The diluted common shares outstanding presented in the guidance table above assumes an average Microchip stock price in the March 2025 quarter between $55 and $65 per share (however, we make no prediction as to what our actual share price will be for such period or any other period and we cannot estimate what our stock option exercise activity will be during the quarter). MICROCHIP TECHNOLOGY INCORPORATED AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(in millions, except per share amounts; unaudited) Three Months Ended December 31, Nine Months Ended December 31, 2024 2023 2024 2023 Net sales$1,026.0 $1,765.7 $3,431.1 $6,308.6 Cost of sales 464.6 645.7 1,464.3 2,102.8 Gross profit 561.4 1,120.0 1,966.8 4,205.8 Research and development 246.2 266.0 728.6 857.1 Selling, general and administrative 158.2 172.2 465.7 572.4 Amortization of acquired intangible assets 122.6 151.3 368.3 454.2 Special charges and other, net 3.5 1.1 7.6 4.6 Operating expenses 530.5 590.6 1,570.2 1,888.3 Operating income 30.9 529.4 396.6 2,317.5 Other expense, net (77.0) (45.1) (189.4) (151.3)(Loss) income before income taxes (46.1) 484.3 207.2 2,166.2 Income tax provision 7.5 65.1 53.1 414.0 Net (loss) income$(53.6) $419.2 $154.1 $1,752.2 Basic net (loss) income per common share$(0.10) $0.78 $0.29 $3.23 Diluted net (loss) income per common share$(0.10) $0.77 $0.28 $3.19 Basic common shares outstanding 537.4 540.8 536.9 543.0 Diluted common shares outstanding 537.4 546.5 542.1 549.0 MICROCHIP TECHNOLOGY INCORPORATED AND SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETS(in millions; unaudited) ASSETS December 31, March 31, 2024 2024 Cash and short-term investments$586.0 $319.7 Accounts receivable, net 857.2 1,143.7 Inventories 1,356.3 1,316.0 Other current assets 196.3 233.6 Total current assets 2,995.8 3,013.0 Property, plant and equipment, net 1,152.1 1,194.6 Other assets 11,484.3 11,665.6 Total assets$15,632.2 $15,873.2 LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable and accrued liabilities$1,330.3 $1,520.0 Current portion of long-term debt — 999.4 Total current liabilities 1,330.3 2,519.4 Long-term debt 6,749.5 5,000.4 Long-term income tax payable 598.7 649.2 Long-term deferred tax liability 22.9 28.8 Other long-term liabilities 899.3 1,017.6 Stockholders' equity 6,031.5 6,657.8 Total liabilities and stockholders' equity$15,632.2 $15,873.2 MICROCHIP TECHNOLOGY INCORPORATED AND SUBSIDIARIESRECONCILIATION OF GAAP TO NON-GAAP MEASURES(in millions, except per share amounts and percentages; unaudited) RECONCILIATION OF GAAP GROSS PROFIT TO NON-GAAP GROSS PROFIT Three Months Ended December 31, Nine Months Ended December 31, 2024 2023 2024 2023 Gross profit, as reported$561.4 $1,120.0 $1,966.8 $4,205.8 Share-based compensation expense 7.4 6.0 18.3 20.2 Cybersecurity incident expenses — — 20.1 — Non-GAAP gross profit$568.8 $1,126.0 $2,005.2 $4,226.0 GAAP gross profit percentage 54.7% 63.4% 57.3% 66.7%Non-GAAP gross profit percentage 55.4% 63.8% 58.4% 67.0% RECONCILIATION OF GAAP RESEARCH AND DEVELOPMENT EXPENSES TO NON-GAAP RESEARCH AND DEVELOPMENT EXPENSES Three Months Ended December 31, Nine Months Ended December 31, 2024 2023 2024 2023 Research and development expenses, as reported$246.2 $266.0 $728.6 $857.1 Share-based compensation expense (28.8) (24.4) (79.0) (71.0)Other adjustments — (0.1) — (0.5)Non-GAAP research and development expenses$217.4 $241.5 $649.6 $785.6 GAAP research and development expenses as a percentage of net sales 24.0% 15.1% 21.2% 13.6%Non-GAAP research and development expenses as a percentage of net sales 21.2% 13.7% 18.9% 12.5% RECONCILIATION OF GAAP SELLING, GENERAL AND ADMINISTRATIVE EXPENSES TO NON-GAAP SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Three Months Ended December 31, Nine Months Ended December 31, 2024 2023 2024 2023 Selling, general and administrative expenses, as reported$158.2 $172.2 $465.7 $572.4 Share-based compensation expense (13.2) (14.4) (42.4) (43.5)Cybersecurity incident expenses — — (1.3) — Other adjustments (3.9) (1.0) (7.3) (0.5)Professional services associated with certain legal matters (0.4) (0.4) (1.1) (1.2)Non-GAAP selling, general and administrative expenses$140.7 $156.4 $413.6 $527.2 GAAP selling, general and administrative expenses as a percentage of net sales 15.4% 9.8% 13.6% 9.1%Non-GAAP selling, general and administrative expenses as a percentage of net sales 13.7% 8.9% 12.1% 8.4% RECONCILIATION OF GAAP OPERATING EXPENSES TO NON-GAAP OPERATING EXPENSES Three Months Ended December 31, Nine Months Ended December 31, 2024 2023 2024 2023 Operating expenses, as reported$530.5 $590.6 $1,570.2 $1,888.3 Share-based compensation expense (42.0) (38.8) (121.4) (114.5)Cybersecurity incident expenses — — (1.3) — Other adjustments (3.9) (1.1) (7.3) (1.0)Professional services associated with certain legal matters (0.4) (0.4) (1.1) (1.2)Amortization of acquired intangible assets (1) (122.6) (151.3) (368.3) (454.2)Special charges and other, net (3.5) (1.1) (7.6) (4.6)Non-GAAP operating expenses$358.1 $397.9 $1,063.2 $1,312.8 GAAP operating expenses as a percentage of net sales 51.7% 33.4% 45.8% 29.9%Non-GAAP operating expenses as a percentage of net sales 34.9% 22.5% 31.0% 20.8% (1) Amortization of acquired intangible assets consists of core and developed technology and customer-related acquired intangible assets in connection with business combinations.
