(2) See the "Use of Non-GAAP Financial Measures" section of this release.
GAAP net sales for the first quarter of fiscal 2021 were $1.310 billion, down 1.0% from net sales of $1.323 billion in the prior year's first fiscal quarter.
GAAP net income for the first quarter of fiscal 2021 was $123.6 million, or $0.48 per diluted share, up from GAAP net income of $50.7 million, or $0.20 per diluted share, in the prior year's first fiscal quarter. For the first quarters of fiscal 2021 and fiscal 2020, GAAP net income was significantly adversely impacted by purchase accounting adjustments associated with our acquisitions.
Non-GAAP net income for the first quarter of fiscal 2021 was $401.9 million, or $1.56 per diluted share, up from non-GAAP net income of $357.6 million, or $1.41 per diluted share, in the prior year's first fiscal quarter. For the first quarters of fiscal 2021 and fiscal 2020, our non-GAAP results exclude the effect of share-based compensation, COVID-19 shelter-in-place restrictions on manufacturing activities, 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, IT security remediation costs, non-cash interest expense on our convertible debentures, losses on the settlement of debt, and gains related to available-for-sale investments. For the first quarters of fiscal 2021 and fiscal 2020, our non-GAAP income tax expense is presented based on projected cash taxes for the 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 has declared a record quarterly cash dividend on its common stock of 36.80 cents per share. The quarterly dividend is payable on September 4, 2020 to stockholders of record on August 21, 2020.
"The June quarter demonstrated what the best of the Microchip culture and its employees represent," said Steve Sanghi, Chief Executive Officer. "Our global team all came together in the middle of a global pandemic, while working on a pay cut, and delivered superb performance during the quarter. I am proud of how rapidly the Microchip team adapted to the new constraints we faced so that our employees would be safe, our customers could be well served and our supply chain partners engaged to achieve mutual success despite the challenges we faced."
Mr. Sanghi added, "Despite the COVID-19 pandemic, we delivered $1.31 billion of net sales which was down 1.3% on a sequential basis compared to our early June updated guidance which was for net sales to be about flat to down 6%. We also delivered outstanding non-GAAP gross margin of 61.7% and operating margin of 38.6%, while reducing our days of inventory from 122 days to 117 days. We believe our inventory is well-positioned to serve the needs of our customers and is within our publicly-stated inventory target of 115 to 120 days."
"In the June quarter, our Data Center and Computing end markets continued to show strength from the shift to a work from home environment," said Ganesh Moorthy, President and Chief Operating Officer. "Medical devices necessary to treat COVID-19 patients in addition to a host of other hospital equipment needed to support increased patient loads were also strong in the quarter. Our Automotive business was very weak, particularly in April and May due to the widespread factory shutdowns, but we are starting to see some improvement in this portion of our business."
Mr. Moorthy added, "Our manufacturing operations worked through varying constraints in the June quarter and were able to ramp up as the quarter progressed and the shelter in place restrictions eased in certain of the higher impacted locations. Our customers and supply chain partners also faced constraints with their factories and logistics, primarily during April and May. As we progressed through May and June, we experienced many short lead time orders from customers due to a variety of factors. We are working with our customers to improve the visibility of their backlog so that we can serve them better."
Eric Bjornholt, Microchip's Chief Financial Officer, said, "We continued to aggressively pay down our debt with another $394.0 million of payments during the June quarter, reflecting a cumulative debt pay down of $2.62 billion over the past eight quarters, as we have actively managed the working capital requirements for the business. In the June quarter, we also issued $2.2 billion of senior notes which was used to repay our senior secured bridge loan facility, repurchased a portion of our convertible debt, and paid down a portion of the borrowings under our revolving credit facility. We believe that the convertible repurchases will significantly reduce share count dilution to the extent our stock price appreciates over time."
Mr. Sanghi concluded, "Our June quarter bookings were soft compared to the March quarter as our customers and distributors did not have the visibility to place long-term orders. Our backlog entering the September quarter was significantly below our backlog entering the June quarter, although bookings have strengthened through the month of July. However, the pace of economic recovery appears to be a bit uncertain due to the resurgence of COVID-19 positive cases in many countries around the world. Taking all of these factors into consideration, we expect our net sales in the September quarter to be flat to down 8% sequentially. The broad guidance range is to help account for the uncertainty from the evolving COVID-19 pandemic."
Microchip's Highlights for the Quarter Ended June 30, 2020:
- Expanded its market-leading maXTouch® portfolio with the new
MXT288UD touch controller family, the industry’s smallest automotive grade packaged touch screen controllers.
- Unveiled the
Adaptec® SmartRAID 3100E RAID adapters designed to provide reliable hardware RAID protection for customer data in cost-sensitive end applications. The SmartRAID 3100E provides over 60 percent performance acceleration over its prior-generation Adaptec Series 8E products at 40 percent power savings.
- Announced the VectorBlox Accelerator Software Development Kit (SDK) to help developers take advantage of Microchip’s PolarFire
® FPGAs for creating low-power, flexible overlay-based neural network applications without learning an FPGA tool flow.
- Introduced the next-generation
AVR® DA family of microcontrollers (MCUs), its first Functional Safety Ready AVR MCU family with Peripheral Touch Controller, building on a legacy of high performance and high code efficiency devices.
- Announced the release to production of the
Switchtec™ PAX Advanced Fabric Gen 4 PCIe switch family, enabling complex fabric topologies with greater scalability, lower latency, and higher performance than traditional Peripheral Component Interconnect Express (PCIe) switches.
- Introduced its newly-expanded portfolio of Transient Voltage Suppressor vertical arrays - the
MDA3KP Transient Voltage Suppressor, a 3 kW diode family of more than 25 products with different screening levels, polarities and qualification standards.
- Announced the release of software version 2.1 for its TimeProvider
® 4100, a 1588 grandmaster including support for the latest ITU-T G.8275.1 and G.8275.2 1588 phase profiles, and complemented by extensive port fan-out for PTP, Network Time Protocol, SyncE, and E1/T1.
- Unveiled a major software update for its BlueSky™ GNSS Firewall product, providing a higher level of resiliency against GPS vulnerabilities for systems dependent on GPS signal reception.
- Announced with KIOXIA America, Inc. the successful completion of the industry’s first 24G SAS End-to-End Storage interoperability testing. This interoperability testing demonstrates that its suite of 24G SAS products and KIOXIA 24G SAS Solid-State Drives can be utilized together as part of next-generation storage solutions.
- Announced availability of the 53100A Phase Noise Analyzer designed for engineers and scientists who rely on precise and accurate measurement of frequency signals.
