Transcript Power-One (PWER) Investor Presentation February 2008

Power-One (PWER)
Investor Presentation
February 2008
Mission Statement
To be recognized as the leader in system-level
power and power management solutions from
AC to the IC in the communications and hightechnology markets, utilizing our technical
leadership to deliver comprehensive low-cost
solutions; providing increasing value to
customers, employees, and investors
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Power-One Power Supplies Are Everywhere
Our products convert, process & purify electricity to
the high levels of quality, reliability, & precise direct
current required by the digital economy
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Power Conversion Products for Communications &
High-tech Infrastructure Markets; including Alt. Energy
AC/DC Power
Powers Communications,
Server/Storage & Industrial
Controls Power at the
System Cabinet
DC/DC Power Conversion &
Digital Power Management
Controls Power on the
Printed Circuit Board
Renewable Energy Inverters
Converts Power from PV Panels
& Wind Turbines to the AC Grid
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Power-One Today
• One of the world’s top power supply companies
– 35 years of experience, innovation, and growth
– Top brand name, quality reputation & customers
– Global reach with ~4000 employees & regional mfg.
– Leading technology including digital efficiency & density
– Broad-line power conversion supplier – 100’s of standard
product families, custom products, and Alternative Energy
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Consolidator – six acquisitions since 1999
Balance sheet (~$36M cash, ~$75M debt)
’06 Sales: $338M – 29% growth
’07 Sales: $512M – 51% growth
Progressing toward profitability
Power-One Is the Technology Leader In Power; a Consolidator;
Uniquely Offering Digital & Renewable Energy Products
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New CEO Announced – Richard J. Thompson
• Over 30 years of management, operations, and
finance experience in electronics, computers,
semiconductors and energy companies
• Appointed to Power-One’s Board of Directors in
August of 2007
• Recently CFO of American Power Conversion
(APC), a $2 billion provider of real-time computing
& data center infrastructure products & services
(APC acquired by Schneider Electric in Feb. ‘07)
• Previously Mr. Thompson was CFO of Artesyn
Technologies, a leading provider of power
electronics, where he also held operations and
general management positions
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Quarterly Revenue
($M)
$140
131.5
124
$120
132.3 132.5
124
116
$100
$80
73
69
66
64
67
69
79
79
Q2
'06
Q3
'06
72
67
67
67
63
64
65
Q4
'05
Q1
'06
60
$60
56
56
48
$40
$20
$0
Q1
'02
Q2
'02
Q3
'02
Q4
'02
Q1
'03
Q2
'03
Q3
'03
Q4
'03
Q1
'04
Q2
'04
Q3
'04
Q4
'04
Q1
'05
Q2
'05
Q3
'05
Q4 '07 estimate is mid-point of guidance range
Q4
'06
Q1
'07
Q2
'07
Q3
'07
Q4
Q1
'07 '08est*
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Power-One’s Global Footprint
Slovakia
Switzerland
Italy
Camarillo, CA
Carlsbad, CA
Baoan, Shenzhen, China
Shekou, Shenzhen, China
Dominican Rep.
Penang, Malaysia
Singapore
Australia
Manufacturing Centers
R&D Centers
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Power-One’s Customers … Premier Customer Base
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Where Power-One Excels
• Worldwide Mfg. and R&D (Asia, Americas & Europe)
• Worldwide Customer Service and Support includes field applications,
sales & sophisticated IT Infrastructure (EDI)
• Technology:
– Alternative Energy conversion expertise
– In-house silicon development and packaging capabilities
– Digital Power Management, Z-One® Digital IBA, the first complete
power conversion AND power management solution
– Density leadership in DC-DC bricks and POLs
– Leadership in AC Front Ends and Telecom Power Systems
– Industry’s highest efficiency and power density in many products,
such as Renewable/Alternative Energy
– Competitive on a world class level
– Custom products designed with sophisticated software and DSPs
– Power-One – a total supplier from the AC to the IC
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35 Years of Innovation in Power
Large Portfolio of Products and IP
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1972 – 1st linear standard
1989 – 1st in configurable high power AC/DC
1993 – 1st DC/DC open frame converter
1995 – 1st dual ½ brick (DC/DC Converter)
1995 – 1st dual ¾ brick
1995 – 1st 50 Amp ¾ brick
1995 – 1st planar transformer
2000 – 1st 100 Amp AC/DC power supply in a 1U height
2001 – 1st 150 Amp ¾ brick
2001 – 1st Surface Mount ¼ brick
2002 – 1st 1/8th brick
2002 – 1st Surface Mount 1/8th brick
2002 – 1st triple-output scalable, sequenceable ½ brick
2004 – 1st in digital power & conversion (Z-One® IBA)
2004 – 1st 97% efficient isolated DC/DC Converter
2005 – 1st 340W 1/8th DC/DC Brick Bus Converter
2006 – 1st to control both analog & digital with Z-Series
2007 – 1st in efficiency (CEC) for Alternative Energy inverters
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Why Customers Select Power-One
• Comprehensive product selection
– Full range of options for power technology
solutions. 100’s of products to fit any application
• Designed-in technology solutions
– Vision-One process used to strengthen
engineering relationships
– Newer technologies facilitate strong partnerships
• Reliable products at competitive prices
– Only 2-5% of system cost, but “mission critical to
performance”
• Logistics and customer support
– Sophisticated Oracle ERP systems
– EDI links to customers
• Long-term partner
– Investing in infrastructure and R&D
– Global resources
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Power-One’s History & Strategic Direction
Acquired
PEG of MAG
Custom Products & Alt. Energy
Silicon
Division
Silicon POLs + 1st Power Mgt.
