Microchip (MCHP) Q2 Earnings Meet Estimates, Sales Rise Y/Y
Microchip Technology MCHP reported second-quarter fiscal 2024 non-GAAP earnings of $1.62 per share, which were in line with the Zacks Consensus Estimate and rose 11% on a year-over-year basis.
Net sales of $2.25 billion increased 8.7% year over year but lagged the Zacks Consensus Estimate by 0.2%.
Microchip witnessed a slowdown in the business due to increasing uncertainty, slowing economic activity and an increase in inventory. Persistent inflation and high interest rates also hurt economic growth.
Quarter in Detail
In terms of product line, mixed-signal microcontroller sales grew 8.5% year over year but declined 1.7% sequentially. Analog net sales decreased 1.7% sequentially but increased 8.8% year over year.
Sales from mixed signal microcontroller, analog and other accounted for 56.8%, 27.6% and 15.6% of net sales, respectively.
Microchip Technology Incorporated Price, Consensus and EPS Surprise
Microchip Technology Incorporated price-consensus-eps-surprise-chart | Microchip Technology Incorporated Quote
Geographically, revenues from the Americas, Europe and Asia contributed 29.1%, 24.8% and 46.2% to net sales, respectively.
Non-GAAP gross margin expanded 30 basis points (bps) on a year-over-year basis to 68.1%.
Non-GAAP research & development expenses, as a percentage of net sales, declined 10 bps year over year to 11.9%.
Non-GAAP selling, general & administrative expenses, as a percentage of net sales, declined 80 bps to 8%.
Non-GAAP operating expenses, as a percentage of net sales, declined 90 bps year over year to 20%.
Consequently, the non-GAAP operating margin expanded 130 bps on a year-over-year basis to 48.1%.
Balance Sheet & Cash Flow
As of Sep 30, 2023, cash and short-term investments totaled $256.6 million compared with $271.2 million as of Jun 30, 2023.
As of Sep 30, 2023, total debt (long-term plus current portion) was $6.08 billion compared with $6.03 billion as of Jun 30.
For the fiscal second quarter, cash flow from operating activities was $616.2 million compared with $993.2 million in the previous quarter.
Free cash flow was $541.8 million compared with $882.1 million in the previous quarter.
Microchip returned roughly $562.5 million to shareholders in the fiscal second quarter through dividends of $222.7 million and share repurchases of approximately $339.8 million.
The company announced a quarterly dividend of 43.9 cents per share, up 33.8% from the year-ago quarter.
Guidance
Microchip expects net sales to be $1.8-$1.916 billion for the third quarter of fiscal 2024, suggesting a decline between 15% and 20% on a sequential basis. At the mid-point of this guidance, revenues are expected to decline 14.3%.
Non-GAAP earnings are anticipated between $1.09 per share and $1.17 per share.
Non-GAAP gross margin is anticipated between 64% and 65%.
Non-GAAP operating expenses are projected to be 22.7-23.3%.
Non-GAAP operating margin is anticipated to be 40.7-42.3%.
Capital expenditure for the fiscal third quarter is expected between $50 million and $70 million. Capital expenditure for fiscal 2024 is estimated between $300 million and $325 million.
Zacks Rank & Stocks to Consider
Microchip currently carries a Zacks Rank #4 (Sell).
NetEase NTES, NVIDIA NVDA and Model N MODN are some better-ranked stocks that investors can consider in the broader Zacks Computer & Technology sector, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
NetEase shares have gained 51.1% year to date. NTES is set to report its third-quarter 2023 results on Nov 16.
NVIDIA shares have returned 197.5% year to date. NVDA is set to report its third-quarter fiscal 2024 results on Nov 21.
Model N shares have declined 39.2% year to date. MODN is set to report its fourth-quarter fiscal 2023 results on Nov 9.
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