Artificial Intelligence
Microchip Technology Announces Financial Results for Third Quarter of Fiscal Year 2020
- Net sales of $1.287 billion, down 3.8% sequentially and down 6.4% from the year ago quarter. The midpoint of our updated net sales guidance provided on January 6, 2020 was $1.285 billion.
- On a GAAP basis: gross margin of 61.0%; operating income of $131.2 million; net income of $311.1 million; and EPS of $1.20 per diluted share. Our guidance provided on December 3, 2019 was GAAP (loss) earnings per share of $(0.03) to $0.04 per diluted share.
- On a Non-GAAP basis: gross margin of 61.5%; operating income of $452.1 million and 35.1% of net sales; net income of $340.8 million and EPS of $1.32 per diluted share. Our guidance provided on December 3, 2019 was Non-GAAP EPS of $1.19 to $1.30 per diluted share.
- End-market demand of $1.324 billion was $36.1 million higher than net sales.
- Cash flow from operations of $395.5 million.
- Paid down $257.0 million of debt in the December 2019 quarter. Cumulatively paid down almost $2 billion of debt over the last six quarters.
- Record quarterly dividend declared of 36.70 cents per share.
CHANDLER, Ariz., Feb. 04, 2020 (GLOBE NEWSWIRE) — (NASDAQ: MCHP) — Microchip Technology Incorporated, a leading provider of smart, connected and secure embedded control solutions, today reported results for the three months ended December 31, 2019 as summarized in the following table:
(in millions, except per share amounts and percentages) | Three Months Ended December 31, 2019 | |||||
Net sales | $1,287.4 | |||||
GAAP | % of Net Sales | Non-GAAP1 | % of Net Sales | |||
Gross margin | $785.5 | 61.0% | $791.2 | 61.5% | ||
Operating income | $131.2 | 10.2% | $452.1 | 35.1% | ||
Other expense | $(120.6) | $(89.5) | ||||
Income tax (benefit) provision | $(300.5) | $21.8 | ||||
Net income | $311.1 | 24.2% | $340.8 | 26.5% | ||
Net income per diluted share | $1.20 | $1.32 |
(1) | See the “Use of Non-GAAP Financial Measures” section of this release. |
GAAP net sales for the third quarter of fiscal 2020 were $1.287 billion, down 6.4% from net sales of $1.375 billion in the prior year’s third fiscal quarter.
GAAP net income for the third quarter of fiscal 2020 was $311.1 million, or $1.20 per diluted share, up from GAAP net income of $49.2 million, or $0.20 per diluted share, in the prior year’s third fiscal quarter. For the third quarters of fiscal 2020 and fiscal 2019, GAAP net income was significantly adversely impacted by purchase accounting adjustments associated with our acquisitions. In the third quarter of fiscal 2020, GAAP net income was significantly positively impacted by the tax benefit related to the intra-group transfer of certain intellectual property rights.
Non-GAAP net income for the third quarter of fiscal 2020 was $340.8 million, or $1.32 per diluted share, down from non-GAAP net income of $381.8 million, or $1.56 per diluted share, in the prior year’s third fiscal quarter. For the third quarters of fiscal 2020 and fiscal 2019, our non-GAAP results exclude the effect of share-based compensation, expenses related to our acquisition activities (including intangible asset amortization, inventory valuation costs, 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), IT security remediation costs, non-cash interest expense on our convertible debentures, losses on the settlement of debt, and gains and losses related to available-for-sale investments. For the third quarters of fiscal 2020 and fiscal 2019, 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.
Prior to the fourth quarter of fiscal 2019, we reported non-GAAP net sales based on end-market demand, which excluded the effect of our distributors increasing or decreasing their inventory holdings. Beginning with the fourth quarter of fiscal 2019, we changed the information included in our financial guidance and provide net sales guidance based on sell-in revenue recognition under the new GAAP standard.
Microchip announced today that its Board of Directors has declared a record quarterly cash dividend on its common stock of 36.70 cents per share. The quarterly dividend is payable on March 6, 2020 to stockholders of record on February 21, 2020.
“We experienced strong bookings activity throughout the December 2019 quarter and upwardly revised our quarterly financial guidance twice after our original guidance on November 5, 2019,” said Steve Sanghi, Chief Executive Officer. “Our December 2019 quarterly net sales were near the high end of our most recent guidance from January 6, 2020 at $1.287 billion, which was down 3.76% sequentially. Our non-GAAP gross margins were 61.5% and our non-GAAP operating margin were 35.1%, both of which were above the high-end of our most recent guidance range. We delivered $1.32 of non-GAAP diluted earnings per share, which was also above the high-end of our most recent guidance.”
Mr. Sanghi added, “End-market demand, which reflects sell-through activities in the distribution channel, was $36.1 million higher than GAAP (sell-in) revenue in the December 2019 quarter, the seventh consecutive quarter that end-market demand has exceeded sell-in revenue. As a result, distribution inventory days declined during the quarter and are at very low levels.”
“The end-market demand for our microcontroller business was down 1.1%, for our analog business was down 3.6% and for our FPGA business was flat compared to the September 2019 quarter. Microcontrollers represented 53.6%, analog represented 28.1% and FPGA represented 6.9% of our end-market demand in the December quarter. We continue to introduce a steady stream of new and innovative microcontroller, analog and FPGA solutions that we believe position us well for future growth,” said Ganesh Moorthy, President and Chief Operating Officer.
Mr. Moorthy added, “While our bookings and backlog trends have not changed since our business update press release on January 6, the Coronavirus situation is rapidly evolving and most Chinese provinces have extended the Chinese New Year holidays in response to the spread of the virus. We have taken preventive measures to help ensure the safety of our employees and have completed a first pass assessment of our supply chain and currently believe our risk is low. However, it is too early to determine the impact to our customers as many of them are still not back from their holidays. We continue to actively monitor the progression of the Coronavirus events and plan to take additional actions as needed.”
