Financial Performance - Net sales for the three months ended September 30, 2025, were $1,140.4 million, a decrease of 2.0% compared to $1,163.8 million in the same period of 2024[111]. - For the six months ended September 30, 2025, net sales were $2,215.9 million, down 7.9% from $2,405.1 million in the same period of 2024[111]. - Mixed-signal microcontrollers accounted for 51.3% of net sales in Q3 2025, down from 51.1% in Q3 2024, with a decrease in sales of 1.7% year-over-year[116][117]. - Analog product line sales increased by 10.1% in Q3 2025, accounting for 28.2% of net sales, compared to 25.1% in Q3 2024[119][121]. - Other product line sales decreased by 15.4% in Q3 2025, representing 20.5% of net sales, down from 23.8% in Q3 2024[123][124]. - Total revenue for the six months ended September 30, 2025, was $789.9 million, with a gross profit of $261.5 million[182]. - The company reported a total net loss of $132.0 million for the six months ended September 30, 2025[182]. Profitability Metrics - Gross profit margin for the three months ended September 30, 2025, was 55.9%, down from 57.4% in the same period of 2024[109]. - Operating income for the three months ended September 30, 2025, was 7.8%, a decline from 12.6% in the same period of 2024[109]. - Gross profit for Q3 2025 was $637.9 million, or 55.9% of net sales, compared to $668.5 million, or 57.4% of net sales in Q3 2024, indicating a decline in gross margin[130]. - The company anticipates fluctuations in gross margins driven by capacity utilization, product mix, and economic conditions[137]. Research and Development - Research and development expenses as a percentage of net sales increased to 23.0% for the three months ended September 30, 2025, compared to 20.7% in the same period of 2024[109]. - R&D expenses for Q3 2025 were $262.3 million, or 23.0% of net sales, up from $240.7 million, or 20.7% in Q3 2024[138]. - R&D expenses for the first half of 2025 increased to $517.8 million, or 23.4% of net sales, compared to $482.4 million, or 20.1% in the same period of 2024[138]. - The company plans to continue investments in new and enhanced products, focusing on mixed-signal microcontrollers, digital signal controllers, and FPGAs[105]. Operational Changes - The closure of the Tempe, Arizona wafer fabrication facility (Fab 2) was completed in May 2025, with production being transferred to Oregon and Colorado locations[102]. - The company aims to maintain a high level of manufacturing control by owning wafer fabrication facilities, which contributes to being one of the lowest cost producers in the embedded control industry[102]. - The company plans to continue investing in internal assembly and test capabilities to enhance cost savings and control over manufacturing processes[135]. Cash Flow and Financing - Net cash provided by operating activities for the first half of 2025 was $363.7 million, down from $420.7 million in the same period of 2024[165]. - Net cash used in investing activities was $98.9 million in the first half of 2025, compared to $189.7 million in the same period of 2024[166]. - Cash and cash equivalents at September 30, 2025 were $236.8 million, a decrease of $534.9 million from March 31, 2025[163]. - Net cash used in financing activities was $799.7 million for the six months ended September 30, 2025, compared to $264.6 million in the same period of 2024[168]. - Cash dividends paid to common stockholders in the first six months of fiscal 2026 totaled $491.3 million, compared to $486.3 million in the same period of fiscal 2025[169]. - The company established a Commercial Paper program with a maximum principal amount of $2.75 billion, with $1.12 billion outstanding as of September 30, 2025[172]. Debt and Assets - As of September 30, 2025, total assets were $9,250.7 million, while total liabilities were $14,586.0 million[182]. - As of September 30, 2025, the company's total current and long-term debt amounted to $5.41 billion, all of which is fixed rate[183]. - The company plans to finance the repayment of fixed rate debt maturing within the next 12 months using available borrowings under its Revolving Credit Facility or Commercial Paper program[183]. - Changes in interest rates will significantly impact the company's interest expense if it refinances fixed rate debt with variable rate debt[183]. - The company has approximately $1.56 billion remaining for stock repurchases under its authorized program as of September 30, 2025[174]. Market and Economic Conditions - Foreign customers represented approximately 75% of total net sales in Q3 2025, up from 74% in Q3 2024[129]. - Distributors accounted for approximately 45% of net sales in Q3 2025, with Arrow Electronics being the largest distributor, contributing 11% of net sales[125]. - Inflation has not materially affected the company's operating results in recent periods[184]. - The company may struggle to offset higher costs due to inflation through price increases, which could adversely impact operating results[184].
Microchip Technology Incorporated(MCHPP) - 2026 Q2 - Quarterly Report