MICROCHIP TECHNOLOGY INC

Previous wording

•Our expectation that we will experience period-to-period fluctuations in operating results, gross margins, product mix and average gross profit per unit;

Current wording

•Our expectation that we will experience period-to-period fluctuations in operating results, gross margins, and product mix;

Previous wording

•Our expected debt obligation maturities and plans to refinance our existing debt;

Current wording

•Our expected debt obligation maturities, including the conversion of debt, Depositary Shares, and Series A Preferred Stock, and plans to refinance our existing debt;

Previous wording

•Our belief that our culture, values, and organizational development and training programs will continue to provide an inclusive work environment where our employees are empowered and engaged to deliver the best embedded control solutions;

Current wording

•Our belief that our culture, values, and organizational development and training programs will continue to provide a work environment where our employees are empowered and engaged to deliver the best embedded control solutions;

Previous wording

We begin our Management's Discussion and Analysis of Financial Condition and Results of Operations with a summary of business and macroeconomic developments followed by a summary of our overall business strategy to provide an overview of the goals and overall direction of our business. This is followed by a discussion of the Critical Accounting Policies and Estimates that we believe are important to understanding the assumptions and judgments incorporated in our reported financial results. We then discuss our Results of Operations for the three and nine months ended December 31, 2024 compared to the three and nine months ended December 31, 2023, followed by an analysis of changes in our balance sheet and cash flows, and discuss our financial commitments in the section titled "Liquidity and Capital Resources."

Current wording

We begin our Management's Discussion and Analysis of Financial Condition and Results of Operations with a summary of business and macroeconomic developments followed by a summary of our overall business strategy to provide an overview of the goals and overall direction of our business. This is followed by a discussion of the Critical Accounting Policies and Estimates that we believe are important to understanding the assumptions and judgments incorporated in our reported financial results. We then discuss our Results of Operations for the three months ended June 30, 2025 compared to the three months ended June 30, 2024, followed by an analysis of changes in our balance sheet and cash flows, and discuss our financial commitments in the section titled "Liquidity and Capital Resources."

Previous wording

We develop, manufacture and sell smart, connected and secure embedded control solutions used by our customers for a wide variety of applications. Our strategic focus includes general purpose and specialized 8-bit, 16-bit, and 32-bit mixed-signal microcontrollers, microprocessors, analog, FPGA, and memory products. With over 30 years of technology leadership, our broad product portfolio is a Total System Solution (TSS) for our customers that can provide a large portion of the silicon requirements in their applications. TSS is a combination of hardware, software and services which help our customers increase their revenue, reduce their costs and manage their risks compared to other solutions. Our synergistic product portfolio empowers disruptive growth trends, including 5G, data centers, sustainability, Internet of Things (IoT) and edge computing, advanced driver assist systems (ADAS) and autonomous driving, and electric vehicles, in key end markets such as automotive, aerospace and defense, communications, consumer appliances, data centers and computing, and industrial.

Current wording

We develop, manufacture and sell smart, connected and secure embedded control solutions used by our customers for a wide variety of applications. Our strategic focus includes general purpose and specialized 8-bit, 16-bit, and 32-bit mixed-signal microcontrollers, microprocessors, analog, FPGA, and memory products. With over 30 years of technology leadership, our broad product portfolio is a Total System Solution (TSS) for our customers that can provide a large portion of the silicon requirements in their applications. TSS is a combination of hardware, software and services which help our customers increase their revenue, reduce their costs and manage their risks compared to other solutions. Our synergistic product portfolio empowers disruptive growth trends, including AI/ML, data centers, edge computing and Internet of Things (IoT), E-mobility, networking and connectivity, and sustainability, in key end markets such as automotive, aerospace and defense, communications, consumer appliances, data centers and computing, and industrial.

Previous wording

Our manufacturing operations include wafer fabrication, wafer probe, assembly and test. In fiscal 2023, we announced our intent to expand our production capacity in the U.S. In the first three quarters of fiscal 2024, we continued our multi-year $800 million capacity expansion plan at Fab 4 in Gresham, Oregon and $880 million plan to expand our SiC and silicon production capacity, including the production of 8-inch wafers at Fab 5 in Colorado Springs, Colorado. In the fourth quarter of fiscal 2024, we paused our expansion efforts until business conditions warrant expansion. In the third quarter of fiscal 2025, we announced the closure of Fab 2 in Tempe, Arizona, which is expected to occur in the second quarter of fiscal 2026. The ownership of a substantial portion of our manufacturing resources is an important component of our business strategy, enabling us to maintain a high level of manufacturing control, resulting in us being one of the lowest cost producers in the embedded control industry. By owning wafer fabrication facilities and our assembly and test operations, and by employing statistical techniques (statistical process control, designed experiments and wafer level monitoring), we have been able to achieve and maintain high production yields. Direct control over manufacturing resources allows us to shorten our design and production cycles. This control also allows us to capture a portion of the wafer manufacturing and assembly and testing profit margin. We outsource a significant portion of our manufacturing requirements to third parties and the amount of our outsourced manufacturing has increased in recent years due to our acquisitions of Microsemi and other companies that outsourced all or substantial portions of their manufacturing.

