(2) See the "Use of Non-GAAP Financial Measures" section of this release.
Net sales for the third quarter of fiscal 2024 were $1.766 billion, down 18.6% from net sales of $2.169 billion in the prior year's third fiscal quarter.
GAAP net income for the third quarter of fiscal 2024 was $419.2 million, or $0.77 per diluted share, down from GAAP net income of $580.3 million, or $1.04 per diluted share, in the prior year's third fiscal quarter. For the third quarters of fiscal 2024 and fiscal 2023, GAAP net income was adversely impacted by amortization of acquired intangible assets associated with our previous acquisitions.
Non-GAAP net income for the third quarter of fiscal 2024 was $592.7 million, or $1.08 per diluted share, down from non-GAAP net income of $863.7 million, or $1.56 per diluted share, in the prior year's third fiscal quarter. For the third quarters of fiscal 2024 and fiscal 2023, 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, and losses on the settlement of debt. For the third quarters of fiscal 2024 and fiscal 2023, 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 45.0 cents per share, up 25.7% from the year ago quarter. The quarterly dividend is payable on March 8, 2024 to stockholders of record on February 23, 2024.
"Our December quarter performance fell short of our November guidance, primarily due to weaker business conditions," said Ganesh Moorthy, President and Chief Executive Officer. "Revenue declined 21.7% sequentially as weak demand drove customers to cut shipments and extend shutdowns to further de-risk their inventories, which prevented us from fulfilling previously planned shipments from backlog. We are proactively taking measures to navigate these short-term challenges, with our focus firmly set on ensuring the long-term sustainability and growth of our business."
Mr. Moorthy added, "While we remain confident in the long-term opportunities for our business, we are cautious about demand in the near term given the weak macro environment and customers' ongoing actions to reduce inventory. As such, we are taking steps to limit discretionary spending and tightly manage inventory levels during this downcycle. As a result, we intend to have two-week shutdowns in our large wafer fabrication facilities in each of the March and June quarters and reduced activity in many of our other factories, resulting in underutilization charges. We believe that our average lead times of less than eight weeks position us to navigate this choppy market environment effectively. At the same time, we continue investing in the innovative technologies and capabilities that will allow us to serve customers better and emerge even stronger when end market conditions improve."
Eric Bjornholt, Microchip's Chief Financial Officer, said, "In response to a more severe than expected downturn, we have taken additional expense control measures, resulting in a sequential decline in non-GAAP operating expenses of 11.6% and a reduction of 14.4% from our peak non-GAAP operating expenses. We expect to reduce our non-GAAP operating expenses in the March 2024 quarter. Given our healthy cash generation during the December quarter, we continued to pay down our debt with $392 million of payments, reflecting a cumulative debt pay down of over $7.1 billion over the past 22 quarters. As of the end of the last quarter in 2023, our net debt to adjusted EBITDA ratio was 1.27x, down from 1.56x in the same quarter of 2022."
Mr. Moorthy concluded, "As we enter the March quarter, we anticipate customers may continue to reduce inventory levels in the short-term as they adjust operations and seek to match demand in an increasingly dynamic market. We anticipate net sales in the March quarter to be between $1.225 billion and $1.425 billion. Notwithstanding any near-term macro weakness, we are confident that our solutions remain the engine of innovation for the applications and end markets we serve. Our focus on Total System Solutions and key market megatrends continue to fuel strong design win momentum which we expect will drive above-market long-term growth. Our unwavering commitment to executing our MCHP 3.0 strategic imperatives prioritizes striking a balance between fostering sustainable long-term growth and delivering substantial value to our shareholders."
Microchip's Highlights for the Quarter Ended December 31, 2023:
- Introduced the industry’s most complete solution for 800G active electrical cables (AECs) used for generative AI networks. Our new META-DX2C 800G retimer is supported by a complete hardware and software reference design with key Microchip components.
- Released our latest TrustAnchor security IC to meet and exceed heightened automotive secure authentication requirements. Available as a CryptoAuthentication™ or CryptoAutomotive™ secure IC, the new TA101 device focuses on larger key sizes and enhanced cybersecurity requirements.
- Expanded and announced Microchip’s Detroit Automotive Technology Center as the destination for automotive clients. The 24,000-square-foot facility includes new high-voltage and E-Mobility labs, as well as technical training rooms for automotive clients to develop and optimize designs.
- Showcased expanded RISC-V-based solutions, partnerships and system design tools at the 2023 RISC-V Summit including BeagleBoard hardware and system on module (SoM) products, as well as AI/ML solutions and an industrial edge solutions suite. Also presented keynote highlighting new advancements in intelligent edge compute and security paradigms based on the RISC-V platform.
- Significantly expanded Strategic R&D commitment in the UK with a new design center in Cambridge that will give Microchip access to a highly skilled engineering workforce, allowing it to expand rapidly and develop new solutions for a wide range of markets.
- Received the Outstanding Community Project Award from The Republic of the Philippines for notable efforts towards undertaking social welfare programs that greatly benefit the Filipino community. Programs included mentoring students, providing school supplies and health kits, as well as participating in beautification projects.
- Launched AVR® EB family of microcontrollers to reduce noise, vibration and system harshness in BLDC motor applications. The family offers a smaller, more cost-effective solution for sophisticated waveform control with increased efficiency.
- Achieved QML class Q qualification for radiation-tolerant PolarFire® FPGAs that bring high levels of density and performance to space applications, saving system cost and engineering efforts through low power consumption and immunity to configuration upsets.
- Introduced press-fit terminal power modules for solder-free solutions in high-volume manufacturing to help customers automate their installation processes. The SP1F and SP3F power modules are highly configurable in Silicon Carbide (SiC) or Silicon (Si) technology.
- Unveiled a new standard of enhanced code security with the PIC18-Q24 family of microcontrollers that introduced the programming and debugging interface disable (PDID) feature. When enabled, this feature is designed to lock out access to the programming/debugging interface and block unauthorized attempts to read, modify or erase firmware.
- Expanded our development ecosystem with MPLAB® XC-DSC compiler with flexible licensing options. Specifically optimized for dsPIC® digital signal controllers, the new compiler licenses are custom-tailored for real-time applications.
- Announced a new 32-bit MCU that features an embedded hardware security module to safeguard industrial and consumer applications. The highly configurable PIC32CZ CA devices are available with a 300 MHz Arm®Cortex®-M7 processor.
Fourth Quarter Fiscal Year 2024 Outlook:
The following statements are based on current expectations. These statements are forward-looking, and actual results may differ materially.