Acquired
di/dt
High-density Bricks & POLs
Silicon
Initiative
Acquired
Power Systems (Europe/Asia)
Powec
Power Systems (North America)
Acquired
HC
DC/DC Bricks (North America)
Acquired
IPD
Acquired
DC/DC Conversion (Europe)
Melcher
AC/DC – North America
Silicon R&D Center Startup
1997 1998
1973
1999
2000
2001
2002
2003
2004
2005
2006
2007
Strategic Direction
Founded
as AC/DC
power
conversion
company
Initial
Public
Offering
(IPO)
Strategic shift to
communications
infrastructure
markets &
acquisitions
A technology leader in
powering communications.
Integrated five acquisitions,
developed silicon & digital
power mgt.
Entered
Server/Storage
markets &
acquired Custom
+ Alt. Energy
Entered
Commercial
Alt. Energy
Market
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Acquisition Highlights
Benefits of the Power Electronics Group
Acquisition in Late ‘06
• Significant increase in revenue for low price
• Purchasing power of larger company – now the
7th largest power supply company in the world
• Economy-of-scale to compete with larger
competitors
• High-volume, low-cost China manufacturing
• Adds custom products (largest & fastest-growing
market)
• Augments top customer base
• R&D resources and technologies are excellent
• Alternative Energy initiative
• Synergy in SG&A & overall cost structure
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Acquisition Highlights: Overall Transaction Assets
• Two main factories
– 230K sq. ft. in Shenzhen China
– 180K sq. ft. in Valdarno, Italy
(Includes R&D and Admin)
• Best-in-class R&D Center
(80+ experienced engineers)
Shenzhen, China
• Custom product capability
• New markets:
– Alternative/Renewable Energy
– Digital control for motors
Valdarno, Italy
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Acquisition Highlights: How Power Conversion &
Power Management Are Changing to Digital
• Products range from smart motor driver &
control circuits to large 300kW inverters
• 90% of products are digital with micro/DSP
and software
– Fewer competitors - less commoditization
– Higher margins over time
DSP-based Motor Controls
– Greater functionality - market diversity
– Higher performance
– Software-driven with reduced parts count;
higher reliability
• Augments Power-One’s board-level
One® digital power management
capabilities
Z-
Digital
Smart Appliance
Control & Management
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Acquisition Highlights: Custom Products –
From Dumb … to Smart
• Greater functionality and better energy efficiency;
DSP-based Motor Controls & Temperature Control
• Smart Appliance Modules (“SAMs”)
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Acquisition Highlights: Renewable Energy Inverters
Using Digital Technology to Innovate
Solar & Wind Power Inverters
• High-reliability and best-in-class efficiency
• High power-density & compact size
• Primary energy source control
• Grid interactive control
• System level control
Wind
Power
Converters
Photovoltaic
Inverters
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Acquisition Highlights: Renewable Energy Inverters
High efficiency
over extremely
wide operating
range
AURORA PVI-6000-OUTD
For distributed architecture
residential or small buildings
from 5kW to 10kW
AURORA PVI-CENTRAL
For larger buildings and
central architecture PV plants
from 30kW up to 40MW
AURORA PVI-3600-OUTD
Individual inverter for PV
trackers up to 10kW
AURORA PVI-2000/3600
For residential PV plants
<5kW
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Digital Power Revolution--- ZZZZ
A Digital Power
Revolution
Conversion … Communications… Control
What Do Customers Want and
Why The Inflection Point Now…..
