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Microchip (MCHP) Q3 Earnings & Revenues Top Estimates, Up Y/Y
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Microchip Technology Incorporated (MCHP - Free Report) reported third-quarter fiscal 2021 non-GAAP earnings of $1.62 per share, which beat the Zacks Consensus Estimate by 2.5%. Moreover, the bottom line increased 22.7% on a year-over-year basis.
Net sales of $1.352 billion increased 5% from the year-ago quarter’s levels and surpassed the Zacks Consensus Estimate by 0.2%. Sequentially, the top line rose 3.3% in the fiscal third quarter.
Recovery in global business environment as well as recovery in demand across automotive, industrial and consumer end-markets was a positive. However, the Huawei ban negatively impacted the company’s data center business.
Microchip Technology Incorporated Price, Consensus and EPS Surprise
In terms of product line, microcontroller business (53.7% of net sales) increased 3.3% sequentially to $726.3 million. On a year-over-year basis, microcontroller business reported revenue growth of 5.9%.
We believe that Microchip's expanding product portfolio, driven by new microcontroller roll outs, will help it expand customer base and sustain its market-leading position. Moreover, the company is well positioned to capitalize on synergies from Microsemi and Atmel acquisitions.
Analog net sales of $372.8 million (27.6%) up 3.1% quarter over quarter and 2.6% year over year.
FPGA revenues (7.3%) were $99.1 million, down 8.5% on a quarter-over-quarter basis. However, on a year-over-year basis, FPGA revenues were up 7.1%.
Licensing, memory and other, or LMO product line (11.4%) reported revenues of $153.9 million, up 13% sequentially and 5.6% year over year.
In the fiscal third quarter conference call, management stated that the company will be reporting FPGA revenues combined with its LMO segment revenues under a new revenue category referred to as “other”, beginning from the calendar year 2021.
Geographically, revenues from Americas, Europe and Asia contributed 25.8%, 18% and 56.2% to net sales, respectively.
Margin Details
Non-GAAP gross margin expanded 150 basis points (bps) on a year-over-year basis to 63%.
Non-GAAP research & development expenses, as a percentage of net sales, contracted 150 bps year over year to 13.7%. Non-GAAP selling, general & administrative (SG&A) expenses, as a percentage of net sales, also shrunk 150 bps year over year to 9.6%.
Non-GAAP operating expenses, as a percentage of net sales, contracted 320 bps year over year to 23.2%.
Consequently, non-GAAP operating margin expanded 470 bps on a year-over-year basis to 39.8%.
Balance Sheet & Cash Flow
As of Dec 31, 2020, cash and short-term investments totaled $372.7 million compared with $370.3 million as of Sep 30, 2020.
As of Dec 31, 2020, total debt (long-term plus current portion) amounted to $9.14 billion compared with $9.18 billion as of Sep 30, 2020. Notably, the company cleared $289.7.1 million of debt during the quarter.
Cash flow from operating activities was $509.7 million compared with $455.8 million reported in the prior quarter.
On Feb 4, 2021, Microchip’s board of directors announced a 5.8% hike in cash dividend to 39 cents, up from prior quarterly dividend payout of 36.85 cents per share. The dividend is payable on Mar 8, 2021, to shareholders as on Feb 22, 2021.
Guidance
Microchip forecast fourth-quarter fiscal 2021 net sales of $1.42-$1.487 billion. The Zacks Consensus Estimate for the same is pegged at $1.39 billion.
For the fiscal fourth quarter, non-GAAP earnings are anticipated in the range of $1.67-$1.79 per share. The Zacks Consensus Estimate for the same is pegged at $1.66 per share.
Non-GAAP gross margin is anticipated to be 63.3-63.7%. Non-GAAP operating margin is anticipated in the range of 39.7-40.5%.
Take Two Interactive, CDW and CrowdStrike are scheduled to release earnings on Feb 8, Feb 10, and Mar 16, respectively.
Long-term earnings growth rate for Take Two Interactive, CDW and CrowdStrike are currently pegged at 12%, 13.1% and 25%, respectively.
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Microchip (MCHP) Q3 Earnings & Revenues Top Estimates, Up Y/Y
Microchip Technology Incorporated (MCHP - Free Report) reported third-quarter fiscal 2021 non-GAAP earnings of $1.62 per share, which beat the Zacks Consensus Estimate by 2.5%. Moreover, the bottom line increased 22.7% on a year-over-year basis.