Eric Bjornholt, Microchip’s Chief Financial Officer, said, “We paid down $257.0 million of total debt during the December quarter, reflecting a cumulative pay down of almost $2 billion over the past six quarters, as we have actively managed the working capital requirements for the business. We will continue to use substantially all of our excess cash generation after dividends to reduce the amount of debt on our balance sheet as quickly as possible.”
Mr. Sanghi concluded, “Our March quarter backlog is significantly higher than the December quarter backlog was at the same point in the quarter. We are experiencing an increased level of customer requested expedited shipments and we are calling the December 2019 quarter as the bottom of the cycle for Microchip barring any negative developments on the US/China trade front, or the impact of Coronavirus . Based on our analysis for our business and the current economic backdrop, we estimate our net sales in the March 2020 quarter to be up between 2% and 9% sequentially. The midpoint of our guidance for the March 2020 quarter reflects what we believe our business can deliver assuming no extraordinary events. However, the wider than normal guidance range is to help account for the uncertainty associated with the evolving Coronavirus situation. We are still in the early days of how this situation is playing out. We have no way to model how the rest of the quarter will play out for the Coronavirus situation, and what the consequent business impact may be, but we believe that our guidance range incorporates our best judgment for the possible scenarios.”
Microchip’s Highlights for the Quarter Ended December 31, 2019:
- Introduced the radiation-tolerant PolarFire® FPGA, enabling high-throughput on-orbit processing space systems with very low power consumption and heat generation and optimized to meet the demanding requirements of spacecraft payload systems high-speed data paths.
- Announced the Early Access Program for the PolarFire® system-on-chip (SoC) field programmable gate array (FPGA), offering the world’s first hardened real-time, Linux® capable, RISC-V-based microprocessor subsystem on the award-winning, mid-range PolarFire FPGA family, bringing low power consumption, thermal efficiency and defense grade security to embedded systems.
- Introduced the next-generation Bluetooth 5.0-qualified dual-mode audio IC and fully certified module to help Bluetooth® speaker and headphone manufacturers maintain product differentiation in the wireless audio market, with the 5.5 x 5.5 mm, low-power IS2083BM IC and the BM83 module.
- Delivered the new family of Serial Peripheral Interface EERAM memory products, providing system designers up to 25 percent cost savings over the current serial NVRAM alternatives. The family introduces four reliable SPI densities to Microchip’s EERAM portfolio.
- Introduced production-ready open source tools for managing its Adaptec® Smart Storage HBA, SmartHBA and SmartRAID offerings in OpenStack data centers, to simplifies configuration, deployment and management of storage resources.
- Announced an added capability to Adaptec Smart Storage adapters, to now seamlessly interoperate with MegaRAC® SP-X remote monitoring and diagnostics firmware from American Megatrends (AMI), supporting its MegaRAC solution development framework.
- Announced easing the transition with IEEE 802.3bt-2018-compliant PoE injectors and midspans for users and power sourcing equipment chipsets for system developers that enable both pre-standard and IEEE-compliant PDs to receive up to 90W of power without changing switches or cabling.
- Announced industry support for development of the Open Compute Project’s Accelerator Infrastructure form factors and interconnects through its PCIe® Switches that provide high-performance connectivity to enable interoperable artificial intelligence (AI) hardware accelerators.
Fourth Quarter Fiscal Year 2020 Outlook:
Beginning with the fiscal quarter ending March 31, 2019, we changed the information included in our financial guidance in response to comments from and discussions with the Staff of the Securities and Exchange Commission. We are now providing net sales guidance based on sell-in revenue recognition under the new GAAP standard. We are also providing guidance and reporting non-GAAP gross margin percentage, operating expense percentage, operating profit percentages and diluted earnings per share based on sell-in GAAP revenue. We are also providing information on end-market demand so that investors will have information on the consumption in the marketplace of our products by our customers or our distributors. We do not use end-market demand for any of our non-GAAP income statement calculations. Please see “Use of End-Market Demand Metric” below for information on how we calculate end-market demand.
The following statements are based on current expectations. These statements are forward-looking, and actual results may differ materially. We are not able to predict whether inventory at our distributors will increase or decrease and are therefore providing a range of GAAP net sales guidance. In recent years, we have seen net inventory at our distributors increase or decrease by a significant amount in a single quarter.
Microchip Consolidated Guidance | |||
Net Sales | $1.313 to $1.403 billion | ||
GAAP | Non-GAAP Adjustments | Non-GAAP1 | |
Gross Margin | 61.1% to 61.5% | $5.5 to $6.0 million | 61.5% to 61.9% |
Operating Expenses2 | 46.9% to 49.3% | $303.0 to $307.0 million | 25.0% to 26.2% |
Operating Income | 11.8% to 14.6% | $308.5 to $313.0 million | 35.3% to 36.9% |
Other Expense, net | $117.0 to $119.0 million | $31.0 million | $86.0 to $88.0 million |
Income Tax Provision | $2.0 to $19.0 million3 | $5.6 to $21.8 million | $23.8 to $24.6 million4 |
Net Income | $36.0 to $66.8 million | $317.7 to $338.4 million | $353.7 to $405.2 million |
Diluted Common Shares Outstanding |
Approximately 261.4 to 267.8 million shares | Approximately 261.4 to 267.8 million shares | |
Earnings per Diluted Share | 14 to 25 cents | $1.21 to $1.26 | $1.35 to $1.51 |
1 | See the “Use of Non-GAAP Financial Measures” section of this release for information regarding our non-GAAP guidance. | ||
2 | We are not able to estimate the amount of certain Special Charges and Other, net that may be incurred during the quarter ending March 31, 2020. Therefore, our estimate of GAAP operating expenses excludes certain amounts that may be recognized as Special Charges and Other, net in the quarter ending March 31, 2020. | ||
3 | The forecast for GAAP tax expense excludes any unexpected tax events that may occur during the quarter, as these amounts cannot be forecasted. | ||
4 | Represents expected cash tax rate for fiscal 2020 excluding any transition tax payments associated with the Tax Cuts and Jobs Act. |
- Microchip’s inventory days in the March 2020 quarter are expected to be in the range of 115 to 129 days, compared to 129 days at December 31, 2019. Our actual inventory level will depend on the inventory that our distributors decide to hold to support their customers, overall demand for our products and our production levels.
