Good morning. It is now 9:00 A.M. The 2018 annual meeting of the stockholders of Microchip Technology Incorporated will please come to order. I am Steve Sanghi, CEO and Chairman of the Board of Microchip Technology. I would also like to introduce additional members of the audience. First, I will introduce the other members of the board of directors. Matt Chapman, recently retired CEO of software assessment company Northwest Evaluation Association. L.B. Day, President of L.B. Day & Company. Esther Johnson, retired executive of Carrier Electronics, and Wade F. Meyercord, President of Meyercord & Associates . Next, I will introduce the company's executive staff that are in attendance today. Ganesh Moorthy, President and Chief Operating Officer. Eric Bjornholt, Vice President and Chief Financial Officer. Steve Drehobl, Vice President of MCU8 Division and Technology Development. Mitch Little, Vice President of Worldwide Sales and Applications.
Rich Simoncic, Vice President of Analog Power and Interface Business Unit. Mathew Bunker, Vice President of Backend Operations and Memory Products Group. Lauren Carr, Vice President of Global Human Resources. Mike Finley, who is the Vice President of Fab Operations, is not in attendance today. Patrick Johnson, Vice President of Mixed Signal and FPGA Business Unit. Sumit Mitra, Vice President of 32-bit MCU and Wireless Business Unit. Mitch Abowski, Vice President of MCU16, Networking and Data Center Business Unit, and Automotive Information Systems Group. That is a Vice President of a lot of things. I thought we fixed it. Three partners of the firm of Ernst & Young, the company's independent registered public accounting firm, are also here today. They are Eric Lewis, David Dameron, and Matt Randolph. Certain other members from EY's team are also present here.
I would also like to introduce Rob Suffoletta, a partner with the law firm of Wilson Sonsini Goodrich & Rosati, who serves as the company's outside general legal counsel. Rob is in the back there. Pursuant to the company's bylaws, I have been appointed by the board of directors to serve as chairman of this meeting. Rob Suffoletta will serve as secretary of the meeting. Notice of this meeting, stating the time, place, and purposes, was mailed on or about July 12, 2018, postage prepaid, to each stockholder of record at the close of business on June 21, 2018. Affidavits of mailing have been received by the company and are available for inspection at this meeting. 235,437,744 shares of common stock were outstanding at the close of business on June 21, 2018, and are entitled to vote at this meeting.
Just some matters with respect to the voting of your shares. If you have already mailed in your proxy and you do not want to change your vote, you do not need to do anything at this time. If you did not turn in your proxy yet, or if you wish to change a proxy you previously submitted, or if you hold a proxy to vote the shares of another stockholder, please submit those proxies to us at this time. Judy, please collect these proxies now. Anyone. Lastly, if there is anyone here who did not submit a proxy and who wishes to vote their shares in person, please raise your hand and Judy will distribute a ballot to you. Any stockholder that needs a ballot. We will collect these ballots when we open the poll for voting in a few moments.
In accordance with the provisions of Delaware law, the board of directors has appointed Rob Suffoletta to serve as inspector of election at this meeting, and he subscribed the oath of his office prior to the meeting. Rob has informed me that a quorum is present, and I declare the meeting open for business. If there are any questions that relate directly to one of the proposals, I would like to receive that question at the time we consider each of the proposals. Otherwise, we have reserved time after we complete the business matters of the meeting for a presentation on the company, followed by a question and answer period. Please hold all questions not related to the proposals until that question and answer period. The first proposal is to elect five directors to serve for the ensuing year and until their successors are elected and qualified.
A nominee for director shall be elected if the votes cast for such nominee's election exceed the votes cast against such nominee's election. Nominations for directors will now be received. I recognize Kathy Clevenger.
Good morning. My name is Kathy Clevenger. I nominate Steve Sanghi, Matthew W. Chapman, L.B. Day, Esther L. Johnson, and Wade F. Meyercord for election as directors of the company.
Mathew Bunker?
I second the nomination
Since no other nominations were received prior to the deadline, the nominations are now closed. The second proposal is to ratify the appointment of Ernst & Young LLP as the independent registered public accounting firm of Microchip for the fiscal year ending March 31, 2019. The affirmative vote of the holders of a majority of the shares of common stock represented at the meeting is required to adopt the proposal. Is there any discussion on this proposal from any of the stockholders? If not, a motion calling for a vote on this proposal will now be received. I recognize Robert Williams.
