(NASDAQ: MCHP) - Microchip Technology
Incorporated, a leading provider of smart, connected, and secure
embedded control solutions, today reported results for the three
months ended December 31, 2023, as summarized in the table
below.
|
Three Months Ended December 31,
2023(1) |
Net sales |
$1,765.7 |
|
|
|
|
GAAP |
% |
Non-GAAP(2) |
% |
Gross profit |
$1,120.0 |
63.4% |
$1,126.0 |
63.8% |
Operating income |
$529.4 |
30.0% |
$728.1 |
41.2% |
Other expense |
$(45.1) |
|
$(45.1) |
|
Income tax provision |
$65.1 |
|
$90.3 |
|
Net income |
$419.2 |
23.7% |
$592.7 |
33.6% |
Net income per diluted share |
$0.77 |
|
$1.08 |
|
(1) In millions, except per share amounts and
percentages of net sales.(2) See the "Use of Non-GAAP Financial
Measures" section of this release.
Net sales for the third quarter of fiscal 2024 were
$1.766 billion, down 18.6% from net sales of $2.169 billion in the
prior year's third fiscal quarter.
GAAP net income for the third quarter of fiscal
2024 was $419.2 million, or $0.77 per diluted share, down from GAAP
net income of $580.3 million, or $1.04 per diluted share, in the
prior year's third fiscal quarter. For the third quarters of fiscal
2024 and fiscal 2023, GAAP net income was adversely impacted by
amortization of acquired intangible assets associated with our
previous acquisitions.
Non-GAAP net income for the third quarter of fiscal
2024 was $592.7 million, or $1.08 per diluted share, down from
non-GAAP net income of $863.7 million, or $1.56 per diluted share,
in the prior year's third fiscal quarter. For the third quarters of
fiscal 2024 and fiscal 2023, our non-GAAP results exclude the
effect of share-based compensation, expenses related to our
acquisition activities (including intangible asset amortization,
severance, and other restructuring costs, and legal and other
general and administrative expenses associated with acquisitions
including legal fees and expenses for litigation and investigations
related to our Microsemi acquisition), professional services
associated with certain legal matters, and losses on the settlement
of debt. For the third quarters of fiscal 2024 and fiscal 2023, our
non-GAAP income tax expense is presented based on projected cash
taxes for the applicable fiscal year, excluding transition tax
payments under the Tax Cuts and Jobs Act. A reconciliation of our
non-GAAP and GAAP results is included in this press release.
Microchip announced today that its Board of
Directors declared a record quarterly cash dividend on its common
stock of 45.0 cents per share, up 25.7% from the year ago quarter.
The quarterly dividend is payable on March 8, 2024 to
stockholders of record on February 23, 2024.
"Our December quarter performance fell short of our
November guidance, primarily due to weaker business conditions,"
said Ganesh Moorthy, President and Chief Executive Officer.
"Revenue declined 21.7% sequentially as weak demand drove customers
to cut shipments and extend shutdowns to further de-risk their
inventories, which prevented us from fulfilling previously planned
shipments from backlog. We are proactively taking measures to
navigate these short-term challenges, with our focus firmly set on
ensuring the long-term sustainability and growth of our
business."
Mr. Moorthy added, "While we remain confident in
the long-term opportunities for our business, we are cautious about
demand in the near term given the weak macro environment and
customers' ongoing actions to reduce inventory. As such, we are
taking steps to limit discretionary spending and tightly manage
inventory levels during this downcycle. As a result, we intend to
have two-week shutdowns in our large wafer fabrication facilities
in each of the March and June quarters and reduced activity in many
of our other factories, resulting in underutilization charges. We
believe that our average lead times of less than eight weeks
position us to navigate this choppy market environment effectively.
At the same time, we continue investing in the innovative
technologies and capabilities that will allow us to serve customers
better and emerge even stronger when end market conditions
improve."
Eric Bjornholt, Microchip's Chief Financial
Officer, said, "In response to a more severe than expected
downturn, we have taken additional expense control measures,
resulting in a sequential decline in non-GAAP operating expenses of
11.6% and a reduction of 14.4% from our peak non-GAAP operating
expenses. We expect to reduce our non-GAAP operating expenses in
the March 2024 quarter. Given our healthy cash generation during
the December quarter, we continued to pay down our debt with $392
million of payments, reflecting a cumulative debt pay down of over
$7.1 billion over the past 22 quarters. As of the end of the last
quarter in 2023, our net debt to adjusted EBITDA ratio was 1.27x,
down from 1.56x in the same quarter of 2022."
Mr. Moorthy concluded, "As we enter the March
quarter, we anticipate customers may continue to reduce inventory
levels in the short-term as they adjust operations and seek to
match demand in an increasingly dynamic market. We anticipate net
sales in the March quarter to be between $1.225 billion and $1.425
billion. Notwithstanding any near-term macro weakness, we are
confident that our solutions remain the engine of innovation for
the applications and end markets we serve. Our focus on Total
System Solutions and key market megatrends continue to fuel strong
design win momentum which we expect will drive above-market
long-term growth. Our unwavering commitment to executing our MCHP
3.0 strategic imperatives prioritizes striking a balance between
fostering sustainable long-term growth and delivering substantial
value to our shareholders."