- Capital expenditures for the quarter ending March 31, 2020 are expected to be between $20 million and $25 million. Capital expenditures for all of fiscal 2020 are expected to be between $76 million and $81 million. We are continuing to invest in the equipment needed to support the growth of our production capabilities for fast-growing new products and technologies and to bring in-house more of the assembly and test operations that are currently outsourced.
Use of End-Market Demand Metric: End-market demand is the net dollar amount of our products, licensing revenue and other services delivered to our direct (non-distributor) customers and by our distributors to their customers. We are able to calculate end-market demand based on information that our distributors provide us about their product shipments to their customers and inventory holdings. The value of end-market demand from our distributors is calculated as the net transaction value of these shipments. We believe that our end-market demand metric reflects true end-market demand based on when product is sold to direct customers or by our distributors to an end customer.
Under the new GAAP revenue recognition standard, we are required to recognize revenue when control of the product changes from us to a customer or distributor. We focus our sales and marketing efforts on creating demand for our products in the end markets we serve and not on moving inventory into our distribution network. Therefore, the elements of our internal performance and executive and employee compensation metrics that are based on sales and operating results are measured using the value of the end-market demand for our products. We use end-market demand for these purposes because we do not believe that the underlying value of our business benefits from increases in the value of inventory that is held in the supply chain. As many of our products are designed into customer applications with relatively long lives, such value is only realized when the end-market demand is created and the supply chain sells the inventory to the end customer. We believe the use of end-market demand is also important to investors and users of our financial statements as it reflects the final outcome of our sales activities whereas our GAAP net sales are based on estimates made earlier in (or before the end of) the process of creating and fulfilling demand is complete. We also manage our manufacturing and supply chain operations, including our distributor relationships, towards the goal of having our products available at the time and location the end customer desires. Management uses end-market demand to manage and assess the profitability of our business and when developing and monitoring our budgets and spending. Many of our investors have requested that we disclose end-market demand metric because they believe it is useful in understanding our performance as it provides better information regarding end-market demand for our products. Therefore, we believe that it is useful to investors for us to disclose end-market demand. Our determination of end-market demand metric might not be the same as similarly titled measures used by other companies.
Use of Non-GAAP Financial Measures: Our non-GAAP adjustments, where applicable, include the effect of share-based compensation, expenses related to our acquisition activities (including intangible asset amortization, inventory valuation costs, 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), IT security remediation costs, non-cash interest expense on our convertible debentures, losses on the settlement of debt, and gains and losses on available-for-sale investments. For the third quarters of fiscal 2020 and 2019, 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.
We are required to estimate the cost of certain forms of share-based compensation, including employee stock options, restricted stock units and our employee stock purchase plan, and to record a commensurate expense in our income statement. Share-based compensation expense is a non-cash expense that varies in amount from period to period and is affected by the price of our stock at the date of grant. The price of our stock is affected by market forces that are difficult to predict and are not within the control of management. Our other non-GAAP adjustments are either non-cash expenses, unusual or infrequent items or other expenses related to transactions. Management excludes all of these items from its internal operating forecasts and models.
We are using non-GAAP operating expenses in dollars including non-GAAP research and development expenses and non-GAAP selling, general and administrative expenses, non-GAAP other expense, net, and non-GAAP income tax rate, which exclude the items noted above, as applicable, to permit additional analysis of our performance.
Management believes these non-GAAP measures are useful to investors because they enhance the understanding of our historical financial performance and comparability between periods. Many of our investors have requested that we disclose this non-GAAP information because they believe it is useful in understanding our performance as it excludes non-cash and other charges that many investors feel may obscure our underlying operating results. Management uses these non-GAAP measures to manage and assess the profitability of our business and for compensation purposes. We also use our non-GAAP results when developing and monitoring our budgets and spending. Our determination of these non-GAAP measures might not be the same as similarly titled measures used by other companies, and it should not be construed as a substitute for amounts determined in accordance with GAAP. There are limitations associated with using these non-GAAP measures, including that they exclude financial information that some may consider important in evaluating our performance. Management compensates for this by presenting information on both a GAAP and non-GAAP basis for investors and providing reconciliations of the GAAP and non-GAAP results.
Generally, gross margin fluctuates over time, driven primarily by the mix of products sold and licensing revenue; variances in manufacturing yields; fixed cost absorption; wafer fab loading levels; costs of wafers from foundries; inventory reserves; pricing pressures in our non-proprietary product lines; and competitive and economic conditions. Operating expenses fluctuate over time, primarily due to net sales and profit levels.
Diluted Common Shares Outstanding can vary for, among other things, the trading price of our common stock, the exercise of options or vesting of restricted stock units, the potential for incremental dilutive shares from our convertible debentures (additional information regarding our share count is available in the investor relations section of our website under the heading “Supplemental Financial Information”), and repurchases or issuances of shares of our common stock. The diluted common shares outstanding presented in the guidance table above assumes an average Microchip stock price in the March 2020 quarter between $100 and $110 per share (however, we make no prediction as to what our actual share price will be for such period or any other period and we cannot estimate what our stock option exercise activity will be during the quarter).