Current wording

Our manufacturing operations include wafer fabrication, wafer probe, assembly and test. Due to high inventory levels and ample capacity, on December 2, 2024, we announced our decision to close our Tempe, Arizona wafer fabrication facility that we refer to as Fab 2 and the closure of Fab 2 was completed in May 2025. Many of the process technologies that ran in Fab 2 also run in our Oregon and Colorado factories, which both have ample clean room space for expansion, and we are transferring production of many devices from Fab 2 to our Oregon and Colorado locations. The ownership of a substantial portion of our manufacturing resources is an important component of our business strategy, enabling us to maintain a high level of manufacturing control, resulting in us being one of the lowest cost producers in the embedded control industry. By owning wafer fabrication facilities and our assembly and test operations, and by employing statistical techniques (statistical process control, designed experiments and wafer level monitoring), we have been able to achieve and maintain high production yields. Direct control over manufacturing resources allows us to shorten our design and production cycles and capture a portion of the wafer manufacturing and assembly and testing profit margin.

Previous wording

There were no changes to our critical accounting policies and estimates during the first nine months of the fiscal year ending March 31, 2025 compared to our "Critical Accounting Policies and Estimates" as previously described in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended March 31, 2024.

Current wording

There were no changes to our critical accounting policies and estimates during the first three months of the fiscal year ending March 31, 2026 compared to our "Critical Accounting Policies and Estimates" as previously described in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended March 31, 2025.

Previous wording

The decreases in net sales in the three and nine months ended December 31, 2024 compared to the three and nine months ended December 31, 2023 were primarily due to adverse economic conditions, including slowing economic activity, increasing business uncertainty, persistent inflation, high interest rates, and shorter product lead times, which factors resulted in many customers having higher levels of inventory and delaying or reducing orders. Due to the size, complexity and diversity of our customer base, we are not able to quantify any material factor contributing to the changes in net sales. See our "Business and Macroeconomic Environment" discussion above for further information on our business outlook.

Current wording

many customers having high levels of inventory and delaying or reducing orders and, to a lesser extent, adverse economic conditions, including slow economic activity, business uncertainty, persistent inflation and high interest rates. Due to the size, complexity and diversity of our customer base, we are not able to quantify any material factor contributing to the changes in net sales. See our "Business and Macroeconomic Environment" discussion above for further information on our business outlook.

Previous wording

Other factors that we believe contributed to changes in our reported net sales for the three and nine months ended December 31, 2024 compared to the three and nine months ended December 31, 2023 and which are drivers of long-term trends in our net sales but which factors we are not able to quantify include:

Current wording

Other factors that we believe contributed to the change in our reported net sales for the three months ended June 30, 2025 compared to June 30, 2024 and which are drivers of long-term trends in our net sales but which factors we are not able to quantify include:

Previous wording

We sell a large number of products to a large and diverse customer base and there was not any single product or customer that accounted for a material portion of the change in our net sales in the three and nine months ended December 31, 2024 or the three and nine months ended December 31, 2023.

Current wording

We sell a large number of products to a large and diverse customer base and there was not any single product or customer that accounted for a material portion of the change in our net sales in the three months ended June 30, 2025 or the three months ended June 30, 2024.

Previous wording

Our mixed-signal microcontroller product line represents the largest component of our total net sales. Mixed-signal microcontrollers and associated application development systems accounted for approximately 51.9% and 51.7% of our net sales for the three and nine months ended December 31, 2024, respectively, compared to approximately 56.3% and 56.7% of our net sales for the three and nine months ended December 31, 2023, respectively.

Current wording

Our mixed-signal microcontroller product line represents the largest component of our total net sales. Mixed-signal microcontrollers and associated application development systems accounted for approximately 49.5% of our net sales in the three months ended June 30, 2025 compared to approximately 51.9% of our net sales in the three months ended June 30, 2024.

Previous wording

Net sales of our mixed-signal microcontroller products decreased 46.4% and 50.4% in the three and nine months ended December 31, 2024, respectively, compared to the three and nine months ended December 31, 2023. These decreases in net sales were primarily due to adverse economic conditions, including slowing economic activity, increasing business uncertainty, competitive pressures, persistent inflation, high interest rates, and shorter product lead times, which factors resulted in many customers having higher levels of inventory and delaying or reducing orders.

Current wording

Net sales of our mixed-signal microcontroller products decreased 17.4% in the three months ended June 30, 2025 compared to the three months ended June 30, 2024 primarily due to many customers having high levels of inventory and delaying or reducing orders and, to a lesser extent, adverse economic conditions, including slow economic activity, business uncertainty, persistent inflation and high interest rates.

Previous wording

Our analog product line includes analog, interface, mixed-signal and timing products. Our analog product line accounted for approximately 26.6% and 26.1% of our net sales for the three and nine months ended December 31, 2024, respectively, compared to approximately 24.4% and 26.7% of our net sales for the three and nine months ended December 31, 2023, respectively.

Current wording

Our analog product line includes analog, interface, mixed-signal and timing products. Our analog product line accounted for approximately 29.4% of our net sales in the three months ended June 30, 2025 compared to approximately 26.6% of our net sales in the three months ended June 30, 2024.

Previous wording

Net sales from our analog product line decreased 36.7% and 46.9% in the three and nine months ended December 31, 2024, respectively, compared to the three and nine months ended December 31, 2023, primarily due to adverse economic conditions, including slowing economic activity, increasing business uncertainty, persistent inflation, high interest rates, and shorter product lead times, which factors resulted in many customers having higher levels of inventory and delaying or reducing orders.

Current wording

Net sales from our analog product line decreased 4.4% in the three months ended June 30, 2025 compared to the three months ended June 30, 2024, was primarily due to many customers having high levels of inventory and delaying or reducing orders and, to a lesser extent, adverse economic conditions, including slow economic activity, business uncertainty, persistent inflation and high interest rates.

