Microchip Technology Reports Q3 Fiscal 2025 Financial Results with Net Sales of $1.026 Billion and Operational Adjustments for Future Profitability

Microchip Technology reported Q3 net sales of $1.026 billion, down 41.9% year-over-year, with a GAAP net loss of $53.6 million.

Quiver AI Summary

Microchip Technology Incorporated reported net sales of $1.026 billion for the third quarter of fiscal 2025, marking an 11.8% decrease sequentially and a 41.9% drop from the same quarter last year. The company posted a GAAP net loss of $53.6 million, or $0.10 per diluted share, compared to a GAAP net income of $419.2 million in the same quarter of the previous year. Non-GAAP results were more favorable, showing a net income of $107.3 million, or $0.20 per diluted share. In light of the challenges, including inventory levels reaching 266 days, CEO Steve Sanghi emphasized ongoing restructuring efforts and operational improvements. The company also declared a quarterly dividend of 45.5 cents per share, representing a 1.1% increase from the prior year. Looking ahead, guidance for the upcoming quarter is set between $920 million to $1 billion in net sales.

Potential Positives

• Microchip declared a quarterly cash dividend of 45.5 cents per share, reflecting a 1.1% increase from the prior year, demonstrating the company's commitment to returning value to shareholders.
• Non-GAAP net income was reported at $107.3 million, or $0.20 per diluted share, indicating the company's ability to generate positive income on a non-GAAP basis even amid challenging market conditions.
• The company reported a significant gross profit margin of 55.4% on a non-GAAP basis, showcasing effective cost management and profitability relative to its sales.
• Microchip's proactive steps to realign its business, including restructuring its manufacturing footprint and adjusting its channel strategy, point towards a focused approach to enhance competitiveness and operational efficiency.

Potential Negatives

• Net sales of $1.026 billion represent a significant decline of 41.9% compared to the same quarter in the previous year, indicating troubling performance trends.
• GAAP net loss of $53.6 million contrasts sharply with the GAAP net income of $419.2 million reported in the same quarter last year, reflecting serious financial challenges.
• Forward-looking guidance for net sales in the March quarter is expected to be between $920 million and $1 billion, suggesting ongoing struggles to recover revenue levels.

FAQ

What were Microchip's net sales for the December quarter?

Microchip reported net sales of $1.026 billion for the December quarter, down 41.9% from the previous year's quarter.

How did GAAP and Non-GAAP earnings compare?

GAAP net loss was $53.6 million, or $0.10 per diluted share, while Non-GAAP net income was $107.3 million, or $0.20 per diluted share.

What is the dividend declared for the March quarter?

The Board of Directors declared a quarterly cash dividend of 45.5 cents per share, a 1.1% increase from last year.

What actions is Microchip taking to improve financial performance?

Microchip is restructuring its manufacturing footprint, adjusting its channel strategy, and enhancing customer engagement to improve financial performance.

What is Microchip's sales guidance for the March quarter?

Microchip's sales guidance for the March quarter is between $920.0 million and $1.000 billion.

Disclaimer: This is an AI-generated summary of a press release distributed by GlobeNewswire. The model used to summarize this release may make mistakes. See the full release here.

$MCHP Congressional Stock Trading

Members of Congress have traded $MCHP stock 1 times in the past 6 months. Of those trades, 0 have been purchases and 1 have been sales.

Here’s a breakdown of recent trading of $MCHP stock by members of Congress over the last 6 months:

• REPRESENTATIVE JOHN JAMES sold up to $15,000 on 09/04.

To track congressional stock trading, check out Quiver Quantitative's congressional trading dashboard.

$MCHP Insider Trading Activity

$MCHP insiders have traded $MCHP stock on the open market 2 times in the past 6 months. Of those trades, 0 have been purchases and 2 have been sales.

Here’s a breakdown of recent trading of $MCHP stock by insiders over the last 6 months:

• JAMES ERIC BJORNHOLT (SENIOR VP AND CFO) has made 0 purchases and 2 sales selling 6,842 shares for an estimated $493,163.

To track insider transactions, check out Quiver Quantitative's insider trading dashboard.

