Investor Presentation September 2012 NASDAQ: MEMS Powerful sensing solutions for a better life
Forward-Looking Statement This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements are subject to risks and uncertainties that could cause the Company s actual operating results to differ materially from those indicated by the forward-looking statements. For further information on risk factors affecting the Company s business, please refer to the Risk Factors section of our Form 10-K and other filings with the Securities and Exchange Commission. The Company expressly disclaims any obligation to update and revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. 2
MEMSIC Introduction A standalone pure-play MEMS sensor & solution company that has: Complete capability in MEMS product design, process development, and highvolume, low-cost manufacturing Sensing system integration differentiates MEMS Global customer base and wide range of market penetration Provides state-of-the-art, cost-effective MEMS IC sensors and multisensor system solutions MEMS sensors will be the largest growth driver in IC s for the next decade Market for MEMS sensors will grow to 3B+ annual units by 2015 at >30% CAGR Executing diversification strategy for long term gross margin growth The consumer market by nature has lower margin Diversifying into high-precision, high-end industrial and automotive application Investing in industrial level multi-sensor solution products MEMSIC has accumulated many fundamental patents in MEMS process and applications 3
Fast-Growth MEMS Market MEMS Sensor Market Forecast (2010-2015) (1) $20.0 $18.0 $17.3 $16.0 $15.0 $ in Billions $14.0 $12.0 $10.0 $8.0 $8.7 $10.2 $11.4 $13.0 $6.0 $4.0 $2.0 $0.0 2010 2011E 2012E 2013E 2014E 2015E Fastest growing sub-segment of semiconductors Consumer / mobile phone will constitute >50% of all MEMS sales in 2015 Integrated sensor systems forecasted to drive substantial share of additional growth 4 MEMS Market Forecasted to Grow at ~2x the Broader Semiconductor Market through 2015 (1) Source: Yole Developpement, March 2011
MEMSIC Addressable Markets Handset Market Consumer Market Automotive Market Industrial Market Handset market projected to grow to 2.3B+ units by 2015 Sensor systems are a de-facto standard in handsets Cameras (DSCs/SLRs); Projectors; Toys DSC camera market forecasted to grow to $150MM units by 2015 Automotive MEMs - growing content in multiple car applications Global market for automotive MEMS grew by 22% in 2011 to $2.2B; forecasted to grow to $3.1B by 2015 Large and stable Increasing need for flexible, intelligent, distributed and wireless monitoring & control in industrial manufacturing, avionics, agricultural and defense applications 5
Wide Product and Technology Range Technology and Product Application Market MEMS Sensors ecompass Accelerometers Gas Flow Sensors and modules Inertial Navigation System & Solution Inertial Sensing Navigation System Flight Display Mobile Phones Automotive LBS Consumer Industrial Aerospace Industrial Control Robot High-Speed Trains Wireless Sensing Network (WSN) X-mesh Network Sensor Integration Transceivers Environmental Monitoring Green Living Smart GRID Agricultural 6
Company Milestones Business Company founded - 1999 1 st MEMS company listed on Acquired IP for sensor fusion & system technology 3x growth in device shipments $68.2 Financial $6.9 Profitable for 6 out of 8 years (from 2004-2011) $9.1 $13.1 $25.3 Revenue $20.1 $28.4 $38.7 $34.4 Introduced gas flow sensor module 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 1H12 Products 1 st CMOS monolithic accelerometer The most reliable sensor for automotive 1 st cell phone application for accelerometer 1st MEMS-based AHRS with FAA certification 1 st MEMS sensor fusion IMU with GPS 1 st cell phone application for AMR compass Honored for world s smallest accelerometer Design Wins Product Milestones Rollover application HDD Protection Projector customers: Washing machine Stability control application 7
