expect inventory value to decline and DIO to increase Inventory ($ million) and Days Inventory Outstanding (# days) $180 $160 $140 $120 $100 $80 $60 $40 $20 $0 83 62 55 81 63 104 120 109 100 81 152 145 34% 52% 145 114 92 144 52% 52% 41% 43% 51% 18% 28% 34% 35% 36% 30% 31% 21% 15% 14% 13% 52 118 65% 23% 12% Q4'11 Q1'12 Q2'12 Q3'12 Q4'12 Q1'13 Q2'13 Q3'13 Q4'13 DIO (1) 100 Average DIO of 83 days 50 0-50 -100 Finished goods Work in process Raw Materials DIO (1) Calculated using average inventory balance over the period 19
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Agenda Appendix
Underlying adjustments FY 2013 22
Notes to the financials Underlying definition (*) Underlying results (net of tax) in Q4-2013 are based on IFRS, adjusted to exclude share-based compensation charges and related charges for National Insurance of US$2.2 million, excluding US$1.1 million of amortisation of intangibles associated with the acquisition of SiTel (now Dialog B.V.), excluding US$2.0 million non-cash effective interest expense in connection with the convertible bond, excluding US$ 0.2 million non-cash effective interest expense related to a licensing agreement entered into in Q3-2012, excluding US$0.5 million acquisition and integration expenses in connection with the purchase of iwatt and excluding US$2.8 million of amortisation and depreciation expenses associated with the acquisition of iwatt, deferred sales and related cost of sales that were reversed in connection with the iwatt business integration of US$ 0.6 million were brought back. Furthermore the gain US$ of 3.2 million from the release of an earn-out provision in relation to the iwatt acquisition was reversed and a recorded income related to a payment the company received in connection with the insolvency of BenQ of US$0.7 million was also taken out. Underlying results (net of tax) in 2013 are based on IFRS, adjusted to exclude share-based compensation charges and related charges for National Insurance of US$7.8 million, excluding US$3.8 million of amortisation of intangibles associated with the acquisition of SiTel (now Dialog B.V.), excluding US$7.8 million non-cash effective interest expense in connection with the convertible bond, excluding US$ 0.8 million non-cash effective interest expense related to a licensing agreement entered into in Q3-2012, excluding US$6.3 million acquisition and integration expenses in connection with the purchase of iwatt and US$10.3 million of amortisation and depreciation expenses associated with the acquisition of iwatt, deferred sales and related cost of sales that were reversed in connection with the iwatt business integration of US$ 2.5 million were brought back. Furthermore the gain US$ of 3.2 million from the release of an earnout provision in relation to the iwatt acquisition was reversed and a recorded income related to a payment the company received in connection with the insolvency of BenQ of US$ 0.7 million was also taken out. 23
Notes to the financials Underlying definition (**) EBITDA in Q4 2013 is defined as operating profit excluding depreciation for property, plant and equipment, (Q4 2013:US$5.4 million, Q4 2012:US$3.6 million), amortisation of intangible assets (Q4 2013:US$9.1 million, Q4 2012:US$5.2 million) and losses on disposals and impairment of fixed assets (Q4 2013:US$0.8 million, Q4 2012:US$0.7 million). EBITDA in 2013 is defined as operating profit excluding depreciation for property, plant and equipment, (2013:US$18.6 million, 2012:US$12.7 million), amortisation of intangible assets (2013:US$28.6 million, 2012:US$19.6 million) and losses on disposals and impairment of fixed assets (2013:US$1.4 million, 2012:US$1.0 million). (***) Free Cash Flow in 2013 is defined as net income of US$62.2 million plus amortisation and depreciation of US$47.2 million, plus net interest expense of US$12.8 million, minus change in working capital of US$4.3 million and minus capital expenditure of US$344.2 million. 24
Statement of financial position as of 31 December 2013 25
Cash flow statement as of 31 December 2013 26
FY 2013 Income statement 27
Investor Information Calendar, events and analyst coverage Analyst coverage Financial Calendar Key Events Bank of America Merrill Lynch Didier Scemama Baader Bank Bankhaus Lampe Barclays Capital Berenberg Bank Guenther Hollfelder Dr. Karsten Iltgen Andrew Gardiner Ali Farid Khwaja AGM Q1 2014 Results 1 May 7 May Mobile World Congress 26 February, Barcelona CA Cheuvreux Close Brothers Seydler Bernd Laux Veysel Taze Q2 2014 Results 30 July Commerzbank Credit Suisse Thomas Becker Achal Sultania Q3 2014 Results 29 October Deutsche Bank Uwe Schupp DZ Bank Exane BNP Paribas Hauck & Aufhauser HSBC Trinkaus & Burkhardt AG Jefferies International JP Morgan Cazenove Harald Schnitzer Jérôme Ramel Tim Wunderlich Christian Rath Lee Simpson Chetan Udeshi, CFA Contacts Jose Cano Head of Investor Relations T: +44 (0)1793 756 961 jose.cano@diasemi.com Financial PR/IR Advisers: FTI Consulting London Matt Dixon T: +44 (0)20 7831 3113 matt.dixon@fticonsulting.com Main First Bank AG Morgan Stanley Natixis RBC Juergen Wagner Francois A Meunier Stephane Mouri Doug Freedman FTI Consulting Frankfurt Thomas M. Krammer T: +49 (0)69 9203 7183 thomas.krammer@fticonsulting.com 28
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