(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, 2023, as summarized in the table
below.
|
Three Months Ended September 30,
2023(1) |
Net sales |
$2,254.3 |
|
|
|
|
GAAP |
% |
Non-GAAP(2) |
% |
Gross profit |
$1,527.4 |
67.8% |
$1,534.8 |
68.1% |
Operating income |
$885.0 |
39.3% |
$1,084.7 |
48.1% |
Other expense |
$(51.4) |
|
$(48.3) |
|
Income tax provision |
$167.0 |
|
$147.1 |
|
Net income |
$666.6 |
29.6% |
$889.3 |
39.4% |
Net income per diluted share |
$1.21 |
|
$1.62 |
|
(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 2024 were $2.254
billion, up 8.7% from net sales of $2.073 billion in the prior
year's second fiscal quarter.
GAAP net income for the second quarter of fiscal 2024 was $666.6
million, or $1.21 per diluted share, up from GAAP net income of
$546.2 million, or $0.98 per diluted share, in the prior year's
second fiscal quarter. For the second 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 second quarter of fiscal 2024 was
$889.3 million, or $1.62 per diluted share, up from non-GAAP net
income of $814.4 million, or $1.46 per diluted share, in the prior
year's second fiscal quarter. For the second 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 second 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 43.9 cents
per share, up 33.8% from the year ago quarter. The quarterly
dividend is payable on December 6, 2023 to stockholders of
record on November 22, 2023.
"Amid a turbulent macro environment, we delivered fiscal
second-quarter results that were in line with our guidance," said
Ganesh Moorthy, President and Chief Executive Officer. "Revenue
declined 1.5% sequentially, as all regions of the world and most
end markets experienced varying degrees of weakness. This marks a
turning point for an extraordinary three-year growth period for
Microchip. Throughout this period, we successfully addressed supply
chain challenges, invested well over a billion dollars in expanding
our capacity, and boosted our investments for high-growth markets
and applications, demonstrating our disciplined commitment to
supply resilience and product innovation, in the pursuit of
above-average long-term growth."
Mr. Moorthy added, "As our customers adjust to their evolving
demand patterns, we have continued to accommodate customer pushout
requests where possible. We have also made considerable progress in
further decreasing average lead times and ended the September
quarter at roughly 13 weeks. The reduction in lead times is
resulting in lower bookings and reduced near-term visibility. The
actions we are taking to reduce lead times are designed to enable
our customers and us to navigate this uncertain environment with
agility and effectiveness."
Eric Bjornholt, Microchip's Chief Financial Officer, said,
"During the September quarter, we took measures to refinance some
of our maturing debt. In light of the unpredictable interest-rate
climate, we strategically utilized a blend of a new $750 million
Term Loan A and our credit line to retire our $1 billion bond which
matured in September 2023. We also issued $1 billion in commercial
paper, which resulted in about a 90 basis point lower interest rate
than the rate under our line of credit. We also retired $18.2
million of principal amount of our convertible bonds due in 2027
with a total cash payment of $42.7 million, effectively mitigating
potential share count dilution. We remain focused on continuing to
enhance our capital structure in the future."
Mr. Moorthy concluded, "Given the broader economic landscape
characterized by decelerating economic activity and escalating
business ambiguity, along with our proactive measures to assist
clients in managing their inventory positions and backlog, we
anticipate net sales in the December quarter to be down 15% to down
20% sequentially. Notwithstanding any near-term macro weakness, we
are confident that semiconductors remain the engine of innovation
for the applications and markets we serve. Our focus on Total
System Solutions and key market megatrends is fueling strong
design-win momentum that we expect will drive above-market
long-term growth."
Microchip's Highlights for the Quarter Ended
September 30, 2023:
- Launched a $300M multi-year investment initiative to expand our
presence in India including funding for facilities, engineering
labs, talent acquisition and support for regional technology
consortia and educational institutions.