Cautionary Statement:The statements in this release relating to the decisive steps we are taking to realign our business, restructuring our manufacturing footprint, adjusting our channel strategy and intensifying our customer engagement, clear areas for operational enhancements, taking a methodical yet urgent approach to evaluating all aspects of our business and implementing necessary changes to strengthen our competitive position, executing on multiple operational initiatives to enhance our financial performance, that our focus remains on returning to premium profitability levels that have historically differentiated Microchip, supported by our diversified business model, that we continue to focus on inventory management while maintaining our commitment to shareholder returns, that our comprehensive technology platform is driving innovation across critical markets, with our new RISC-V processors and expanded connectivity solutions demonstrating strong momentum in industrial, automotive, and aerospace applications, that we believe we are well-positioned to meet the evolving needs of our customers in increasingly complex technological environments, that we believe the correction cycle is still not completed, our net sales guidance of $920.0 million to $1.000 billion for our March 2025 quarter, that we maintain a cautious but focused approach, our fourth quarter fiscal 2025 guidance for net sales and GAAP and non-GAAP gross profit, operating expenses, operating income (loss), other expense, net, income tax (benefit) provision, net income (loss), diluted common shares outstanding, earnings (loss) per diluted share, capital expenditures for the March 2025 quarter and for all of fiscal 2025, adding capital equipment to selectively expand our production capacity and add research and development equipment, our belief that non-GAAP measures are useful to investors and our assumed average stock price in the March 2025 quarter are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
RECONCILIATION OF GAAP OTHER EXPENSE, NET TO NON-GAAP OTHER EXPENSE, NET Three Months Ended December 31, Nine Months Ended December 31, 2024 2023 2024 2023 Other expense, net, as reported$(77.0) $(45.1) $(189.4) $(151.3)Loss on settlement of debt 0.3 — 0.3 12.2 Loss on available-for-sale investments — — 1.8 — Non-GAAP other expense, net$(76.7) $(45.1) $(187.3) $(139.1)GAAP other expense, net, as a percentage of net sales(7.5)% (2.6)% (5.5)% (2.4)%Non-GAAP other expense, net, as a percentage of net sales(7.5)% (2.6)% (5.5)% (2.2)% RECONCILIATION OF GAAP INCOME TAX PROVISION TO NON-GAAP INCOME TAX PROVISION Three Months Ended December 31, Nine Months Ended December 31, 2024 2023 2024 2023 Income tax provision as reported$7.5 $65.1 $53.1 $414.0 Income tax rate, as reported(16.3)% 13.4% 25.6% 19.1%Other non-GAAP tax adjustment 19.2 25.2 54.2 (27.2)Non-GAAP income tax provision$26.7 $90.3 $107.3 $386.8 Non-GAAP income tax rate 19.9% 13.2% 14.2% 13.9% RECONCILIATION OF GAAP NET (LOSS) INCOME AND GAAP DILUTED NET (LOSS) INCOME PER COMMON SHARE TO NON-GAAP NET INCOME AND NON-GAAP DILUTED NET INCOME PER COMMON SHARE Three Months Ended December 31, Nine Months Ended December 31, 2024 2023 2024 2023 Net (loss) income, as reported$(53.6) $419.2 $154.1 $1,752.2 Share-based compensation expense 49.4 44.8 139.7 134.7 Cybersecurity incident expenses — — 21.4 — Other adjustments 3.9 1.1 7.3 1.0 Professional services associated with certain legal matters 0.4 0.4 1.1 1.2 Amortization of acquired intangible assets 122.6 151.3 368.3 454.2 Special charges and other, net 3.5 1.1 7.6 4.6 Loss on settlement of debt 0.3 — 0.3 12.2 Loss on available-for-sale investments — — 1.8 — Other non-GAAP tax adjustment (19.2) (25.2) (54.2) 27.2 Non-GAAP net income$107.3 $592.7 $647.4 $2,387.3 GAAP net (loss) income as a percentage of net sales(5.2)% 23.7% 4.5% 27.8%Non-GAAP net income as a percentage of net sales 10.5% 33.6% 18.9% 37.8%Diluted net (loss) income per common share, as reported$(0.10) $0.77 $0.28 $3.19 Non-GAAP diluted net income per common share$0.20 $1.08 $1.19 $4.35 Diluted common shares outstanding, as reported 537.4 546.5 542.1 549.0 Diluted common shares outstanding non-GAAP 541.6 546.5 542.1 549.0 RECONCILIATION OF GAAP CASH FLOW FROM OPERATIONS TO FREE CASH FLOW Three Months Ended December 31, Nine Months Ended December 31, 2024 2023 2024 2023 GAAP cash flow from operations, as reported$271.5 $853.3 $692.2 $2,462.7 Capital expenditures (18.1) (59.5) (111.8) (245.0)Free cash flow$253.4 $793.8 $580.4 $2,217.7 GAAP cash flow from operations as a percentage of net sales 26.5% 48.3% 20.2% 39.0%Free cash flow as a percentage of net sales 24.7% 45.0% 16.9% 35.2% Microchip will host a conference call today, February 6, 2025 at 5:00 p.m.(Eastern Time) to discuss this release.
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