Good morning. It's 9:00 A.M. and the 2022 annual meeting of the stockholders of Microchip Technology Incorporated will please come to order. I'm Steve Sanghi, Executive Chair 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, Retired CEO of software assessment company, Northwest Evaluation Association. Esther Johnson, Retired Executive of Carrier Global Corporation. Karlton Johnson, CEO of Delaine Strategy Group LLC. Didn't wanna retire you yet. Sorry. Wade Meyercord, President of Meyercord & Associates. Ganesh Moorthy, President and CEO of Microchip Technology, and Karen Rapp, CFO of National Instruments. Next, I will introduce the company's executive staff that are in attendance today, starting with Eric Bjornholt, Senior Vice President and Chief Financial Officer.
Steve Drehobl, Senior Vice President, MCU8 and MCU16 Business Units. Rich Simoncic, Senior Vice President, Analog Power and Interface Business Unit. Mathew Bunker, Senior Vice President of Backend Operations. Lauren Carr, Senior Vice President, Global Human Resources. Mike Finley, Senior Vice President, Fab Operations, and Patrick Johnson, Senior Vice President, Mixed Signal Timing and FPGA Business Unit. Joe Krawczyk, Senior Vice President, Worldwide Client Engagement. Sumit Mitra, Senior Vice President, 32-bit MCU, MPU and Wireless Business Units, and Mitchel Obolsky, Senior Vice President, Networking and Data Center Business Unit. Two partners of the firm of Ernst & Young, the company's independent registered public accounting firm, are also here today. They are Ron Butler and John Gaylor, both are here.
I would also like to introduce Robert Suffoletta, he's sitting in the back, a partner with the law firm of Wilson Sonsini Goodrich & Rosati, who serves as the company's outside legal counsel. Pursuant to the company's bylaws, I've been appointed by the board of directors to serve as chair for this meeting. Robert Suffoletta will serve as secretary of the meeting. Notice of this meeting, stating the time, place, and purposes, was mailed on or about July 15, 2022, postage prepaid to each stockholder of record at the close of business on June 24, 2022. Affidavits of mailing have been received by the company and are available for inspection at this meeting.
552,484,192 shares of common stock were outstanding at the close of business on June 24, 2022, and are entitled to vote at this meeting. Now 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, then you do not need to do anything at this time. Most people fit in this category. If you did not turn in your proxy, 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. Carrie will collect those proxies now. If anybody wants to change their vote, holding a proxy for another shareholder. No one.
Lastly, if there's anyone here who did not submit a proxy and who wishes to vote their shares in person, please raise your hand and Carrie will distribute a ballot to you. Anybody who wishes to vote and has not voted and need a proxy? We'll collect those ballots when we open the polls for voting in a few minutes. In accordance with the provisions of Delaware law, the board of directors has appointed Robert 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, then I would like to receive that question at the time that we consider each of the proposals.
Otherwise, we have reserved time after we complete the business matters of the meeting for a company presentation and a question and answer period. Please hold all questions not related to the proposal until that question and answer period. The first proposal is to elect seven 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 a nominee's election exceed the votes cast against such a nominee's election. Nomination for directors will now be received. I recognize Eric Bjornholt.
My name is Eric Bjornholt. I nominate Matthew W. Chapman, Esther L. Johnson, Karlton D. Johnson, Wade F. Meyercord, Ganesh Moorthy, Karen Rapp, and Steve Sanghi for election as directors of the company.
Sumit Mitra?
I second the nominations.
Since no other nominations were received, 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, 2023. The affirmative vote of the holders of a majority of the votes cast at the meeting is required to adopt the proposal. Is there any discussion on this proposal? If not, a motion calling for a vote on this proposal will now be received. I recognize Sumit Mitra.
My name is Sumit Mitra. 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 31st, two thousand twenty-three be approved.
Rich Simoncic.
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 votes cast at the meeting is required to approve this proposal. Is there any discussion on this proposal? If not, a motion calling for a vote on this proposal will now be received. I recognize Rich Simoncic.
My name is Rich Simoncic. I move to 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 15, 2022, be approved on an advisory non-binding basis.
Mitchel Obolsky.
I second the motion.
