Microchip Technology Incorporated(MCHPP) - 2025 Q3 - Quarterly Report

Financial Performance - For the three months ended December 31, 2024, the company's gross profit margin decreased to 54.7% from 63.4% in the same period of 2023, while operating income fell to 3.0% from 30.0%[108]. - Net sales for the three months ended December 31, 2024, were $1,026.0 million, a decrease of 41.9$1,765.7 million in the same period of 2023[110]. - For the nine months ended December 31, 2024, net sales were $3,431.1 million, down 45.6$6,308.6 million in 2023[110]. - Total revenue for the nine months ended December 31, 2024, was $1.28 billion, compared to$2.80 billion for the year ended March 31, 2024, showing a decline of approximately 54.3%[172]. - The company reported a total net loss of $122.2 million for the nine months ended December 31, 2024, compared to a net income of$465.2 million for the year ended March 31, 2024[172]. Expenses and Cost Management - Research and development expenses increased to 24.0% of net sales for the three months ended December 31, 2024, compared to 15.1% in the same period of 2023[108]. - The company reported a significant increase in selling, general, and administrative expenses to 15.4% of net sales for the three months ended December 31, 2024, compared to 9.8% in the same period of 2023[108]. - Selling, general and administrative expenses for the three months ended December 31, 2024, were $158.2 million, or 15.4$172.2 million, or 9.8% of net sales, for the same period last year[139]. - Selling, general and administrative expenses decreased by $14.0 million, or 8.1$106.7 million, or 18.6%, for the nine months ended December 31, 2024, mainly due to lower employee compensation costs[140]. - R&D expenses for the three months ended December 31, 2024, were $246.2 million, or 24.0$266.0 million, or 15.1% of net sales, in the same period last year[136]. - R&D expenses decreased by $19.8 million, or 7.4$128.5 million, or 15.0%, for the nine months ended December 31, 2024, primarily due to lower employee compensation costs[137]. Capital Expenditures and Investments - The company is currently executing a multi-year $800 million capacity expansion plan at Fab 4 in Oregon and an$880 million plan to expand SiC and silicon production capacity[101]. - The anticipated level of capital expenditures is expected to provide sufficient manufacturing capacity to support the growth of new products and technologies over the next 12 months[99]. - Capital expenditures in the nine months ended December 31, 2024, were $111.8 million, a decrease from$245.0 million in the same period last year, primarily for selective expansion of production capacity[161]. - The company plans to invest between $100 million and$150 million in equipment and facilities over the next 12 months to support growth in production capabilities[161]. - The company plans to continue investing in assembly and test equipment to increase internal capacity capabilities[133]. Inventory and Sales Distribution - The overall inventory level was $1.36 billion at December 31, 2024, with 266 days of inventory compared to 224 days at March 31, 2024[130]. - Distributors accounted for approximately 43$297.4 million, representing 29.0% of total net sales, while Asia accounted for 53.1% with sales of $544.7 million[126][127]. Strategic Initiatives - The company plans to continue transitioning certain outsourced assembly and test capacity to internal facilities to enhance operational efficiency[99]. - The company expects to moderate future average selling price declines and is focused on maintaining manufacturing yields and competitive position through investments in new products[99]. - The company believes that its strong technical service presence is essential for the continued development of the embedded control market, leveraging the expertise of its sales force[105]. Shareholder Returns and Financing - In the first nine months of fiscal 2025, the company paid cash dividends of$730.9 million, compared to $669.0 million in fiscal 2024, reflecting a year-over-year increase of approximately 9.5$90.0 million in the first nine months of fiscal 2025, a decrease from 7.4 million shares for $594.7 million in the same period of fiscal 2024[166]. - A quarterly dividend of$0.455 per share was declared for March 2025, with an expected total cash dividend of approximately $244.9 million[167]. - The company plans to refinance certain existing notes as they mature and may seek additional financing depending on market conditions and operational needs[168]. - As of December 31, 2024, the company had$586.0 million in cash and cash equivalents, an increase of $266.3 million from the previous balance[157]. - Net cash provided by operating activities was$692.2 million in the nine months ended December 31, 2024, compared to $2.46 billion in the same period last year[158]. - Net cash used in financing activities was$194.1 million for the nine months ended December 31, 2024, a significant decrease from $2.09 billion for the same period in 2023[162]. - As of December 31, 2024, the principal amount of outstanding indebtedness was$6.79 billion, with no borrowings under the Revolving Credit Facility[165]. - The company has approximately $1.56 billion remaining for stock repurchases under the Board's authorization as of December 31, 2024[166]. Facility Closures - In fiscal 2024, the company announced the closure of its Tempe, Arizona wafer fabrication facility (Fab 2), expected to generate annual cash savings of approximately$90 million starting from the June 2026 quarter[99].