Press Release: Microchip Technology Announces Financial Results for Third Quarter of Fiscal Year 2021
Microchip Technology Announces Financial Results for Third Quarter of Fiscal Year 2021
CHANDLER, Ariz., Feb. 04, 2021 (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, 2020 as summarized in the following table:
GAAP net sales for the third quarter of fiscal 2021 were $1.35 billion, up 5.0% from net sales of $1.29 billion in the prior year's third fiscal quarter.
GAAP net income for the third quarter of fiscal 2021 was $36.2 million, or $0.13 per diluted share, down from GAAP net income of $311.1 million, or $1.20 per diluted share, in the prior year's third fiscal quarter. For the third quarters of fiscal 2021 and fiscal 2020, GAAP net income was significantly adversely impacted by purchase accounting adjustments associated with our acquisitions. For the third quarter of fiscal 2021, GAAP net income was significantly adversely impacted by a loss on debt settlement.
Non-GAAP net income for the third quarter of fiscal 2021 was $444.9 million, or $1.62 per diluted share, up from non-GAAP net income of $340.8 million, or $1.32 per diluted share, in the prior year's third fiscal quarter. For the third quarters of fiscal 2021 and fiscal 2020, our non-GAAP results exclude the effect of share-based compensation, COVID-19 shelter-in-place restrictions on manufacturing activities, 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, IT security remediation costs, non-cash interest expense on our convertible debentures, losses on the settlement of debt, and gains related to equity investments. For the third quarters of fiscal 2021 and fiscal 2020, 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 has declared a record quarterly cash dividend on its common stock of 39 cents per share, up 5.8% from the cash dividend paid last quarter. The quarterly dividend is payable on March 8, 2021 to stockholders of record on February 22, 2021.
"The December quarter represented a shift of the business cycle back to growth as we saw a 3.3% sequential growth in revenue during the December quarter, which typically would be a sequentially down quarter in a normal seasonal environment," said Steve Sanghi, Chief Executive Officer. "Supply constraints in the industry are creating lots of challenges in meeting customer demand and our global operations team is working hard at increasing production at our internal factories and also working with our supply chain partners to get larger allocations of manufacturing capacity and materials."
Mr. Sanghi added, "We delivered a record non-GAAP gross margin of 63% and a record non-GAAP operating margin of 39.8% in the December quarter. We achieved non-GAAP EPS of $1.62 which was 5 cents above the midpoint of our guidance."
"In the December quarter, we saw the automotive, industrial and consumer home appliance markets strengthen further," said Ganesh Moorthy, President and Chief Operating Officer. "As expected, the end markets that benefited earlier in 2020 from the work from home and medical related demand surge remained at more normal demand patterns. Finally, demand for our products that go into the office environment remained weak as many businesses remain predominantly with work from home policies, thus deferring spending for these items."
Mr. Moorthy added, "During the December quarter, a robust overall business environment, accentuated by rising demand in the automotive, industrial and consumer end market, along with low levels of inventory in the distribution channel, resulted in supply constraints in practically all of our internal and external factories. In spite of our concerted efforts to increase our capacity, we expect the supply constraints we are currently seeing to continue through much of calendar year 2021. As a result, we have seen our lead times stretch out for many of our products where the constraints are more acute. We have also experienced increases in material and sub-contracted manufacturing costs and have had to take steps to secure capacity for calendar year 2021 as well as adjust our pricing accordingly."
Eric Bjornholt, Microchip's Chief Financial Officer, said, "We continued to aggressively pay down our debt with another $289.7 million of payments during the December quarter, reflecting a cumulative debt pay down of $3.24 billion over the past ten quarters, as we have actively managed the working capital requirements for the business. In the December quarter, we executed multiple debt transactions which both reduced the amount of convertible bonds we have on our balance sheet as well as reduced the weighted average interest rate of our outstanding debt. In calendar year 2020, we reduced the amount of convertible bonds on Microchip's balance sheet by approximately $2.9 billion. We believe that these actions with our convertible bonds will continue to benefit our stockholders by significantly reducing share count dilution to the extent our stock price appreciates over time."
Mr. Sanghi concluded, "Our December quarter bookings were strong and have continued that way through January, resulting in record levels of backlog and long-term order visibility. Supply constraints are currently a significant challenge as our internal and external manufacturing capacity is facing limitations. We expect our net sales in the March quarter to be up between 5% and 10% sequentially. We are guiding to a much stronger than seasonal March quarter and we expect significant revenue growth in calendar year 2021."
Microchip's Highlights for the Quarter Ended December 31, 2020:
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February 04, 2021 15:50 ET (20:50 GMT)