My name is Robert Williams. I move for the adoption of the following resolution. Resolved, that the proposal to ratify the appointment of Ernst & Young LLP as the independent registered public accounting firm of Microchip for the fiscal year ending March 31, 2019, as more fully described in the company's proxy statement dated July 12, 2018, be approved.
Sumit Mitra.
I second the motion.
The third proposal is to hold an advisory non-binding vote regarding the compensation of our named executives. The affirmative vote of the holders of a majority of the shares of common stock represented at the meeting is required to approve this proposal. Is there any discussion on this proposal from any of the stockholders? If not, then a motion calling for a vote on this proposal will now be received. I recognize Patrick Johnson.
My name is Patrick Johnson. I move for the adoption of the following resolution. Resolved, that the compensation of our named executives, as more fully described in the company's proxy statement dated July 12th, 2018, be approved on an advisory non-binding basis.
Steve Drehobl.
I second the motion.
The polls are now open for voting on the proposals before the meeting. The time and date of the opening of the polls is 9:08 A.M. today, August 14, 2018. Judy, please collect the ballots of those stockholders who wish to vote in person. If you have a ballot, please raise your hand so that we can collect them. Anybody with ballots? After we finish the formal portion of this meeting and voting and the results are announced, I will momentarily adjourn the meeting. Please stay seated. Right after that, we reconvene for the presentation. In between that pause, just stay seated. You can stretch your legs, stand up for a second if you like. The polls are now closed. The time and date of closing of the polls is 9:09 A.M. today, August 14, 2018. Will the Inspector of Election please announce the vote?
With respect to Proposal One, I hereby declare that all the nominees have been duly elected as directors of the company to serve for the ensuing year until their successors are elected and qualified. With respect to Proposal Two, I hereby declare that the proposal to ratify the appointment of Ernst & Young LLP as the independent registered public accounting firm of Microchip for the fiscal year ending March 31, 2019, has been adopted. With respect to Proposal Three, I hereby declare that the compensation of the company's named executives has been approved on an an advisory non-binding basis.
This concludes the formal portion of the meeting. Before I adjourn the meeting, is there any further business from any of the stockholders? If not, I will entertain a motion to adjourn. Eric Bjornholt.
I move the meeting be adjourned.
Ganesh Moorthy.
I second the motion.
All in favor say "aye.
Aye.
Any opposed say "no." Ayes have it. The meeting is adjourned. Please stay seated. At this time, we'll make a presentation of the company. Are we ready? Presentation is up on Okay. Before I begin, there's a long safe harbor statement. I will not read it all, but I wish to remind you that during this presentation, I will be making projections and other forward-looking statements regarding the future financial performance of Microchip. These statements always involve predictions, and the actual results may vary materially. I refer you to the filings with the SEC regarding some important risk factors about the company. With that, this is a recap of our fiscal Q1 of fiscal year 2019 business results that we just announced late last week. It was a record quarter in every respect. Record GAAP net sales, record non-GAAP net sales.
We also achieved a record non-GAAP gross margin of 62.2%, first ever in the history of the company. Record non-GAAP operating income of $473.5 million. Record non-GAAP net income of $405.8 million. A record non-GAAP earnings per share of $1.61, which was up 22.9% from a year ago. We declared record quarterly dividend per share of $0.365 per share. As you know, we also closed the acquisition of Microsemi on May 29. Our bookings have continued to be strong with a record high backlog, and we are executing on the Microchip 2.0, which entails total system solutions for our customers with products that are smart, connected, and secure. I'll introduce you to Microchip 2.0 a lot more during this presentation.
Our vision in Microchip 2.0 is to be the very best embedded control solutions company ever, products as well as customers applications that are smart, connected, and secure. Before I go into Microchip 2.0, we'll rapidly recap the Microchip 1.0, which is really the history of Microchip for the last 25 years, which has seen consistent growth from Microchip in revenue and profits, perennial market share gains, a very high margin business model. The company has been very shareholder-friendly with consistently increasing dividends and consistently increasing free cash flow. We have executed a very successful M&A strategy going back more than a decade, where the company's built up and grown its revenue by a number of very successful acquisitions that we have integrated. This slide shows the annual net sales growth going back all the way to fiscal year 1993 when we went public.
This is 25 years of record, largely up into the right. There have been couple of notable spots where, because of significant industry upheaval, one was in year 2001 when the entire tech industry crashed, and other one was in 2009 during a major global financial crisis, where you see that the sales took a dip for the year, and those events, looking back now, just look like a minor bump on the road. The last bar on this slide, fiscal year 2019, is just based on run rate of the last one quarter times four. The bars are also divided into our major product lines, microcontroller being the largest product line in green, analog in blue, small memory business and small FPGA business and licensing business. The slide also shows 100 consecutive quarters of non-GAAP profitability that we believe is unprecedented in the industry.
