Analyst Conference Summary

semiconductors

conference date: November 4, 2015 @ 2:00 PM Pacific Time
for quarter ending: September 31, 2015 (Q2, fiscal second quarter 2016)

Forward-looking statements

Overview: Solid quarter, better than guidance, but revenue down y/y despite acquisition.

Basic data (GAAP):

Revenues were $541.4 million, up 1% sequentially from $534.0 million, and down 1% from $546.2 million in the year-earlier quarter.

Net income was $64.9 million, down 50% sequentially from $130.7 million, and down 31% from $93.6 million in the year-earlier quarter.

EPS (diluted earnings per share) were $0.30, down 50% sequentially from $0.60 and down 29% from $0.42 year-earlier.

Guidance:

Fiscal Q3 (December quarter) non-GAAP revenue between $539.7 and $563.5 million. Net income $127.2 million to $139.2 million. EPS $0.58 to $0.64. Includes Micrel.

Micrel's Q3 revenue contribution is expected between $51 and $54 million.

Also believes March 2016 quarter reenue to be sequentially up in low single digit percentage.

Conference Highlights:

CEO Steve Sanghi said "We believe that industry conditions continue to be very weak," but believes the end of the inventory correction is near.

Micrel acquisition closed on August 3, 2015, accounting for the GAAP net income and EPS drops.

A dividend of 35.85 cents per share will be paid on December 4 to shareholders of record on November 20. The prior dividend was 35.8 cents per share.

Non-GAAP numbers: Sales were $559.4 million. Net income was $142.9 million, down 4% sequentially from $148.9 million and down 5% from $150.2 million year-earlier. EPS was $0.66, down 4% sequentially from $0.69 and also down 1.5% from $0.67 year-earlier. 57.9% gross margin. 30.4% operating margin.

Microcontroller revenue was $ million, down 4% sequentially from $348.2 million and up % y/y. % of overall revenue.

Analog chip revenue excluding Micrel was $ million, about flat sequentially from $127.1 million, and was up 4% y/y. Including Micrel revenue rose 30% sequentially and 35% y/y. % of overall revenue.

Memory business revenue was $ million, sequentially from $31.8. Was % of overall revenue.

Licensing revenue was $ million.

Other revenue was $ million.

In the quarter Microchip integrated Intel Enhanced Privacy ID technology. New 8, 16, and 32-bit microcontroller products were introduced, along with a new 8 bit development platform.

New design wins by MOST technology for automotive infotainment networks were announced.

New products were added to the industrial Ethernet switch portfolio.

Cash and investments ended at $2.59 billion, up sequentially from $2.43 billion. Cash generation was $150 million. $ million capital spend in quarter. Debt was about $ million. $ million paid in cash dividends. $ million depreciation expense.

Cost of goods sold was $240.4 million, leaving gross profit of $301.0 million. Operating expenses of $226.0 million consisted of: research and development $95.3 million; selling, general and administrative $80.3 million; amortization $43.8 million; and special charge $6.6 million. Leaving operating income of $74.9 million. Other expense $20.9 million. Income tax benefit of $10.9 million.

Eventually, once the products are shifted to other Fabs, the Micrel San Jose fab will be closed.

Q&A:

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