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Stock Analysis on Net

Microchip Technology Inc. (NASDAQ:MCHP)

This company has been moved to the archive! The financial data has not been updated since February 2, 2023.

Common-Size Income Statement

Microchip Technology Inc., common-size consolidated income statement

Microsoft Excel
12 months ended: Mar 31, 2022 Mar 31, 2021 Mar 31, 2020 Mar 31, 2019 Mar 31, 2018 Mar 31, 2017
Net sales 100.00 100.00 100.00 100.00 100.00 100.00
Cost of sales -34.77 -37.87 -38.53 -45.20 -39.19 -48.44
Gross profit 65.23% 62.13% 61.47% 54.80% 60.81% 51.56%
Research and development -14.50 -15.38 -16.64 -15.45 -13.30 -16.00
Selling, general and administrative -10.54 -11.22 -12.83 -12.77 -11.36 -14.67
Amortization of acquired intangible assets -12.64 -17.14 -18.84 -12.60 -12.20 -9.91
Employee separation costs -0.01 0.02 -0.11 -1.22 -0.03 -1.15
Gain on sale of assets 0.12 0.11 0.03 0.00 0.11 0.00
Impairment charges 0.00 0.00 -0.01 -0.07 0.00 -0.37
Contract exit costs -0.07 0.03 -0.10 0.09 -0.02 -1.29
Wafer fabrication restructuring -0.31 -0.28 -0.34 0.00 0.00 0.00
Other 0.00 0.00 -0.05 0.01 0.00 -0.08
Restructuring -0.27% -0.12% -0.59% -1.19% 0.06% -2.89%
Legal contingencies -0.18 0.00 -0.30 0.56 0.00 0.00
Contingent consideration revaluation 0.02 0.09 0.00 0.00 0.00 0.00
Non-restructuring contract exit costs and other 0.00 0.00 0.00 0.00 -0.50 0.00
Special charges and other, net -0.43% -0.03% -0.89% -0.63% -0.44% -2.89%
Operating expenses -38.12% -43.78% -49.20% -41.44% -37.29% -43.47%
Operating income 27.12% 18.35% 12.27% 13.35% 23.52% 8.09%
Losses on equity method investments 0.00 0.00 0.00 0.00 -0.01 -0.01
Interest income 0.01 0.03 0.05 0.15 0.55 0.09
Interest expense -3.77 -6.56 -9.43 -9.40 -5.00 -4.29
Loss on settlement of debt -1.66 -5.51 -0.10 -0.24 -0.40 -1.29
Other income (expense) -5.42% -12.04% -9.48% -9.48% -4.85% -5.49%
Other income (loss), net 0.04 -0.07 0.06 -0.04 -0.15 0.04
Income before income taxes 21.73% 6.24% 2.85% 3.82% 18.52% 2.63%
Income tax (provision) benefit -2.89 0.18 7.97 2.83 -12.11 2.37
Net income from continuing operations 18.85% 6.42% 10.82% 6.65% 6.42% 5.01%
Net loss from discontinued operations 0.00 0.00 0.00 0.00 0.00 -0.17
Net income 18.85% 6.42% 10.82% 6.65% 6.42% 4.83%

Based on: 10-K (reporting date: 2022-03-31), 10-K (reporting date: 2021-03-31), 10-K (reporting date: 2020-03-31), 10-K (reporting date: 2019-03-31), 10-K (reporting date: 2018-03-31), 10-K (reporting date: 2017-03-31).

An analysis of the common-size income statement from 2017 to 2022 reveals a significant expansion in overall profitability, driven primarily by increasing gross margins and improved operational efficiency. The net income margin grew from 4.83% in 2017 to 18.85% in 2022, reflecting a strengthened ability to convert revenue into profit despite fluctuations in non-operating expenses.

Gross Profitability Trends
Gross profit margins exhibited a consistent upward trajectory, rising from 51.56% in 2017 to 65.23% in 2022. This improvement is directly attributed to a steady reduction in the cost of sales, which decreased from 48.44% to 34.77% of net sales over the same period. This trend suggests enhanced pricing power or increased manufacturing efficiencies.
Operating Expense Management
Operating expenses as a percentage of net sales fluctuated, ending at 38.12% in 2022 compared to 43.47% in 2017. Selling, general and administrative (SG&A) expenses showed a clear downward trend, falling from 14.67% to 10.54%. Research and development (R&D) remained relatively stable, generally oscillating between 13% and 16% of net sales. Amortization of acquired intangible assets represented a significant cost center, peaking at 18.84% in 2020 before moderating to 12.64% in 2022.
Operating Income Performance
Operating income margins demonstrated substantial growth, increasing from 8.09% in 2017 to 27.12% in 2022. While there was a period of compression between 2019 and 2020, where margins dipped to approximately 12-13%, the subsequent recovery indicates strong operational leverage.
Non-Operating Volatility
The transition from operating income to income before taxes was heavily influenced by interest expenses and debt-related costs. Interest expense peaked at 9.43% of net sales in 2020 before declining to 3.77% by 2022. Significant volatility was also observed in losses on the settlement of debt, most notably in 2021 when such losses reached 5.51% of net sales, which temporarily suppressed pre-tax income.
Net Income and Tax Impact
Net income margins remained volatile but trended upward, peaking at 18.85% in 2022. The impact of income tax provisions varied significantly, with a notable tax benefit in 2020 (7.97% of sales) contributing to a net income spike that year, contrasted by a tax provision of 2.89% in 2022.

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