MEMSIC ecompass Product Beats Every Competition by Performance Magnetometer / Compass MMC3140MS Definition - Device that measures the strength and/or direction of magnetic fields MMC3280MA MMC3316MT Applications Compass in Mobile Devices Position Sensing Current Sensing Automotive Medical Mineral Exploration Military Gesture Recognition MEMSIC A Leader in the Compass Market Unique AMR technology enables: Highest accuracy Highest response speed Low power consumption Lowest noise Unique packaging technology enables: Low-cost package capturing superior performance High yield High reliability Large TAM Worldwide volume will reach >800M units by 2014 8 (1) Source: Yole Developpement, March 2011
MEMSIC Accelerometer Beats Every Competition by Size and Cost Accelerometer / Tilt Sensor Definition - Device that measures acceleration and tilt MEMSIC Accelerometer / Tilt Sensor Applications Automotive Mobile Phone Consumer Industrial Electronic Stability Control Rollover Headlight Levelling Alarm Testing Orientation Sensing Pedometer Picture Rotation Image Stabilization Gaming Digital Cameras Projectors PMPs Game Consoles White Goods Hard Disk Protection Navigation Devices Systems Gas Flow Meter Equipment Facilities Monitoring Current Sensing MEMSIC s Unique Patented Thermal Technology Uses heated gas molecules to detect acceleration Low cost, highest reliability (no moving parts) High shock survivability High accuracy and temperature performance - World s Smallest Accelerometer, honored by Electronic Products Magazine Special handling & testing not required, saving significant costs Large TAM Projected to grow from $1.3B in 2010 to $1.8B by 2014 9 (1) Source: Yole Developpement, September 2011
MEMSIC Inertial Systems and Solutions Integration Capability Way Ahead of Competition MEMSIC s Inertial Systems Avionics Description High-performance inertial 11DOF systems for avionics and industrial applications MEMS-based solutions for measuring static and dynamic motion in challenging environments e.g., avionics, remotely operated vehicles, agricultural and construction vehicles, automotive test and wind power turbines MEMSIC Inertial Systems Applications Industrial Products: Applications: Inertial Measurement Units Avionics systems Remote magnetometer systems Unmanned vehicle control Heading Reference Systems (AHRS) Platform stabilization Vertical gyroscopes (VG) Land vehicle guidance Fiber optic vertical gyros Flight management systems Airborne antennal control Products: Accelerometer systems Magnetometer systems Tilt sensors Applications: Automotive Testing Monitoring (Condition, Vibration, Wind Turbine, Structural Health) Seismic Instrumentation Antenna Stabilization Towed sonar arrays Construction Product Features and Capabilities MEMSIC: First to market with FAA-certified, MEMS-based systems flying in 600+ types of aircraft Anticipate 30,000 retrofit upgrades in next 5 years Integrated: Integrated with MEMS sensors, GPS, and wireless links to extend applications in industrial and transportation for safety and structural health monitoring High barriers to entry: Proprietary algorithms, FAA certification and established customer relationships AHRS Family: Vertical and directional gyro Measures roll, pitch, and heading VG Family: Vertical gyro Measures roll and pitch Select Systems IMU Family: 6DOF Measures roll angular rate and linear accel NAV Family: Mag sensors and GPS Full data angles, rates and accels 10
11 MEMSIC Strategy
MEMSIC at Strategic Crossroad Sensor unit shipments to mobile phone applications grew 3x over the past two years MEMSIC s market share grew to ~15% in 2011, up from 1% in 2010 However, mobile phone gross margin decreased Primarily reflected pricing pressure at one major mobile phone customer Shipment (million units) Gross Margin % Trading Rapid Revenue Growth for Stable Revenue and Higher Margin 12
Going Forward: Targeting Margin Growth Focusing on design wins at higher-margin mobile customers Diversified group of global Tier 1 customers China smart phone market (market size: 300+M units in 2013) Developing marketing strategy in higher-margin applications Industrial applications Automotive applications Investing in higher-margin products Integrated solutions combining components, systems and software High performance industrial IMUs Gas flow sensor module for home gas metering, medical, and industrial apps Magnetic sensors for automotive, industrial, and medical applications 13 Accelerometers for industrial and automotive applications