Microchip's Highlights for the Quarter
Ended December 31, 2023:
- Introduced the industry’s most complete solution for 800G
active electrical cables (AECs) used for generative AI networks.
Our new META-DX2C 800G retimer is supported by a complete hardware
and software reference design with key Microchip components.
- Released our latest TrustAnchor security IC to meet and exceed
heightened automotive secure authentication requirements. Available
as a CryptoAuthentication™ or CryptoAutomotive™ secure IC, the new
TA101 device focuses on larger key sizes and enhanced cybersecurity
requirements.
- Expanded and announced Microchip’s Detroit Automotive
Technology Center as the destination for automotive clients. The
24,000-square-foot facility includes new high-voltage and
E-Mobility labs, as well as technical training rooms for automotive
clients to develop and optimize designs.
- Showcased expanded RISC-V-based solutions, partnerships and
system design tools at the 2023 RISC-V Summit including BeagleBoard
hardware and system on module (SoM) products, as well as AI/ML
solutions and an industrial edge solutions suite. Also presented
keynote highlighting new advancements in intelligent edge compute
and security paradigms based on the RISC-V platform.
- Significantly expanded Strategic R&D commitment in the UK
with a new design center in Cambridge that will give Microchip
access to a highly skilled engineering workforce, allowing it to
expand rapidly and develop new solutions for a wide range of
markets.
- Received the Outstanding Community Project Award from The
Republic of the Philippines for notable efforts towards undertaking
social welfare programs that greatly benefit the Filipino
community. Programs included mentoring students, providing school
supplies and health kits, as well as participating in
beautification projects.
- Launched AVR® EB family of microcontrollers to reduce noise,
vibration and system harshness in BLDC motor applications. The
family offers a smaller, more cost-effective solution for
sophisticated waveform control with increased efficiency.
- Achieved QML class Q qualification for radiation-tolerant
PolarFire® FPGAs that bring high levels of density and performance
to space applications, saving system cost and engineering efforts
through low power consumption and immunity to configuration
upsets.
- Introduced press-fit terminal power modules for solder-free
solutions in high-volume manufacturing to help customers automate
their installation processes. The SP1F and SP3F power modules are
highly configurable in Silicon Carbide (SiC) or Silicon (Si)
technology.
- Unveiled a new standard of enhanced code security with the
PIC18-Q24 family of microcontrollers that introduced the
programming and debugging interface disable (PDID) feature. When
enabled, this feature is designed to lock out access to the
programming/debugging interface and block unauthorized attempts to
read, modify or erase firmware.
- Expanded our development ecosystem with MPLAB® XC-DSC compiler
with flexible licensing options. Specifically optimized for dsPIC®
digital signal controllers, the new compiler licenses are
custom-tailored for real-time applications.
- Announced a new 32-bit MCU that features an embedded hardware
security module to safeguard industrial and consumer applications.
The highly configurable PIC32CZ CA devices are available with a 300
MHz Arm®Cortex®-M7 processor.
Fourth Quarter Fiscal Year 2024
Outlook:
The following statements are based on current
expectations. These statements are forward-looking, and actual
results may differ materially.
|
Microchip Consolidated Guidance |
Net Sales |
$1.225 to $1.425 billion |
|
|
|
GAAP |
Non-GAAP Adjustments |
Non-GAAP(1) |
Gross Profit |
58.5% to 61.1% |
$5.9 to $6.9 million |
59.0% to 61.6 % |
Operating Expenses(2) |
41.1% to 46.9 % |
$198.7 to $202.7 million |
26.9% to 30.7% |
Operating Income |
11.6% to 20.0% |
$204.6 to $209.6 million |
28.3% to 34.7% |
Other Expense, net |
$55.3 to $57.7 million |
($0.2) to $0.2 million |
$55.5 to $57.5 million |
Income Tax Provision |
$17.4 to $52.3 million(3) |
$8.9 to $23.4 million |
$40.8 to $61.2 million(4) |
Net Income |
$69.4 to $174.9 million |
$181.0 to $200.9 million |
$250.4 to $375.8 million |
Diluted Common Shares Outstanding |
Approximately 545.5 to 546.5 million shares |
|
Approximately 545.5 to 546.5 million shares |
Earnings per Diluted Share |
$0.13 to $0.32 |
$0.33 to $0.36 |
$0.46 to $0.68 |
(1) See the "Use of Non-GAAP Financial Measures"
section of this release for information regarding our non-GAAP
guidance.(2) We are not able to estimate the amount of certain
Special Charges and Other, net that may be incurred during the
quarter ending March 31, 2024. Therefore, our estimate of GAAP
operating expenses excludes certain amounts that may be recognized
as Special Charges and Other, net in the quarter ending March 31,
2024.(3) The forecast for GAAP tax expense excludes any unexpected
tax events that may occur during the quarter, as these amounts
cannot be forecasted.(4) Represents the expected cash tax rate for
fiscal 2024, excluding any transition tax payments associated with
the Tax Cuts and Jobs Act.