This shows the market share gains in the total microcontroller market. I could have plotted it going way back prior to 2003, when Microchip really was at the bottom behind 25 other players in U.S., Europe, Asia, and Japan. The red line really tracks the market share gains of Microchip, reaching to number 3 position behind Renesas and NXP, both of which are a result of a large number of mergers in those companies also. Renesas is a merger of Hitachi, NEC, and Mitsubishi, the three largest Japanese giants. NXP is a merger of the old Philips business, plus they acquired Freescale, plus a number of other small acquisitions. Without any of those, Microchip ranking would be even higher. Microchip has acquired, too. This shows the MCU market share in percentage terms.
This is Microchip's revenue dollars divided by the market data reported by SIA regarding the size of the microcontroller market. You could see, again, going back all the way to 1993, 1994, we've had very substantial market share gain, largely organic. In the last several years, the market share gains have also been achieved through acquisitions. The big jump in calendar year 2016 is a result of acquisition of Atmel, which had a significant microcontroller business. This chart ends at calendar year 2017, so any business got from Microsemi is really not on this chart. That would be in future when we put the calendar year 2018 on it. This is the analog yearly revenue. We began in the analog business back in 1998 from a very small step, and then we did a number of acquisitions and dramatically grew our own business also.
For a long time, we had a goal of building a billion-dollar analog business. This quarter, the quarter we just finished, the June quarter, not only we crossed $1 billion, we crossed $1.25 billion, and a large portion of that addition came from the acquisition of Microsemi. Annual non-GAAP net sales. I'll show you series of these charts. They all have one common message. They all show substantial compounded annual growth rate. All these charts are largely up into the right. This one is sales. This one is gross profit, showing 18.6% compounded annual growth rate. This one is EBITDA, also showing 18.3% compounded annual growth rate. This is free cash flow as a percentage of sales. The bars show total free cash flow in dollars. You can see in fiscal year 2018, we produced a little over $1.2 billion of free cash flow.
The blue line shows it in percentage. On the very left, I think we were at 27%, and to the very right, we are in a low 30% free cash flow as a percentage of sales. This shows the cumulative dividends paid in dollars as well as in cents per share. We have overall paid about $5 billion that have been returned to shareholders. $3.5 billion have been in dividends, and $1.4 billion have been in share buybacks. Our current dividend is about a run rate of $1.45, $1.46, in that range. Ending the Microchip 1.0 summation in the last decade, we've also been expanding our solutions through large number of acquisitions. This shows the history of our acquisitions by year. It kind of does show what the company's brought. It's too detailed to really cover here.
These slides are on our website. If you want to further study what each of the acquisition brought, that's certainly available for you to look at. Our latest acquisition was Microsemi. That brought us a large amount of FPGA business, analog business, also some specialized microcontrollers for storage and other applications, a large defense business. Each and every acquisition here has been quite successful, added to Microchip's, not only sales, but Microchip's earnings per share has been accretive. The combination of all those acquisitions has built a scenario where in the past, go back 10 years ago, Microchip will largely sell a microcontroller or an analog part in a customer socket.
Increasingly now, we can take a customer's board and have five, six, eight, 10, even higher number of Microchip parts populating that board because we pretty much today make microcontroller, all sorts of analog converters, power management, op-amps. We made USB, Ethernet, FPGAs, many specialized microcontroller solutions, flash memory, E squared, static RAM. Therefore, by all these, we are able to complete a customer solution largely built by Microchip parts. Many times, only other thing the board has is resistors and capacitors and battery and switches from somebody else. We take the entire silicon real estate. That's not in every application. That's still a dream in the works, a vision in the works. Increasing amount, we are able to sell more and more of Microchip chips onto a single customer's board.
That's really what leads us to a Microchip 2.0, to be in a position now with all these acquisitions to have a vision to be the very best embedded control solutions company ever that delivers products and solutions that are smart, they're connected, and they're secure. Here are some of the elements of Microchip 2.0, starting with the total system solution in embedded control. We also enjoy the leading customer preference to design with our MCUs. Year after year, when EE Times survey, when they ask the question to the customers, in your next design, whether it's 8-bit, 16-bit, or 32-bit, which solution, which architecture, which products, which company would you choose from? The leading answer has been Microchip, and substantial difference to the number two and number three. We have multiple growth drivers in our business today. Our non-GAAP gross margin target is 63%.
