Microchip Technology Announces Financial Results for Second Quarter of Fiscal Year 2025
Net sales of $1.164 billion, down 6.2% sequentially and down 48.4% from the year ago quarter. The midpoint of our guidance provided on August 1, 2024 was net sales of $1.150 billion.
Revenue, gross profit and non-GAAP gross profit were positively impacted by a $13.3 million legal settlement. This settlement also positively impacted GAAP and non-GAAP EPS by $0.02 per diluted share.
On a GAAP basis: gross profit of 57.4%; operating income of $146.6 million and 12.6% of net sales; net income of $78.4 million; and EPS of $0.14 per diluted share. Our guidance provided on August 1, 2024 was for GAAP EPS of $0.10 to $0.14 per diluted share.
On a Non-GAAP basis: gross profit of 59.5%; operating income of $340.8 million and 29.3% of net sales; net income of $250.2 million; and EPS of $0.46 per diluted share. Our guidance provided on August 1, 2024 was for Non-GAAP EPS of $0.40 to $0.46 per diluted share.
Returned approximately $261.0 million to stockholders in the September quarter through dividends of $243.7 million and the repurchase of $17.3 million, or 0.2 million shares of our common stock, at an average price of $76.86 per share under our previously announced $4.0 billion stock buyback program. Cumulatively repurchased $2.444 billion, or 31.4 million shares, over the last twelve quarters.
Record quarterly dividend declared today for the December quarter of 45.5 cents per share, an increase of 3.6% from the year ago quarter.
CHANDLER, Ariz., Nov. 05, 2024 (GLOBE NEWSWIRE) -- (NASDAQ:MCHP) - Microchip Technology Incorporated, a leading provider of smart, connected, and secure embedded control solutions, today reported results for the three months ended September 30, 2024, as summarized in the table below.
Three Months Ended September 30, 2024(1)
Net sales
$1,163.8
GAAP
%
Non-GAAP(2)
%
Gross profit
$668.5
57.4%
$692.9
59.5%
Operating income
$146.6
12.6%
$340.8
29.3%
Other expense
$(55.1)
$(53.3)
Income tax provision
$13.1
$37.3
Net income
$78.4
6.7%
$250.2
21.5%
Net income per diluted share
$0.14
$0.46
(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 second quarter of fiscal 2025 were $1.164 billion, down 48.4% from net sales of $2.254 billion in the prior year's second fiscal quarter.
GAAP net income for the second quarter of fiscal 2025 was $78.4 million, or $0.14 per diluted share, down from GAAP net income of $666.6 million, or $1.21 per diluted share, in the prior year's second fiscal quarter. For the second quarters of fiscal 2025 and fiscal 2024, GAAP net income was adversely impacted by amortization of acquired intangible assets associated with our previous acquisitions.
Non-GAAP net income for the second quarter of fiscal 2025 was $250.2 million, or $0.46 per diluted share, down from non-GAAP net income of $889.3 million, or $1.62 per diluted share, in the prior year's second fiscal quarter. For the second quarters of fiscal 2025 and fiscal 2024, our non-GAAP results exclude the effect of share-based compensation, cybersecurity incident expenses, other manufacturing adjustments, 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 second quarters of fiscal 2025 and fiscal 2024, 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 45.5 cents per share, up 3.6% from the year ago quarter. The quarterly dividend is payable on December 6, 2024 to stockholders of record on November 22, 2024.
"Our September quarter results were consistent with our guidance, as we continued to navigate through an inventory correction that's occurring in the midst of macro weakness for many manufacturing businesses, accentuated by heightened weakness in our European business which is concentrated with Industrial and Automotive customers," said Ganesh Moorthy, President and Chief Executive Officer. "The 'green shoots' we saw in recent quarters have progressed unevenly with essentially flat sequential bookings, normalized cancellation rates and much higher expedite requests, which we believe are all positive signs for a potential bottom formation despite limited visibility."
Eric Bjornholt, Microchip's Chief Financial Officer, said, "Our September quarter results reflect continued customer destocking efforts and sluggish end-market demand. We are maintaining strong cost discipline and balance sheet management while taking actions to ensure operational readiness for the anticipated market recovery."
