Ganesh Moorthy
President and Chief Executive Officer at Microchip Technology
Thank you, Eric, and good afternoon everyone. Our June quarter results were strong in the context of a slowing macro environment, marked by our continued disciplined execution, as well as our resilient end markets and diversified customer base. Net sales grew 2.5% sequentially and 16.6% on a year-over-year basis to achieve another all-time record of $2.29 billion. The June quarter represented our 11th consecutive quarter of sequential revenue growth. Non-GAAP gross and operating margins were both records at 68.4% and 48.1% respectively.
Our consolidated non-GAAP diluted earnings per share was $1.64 per share, another record by a whisker and up 19.7% from the year-ago quarter. Adjusted EBITDA was a record 51.2% of net sales and adjusted free cash flow was 33.9% of net sales in the June quarter, continuing to demonstrate the robust cash generation characteristics of our business. Our net leverage exiting June dropped to 1.29x. We returned $349.2 million to shareholders in dividends and share repurchases in the June quarter, representing 67.5% of our March quarter adjusted free cash flow.
Our capital return to shareholders in the September quarter will increase to 72.5% of our June quarter adjusted free cash flow, as we continue on our path to return 100% of our adjusted free cash flow to shareholders by the March quarter of calendar year 2025. My profuse thanks to all our stakeholders who enabled us to achieve these outstanding results despite the increasingly challenging macro environment, and especially to the worldwide Microchip team whose tireless efforts and agility to adapt are what enable us to navigate effectively through the business cycles.
Taking a look at our June quarter net sales from a product line perspective, our mixed signal microcontroller net sales set another all-time record, coming in sequentially up 0.8% in the June quarter and up 22.5% on a year-over-year basis. Our analog net sales also set another all-time record, coming in sequentially up 2.5% in the June quarter and up 9.2% on a year-over-year basis. Our FPGA net sales, which we comment on from time-to-time, had another record quarter with annualized revenue growth continuing to be in the double digits.
Now for some color on the June quarter. While our overall business remains steady, our customers continue to feel the effects of slowing economic activity and increasing business uncertainty. Starting in early June, we saw business conditions deteriorate in three areas. First, our China business was much weaker than our expectations and has not recovered from the shutdowns of last year and the Lunar New year holidays in the March quarter. This manifested in weak sell-through activity and the building of inventory in the distribution channel in China.
Second, we started to see initial signs of weakness and uncertainty in the automotive and industrial segments, reflecting the impact of high inflation and high interest rates driving more cautious spending. And third, we are seeing early signs of an impending slowdown in Europe, exacerbated by some of our European customers being dependent on exports to countries like China, whereas we know that the business environment is much weaker than expected.
As a result, we continue to receive requests to push out or cancel backlog as customers start to rebalance their inventory in light of the weaker business conditions and increased uncertainty they were experiencing. We were able to push out meaningful amounts of non-reschedulable backlog to later quarters to help many customers with inventory positions. While the rate of cancellation and push-out requests appears to be stabilizing, we expect request to push out or cancel backlog will likely be with us through the rest of calendar 2023, as customers adjust to their new demand environment and attempt to de-risk their inventory position commensurately.
We are also seeing an increasing direct and indirect impact from the cumulative effect of U.S. export control actions, especially in China. These actions were less of an issue over the last few quarters when demand was significantly higher than supply, but are more of an issue now as demand and supply come more into balance. Despite all the factors mentioned so far, in the June quarter we were able to reverse the growth in days of inventory on our balance sheet, with inventory dropping by two days to 167 days, of which, eight days of inventory were from an investment in last-time buys of high-margin, long-lived products whose manufacturing capacity was being end of life by our supply chain.
Reflecting the slowing macro-environment, especially in China, our channel inventory grew by five days to 29 days. We continue to take actions to further reduce the days of inventory on our balance sheet, while maintaining absorption in our internal wafer fabrication factories. We're also working with our channel partners to find the right balance of inventory required to serve customers and to be positioned for an eventual strengthening of business conditions.
Finally, while our overall inventory is still a bit higher than our target, we made excellent progress to position our inventory at the best locations in manufacturing to be able to rapidly respond to demand growth when the macro environment strengthens. Consistent with the slowing macro environment and the higher than target level of inventory on our balance sheet, as well as with some of our customers and channel partners, most of our internal factory expansion actions remain paused.
This we expect will result in lower capital investments in fiscal year '24 and fiscal year '25. During a period of macro weakness and business uncertainty, we believe shorter lead times are the best way to help customers navigate the environment successfully, and improve the quality of backlog placed on us. We have been able to reduce average lead time from roughly 52 weeks at the start of 2023 to roughly 26 weeks by the end of the June quarter, and we expect to continue to drive lead times down farther in the coming months.
We have heard concerns from some of the investment community about falling lead times, because it results in lower backlog. While this is often true, we believe the level of backlog does not equate to true end market consumption. And in the final analysis, shorter lead times enable our customers and Microchip to navigate an uncertain environment with agility and more effectively. So now let's get into the guidance for the September quarter. Although our backlog for the September quarter is strong, we are continuing to take active steps to help customers with inventory positions to push out their backlog.
Taking all the factors we have discussed on the call today into consideration, we expect our net sales for the September quarter to be between up 1% and down 3% sequentially. At the midpoint of our net sales guidance for the September quarter, our year-over-year growth for the quarter would be 9.3%. We expect our non-GAAP gross margin to be between 68.3% and 68.5% of sales. We expect non-GAAP operating expenses to be between 20.1% and 20.5% of sales.
We expect non-GAAP operating profit to be between 47.8% and 48.4% of sales and we expect our non-GAAP diluted earnings per share to be between $1.60 and $1.64. At the midpoint of our non-GAAP earnings per share guidance, our year-over-year growth for the September quarter would be 11% despite a much higher tax rate than the year-ago quarter. As supply and demand come into balance, we expect normal seasonality to return to our business.
Historically, the December quarter has been our seasonally weakest quarter. This year, we expect that our normal seasonality in the December quarter will likely be amplified by the macro weakness and business uncertainty that our customers are experiencing. As a result, we anticipate further business headwinds in the December quarter. However, notwithstanding any near-term macro weakness, we are confident that semiconductors remain the engine of innovation for the markets and applications we serve.
Our focus on total system solutions and key market megatrends continues to fuel strong design momentum, which we expect will drive above-market long-term growth. Finally, as you can see from our June quarter results and our September quarter guidance, our Microchip 3.0 strategy which we launched 21 months ago, continues to be the foundation of our results, as we continue to build and improve what we believe is one of the most diversified, defensible, high-growth, high-margin, high-cash generating businesses in the semiconductor industry.
However, we recognize that we operate in a cyclical industry and that we're not immune to the business cycles. If you review Microchip's peak to trough performance through the business cycles over the last 15-plus years, which is included in the investor presentation posted on our website, you will observe our robust and consistent cash-generation, gross margin and operating margin results.
Although we don't know what exactly the future holds, if we were to experience a semiconductor inventory correction like what the industry has seen in the past, we are highly confident that our non-GAAP operating margins would remain well above 40%, and we expect our cash-generation, non-GAAP gross margin, and non-GAAP operating margin to once again demonstrate consistency and resiliency through the cycle.
And with that, let me pass the baton to Steve to talk more about our cash return to shareholders. Steve.