- Opened a new R&D facility for capacity growth in Hyderabad
India’s One Golden Mile Office Tower with capacity for 1,000
employees. The 168,000-square-foot center will support growth plans
for many years to come.
- Jointly announced with GlobalFoundries® (GF) that Microchip’s
28-nm SuperFlash® embedded Flash memory solution is now in
production at GF. This widely deployed nonvolatile memory (NVM)
solution is optimized for microcontrollers, smart cards and IoT
chips.
- On September 15, 2023, Moody's Investors Service (Moody's)
upgraded our senior unsecured rating to Baa1 from Baa2. Moody's
also assigned a P-2 short term rating to our new commercial paper
program. The rating outlook is stable.
- Revealed nine new PolarFire® FPGA and SoC solution stacks to
speed intelligent edge designs and reduce development cost and
risk. The tailored stacks span the industrial and communications
sectors and smart embedded vision, motor control and optical access
technologies. They feature IP, reference designs, development kits,
application notes, demo guides and more.
- Announced that PolarFire® FPGA’s single-chip crypto design flow
was “successfully reviewed” by the United Kingdom Government’s
National Cyber Security Centre (NCSC). The review confirms the
strength of PolarFire FPGA’s security solution.
- Teamed up with Intelligent Hardware Korea (IHWK) to develop an
analog compute platform to accelerate edge AI/ML inferencing. Using
Microchip’s (SST®) memBrain™ nonvolatile in-memory compute
technology and working with universities, IHWK is creating a SoC
processor for neurotechnology devices.
- Introduced industry’s first low-pin-count MCU family with I3C®
support. The PIC18 Q20 product line is space efficient and easily
interfaces with devices operating in multiple voltage domains.
- Launched Microchip’s first automotive-qualified 10BASE-T1S
Ethernet devices. The LAN8670/1/2 family of Ethernet PHYs
simplifies the architecture to connect low-speed devices into a
standard Ethernet network.
- Introduced a new family of 10BASE-T1S Ethernet solutions to
ease the design for OEMs to connect automotive devices to a
10BASE-T1S Ethernet network. The new family of LAN8650/1 MAC-PHY
devices connects low-cost microcontrollers without a built-in
Ethernet MAC to a 10BASE-T1S network.
- Revealed MPLAB® Machine Learning Development Suite to
incorporate ML more easily into MCUs and MPUs. The unique solution
is the first to support 8-bit, 16-bit and 32-bit MCUs and 32-bit
MPUs for ML at the edge.
- Expanded Microchip’s Gigabit Ethernet switch with Audio-Video
Bridging and Time Sensitive Network (AVB/TSN) and integrated PHYs
for industrial automation. The LAN9662 includes a real-time engine
to process high-speed cyclical data in flight.
Third 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 |
$1.803 to $1.916 billion |
|
|
|
GAAP |
Non-GAAP Adjustments |
Non-GAAP(1) |
Gross Profit |
63.6% to 64.6% |
$7.2 to $8.2 million |
64.0% to 65.0% |
Operating Expenses(2) |
33.2% to 34.2% |
$196.9 to $200.9 million |
22.7% to 23.3% |
Operating Income |
29.4% to 31.4% |
$204.1 to $209.1 million |
40.7% to 42.3% |
Other Expense, net |
$50.8 to $53.2 million |
