Microchip Technology Inc. (NASDAQ:MCHP) Q4 2017 Earnings Conference Call - Final Transcript

May 09, 2017 • 05:00 pm ET


Microchip Technology Inc. (NASDAQ:MCHP) Q4 2017 Earnings Conference Call - Final Transcript


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Good day, everyone, and welcome to the Microchip Technology's Fourth Quarter and Fiscal Year 2017 Financial Results Conference Call. As a reminder, today's call is being recorded.

At this time that, I'd like to turn the call over to Microchip's Chief Financial Officer, 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 Chairman and CEO and Ganesh Moorthy, Microchip's President and COO. I will comment on our fourth quarter and full fiscal year 2017 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 wanted to remind you that we're including information in our press release in 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 on our website at www.microchip.com, which we believe we 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 share-based compensation and our acquisition activity.

Non-GAAP net sales in the March quarter were a record $902.7 million, near the high end of our guidance and up 2.4% sequentially from net sales of $881.2 million in the immediately preceding quarter. We have posted a summary of our revenue by product line and geography on our website for your reference.

On a non-GAAP basis, gross margins were 59.24% in the March quarter and significantly above the midpoint of our guidance, which was 58.2%. Non-GAAP operating expenses were 23.66% of sales, significantly below the midpoint of our guidance range of 24.5%. And non-GAAP operating income was an outstanding 35.6%, well above the midpoint of our guidance of 33.7% and very close to reaching our prior long-term operating model goal of 36%, which we had just established this past quarter.

Non-GAAP net income was a record $276.9 million, resulting in record earnings per diluted share of $1.16, which was $0.10 higher than the midpoint of our guidance of $1.06, up 12.6% on a sequential basis and up 64.7% as compared to the same quarter last year. For fiscal 2017, on a non-GAAP basis, net sales were a record $3.502 billion and up 58.2% year-over-year. Gross margins were 57.6%, operating expenses were 25.9% of sales, and operating income was 31.6% of sales. Net income was $937.1 million and non-GAAP EPS was a record $3.99 per diluted share.

On a GAAP basis, net sales on the March 2017 quarter for $902.7 million, GAAP gross margins, including share-based compensation and acquisition-related expenses, were 59% in the March quarter. GAAP gross margins including the impact of $3.2 billion of share-based compensation and a benefit of $1.4 million from a settlement with the vendor associated