(2) See the "Use of Non-GAAP Financial Measures" section of this release.
Net sales for the first quarter of fiscal 2023 were a record $1.964 billion, up 25.1% from net sales of $1.569 billion in the prior year's first fiscal quarter.
GAAP net income for the first quarter of fiscal 2023 was $507.2 million, or $0.90 per diluted share, up from GAAP net income of $252.8 million, or $0.45 per diluted share, in the prior year's first fiscal quarter. For the first quarters of fiscal 2023 and fiscal 2022, GAAP net income was adversely impacted by amortization of acquired intangible assets associated with our previous acquisitions.
Non-GAAP net income for the first quarter of fiscal 2023 was a record at $767.2 million, or $1.37 per diluted share, up from non-GAAP net income of $558.8 million, or $0.99 per diluted share, in the prior year's first fiscal quarter. For the first quarters of fiscal 2023 and fiscal 2022, our non-GAAP results exclude the effect of share-based compensation, expenses related to our acquisition activities (including intangible asset amortization, severance, and other restructuring costs, and legal and other general and administrative expenses associated with acquisitions including legal fees and expenses for litigation and investigations related to our Microsemi acquisition), professional services associated with certain legal matters, non-cash interest expense on our convertible debentures and losses on the settlement of debt. For the first quarters of fiscal 2023 and fiscal 2022, our non-GAAP income tax expense is presented based on projected cash taxes for the applicable fiscal year, excluding transition tax payments under the Tax Cuts and Jobs Act. A reconciliation of our non-GAAP and GAAP results is included in this press release.
Microchip announced today that its Board of Directors declared a record quarterly cash dividend on its common stock of 30.1 cents per share, up 9.1% from the cash dividend paid last quarter and up 37.8% from the year ago quarter. The quarterly dividend is payable on September 2, 2022 to stockholders of record on August 19, 2022.
"We kicked off our fiscal 2023 on a strong note, delivering record revenue of $1.96 billion which exceeded the mid-point of our guidance range and marked the seventh consecutive quarter of record revenue," said Ganesh Moorthy, President and Chief Executive Officer. "Year-over-year revenue growth of 25.1% was driven by robust demand across all of our product categories, which again outpaced the capacity improvements we implemented during the June quarter. We are progressing well toward our long-term profitability targets as non-GAAP gross margins improved to 67.1% and non-GAAP operating margins to 45.6% during the quarter. Non-GAAP diluted earnings per share grew 38.4% from a year ago quarter to $1.37, which was at the high end of our guidance range."
Mr. Moorthy added, "We ended the June quarter with our highest unsupported backlog ever, with well over 50% of this backlog being non-cancellable under our Preferred Supply Program (PSP). With our June quarter unsupported backlog being well ahead of the actual revenue we achieved in the quarter, we believe we are well positioned to continue to drive incremental revenue growth and profitability. We acknowledge that our strong internal indicators are subject to the uncertainty driven by macro factors. However, even if the macro environment were to have a more pronounced impact on us, we believe our business has a number of attributes within our control that should enable us to navigate a “soft landing” with continued strong free cash flow generation and operating margins."
Steve Sanghi, Microchip's Executive Chair, said, “Microchip’s Board of Directors approved a sequential increase in our dividend of 9.1%, to a record 30.1 cents per share. The dividend announced today represents a 37.8% year-over-year increase, and the board remains committed to an increasing cash return strategy. Given our strong cash flow generation during the June quarter, we are targeting to return $413.1 million to our shareholders in the September quarter through dividends and share repurchases."
Eric Bjornholt, Microchip's Chief Financial Officer, said, "Our strong cash generation capabilities have helped to aggressively pay down over $5.2 billion in debt over the past 16 quarters. This past quarter we reduced our net debt by another $293.3 million, and our net leverage dropped to 2.05. We are making excellent progress towards our net debt to adjusted EBITDA target of 1.5 times."
Mr. Moorthy concluded, "Our backlog for the September quarter is strong and we have more capacity improvements coming into effect. Demand continues to outpace supply, and we also have considerable backlog requested by customers in the September quarter that currently cannot be fulfilled until later quarters, despite growing capacity from last quarter. We believe our Total Systems Solutions strategy, combined with our focus on key market megatrends, is driving stronger customer engagements resulting in share gains in the end markets we serve. Taking these factors as well as the economic backdrop into consideration, we expect net sales in the September quarter to be up between 3% and 7% sequentially. At the mid-point of our guidance for the September quarter, net sales would be 25% higher than the year-ago quarter."
Microchip's Highlights for the Quarter Ended June 30, 2022:
- Grew our commitment to the 8-bit PIC® and AVR® microcontrollers (MCUs) by releasing five new product families and over 60 new devices. PIC and AVR MCUs anchor the majority of embedded designs today.
- Announced new resilient, redundant source of secure network timing and synchronization for power operators. Microchip’s GridTime™ 3000 GNSS Time Server meets rugged international environmental standards for power plants and substations.
- Introduced the industry’s first MCU that is integrated with Microchip’s robust secure subsystem and Arm® TrustZone® technology. Microchip released an Arm Cortex®-M23-based MCU supported with secure key provisioning solutions.
- Released a fully integrated Precise Time Scale System enabling nations to operate an independent time scale back-up to GNSS to protect critical infrastructure.
- Unveiled the first RISC-V-based System-on-Chip (SoC) FPGA to enter mass production. Microchip’s Mi-V ecosystem enables customers to ramp products based on PolarFire® devices more quickly, from prototypes to production.
- Introduced the fully configurable microcontroller-based CEC1736 Trust Shield family, a real-time platform to provide an entire chain of trust for system platforms. The family provides an end-to-end solution for protecting data center, telecommunication and networking systems against rapidly evolving security threats.
- Added to the industry’s largest family of inductive position sensors with the LX34070 IC that includes ISO 26262-compliance for EV motor control applications. The device can help accelerate the global move away from expensive and less accurate magnet-based solutions for safety-critical EV motor position monitoring.
- Released the maXTouch® Knob-on-Display™ (KoD™) touch controller family, which disrupts traditional touchscreen designs. The maXTouch KoD controller enables innovative Human-Machine Interface (HMI) solutions by combining mechanical knobs with existing multi-touch displays.
- Announced a new 8-bit MCU development board that connects to 5G LTE-M narrowband-IoT networks. The AVR-IoT Cellular Mini Development Board is the latest to join Microchip’s AVR MCU family, providing developers an easy blueprint for building IoT devices.
- Simplified automotive designs with ISO 26262-compliant, AUTOSAR-ready devices and ecosystem. The new dsPIC33C Digital Signal Controllers (DSCs) add support for AUTOSAR, OS, MCAL drivers and functional safety, enabling robust and secure automotive solutions.
- Introduced the industry’s first single-core Microproccessing Unit (MPU) with a MIPI™ CSI-2 camera interface and advanced audio features. The new 1 GHz SAMA7G54 is based on Arm® Cortex®-A7 processor and combines high performance with low power consumption.
- Revealed a serial 64-Mbit SuperFlash® memory IC that extends options for designing space systems using Radiation-Tolerant (RT) Commercial-Off-The-Shelf (COTS)-based devices. The SST26LF064RT memory device is Microchip’s second SuperFlash technology-based offering to be space qualified.