Rich Simoncic, Microchip's Chief Operating Officer, said, "Our Total System Solutions approach is driving strong execution and seeing growing adoption in AI-accelerated servers in the data center markets. Our PCIe switches, SSD controllers, CXL solutions, and associated power and timing products are key to continuing to strengthen our data center portfolio. With our expanding capabilities, we believe we are well-positioned to capitalize on opportunities in this growth market."
Mr. Moorthy concluded, "For the December quarter, we expect net sales between $1.025 billion and $1.095 billion. While substantial inventory destocking has occurred, we continue to face macro uncertainties in what is historically our seasonally weakest quarter. Our design-in momentum continues to remain strong, driven by our Total System Solutions strategy and key market megatrends."
Third Quarter Fiscal Year 2025 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
$1.025 to $1.095 billion
GAAP
Non-GAAP Adjustments(1)
Non-GAAP(1)
Gross Profit
56.2% to 58.1%
$8.4 to $9.4 million
57.0% to 59.0%
Operating Expenses(2)
49.1% to 51.4%
$170.0 to $174.0 million
33.2% to 34.8%
Operating Income
4.8% to 9.1%
$178.4 to $183.4 million
22.2% to 25.8%
Other Expense, net
$69.3 to $69.7 million
($0.2) to $0.2 million
$69.5 million
Income Tax Provision
$1.0 to $13.0 million(3)
$12.6 to $21.1 million
$22.1 to $25.6 million(4)
Net Income (loss)
($21.1) to $16.5 million
$157.0 to $170.9 million
$135.9 to $187.4 million
Diluted Common Shares Outstanding
Approximately 537.3 to 543.0 million shares
Approximately 543.0 million shares
Earnings (Loss) per Diluted Share
($0.04) to $0.03
$0.29 to $0.32
$0.25 to $0.35
(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 December 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 December 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 2025, excluding any transition tax payments associated with the Tax Cuts and Jobs Act.
Capital expenditures for the quarter ending December 31, 2024 are expected to be about $20 million. Capital expenditures for all of fiscal 2025 are expected to be about $150 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, 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, cybersecurity incident expenses, other manufacturing adjustments, 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 second quarters of fiscal 2025 and fiscal 2024, 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 December 2024 quarter between $75 and $85 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 September 30,
Six Months Ended September 30,
2024
2023
2024
2023
Net sales
$
1,163.8
$
2,254.3
$
2,405.1
$
4,542.9
Cost of sales
495.3
726.9
999.7
1,457.1
Gross profit
668.5
1,527.4
1,405.4
3,085.8
Research and development
240.7
292.6
482.4
591.1
Selling, general and administrative
157.0
196.6
307.5
400.2
Amortization of acquired intangible assets
122.7
151.4
245.7
302.9
Special charges and other, net
1.5
1.8
4.1
3.5
Operating expenses
521.9
642.4
1,039.7
1,297.7
Operating income
146.6
885.0
365.7
1,788.1
Other expense, net
(55.1
)
(51.4
)
(112.4
)
(106.2
)
Income before income taxes
91.5
833.6
253.3
1,681.9
Income tax provision
13.1
167.0
45.6
348.9
Net income
$
78.4
$
666.6
$
207.7
$
1,333.0
Basic net income per common share
$
0.15
$
1.23
$
0.39
$
2.45
Diluted net income per common share
$
0.14
$
1.21
$
0.38
$
2.42
Basic common shares outstanding
536.7
543.1
536.7
544.1
Diluted common shares outstanding
542.0
549.2
542.4
550.3
MICROCHIP TECHNOLOGY INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions; unaudited)
ASSETS
September 30,
March 31,
2024
2024
Cash and short-term investments
$
286.1
$
319.7
Accounts receivable, net
1,044.3
1,143.7
Inventories
1,339.6
1,316.0
Other current assets
235.5
233.6
Total current assets
2,905.5
3,013.0
Property, plant and equipment, net
1,171.2
1,194.6
Other assets
11,545.6
11,665.6
Total assets
$
15,622.3
$
15,873.2
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued liabilities
$
1,339.4
$
1,520.0
Current portion of long-term debt
1,946.3
999.4
Total current liabilities
3,285.7
2,519.4
Long-term debt
4,476.6
5,000.4
Long-term income tax payable
590.4