- Capital expenditures for the quarter ending March 31, 2024 are
expected to be between $50 million and $60 million. Capital
expenditures for all of fiscal 2024 are expected to be between $300
million and $310 million. We are selectively adding capital
equipment to maintain, grow and operate our internal manufacturing
capabilities to support the expected growth of our business.
Under the GAAP revenue recognition standard, which
we adopted on April 1, 2018, we are required to recognize revenue
when control of the product changes from us to a customer or
distributor. We focus our sales and marketing efforts on creating
demand for our products in the end markets we serve and not on
moving inventory into our distribution network. We also manage our
manufacturing and supply chain operations, including our
distributor relationships, towards the goal of having our products
available at the time and location the end customer desires.
Use of Non-GAAP Financial
Measures: Our non-GAAP adjustments, where applicable,
include the effect of share-based compensation, expenses related to
our acquisition activities (including intangible asset
amortization, severance, and other restructuring costs, and legal
and other general and administrative expenses associated with
acquisitions including legal fees and expenses for litigation and
investigations related to our Microsemi acquisition), professional
services associated with certain legal matters, and losses on the
settlement of debt. For the third quarters of fiscal 2024 and
fiscal 2023, our non-GAAP income tax expense is presented based on
projected cash taxes for the fiscal year, excluding transition tax
payments under the Tax Cuts and Jobs Act.
We are required to estimate the cost of certain
forms of share-based compensation, including employee stock
options, restricted stock units, and our employee stock purchase
plan, and to record a commensurate expense in our income statement.
Share-based compensation expense is a non-cash expense that varies
in amount from period to period and is affected by the price of our
stock at the date of grant. The price of our stock is affected by
market forces that are difficult to predict and are not within the
control of management. Our other non-GAAP adjustments are either
non-cash expenses, unusual or infrequent items, or other expenses
related to transactions. Management excludes all of these items
from its internal operating forecasts and models.
We are using non-GAAP operating expenses in
dollars, including non-GAAP research and development expenses and
non-GAAP selling, general and administrative expenses, non-GAAP
other expense, net, and non-GAAP income tax rate, which exclude the
items noted above, as applicable, to permit additional analysis of
our performance.
Management believes these non-GAAP measures are
useful to investors because they enhance the understanding of our
historical financial performance and comparability between periods.
Many of our investors have requested that we disclose this non-GAAP
information because they believe it is useful in understanding our
performance as it excludes non-cash and other charges that many
investors feel may obscure our underlying operating results.
Management uses non-GAAP measures to manage and assess the
profitability of our business and for compensation purposes. We
also use our non-GAAP results when developing and monitoring our
budgets and spending. Our determination of these non-GAAP measures
might not be the same as similarly titled measures used by other
companies, and it should not be construed as a substitute for
amounts determined in accordance with GAAP. There are limitations
associated with using these non-GAAP measures, including that they
exclude financial information that some may consider important in
evaluating our performance. Management compensates for this by
presenting information on both a GAAP and non-GAAP basis for
investors and providing reconciliations of the GAAP and non-GAAP
results.
Generally, gross profit fluctuates over time,
driven primarily by the mix of products sold and licensing revenue;
variances in manufacturing yields; fixed cost absorption; wafer fab
loading levels; costs of wafers from foundries; inventory reserves;
pricing pressures in our non-proprietary product lines; and
competitive and economic conditions. Operating expenses fluctuate
over time, primarily due to net sales and profit levels.
Diluted Common Shares Outstanding can vary for,
among other things, the trading price of our common stock, the
exercise of options or vesting of restricted stock units, the
potential for incremental dilutive shares from our convertible
debentures (additional information regarding our share count is
available in the investor relations section of our website under
the heading "Supplemental Financial Information"), and repurchases
or issuances of shares of our common stock. The diluted common
shares outstanding presented in the guidance table above assumes an
average Microchip stock price in the March 2024 quarter between $80
and $90 per share (however, we make no prediction as to what our
actual share price will be for such period or any other period and
we cannot estimate what our stock option exercise activity will be
during the quarter).
