Microchip Technology Incorporated today reported results for the three months ended June 30, 2017. GAAP net sales for the first quarter of fiscal 2018 were $972.1 million, up 21.6% from GAAP net sales of $799.4 million in the prior year’s first fiscal quarter.
GAAP net income from continuing operations for the first quarter of fiscal 2018 was $170.6 million, or 70 cents per diluted share, up from GAAP net loss from continuing operations of $(109.2) million, or (51) cents per diluted share, in the prior year’s first fiscal quarter. The prior year’s GAAP net income results were significantly adversely impacted by purchase accounting adjustments associated with our Atmel acquisition.
“Our June quarter financial results were extremely strong and represent an acceleration of our organic growth with our Microchip 2.0 initiative,” said Steve Sanghi, Chief Executive Officer. “Microchip 2.0 combines the product, technology, system and employee strength of Microchip and its previous acquisitions and allows us to provide total system solutions to our customers by selling multiple products into the circuit boards that drive their end applications.”
Mr. Sanghi continued: “Our net sales were at record levels and well above the high end of our revised guidance. Our non-GAAP net sales for the June quarter were up 15.2% from the June quarter of a year ago. It is noteworthy that our year-over-year non-GAAP net sales comparison was not impacted by acquisitions since Atmel’s full quarter revenue results were included in our June 2016 quarter net sales.
"GAAP net sales for the June 2017 quarter were up 21.6% from the June quarter of a year ago. Our gross margin percentage and operating profit percentage each exceeded the high end of our guidance on both a GAAP and non-GAAP basis and our earnings per share exceeded the high end of our revised guidance on both a GAAP and non-GAAP basis.
"Our non-GAAP gross margin crossed the 60% milestone and non-GAAP operating profit exceeded 37% for the first time. Non-GAAP earnings per share were up 56% from the June quarter of a year ago due to improving sales, gross margin percentage, operating expense leverage and successful execution of our core business as well as accretion from our acquisitions," Mr. Sanghi added.
“Our Microcontroller businesses performed very strongly in the June quarter with revenue being up 9.5% sequentially compared to the March quarter, setting a new record in the process,” said Ganesh Moorthy, President and Chief Operating Officer.
“We continue to see customers using microcontrollers that originated from Atmel's heritage express confidence in Microchip's stewardship of these product families. As a result we are seeing more designs that are in the pipeline going to production and ramping in volume. We are also seeing continued growth in our design-in funnel which we expect will drive future growth as these designs progress into production over time.
“Our analog product revenue was up 3.7% sequentially in the June quarter compared to the March quarter, and also set a new record in the process. Our transformation to Microchip 2.0 with a more powerful Total System Solution approach is enabling us to successfully find more opportunities to attach Microchip's vast portfolio of analog products to Atmel microcontrollers and microprocessors at multiple customers and applications. This effort should contribute to further revenue over time as these new design wins go to production," Mr. Moorthy observed.
Eric Bjornholt, Microchip’s Chief Financial Officer, said, “Cash flow from operations in the June quarter was a record $345 million. As of June 30, 2017, the consolidated cash and total investment position on our balance sheet was $1.65 billion.”
Mr. Bjornholt added, “Our inventory at June 30, 2017 was at 100 days and was the lowest in 7 years. Our distributor inventory at 31 days was also on the low end of our normal range. Despite our recent manufacturing ramp, we have not been able to grow our inventories since all of the additional output is getting shipped for revenue. We are projecting Microchip's inventory at September 30, 2017 to be between 99 and 101 days, which is essentially flat to the June quarter levels.”
Commenting on the business environment, Mr. Sanghi added, “We are continuing to see a very strong business environment for our products worldwide and have a number of company specific demand drivers. Our bookings rate in the June quarter was extremely strong.
"We are continuing to add capacity in our internal fabs, assembly and test plants, foundries and subcontractors. Our lead times are still long, but with the increased output from our recent efforts, we believe we have managed to stabilize lead times to create a soft landing without triggering over ordering in our customer base.”
Mr. Sanghi concluded, “We expect total net sales to be up approximately 3% sequentially which would represent 14.6% growth on a non-GAAP basis year-over-year and 14.9% growth on a GAAP basis year-over-year.”