MICROCHIP TECHNOLOGY INCORPORATED AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (in millions except per share amounts) (unaudited) |
|||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Net sales | $ | 1,287.4 | $ | 1,374.7 | $ | 3,947.8 | $ | 4,019.7 | |||||||
Cost of sales | 501.9 | 595.1 | 1,519.6 | 1,908.8 | |||||||||||
Gross profit | 785.5 | 779.6 | 2,428.2 | 2,110.9 | |||||||||||
Research and development | 217.1 | 217.7 | 656.0 | 611.6 | |||||||||||
Selling, general and administrative | 170.7 | 174.8 | 510.9 | 515.5 | |||||||||||
Amortization of acquired intangible assets | 248.7 | 193.7 | 745.4 | 497.2 | |||||||||||
Special charges (income) and other, net | 17.8 | (1.3 | ) | 29.5 | 57.0 | ||||||||||
Operating expenses | 654.3 | 584.9 | 1,941.8 | 1,681.3 | |||||||||||
Operating income | 131.2 | 194.7 | 486.4 | 429.6 | |||||||||||
Losses on equity method investments | — | (0.1 | ) | — | (0.2 | ) | |||||||||
Other expense, net | (120.6 | ) | (139.6 | ) | (381.8 | ) | (376.1 | ) | |||||||
Income before income taxes | 10.6 | 55.0 | 104.6 | 53.3 | |||||||||||
Income tax (benefit) provision | (300.5 | ) | 5.8 | (366.1 | ) | (127.9 | ) | ||||||||
Net income | $ | 311.1 | $ | 49.2 | $ | 470.7 | $ | 181.2 | |||||||
Basic net income per common share | $ | 1.30 | $ | 0.21 | $ | 1.97 | $ | 0.77 | |||||||
Diluted net income per common share | $ | 1.20 | $ | 0.20 | $ | 1.84 | $ | 0.73 | |||||||
Basic common shares outstanding | 239.2 | 236.7 | 238.5 | 235.9 | |||||||||||
Diluted common shares outstanding | 258.3 | 244.6 | 255.8 | 249.5 |
MICROCHIP TECHNOLOGY INCORPORATED AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (in millions) |
|||||||
ASSETS | |||||||
December 31, | March 31, | ||||||
2019 | 2019 | ||||||
(Unaudited) | |||||||
Cash and short-term investments | $ | 402.3 | $ | 430.9 | |||
Accounts receivable, net | 807.5 | 880.6 | |||||
Inventories | 708.8 | 711.7 | |||||
Other current assets | 185.4 | 191.6 | |||||
Total current assets | 2,104.0 | 2,214.8 | |||||
Property, plant and equipment, net | 909.7 | 996.7 | |||||
Other assets | 14,574.9 | 15,138.5 | |||||
Total assets | $ | 17,588.6 | $ | 18,350.0 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Accounts payable and accrued liabilities | $ | 935.8 | $ | 1,013.7 | |||
Current portion of long-term debt | 1,400.8 | 1,360.8 | |||||
Total current liabilities | 2,336.6 | 2,374.5 | |||||
Long-term debt | 8,179.7 | 8,946.2 | |||||
Long-term income tax payable | 711.4 | 756.2 | |||||
Long-term deferred tax liability | 386.3 | 706.1 | |||||
Other long-term liabilities | 358.0 | 279.5 | |||||
Stockholders’ equity | 5,616.6 | 5,287.5 | |||||
Total liabilities and stockholders’ equity | $ | 17,588.6 | $ | 18,350.0 | |||
MICROCHIP TECHNOLOGY INCORPORATED AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP MEASURES
(in millions except per share amounts and percentages)
(unaudited)
The non-GAAP results for the three and nine months ended December 31, 2018 in the following reconciliation tables have been adjusted from previously reported amounts. The percentages are now calculated based on GAAP net sales whereas the previously reported percentages were calculated based on non-GAAP net sales, which included the impact of changes in distributor inventory levels (sell-through). Please refer to our prior year earnings releases for the previously reported non-GAAP figures.
RECONCILIATION OF GAAP GROSS PROFIT TO NON-GAAP GROSS PROFIT
Three Months Ended | Nine Months Ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Gross profit, as reported | $ | 785.5 | $ | 779.6 | $ | 2,428.2 | $ | 2,110.9 | |||||||
Share-based compensation expense | 5.7 | 3.4 | 15.8 | 10.9 | |||||||||||
Acquisition-related costs | — | — | — | 0.2 | |||||||||||
Excess capacity charges to normalize acquired inventory levels | — | — | — | 2.3 | |||||||||||
Acquired inventory valuation costs | — | 74.3 | — | 363.9 | |||||||||||
Non-GAAP gross profit | $ | 791.2 | $ | 857.3 | $ | 2,444.0 | $ | 2,488.2 | |||||||
Non-GAAP gross profit percentage | 61.5 | % | 62.4 | % | 61.9 | % | 61.9 | % | |||||||
RECONCILIATION OF GAAP RESEARCH AND DEVELOPMENT EXPENSES TO NON-GAAP RESEARCH AND DEVELOPMENT EXPENSES
Three Months Ended | Nine Months Ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Research and development expenses, as reported | $ | 217.1 | $ | 217.7 | $ | 656.0 | $ | 611.6 | |||||||
Share-based compensation expense | (21.2 | ) | (19.4 | ) | (63.0 | ) | (53.2 | ) | |||||||
Acquisition-related costs | — | (0.3 | ) | (0.1 | ) | (1.3 | ) | ||||||||
Non-GAAP research and development expenses | $ | 195.9 | $ | 198.0 | $ | 592.9 | $ | 557.1 | |||||||
Non-GAAP research and development expenses as a percentage of net sales | 15.2 | % | 14.4 | % | 15.0 | % | 13.9 | % | |||||||
RECONCILIATION OF GAAP SELLING, GENERAL AND ADMINISTRATIVE EXPENSES TO NON-GAAP SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Three Months Ended | Nine Months Ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Selling, general and administrative expenses, as reported | $ | 170.7 | $ | 174.8 | $ | 510.9 | $ | 515.5 | |||||||
Share-based compensation expense | (16.6 | ) | (16.6 | ) | (50.7 | ) | (46.1 | ) | |||||||
Acquisition-related costs | (10.2 | ) | (5.1 | ) | (24.8 | ) | (37.6 | ) | |||||||
IT security remediation | (0.7 | ) | — | (5.7 | ) | — | |||||||||
Non-GAAP selling, general and administrative expenses | $ | 143.2 | $ | 153.1 | $ | 429.7 | $ | 431.8 | |||||||