($0.2) to $0.2 million |
$51.0 to $53.0 million |
Income Tax Provision |
$107.8 to $134.3 million(3) |
$17.6 to $19.2 million |
$90.2 to $115.1 million(4) |
Net Income |
$371.3 to $413.9 million |
$221.5 to $228.5 million |
$592.8 to $642.4 million |
Diluted Common Shares Outstanding |
Approximately 546.0 to 547.0 million shares |
|
Approximately 546.0 to 547.0 million shares |
Earnings per Diluted Share |
$0.68 to $0.76 |
$0.41 |
$1.09 to $1.17 |
(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, 2023. 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, 2023.(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 December 31, 2023
are expected to be between $50 million and $70 million. Capital
expenditures for all of fiscal 2024 are expected to be between $300
million and $325 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 second 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 December 2023 quarter between
$70 and $80 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, |
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Net sales |
$ |
2,254.3 |
|
|
$ |
2,073.2 |
|
|
$ |
4,542.9 |
|
|
$ |
4,036.8 |
|
Cost of sales |
|
726.9 |
|
|
|
675.3 |
|
|
|
1,457.1 |
|
|
|
1,329.0 |
|
Gross profit |
|
1,527.4 |
|
|
|
1,397.9 |
|
|
|
3,085.8 |
|
|
|
2,707.8 |
|
|
|
|
|
|
|
|
|
Research and development |
|
292.6 |
|
|
|
268.6 |
|
|
|
591.1 |
|
|
|
537.6 |
|
Selling, general and
administrative |
|
196.6 |
|
|
|
202.4 |
|
|
|
400.2 |
|
|
|
391.3 |
|
Amortization of acquired
intangible assets |
|
151.4 |
|
|
|
167.5 |
|
|
|
302.9 |
|
|
|
335.1 |
|
Special charges (income) and
other, net |
|
1.8 |
|
|
|
4.3 |
|
|
|
3.5 |
|
|
|
(12.6 |
) |
Operating expenses |
|
642.4 |
|
|
|
642.8 |
|
|
|
1,297.7 |
|
|
|
1,251.4 |
|
|
|
|
|
|
|
|
|
Operating income |
|
885.0 |
|
|
|
755.1 |
|
|
|
1,788.1 |
|
|
|
1,456.4 |
|
|
|
|
|
|
|
|
|
Other expense, net |
|
(51.4 |
) |
|
|
(56.0 |
) |
|
|
(106.2 |
) |
|
|
(110.7 |
) |
Income before income
taxes |
|
833.6 |
|
|
|
699.1 |
|
|
|
1,681.9 |
|
|
|
1,345.7 |
|
Income tax provision |
|
167.0 |
|
|
|
152.9 |
|
|
|
348.9 |
|
|
|
292.3 |
|
Net income |
$ |
666.6 |
|
|
$ |
546.2 |
|
|
$ |
1,333.0 |
|
|
$ |
1,053.4 |
|
|
|
|
|
|
|
|
|
Basic net income per common
share |
$ |
1.23 |
|
|
$ |
0.99 |
|
|
$ |
2.45 |
|
|
$ |
1.91 |
|
Diluted net income per common
share |
$ |
1.21 |
|
|
$ |
0.98 |
|
|
$ |
2.42 |
|
|
$ |
1.88 |
|
|
|
|
|
|
|
|
|
Basic common shares
outstanding |
|
543.1 |
|
|
|
551.5 |
|
|
|
544.1 |
|
|
|
552.7 |
|
Diluted common shares
outstanding |
|
549.2 |
|
|
|
558.3 |
|
|
|
550.3 |
|
|
|
559.9 |
|
MICROCHIP TECHNOLOGY INCORPORATED AND
SUBSIDIARIES |
CONDENSED CONSOLIDATED BALANCE
SHEETS |
(in millions; unaudited) |
|
ASSETS |
|
September 30, |
|
March 31, |
|
|
2023 |
|
|
2023 |
Cash and short-term investments |
$ |
256.6 |
|
$ |
234.0 |
Accounts receivable, net |
|
1,706.2 |
|
|
1,305.3 |
Inventories |
|
1,330.9 |
|
|
1,324.9 |
Other current assets |
|
232.7 |
|
|
205.1 |
Total current assets |
|
3,526.4 |
|
|
3,069.3 |
|
|
|
|
Property, plant and equipment, net |
|
1,206.9 |
|
|
1,177.9 |
Other assets |
|
11,868.1 |
|
|
12,123.1 |
Total assets |
$ |
16,601.4 |
|
$ |
16,370.3 |