1. More and more lower voltages are
needed by our customers
2. Number of outputs are increasing
3. Power management functions are
escalating, as are # of components
4. Power takes too much space & costs
too much
5. Power is getting more complex –
integration has been non-existent
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Power Management and Power Conversion…
Two Separate Markets
Conversion
Control (Pwr. Mgt.)
Communication?
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Power Management and Power Conversion
Becomes One … with Digital Technology
Conversion
Communication
Control (Pwr. Mgt.)
Goal: 20% Market Share in 5 Years
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The “Before” – Unmanageable with Analog
Analog
Controller
48 V
“BRICK”
DC/DC
Converter
POL
3.3V
POL
2.5V
POL
3.0V
V1
V2
POL
V5
POL
1.8V
V3
V4
POL
POL
V6
V7
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The “After”: Z-One® DIGITAL IBA™
48 V
I2 C
from
Host
System
“BRICK”
DC/DC
Converter
DPM
Z-POL
Z-POL
Z-POL
V2
V1
Z-POL
V5
Z-POL
V3
Z-POL
V6
V4
Z-POL
V7
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8-output Power System Comparison
IBA with Analog
Power Mgmt
Z-One®
Digital IBA
200+
9
600+
<100
~10 in2
3.8 in2
8 Weeks
3 Days
~$100+
~$90
Virtually
Unlimited
Limited
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Z-One® Architecture Benefits of Z-7000
• Any voltage, any current, any configuration; architecture is highly adaptive &
flexible; system reconfiguration on-the-fly
• Real-time telemetry – continually monitors temperature, current, and voltage for
precise and optimized control
• Open architecture communications with industry-standard I2C interface bus
and affiliate program with BOTH module mfg. and silicon partners
• More reliable and flexible fault management strategies
• 90% reduction in time to market, development, # of components & board traces
Z-Series
Digital
Power
Manager
Z-Point Of Load
Converters
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2nd Generation Digital Power
• 2nd Gen POLs – "Server Series"
– Triples output current to 60 amps
– High current expands market
– Very high level of interest
• Enhanced Digital Power Manager
– IC replaces entire module (1/6th the
footprint) with increased functionality
– Controls four non-Z converters, e.g., fans
• No-Bus Z-1000 Series POLs
– NO protocol, NO memory, NO software
and NO programming are required
– Lower price point matches analog POLs
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Results for Z-One® Digital Power
• We have a significant head-start on the competition. No other competitors’
module available due to our IP
• Market adoption was significantly delayed by competing technology that
violated Power-One’s IP. Jury found “for” Power-One in recent lawsuit
• The Z’s disruptive architecture is a true revolution in power and 2nd
Generation POLs - tripled the output current!
• Licensed technology (second sourcing)
– Module 2nd source with Murata Mfg. (Top 5 DC/DC supplier)
– Semiconductor Z-affiliate announced with Atmel in July’05; and with Micrel LDO
(Low Drop-Out) regulator IC in Sept ‘06
– Silicon Labs joined the Z-Alliance in August ’06
– Micrel joined the Z-Alliance in March ‘07
• Customers can offer products with additional system features and benefits;
and with faster TTM (time to market)
• New markets opened, e.g., Storage & Server, Military, Aerospace & Security
(total POL market exceeds $1.0 billion)
• Board-level design wins continue – significantly more embedded in the
customers’ systems
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Recent Actions &
Improvement Plans
2005/2006: Major Restructuring/Sales Growth
2005: Goal of profitability achieved in Q3 & Q4
• Reduced >$30M in overhead & SG&A
• High-cost Norway functions moved to low-cost areas
• Telecom Power Systems integrated with embedded business
2006: Return of Growth
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Return of sales growth was #1 goal
Server & Storage and Power Systems growth
10-15% growth was at high-end without acquisition
Acquisition in Oct. of Power Electronics Group of Magnetek
Q4 negative changes to core business started
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2007: Integration Execution, Synergy & Cost Control
• Acquisition increased sales dramatically to $512M with
significant opportunities for growth
• Material costs and synergy/leverage – some improvement,
but off-set by higher logistics’ costs and inefficiencies
• Acquisition integration and synergies:
– Shutdown California facility & moved products to low-cost areas
– Closure of Hungary mfg. in Q4-07 & completed move to low-cost
Slovakia in Q1-08
– Moving China outsourced products to acquired mfg. in Asia
• SG&A restructured for ~$20M in savings
– High-cost R&D (U.S. & Ireland) moved to lower-cost areas
– Texas and Finland shutdown
• Improved Gross Margins and lowered costs, but not as
much as planned (Positive EBITDA in Q3 & Q4)
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2008: Focus on Gross Margin & Efficiency
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Sales & orders are not the issue – there are many opportunities. We must be
profitable with a $500M+ business.