Non-GAAP selling, general and administrative expenses as a percentage of net sales | 11.1 | % | 11.1 | % | 10.9 | % | 10.7 | % | |||||||
RECONCILIATION OF GAAP OPERATING EXPENSES TO NON-GAAP OPERATING EXPENSES
Three Months Ended | Nine Months Ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Operating expenses, as reported | $ | 654.3 | $ | 584.9 | $ | 1,941.8 | $ | 1,681.3 | |||||||
Share-based compensation expense | (37.8 | ) | (36.0 | ) | (113.7 | ) | (99.3 | ) | |||||||
Acquisition-related costs | (10.2 | ) | (5.4 | ) | (24.9 | ) | (38.9 | ) | |||||||
IT security remediation | (0.7 | ) | — | (5.7 | ) | — | |||||||||
Amortization of acquired intangible assets | (248.7 | ) | (193.7 | ) | (745.4 | ) | (497.2 | ) | |||||||
Special charges (income) and other, net | (17.8 | ) | 1.3 | (29.5 | ) | (57.0 | ) | ||||||||
Non-GAAP operating expenses | $ | 339.1 | $ | 351.1 | $ | 1,022.6 | $ | 988.9 | |||||||
Non-GAAP operating expenses as a percentage of net sales | 26.4 | % | 25.5 | % | 25.9 | % | 24.6 | % | |||||||
RECONCILIATION OF GAAP OPERATING INCOME TO NON-GAAP OPERATING INCOME
Three Months Ended | Nine Months Ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Operating income, as reported | $ | 131.2 | $ | 194.7 | $ | 486.4 | $ | 429.6 | |||||||
Share-based compensation expense | 43.5 | 39.4 | 129.5 | 110.2 | |||||||||||
Acquisition-related costs | 10.2 | 5.4 | 24.9 | 39.1 | |||||||||||
IT security remediation | 0.7 | — | 5.7 | — | |||||||||||
Excess capacity charges to normalize acquired inventory levels | — | — | — | 2.3 | |||||||||||
Acquired inventory valuation costs | — | 74.3 | — | 363.9 | |||||||||||
Amortization of acquired intangible assets | 248.7 | 193.7 | 745.4 | 497.2 | |||||||||||
Special charges (income) and other, net | 17.8 | (1.3 | ) | 29.5 | 57.0 | ||||||||||
Non-GAAP operating income | $ | 452.1 | $ | 506.2 | $ | 1,421.4 | $ | 1,499.3 | |||||||
Non-GAAP operating income as a percentage of net sales | 35.1 | % | 36.8 | % | 36.0 | % | 37.3 | % | |||||||
RECONCILIATION OF GAAP OTHER EXPENSE, NET TO NON-GAAP OTHER EXPENSE, NET
Three Months Ended | Nine Months Ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Other expense, net, as reported | $ | (120.6 | ) | $ | (139.6 | ) | $ | (381.8 | ) | $ | (376.1 | ) | |||
Loss on settlement of debt | — | 0.2 | 2.0 | 4.3 | |||||||||||
Non-cash other expense, net | 31.1 | 29.2 | 91.6 | 94.6 | |||||||||||
Losses (gains) on available-for-sale investments | — | 0.6 | (1.1 | ) | 6.7 | ||||||||||
Non-GAAP other expense, net | $ | (89.5 | ) | $ | (109.6 | ) | $ | (289.3 | ) | $ | (270.5 | ) | |||
Non-GAAP other expense, net, as a percentage of net sales | (7.0 | )% | (8.0 | )% | (7.3 | )% | (6.7 | )% | |||||||
RECONCILIATION OF GAAP INCOME TAX BENEFIT TO NON-GAAP INCOME TAX PROVISION
Three Months Ended | Nine Months Ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Income tax (benefit) provision, as reported | $ | (300.5 | ) | $ | 5.8 | $ | (366.1 | ) | $ | (127.9 | ) | ||||
Income tax rate, as reported | (2,834.9 | )% | 10.5 | % | (350.0 | )% | (240.0 | )% | |||||||
Other non-GAAP tax adjustment | 322.3 | 8.9 | 434.1 | 173.9 | |||||||||||
Non-GAAP income tax provision | $ | 21.8 | $ | 14.7 | $ | 68.0 | $ | 46.0 | |||||||
Non-GAAP income tax rate | 6.0 | % | 3.7 | % | 6.0 | % | 3.7 | % | |||||||
RECONCILIATION OF GAAP NET INCOME AND GAAP DILUTED NET INCOME PER COMMON SHARE TO NON-GAAP NET INCOME AND NON-GAAP DILUTED NET INCOME PER COMMON SHARE
Three Months Ended | Nine Months Ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Net income, as reported | $ | 311.1 | $ | 49.2 | $ | 470.7 | $ | 181.2 | |||||||
Share-based compensation expense | 43.5 | 39.4 | 129.5 | 110.2 | |||||||||||
Acquisition-related costs | 10.2 | 5.4 | 24.9 | 39.1 | |||||||||||
IT security remediation | 0.7 | — | 5.7 | — | |||||||||||
Excess capacity charges to normalize acquired inventory levels | — | — | — | 2.3 | |||||||||||
Acquired inventory valuation costs | — | 74.3 | — | 363.9 | |||||||||||
Amortization of acquired intangible assets | 248.7 | 193.7 | 745.4 | 497.2 | |||||||||||
Special charges (income) and other, net | 17.8 | (1.3 | ) | 29.5 | 57.0 | ||||||||||
Loss on settlement of debt | — | 0.2 | 2.0 | 4.3 | |||||||||||
Non-cash other expense, net | 31.1 | 29.2 | 91.6 | 94.6 | |||||||||||
Losses (gains) on available-for-sale investments | — | 0.6 | (1.1 | ) | 6.7 | ||||||||||
Other non-GAAP tax adjustment | (322.3 | ) | (8.9 | ) | (434.1 | ) | (173.9 | ) | |||||||
Non-GAAP net income | $ | 340.8 | $ | 381.8 | $ | 1,064.1 | $ | 1,182.6 | |||||||
Non-GAAP net income as a percentage of net sales | 26.5 | % | 27.8 | % | 27.0 | % | 29.4 | % | |||||||
GAAP net income as a percentage of net sales | 24.2 | % | 3.6 | % | 11.9 | % | 4.5 | % | |||||||
Diluted net income per common share, as reported | $ | 1.20 | $ | 0.20 | $ | 1.84 | $ | 0.73 | |||||||
Non-GAAP diluted net income per common share | $ | 1.32 | $ | 1.56 | $ | 4.16 | $ | 4.74 | |||||||
Diluted common shares outstanding, as reported | 258.3 | 244.6 | 255.8 | 249.5 | |||||||||||
Diluted common shares outstanding non-GAAP | 258.3 | 244.6 | 255.8 | 249.5 | |||||||||||
Microchip will host a conference call today, February 4, 2020 at 5:00 p.m. (Eastern Time) to discuss this release. This call will be simulcast over the Internet at www.microchip.com. The webcast will be available for replay until February 18, 2020.
