(2) See the "Use of Non-GAAP Financial Measures" section of this release.
Net sales for the first quarter of fiscal 2024 were a record $2.289 billion, up 16.6% from net sales of $1.964 billion in the prior year's first fiscal quarter.
GAAP net income for the first quarter of fiscal 2024 was $666.4 million, or $1.21 per diluted share, up from GAAP net income of $507.2 million, or $0.90 per diluted share, in the prior year's first fiscal quarter. For the first 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 first quarter of fiscal 2024 was a record at $905.3 million, or $1.64 per diluted share, up from non-GAAP net income of $767.2 million, or $1.37 per diluted share, in the prior year's first fiscal quarter. For the first 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 first 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 41.0 cents per share, up 36.2% from the year ago quarter. The quarterly dividend is payable on September 5, 2023 to stockholders of record on August 22, 2023.
"Our June quarter results were in-line with the midpoint of our guidance as revenue grew 2.5% sequentially and 16.6% year over year, amid a weakening macro backdrop and increased business uncertainty," said Ganesh Moorthy, President and Chief Executive Officer. "We delivered record revenue of $2.29 billion during our first fiscal quarter, marking the 11th consecutive quarter of revenue growth. Our team's disciplined execution, in combination with resilient end markets and a diverse customer base, helped to drive record non-GAAP gross and operating margins of 68.4% and 48.1%, respectively."
Mr. Moorthy added, "We continue to navigate a challenging market environment and are trending toward supply chain normalization as we continue to improve lead times for many of our products. In the June quarter, we further assisted customers in de-risking their inventory positions by pushing out non-reschedulable backlog to future quarters. China was our weakest region again, as macro softness drove weaker sell-through activity and inventory build at Chinese distributors. Even as our broad base of customers experience demand uncertainty, we expect our operating metrics to demonstrate resiliency through this business cycle."
Eric Bjornholt, Microchip's Chief Financial Officer, said, "We continued to pay down our debt with another $413.0 million of payments during the June quarter, reflecting a cumulative debt pay down of over $6.8 billion over the past 20 quarters, as we have enhanced our operating performance while actively managing the working capital requirements for the business. We ended the June 2023 quarter with our net debt to adjusted EBITDA ratio at 1.29x compared to 2.05x at the end of the June 2022 quarter. Our operating model has been, and remains, a strong cash generator and continues to demonstrate consistently high non-GAAP operating margins as we execute our Microchip 3.0 strategy."
Steve Sanghi, Microchip's Executive Chair, said, "Microchip's board of directors approved a record dividend of 41 cents per share, which represents a 36.2% year-over-year increase. Given our cash flow generation during the June quarter, we are targeting to return $562.6 million to our shareholders in the September quarter through dividends and share repurchases. Our board remains committed to increasing cash returns to shareholders with the goal of returning 100% of our adjusted free cash flow to shareholders by the March 2025 quarter."
Mr. Moorthy concluded, "Considering the macro environment we face of slowing economic activity and increasing business uncertainty, combined with the active steps we are taking to help customers with inventory positions to push out some of their backlog, we expect net sales in the September quarter to be up 1% to down 3% sequentially. At the mid-point of our guidance for the September quarter, net sales would be 9.3% higher than the year-ago quarter. 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 June 30, 2023:
- Published annual
Sustainability Report, highlighting key sustainability goals, the strategies used to implement them, and progress made to further sustainable business practices.
- Announced the promotion of Rich Simoncic to executive vice president. Rich will continue to manage all of Microchip’s analog business units while playing a larger role assisting the CEO with corporate initiatives such as strategic planning, total system solutions, market megatrends and investor relations.
- Released updated, next-generation MPLAB® ICD 5 and MPLAB PICkit™ 5 in-circuit debuggers/programmers with advanced connectivity and power options for developers of designs based on PIC®, AVR® and SAM devices and dsPIC® Digital Signal Controllers (DSCs). The new tools offer fast, affordable and convenient solutions that feature remote programming capabilities for an enhanced user experience.
- Introduced a Silicon Carbide (SiC) E-Fuse demonstrator that provides a faster, more reliable method for protecting power electronics in electric vehicle applications. The E-Fuse demonstrator is available in six variants for 400–800V battery systems.
- Revealed new long-reaching USB 3.2 compatible reclocker/redriver devices for automotive and industrial applications. The EQCO510 and EQCO5X31 devices offer a solid two-channel solution to send high-speed data signals up to 15 meters in both directions.
- Expanded our radiation-tolerant family of gigabit ethernet physical layers (PHY). The new VSC8574RT PHY supports both copper and fiber interfaces for added flexibility in space applications.
- Launched a new cesium atomic clock that provides autonomous precise time of 100 ns holdover for months. The 5071B is a compact commercial timing product offering ease of deployment across multiple industries.
- Announced an industrial edge stack, more core library IP and conversion tools for the industry’s most power-efficient mid-range FPGA. The new tools are designed to help customers slash time to innovation by making it easier to than ever to switch to PolarFire® FPGAs and System-on-Chip (SoC) FPGAs.
Second 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 | $2.220 to $2.312 billion | ||
| GAAP | Non-GAAP Adjustments | Non-GAAP (1) | |
| Gross Profit | 68.0% to 68.2% | $6.8 to $7.8 million | 68.3% to 68.5% |
| Operating Expenses (2) | 28.8% to 29.4% | $197.7 to $201.7 million | 20.1% to 20.5% |
| Operating Income | 38.6% to 39.3% | $204.5 to $209.5 million | 47.8% to 48.4% |
| Other Expense, net | $48.8 to $50.2 million | ($0.2) to $0.2 million | $49.0 to $50.0 million |
| Income Tax Provision | $157.5 to $193.3 million (3) | $23.9 to $30.8 million | $133.6 to $162.5 million (4) |
| Net Income | $650.3 to $665.8 million | $228.2 to $240.5 million | $878.5 to $906.3 million |
| Diluted Common Shares Outstanding | Approximately 550.6 to 551.0 million shares | Approximately 550.6 to 551.0 million shares | |
| Earnings per Diluted Share | $1.18 to $1.21 | $0.42 to $0.43 | $1.60 to $1.64 |
