Microchip Technology Inc. (NASDAQ:MCHP) Q3 2015 Earnings Conference Call - Final Transcript

Jan 29, 2015 • 05:00 pm ET


Microchip Technology Inc. (NASDAQ:MCHP) Q3 2015 Earnings Conference Call - Final Transcript


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Good day, everyone, and welcome to this Microchip Technology Third Quarter Fiscal Year 2015 Financial Results Conference Call. As a reminder, today's call is being recorded. At this time, I would like to turn the call over to Microchip's CFO, Mr. Eric Bjornholt. Please go ahead, sir.

James Eric Bjornholt

Good afternoon everyone. (Forward-Looking Cautionary Statements).

In attendance with me today are Steve Sanghi, Microchip's President and CEO; and Ganesh Moorthy, Microchip's COO. I will comment on our third quarter fiscal year 2015 financial performance, and Steve and Ganesh will then give their comments on the results and discuss the current business environment as well as our guidance. We will then be available to respond to specific investor and analyst questions.

I want to remind you that we are including information in our press release and this conference call on various GAAP and non-GAAP measures. We have posted a full GAAP to non-GAAP reconciliation on the Investor Relations page of our website at www.microchip.com, which we believe you will find useful when comparing GAAP and non-GAAP results.

I will now go through some of the operating results, including net sales, gross margin and operating expenses. I will be referring to these results on a non-GAAP basis prior to the effects of our acquisition activities and share-based compensation.

Non-GAAP net sales in the December quarter were $535.8 million and were down 1.9% sequentially from non-GAAP net sales of $546.2 million in the immediately preceding quarter. The December quarter revenue exceeded the high-end of our updated guidance for the quarter. Revenue by product line was $345.5 million for microcontrollers, a $125.5 million for analog, $33.2 million for memory, $22.9 million for licensing and $8.7 million of others. Revenue by geography was $104.9 million in the Americas, $105.9 million in Europe and $325 million in Asia. I'll remind you that we recognize revenue based on where we ship our products to, which tends to skew some of the revenue towards Asia where a lot of contract manufacturing takes place.

On a non-GAAP basis, gross margins were 58.2% in the December quarter, at the high-end of our guidance range. Non-GAAP operating expenses were 26.6% of sales, well below the bottom-end of our guidance range. Non-GAAP operating income was 31.6% of sales, and net income was $143.3 million. This resulted in earnings of $0.64 per diluted share, which was at the high-end of our updated guidance.

GAAP net sales in the December quarter were $528.7 million and were $7.1 million lower than non-GAAP net sales, as we changed the contractual relationships with the ISSC distribution network to a sell-through revenue recognition model. On a GAAP basis, gross margins, including share-based compensation and acquisition-related expenses, were $57.1 million in the December -- 57.1% in the December quarter. GAAP gross margins include the impact of $2.3 million of share-based compensation, $4.2 million of charges associated with the sell-through of written-up inventory from our acquisitions of Supertex and ISSC and $3.2 million of gross profit on the revenue recognition change previously mentioned.