Net sales of $1.352 billion increased 5% from the year-ago quarter’s levels and surpassed the Zacks Consensus Estimate by 0.2%. Sequentially, the top line rose 3.3% in the fiscal third quarter.
Recovery in global business environment as well as recovery in demand across automotive, industrial and consumer end-markets was a positive. However, the Huawei ban negatively impacted the company’s data center business.
Microchip Technology Incorporated Price, Consensus and EPS Surprise
Microchip Technology Incorporated price-consensus-eps-surprise-chart | Microchip Technology Incorporated Quote
Quarter in Detail
In terms of product line, microcontroller business (53.7% of net sales) increased 3.3% sequentially to $726.3 million. On a year-over-year basis, microcontroller business reported revenue growth of 5.9%.
We believe that Microchip's expanding product portfolio, driven by new microcontroller roll outs, will help it expand customer base and sustain its market-leading position. Moreover, the company is well positioned to capitalize on synergies from Microsemi and Atmel acquisitions.
Analog net sales of $372.8 million (27.6%) up 3.1% quarter over quarter and 2.6% year over year.
FPGA revenues (7.3%) were $99.1 million, down 8.5% on a quarter-over-quarter basis. However, on a year-over-year basis, FPGA revenues were up 7.1%.
Licensing, memory and other, or LMO product line (11.4%) reported revenues of $153.9 million, up 13% sequentially and 5.6% year over year.
In the fiscal third quarter conference call, management stated that the company will be reporting FPGA revenues combined with its LMO segment revenues under a new revenue category referred to as “other”, beginning from the calendar year 2021.
Geographically, revenues from Americas, Europe and Asia contributed 25.8%, 18% and 56.2% to net sales, respectively.
Margin Details
Non-GAAP gross margin expanded 150 basis points (bps) on a year-over-year basis to 63%.
Non-GAAP research & development expenses, as a percentage of net sales, contracted 150 bps year over year to 13.7%. Non-GAAP selling, general & administrative (SG&A) expenses, as a percentage of net sales, also shrunk 150 bps year over year to 9.6%.
Non-GAAP operating expenses, as a percentage of net sales, contracted 320 bps year over year to 23.2%.
Consequently, non-GAAP operating margin expanded 470 bps on a year-over-year basis to 39.8%.
Balance Sheet & Cash Flow
As of Dec 31, 2020, cash and short-term investments totaled $372.7 million compared with $370.3 million as of Sep 30, 2020.
As of Dec 31, 2020, total debt (long-term plus current portion) amounted to $9.14 billion compared with $9.18 billion as of Sep 30, 2020. Notably, the company cleared $289.7.1 million of debt during the quarter.
Cash flow from operating activities was $509.7 million compared with $455.8 million reported in the prior quarter.
On Feb 4, 2021, Microchip’s board of directors announced a 5.8% hike in cash dividend to 39 cents, up from prior quarterly dividend payout of 36.85 cents per share. The dividend is payable on Mar 8, 2021, to shareholders as on Feb 22, 2021.
Guidance
Microchip forecast fourth-quarter fiscal 2021 net sales of $1.42-$1.487 billion. The Zacks Consensus Estimate for the same is pegged at $1.39 billion.
For the fiscal fourth quarter, non-GAAP earnings are anticipated in the range of $1.67-$1.79 per share. The Zacks Consensus Estimate for the same is pegged at $1.66 per share.
Non-GAAP gross margin is anticipated to be 63.3-63.7%. Non-GAAP operating margin is anticipated in the range of 39.7-40.5%.
Zacks Rank & Key Picks
Microchip currently has a Zacks Rank #2 (Buy).
Some other top-ranked stocks in the broader technology sector are Take Two Interactive (TTWO - Free Report) , CDW Corporation (CDW - Free Report) , and CrowdStrike (CRWD - Free Report) . All the stocks carry a Zacks Rank #2. You can see the complete list of today's Zacks #1 (Strong Buy) Rank stocks here.
Take Two Interactive, CDW and CrowdStrike are scheduled to release earnings on Feb 8, Feb 10, and Mar 16, respectively.
Long-term earnings growth rate for Take Two Interactive, CDW and CrowdStrike are currently pegged at 12%, 13.1% and 25%, respectively.
Breakout Biotech Stocks with Triple-Digit Profit Potential
The biotech sector is projected to surge beyond $775 billion by 2024 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases.
Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Our recent biotech recommendations have produced gains of +50%, +83% and +164% in as little as 2 months. The stocks in this report could perform even better.
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