Last quarter was another all-time record of 62.2%. I think we are knocking onto that long-term target. Although temporarily, that number will go down with the acquisition of Microsemi, whose margins were a little bit lower than us. Last quarter, we only consolidated one month of Microsemi business into our numbers. This quarter, when we consolidate all three months, the gross margin actually goes down a little bit. We have some work to do to get to this longer term gross margin of 63%. Non-GAAP operating expense target of 22.5%. This is very similar story. The core Microchip is already there. We got to get the Microsemi to integration to those kind of numbers. End-market mix is skewed to industrial and automotive. Certainly, that was true for classic Microchip.
With the acquisition of Microsemi, we have also picked up a fair amount of exposure to aerospace and defense, to the data center market. Our end-market mix has gotten more broader, more diversified, with larger number of opportunities. The new long-term model with industry-leading operating profits, we're guiding to 40.5% operating profits longer term. Last quarter was 38.9. You can see that we are in that range and getting better. In the past, in various presentations, I have shown five to eight slides showing end customer boards with a substantial amount of products coming from Microchip. We have hundreds of those slides, and for about more than a year, we've been picking five different slides to show how broadly in a large number of applications we are populating those boards with Microchip-only products.
Today, I only just picked one, and that's a Google IoT engagement platform. I love this one because not only it has large number of chips from Microchip, you can see by all those arrows. You have a battery charger chip from Microchip, buck-boost from Microchip, light sensor from Microchip. You have another chip that is an EDBG Dragon, seal USB, a temp sensor. The beauty is that this one single board shows our Microchip 2.0 in the works, smart, connected, and secure. Smart is through a microcontroller from Microchip, connected is through a chip that is a Wi-Fi chip from Microchip, and secure is through a security chip from Microchip. One single board, and this has been launched by Google, they did a press release, and a lot more information is available on Google's website and also Microchip website.
This single application, essentially, customer can utilize this board to adopt any of their applications and adopt it to connect to the internet. This single application shows our Microchip 2.0 in the works with solutions that are smart, connected, and secure, and also a large number of other chips coming from Microchip. The only thing here that is not from Microchip, again, are connectors and board and battery and power and other things. This is really one of the best example of Microchip 2.0 in the works. This shows the number of parts per customer project in design. As I've been telling you that we have been getting a larger and larger of Microchip parts on the customer's board.
This says that in this timeframe of a course of about seven or eight quarters, we've had a 26% increase on the average in number of parts from Microchip that customers are putting on their boards. This is the same thing with percentage of projects with more than one product family in design. Again, in the history, you would have one business unit from Microchip engage with the customer and sell either a microcontroller or a power management or something. This shows the percentage of projects at customers which have more than one Microchip division, one Microchip business unit, one Microchip family being designed in. There's a 58% increase in this last six, seven quarters. That's sort of the demonstration of Microchip 2.0 in the works. We have built a very high profitability financial model.
This shows quarter ending June 30 in the first column and a long-term model in the second column. Our non-GAAP gross margin was a new record last quarter at 62.2%, long-term model at 63%. Non-GAAP operating expenses last quarter was 23.3%, and our long-term goal is 22.5%. Non-GAAP operating profit 38.9%, going to 40.5%. Non-GAAP earnings per share last quarter was $1.61, so that would be a run rate of about $6.40, and what we have guided to in our long-term model is in fiscal year 2021, a total earnings per share of $8. That was the number we gave when we announced our Microsemi acquisition. In our last earnings call, we actually said that that $8 is conservative, we did not provide a new number.
Summarizing the presentation today, Microchip is a consistent revenue grower and market share gainer with multiple growth drivers of the business, a very high margin business model and shareholder friendly. Microsemi acquisition closed and integration is heavily underway. We delivered the accretion from Microsemi in the first quarter, which was the last quarter, and we already said in our earnings call that the accretion for September quarter will be higher than the $0.15 that we originally guided, we did not really give a total number. Executing on Microchip 2.0 total system solutions, which are smart, connected, and secure, and a very premium long-term non-GAAP financial model of 63% gross margin, 22.5% operating expenses, and 40.5% operating income. Thank you very much. I'll take your questions. If you have a question, please raise your hand, state your relationship with the company. If you're a stockholder, say so.
If you're an employee, if you're a reporter, if you're a correspondent, you're an analyst, just state your relationship with the company, ask your question. We don't have any questions from the web audience. Okay. It's not open to the phone for asking questions. If you have any questions, they're only from the audience here. Okay, I do not see any questions, hopefully you understood it all. Thank you very much for coming.