The polls are now open for voting on the proposals before the meeting. The time and date of opening up the polls is 9:08 A.M. today, August 23, 2022. Carrie, please collect the ballots of those stockholders who wish to vote in person. If you have a ballot, please raise your hand so we can collect them. No one with a live ballot. The polls are now closed. The time and date of closing of the polls is 9:09 A.M. today, August 23, 2022. Will the Inspector of Election please announce the vote.
With respect to proposal number 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, 2023 has been adopted. With respect to proposal number three, I hereby declare the compensation of the company's named executives has been approved on an advisory non-binding basis.
This concludes the formal portion of the meeting. As we adjourn the meeting, please stay seated because a company presentation will be made after we adjourn the formal business meeting. Before I adjourn the meeting, is there any further business? If not, I will entertain a motion to adjourn. Mitchel Obolsky. I move that the meeting be adjourned. Mr. Moorthy.
I second the motion.
All in favor say aye. Any opposed say no. Ayes have it. The meeting is adjourned. At this time, I will ask Mr. Ganesh Moorthy to come up and provide a company presentation, and afterwards, Ganesh and I will entertain questions from stockholders.
Thank you, Steve. I'll just go ahead. Okay, we haven't had the opportunity to do a company presentation for several years because of COVID and the restrictions on face-to-face meetings and all that. It's the first time we're doing it in the last two or three years. It won't take very long, but it'll give you hopefully a good update of where Microchip is and where we're going in the coming years. To start with, we're gonna have a bit of an eye test. This is a legal requirement, and basically what it says is that during the course of this presentation, we're gonna be making projections and other forward-looking statements regarding the future events and the future financial performance of the company.
We wish to caution you that such statements are predictions and that the actual events or results may differ materially, and we refer you to all of our filings with the SEC that identify important risk factors that impact Microchip's business results, and results from operations. Okay, with that out of the way. I look at this slide as this is our resume. In one slide, it gives you what do we do, the breadth of product lines we have. So microcontrollers, processors, DSPs, analog, mixed signal, FPGA, many broad set of solutions, the non-volatile memory products, et cetera. These are the products that over time have built up to become our total system solutions that we offer today. We're a leading provider of these total system solutions.
I'll show you some examples as we go on subsequent slides. In the fiscal year that ended at the end of March of this year, we did $6.8 billion in revenue. We're growing continuously into the quarters and this year. The guidance for this quarter, the September quarter, is a $8 billion dollar run rate for the whole year, so just over $2 billion is the revenue we have. We'll see some of that here in a minute. We're right here in headquarters and about 21,000 employees worldwide. Now, what drives us every day, what brings 21,000 employees to come in and give everything they have, is a purpose. The purpose we have every single day is really how do we empower innovation? There's tremendous opportunities for things that can be done.
How do we enable that? How do we empower that? This is the type of innovation that we wanted to change people's lives. It's the human experience that we wanna be able to change. We do that with our part, which is to provide the ingredients that deliver smart, connected, and secure solutions. Sounds good. What does that mean? Here's some great examples on, in many, many end markets, some of which will be closer to what you are familiar with, some may not be. Every one of these is an embedded solution, a total system solution, that includes all of the different capabilities that Microchip brings. It changes the lives for many, many people with what that is enabling our customers to be able to do. That's what empowering innovation is about.
That's what gets us going every single morning for the 21,000 employees worldwide. About a year ago, we introduced kind of the third wave of Microchip. We call that Microchip 3.0. We've had Microchip 1.0, which was about the first 10 or 15 years of our life, and Microchip 2.0, which built on top of that for the next 10 or 15 years of our life. Microchip 3.0 builds on that solid foundation of Microchip 1.0 and 2.0, and here are some of the key elements that go with it. First is around growth, and that growth coming from organic actions that we take for providing complete solutions focused on the markets that we think have the highest growth. We call those the mega trends.
A growth rate of 10%-15% on a compounded annual growth rate basis using fiscal year 2021 as a baseline. We are into year two of that five-year projection, and we think we're on the right track to be able to get there. To have that growth come from durable demand sources, so a diversification of the end market that creates consistent results that creates resilient results over the ups and downs of the industry. Next is around what kind of financial results that we wanna have, and on non-GAAP gross margins and operating margins, we have targets to get to in the gross margin areas between 67.5%-68.5%, and the operating margin area between 44%-46%. These are outstanding results compared against anybody in the industry.