|
MICROCHIP TECHNOLOGY INCORPORATED AND
SUBSIDIARIES |
CONDENSED CONSOLIDATED STATEMENTS OF INCOME |
(in millions, except per share amounts; unaudited) |
|
|
Three Months Ended December 31, |
|
Nine Months Ended December 31, |
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Net sales |
$ |
1,765.7 |
|
|
$ |
2,169.2 |
|
|
$ |
6,308.6 |
|
|
$ |
6,206.0 |
|
Cost of sales |
|
645.7 |
|
|
|
698.4 |
|
|
|
2,102.8 |
|
|
|
2,027.4 |
|
Gross profit |
|
1,120.0 |
|
|
|
1,470.8 |
|
|
|
4,205.8 |
|
|
|
4,178.6 |
|
|
|
|
|
|
|
|
|
Research and development |
|
266.0 |
|
|
|
282.4 |
|
|
|
857.1 |
|
|
|
820.0 |
|
Selling, general and
administrative |
|
172.2 |
|
|
|
202.9 |
|
|
|
572.4 |
|
|
|
594.2 |
|
Amortization of acquired
intangible assets |
|
151.3 |
|
|
|
167.4 |
|
|
|
454.2 |
|
|
|
502.5 |
|
Special charges (income) and
other, net |
|
1.1 |
|
|
|
6.5 |
|
|
|
4.6 |
|
|
|
(6.1 |
) |
Operating expenses |
|
590.6 |
|
|
|
659.2 |
|
|
|
1,888.3 |
|
|
|
1,910.6 |
|
|
|
|
|
|
|
|
|
Operating income |
|
529.4 |
|
|
|
811.6 |
|
|
|
2,317.5 |
|
|
|
2,268.0 |
|
|
|
|
|
|
|
|
|
Other expense, net |
|
(45.1 |
) |
|
|
(49.4 |
) |
|
|
(151.3 |
) |
|
|
(160.1 |
) |
Income before income
taxes |
|
484.3 |
|
|
|
762.2 |
|
|
|
2,166.2 |
|
|
|
2,107.9 |
|
Income tax provision |
|
65.1 |
|
|
|
181.9 |
|
|
|
414.0 |
|
|
|
474.2 |
|
Net income |
$ |
419.2 |
|
|
$ |
580.3 |
|
|
$ |
1,752.2 |
|
|
$ |
1,633.7 |
|
|
|
|
|
|
|
|
|
Basic net income per common
share |
$ |
0.78 |
|
|
$ |
1.06 |
|
|
$ |
3.23 |
|
|
$ |
2.96 |
|
Diluted net income per common
share |
$ |
0.77 |
|
|
$ |
1.04 |
|
|
$ |
3.19 |
|
|
$ |
2.93 |
|
|
|
|
|
|
|
|
|
Basic common shares
outstanding |
|
540.8 |
|
|
|
549.2 |
|
|
|
543.0 |
|
|
|
551.5 |
|
Diluted common shares
outstanding |
|
546.5 |
|
|
|
555.4 |
|
|
|
549.0 |
|
|
|
558.4 |
|
|
MICROCHIP TECHNOLOGY INCORPORATED AND
SUBSIDIARIES |
CONDENSED CONSOLIDATED BALANCE SHEETS |
(in millions; unaudited) |
|
ASSETS |
|
December 31, |
|
March 31, |
|
2023 |
|
2023 |
Cash and short-term investments |
$ |
281.0 |
|
|
$ |
234.0 |
|
Accounts receivable, net |
|
1,398.1 |
|
|
|
1,305.3 |
|
Inventories |
|
1,311.1 |
|
|
|
1,324.9 |
|
Other current assets |
|
229.4 |
|
|
|
205.1 |
|
Total current assets |
|
3,219.6 |
|
|
|
3,069.3 |
|
|
|
|
|
Property, plant and equipment, net |
|
1,208.3 |
|
|
|
1,177.9 |
|
Other assets |
|
11,715.1 |
|
|
|
12,123.1 |
|
Total assets |
$ |
16,143.0 |
|
|
$ |
16,370.3 |
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
Accounts payable and accrued liabilities |
$ |
1,631.1 |
|
|
$ |
1,720.4 |
|
Current portion of long-term debt |
|
1,662.1 |
|
|
|
1,398.2 |
|
Total current liabilities |
|
3,293.2 |
|
|
|
3,118.6 |
|
|
|
|
|
Long-term debt |
|
4,033.3 |
|
|
|
5,041.7 |
|
Long-term income tax payable |
|
635.1 |
|
|
|
705.7 |
|
Long-term deferred tax liability |
|
33.0 |
|
|
|
42.7 |
|
Other long-term liabilities |
|
1,068.2 |
|
|
|
948.0 |
|
|
|
|
|
Stockholders' equity |
|
7,080.2 |
|
|
|
6,513.6 |
|
Total liabilities and stockholders' equity |
$ |
16,143.0 |
|
|
$ |
16,370.3 |
|
|
MICROCHIP TECHNOLOGY INCORPORATED AND
SUBSIDIARIES |
RECONCILIATION OF GAAP TO NON-GAAP MEASURES |
(in millions, except per share amounts and percentages;
unaudited) |
|
RECONCILIATION OF GAAP GROSS PROFIT TO NON-GAAP GROSS
PROFIT |
|
Three Months Ended December 31, |
|
Nine Months Ended December 31, |
|
2023 |
|
2022 |
|
2023 |
|
2022 |
Gross profit, as reported |
$ |
1,120.0 |
|
|
$ |
1,470.8 |
|
|
$ |
4,205.8 |
|
|
$ |
4,178.6 |
|
Share-based compensation
expense |
|
6.0 |
|
|
|
6.9 |
|
|
|
20.2 |
|
|
|
21.1 |
|
Non-GAAP gross profit |
$ |
1,126.0 |
|
|
$ |
1,477.7 |
|
|
$ |
4,226.0 |
|
|
$ |
4,199.7 |
|
GAAP gross profit
percentage |
|
63.4 |
% |
|
|
67.8 |
% |
|
|
66.7 |
% |
|
|
67.3 |
% |
Non-GAAP gross profit