Previous wording

Our other product line includes FPGA products, royalties associated with licenses for the use of our SuperFlash and other technologies, sales of our intellectual property, fees for engineering services, memory products, timing systems, manufacturing services (wafer foundry and assembly and test subcontracting), legacy application specific integrated circuits, and certain products for aerospace applications. Revenue from these services and products accounted for approximately 21.5% and 22.2% of our net sales for the three and nine months ended December 31, 2024, respectively, compared to approximately 19.3% and 16.6% of our net sales for the three and nine months ended December 31, 2023, respectively. In the nine months ended December 31, 2024, we settled an ongoing legal matter with one of our licensees which resulted in the release of an accrual, which increased both our revenue and profits by $13.3 million in such nine month period.

Current wording

Our other product line includes FPGA products, royalties associated with licenses for the use of our SuperFlash and other technologies, sales of our intellectual property, fees for engineering services, memory products, timing systems, manufacturing services (wafer foundry and assembly and test subcontracting), legacy application specific integrated circuits, and certain products for aerospace applications. Revenue from these services and products accounted for approximately 21.1% of our net sales in the three months ended June 30, 2025 compared to approximately 21.5% of our net sales in the three months ended June 30, 2024.

Previous wording

Net sales related to these services and products decreased 35.2% and 26.9% in the three and nine months ended December 31, 2024, respectively, compared to the three and nine months ended December 31, 2023. These decreases in net sales were primarily due to adverse economic conditions, including slowing economic activity, increasing business uncertainty, persistent inflation, high interest rates, and shorter product lead times, which factors resulted in many customers having higher levels of inventory and delaying or reducing orders. Net sales of our other product line can fluctuate over time based on general economic and semiconductor industry conditions as well as changes in demand for our FPGA products, licenses, engineering services, memory products, timing systems, and manufacturing services (wafer foundry and assembly and test subcontracting).

Current wording

Net sales related to these services and products decreased 14.8% in the three months ended June 30, 2025 compared to the three months ended June 30, 2024. The decrease in net sales was primarily due many customers having high levels of inventory and delaying or reducing orders and, to a lesser extent, adverse economic conditions, including slow economic activity, business uncertainty, persistent inflation and high interest rates. Net sales of our other product line can fluctuate over time based on general economic and semiconductor industry conditions as well as changes in demand for our FPGA products, licenses, engineering services, memory products, timing systems, and manufacturing services (wafer foundry and assembly and test subcontracting).

Previous wording

Distributors accounted for approximately 43% and 45% of our net sales in the three and nine months ended December 31, 2024, respectively, and approximately 44% and 48% of our net sales in the three and nine months ended December 31, 2023, respectively. With the exception of Arrow Electronics, our largest distributor, which accounted for 10% and 12% of our net sales in the nine months ended December 31, 2024 and in the nine months ended December 31, 2023, respectively, no other distributor or direct customer accounted for more than 10% of our net sales in the nine months ended December 31, 2024 or in the nine months ended December 31, 2023. Our distributors focus primarily on servicing the product requirements of a broad base of diverse customers. We believe that distributors provide an effective means of reaching this broad and diverse customer base and that customers recognize Microchip for its products and brand name and use distributors as an effective supply channel.

Current wording

Distributors accounted for approximately 47% of our net sales in each of the three months ended June 30, 2025 and June 30, 2024. With the exception of Arrow Electronics, our largest distributor, which accounted for 11% of our net sales in each of the three months ended June 30, 2025 and the three months ended June 30, 2024, no other distributor or direct customer accounted for more than 10% of our net sales in the three months ended June 30, 2025 or in the three months ended June 30, 2024. Our distributors focus primarily on servicing the product requirements of a broad base of diverse customers. We believe that distributors provide an effective means of reaching this broad and diverse customer base and that customers recognize Microchip for its products and brand name and use distributors as an effective supply channel.

Previous wording

At December 31, 2024, our distributors maintained 37 days of inventory of our products compared to 41 days at March 31, 2024. Over the past ten fiscal years, the days of inventory maintained by our distributors have fluctuated between approximately 17 days and 43 days. Inventory holding patterns at our distributors have had a material adverse impact on our net sales in recent periods. Due to the relatively high level of inventory days, we have accommodated efforts by our distributors to manage their inventory levels.

Current wording

At June 30, 2025, our distributors maintained 29 days of inventory of our products compared to 33 days at March 31, 2025. Over the past ten fiscal years, the days of inventory maintained by our distributors have fluctuated between approximately 17 days and 43 days. Inventory holding patterns at our distributors have had a material adverse impact on our net sales in recent periods.

Previous wording

Americas sales include sales to customers in the U.S., Canada, Central America and South America. Sales to foreign customers accounted for approximately 76% and 75% of our total net sales in the three and nine months ended December 31, 2024, respectively, compared to approximately 75% of our total net sales in each of the three and nine months ended December 31, 2023, respectively. The decreases in net sales in the European market in the three and nine months ended December 31, 2024 compared to the three and nine months ended December 31, 2023 were due to general weakness in the European economy, and decreases in our net sales in the European industrial and automotive markets, which were particularly weak. Our net sales in the Americas and Asia market decreased in the three and nine months ended December 31, 2024 compared to the three and nine months ended December 31, 2023, primarily due to adverse economic conditions, including slowing economic activity, persistent inflation, high interest rates, and shorter product lead times which resulted in delayed or reduced orders. Substantially all of our foreign sales are U.S. dollar denominated. Our sales force in the Americas and Europe supports a significant portion of the design activity for products which are ultimately shipped to Asia.

