Semtech Corporation (Nasdaq: SMTC), a leading supplier of high
performance analog and mixed-signal semiconductors and advanced
algorithms, today reported unaudited financial results for its
first quarter of fiscal year 2020, which ended April 28, 2019.
Highlights for the First Fiscal Quarter 2020
- Q1 FY2020 net sales of $131.4 million,
and GAAP EPS of $0.20 and non-GAAP EPS of $0.34
- Bookings grew 18% sequentially
resulting in a Book to Bill greater than 1
- Announced first LoRa Cloud™ Services
platform for geolocation
- Record quarterly number of design
wins
Results on a GAAP basis for the First Fiscal Quarter
2020
- GAAP Net sales were $131.4 million
- GAAP Gross margin was 61.9%
- GAAP SG&A expense was $38.4
million
- GAAP R&D expense was $27.1
million
- GAAP Operating margin was 9.8%
- GAAP Net income was $13.3 million or
$0.20 per diluted share
To facilitate a complete understanding of comparable financial
performance between periods, the Company also presents performance
results that exclude certain non-cash items and items that are not
considered reflective of the Company’s core results over time.
These non-GAAP financial measures exclude certain items and are
described below under “Non-GAAP Financial Measures.”
Results on a Non-GAAP basis for the First Fiscal Quarter
2020 (see the list of non-GAAP items and the reconciliation of
these to the most relevant GAAP items set forth in the tables
below):
- Non-GAAP Gross margin was 62.2%
- Non-GAAP SG&A expense was $28.7
million
- Non-GAAP R&D expense was $24.4
million
- Non-GAAP Operating margin was
21.8%
- Non-GAAP Net income was $23.0 million
or $0.34 per diluted share
Mohan Maheswaran, Semtech’s President and Chief Executive
Officer, stated, “We delivered first fiscal quarter 2020 results
that were in-line with our expectations. Our bookings grew nicely
over the prior quarter, as we saw early signs of improving customer
demand in several of our end-markets. Despite near-term
uncertainties, our main growth drivers have strong design win
momentum and should contribute to revenue growth in the second half
of fiscal year 2020.”
Second Fiscal Quarter 2020 Outlook
Both the GAAP and non-GAAP second fiscal quarter 2020 outlook
below take into account the anticipated impact to the Company,
based on its current estimates, of the recently announced export
restrictions pertaining to Huawei and certain of its affiliates,
imposed by the U.S. Department of Commerce. The Company is
continuing to review and assess the impact of the export
restrictions on its products and services, and is unable to predict
the full impact such restrictions may have on its results of
operations.
GAAP Second Fiscal Quarter 2020 Outlook
- Net sales are expected to be in the
range of $128.0 million to $142.0 million
- GAAP Gross margin is expected to be in
the range of 61.6% to 62.2%
- GAAP SG&A expense is expected to be
in the range of $37.4 million to $38.4 million
- GAAP R&D expense is expected to be
in the range of $26.7 million to $27.7 million
- GAAP Intangible amortization expense is
expected to be approximately $3.9 million
- GAAP Interest and other expense is
expected to be approximately $1.6 million
- GAAP Effective tax rate is expected to
be in the range of 16% to 18%
- GAAP Earnings per diluted share are
expected to be in the range of $0.11 to $0.20
- Fully-diluted share count is expected
to be approximately 68.0 million shares
- Share-based compensation is expected to
be approximately $11.3 million, categorized as follows: $0.4
million cost of sales, $8.4 million SG&A, and $2.5 million
R&D
- Capital expenditures are expected to be
approximately $7.0 million
- Depreciation expense is expected to be
approximately $5.9 million
Non-GAAP Second Fiscal Quarter 2020 Outlook (see the list
of non-GAAP items and the reconciliation of these to the most
comparable GAAP items set forth in the tables below)
- Non-GAAP Gross margin is expected to be
in the range of 61.9% to 62.5%
- Non-GAAP SG&A expense is expected
to be in the range of $28.0 million to $29.0 million
- Non-GAAP R&D expense is expected to
be in the range of $24.0 million to $25.0 million
- Non-GAAP Interest and other expense is
expected to be approximately $1.6 million
- Non-GAAP Effective tax rate is expected
to be in the range of 15% to 17%
- Non-GAAP Earnings per diluted share are
expected to be in the range of $0.32 to $0.40
Webcast and Conference Call
Semtech will be hosting a conference call today to discuss its
first fiscal quarter 2020 results at 2:00 p.m. Pacific time. An
audio webcast will be available on Semtech’s website at
www.semtech.com in the “Investor Relations” section under “Investor
News.” A replay of the call will be available through June 29, 2019
at the same website or by calling (855) 859-2056 and entering
conference ID 7237419.