A telephonic replay of the conference call will be available at approximately 8:00 p.m. (Eastern Time) on February 4, 2020 and will remain available until 5:00 p.m. (Eastern Time) on February 18, 2020. Interested parties may listen to the replay by dialing 719-457-0820 and entering access code 9230509.
Cautionary Statement:
The statements in this release relating to continuing to introduce a steady stream of new and innovative microcontroller, analog and FPGA solutions that we believe position us well for future growth, that the Coronavirus situation is rapidly evolving, that we have taken preventive measures to help ensure the safety of our employees and have completed a first pass assessment of our supply chain and currently believe our risk is low, that it is too early to determine the impact to our customers as many of them are still not back from their holidays, that we continue to actively monitor the progression of the Coronavirus events and plan to take additional actions as needed, that we will continue to use substantially all of our excess cash generation after dividends to reduce the amount of debt on our balance sheet as quickly as possible, experiencing an increased level of customer requested expedited shipments, calling the December 2019 quarter as the bottom of the cycle for Microchip, that we estimate our net sales in the March 2020 quarter to be up between 2% and 9% sequentially, that the midpoint of our guidance for the March 2020 quarter reflects what we believe our business can deliver, assuming no extraordinary events, that the wider than normal guidance range is to help account for the uncertainty associated with the evolving Coronavirus situation, that we are still in the early days of how this situation is playing out, that we have no way to model how the rest of the quarter will play out for the Coronavirus situation, and what the consequent business impact may be, that we believe that our guidance range incorporates our best judgment for the possible scenarios, our fourth quarter fiscal 2020 guidance for net sales and GAAP and non-GAAP gross margin, operating expenses, operating income, other expense, net, income taxes, net (loss) income, diluted common shares outstanding, (loss) earnings per diluted share, expected inventory days in the March 2020 quarter, capital expenditures for the March 2020 quarter and for all of fiscal 2020, continuing to invest to support the growth of our production capabilities for fast-growing new products and technologies and to bring in-house more of the assembly and test operations that are currently outsourced, our belief that our end-market demand metric reflects true end-market demand based on when product is sold to direct customers or by our distributors to an end customer and our assumed average stock price in the March 2020 quarter are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties that could cause our actual results to differ materially, including, but not limited to: any continued economic uncertainty due to monetary policy, political, geopolitical, trade or other issues in the U.S. or internationally, any unexpected fluctuations or weakness in the U.S. and global economies (including China), changes in demand or market acceptance of our products and the products of our customers; our ability to successfully integrate the operations and employees, retain key employees and customers and otherwise realize the expected synergies and benefits of our acquisitions; the impact of current and future changes in U.S. corporate tax laws (including the Tax Cuts and Jobs Act of 2017), foreign currency effects on our business; the mix of inventory we hold and our ability to satisfy short-term orders from our inventory; changes in utilization of our manufacturing capacity and our ability to effectively manage and expand our production levels; competitive developments including pricing pressures; the level of orders that are received and can be shipped in a quarter; changes or fluctuations in customer order patterns and seasonality; the impact of any future significant acquisitions that we may make; our ability to obtain a sufficient supply of wafers from third party wafer foundries and the cost of such wafers, the costs and outcome of any current or future litigation or other matters involving our Microsemi acquisition, the Microsemi business, intellectual property, customers, or other issues; the costs and outcome of any current or future tax audit or investigation regarding our business or the business of Microsemi, our actual average stock price in the March 2020 quarter and the impact such price will have on our share count; fluctuations in our stock price and trading volume which could impact the number of shares we acquire under our share repurchase program and the timing of such repurchases; disruptions in our business or the businesses of our customers or suppliers due to natural disasters (including any floods in Thailand), terrorist activity, armed conflict, war, worldwide oil prices and supply, public health concerns (including the Coronavirus) or disruptions in the transportation system; and general economic, industry or political conditions in the United States or internationally.
For a detailed discussion of these and other risk factors, please refer to Microchip’s filings on Forms 10-K and 10-Q. You can obtain copies of Forms 10-K and 10-Q and other relevant documents for free at Microchip’s website (www.microchip.com) or the SEC’s website (www.sec.gov) or from commercial document retrieval services.
Stockholders of Microchip are cautioned not to place undue reliance on our forward-looking statements, which speak only as of the date such statements are made. Microchip does not undertake any obligation to publicly update any forward-looking statements to reflect events, circumstances or new information after this February 4, 2020 press release, or to reflect the occurrence of unanticipated events.
About Microchip:
Microchip Technology Incorporated is a leading provider of smart, connected and secure embedded control solutions. Its easy-to-use development tools and comprehensive product portfolio enable customers to create optimal designs, which reduce risk while lowering total system cost and time to market. The company’s solutions serve more than 120,000 customers across the industrial, automotive, consumer, aerospace and defense, communications and computing markets. Headquartered in Chandler, Arizona, Microchip offers outstanding technical support along with dependable delivery and quality. For more information, visit the Microchip website at www.microchip.com.
Note: The Microchip name and logo, the Microchip logo, PolarFire ad Adapttec are registered trademarks of Microchip Technology Inc. in the USA and other countries. All other trademarks mentioned herein are the property of their respective companies.