Current wording

Americas sales include sales to customers in the U.S., Canada, Central America and South America. Sales to foreign customers accounted for approximately 77% of our total net sales in the three months ended June 30, 2025 compared to approximately 76% of our total net sales in the three months ended June 30, 2024, respectively. Our net sales in all geographies decreased in the three months ended June 30, 2025 compared to the three months ended June 30, 2024, primarily due to many customers having high levels of inventory and delaying or reducing orders and, to a lesser extent, adverse economic conditions, including slow economic activity, business uncertainty, persistent inflation and high interest rates. Substantially all of our foreign sales are U.S. dollar denominated. Our sales force in the Americas and Europe supports a significant portion of the design activity for products which are ultimately shipped to Asia.

Previous wording

The primary reasons for the decreases in gross profit of $506.9 million and $2.05 billion in the three and nine months ended December 31, 2024, respectively, compared to the three and nine months ended December 31, 2023, respectively, were an unfavorable net impact of sales volume, product mix, geographic mix, and average gross profit per unit in the three and nine months ended December 31, 2024. The net impact of product mix and average gross profit per unit may fluctuate over time due to the mix of sales volumes of lower or higher margin products, changes in selling prices, and fluctuations in product costs. We are not able to separately quantify these impacts on our gross profit. The net impact to our gross profit from inventory reserve charges was an adverse impact of $24.4 million and $84.8 million in the three and nine months ended December 31, 2024, respectively, compared to the three and nine months ended December 31, 2023, respectively. The gross margin impact of changes in licensing revenue, which has no associated cost of sales, was a favorable impact of $6.8 million and $7.4 million in the three and nine months ended December 31, 2024, respectively, compared to the three and nine months ended December 31, 2023, respectively. The impact of unabsorbed capacity charges was an adverse impact of $34.1 million and $110.1 million in the three and nine months ended December 31, 2024, respectively, compared to the three and nine months ended December 31, 2023, respectively. In the three and nine months ended December 31, 2023, the impact of unabsorbed capacity charges was not material. Unabsorbed capacity charges are expensed as incurred when we operate our manufacturing facilities below normal levels.

Current wording

The primary reason for the decrease in gross profit of $156.5 million in the three months ended June 30, 2025 compared to June 30, 2024 was an unfavorable net impact of sales volume, product mix, and geographic mix in the three months ended June 30, 2025. The net impact of product mix may fluctuate over time due to the mix of sales volumes of lower or higher margin products, changes in selling prices, and fluctuations in product costs. We are not able to separately quantify these impacts on our gross profit. The impact of unabsorbed capacity charges was an adverse impact of $15.6 million in the three months ended June 30, 2025 compared to June 30, 2024. Unabsorbed capacity charges are expensed as incurred when we operate our manufacturing facilities below normal levels. The net impact to our gross profit from inventory reserve charges was a favorable impact of $1.0 million in the three months ended June 30, 2025 compared to June 30, 2024. The gross margin impact of changes in licensing revenue, which has no associated cost of sales, was a favorable impact of $10.9 million in the three months ended June 30, 2025 compared to June 30, 2024.

Previous wording

Our overall inventory levels were $1.36 billion at December 31, 2024, compared to $1.32 billion at March 31, 2024. We maintained 266 days of inventory on our balance sheet at December 31, 2024 compared to 224 days of inventory at March 31, 2024. Our overall inventory level was generally flat as a result of our efforts to balance manufacturing production, customer demand and inventory levels. However, our days of inventory increased significantly due to lower net sales. Our inventory amounts are impacted by timing of shipment activity in the quarter, the timing of receipt of raw materials, foundry wafers, and strategic last time buy materials and completion of finished goods. Nonetheless, we believe that our current inventory and production capacity are adequate to fulfill the projected requirements of our customers.

Current wording

Our overall inventory levels were $1.17 billion at June 30, 2025, compared to $1.29 billion at March 31, 2025. We maintained 214 days of inventory on our balance sheet at June 30, 2025 compared to 251 days of inventory at March 31, 2025. Our overall inventory level in dollars decreased as a result of our efforts to balance manufacturing production, customer demand and inventory levels. Our days of inventory decreased from the prior quarter levels driven by our inventory reduction actions. Our inventory amounts are impacted by timing of shipment activity in the quarter, the timing of receipt of raw materials, foundry wafers, and strategic last time buy materials and completion of finished goods. We believe that our current inventory and production capacity are adequate to fulfill the projected requirements of our customers.

Previous wording

We operate assembly and test facilities in Thailand, the Philippines, and other locations throughout the world. Approximately 67% of our assembly requirements were performed in our internal assembly facilities during each of the three and nine months ended December 31, 2024, compared to approximately 59% and 58% during the three and nine months ended December 31, 2023, respectively. Approximately 67% of our test requirements were performed in our internal test facilities during each of the three and nine months ended December 31, 2024, compared to approximately 72% and 71% during the three and nine months ended December 31, 2023, respectively. The percentage of our assembly and test operations that are performed internally fluctuates over time based on supply and demand conditions in the semiconductor industry, our internal capacity capabilities and our acquisition activities. We believe that the assembly and test operations performed at our internal facilities provide us with significant cost savings compared to third-party contractor assembly and test costs, as well as increased control over these portions of the manufacturing process. We plan to continue to selectively invest in assembly and test equipment to increase our internal capacity capabilities and transition certain outsourced assembly and test capacity to our internal facilities.

