Financial Performance - In the three months ended September 30, 2024, net sales were 100% of total sales, with a gross profit margin of 57.4%, down from 67.8% in the same period of 2023[96]. - Net sales for the three months ended September 30, 2024, were $1,163.8 million, a decrease of 48.4% compared to $2,254.3 million in the same period of 2023[98]. - Net sales for the six months ended September 30, 2024, were $2,405.1 million, down 47.1% from $4,542.9 million in the same period of 2023[98]. - Gross profit for Q3 2024 was $668.5 million, or 57.4% of net sales, compared to $1.53 billion, or 67.8% of net sales in Q3 2023[116]. - The company reported a total net loss of $22.1 million for the six months ended September 30, 2024, compared to a net income of $465.2 million for the year ended March 31, 2024[161]. - Total revenue for the six months ended September 30, 2024, was $899.0 million, compared to $2.8031 billion for the year ended March 31, 2024[161]. Cost and Expenses - Cost of sales increased to 42.6% of net sales in Q3 2024, compared to 32.2% in Q3 2023, indicating rising production costs[96]. - Research and development expenses rose to 20.7% of net sales in Q3 2024, up from 13.0% in Q3 2023, reflecting increased investment in new product development[96]. - Operating income for the three months ended September 30, 2024, was 12.6%, significantly lower than 39.3% in the same quarter of 2023[96]. - Selling, general and administrative expenses for Q3 2024 were $157.0 million, or 13.5% of net sales, down $39.6 million, or 20.1%, from Q3 2023[126][127]. - R&D expenses for Q3 2024 were $240.7 million, or 20.7% of net sales, a decrease of $51.9 million, or 17.7%, compared to Q3 2023[123][124]. - Amortization of acquired intangible assets for Q3 2024 was $122.7 million, a decrease from $151.4 million in Q3 2023[130]. Inventory and Sales Distribution - Overall inventory levels were $1.34 billion at September 30, 2024, with 247 days of inventory compared to 224 days at March 31, 2024[118]. - Distributors accounted for approximately 44% of net sales in Q3 2024, down from 50% in Q3 2023, with Arrow Electronics being the largest distributor[110]. - Foreign customers represented approximately 74% of total net sales in Q3 2024, slightly down from 75% in Q3 2023[115]. - Mixed-signal microcontrollers accounted for 51.1% of net sales in Q3 2024, down from 56.8% in Q3 2023, with a decrease in sales of 53.6%[101][102]. - Analog product line represented 25.1% of net sales in Q3 2024, down from 27.6% in Q3 2023, with a decrease in sales of 53.1%[105][106]. - Other product line sales accounted for 23.8% of net sales in Q3 2024, up from 15.6% in Q3 2023, despite a decrease in sales of 21.1%[108][109]. Capital Expenditures and Investments - The company is executing a multi-year $800 million capacity expansion plan at Fab 4 in Oregon and an $880 million plan for SiC and silicon production capacity[88]. - The anticipated level of capital expenditures is expected to support growth in production capabilities for new products and technologies[96]. - Capital expenditures in the six months ended September 30, 2024 were $93.7 million, down from $185.5 million in the same period in 2023[149][151]. - The company plans to invest between $125 million and $150 million in equipment and facilities over the next 12 months[151]. - The company reached a Preliminary Memorandum of Terms with the U.S. Department of Commerce for $162 million in CHIPS Act grants for two U.S. wafer fabrication facilities[151]. Financing and Debt - Net cash provided by operating activities was $420.7 million in the six months ended September 30, 2024, compared to $1.61 billion in the same period in 2023[147]. - Net cash used in financing activities was $264.6 million for the six months ended September 30, 2024, a significant decrease from $1.35 billion for the same period in 2023[152]. - The company borrowed $750.0 million under the new 2025 Term Loan Facility with interest rates ranging from 1.125% to 1.5%[152]. - As of September 30, 2024, the principal amount of outstanding indebtedness was $6.45 billion, with no borrowings under the Revolving Credit Facility[152]. - A 50-basis point increase in interest rates would increase expected annual interest expense by approximately $3.8 million[162]. - The company plans to refinance certain existing notes as they mature and may seek additional financing depending on market conditions and operational needs[158]. Strategic Focus and Future Plans - The macroeconomic environment remains weak, with customers continuing to reduce inventory levels due to business uncertainty and ample supply[86]. - The company has paused most factory expansion activities and reduced planned capital investments through fiscal 2026[86]. - The strategic focus includes developing smart, connected, and secure embedded control solutions for key markets such as automotive and data centers[87]. - The company plans to continue transitioning certain outsourced assembly and test capacity to internal facilities to enhance manufacturing control[88]. - The company plans to continue investing in internal assembly and test capabilities to enhance cost savings and control over manufacturing processes[120]. - Approximately 66% of net sales in Q3 2024 came from products produced at outside wafer foundries, consistent with 65% in Q3 2023[121]. Tax and Assets - The effective tax rate for the six months ended September 30, 2024 was approximately 22% for domestic operations[135]. - As of September 30, 2024, total assets were $9.8814 billion, an increase from $8.8577 billion as of March 31, 2024[161].
Microchip Technology Incorporated(MCHPP) - 2025 Q2 - Quarterly Report