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Press Release: Microchip Technology Announces -2-

· 02/04/2021 15:50
Microchip Consolidated Guidance ------------------ Net Sales $1.420 to $1.487 billion ------------------ ------------------ ------------------ ------------------ GAAP Non-GAAP Non-GAAP(1) Adjustments ------------------ ------------------ ------------------ ------------------ Gross Margin 62.8% to 63.2% $6.9 to $7.9 63.3% to 63.7% million ------------------ ------------------ ------------------ ------------------ Operating 43.0% to 44.1% $290.5 to $294.3 23.2% to 23.6% Expenses(2) million ------------------ ------------------ ------------------ ------------------ Operating 18.8% to 20.2% $297.4 to $302.2 39.7% to 40.5% Income million ------------------ ------------------ ------------------ ------------------ Other Expense, net $88.0 to $90.0 $13.0 million $75.0 to $77.0 million million ------------------ ------------------ ------------------ ------------------ Income Tax $32.1 to $47.2 $11.3 to $24.9 $20.8 to $22.3 Provision million(3) million million(4) ------------------ ------------------ ------------------ ------------------ Net Income $146.2 to $162.9 $321.7 to $340.1 $467.9 to $503.0 million million million ------------------ ------------------ ------------------ ------------------ Diluted Common Approximately Approximately Shares 280.2 to 281.2 280.2 to 281.2 Outstanding million shares million shares ------------------ ------------------ ------------------ ------------------ Earnings per $0.52 to $0.58 $1.15 to $1.21 $1.67 to $1.79 Diluted Share ------------------ ------------------ ------------------ ------------------ (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, 2021. 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, 2021. (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 expected cash tax rate for fiscal 2021 excluding any transition tax payments associated with the Tax Cuts and Jobs Act. -- Microchip's inventory days in the March 2021 quarter are expected to be in the range of 111 to 119 days, compared to 120 days at December 31, 2020. Our actual inventory level will depend on the inventory that our distributors decide to hold to support their customers, overall demand for our products and our production levels. -- Capital expenditures for the quarter ending March 31, 2021 are expected to be between $50 million and $60 million. Capital expenditures for all of fiscal 2021 are expected to be between $87 million and $97 million. We are continuing to invest in the equipment needed to support the growth of our production capabilities, and to mitigate industry capacity constraints, by bringing in-house some of our wafer fabrication, assembly and test operations that are currently outsourced.IEC/UL 60730 Class B pre-certified solutions for OEMs. -- Unveiled our XpressConnect(TM) family of low-latency PCI Express(R) (PCIe(R)) 5.0 and Compute Express Link(TM) (CXL(TM)) 1.1/2.0 retimers, tripling high-speed signal reach and enabling data center equipment providers to harness advancement in compute IO performance. -- Collaborated with Innovium to deliver the industry's highest-density secured Ethernet switching solution for hyperscale data centers and telecom service providers, demonstrating interoperability between Microchip's META-DX1 terabit-class Ethernet Physical-Layer (PHY) devices and Innovium's TERALYNX(R) 7 Ethernet switches. -- Introduced our MCP47/48FxBx8 family of octal 12-bit digital-to-analog converters, the first to include nonvolatile memory and an integrated voltage reference source so they can be pre-configured for safe and efficient power-up without relying on the system processor. -- Introduced our CryptoAutomotive(TM) security IC, the TrustAnchor100 (TA100) -- the first cryptographic companion device supporting in-vehicle network security solutions such as secure boot, firmware update and message authentication. -- Announced our LX772, the first highly integrated radiation-hardened motor controller, consolidating essential functions for the motor control and position sensing circuitry of satellite elements into a single chip, increasing reliability while reducing weight. -- Introduced our newest generation of AEC-Q101 qualified 700 and 1200V Silicon Carbide (SiC) Schottky Barrier Diode (SBD) devices for automotive applications, providing Electric Vehicle (EV) system designers with solutions that meet stringent automotive quality standards. -- Announced our RTG4(TM) Field Programmable Gate Array (FPGA) family, the first of its kind in a Ceramic Quad Flat Pack option to achieve qualification to the industry's Qualified Manufacturers List (QML), and offering a unique combination of radiation hardening by design. -- Announced our low-power radiation-tolerant PolarFire FPGA available in engineering silicon and on a path to full QML Class V spaceflight qualification, so customers can prototype with the same FPGA silicon and package now headed for space qualification. -- Acquired LegUp Computing Inc., expanding our Field-Programmable Gate Array (FPGA)-based edge compute solution stack with a high-level synthesis tool to make it easier for software engineers to harness the algorithm-accelerating power of its PolarFire(R) FPGA and PolarFire System on Chip (SoC) platforms. -- Introduced 64 Mbit parallel SuperFlash(R) memory to our family of radiation-tolerant COTS-based devices for space systems, complementing its COTS-based processors and communication interfaces to streamline development of space-qualified and scalable total system solutions. -- Acquired Tekron International Ltd., a global leader in high-precision GPS and atomic clock time-keeping technologies and solutions for the smart grid and other industrial applications.

Fourth Quarter Fiscal Year 2021 Outlook:

The following statements are based on current expectations. These statements are forward-looking, and actual results may differ materially. We are not able to predict whether inventory at our distributors will increase or decrease during the quarter and are therefore providing a range of GAAP net sales guidance. In recent years, we have seen net inventory at our distributors increase or decrease by a significant amount in a single quarter.

Under the new 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. Therefore, the elements of our internal performance and executive and employee compensation metrics that are based on sales and operating results are measured using the value of the end-market demand for our products. We use end-market demand for these purposes because we do not believe that the underlying value of our business benefits from increases in the value of inventory that is held in the supply chain. As many of our products are designed into customer applications with relatively long lives, such value is only realized when the end-market demand is created and the supply chain sells the inventory to the end customer. We define end-market demand as the net dollar amount of our products, licensing revenue and other services delivered to our direct (non-distributor) customers and by our distributors to their customers. We are able to calculate end-market demand based on information that our distributors provide us about their product shipments to their customers and inventory holdings. The value of end-market demand from our distributors is calculated as the net transaction value of these shipments. We believe that our end-market demand metric reflects true end-market demand based on when product is sold to direct customers or by our distributors to an end customer. We believe the use of end-market demand is also important to investors and users of our financial statements as it reflects the final outcome of our sales activities whereas our GAAP net sales are based on estimates made earlier in (or before the end of) the process of creating and fulfilling demand is complete. 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. Management uses end-market demand to manage and assess the profitability of our business and when developing and monitoring our budgets and spending. Many of our investors have requested that we disclose end-market demand metric because they

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February 04, 2021 15:50 ET (20:50 GMT)