Current wording

We operate assembly and test facilities in Thailand and the Philippines. Approximately 69% of our assembly requirements were performed in our internal assembly facilities during the three months ended June 30, 2025, compared to 68% during the three months ended June 30, 2024. During the three months ended June 30, 2025, approximately 68% of our test requirements were performed in our internal facilities compared to 66% during the three months ended June 30, 2024. The percentage of our assembly and test operations that are performed internally fluctuates over time based on supply and demand conditions in the semiconductor industry, our internal capacity capabilities and our acquisition activities. We believe that the assembly and test operations performed at our internal facilities provide us with significant cost savings compared to third-party contractor assembly and test costs, as well as increased control over these portions of the manufacturing process. In addition, we have specialized assembly and test facilities dedicated to our aerospace and defense products in Germany, France, Ireland, the United Kingdom, the Philippines, Thailand, and the United States. These facilities are designed to support the unique requirements of these sectors, helping to accelerate time to market and ensure consistent, high-quality products. We plan to continue to selectively invest in assembly and test equipment to increase our internal capacity capabilities and transition certain outsourced assembly and test capacity to our internal facilities.

Previous wording

We rely on outside wafer foundries for a significant portion of our wafer fabrication requirements. Approximately 64% of our net sales came from products that were produced at outside wafer foundries during each of the three and nine months ended December 31, 2024, compared to approximately 64% and 65% during the three and nine months ended December 31, 2023, respectively. This percentage may vary based on supply and demand conditions in the market.

Current wording

We rely on outside wafer foundries for a significant portion of our wafer fabrication requirements. Approximately 64% of our net sales came from products that were produced at outside wafer foundries during the three months ended June 30, 2025, compared to 63% during the three months ended June 30, 2024. This percentage may vary based on supply and demand conditions in the market.

Previous wording

R&D expenses for the three months ended December 31, 2024 were $246.2 million, or 24.0% of net sales, compared to $266.0 million, or 15.1% of net sales, for the three months ended December 31, 2023. R&D expenses for the nine months ended December 31, 2024 were $728.6 million, or 21.2% of net sales, compared to $857.1 million, or 13.6% of net sales, for the nine months ended December 31, 2023. We are committed to investing in new and enhanced products, including development systems software, and in our design and manufacturing process technologies. We believe these investments are significant factors in maintaining our competitive position. R&D costs are expensed as incurred. Assets purchased to support our ongoing research and development activities are capitalized when related to products which have achieved technological feasibility or that have alternative future uses and are amortized over their expected useful lives. R&D expenses include labor, depreciation, masks, prototype wafers, and expenses for the development of process technologies, new packages, and software to support new products and design environments.

Current wording

R&D expenses for the three months ended June 30, 2025 were $255.5 million, or 23.8% of net sales, compared to $241.7 million, or 19.5% of net sales, for the three months ended June 30, 2024. We are committed to investing in new and enhanced products, including development systems software, and in our design and manufacturing process technologies. We believe these investments are significant factors in maintaining our competitive position. R&D costs are expensed as incurred. Assets purchased to support our ongoing research and development activities are capitalized when related to products which have achieved technological feasibility or that have alternative future uses and are amortized over their expected useful lives. R&D expenses include labor, depreciation, masks, prototype wafers, and expenses for the development of process technologies, new packages, and software to support new products and design environments.

Previous wording

Selling, general and administrative expenses for the three months ended December 31, 2024 were $158.2 million, or 15.4% of net sales, compared to $172.2 million, or 9.8% of net sales, for the three months ended December 31, 2023. Selling, general and administrative expenses for the nine months ended December 31, 2024 were $465.7 million, or 13.6% of net sales, compared to $572.4 million, or 9.1% of net sales, for the nine months ended December 31, 2023. Our goal is to continue to be more efficient with our selling, general and administrative expenses. Selling, general and administrative expenses include salary expenses related to field sales, marketing and administrative personnel, advertising and promotional expenditures and legal expenses as well as costs related to our direct sales force, CEMs and ESEs who work remotely from sales offices worldwide to stimulate demand by assisting customers in the selection and use of our products.

Current wording

Selling, general and administrative expenses for the three months ended June 30, 2025 were $159.3 million, or 14.8% of net sales, compared to $150.5 million, or 12.1% of net sales, for the three months ended June 30, 2024. Our goal is to continue to be more efficient with our selling, general and administrative expenses. Selling, general and administrative expenses include salary expenses related to field sales, marketing and administrative personnel, advertising and promotional expenditures and legal expenses as well as costs related to our direct sales force, CEMs and ESEs who work remotely from sales offices worldwide to stimulate demand by assisting customers in the selection and use of our products.

Previous wording

Amortization of acquired intangible assets for the three and nine months ended December 31, 2024 was $122.6 million and $368.3 million, respectively, compared to $151.3 million and $454.2 million for the three and nine months ended December 31, 2023, respectively. The primary reason for the decreases in acquired intangible asset amortization was due to the use of accelerated amortization methods for assets placed in service in previous fiscal years.

Current wording

Amortization of acquired intangible assets for the three months ended June 30, 2025 was $107.6 million, compared to $123.0 million for the three months ended June 30, 2024. The primary reason for the decrease in acquired intangible asset amortization was due to the use of accelerated amortization methods for assets placed in service in previous fiscal years.