percentage |
|
63.8 |
% |
|
|
68.1 |
% |
|
|
67.0 |
% |
|
|
67.7 |
% |
|
RECONCILIATION OF GAAP RESEARCH AND DEVELOPMENT EXPENSES TO
NON-GAAP RESEARCH AND DEVELOPMENT EXPENSES |
|
Three Months Ended December 31, |
|
Nine Months Ended December 31, |
|
2023 |
|
2022 |
|
2023 |
|
2022 |
Research and development expenses, as reported |
$ |
266.0 |
|
|
$ |
282.4 |
|
|
$ |
857.1 |
|
|
$ |
820.0 |
|
Share-based compensation
expense |
|
(24.4 |
) |
|
|
(21.2 |
) |
|
|
(71.0 |
) |
|
|
(61.1 |
) |
Other adjustments |
|
(0.1 |
) |
|
|
(0.2 |
) |
|
|
(0.5 |
) |
|
|
(0.6 |
) |
Non-GAAP research and
development expenses |
$ |
241.5 |
|
|
$ |
261.0 |
|
|
$ |
785.6 |
|
|
$ |
758.3 |
|
GAAP research and development
expenses as a percentage of net sales |
|
15.1 |
% |
|
|
13.0 |
% |
|
|
13.6 |
% |
|
|
13.2 |
% |
Non-GAAP research and
development expenses as a percentage of net sales |
|
13.7 |
% |
|
|
12.0 |
% |
|
|
12.5 |
% |
|
|
12.2 |
% |
|
RECONCILIATION OF GAAP SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES TO NON-GAAP SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES |
|
Three Months Ended December 31, |
|
Nine Months Ended December 31, |
|
2023 |
|
2022 |
|
2023 |
|
2022 |
Selling, general and administrative expenses, as reported |
$ |
172.2 |
|
|
$ |
202.9 |
|
|
$ |
572.4 |
|
|
$ |
594.2 |
|
Share-based compensation
expense |
|
(14.4 |
) |
|
|
(15.9 |
) |
|
|
(43.5 |
) |
|
|
(44.3 |
) |
Other adjustments |
|
(1.0 |
) |
|
|
(0.1 |
) |
|
|
(0.5 |
) |
|
|
(1.4 |
) |
Professional services
associated with certain legal matters |
|
(0.4 |
) |
|
|
— |
|
|
|
(1.2 |
) |
|
|
(3.2 |
) |
Non-GAAP selling, general and
administrative expenses |
$ |
156.4 |
|
|
$ |
186.9 |
|
|
$ |
527.2 |
|
|
$ |
545.3 |
|
GAAP selling, general and
administrative expenses as a percentage of net sales |
|
9.8 |
% |
|
|
9.4 |
% |
|
|
9.1 |
% |
|
|
9.6 |
% |
Non-GAAP selling, general and
administrative expenses as a percentage of net sales |
|
8.9 |
% |
|
|
8.6 |
% |
|
|
8.4 |
% |
|
|
8.8 |
% |
|
RECONCILIATION OF GAAP OPERATING EXPENSES TO NON-GAAP
OPERATING EXPENSES |
|
Three Months Ended December 31, |
|
Nine Months Ended December 31, |
|
2023 |
|
2022 |
|
2023 |
|
2022 |
Operating expenses, as reported |
$ |
590.6 |
|
|
$ |
659.2 |
|
|
$ |
1,888.3 |
|
|
$ |
1,910.6 |
|
Share-based compensation
expense |
|
(38.8 |
) |
|
|
(37.1 |
) |
|
|
(114.5 |
) |
|
|
(105.4 |
) |
Other adjustments |
|
(1.1 |
) |
|
|
(0.3 |
) |
|
|
(1.0 |
) |
|
|
(2.0 |
) |
Professional services
associated with certain legal matters |
|
(0.4 |
) |
|
|
— |
|
|
|
(1.2 |
) |
|
|
(3.2 |
) |
Amortization of acquired
intangible assets |
|
(151.3 |
) |
|
|
(167.4 |
) |
|
|
(454.2 |
) |
|
|
(502.5 |
) |
Special charges (income) and
other, net |
|
(1.1 |
) |
|
|
(6.5 |
) |
|
|
(4.6 |
) |
|
|
6.1 |
|
Non-GAAP operating
expenses |
$ |
397.9 |
|
|
$ |
447.9 |
|
|
$ |
1,312.8 |
|
|
$ |
1,303.6 |
|
GAAP operating expenses as a
percentage of net sales |
|
33.4 |
% |
|
|
30.4 |
% |
|
|
29.9 |
% |
|
|
30.8 |
% |
Non-GAAP operating expenses as
a percentage of net sales |
|
22.5 |
% |
|
|
20.6 |
% |
|
|
20.8 |
% |
|
|
21.0 |
% |
|
RECONCILIATION OF GAAP OPERATING INCOME TO NON-GAAP
OPERATING INCOME |
|
Three Months Ended December 31, |
|
Nine Months Ended December 31, |
|
2023 |
|
2022 |
|
2023 |
|
2022 |
Operating income, as reported |
$ |
529.4 |
|
|
$ |
811.6 |
|
|
$ |
2,317.5 |
|
|
$ |
2,268.0 |
|
Share-based compensation
expense |
|
44.8 |
|
|
|
44.0 |
|
|
|
134.7 |
|
|
|
126.5 |
|
Other adjustments |
|
1.1 |
|
|
|
0.3 |
|
|
|
1.0 |
|
|
|
2.0 |
|
Professional services
associated with certain legal matters |
|
0.4 |
|
|
|
— |
|
|
|
1.2 |
|
|
|
3.2 |
|
Amortization of acquired
intangible assets |
|
151.3 |
|
|
|
167.4 |
|
|
|
454.2 |
|
|
|
502.5 |
|
Special charges (income) and
other, net |