Main issues are 1.) factory costs increases/inefficiencies, 2.) material costs,
and 3.) logistical costs, both fuel and excess component movements
1. Factory costs:
– All low-cost/high-volume products are being transferred to Asia – Increases
efficiencies with less product movement, economy of scale, and lowest cost
– All factories and products are being evaluated and product transferred to align with
customer/supplier bases to gain optimum cost savings
– Low margin products and projects (customers) will be rationalized;
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2. Material costs:
– Progress has been made, but not as much as planned and the savings have been
offset with escalating logistical costs.
– We have focused teams assigned for this to continue driving down the costs of
materials
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3. Logistic costs:
– Improved 1.5% in gross margin in Q4, more improvements expected
– Need to minimize movement of components - Lowest costs materials are in Asia,
having more products manufactured in the area should increase savings
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Strategic Position & Opportunities
Market Drivers & Power-One’s Competitive Position
Global Market Trends
Vendor Consolidation
Customers Demand
Strong Balance Sheet
& Global Operations
Product Choices
Both Standard & Custom.
Silicon to Systems Offer
“One-Stop-Shop”
The Power-One Advantage
• Leading Technology – from Silicon
to Systems; High Efficiency
• Broad Product Portfolio: Standard
+ Custom
• Leading Brand – Top Quality &
Support
• Proven Consolidation Capabilities
• Global Manufacturing
DPA  IBA Digital
Distributed Pwr. Arch.
Changing to
Intermediate Bus Arch.
& Digital Pwr. Mgt.
• Few Competitors Can Compete at
Larger Customers. (Top Customers
dominate TAM)
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Growth Opportunities
CORE GROWTH
NEW OPPORTUNITIES
1. Technology Leadership
2. High Density & Efficiency
3. Broad Product Portfolio
1. Expand Markets
2. New Products
3. Digital Power & Control
Communications &
Industrial Markets
Standard & Custom
Products
Server & Storage
Markets Expansion
Renewable Energy
Power Systems
(Indoor & Outdoor)
Motor Controls for
High-end Applications
AC/DC Power Supplies
& Front Ends (FE)
Z-One® Licensing &
Power Management
DC/DC Bricks & POLs
Digital Controls
A
c
q
u
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s
I
t
i
o
n
s
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Strategic Initiatives
Focus on gross margin improvements
Invest in most advanced power technologies
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Silicon-based products; Protect IP
Leading position in DC/DC bricks; new POL converters
Advanced AC/DC front-ends for DPA/IBA markets
High-density Power Systems for telecom/ISP/infrastructure
Digital power circuitry & control algorithms for all products
Broaden portfolio into new markets for Power-One
– Gain further traction in Storage/Server markets
– Custom AC/DC power supplies & DC/DC converters
– Alternative Energy initiative
Continue to reduce overall cost structure
Bottom and top-line growth
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Thank You!
Disclaimer & Forward Looking Statements
This presentation includes forward-looking statements within the meaning of the Safe Harbor
provisions of the Private Securities Litigation Reform Act of 1995 that can be identified by the
use of forward-looking words such as “will” or “estimate” or comparable words. These
statements are subject to a number of factors, risks and uncertainties that could cause actual
results to differ materially from those projected. Risks and uncertainties include, but are not
necessarily limited to: the Company’s success in securing customer acceptance and adoption
of the Company’s products and technologies; the Company’s success in integrating the newly
acquired Magnetek PEG operations into the Company’s overall operations; the Company’s
success in achieving anticipated cost savings from projected synergies relating to the
Magnetek PEG acquisition; the size and pace of growth and improvement in target and
potential markets; the Company’s success in establishing and maintaining adequate and
qualified manufacturing sources for supply of products; constraints and limitations in the
supply chain(s) for critical components contained in Company products; the Company’s ability
to achieve and sustain gross margins at levels anticipated and noted as comparable to “siliconbased” companies; the Company’s ability to continue spending at prior or desired levels for
research and development related to the products and technologies discussed in this
presentation; competitor advances and successes in comparable, alternative or competing
technologies;
the Company’s success in securing protection for intellectual property
incorporated into the Company’s products and/or enforcing such intellectual property against
use of same by competitors; intellectual property claims or rights of third parties which are
unknown to the Company, and/or which are asserted in the future against the Company. In
addition, we refer you to the Company’s most recent SEC financial filings, to include the
Company’s report(s) filed with the SEC on Form 10-K and/or 10-Q for disclosure and
discussion, where applicable or additional risk factors.
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