Previous wording

During the three and nine months ended December 31, 2024, we incurred special charges and other, net of $3.5 million and $7.6 million, respectively, primarily related to employee severance and the restructuring of acquired and existing wafer fabrication operations to increase operational efficiency. During the three and nine months ended December 31, 2023, we incurred special charges and other, net of $1.1 million and $4.6 million, respectively, primarily related to restructuring of acquired and existing wafer fabrication operations to increase operational efficiency.

Current wording

During the three months ended June 30, 2025, we incurred special charges and other, net of $22.2 million primarily related to restructuring expenses, including contract exit costs, closure of our Tempe, Arizona wafer fabrication facility and employee separation costs. During the three months ended June 30, 2024 we incurred special charges and other, net of $2.6 million primarily related to restructuring of existing wafer fabrication operations to increase operational efficiency.

Previous wording

Interest expense in the three and nine months ended December 31, 2024 was $68.7 million and $189.6 million, respectively, compared to $49.2 million and $143.2 million, respectively, for the three and nine months ended December 31, 2023. The primary reasons for the increases in interest expense were higher debt balances and higher interest rates on such outstanding debt balances in the three and nine months ended December 31, 2024.

Current wording

Interest expense in the three months ended June 30, 2025 was $57.4 million compared to $61.8 million for the three months ended June 30, 2024. The primary reason for the decrease in interest expense in the three months ended June 30, 2025 compared to the same period last year was due to lower debt balances offset by higher interest rates on such outstanding debt balances in the three months ended June 30, 2025.

Previous wording

Our provision for income taxes is attributable to U.S. federal, state, and foreign income taxes. A comparison of our effective tax rates for the nine months ended December 31, 2024 and December 31, 2023 is not meaningful due to changes in the amount of pre-tax income earned, changes in the mix of jurisdictions in which income is earned, and the impact of discrete items relative to the amount of income earned.

Current wording

Our provision for income taxes is attributable to U.S. federal, state, and foreign income taxes. A comparison of our effective tax rate for the three months ended June 30, 2025 and June 30, 2024 is not meaningful due to changes in the amount of pre-tax income earned, changes in the mix of jurisdictions in which income is earned, and the impact of discrete items relative to the amount of income earned.

Previous wording

We are subject to taxation in many jurisdictions in which we have operations. The effective tax rates that we pay in these jurisdictions vary widely, but they are generally lower than our combined U.S. federal and state effective tax rate. Our domestic blended statutory tax rate in each of the nine months ended December 31, 2024 and December 31, 2023 was approximately 22%. Our non-U.S. blended statutory tax rates in the nine months ended December 31, 2024 and December 31, 2023 were lower than this amount. The difference in rates applicable in foreign jurisdictions results from a number of factors, including lower statutory rates, tax holidays, financing arrangements and other factors. Our effective tax rate has been and will continue to be impacted by the geographical dispersion of our earnings and losses.

Current wording

We are subject to taxation in many jurisdictions in which we have operations. The effective tax rates that we pay in these jurisdictions vary widely, but they are generally lower than our combined U.S. federal and state effective tax rate. Our domestic blended statutory tax rate in each of the three months ended June 30, 2025 and June 30, 2024 was approximately 22%. Our non-U.S. blended statutory tax rates in the three months ended June 30, 2025 and June 30, 2024 were lower than this amount. The difference in rates applicable in foreign jurisdictions results from a number of factors, including lower statutory rates, tax holidays, financing arrangements and other factors. Our effective tax rate has been and will continue to be impacted by the geographical dispersion of our earnings and losses.

Previous wording

In September 2023, we received a Revenue Agent Report (RAR) from the IRS for fiscal 2013 and fiscal 2016. In October 2023, we received a Statutory Notice of Deficiency (2014 to 2015 Notice) from the IRS for fiscal 2014 and fiscal 2015. The disputed amounts for fiscal 2013 to fiscal 2016 largely relate to transfer pricing matters. In December 2023, we filed a petition in the U.S. Tax Court challenging the 2014 to 2015 Notice.

Current wording

In September 2021, we received a Statutory Notice of Deficiency (2007 to 2012 Notice) from the United States Internal Revenue Service (IRS) for fiscal 2007 through fiscal 2012. The disputed amounts largely relate to transfer pricing matters. In December 2021, we filed a petition in the U.S. Tax Court challenging the 2007 to 2012 Notice. In September 2023, we received a Revenue Agent Report (RAR) from the IRS for fiscal 2013 and fiscal 2016. In October 2023, we received a Statutory Notice of Deficiency (2014 to 2015 Notice) from the IRS for fiscal 2014 and fiscal 2015. The disputed amounts for fiscal 2013 to fiscal 2016 largely relate to transfer pricing matters. In December 2023, we filed a petition in the U.S. Tax Court challenging the 2014 to 2015 Notice.

Previous wording

In May 2023, we received a proposed income adjustment from the Malaysian Inland Revenue Board (IRB) for fiscal 2020. In December 2023, we received a Notice of Assessment from the IRB asserting the same proposed income adjustment. If the adjustment is upheld by the highest court that has jurisdiction over this matter in Malaysia, it could result in income taxes and penalties up to $410.0 million. The disputed amounts largely relate to the characterization of certain assets. Depending on the outcome of the IRB audit, we may need to adjudicate this matter in Malaysia, and if we do, we may be required to pay the assessment and then, upon a series of favorable court rulings, request a refund of the amount. The timing of adjudicating this matter is uncertain but could occur in the next 12 months. We firmly believe that the assessment is without merit and we plan to pursue all available administrative and judicial remedies necessary to resolve this matter. We intend to vigorously defend our position and we are confident in our ability to prevail on the merits.