|
1.1 |
|
|
|
6.5 |
|
|
|
4.6 |
|
|
|
(6.1 |
) |
Non-GAAP operating income |
$ |
728.1 |
|
|
$ |
1,029.8 |
|
|
$ |
2,913.2 |
|
|
$ |
2,896.1 |
|
GAAP operating income as a
percentage of net sales |
|
30.0 |
% |
|
|
37.4 |
% |
|
|
36.7 |
% |
|
|
36.5 |
% |
Non-GAAP operating income as a
percentage of net sales |
|
41.2 |
% |
|
|
47.5 |
% |
|
|
46.2 |
% |
|
|
46.7 |
% |
|
RECONCILIATION OF GAAP OTHER EXPENSE, NET TO NON-GAAP OTHER
EXPENSE, NET |
|
Three Months Ended December 31, |
|
Nine Months Ended December 31, |
|
2023 |
|
2022 |
|
2023 |
|
2022 |
Other expense, net, as reported |
$ |
(45.1 |
) |
|
$ |
(49.4 |
) |
|
$ |
(151.3 |
) |
|
$ |
(160.1 |
) |
Loss on settlement of
debt |
|
— |
|
|
|
— |
|
|
|
12.2 |
|
|
|
8.3 |
|
Non-cash other expense,
net |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
0.1 |
|
Non-GAAP other expense,
net |
$ |
(45.1 |
) |
|
$ |
(49.4 |
) |
|
$ |
(139.1 |
) |
|
$ |
(151.7 |
) |
GAAP other expense, net, as a
percentage of net sales |
|
(2.6 |
)% |
|
|
(2.3 |
)% |
|
|
(2.4 |
)% |
|
|
(2.6 |
)% |
Non-GAAP other expense, net,
as a percentage of net sales |
|
(2.6 |
)% |
|
|
(2.3 |
)% |
|
|
(2.2 |
)% |
|
|
(2.4 |
)% |
|
RECONCILIATION OF GAAP INCOME TAX PROVISION TO NON-GAAP
INCOME TAX PROVISION |
|
Three Months Ended December 31, |
|
Nine Months Ended December 31, |
|
2023 |
|
2022 |
|
2023 |
|
2022 |
Income tax provision as reported |
$ |
65.1 |
|
|
$ |
181.9 |
|
|
$ |
414.0 |
|
|
$ |
474.2 |
|
Income tax rate, as
reported |
|
13.4 |
% |
|
|
23.9 |
% |
|
|
19.1 |
% |
|
|
22.5 |
% |
Other non-GAAP tax
adjustment |
|
25.2 |
|
|
|
(65.2 |
) |
|
|
(27.2 |
) |
|
|
(175.1 |
) |
Non-GAAP income tax
provision |
$ |
90.3 |
|
|
$ |
116.7 |
|
|
$ |
386.8 |
|
|
$ |
299.1 |
|
Non-GAAP income tax rate |
|
13.2 |
% |
|
|
11.9 |
% |
|
|
13.9 |
% |
|
|
10.9 |
% |
|
RECONCILIATION OF GAAP NET INCOME AND GAAP DILUTED NET
INCOME PER COMMON SHARE TO NON-GAAP NET INCOME AND NON-GAAP DILUTED
NET INCOME PER COMMON SHARE |
|
Three Months Ended December 31, |
|
Nine Months Ended December 31, |
|
2023 |
|
2022 |
|
2023 |
|
2022 |
Net income, as reported |
$ |
419.2 |
|
|
$ |
580.3 |
|
|
$ |
1,752.2 |
|
|
$ |
1,633.7 |
|
Share-based compensation
expense |
|
44.8 |
|
|
|
44.0 |
|
|
|
134.7 |
|
|
|
126.5 |
|
Other adjustments |
|
1.1 |
|
|
|
0.3 |
|
|
|
1.0 |
|
|
|
2.0 |
|
Professional services
associated with certain legal matters |
|
0.4 |
|
|
|
— |
|
|
|
1.2 |
|
|
|
3.2 |
|
Amortization of acquired
intangible assets |
|
151.3 |
|
|
|
167.4 |
|
|
|
454.2 |
|
|
|
502.5 |
|
Special charges (income) and
other, net |
|
1.1 |
|
|
|
6.5 |
|
|
|
4.6 |
|
|
|
(6.1 |
) |
Loss on settlement of
debt |
|
— |
|
|
|
— |
|
|
|
12.2 |
|
|
|
8.3 |
|
Non-cash other expense,
net |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
0.1 |
|
Other non-GAAP tax
adjustment |
|
(25.2 |
) |
|
|
65.2 |
|
|
|
27.2 |
|
|
|
175.1 |
|
Non-GAAP net income |
$ |
592.7 |
|
|
$ |
863.7 |
|
|
$ |
2,387.3 |
|
|
$ |
2,445.3 |
|
GAAP net income as a
percentage of net sales |
|
23.7 |
% |
|
|
26.8 |
% |
|
|
27.8 |
% |
|
|
26.3 |
% |
Non-GAAP net income as a
percentage of net sales |
|
33.6 |
% |
|
|
39.8 |
% |
|
|
37.8 |
% |
|
|
39.4 |
% |
Diluted net income per common
share, as reported |
$ |
0.77 |
|
|
$ |
1.04 |
|
|
$ |
3.19 |
|
|
$ |
2.93 |
|
Non-GAAP diluted net income
per common share |
$ |
1.08 |
|
|
$ |
1.56 |
|
|
$ |
4.35 |
|
|
$ |
4.38 |
|
Diluted common shares
outstanding, as reported |
|
546.5 |
|
|
|
555.4 |
|
|
|
549.0 |
|
|
|
558.4 |
|
Diluted common shares
outstanding non-GAAP |
|
546.5 |
|
|
|
555.4 |
|
|
|
549.0 |
|
|
|
558.4 |
|
|
RECONCILIATION OF GAAP CASH FLOW FROM OPERATIONS TO FREE
CASH FLOW |
|
Three Months Ended December 31, |
|
Nine Months Ended December 31, |
|
2023 |
|
2022 |
|
2023 |
|
2022 |
