Financial Performance - In the three months ended December 31, 2023, net sales were 100% of total sales, with a gross profit margin of 63.4%, down from 67.8% in the same period of 2022[97]. - Operating income for the three months ended December 31, 2023, was 30.0%, down from 37.4% in the same period of 2022, highlighting a decline in profitability[97]. - Net sales for the three months ended December 31, 2023, were $1,765.7 million, a decrease of 18.6% compared to $2,169.2 million in the same period of 2022[99]. - Net sales for the nine months ended December 31, 2023, increased by 1.7% to $6,308.6 million from $6,206.0 million in the same period of 2022[99]. - Gross profit for the three months ended December 31, 2023, was $1.12 billion, or 63.4% of net sales, down from $1.47 billion, or 67.8% of net sales, in the same period of 2022[117]. Cost and Expenses - The cost of sales increased to 36.6% in Q3 2023 from 32.2% in Q3 2022, indicating rising production costs[97]. - Research and development expenses rose to 15.1% of net sales in Q3 2023, compared to 13.0% in Q3 2022, reflecting increased investment in innovation[97]. - R&D expenses for the three months ended December 31, 2023, were $266.0 million, or 15.1% of net sales, a decrease of $16.4 million, or 5.8%, from the same period last year[124][125]. - Selling, general and administrative expenses for the three months ended December 31, 2023, were $172.2 million, or 9.8% of net sales, a decrease of $30.7 million, or 15.1%, from the same period last year[127][129]. - Amortization of acquired intangible assets for the three and nine months ended December 31, 2023, was $151.3 million and $454.2 million, respectively, compared to $167.4 million and $502.5 million for the same periods in 2022[131]. Inventory and Sales Distribution - Inventory levels were $1.31 billion at December 31, 2023, with 185 days of inventory compared to 169 days at March 31, 2023[119]. - Distributors accounted for approximately 44% of net sales in the three months ended December 31, 2023, down from 48% in the same period of 2022[111]. - Sales in the Americas for the three months ended December 31, 2023, were $510.2 million, representing 28.9% of total net sales[115]. - Mixed-signal microcontrollers accounted for approximately 56.3% of net sales for the three months ended December 31, 2023, consistent with the same percentage in 2022[102]. - Analog product line net sales decreased by 29.0% in the three months ended December 31, 2023, compared to the same period in 2022[107]. - Other product line revenue accounted for approximately 19.3% of net sales for the three months ended December 31, 2023, up from 15.7% in the same period of 2022[109]. Future Investments and Plans - The company plans to invest $880 million to expand silicon carbide and silicon production capacity, including 8-inch wafer production in Colorado Springs, Colorado[90]. - The company plans to invest between $200 million and $300 million in equipment and facilities over the next 12 months to support new products and technologies[150]. - The company is pursuing incentives under the CHIPS Act, with a preliminary agreement for $162 million in grants for U.S. wafer fabrication facilities[150]. Economic Conditions and Challenges - The company has paused most factory expansion activities and reduced planned capital investments through fiscal 2025 due to weak macroeconomic conditions[87]. - The company anticipates continued weak business conditions into the March 2024 quarter, leading to production level reductions and potential inventory management strategies[87]. - The company expects to continue facing challenges from inflation, higher interest rates, and global economic uncertainties impacting customer demand[87]. Cash Flow and Debt - Net cash provided by operating activities was $2.46 billion in the nine months ended December 31, 2023, primarily due to higher net income of $1.75 billion[148]. - Net cash used in investing activities was $320.9 million in the nine months ended December 31, 2023, compared to $448.7 million in the same period in 2022[149]. - Net cash used in financing activities was $2.09 billion for the nine months ended December 31, 2023, compared to $2.49 billion in the same period of 2022[151]. - The company had $281.0 million in cash and cash equivalents at December 31, 2023, an increase of $47.0 million from the March 31, 2023 balance[147]. - As of December 31, 2023, the company had $5.71 billion in total debt, with $4.96 billion being fixed rate debt[158]. - A 50-basis point increase in interest rates would raise expected annual interest expense by approximately $3.8 million[158]. - The company expects to pay a quarterly cash dividend of $0.450 per share in March 2024, totaling approximately $243.0 million[154]. - The company has $2.03 billion remaining for stock repurchases under its authorized program as of December 31, 2023[153]. - The company repurchased approximately 7.4 million shares for $594.7 million in the first nine months of fiscal 2024, compared to 9.6 million shares for $671.9 million in the same period of fiscal 2023[153].
Microchip Technology Incorporated(MCHPP) - 2024 Q3 - Quarterly Report