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
Accounts payable and accrued liabilities |
$ |
1,751.5 |
|
$ |
1,720.4 |
Current portion of long-term debt |
|
1,661.1 |
|
|
1,398.2 |
Total current liabilities |
|
3,412.6 |
|
|
3,118.6 |
|
|
|
|
Long-term debt |
|
4,414.7 |
|
|
5,041.7 |
Long-term income tax payable |
|
678.5 |
|
|
705.7 |
Long-term deferred tax liability |
|
34.1 |
|
|
42.7 |
Other long-term liabilities |
|
1,093.0 |
|
|
948.0 |
|
|
|
|
Stockholders' equity |
|
6,968.5 |
|
|
6,513.6 |
Total liabilities and stockholders' equity |
$ |
16,601.4 |
|
$ |
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 September 30, |
|
Six Months Ended September 30, |
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Gross profit, as reported |
$ |
1,527.4 |
|
|
$ |
1,397.9 |
|
|
$ |
3,085.8 |
|
|
$ |
2,707.8 |
|
Share-based compensation
expense |
|
7.4 |
|
|
|
6.5 |
|
|
|
14.2 |
|
|
|
14.2 |
|
Non-GAAP gross profit |
$ |
1,534.8 |
|
|
$ |
1,404.4 |
|
|
$ |
3,100.0 |
|
|
$ |
2,722.0 |
|
GAAP gross profit
percentage |
|
67.8 |
% |
|
|
67.4 |
% |
|
|
67.9 |
% |
|
|
67.1 |
% |
Non-GAAP gross profit
percentage |
|
68.1 |
% |
|
|
67.7 |
% |
|
|
68.2 |
% |
|
|
67.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RECONCILIATION OF GAAP RESEARCH AND DEVELOPMENT EXPENSES
TO NON-GAAP RESEARCH AND DEVELOPMENT EXPENSES
|
Three Months Ended September 30, |
|
Six Months Ended September 30, |
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Research and development
expenses, as reported |
$ |
292.6 |
|
|
$ |
268.6 |
|
|
$ |
591.1 |
|
|
$ |
537.6 |
|
Share-based compensation
expense |
|
(23.7 |
) |
|
|
(19.8 |
) |
|
|
(46.6 |
) |
|
|
(39.9 |
) |
Other adjustments |
|
(0.2 |
) |
|
|
(0.2 |
) |
|
|
(0.4 |
) |
|
|
(0.4 |
) |
Non-GAAP research and
development expenses |
$ |
268.7 |
|
|
$ |
248.6 |
|
|
$ |
544.1 |
|
|
$ |
497.3 |
|
GAAP research and development
expenses as a percentage of net sales |
|
13.0 |
% |
|
|
13.0 |
% |
|
|
13.0 |
% |
|
|
13.3 |
% |
Non-GAAP research and
development expenses as a percentage of net sales |
|
11.9 |
% |
|
|
12.0 |
% |
|
|
12.0 |
% |
|
|
12.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RECONCILIATION OF GAAP SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES TO NON-GAAP SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES
|
Three Months Ended September 30, |
|
Six Months Ended September 30, |
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Selling, general and
administrative expenses, as reported |
$ |
196.6 |
|
|
$ |
202.4 |
|
|
$ |
400.2 |
|
|
$ |
391.3 |
|
Share-based compensation
expense |
|
(14.3 |
) |
|
|
(15.0 |
) |
|
|
(29.1 |
) |
|
|
(28.4 |
) |
Other adjustments |
|
(0.6 |
) |
|
|
(0.7 |
) |
|
|
0.5 |
|
|
|
(1.3 |
) |
Professional services
associated with certain legal matters |
|
(0.3 |
) |
|
|
(2.3 |
) |
|
|
(0.8 |
) |
|
|
(3.2 |
) |
Non-GAAP selling, general and
administrative expenses |
$ |
181.4 |
|
|
$ |
184.4 |
|
|
$ |
370.8 |
|
|
$ |
358.4 |
|
GAAP selling, general and
administrative expenses as a percentage of net sales |
|
8.7 |
% |
|
|
9.8 |
% |
|
|
8.8 |
% |
|
|
9.7 |
% |
Non-GAAP selling, general and
administrative expenses as a percentage of net sales |
