Microchip Technology Inc. (NASDAQ:MCHP) Q1 2018 Earnings Conference Call - Final Transcript

Aug 03, 2017 • 05:00 pm ET

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Microchip Technology Inc. (NASDAQ:MCHP) Q1 2018 Earnings Conference Call - Final Transcript

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Presentation
Operator
Operator

Good day, everyone, and welcome to this Microchip Technology First Quarter and Fiscal Year 2018 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 Chief Financial Officer, Mr. Eric Bjornholt. Please go ahead, sir.

Executive
J. Eric Bjornholt

Good afternoon everyone. During the course of this conference call, we will be making projections and other forward-looking statements regarding future events or the future financial performance of the company. We wish to caution you that such statements are predictions and that actual events or results may differ materially. We refer you to our press release as of today as well as our recent filings with the SEC that identify important risk factors that may impact Microchip's business and results of operations.

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 first quarter fiscal year 2018 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 effect of our acquisition activities and share-based compensation. Net sales in the June quarter were a record $972.1 million, above the high end of our June 5, 2017 upwardly revised guidance and up 7.7% sequentially from net sales of $902.7 million in the immediately preceding quarter. We have posted the summary of our revenue by product line and geography on our website for your reference.

On a non-GAAP basis, gross margins were 60.4% in the June quarter and above the high end of our guidance, which was 60%. Non-GAAP operating expenses were 22.9% of sales, below the low end of our guidance range of 23%. And non-GAAP operating income was a record 37.5%, well above the high end of the our guidance range of 37%.

Non-GAAP net income was a record $319.1 million, resulting in record earnings per diluted share of $1.31, which was $0.07 higher than the mid-point of our guidance of $1.24, up 12.9% on a sequential basis and up 56% as compared to the same quarter last year. On a GAAP basis, gross margins, including share-based compensation and acquisition-related expenses, were 60.1% in the June quarter. GAAP gross margins include the impact of $3.4 million of share-based compensation and $0.7 million benefit from the recovery of material that was previously written