Microchip Technology Announces Record Non-GAAP Earnings Per Share For First Quarter Fiscal Year 2016

Microchip announced today that its Board of Directors declared a quarterly cash dividend on its common stock of 35.80 cents per share.  The quarterly dividend is payable on September 25, 2015 to stockholders of record on September 11, 2015.

Microchip also announced today that it has completed its acquisition of Micrel Incorporated for a combination of approximately $430 million in cash and the issuance of 8,626,795 shares of Microchip common stock.

"Our June quarter revenue was below our guidance but was consistent with industry conditions as evidenced by what others in the semiconductor industry have reported," said Steve Sanghi, President and CEO.  "The June quarter started out well, but the negative effects of a very weak economy in China and challenges in Europe, led by a very weak Euro caused us to finish the quarter below our revenue guidance provided on May 7, 2015."

Mr. Sanghi added, "Our non-GAAP gross margin percentage and our operating profit percentage were within our guidance and we achieved record non-GAAP earnings per share.  The June quarter was our 99th consecutive quarter of profitability."

"Our microcontroller revenue was up 1.3% in the June quarter compared to the year ago quarter and we experienced the same broad-based weakness that has been reported by many other companies in the industry," said Ganesh Moorthy, Chief Operating Officer.  "In the aggregate over the last four rolling quarters, our microcontroller business was up 8% over the prior four quarters.  We are continuing to deliver innovative new 8-bit, 16-bit and 32-bit microcontrollers that we believe will enable us to continue to gain market share."

Mr. Moorthy added, "Our analog business was down 0.6% in the June quarter compared to the year ago quarter and experienced the same weakness we saw in our microcontroller business.  In the aggregate over the last four rolling quarters, our analog business was up 11% over the prior four quarters.  We continue to develop and introduce a wide range of innovative and proprietary new products to help fuel the future growth of our analog business."

Eric Bjornholt, Microchip's Chief Financial Officer, said, "Our cash generation in the June quarter excluding the purchase of the remaining outstanding shares of ISSC, our dividend payment, and changes in borrowing levels, was $143.8 million.  As of June 30, 2015, our consolidated cash and total investment position was approximately $2.43 billion.  The dividend that we announced today marks the 46th occasion that we have increased our dividend payment, and cumulative dividends paid are now $2.59 billion."

Mr. Sanghi concluded, "We have evaluated the current global economic environment, semiconductor industry conditions, our backlog position and customer designs coming to production and expect our revenue to be between $497 million and $534 million in the September quarter, excluding any revenue from our Micrel acquisition for the partial quarter after the closing of the acquisition.  From the date of acquisition, we expect non-GAAP revenue from Micrel to add an additional $35 million to our September results."

Microchip's Highlights for the Quarter Ended June 30, 2015:

  • Microchip reclaimed the #1 position in 8-bit microcontroller revenue in 2014, while growing its market share in 8, 16 and 32-bit MCUs and breaking into the top 10 for 32-bit MCUs, according to Gartner. Microchip has continued to innovate across all of its 8-bit, 16-bit and 32-bit product lines.
  • As an example of that innovation, Microchip continued to expand its offering of 8-bit PIC® microcontrollers with two new families that integrate Core Independent Peripherals (CIPs), which combine to perform functions autonomously, without the core. Because these functions are deterministically and reliably performed in hardware instead of software, CIPs enable system performance that is far beyond typical 8-bit MCUs while simplifying the design experience and reducing memory cost.
  • Microchip's MOST® technology devices continued to win new designs in automotive infotainment networks, with fresh deployments in Volvo's XC90 and Kia's K900 models. More than 170 million MOST devices have been installed in 184 car models, since 2001. Additionally, Microchip recently shipped the 25 millionth device from its MOST50 product line, due to the continued deployment by a wide variety of brands from carmakers General Motors Co. and Toyota Motor Corporation.
  • On the technology side, designers using the Automotive Open System Architecture (AUTOSAR) to develop and reuse their in-vehicle software can now connect their systems to not only networking technologies such as CAN and LIN, but also to MOST networking technology. This means that Microchip's MOST devices can be used for cross-domain communication in an AUTOSAR system, such as Advanced Driver Assistance Systems (ADAS), which simplifies automotive networking and diagnostics.
  • Microchip subsidiary Silicon Storage Technology (SST) further strengthened its market leadership in embedded Flash-based devices, by expanding its partnership with GLOBALFOUNDRIES to include an automotive-grade 55nm embedded SuperFlash® memory platform. To date, more than 50 billion devices have shipped with SST's SuperFlash technology.
  • In the growing digital power market, Microchip introduced its third-generation 16-bit dsPIC33EP "GS" family, which features higher performance, more integration, lower power consumption, smaller footprints and the unique Live Update capability.
  • For analog power designs, Microchip announced the world's first high-side current/power sensor to feature both a configurable analog output and a 2-wire digital bus, which maximizes data and diagnostic reporting while minimizing data latency. Additionally, the Company added a power-monitoring IC with advanced features for high-accuracy power measurement in commercial and industrial designs.
  • In other analog news, Microchip expanded its high-speed analog-to-digital converter portfolio with high-integration, low-power 14-/12-bit, 200 Msps stand-alone ADCs. These devices are targeted for applications in the communications markets, such as base stations, test equipment, and IF receivers, among others.
  • Microchip also unveiled the world's first USB3.0 Smart Hubs, which enable host and device port swapping, I/O bridging and various other serial communication interfaces. These Smart Hubs simplify system design, reduce board area, are USB-IF logo certified and deliver Microchip's proven USB hub interoperability for a wide range of applications in the computing, embedded, medical, industrial and networking markets.
  • In the high-growth area of human interface, Microchip expanded its portfolio of projected-capacitive touch screen controllers with a noise-robust, advanced multi-touch and gesture device that supports screens up to 10". It provides multi-touch coordinates as well as a readymade multi-finger surface gesture suite that brings modern user-interface elements-such as pinch and zoom, multi-finger scrolling, and swipes-to any embedded design, with minimal host requirements.
  • To ease the development of consumer audio products with its 32-bit MCUs, Microchip introduced the PIC32 Harmony Software Decoder Framework and Microsoft WMA Decoder Library. Example applications include audio docks, automotive head units and home-audio platforms.

Second Quarter Fiscal Year 2016 Outlook:

The following statements are based on current expectations.  These statements are forward-looking, and actual results may differ materially.  Due to the closing of our acquisition of Micrel on August 3, 2015, we are not able to provide GAAP guidance at this time, as the purchase accounting valuation adjustments related to the acquisition including acquired intangibles and inventory write-up as well as other acquisition-related charges are not yet known.  We are able to provide the following non-GAAP guidance which includes Micrel:

Microchip Consolidated Guidance - Non-GAAP1

Net Sales

$532 million to $569 million

   Gross Margin2

57.6% to 57.8%

   Operating Expenses

27.7% to 28.9%

Other Expense

$7.9 million

Income Tax Expense

11.1% to 12.1%

Net Income

$127.3 million to $145.4 million

Diluted Common Shares Outstanding 3

220 million shares

Earnings per Diluted Share 3

58 cents to 66 cents

1    See the "Use of Non-GAAP Financial Measures" section of this release.

2    See Footnote 2 under the "Use of Non-GAAP Financial Measures" section of this release.

3    Earnings per share have been calculated based on the diluted shares outstanding of Microchip on a consolidated basis.

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