|
8.0 |
% |
|
|
8.9 |
% |
|
|
8.2 |
% |
|
|
8.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RECONCILIATION OF GAAP OPERATING EXPENSES TO NON-GAAP
OPERATING EXPENSES
|
Three Months Ended September 30, |
|
Six Months Ended September 30, |
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Operating expenses, as
reported |
$ |
642.4 |
|
|
$ |
642.8 |
|
|
$ |
1,297.7 |
|
|
$ |
1,251.4 |
|
Share-based compensation
expense |
|
(38.0 |
) |
|
|
(34.8 |
) |
|
|
(75.7 |
) |
|
|
(68.3 |
) |
Other adjustments |
|
(0.8 |
) |
|
|
(0.9 |
) |
|
|
0.1 |
|
|
|
(1.7 |
) |
Professional services
associated with certain legal matters |
|
(0.3 |
) |
|
|
(2.3 |
) |
|
|
(0.8 |
) |
|
|
(3.2 |
) |
Amortization of acquired
intangible assets |
|
(151.4 |
) |
|
|
(167.5 |
) |
|
|
(302.9 |
) |
|
|
(335.1 |
) |
Special charges (income) and
other, net |
|
(1.8 |
) |
|
|
(4.3 |
) |
|
|
(3.5 |
) |
|
|
12.6 |
|
Non-GAAP operating
expenses |
$ |
450.1 |
|
|
$ |
433.0 |
|
|
$ |
914.9 |
|
|
$ |
855.7 |
|
GAAP operating expenses as a
percentage of net sales |
|
28.5 |
% |
|
|
31.0 |
% |
|
|
28.6 |
% |
|
|
31.0 |
% |
Non-GAAP operating expenses as
a percentage of net sales |
|
20.0 |
% |
|
|
20.9 |
% |
|
|
20.1 |
% |
|
|
21.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RECONCILIATION OF GAAP OPERATING INCOME TO NON-GAAP
OPERATING INCOME
|
Three Months Ended September 30, |
|
Six Months Ended September 30, |
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Operating income, as
reported |
$ |
885.0 |
|
|
$ |
755.1 |
|
|
$ |
1,788.1 |
|
|
$ |
1,456.4 |
|
Share-based compensation
expense |
|
45.4 |
|
|
|
41.3 |
|
|
|
89.9 |
|
|
|
82.5 |
|
Other adjustments |
|
0.8 |
|
|
|
0.9 |
|
|
|
(0.1 |
) |
|
|
1.7 |
|
Professional services
associated with certain legal matters |
|
0.3 |
|
|
|
2.3 |
|
|
|
0.8 |
|
|
|
3.2 |
|
Amortization of acquired
intangible assets |
|
151.4 |
|
|
|
167.5 |
|
|
|
302.9 |
|
|
|
335.1 |
|
Special charges (income) and
other, net |
|
1.8 |
|
|
|
4.3 |
|
|
|
3.5 |
|
|
|
(12.6 |
) |
Non-GAAP operating income |
$ |
1,084.7 |
|
|
$ |
971.4 |
|
|
$ |
2,185.1 |
|
|
$ |
1,866.3 |
|
GAAP operating income as a
percentage of net sales |
|
39.3 |
% |
|
|
36.4 |
% |
|
|
39.4 |
% |
|
|
36.1 |
% |
Non-GAAP operating income as a
percentage of net sales |
|
48.1 |
% |
|
|
46.9 |
% |
|
|
48.1 |
% |
|
|
46.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RECONCILIATION OF GAAP OTHER EXPENSE, NET TO NON-GAAP
OTHER EXPENSE, NET
|
Three Months Ended September 30, |
|
Six Months Ended September 30, |
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Other expense, net, as
reported |
$ |
(51.4 |
) |
|
$ |
(56.0 |
) |
|
$ |
(106.2 |
) |
|
$ |
(110.7 |
) |
Loss on settlement of
debt |
|
3.1 |
|
|
|
2.1 |
|
|
|
12.2 |
|
|
|
8.3 |
|
Non-cash other expense,
net |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
0.1 |
|
Non-GAAP other expense,
net |
$ |
(48.3 |
) |
|
$ |
(53.9 |
) |
|
$ |
(94.0 |
) |
|
$ |
(102.3 |
) |
GAAP other expense, net, as a
percentage of net sales |
|
(2.3 |
)% |
|
|
(2.7 |
)% |
|
|
(2.3 |
)% |
|
|
(2.7 |
)% |
Non-GAAP other expense, net,
as a percentage of net sales |
|
(2.1 |
)% |
|
|
(2.6 |
)% |
|
|
(2.1 |