These are not easy targets to get to, and many folks work every single day to make parts of this work and whatever they contribute to see these results. As measured by a measurement called EBITDA, the earnings before interest, taxes, depreciation, amortization, to get 48% of the revenue converted into that type of cash capability, and then free cash flow, which is all of the cash after we have spent what we need for the business, minus anything we do with capital expenses of 38% of revenue. These are very profitable, very high cash-generating targets we've set for ourselves. We're well on our way for them. You'll see some of the results as I show them in a few slides.
We also make investments in, besides the investments in R&D and new products and all that, but investments in new capacity that will give us more control of our destiny and investments in inventory, that allow us to provide great service to our customers, again, through the ups and downs, of the industry. As we generate all this profits and cash, how we take and return portion to all of us here, the shareholders, who own this, and to be able to have an increase starting at 50% of our free cash flow and continue to increase every single quarter until when we get our debt down and our leverage down, we're eventually gonna provide 100% of free cash flow back, to shareholders. Finally, how we do it is as important as what we do.
That strong business foundation we wanna build based on both culture, which is a critical part of our DNA and our success, and sustainability, which is our commitment to the future of what we do to, as we build this company, as we build it in the different areas of the world that we operate in. We'll cover both those two. In the next few slides, we'll cover many of the elements of what I just showed here as Microchip 3.0. Here's our revenue. The very last bar is the June quarter multiplied by four, so it's not an actual number for the fiscal year as much as a projection if we stayed flat, which we won't.
We've had 127 consecutive quarters of non-GAAP profitability in a record we think is relatively unmatched in the semiconductor industry. Over this long period of time, it's a 16%+ compounded annual growth rate that we have done. It comes from products and technologies being our foundation, and we have a broad range of these products and technologies, they comprise hardware, software, and service solutions that all come together. That's what total system solutions are.
From the center of the customer's design, which tends to be something which is processing, processor, FPGA, microcontroller, to all the things that are gonna be needed around that processor for the customer, from timing and power, which is an essential requirement every customer is saying to many of the other parts of what they will need in the signal chain or in the connectivity or in the security, for their systems. These are just a representation of the breadth of solutions we bring, both individually and sometimes integrated into some of our processors. That product line then, our teams look to design in to applications and end markets. This is that end result of what markets are we designed into?
Fully 40% of our revenue is in the industrial market, and within industrial, we have defense and aerospace, and that's about 8%-9% of our revenue as well. It's the biggest market we play in. 18% of the market is in computing, but a predominant piece of that is in data centers and servers and what we do there. 17% is in automotive, and it has grown a little bit in the last couple of years as automotive has grown. 11% in communications infrastructure, so we don't do much on the phone side of things. We really do it all on the infrastructure side of communication. The 14% is on consumer appliances.
All of us here have appliances at home, and I will bet every one of you has many of the Microchip products that are built into those appliances itself. That's where we go. The shape of this pie chart and what goes where is really driven by our objective of how do we create consistent growth, profitable growth over a long period of time that takes us into the markets that are more durable that you see here. Now, we're also looking forward at where do we see future growth coming from. Clearly, on the left-hand side of this slide, you can see just the five end markets I just talked about. On the right-hand side are six major market trends.
These are trends that are happening with or without Microchip, and we are choosing to attach ourselves with our solutions to be able to have faster growth from these mega trends than Microchip, and therefore pulling up the average growth for Microchip as we do well in these segments. Those six mega trends are the rollout of the 5G infrastructure. We're about two years into that in a 10-year rollout of the fifth generation 5G. Each generation prior has been about 10 years of time, so a lot of ways to go on that infrastructure.
The whole rollout of the Internet of Things, particularly in the industrial side of the Internet of Things and how all of our products that are smart, connected, secure, and both at the endpoints as well as the edge nodes that we have becoming a bit big part of that. In data centers, we play a very large role in compute as well as storage servers. That's a big trend of how fast compute and data is being generated. We have our role to play in taking advantage of faster growth potential. Electric cars have been a lot of news more recently.