Current wording

In May 2023, we received a proposed income adjustment from the Malaysian Inland Revenue Board (IRB) for fiscal 2020. In December 2023, we received a Notice of Assessment from the IRB asserting the same proposed income adjustment. In March 2025, we entered into a Consent Judgment before the High Court, agreeing that the dispute will be heard before the Special Commissioners of Income Tax (SCIT). It was also agreed that the payment on the taxes assessed is stayed and the IRB will pause all enforcement and proceedings against the collection of the taxes assessed until the appeal before the SCIT is concluded. If the adjustment is upheld by the highest court that has jurisdiction over this matter in Malaysia, it could result in income taxes and penalties up to $410.0 million. The disputed amounts largely relate to the characterization of certain assets. The timing of adjudicating this matter is uncertain but could occur in the next 12 months.

Previous wording

We regularly assess the likelihood of adverse outcomes resulting from examinations such as these to determine the adequacy of our tax reserves. The ultimate outcome of disputes of this nature is uncertain, and if the IRS and IRB were to prevail on their assertions, the assessed tax, penalties, and deficiency interest could have a material adverse impact on our financial position, results of operations or cash flows.

Current wording

We firmly believe that the assessments described above are without merit and we plan to pursue all available administrative and judicial remedies necessary to resolve these matters. We intend to vigorously defend our position, and we are confident in our ability to prevail on the merits. We regularly assess the likelihood of adverse outcomes resulting from examinations such as these to determine the adequacy of our tax reserves. The ultimate outcome of disputes of this nature is uncertain, and if the IRS, IRB, or GTA were to prevail on their assertions, the assessed tax, penalties, and deficiency interest could have a material adverse impact on our financial position, results of operations or cash flows.

Previous wording

In August 2022, the U.S. government enacted the Inflation Reduction Act into law. The Inflation Reduction Act includes a new corporate alternative minimum tax (Corporate AMT) of 15.0% on the adjusted financial statement income (AFSI) of corporations with average AFSI exceeding $1.00 billion over a three-year period, as well as a 1% excise tax on the net fair market value of stock repurchases made after December 31, 2022. The Corporate AMT is effective beginning in fiscal 2024. The Inflation Reduction Act did not have a material impact on our tax expense, cash taxes, or effective tax rate for the nine month period ending December 31, 2024 and year ending March 31, 2024.

Current wording

In August 2022, the U.S. government enacted the Inflation Reduction Act into law. The Inflation Reduction Act includes a new corporate alternative minimum tax (Corporate AMT) of 15.0% on the adjusted financial statement income (AFSI) of corporations with average AFSI exceeding $1.00 billion over a three-year period, as well as a 1% excise tax on the net fair market value of stock repurchases made after December 31, 2022. The Corporate AMT is effective beginning in fiscal 2024. The Inflation Reduction Act did not have a material impact on our tax expense or effective tax rate during the three months ending June 30, 2025.

Previous wording

We had $586.0 million in cash and cash equivalents at December 31, 2024, an increase of $266.3 million from the March 31, 2024 balance.

Current wording

We had $566.5 million in cash and cash equivalents at June 30, 2025, a decrease of $205.2 million from the March 31, 2025 balance.

Previous wording

Net cash provided by operating activities was $692.2 million in the nine months ended December 31, 2024 primarily due to net income of $154.1 million, adjusted for non-cash and non-operating charges of $589.5 million and net cash outflows of $51.4 million from changes in our operating assets and liabilities. The primary drivers of the changes in operating assets and liabilities in the nine months ended December 31, 2024 include an increase in inventories related to increased raw materials and foundry wafers, decreases in accrued liabilities driven by decreases in sales related reserves, a decrease due to cash refunded to our customers under the LTSAs, offset by an increase in income tax payable and a decrease in trade accounts receivable driven primarily by reduced revenue and timing of shipments and collections. Net cash provided by operating activities was $2.46 billion in the nine months ended December 31, 2023 primarily due to net income of $1.75 billion, adjusted for non-cash and non-operating charges of $866.4 million and net cash outflows of $155.9 million from changes in our operating assets and liabilities.

Current wording

Net cash provided by operating activities was $275.6 million in the three months ended June 30, 2025 primarily due to net loss of $18.6 million, adjusted for non-cash and non-operating charges of $225.4 million and net cash inflows of $68.8 million from changes in our operating assets and liabilities. The primary drivers of the changes in operating assets and liabilities in the three months ended June 30, 2025 include a decrease in inventories, increases in accrued liabilities driven by increases in accrued interest and wage related accruals, partially offset by a decrease due to cash refunded to our customers under the LTSAs, and offset by an increase in trade accounts receivable driven primarily by higher revenue and timing of shipments and collections. Net cash provided by operating activities was $377.1 million in the three months ended June 30, 2024 primarily due to net income of $129.3 million, adjusted for non-cash and non-operating charges of $224.8 million and net cash inflows of $23.0 million from changes in our operating assets and liabilities.

Previous wording

Net cash used in investing activities was $231.8 million in the nine months ended December 31, 2024 compared to $320.9 million in the nine months ended December 31, 2023. During the nine months ended December 31, 2024, and the nine months ended December 31, 2023, net investing activities primarily related to capital purchases and investments in other assets.