)% |
|
|
(2.5 |
)% |
|
|
|
|
|
|
|
|
RECONCILIATION OF GAAP INCOME TAX PROVISION TO NON-GAAP
INCOME TAX PROVISION
|
Three Months Ended September 30, |
|
Six Months Ended September 30, |
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Income tax provision as
reported |
$ |
167.0 |
|
|
$ |
152.9 |
|
|
$ |
348.9 |
|
|
$ |
292.3 |
|
Income tax rate, as
reported |
|
20.0 |
% |
|
|
21.9 |
% |
|
|
20.7 |
% |
|
|
21.7 |
% |
Other non-GAAP tax
adjustment |
|
(19.9 |
) |
|
|
(49.8 |
) |
|
|
(52.4 |
) |
|
|
(109.9 |
) |
Non-GAAP income tax
provision |
$ |
147.1 |
|
|
$ |
103.1 |
|
|
$ |
296.5 |
|
|
$ |
182.4 |
|
Non-GAAP income tax rate |
|
14.2 |
% |
|
|
11.2 |
% |
|
|
14.2 |
% |
|
|
10.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 September 30, |
|
Six Months Ended September 30, |
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Net income, as reported |
$ |
666.6 |
|
|
$ |
546.2 |
|
|
$ |
1,333.0 |
|
|
$ |
1,053.4 |
|
Share-based compensation
expense |
|
45.4 |
|
|
|
41.3 |
|
|
|
89.9 |
|
|
|
82.5 |
|
Other adjustments |
|
0.8 |
|
|
|
0.9 |
|
|
|
(0.1 |
) |
|
|
1.7 |
|
Professional services
associated with certain legal matters |
|
0.3 |
|
|
|
2.3 |
|
|
|
0.8 |
|
|
|
3.2 |
|
Amortization of acquired
intangible assets |
|
151.4 |
|
|
|
167.5 |
|
|
|
302.9 |
|
|
|
335.1 |
|
Special charges (income) and
other, net |
|
1.8 |
|
|
|
4.3 |
|
|
|
3.5 |
|
|
|
(12.6 |
) |
Loss on settlement of
debt |
|
3.1 |
|
|
|
2.1 |
|
|
|
12.2 |
|
|
|
8.3 |
|
Non-cash other expense,
net |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
0.1 |
|
Other non-GAAP tax
adjustment |
|
19.9 |
|
|
|
49.8 |
|
|
|
52.4 |
|
|
|
109.9 |
|
Non-GAAP net income |
$ |
889.3 |
|
|
$ |
814.4 |
|
|
$ |
1,794.6 |
|
|
$ |
1,581.6 |
|
GAAP net income as a
percentage of net sales |
|
29.6 |
% |
|
|
26.3 |
% |
|
|
29.3 |
% |
|
|
26.1 |
% |
Non-GAAP net income as a
percentage of net sales |
|
39.4 |
% |
|
|
39.3 |
% |
|
|
39.5 |
% |
|
|
39.2 |
% |
Diluted net income per common
share, as reported |
$ |
1.21 |
|
|
$ |
0.98 |
|
|
$ |
2.42 |
|
|
$ |
1.88 |
|
Non-GAAP diluted net income
per common share |
$ |
1.62 |
|
|
$ |
1.46 |
|
|
$ |
3.26 |
|
|
$ |
2.82 |
|
Diluted common shares
outstanding, as reported |
|
549.2 |
|
|
|
558.3 |
|
|
|
550.3 |
|
|
|
559.9 |
|
Diluted common shares
outstanding non-GAAP |
|
549.2 |
|
|
|
558.3 |
|
|
|
550.3 |
|
|
|
559.9 |
|
|
RECONCILIATION OF GAAP CASH FLOW FROM OPERATIONS TO FREE
CASH FLOW
|
Three Months Ended September 30, |
|
Six Months Ended September 30, |
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
GAAP cash flow from
operations, as reported |
$ |
616.2 |
|
|
$ |
793.2 |
|
|
$ |
1,609.4 |
|
|
$ |
1,633.6 |
|
Capital expenditures |
|
(74.4 |
) |
|
|
(110.3 |
) |
|
|
(185.5 |
) |
|
|
(232.2 |
) |
Free cash flow |
$ |
541.8 |
|
|
$ |
682.9 |
|
|
$ |
1,423.9 |
|
|
$ |
1,401.4 |
|
GAAP cash flow from operations
as a percentage of net sales |
|
27.3 |
% |
|
|
38.3 |
% |
|
|
35.4 |
% |
|
|
40.5 |
% |
Free cash flow as a percentage
of net sales |
|
24.0 |
% |
|
|
32.9 |
% |
|
|
31.3 |
% |
|
|
34.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Microchip will host a conference call today, November 2, 2023 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 November 16, 2023.
