Sentiment Analysis of the earnings transcript to help figure out if there are any bullish or bearish sentiments that could be gathered from it. We're doing ML and AI based analysis on the earnings call to get some more insights.
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| Statement |
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| It is contributing to the results that we have been quoting on FPGA, both last quarter for the fiscal year and this quarter to reflect that it is hitting new records every quarter, and we are very, very optimistic about how RISC-V based FPGAs, along with all of the other elements that we have integrated on the solution, is going to play out |
| Net sales grew 2.5% sequentially and 16.6% on a year-over-year basis to achieve another all-time record of $2.29 billion |
| On a non-GAAP basis, gross margins were a record at 68.4%, operating expenses were at 20.3% and operating income was a record 48.1% |
| With respect to the gross margins, as we have said many times, we have a pretty strong resilience to the way the gross margin works |
| On a GAAP basis in the June quarter gross margins were a record at 68.1% |
| And the vast majority of the customers who were part of the NCNR programs have been extremely happy with what they were able to get in an extremely different environment in 2021 and 2022 |
| I believe that our programs have had substantially more benefit than issues with them |
| However, notwithstanding any near-term macro weakness, we are confident that semiconductors remain the engine of innovation for the markets and applications we serve |
| Finally, while our overall inventory is still a bit higher than our target, we made excellent progress to position our inventory at the best locations in manufacturing to be able to rapidly respond to demand growth when the macro environment strengthens |
| Finally, as you can see from our June quarter results and our September quarter guidance, our Microchip 3.0 strategy which we launched 21 months ago, continues to be the foundation of our results, as we continue to build and improve what we believe is one of the most diversified, defensible, high-growth, high-margin, high-cash generating businesses in the semiconductor industry |
| Our FPGA net sales, which we comment on from time-to-time, had another record quarter with annualized revenue growth continuing to be in the double digits |
| Our focus on total system solutions and key market megatrends continues to fuel strong design momentum, which we expect will drive above-market long-term growth |
| Reflective on our financial results, I continue to be very proud of all employees of Microchip that have delivered another exceptional quarter while making new records in many respects, namely record net sales, record non-GAAP gross margin percentage, record non-GAAP operating margin percentage, record non-GAAP EPS and record adjusted EBITDA, and all of that in a continuing challenging environment |
| Although we don't know what exactly the future holds, if we were to experience a semiconductor inventory correction like what the industry has seen in the past, we are highly confident that our non-GAAP operating margins would remain well above 40%, and we expect our cash-generation, non-GAAP gross margin, and non-GAAP operating margin to once again demonstrate consistency and resiliency through the cycle |
| Our consolidated non-GAAP diluted earnings per share was $1.64 per share, another record by a whisker and up 19.7% from the year-ago quarter |
| Adjusted EBITDA was a record 51.2% of net sales and adjusted free cash flow was 33.9% of net sales in the June quarter, continuing to demonstrate the robust cash generation characteristics of our business |
| If you review Microchip's peak to trough performance through the business cycles over the last 15-plus years, which is included in the investor presentation posted on our website, you will observe our robust and consistent cash-generation, gross margin and operating margin results |
| Our June quarter results were strong in the context of a slowing macro environment, marked by our continued disciplined execution, as well as our resilient end markets and diversified customer base |
| Taking a look at our June quarter net sales from a product line perspective, our mixed signal microcontroller net sales set another all-time record, coming in sequentially up 0.8% in the June quarter and up 22.5% on a year-over-year basis |
| Our analog net sales also set another all-time record, coming in sequentially up 2.5% in the June quarter and up 9.2% on a year-over-year basis |
| We're also working with our channel partners to find the right balance of inventory required to serve customers and to be positioned for an eventual strengthening of business conditions |
| Our trailing 12-month adjusted EBITDA was also a record at $4.473 billion |
| During a period of macro weakness and business uncertainty, we believe shorter lead times are the best way to help customers navigate the environment successfully, and improve the quality of backlog placed on us |
| The June quarter represented our 11th consecutive quarter of sequential revenue growth |
| My profuse thanks to all our stakeholders who enabled us to achieve these outstanding results despite the increasingly challenging macro environment, and especially to the worldwide Microchip team whose tireless efforts and agility to adapt are what enable us to navigate effectively through the business cycles |
| And it will be a huge growth driver for Microchip |
| So quite broadly present, it is doing exceedingly well |
| Our adjusted EBITDA in the June quarter was a record at $1.172 billion and 51.2% of net sales |
| But also increasingly it is winning quite significantly in industrial, and it is winning in some automotive applications as well |
| Non-GAAP net income was $905.3 million and Non-GAAP earnings per share on a diluted basis was a record $1.64 |
| Statement |
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| First, our China business was much weaker than our expectations and has not recovered from the shutdowns of last year and the Lunar New Year holidays in the March quarter |
| We have heard concerns from some of the investment community about falling lead times, because it results in lower backlog |
| And third, we are seeing early signs of an impending slowdown in Europe, exacerbated by some of our European customers being dependent on exports to countries like China, whereas we know that the business environment is much weaker than expected |
| Compared to our other regions, inventory at our Asia distributors grew the most in the quarter, as sell-through activity was down significantly on a sequential basis in this region, heavily driven by unfavorable business conditions in China |
| Starting in early June, we saw business conditions deteriorate in three areas |
| Our bookings have been weak |
| As a result, we anticipate further business headwinds in the December quarter |
| Second, we started to see initial signs of weakness and uncertainty in the automotive and industrial segments, reflecting the impact of high inflation and high interest rates driving more cautious spending |
| And then as I look out to the December quarter, I think you mentioned it could be worse than seasonal |
| This manifested in weak sell-through activity and the building of inventory in the distribution channel in China |
| And how much of it is consumption changes and how consumptions changes might change? So just using China as the example, China consumption was weak or weaker than anyone expected in the June quarter |
| We are expecting that the December quarter is going to be weaker than normal seasonality |
| I guess you're describing an environment in which you're seeing weakness in multiple regions, weakness in multiple end markets, and you're characterizing that as kind of early signs of that, and yet you're only guiding down 1% quarter-on-quarter |
| Consistent with the slowing macro environment and the higher than target level of inventory on our balance sheet, as well as with some of our customers and channel partners, most of our internal factory expansion actions remain paused |
| We're giving you a sense that the December quarter is going to be seasonally weaker than normal |
| But at the moment, I think things are uncertain enough that consumption is being held down |
| To the extent China is weak, we're going to see some of that weakness in China, but we'll also see some of the weakness in Europe, when their exports are not quite realized |
| Although we reduced inventory days in the quarter, we were not able to make as much progress as we would have liked to, as we accommodated requests by customers to push out delivery schedules for products that were very far through the manufacturing process |
| This year, we expect that our normal seasonality in the December quarter will likely be amplified by the macro weakness and business uncertainty that our customers are experiencing |
| As a result, we continue to receive requests to push out or cancel backlog as customers start to rebalance their inventory in light of the weaker business conditions and increased uncertainty they were experiencing |
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