(2) See the "Use of Non-GAAP Financial Measures" section of this release.
Net sales for the second quarter of fiscal 2024 were $2.254 billion, up 8.7% from net sales of $2.073 billion in the prior year's second fiscal quarter.
GAAP net income for the second quarter of fiscal 2024 was $666.6 million, or $1.21 per diluted share, up from GAAP net income of $546.2 million, or $0.98 per diluted share, in the prior year's second fiscal quarter. For the second 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 second quarter of fiscal 2024 was $889.3 million, or $1.62 per diluted share, up from non-GAAP net income of $814.4 million, or $1.46 per diluted share, in the prior year's second fiscal quarter. For the second 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 second 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 43.9 cents per share, up 33.8% from the year ago quarter. The quarterly dividend is payable on December 6, 2023 to stockholders of record on November 22, 2023.
"Amid a turbulent macro environment, we delivered fiscal second-quarter results that were in line with our guidance," said Ganesh Moorthy, President and Chief Executive Officer. "Revenue declined 1.5% sequentially, as all regions of the world and most end markets experienced varying degrees of weakness. This marks a turning point for an extraordinary three-year growth period for Microchip. Throughout this period, we successfully addressed supply chain challenges, invested well over a billion dollars in expanding our capacity, and boosted our investments for high-growth markets and applications, demonstrating our disciplined commitment to supply resilience and product innovation, in the pursuit of above-average long-term growth."
Mr. Moorthy added, "As our customers adjust to their evolving demand patterns, we have continued to accommodate customer pushout requests where possible. We have also made considerable progress in further decreasing average lead times and ended the September quarter at roughly 13 weeks. The reduction in lead times is resulting in lower bookings and reduced near-term visibility. The actions we are taking to reduce lead times are designed to enable our customers and us to navigate this uncertain environment with agility and effectiveness."
Eric Bjornholt, Microchip's Chief Financial Officer, said, "During the September quarter, we took measures to refinance some of our maturing debt. In light of the unpredictable interest-rate climate, we strategically utilized a blend of a new $750 million Term Loan A and our credit line to retire our $1 billion bond which matured in September 2023. We also issued $1 billion in commercial paper, which resulted in about a 90 basis point lower interest rate than the rate under our line of credit. We also retired $18.2 million of principal amount of our convertible bonds due in 2027 with a total cash payment of $42.7 million, effectively mitigating potential share count dilution. We remain focused on continuing to enhance our capital structure in the future."
Mr. Moorthy concluded, "Given the broader economic landscape characterized by decelerating economic activity and escalating business ambiguity, along with our proactive measures to assist clients in managing their inventory positions and backlog, we anticipate net sales in the December quarter to be down 15% to down 20% sequentially. 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 September 30, 2023:
- Launched a $300M multi-year investment initiative to expand our presence in India including funding for facilities, engineering labs, talent acquisition and support for regional technology consortia and educational institutions.
- Opened a new R&D facility for capacity growth in Hyderabad India’s One Golden Mile Office Tower with capacity for 1,000 employees. The 168,000-square-foot center will support growth plans for many years to come.
- Jointly announced with GlobalFoundries® (GF) that Microchip’s 28-nm SuperFlash® embedded Flash memory solution is now in production at GF. This widely deployed nonvolatile memory (NVM) solution is optimized for microcontrollers, smart cards and IoT chips.
- On September 15, 2023, Moody's Investors Service (Moody's) upgraded our senior unsecured rating to Baa1 from Baa2. Moody's also assigned a P-2 short term rating to our new commercial paper program. The rating outlook is stable.
- Revealed nine new PolarFire® FPGA and SoC solution stacks to speed intelligent edge designs and reduce development cost and risk. The tailored stacks span the industrial and communications sectors and smart embedded vision, motor control and optical access technologies. They feature IP, reference designs, development kits, application notes, demo guides and more.
- Announced that PolarFire® FPGA’s single-chip crypto design flow was “successfully reviewed” by the United Kingdom Government’s National Cyber Security Centre (NCSC). The review confirms the strength of PolarFire FPGA’s security solution.
- Teamed up with Intelligent Hardware Korea (IHWK) to develop an analog compute platform to accelerate edge AI/ML inferencing. Using Microchip’s (SST®) memBrain™ nonvolatile in-memory compute technology and working with universities, IHWK is creating a SoC processor for neurotechnology devices.
- Introduced industry’s first low-pin-count MCU family with I3C® support. The PIC18 Q20 product line is space efficient and easily interfaces with devices operating in multiple voltage domains.
- Launched Microchip’s first automotive-qualified 10BASE-T1S Ethernet devices. The LAN8670/1/2 family of Ethernet PHYs simplifies the architecture to connect low-speed devices into a standard Ethernet network.
- Introduced a new family of 10BASE-T1S Ethernet solutions to ease the design for OEMs to connect automotive devices to a 10BASE-T1S Ethernet network. The new family of LAN8650/1 MAC-PHY devices connects low-cost microcontrollers without a built-in Ethernet MAC to a 10BASE-T1S network.
- Revealed MPLAB® Machine Learning Development Suite to incorporate ML more easily into MCUs and MPUs. The unique solution is the first to support 8-bit, 16-bit and 32-bit MCUs and 32-bit MPUs for ML at the edge.
- Expanded Microchip’s Gigabit Ethernet switch with Audio-Video Bridging and Time Sensitive Network (AVB/TSN) and integrated PHYs for industrial automation. The LAN9662 includes a real-time engine to process high-speed cyclical data in flight.
Third 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 | $1.803 to $1.916 billion | |||
| GAAP | Non-GAAP Adjustments | Non-GAAP (1) | ||
| Gross Profit | 63.6% to 64.6% | $7.2 to $8.2 million | 64.0% to 65.0% | |
| Operating Expenses (2) | 33.2% to 34.2% | $196.9 to $200.9 million | 22.7% to 23.3% | |
| Operating Income | 29.4% to 31.4% | $204.1 to $209.1 million | 40.7% to 42.3% | |
| Other Expense, net | $50.8 to $53.2 million | ($0.2) to $0.2 million | $51.0 to $53.0 million | |
| Income Tax Provision | $107.8 to $134.3 million (3) | $17.6 to $19.2 million | $90.2 to $115.1 million (4) | |
| Net Income | $371.3 to $413.9 million | $221.5 to $228.5 million | $592.8 to $642.4 million | |
| Diluted Common Shares Outstanding | Approximately 546.0 to 547.0 million shares | Approximately 546.0 to 547.0 million shares | ||
| Earnings per Diluted Share | $0.68 to $0.76 | $0.41 | $1.09 to $1.17 | |