INVESTOR RELATIONS CONTACT:
J. Eric Bjornholt – CFO (480) 792-7804
Artificial Intelligence
LambdaTest launches LambdaTest extension for GitHub Copilot to make test automation pervasive across SDLC and drive developer productivity
NOIDA, India and SAN FRANCISCO, May 22, 2024 /PRNewswire/ — LambdaTest extension for GitHub Copilot enables AI-powered bridge experiences by seamlessly integrating test and dev workflow. It acts as a test automation copilot, assisting developers with quality assurance capabilities across different stages in SDLC, right where they code.
May 22, 2024, Noida/San Francisco: LambdaTest, a leading cloud-based unified testing platform, announced the launch of the LambdaTest extension for GitHub Copilot. This innovative capability revolutionizes the way developers manage and execute test workflows within their integrated development environments (IDEs).
The LambdaTest extension seamlessly integrates with GitHub Copilot Chat bridging the gap between development and testing workflows. Developers can now trigger test execution directly from their GitHub and VS Code environment, eliminating the need to switch between multiple applications. This streamlined process enhances productivity and accelerates software delivery.
With LambdaTest extension, developers can initiate tests effortlessly with a simple command, bringing testing closer to their code. This capability not only saves time but also enhances collaboration among development and testing teams by providing a unified platform for managing quality software releases, faster.
Moreover, real-time feedback integrated into GitHub Copilot empowers developers to iterate more efficiently, at speed, ensuring the quality and stability of their codebase. By conveniently viewing regression run results within their coding environment, developers and testers can quickly identify and address potential issues or bugs, facilitating faster resolution and delivery of high-quality software.
“LambdaTest Extension for GitHub Copilot is a huge milestone in our commitment to enable devs and QA processionals worldwide with frictionless experiences to accelerate software delivery.,” said Mohit Juneja, VP, Strategic Sales and Partnerships, LambdaTest. “Gone are the days of switching between multiple applications; now, developers can design, trigger, and analyze tests with simple prompts in natural language, without switching context from the IDE.”
The benefits of the LambdaTest extension extend beyond just test execution. It also offers powerful analysis tools, allowing developers to dive deep into test data, identify trends, and make data-driven decisions to continuously improve code quality and stability.
LambdaTest remains committed to driving innovation in the field of software testing, and this capability is another testament to that commitment. By providing developers and testers with tools to streamline processes and deliver high-quality software efficiently, LambdaTest continues to support and empower software development teams worldwide.
The LambdaTest extension for GitHub Copilot is now available for developers and testers. To learn more and get started, visit https://github.blog/2024-05-21-introducing-github-copilot-extensions
About LambdaTest LambdaTest is an intelligent and omnichannel enterprise execution environment that helps businesses drastically reduce time to market through Just in Time Test Orchestration (JITTO), ensuring quality releases and accelerated digital transformation. Over 10,000+ enterprise customers and 2+ million users across 130+ countries rely on LambdaTest for their testing needs.
Browser & App Testing Cloud allows users to run both manual and automated tests of web and mobile apps across 3000+ different browsers, real devices, and operating system environments.HyperExecute helps customers run and orchestrate test grids in the cloud for any framework and programming language at blazing-fast speeds to cut down on quality test time, helping developers build software faster.For more information, please visit, https://lambdatest.com
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Artificial Intelligence
DeepL announces $300 million investment at $2 billion valuation fueled by global demand for AI language solutions
Index Ventures led heavily oversubscribed round with participation from late-stage investment firms ICONIQ Growth, Teachers’ Venture Growth, and more Rapid enterprise adoption of DeepL has fueled the company’s growth in 60+ global markets for 100,000+ businesses, governments, and other organizationsDeepL’s Language AI Platform for business provides category-leading AI-powered translation and writing solutions COLOGNE, Germany, May 22, 2024 /PRNewswire/ — DeepL, a leading Language AI company, today announced $300 million of investment at a $2 billion valuation. Led by Index Ventures, the heavily oversubscribed round attracted strong support from new investors, who will bring their extensive expertise, connections, and resources to support DeepL’s growth and long-term vision to transform the way companies communicate around the world. Additional late-stage investors, including ICONIQ Growth, Teachers’ Venture Growth, and others, also participated, along with existing investors IVP, Atomico, and WiL.
“We’re approaching an inflection point in the AI boom where businesses who are racing to adopt the technology begin to discern between hype versus solutions that are secure and actually solve real problems in their business,” said Jarek Kutylowski, founder and CEO of DeepL. “This new investment comes during what is on track to be DeepL’s most transformative year yet and is a testament to the crucial role that our Language AI platform has in solving the complex linguistic challenges global companies face today. We’re highly focused on continued growth and innovation to expand our solutions and ensure they remain industry-leading in terms of quality, precision, and security. This will bring us closer to a future where every company, regardless of location, can operate seamlessly on a global scale with our AI.”
The new investment comes during a period of significant growth and momentum for DeepL, which has amassed a customer network of 100,000+ businesses, governments, and other organizations worldwide. This network includes Zendesk, Nikkei, Coursera, and Deutsche Bahn, who rely on its highly accurate and secure enterprise Language AI platform to deliver seamless communication, driving international growth and cost savings. In response to surging demand from global enterprises, DeepL has accelerated its expansion efforts and strategic investments into key markets over the past year. In January 2024, DeepL deepened its commitment to the U.S.—now its third largest market—by opening its first office in the region. The company continues to expand its team in the U.S. to support growing demand.
Within the last 12 months, DeepL has also substantially broadened its product offerings tailored for businesses. In April 2024, the company launched DeepL Write Pro, a writing assistant specifically tailored for business writing, powered by its own proprietary LLM technology. The company also continues to expand the range of languages supported by its platform with the recent additions of Arabic, as well as Korean and Norwegian, bringing its total number of languages to 32.
“DeepL’s runaway success is a bit of an ‘open secret’ in the business community,” said Danny Rimer, who led the investment from Index Ventures. “The company is exceptionally thoughtful about creating cutting-edge AI products that deliver real and immediate value to their customers. Jarek and the rest of the DeepL team are equally research and commercially minded – both of which are key to the company’s success.” Index Ventures is recognized for its investments in highly successful SaaS businesses like Figma, Slack, Wiz, and Scale AI.