$MCHP Hedge Fund Activity

We have seen 432 institutional investors add shares of $MCHP stock to their portfolio, and 735 decrease their positions in their most recent quarter.

Here are some of the largest recent moves:

• JPMORGAN CHASE & CO added 11,838,146 shares (+68.9%) to their portfolio in Q3 2024, for an estimated $950,484,742
• FIL LTD added 7,176,325 shares (+15123.3%) to their portfolio in Q3 2024, for an estimated $576,187,134
• AMERIPRISE FINANCIAL INC removed 6,593,525 shares (-84.7%) from their portfolio in Q3 2024, for an estimated $529,394,122
• INVESCO LTD. removed 3,705,771 shares (-28.4%) from their portfolio in Q3 2024, for an estimated $297,536,353
• FMR LLC removed 3,698,018 shares (-69.0%) from their portfolio in Q3 2024, for an estimated $296,913,865
• VAN ECK ASSOCIATES CORP added 3,131,807 shares (+39.3%) to their portfolio in Q4 2024, for an estimated $179,609,131
• ASSENAGON ASSET MANAGEMENT S.A. added 2,829,082 shares (+9901.6%) to their portfolio in Q4 2024, for an estimated $162,247,852

To track hedge funds' stock portfolios, check out Quiver Quantitative's institutional holdings dashboard.

Full Release

• 
  
  Net sales of
  
  
  $1.026 billion
  
  
  ,
  
  
  down 11.8%
  
  
  sequentially and
  
  
  down
  
  
  41.9%
  
  
  from the year ago quarter.
  
  
  Our updated guidance provided on December 2, 2024 was net sales of $1.025 billion.
  
  


• 
  
  On a GAAP basis: gross profit of
  
  
  54.7%
  
  
  ; operating income of
  
  
  $30.9 million
  
  
  and
  
  
  3.0%
  
  
  of net sales; net loss of
  
  
  $53.6 million
  
  
  ; and l
  
  
  oss of $0.10
  
  
  per diluted share. Our guidance provided on
  
  
  November 5, 2024
  
  
  was for GAAP e
  
  
  arnings (loss) per share
  
  
  of $
  
  
  (0.04)
  
  
  to $
  
  
  0.03
  
  
  per diluted share.
  
  


• 
  
  On a Non-GAAP basis: gross profit of
  
  
  55.4%
  
  
  ; operating income of
  
  
  $210.7 million
  
  
  and
  
  
  20.5%
  
  
  of net sales; net income of
  
  
  $107.3 million
  
  
  ; and EPS of
  
  
  $0.20
  
  
  per diluted share.
  
  
  Our updated guidance provided on December 2, 2024 was for Non-GAAP EPS of $0.25 per diluted share.
  
  


• 
  
  Returned approximately
  
  
  $244.6 million
  
  
  to stockholders in the
  
  
  December
  
  
  quarter through dividends
  
  
  .
  
  


• 
  
  Quarterly
  
  
  dividend declared today for the
  
  
  March
  
  
  quarter of
  
  
  45.5 cents
  
  
  per share, an increase of
  
  
  1.1
  
  
  % from the year ago quarter.
  
  
  
  

CHANDLER, Ariz., Feb. 06, 2025 (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 December 31, 2024, as summarized in the table below.

⁽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 2025 were $1.026 billion, down 41.9% from net sales of $1.766 billion in the prior year's third fiscal quarter.

GAAP net loss for the third quarter of fiscal 2025 was $53.6 million, or $0.10 per diluted share, down from GAAP net income of $419.2 million, or $0.77 per diluted share, in the prior year's third fiscal quarter. For the third quarters of fiscal 2025 and fiscal 2024, GAAP results were adversely impacted by amortization of acquired intangible assets associated with our previous acquisitions.

Non-GAAP net income for the third quarter of fiscal 2025 was $107.3 million, or $0.20 per diluted share, down from non-GAAP net income of $592.7 million, or $1.08 per diluted share, in the prior year's third fiscal quarter. For the third quarters of fiscal 2025 and fiscal 2024, 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 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 quarterly cash dividend on its common stock of 45.5 cents per share, up 1.1% from the year ago quarter. The quarterly dividend is payable on March 7, 2025 to stockholders of record on February 24, 2025.

