Microchip (MCHP) Q1 2025 earnings summary

Executive summary

• Net sales for Q1 FY2025 were $1.241 billion, down 6.4% sequentially and 45.8% year-over-year, reflecting ongoing inventory correction and weak demand in key markets, especially industrial and automotive in Europe and the Americas.

• Non-GAAP gross margin was 59.9% and operating margin was 31.5%; GAAP gross margin was 59.4% and operating margin was 17.7%.

• Non-GAAP diluted EPS was $0.53; GAAP EPS was $0.24.

• Returned $315.3 million to shareholders via dividends and buybacks; declared a record quarterly dividend of $0.454 per share, up 10.7% year-over-year.

• The company launched new 64-bit embedded microprocessor and AI-focused portfolios, and expanded its ecosystem and partnerships.

Financial highlights

• Net income for the quarter was $129.3 million (GAAP) and $289.9 million (non-GAAP).

• Adjusted EBITDA was $456.2 million (36.8% of net sales); trailing 12-month adjusted EBITDA was $2.9 billion.

• Free cash flow for the quarter was $304.2 million; cash flow from operations was $377.1 million; capital expenditures were $72.9 million.

• Inventory at June 30, 2024, was $1.308 billion, with 237 days of inventory, up 13 days sequentially.

• Cash and short-term investments at quarter-end were $315.1 million.

Outlook and guidance

• Q2 FY2025 net sales expected between $1.12 billion and $1.18 billion.

• Non-GAAP gross margin guidance: 58.5%–59.5%; non-GAAP operating profit: 27.5%–29.5% of sales.

• Non-GAAP diluted EPS guidance: $0.40–$0.46; GAAP EPS guidance: $0.10–$0.14.

• Capital expenditures for Q2 expected to be $35–$40 million; full-year capex expected at $175 million.

• Capital return to shareholders to increase to 92.5% of adjusted free cash flow in Q2, targeting 100% by March 2025.