It's an area we've been focused on for some time, and both the cars themselves, but also the charging infrastructures represent huge opportunities for us to be able to grow. Artificial intelligence and machine learning, this is activities that are in some of these other mega trends, but also stand by themselves as an opportunity for us to be able to sell our solutions. Finally, in automotive, the advanced driver assist and eventually leading to some form of automation in the cars itself are all opportunities. We are latched on to these six in a big way with our investments, our customer engagements, our future growth to give us that much faster than average growth for the company. Looking at some results, these are our quarters we just finished in, the June quarter.
Record financials across the board. I won't go through each of them individually, but you could take any metric and we had record results there. Those results generated cash that allowed us to pay down the debt again, significantly making more progress. Over the last 16 quarters, we've paid down $5.2 billion of debt and gone from debt being a concern three, four years ago to really a non-issue at this point in time in terms of where we are and how much more cash we're generating. Finally, as we pay off the debt, pay for our CapEx, pay for our business, the free cash flow that's left over. Last quarter, we had $718.5 million of free cash flow, measured by revenue.
That's 36.6% of the revenue we generated last quarter. We've returned a portion of that to our shareholders. Last quarter was $348.2 million that we returned to shareholders, a large part of it in dividends and a slightly bigger part from that back in share buyback itself. That is something consistently we're gonna do is raise the dividend and continue to buy back shares every quarter programmatically. Finally, a record dividend last quarter that we paid out as well. I'll show you a trend of kind of how dividends over the last many quarters have been trending. It's quite stunning. Then looking forward to this quarter, this is the midpoint of our guidance is in the middle section there that's highlighted.
You know, we are on track for the guidance that we have provided. We have also said we will expect to grow into the December quarter as well. The momentum in our business is not just into this quarter, it's into the following quarter as well. The very long-term model is on the right-hand side. That's the long-term growth, the gross margins and operating margins. You'll see in many of those cases, on the gross and operating margins, we're either close to or at some of the long-term targets we've set for ourselves. We are doing very well with respect to delivering on the results for all the different metrics we've set for ourselves and we have committed to our shareholders. Okay, looking at a few graphs.
This is the non-GAAP gross profit, and you can see in bars it's the absolute dollars, and the line is the percentage of where we're at. We're continuing to have a significant improvement as we go through every quarter. The very last bar is the actual for the last quarter, the midpoint of guidance for this quarter, annualized is kind of how those numbers are at. 18.9% compounded annual growth rate over the last 10 years is how gross profit is growing. Here's operating income. Same window of time, growing at 21.1% compounded annual growth rate. Again, a nice continued drop down to the bottom line.
Here's EBITDA showing the same trend and actually showing some acceleration in the last two years as the business has grown dramatically as we pay down our debt, we're generating more and more cash from our business. 20.1% compounded annual growth rate. This is a bit of a more complex chart. The blue line represents the net leverage ratio that we have, and that is, you divide the debt we have by the EBITDA we're generating, which are the two bars, the blue bar and the orange bar. The orange bar is up and to the right. That's more and more EBITDA we're generating. The blue bar is coming down. That's the debt that's coming down over time.
The blue line is just a ratio of the two. We're at 2.05. We are well on our way to being under 2.0, and 1.5 is kind of the nominal long-term target that we have set for ourselves. Here's the free cash flow, and this shows in the blue bars the absolute number, in the line the percentage. You know, we've been pretty consistently in that high 20s, low 30s, and continuing to grow over time. The interesting characteristic about this is, you know, in these last 10 years have been many ups and downs of the industry. We've had cycles for various reasons, slowdown in China, slowdown for COVID, and so on and so forth.
You can see how consistent the cash flow is and how we manage the business from that perspective. In whatever down cycle may be there ahead of us, and today's news always has uncertainties into 2023 and 2024, we expect that the cash-generating capabilities of the business will continue to be as successful as it has been in history. With that, we are, with the debt coming down, cash generation strong, we have been increasing the dividends. In the last three, four quarters, it's been increasing at an annual rate, that's over 40%, at a sequential rate of 9%. Quite substantial growth every single quarter, as we return more capital to the shareholders. This is 80 consecutive quarters that we've been paying a dividend now, so 20 years. We're not just doing dividends only.