MEMSIC Gas Flow Sensor Module Proprietary and High-Margin Product Example Disruptive Technology Over the Old Mechanical Meters True MASS flow measurement >15 years reliability, with performance guaranteed Fully electrical and easier integration to form SMART meter No moving parts, no wearing Potential future market: $170M* ~$80MM: residential gas meters ~$50M: automotive MAF (Mass Air Flow) sensors ~$40M: industrial/medical (HVAC, respiration, anesthesia, etc.) Starting to sample with interested customers 14
Building a Stronger Organization Enhanced management team by bringing on industry experts Paul Zavracky, President, North American & European Operations Co-founder, President & COO of The MicroOptical Corporation and Kopin Corporation 100+ publications and named inventor in 67 issued patents John Newton, VP, Marketing 23 years experience in IC industry 9 years as Executive Director, Product Definition & Business Management, Maxim Integrated Products Enhanced total quality system by hiring experienced corporate QA director Built a marketing team focusing on automotive and industrial applications Investing in R&D resources Improving new product development process Driving productivity improvements by implementing lean manufacturing 14
Financial Highlights 16
Financial Snapshot Income Statement FY 2010 FY 2011 1H 2012 Net Sales $38.7 $68.2 $34.4 Gross Profit $15.3 $23.8 $13.2 Gross Margin 39.6% 35.0% 38.3% Net Income (Loss) ($7.4) ($6.1) 1 $0.7 EBITDA 2 ($3.9) ($1.7) $3.2 Balance Sheet as of 06-30-12 Cash, Restricted Cash & S-T Investments $61.8 Total Assets $123.0 Total Liabilities $35.2 Shareholder s Equity $87.8 1 Includes a $4.5 million non-cash goodwill impairment charge 2 See Appendix 17
Investment Summary Large Opportunity Large and fast-growing handset market Large and growing automotive market Diversified customer base including industrial Right Products at the Right Time Positioned for Growth & Profitability Volume shipments of magnetic sensor and accelerometer Integrated sensing system product Leader in emerging flow sensor technology Managing risk with operating efficiency and leverage Continuously introducing cost-competitive products Strong balance sheet supports new product development initiatives 18 18
Thank You! MEMSIC INC. One Tech Drive, Suite 325 Andover, Massachusetts 01810 TEL +1-978 738-0900 FAX +1-978 738-0196 EMAIL info@memsic.com www.memsic.com Yang Zhao, PhD Chairman, CEO & President zhao@memsic.com +1-781-888-8688 Patricia Niu Chief Financial Officer pniu@memsic.com +1-978-738-0900, ext. 225 19
Appendix EBITDA is a measure used by management to evaluate the Company s ongoing operations and as a general indicator of its operating cash flow (in conjunction with a cash flow statement that also includes, among other items, changes in working capital and the effect of non-cash charges). The Company defines EBITDA as net income, plus interest expense, net of interest income, provision for income taxes, and depreciation and amortization. Management believes EBITDA is useful to investors because it is frequently used by securities analysts, investors and other interested parties in the comparative evaluation of companies. Because not all companies use identical calculations, the company's presentation of EBITDA and EBITDA per share may not be comparable to similarly titled measures of other companies. EBITDA is not a recognized term under GAAP and does not purport to be an alternative to net income as a measure of operating performance or to cash flows from operating activities as a measure of liquidity. Additionally, EBITDA is not intended to be a measure of free cash flow for management's discretionary use as it does not reflect certain cash requirements such as interest payments, tax payments and debt service requirements. Pursuant to the requirements of Regulation G, we have provided a reconciliation of EBITDA to GAAP net income: Three months ended June 30, Six months ended June 30, 2012 2011 2012 2011 Net income (loss) $ (461,414) $ (1,108,301) $ 739,090 $ (2,436,482) Interest (income) expense, net (125,259) (98,366) (233,034) (181,855) Income tax expense 29,355 (3,084) 97,938 114,310 Depreciation and amortization 1,305,595 1,085,682 2,613,747 2,155,002 EBITDA $ 748,277 $ (124,069) $ 3,217,741 $ (349,025) 20