"Our December quarter performance reflects the need for the decisive steps we are taking to realign our business, as revenue declined to $1.026 billion and inventory levels reached 266 days," said Steve Sanghi, Microchip's CEO and President. "Since returning as CEO in November, we have already initiated several key actions, including restructuring our manufacturing footprint, adjusting our channel strategy and intensifying our customer engagement. Our initial assessment indicates clear areas for operational enhancement, and we are taking a methodical yet urgent approach to evaluating all aspects of our business and implementing necessary changes to strengthen our competitive position."

Eric Bjornholt, Microchip's Chief Financial Officer, said, "We are executing on multiple operational initiatives to enhance our financial performance. Our focus remains on returning to premium profitability levels that have historically differentiated Microchip, supported by our diversified business model. While navigating the current cycle, we continue to focus on inventory management while maintaining our commitment to shareholder returns."

Rich Simoncic, Microchip's Chief Operating Officer, said, "Our comprehensive technology platform is driving innovation across critical markets, with our new RISC-V processors and expanded connectivity solutions demonstrating strong momentum in industrial, automotive, and aerospace applications. By delivering advanced AI capabilities, enhanced networking, and robust security technologies, we believe we are well-positioned to meet the evolving needs of our customers in increasingly complex technological environments."

Mr. Sanghi concluded, "While we have seen substantial inventory destocking at our customers and channel partners, we believe the correction cycle is still not completed. Our March quarter bookings are running at a higher rate than December, though overall levels remain low. With net sales guidance of $920.0 million to $1.000 billion for our March quarter, we maintain a cautious but focused approach and look forward to providing a comprehensive update during our business update call on March 3, 2025."

Fourth Quarter Fiscal Year 2025 Outlook:

The following statements are based on current expectations. These statements are forward-looking, and actual results may differ materially.

⁽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, 2025. 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, 2025.



⁽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.



⁽⁵⁾

Our GAAP guidance excludes the impact of any potential charges related to our ongoing evaluation of restructuring activities.

Capital expenditures for the quarter ending March 31, 2025 are expected to be about $23 million. Capital expenditures for all of fiscal 2025 are expected to be about $135 million. Consistent with the slowing macroeconomic environment in fiscal 2025, we have paused most of our factory expansion actions and reduced our planned capital investments through fiscal 2026. However, we are adding capital equipment to selectively expand our production capacity and add research and development equipment.

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, 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 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 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 2025 quarter between $55 and $65 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




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

RECONCILIATION OF GAAP RESEARCH AND DEVELOPMENT EXPENSES TO NON-GAAP RESEARCH AND DEVELOPMENT EXPENSES

RECONCILIATION OF GAAP SELLING, GENERAL AND ADMINISTRATIVE EXPENSES TO NON-GAAP SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

RECONCILIATION OF GAAP OPERATING EXPENSES TO NON-GAAP OPERATING EXPENSES

⁽¹⁾

Amortization of acquired intangible assets consists of core and developed technology and customer-related acquired intangible assets in connection with business combinations. Such charges are excluded for purposes of calculating certain non-GAAP measures.

RECONCILIATION OF GAAP OPERATING INCOME TO NON-GAAP OPERATING INCOME

⁽¹⁾

Amortization of acquired intangible assets consists of core and developed technology and customer-related acquired intangible assets in connection with business combinations. Such charges are excluded for purposes of calculating certain non-GAAP measures. The use of acquired intangible assets contributed to our revenues earned during the periods presented.

RECONCILIATION OF GAAP OTHER EXPENSE, NET TO NON-GAAP OTHER EXPENSE, NET

RECONCILIATION OF GAAP INCOME TAX PROVISION TO NON-GAAP INCOME TAX PROVISION

RECONCILIATION OF GAAP NET (LOSS) INCOME AND GAAP DILUTED NET (LOSS) INCOME PER COMMON SHARE TO NON-GAAP NET INCOME AND NON-GAAP DILUTED NET INCOME PER COMMON SHARE

RECONCILIATION OF GAAP CASH FLOW FROM OPERATIONS TO FREE CASH FLOW