We started to also buy back shares, so that's the orange part of the bar that we have added onto it. We have a formulaic way that we go quarter by quarter by quarter. Last quarter, in the June quarter, we had 55% of the free cash flow generated in the prior quarter that we returned. This quarter we have guided we'll do 57.5% of the free cash flow we generated last quarter. We are continuing to grow that every single quarter. You can see the buybacks are a little more, you know, up and down depending on what the free cash flow is, but the dividends are consistently growing every single quarter.
Our expectation is that this quarter, the total capital return, dividend plus, the share buybacks, will be a record, as well. We did approve just under a year ago a $4 billion buyback, and, we're making good progress on that, every single quarter. We're gonna be pretty close to $1 billion of the buyback, done and with more headroom for where we're going. Enough about the financial part of the results. Now a little bit about what else are we doing. We consider environmental stewardship to be an important responsibility for the leadership team. It is focused in four different areas. It's in what are we doing to reduce the waste that we would create. We are a manufacturer. We need to be cognizant of what we're doing there.
What are we doing in terms of water management and being optimal in terms of how we use water? Reducing the energy consumption and the efficiency with which we use the energy. Finally, on greenhouse gas emissions. All four of those are parts of what are our commitment from an environmental sustainability standpoint on which we have goals that we track and drive and improvements that we make towards the running of our business with a long-term view of the target we set for ourselves, which is to be net zero by 2040. This is a goal we set about a year ago. It's a long ways away, but we need to have intermediate targets yearly, five yearly, et cetera, and that's what the team is driving towards.
We will have, and we do have at this point, more information on our website. We will continue to make it available on the environmental side of our website. The other part of this is our human capital and culture is that enduring competitive advantage that for 30 years Microchip has had. It's the secret to our success, and it continues to be a very important part of how we nurture our teams, we nurture the environment for the teams to thrive in and produce the results that we do. I won't go through all the details of how we do it, but there are so many elements of what we do that are unique to Microchip and are really hard for anybody else to copy. They can copy products, they can copy other things, but culture is unique to us.
The employees we have are unique to us, and the culture is what unleashes the capability of these 21+ employees that are part of the team. In the famous words of a management consultant, you know, you can have the greatest strategy, but without the culture, you really don't liberate that strategy. We honestly believe that culture eats strategy for breakfast. A great culture will figure things out even if the strategy is not perfect, and that's where we're at. Looking at it from an employee perspective, don't just take our word.
These are awards we win on a constant basis, that are employees who vote to whatever the agency is that's collecting data as to how do they see and then why are we a preferred place for them to carry out their careers and their aspirations and where they go. These come from all over the world. Here you'll see there's U.S., there's Asian, there's Irish, there's Bay Area within the U.S., there's Arizona within the U.S., etc. Just to wrap it up again, those are all the different elements that you just saw in the slide. That's what Microchip 3.0 is. It continues to be a place for us to focus, improve, and deliver results. The formula for winning for us is three parts.
It's that overall organic growth rate at over a five-year period of time, 10%-15% using fiscal year 2021. While we do that, continuing to expand the non-GAAP gross margins and operating margins, generate a ton of cash as we do that, and increase the return to our shareholders off that cash that we generate. Make that a virtuous machine of how we do this. Finally, not just what we do, but how we do it, is to do it on a strong foundation that is built on culture and sustainability. Every one of us believes that our very best is yet to come in front of us with all the different work that we're doing.
On that note, I wanna say thank you for your attention and if I can perhaps invite Steve to come back up. This is a Q&A session. If you have a question, please raise your hand. We'll get a microphone out to you. When you're recognized, please state your name, your relationship to the company, and then your question. Then either Steve or I, or both of us, will provide the answer. With that, the floor is open. Can't go without one question.
Well, you did such a good job, there are no questions. Okay. If there are no questions, we'll adjourn the meeting. Thank you for coming to the shareholders' meeting. For many of you who are from, not employees, who are from outside, hopefully we'll see you again next year. Thank you.