GAAP cash flow from operations, as reported |
$ |
853.3 |
|
|
$ |
1,277.9 |
|
|
$ |
2,462.7 |
|
|
$ |
2,911.5 |
|
Capital expenditures |
|
(59.5 |
) |
|
|
(141.3 |
) |
|
|
(245.0 |
) |
|
|
(373.5 |
) |
Free cash flow |
$ |
793.8 |
|
|
$ |
1,136.6 |
|
|
$ |
2,217.7 |
|
|
$ |
2,538.0 |
|
GAAP cash flow from operations
as a percentage of net sales |
|
48.3 |
% |
|
|
58.9 |
% |
|
|
39.0 |
% |
|
|
46.9 |
% |
Free cash flow as a percentage
of net sales |
|
45.0 |
% |
|
|
52.4 |
% |
|
|
35.2 |
% |
|
|
40.9 |
% |
Microchip will host a conference call today,
February 1, 2024 at 5:00 p.m. (Eastern Time) to discuss this
release. This call will be simulcast over the Internet at
www.microchip.com. The webcast will be available for replay until
February 15, 2024.
A telephonic replay of the conference call will be
available at approximately 8:00 p.m. (Eastern Time) on February 1,
2024 and will remain available until 5:00 p.m. (Eastern Time) on
February 15, 2024. Interested parties may listen to the replay by
dialing 201-612-7415/877-660-6853 and entering access code
13742831.
Cautionary Statement:
The statements in this release relating to
proactively taking measures to navigate these short-term
challenges, our focus firmly set on ensuring the long-term
sustainability and growth of our business, remaining confident in
the long-term opportunities for our business, being cautious about
demand in the near term given the weak macro environment and
customers' ongoing actions to reduce inventory, taking steps to
limit discretionary spending and tightly manage inventory levels
during this downcycle, that we intend to have two-week shutdowns in
our large wafer fabrication facilities in each of the March and
June quarters and reduced activity in many of our other factories,
resulting in underutilization charges, that we believe our average
lead times of less than eight weeks position us to navigate this
choppy market environment effectively, that we continue investing
in the innovative technologies and capabilities that will allow us
to serve customers better and emerge even stronger when end market
conditions improve, that we expect to reduce our non-GAAP operating
expenses in the March 2024 quarter, that we anticipate customers
may continue to reduce inventory levels in the short-term as they
adjust operations and seek to match demand in an increasingly
dynamic market, that we anticipate net sales in the March quarter
to be between $1.225 billion and $1.425 billion, that we are
confident that our solutions remain the engine of innovation for
the applications and end markets we serve, that our focus on Total
System Solutions and key market megatrends continue to fuel strong
design win momentum which we expect will drive above-market
long-term growth, our unwavering commitment to executing our MCHP
3.0 strategic imperatives prioritizes striking a balance between
fostering sustainable long-term growth and delivering substantial
value to our shareholders, that our highly skilled engineering
workforce will allow it to expand rapidly and develop new solutions
for a wide range of markets, our fourth quarter fiscal 2024
guidance for net sales and GAAP and non-GAAP gross profit,
operating expenses, operating income, other expense, net, income
tax provision, net income, diluted common shares outstanding,
earnings per diluted share, capital expenditures for the March 2024
quarter and for all of fiscal 2024, selectively adding capital
equipment to maintain, grow and operate our internal manufacturing
capabilities to support the expected growth of our business, our
belief that non-GAAP measures are useful to investors and our
assumed average stock price in the March 2024 quarter are
forward-looking statements made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995.
