Microchip Technology-Microchip Q3 Earnings & Sales Lag Estimates, Shares Fall on Weak View

Core Insights - Microchip Technology reported disappointing third-quarter fiscal 2025 results, with non-GAAP earnings of 20 cents per share, missing the Zacks Consensus Estimate by 28.57% and down 81.5% year over year [1][2] - Net sales were $1.03 billion, a decrease of 42% year over year, also missing the Zacks Consensus Estimate by 2.02%, and a sequential decline of 11.8% [2] - Following the results, Microchip shares fell over 6% in after-hours trading, with a 37% decline over the past 12 months compared to a 22.8% growth in the Zacks Computer and Technology sector [2] Segmental Performance - Sales from Mixed-signal Microcontroller, Analog, and Other segments accounted for 52%, 26.6%, and 21.5% of net sales, respectively [3] - Direct sales made up 57% of total sales, while distribution accounted for 43% [3] - Geographically, revenues from the Americas, Europe, and Asia contributed 29%, 17.9%, and 53.1% to net sales, respectively [3] Operating Results - Non-GAAP gross margin contracted by 830 basis points year over year to 55.4% [4] - Non-GAAP research & development expenses increased by 750 basis points year over year to 21.2% of net sales [4] - Non-GAAP selling, general & administrative expenses rose by 490 basis points to 13.7% of net sales [4] - Non-GAAP operating margin declined to 20.5% from 41.2% in the year-ago quarter [5] Balance Sheet & Cash Flow - As of December 31, 2024, cash and short-term investments totaled$ 586 million, up from $286.1 million as of September 30, 2024 [6] - Total debt increased to$ 6.75 billion from $6.42 billion over the same period [6] - Inventory days rose to 266 from 247, exceeding the targeted range of 130-150 days [6] - Cash flow from operating activities remained stable at$ 43.6 million, while free cash flow dropped to $22.8 million from$ 304.2 million in the previous quarter [7] Shareholder Returns - Microchip returned approximately $244.6 million to shareholders through dividends in the fiscal third quarter, with a quarterly dividend of 45.5 cents per share, up 1.1% from the previous year [8] Guidance - For the fourth quarter of fiscal 2025, Microchip expects net sales between$ 920 million and $1 billion [9] - Non-GAAP earnings are anticipated to be between 5 cents and 15 cents per share, with a gross margin forecast of 52% to 54% [10] - Non-GAAP operating expenses are projected to be 37.7% to 40.5% of net sales, with an operating margin expected between 11.5% and 16.3% [10]