Microchip Technology (MCHP) Tops Q1 EPS by 13c; Guides In-Line

Microchip Technology (NASDAQ: MCHP) reported Q1 EPS of $1.56, $0.13 better than the analyst estimate of $1.43. Revenue for the quarter came in at $1.3 billion versus the consensus estimate of $1.28 billion.

"The June quarter demonstrated what the best of the Microchip culture and its employees represent," said Steve Sanghi, Chief Executive Officer. "Our global team all came together in the middle of a global pandemic, while working on a pay cut, and delivered superb performance during the quarter. I am proud of how rapidly the Microchip team adapted to the new constraints we faced so that our employees would be safe, our customers could be well served and our supply chain partners engaged to achieve mutual success despite the challenges we faced."

Mr. Sanghi added, "Despite the COVID-19 pandemic, we delivered $1.31 billion of net sales which was down 1.3% on a sequential basis compared to our early June updated guidance which was for net sales to be about flat to down 6%. We also delivered outstanding non-GAAP gross margin of 61.7% and operating margin of 38.6%, while reducing our days of inventory from 122 days to 117 days. We believe our inventory is well-positioned to serve the needs of our customers and is within our publicly-stated inventory target of 115 to 120 days."

"In the June quarter, our Data Center and Computing end markets continued to show strength from the shift to a work from home environment," said Ganesh Moorthy, President and Chief Operating Officer. "Medical devices necessary to treat COVID-19 patients in addition to a host of other hospital equipment needed to support increased patient loads were also strong in the quarter. Our Automotive business was very weak, particularly in April and May due to the widespread factory shutdowns, but we are starting to see some improvement in this portion of our business."

Mr. Moorthy added, "Our manufacturing operations worked through varying constraints in the June quarter and were able to ramp up as the quarter progressed and the shelter in place restrictions eased in certain of the higher impacted locations. Our customers and supply chain partners also faced constraints with their factories and logistics, primarily during April and May. As we progressed through May and June, we experienced many short lead time orders from customers due to a variety of factors. We are working with our customers to improve the visibility of their backlog so that we can serve them better."

Eric Bjornholt, Microchip's Chief Financial Officer, said, "We continued to aggressively pay down our debt with another $394.0 million of payments during the June quarter, reflecting a cumulative debt pay down of $2.62 billion over the past eight quarters, as we have actively managed the working capital requirements for the business. In the June quarter, we also issued $2.2 billion of senior notes which was used to repay our senior secured bridge loan facility, repurchased a portion of our convertible debt, and paid down a portion of the borrowings under our revolving credit facility. We believe that the convertible repurchases will significantly reduce share count dilution to the extent our stock price appreciates over time."

Mr. Sanghi concluded, "Our June quarter bookings were soft compared to the March quarter as our customers and distributors did not have the visibility to place long-term orders. Our backlog entering the September quarter was significantly below our backlog entering the June quarter, although bookings have strengthened through the month of July. However, the pace of economic recovery appears to be a bit uncertain due to the resurgence of COVID-19 positive cases in many countries around the world. Taking all of these factors into consideration, we expect our net sales in the September quarter to be flat to down 8% sequentially. The broad guidance range is to help account for the uncertainty from the evolving COVID-19 pandemic."

GUIDANCE:

Microchip Technology sees Q2 2021 EPS of $1.30-$1.52, versus the consensus of $1.42. Microchip Technology sees Q2 2021 revenue of $1.205-1.31 billion, versus the consensus of $1.27 billion.

For earnings history and earnings-related data on Microchip Technology (MCHP) click here.

You May Also Be Interested In

• IDT Corp. (IDT) Tops Q3 EPS by 2c; offer guidance
• CrowdStrike posts record ARR growth, raises full-year outlook
• Tilly's, Inc. (TLYS) Tops Q1 EPS by 44c ; offer guidance