Demand for AI solutions among global enterprises is on the rise. A recent IBM study found that 42% are already actively deploying AI and 40% are exploring its potential. Within this rapidly evolving landscape, DeepL is leading the way in applying AI to transform the $67.9 billion language industry, which is projected to grow to $95.3 billion by 2028.
Since its inception in 2017, DeepL has become the Language AI provider of choice for businesses across multiple industries including manufacturing, legal, retail, healthcare, technology, and professional services. The company’s specialized Language AI platform has become a critical investment for global businesses today, addressing a variety of communication challenges ranging from internal communications to customer support and international market expansion. Unlike general-purpose AI systems, DeepL’s cutting-edge translation and writing solutions rely on specialized AI models specifically tuned for language, resulting in more precise translations for a variety of use cases and a reduced risk of hallucinations and misinformation. In business translation and writing, accuracy is paramount, making specialized AI models the most reliable and preferred solution for language challenges.
DeepL’s Language AI platform is also proven to drive significant cost savings and efficiencies. A 2024 Forrester study revealed that the use of DeepL delivered 345% ROI for global companies, reducing translation time by 90% and driving a 50% in workload reduction, underscoring, in our opinion, the power of its platform for businesses looking to grow their revenue and enter new markets faster and at scale.
“At Zendesk we see first hand the power of infusing AI tools into customer experience, and DeepL’s industry-leading translation is a prime example,” said Adrian McDermott, CTO, Zendesk. “The ability to have accurate AI translation allows companies from startups to large enterprises the ability to scale globally, reaching prospects and existing customers in new ways. Zendesk’s open and flexible platform allows for seamless partnerships, and the tangible results we’ve seen so far from joint customers have us looking forward to continued work with DeepL.”
Looking ahead, DeepL will continue to invest in research and product innovation to strengthen its suite of leading AI communication tools for businesses. The company is also doubling down on global market expansion and talent recruitment across multiple areas including AI research, product, engineering, and GTM.
About DeepLDeepL is on a mission to break down language barriers for businesses everywhere. Over 100,000 businesses, governments and other organizations and millions of individuals in 63 global markets trust DeepL’s Language AI platform for human-like translation and better writing. Designed with enterprise security in mind, companies around the world leverage DeepL’s AI solutions that are specifically tuned for language to transform business communications, expand markets and improve productivity. Founded in 2017 by CEO Jaroslaw (Jarek) Kutylowski, DeepL today has over 900 passionate employees and is supported by world-renowned investors including Benchmark, IVP and Index Ventures.
Contact:Sebastian RiesOpeners [email protected]+49 1578 058 8488
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Artificial Intelligence
Hyundai Motor and Plus Announce Collaboration to Demonstrate First Level 4 Autonomous Fuel Cell Electric Truck in the U.S.
Hyundai Motor and Plus collaboration aims to enhance road safety and freight efficiencies by demonstrating benefits of XCIENT Fuel Cell truck equipped with Plus’s Level 4 autonomous driving softwareHyundai Motor’s Class 8 XCIENT Fuel Cell truck featuring Plus’s Level 4 SuperDrive™ system is on display at the Plus ACT Expo booth (#2044)LAS VEGAS and SEOUL, South Korea, May 22, 2024 /PRNewswire/ — Hyundai Motor Company (Hyundai Motor) and autonomous driving software leader Plus today unveiled the first Level 4 autonomous Class 8 hydrogen fuel cell electric truck in the U.S. at the Advanced Clean Transportation (ACT) Expo, the largest advanced clean transportation technology and fleet event in North America.
A result of the collaboration between Hyundai Motor and Plus, Hyundai Motor’s XCIENT Fuel Cell truck, equipped with Plus SuperDrive™ Level 4 autonomous driving technology, is on display at the Plus ACT Expo booth (#2044).
The Level 4 autonomous XCIENT Fuel Cell truck is undergoing initial autonomous driving assessments in the U.S., making it the first-ever Level 4 self-driving test on a Class 8 fuel cell electric truck to take place in the country. The collaboration seeks to show that autonomous hydrogen fuel cell trucks can help make trucking safer, more efficient, and more sustainable.
“We are excited to showcase our collaboration with Plus to test Level 4 autonomous driving technology with our Class 8 XCIENT Fuel Cell truck,” said Martin Zeilinger, Executive Vice President and Head of Commercial Vehicle Development at Hyundai. “Hyundai Motor has been driving the energy transition paradigm with our advanced fuel cell technologies. By adding autonomous capabilities to our world’s first mass-produced hydrogen-powered XCIENT Fuel Cell truck, Hyundai is looking forward to providing fleets and vehicle operators additional solutions that enhance road safety and freight efficiencies thanks to Plus’s industry-leading autonomous driving technology.”
First introduced in 2020, Hyundai Motor’s XCIENT Fuel Cell truck has conducted commercial operations in eight countries worldwide, establishing a successful track record of real-world applications and technological reliability.
At last year’s ACT Expo, Hyundai introduced XCIENT Fuel Cell tractor, the commercialized Class 8 6×4 fuel cell electric model, powered by two 90kW hydrogen fuel cell systems and a 350kW e-motor, providing a driving range of over 450 miles per charge even when fully loaded.
Plus’s SuperDrive™ solution is being deployed across the U.S., Europe, and Australia. The system uses a combination of cutting-edge sensors, including LiDAR, radar and cameras, to provide surround perception, planning, prediction and self-driving capabilities.
“We are thrilled to collaborate with Hyundai Motor Company on this important initiative to create more sustainable and safe transportation options. A decarbonized future with autonomous hydrogen fuel cell electric trucks that also improve safety and efficiency is one that Plus is proud to support with our cutting-edge autonomous driving technology,” said Shawn Kerrigan, COO and Co-Founder at Plus.
Hyundai Motor and Plus have released a video highlighting their collaboration, which can be seen here: https://www.youtube.com/watch?v=_d19h_v7abo.
About Hyundai Motor Company
More information about Hyundai Motor and its products can be found at: https://www.hyundai.com/worldwide/en/ or Newsroom: Media Hub by Hyundai
About Plus
For more information, visit http://www.plus.ai/.
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