Microchip Technology Incorporated (MCHP) reported net revenues of $320.8 million, in the first quarter 2011, up 15.4% sequentially and 66.3% year over year and beat the Zacks Consensus Estimate of $319 million.
Growth was seen across the board in the quarter, across all geographies as well as the three product lines – Microcontrollers, Analog and Serial EEPROMs.
Geographically, revenues in the Americas were up 8.6%, Europe was up 2.7% and Asia was up 25.4%. In particular, growth was strongest in Asia accounting for 53.9% of total revenues.
Strength in the Microcontroller business continues to drive revenue growth. Revenues from this business were up 9.8% sequentially and 55.3% year over year. All three microcontroller segments, 8 bit, 16 bit and 32 bit posted record revenues. In particular, the 16-bit microcontroller business achieved record quarterly revenues, which grew 26% sequentially and 154% year over year. The 32-bit microcontroller product line registered an 86% sequential growth although from a small base.
The Analog business was up 101.2% year over year and 17.8% sequentially. Growth was especially strong in the linear, interface, mixed-signal, safety, security and radio frequency product lines.
Serial EEPROMs business was flat on a sequential basis as Microchip continues to prioritize capacity to support its proprietary microcontroller and analog product lines.
We believe the topline has gained momentum at Microchip after taking a hit in the second half of calendar 2008 and first half of calendar 2009. This was the fifth consecutive quarter of sequential revenue growth.
Excluding stock-based compensation expense and one-time items, gross margins came in at 63.6%, up from 51.4% in the year-ago quarter and 61.6% in the previous quarter.
Operating expenses came in at 25.7% of total sales, down from 25.8% in the previous quarter and better than management’s guidance of 26.6%. Operating margin came in at 37.9% compared to 22.1% in the year-earlier quarter.
Net income came in at $89.6 million or 47 cents compared with a net income of $75.7 million or 40 cents per share in the previous quarter and a net income of $27.4 million or 15 cents per share in the year-earlier quarter. Excluding one-time items and stock-based compensation expense, net income came in at 50 cents per share. This beat the Zacks Consensus Estimate by a penny.
Microchip generated $95.3 million of cash from operations prior to the payment of dividends of $63.7 million. Capital expenditures were approximately $34.1 million for the June quarter. Microchip ended the quarter with cash and cash equivalents of $1.3 billion, up from $1.2 billion at the end of the previous quarter. Debt to capital ratio declined to 17.9% from 18.2% at the end of previous quarter.
Meanwhile, Microchip closed the acquisition of Storage Technology Inc. (SST) on April 8, 2010 and has identified the core and non-core assets of SST. The licensing business and 8051 microcontroller business have been identified as the core assets of the company, and the results from these operations are reported under continuing operations.
NANDrive, NAN controllers, smart card business, and Wi-Fi PA businesses of SST were identified as non-core assets. During the June quarter, Microchip sold one division of SST, which contained the non-core assets of NAND drive, NAND Controllers, smart card and some older flash memory products of SST. Microchip is nearing the sale of another division of SST – Wi-Fi PA assets and will most likely consummate this transaction in the current quarter.
Inventory at the end of the quarter was $128.1 million, down from $116.6 million at the end of the previous quarter. Inventory days (the number of days inventory is held) were approximately 136 days, down two days from the prior quarter and well below the internal target of 115. Given the industry – wide supply constraints, Microchip continued to aggressively increase its manufacturing output in the June quarter to meet customer demand.
The guidance provided by Microchip was strong as well. Including operations from SST, Microchip expects to report revenue growth of 6% – 7% sequentially in the second quarter of 2011. This implies a revenue guidance of $340.0 million – $343.2 million. SST operations are expected to contribute about $20 million to total revenues in the September quarter. Gross margin is projected at 63.6%. Earnings per share are projected at 58 cents.
The results did not have much impact on the share price. Shares of Microchip were up 0.2% to close at $30.82 in after hours trading. In regular trading, shares were up 1.12% and closed at $30.76.
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