MICROCHIP TECHNOLOGY ANNOUNCES FINANCIAL RESULTS FOR THIRD QUARTER OF FISCAL YEAR 2024
CHANDLER, Arizona – February 1, 2024 – (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.
•Net sales of $1.766 billion, down 21.7% sequentially and down 18.6% from the year ago quarter. Our preliminary net sales results provided on January 8, 2024 was for net sales to be down 22% sequentially.
•On a GAAP basis: gross profit of 63.4%; operating income of $529.4 million and 30.0% of net sales; net income of $419.2 million; and EPS of $0.77 per diluted share. Our guidance provided on November 2, 2023 was for GAAP EPS of $0.68 to $0.76 per diluted share.
•On a Non-GAAP basis: gross profit of 63.8%; operating income of $728.1 million and 41.2% of net sales; net income of $592.7 million and EPS of $1.08 per diluted share. Our guidance provided on November 2, 2023 was for Non-GAAP EPS of $1.09 to $1.17 per diluted share.
•Returned approximately $352.0 million to shareholders in the December quarter through dividends of $237.4 million and the repurchase of approximately $114.6 million, or 1.4 million shares of our common stock, at an average price of $82.66 per share under our previously announced $4.0 billion stock buyback program. Cumulatively repurchased approximately $1.966 billion, or 25.9 million shares, over the last nine quarters.
•Paid down $392.0 million of debt in the December 2023 quarter. Cumulatively paid down $7.1 billion of debt over the last 22 quarters. Reduced net leverage to 1.27x.
•Record quarterly dividend declared today for the March quarter of 45.0 cents per share, an increase of 25.7% from the year ago quarter.
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Three Months Ended December 31, 2023(1)
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| Net sales | $1,765.7 | |||||||||||||
| GAAP | % |
Non-GAAP(2)
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% | |||||||||||
| 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.”