Current wording

Net cash used in investing activities was $36.9 million in the three months ended June 30, 2025 compared to $125.5 million in the three months ended June 30, 2024. During the three months ended June 30, 2025, and the three months ended June 30, 2024, net investing activities primarily related to capital purchases and investments in other assets.

Previous wording

Our level of capital expenditures varies from time to time as a result of actual and anticipated business conditions. Capital expenditures in the nine months ended December 31, 2024 were $111.8 million compared to $245.0 million in the nine months ended December 31, 2023. Capital expenditures were primarily for the selective expansion of production capacity and the addition of research and development equipment. Consistent with the slowing macroeconomic environment in fiscal 2025, we have paused most of our factory expansion actions and reduced our planned capital investments through fiscal 2026. We currently intend to invest between $100 million and $150 million in equipment and facilities during the next 12 months. We believe that the capital expenditures anticipated to be incurred over the next 12 months will provide sufficient manufacturing capacity to support the growth of our production capabilities for our new products and technologies and to bring in-house more of the assembly and test operations that are currently outsourced. We expect to finance our capital expenditures through our existing cash balances and cash flows from operations. In February 2023, we announced our plan to invest $880 million over the next several years to expand our SiC and silicon production capacity, including the production of 8-inch wafers, at our Fab 5 facility. While select investments are still being made, in the fourth quarter of fiscal 2024, we paused most of our expansion activity. In the third quarter of fiscal 2025, we announced the closure of Fab 2 in Tempe, Arizona which is expected to occur in the second quarter of fiscal 2026. Despite pausing our expansion activity, we believe that our current inventory and production capacity are adequate to fulfill the projected requirements of our customers. In August 2022, the U.S. government enacted the CHIPS Act which is to provide billions of dollars of cash incentives and a new investment tax credit to increase domestic manufacturing capacity in our industry. In December 2023, we reached a Preliminary Memorandum of Terms with the U.S. Department of Commerce for $162 million in CHIPS Act grants for two of our U.S. wafer fabrication facilities; however, in the third quarter of fiscal 2025, our CHIPS Act negotiations were paused and there can be no assurance that we will conclude grant negotiations or that the grants will receive final approval. If we do receive a CHIPS Act grant, the restrictions and operational requirements that are imposed on CHIPS Act grant recipients could add complexity to our operations and increase our costs. We expect to receive the cash benefit associated with the investment tax credit for qualifying capital expenditures in future periods and may apply for other incentives provided by the legislation; however, there can be no assurance that we will receive any such other incentives, what the amount and timing of any incentive we receive will be, as to which other companies will recei…

Excerpt shortened here; the source contains the full paragraph.

Current wording

Our level of capital expenditures varies from time to time as a result of actual and anticipated business conditions. Capital expenditures in the three months ended June 30, 2025 were $17.9 million compared to $72.9 million in the three months ended June 30, 2024. Capital expenditures were primarily for the selective expansion of production capacity and the addition of research and development equipment. We have paused most of our factory expansion actions and reduced our planned capital investments through fiscal 2026. Our investments in equipment and facilities during the next 12 months are expected to be at or below $100 million. We believe that the capital expenditures anticipated to be incurred over the next 12 months will provide sufficient manufacturing capacity to support the growth of our production capabilities for our new products and technologies and to bring in-house more of the assembly and test operations that are currently outsourced. We expect to finance our capital expenditures through our existing cash balances and cash flows from operations. Despite pausing our expansion activity, we believe that our current inventory and production capacity are adequate to fulfill the projected requirements of our customers. In August 2022, the U.S. government enacted the CHIPS Act to provide billions of dollars of cash incentives and a new investment tax credit to increase domestic manufacturing capacity in our industry. In December 2023, we reached a Preliminary Memorandum of Terms with the U.S. Department of Commerce for $162 million in CHIPS Act grants for two of our U.S. wafer fabrication facilities; however, we have not concluded negotiations with the U.S. Department of Commerce and there can be no assurance that the grants will receive final approval. If we do receive a CHIPS Act grant, the restrictions and operational requirements that are imposed on CHIPS Act grant recipients could add complexity to our operations and increase our costs. We expect to receive the cash benefit associated with the investment tax credit for qualifying capital expenditures in future periods and may apply for other incentives provided by the legislation; however, there can be no assurance that we will receive any such other incentives, what the amount and timing of any incentive we receive will be, as to which other companies will receive incentives and whether the legislation will have a positive or negative impact on our competitive position.

Previous wording

Net cash used in financing activities was $194.1 million in the nine months ended December 31, 2024 compared to $2.09 billion in the nine months ended December 31, 2023. Significant transactions affecting our net financing cash flows included:

Current wording

Net cash used in financing activities was $443.9 million in the three months ended June 30, 2025 compared to $256.2 million in the three months ended June 30, 2024. Significant transactions affecting our net financing cash flows included:

Previous wording

•in the first nine months of fiscal 2025, $654.9 million of net proceeds from the issuances of our 4.900% 2028 Senior Notes, our 5.050% 2030 Senior Notes, our 2024 Senior Convertible Debt and our Commercial Paper, offset by the settlement of our 2020 Convertible Debt, settlement of our 2025 Term Loan Facility, purchase of our capped call options, and the pay down of our 0.983% 2024 Notes, and

Current wording

•in the first three months of fiscal 2025, $80.9 million of net proceeds from the issuance of our 2024 Senior Convertible Debt offset by the purchase of our capped call options, and the paydown of our Commercial Paper balance, and