These statements involve risks and uncertainties that could cause
our actual results to differ materially, including, but not limited
to: any continued uncertainty, fluctuations or weakness in the U.S.
and world economies (including China) due to changes in interest
rates, high inflation or the impact of the COVID-19 pandemic
(including lock-downs in China), actions taken or which may be
taken by the Biden administration or the U.S. Congress, monetary
policy, political, geopolitical, trade or other issues in the U.S.
or internationally (including the military conflicts in
Ukraine-Russia and the Middle East), further changes in demand or
market acceptance of our products and the products of our customers
and our ability to meet any increases in market demand or customer
requests to reschedule or cancel orders; the mix of inventory we
hold, our ability to satisfy any short-term orders from our
inventory and our ability to effectively manage our inventory
levels; the impact that the CHIPS Act will have on increasing
manufacturing capacity in our industry by providing incentives for
us, our competitors and foundries to build new wafer manufacturing
facilities or expand existing facilities; the amount and timing of
any incentives we may receive under the CHIPS Act, the impact of
current and future changes in U.S. corporate tax laws (including
the Inflation Reduction Act of 2022 and the Tax Cuts and Jobs Act
of 2017), foreign currency effects on our business; changes in
utilization of our manufacturing capacity and our ability to
effectively manage and expand our production levels to meet any
increases in market demand or any customer requests to reschedule
or cancel orders; the impact of inflation on our business;
competitive developments including pricing pressures; the level of
orders that are received and can be shipped in a quarter; our
ability to realize the expected benefits of our long-term supply
assurance program; changes or fluctuations in customer order
patterns and seasonality; our ability to effectively manage our
supply of wafers from third party wafer foundries to meet any
decreases or increases in our needs and the cost of such wafers,
our ability to obtain additional capacity from our suppliers to
increase production to meet any future increases in market demand;
our ability to successfully integrate the operations and employees,
retain key employees and customers and otherwise realize the
expected synergies and benefits of our acquisitions; the impact of
any future significant acquisitions or strategic transactions we
may make; the costs and outcome of any current or future litigation
or other matters involving our acquisitions (including the acquired
business, intellectual property, customers, or other issues); the
costs and outcome of any current or future tax audit or
investigation regarding our business or our acquired businesses;
fluctuations in our stock price and trading volume which could
impact the number of shares we acquire under our share repurchase
program and the timing of such repurchases; disruptions in our
business or the businesses of our customers or suppliers due to
natural disasters (including any floods in Thailand), terrorist
activity, armed conflict, war, worldwide oil prices and supply,
public health concerns (including the COVID-19 pandemic) or
disruptions in the transportation system; and general economic,
industry or political conditions in the United States or
internationally.
For a detailed discussion of these and other risk
factors, please refer to Microchip's filings on Forms 10-K and
10-Q. You can obtain copies of Forms 10-K and 10-Q and other
relevant documents for free at Microchip's website
(www.microchip.com) or the SEC's website (www.sec.gov) or from
commercial document retrieval services.
Stockholders of Microchip are cautioned not to
place undue reliance on our forward-looking statements, which speak
only as of the date such statements are made. Microchip does not
undertake any obligation to publicly update any forward-looking
statements to reflect events, circumstances or new information
after this February 1, 2024 press release, or to reflect the
occurrence of unanticipated events.
About Microchip:
Microchip Technology Incorporated is a leading
provider of smart, connected and secure embedded control solutions.
Its easy-to-use development tools and comprehensive product
portfolio enable customers to create optimal designs, which reduce
risk while lowering total system cost and time to market. Our
solutions serve more than 125,000 customers across the industrial,
automotive, consumer, aerospace and defense, communications and
computing markets. Headquartered in Chandler, Arizona, Microchip
offers outstanding technical support along with dependable delivery
and quality. For more information, visit the Microchip website at
www.microchip.com.
Note: The Microchip name and logo, the Microchip
logo, AVR, dsPIC, MPLAB and PolarFire are registered trademarks of
Microchip Technology Incorporated in the U.S.A. and other
countries. CryptoAuthentication and CryptoAutomotive are trademarks
of Microchip Technology Incorporated in the U.S.A. and other
countries. All other trademarks mentioned herein are the property
of their respective companies.
INVESTOR RELATIONS CONTACT:J. Eric Bjornholt --
CFO..... (480) 792-7804
Microchip Technology (NASDAQ:MCHP)
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