A telephonic replay of the conference call will be available at
approximately 8:00 p.m. (Eastern Time) on November 2, 2023 and will
remain available until 5:00 p.m. (Eastern Time) on November 16,
2023. Interested parties may listen to the replay by dialing
201-612-7415/877-660-6853 and entering access code 13740747.
Cautionary Statement:
The statements in this release relating to a turbulent macro
environment, a turning point for an extraordinary three-year growth
period for Microchip, our disciplined commitment to supply
resilience and product innovation, in the pursuit of above-average
long-term growth, accommodating customer pushout requests where
possible, considerable progress in further decreasing average lead
times, that the reduction in lead times is resulting in lower
bookings and reduced near-term visibility, that the actions we are
taking to reduce lead times are designed to enable our customers
and us to navigate this uncertain environment with agility and
effectiveness, effectively mitigating potential share count
dilution, that we remain focused on continuing to enhance our
capital structure in the future, the broader economic landscape
characterized by decelerating economic activity and escalating
business ambiguity, along with our proactive measures to assist
clients in managing their inventory positions and backlog, that we
anticipate net sales in the December quarter to be down 15% to down
20% sequentially, being confident that semiconductors remain the
engine of innovation for the applications and markets we serve,
that our focus on Total System Solutions and key market megatrends
is fueling strong design-win momentum that we expect will drive
above-market long-term growth, that our 168,000 square foot center
in India will support our growth plans for many years to come, our
third 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 December 2023 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
December 2023 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 rising 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), 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 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 preferred supply program and our long-term supply assurance
program; changes or fluctuations in customer order patterns and
seasonality; our ability to obtain a sufficient supply of wafers
from third party wafer foundries to meet our needs and the cost of
such wafers, our ability to obtain additional capacity from our
suppliers to increase production to meet any 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,
our actual average stock price in the December quarter and the
impact such price will have on our share count; 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
November 2, 2023 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, MPLAB, PolarFire, SST, and SuperFlash are registered
trademarks of Microchip Technology Incorporated in the U.S.A. and
other countries. memBrain is a trademark 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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