Non-GAAP Financial Measures
To supplement the Company's consolidated financial statements
prepared in accordance with GAAP, this release includes a
presentation of select non-GAAP metrics. The Company's measure of
free cash flow is calculated as cash flow from operations less net
capital expenditures. The Company’s non-GAAP measures of gross
margin, SG&A expenses, R&D expenses, operating margin,
effective tax rate, net income and earnings per diluted share
exclude the following items, if any:
- Share-based compensation
- Amortization of purchased intangibles
and impairments
- Restructuring, transaction and other
acquisition or disposition-related expenses and gains on
dispositions
- Litigation expenses or dispute
settlement charges or gains
- Environmental reserves
- Equity in net gains or losses of equity
method investments
To provide additional insight into the Company's second quarter
outlook, this release also includes a presentation of
forward-looking non-GAAP measures. Management believes that the
presentation of these non-GAAP financial measures provide useful
information to investors regarding the Company’s financial
condition and results of operations because these non-GAAP
financial measures are adjusted to exclude the items identified
above because such items are either operating expenses which would
not otherwise have been incurred by the Company in the normal
course of the Company’s business operations or are not reflective
of the Company’s core results over time. These excluded items may
include recurring as well as non-recurring items, and no inference
should be made that all of these adjustments, charges, costs or
expenses are unusual, infrequent or non-recurring. For example:
certain restructuring and integration-related expenses (which
consist of employee termination costs, facility closure or lease
termination costs, and contract termination costs) may be
considered recurring given the Company’s ongoing efforts to be more
cost effective and efficient; certain acquisition and
disposition-related adjustments or expenses may be deemed recurring
given the Company's regular evaluation of potential transactions
and investments; and certain litigation expenses or dispute
settlement charges or gains (which may include estimated losses for
which we may have established a reserve, as well as any actual
settlements, judgments, or other resolutions against, or in favor
of, the Company related to litigation, arbitration, disputes or
similar matters, and insurance recoveries received by the Company
related to such matters) may be viewed as recurring given that the
Company may from time to time be involved in, and may resolve,
litigation, arbitration, disputes, and similar matters.
Notwithstanding that certain adjustments, charges, costs or
expenses may be considered recurring, in order to provide
meaningful comparisons, the Company believes that it is appropriate
to exclude such items because they are not reflective of the
Company's core results and tend to vary based on timing, frequency
and magnitude.
As noted in its first quarter fiscal year 2019 earnings release,
the Company is no longer adjusting prior-period non-GAAP
performance metrics of net sales and gross margin to exclude the
cost of the Comcast Warrant as the Comcast Warrant was fully vested
in the first quarter of fiscal year 2019. Accordingly, the
Company’s non-GAAP performance previously reported for the first
quarter of fiscal year 2019 will not be comparable to the period
presented in the tables below. The Company in previous periods had
excluded the recognized cost of the Comcast Warrant from non-GAAP
net sales and non-GAAP gross margin because the cost related to a
non-routine, non-cash equity award that was provided to Comcast as
an incentive to deploy a network based on technology developed by
the Company and because the Comcast Warrant would not have had an
ongoing impact on revenues in future periods.
These non-GAAP financial measures are provided to enhance the
user's overall understanding of the Company's comparable financial
performance between periods. In addition, the Company’s management
generally excludes the items noted above when managing and
evaluating the performance of the business. The financial
statements provided with this release include reconciliations of
these non-GAAP measures to their most comparable GAAP measures for
the first and fourth quarters of fiscal year 2019 and first quarter
of fiscal year 2020, along with a reconciliation of forward-looking
non-GAAP measures (other than the non-GAAP effective tax rate) to
their most comparable GAAP measures for the second quarter of
fiscal year 2020. The Company is unable to include a reconciliation
of the forward-looking non-GAAP measure of the non-GAAP effective
tax rate to the corresponding GAAP measure as this is not available
without unreasonable efforts due to the high variability and low
visibility with respect to the charges that are excluded from this
non-GAAP measure. We expect the variability of the above charges to
have a potentially significant impact on our GAAP financial
results. These additional non-GAAP financial measures should not be
considered substitutes for any measures derived in accordance with
GAAP and may be inconsistent with similar measures presented by
other companies.
Forward-Looking and Cautionary Statements
This press release contains “forward-looking statements” within
the meaning of the “safe harbor” provisions of the Private
Securities Litigation Reform Act of 1995, as amended, based on the
Company’s current expectations, estimates and projections about its
operations, industry, financial condition, performance, results of
operations, and liquidity. Forward-looking statements are
statements other than historical information or statements of
current condition and relate to matters such as future financial
performance including the second quarter of fiscal year 2020
outlook, the Company’s expectations concerning the negative impact
on the Company’s results of operations from its inability to ship
certain products and provide certain support services due to the
export restrictions related to Huawei, future operational
performance, the anticipated impact of specific items on future
earnings, and the Company’s plans, objectives and expectations.
Statements containing words such as “may,” “believes,”
“anticipates,” “expects,” “intends,” “plans,” “projects,”
“estimates,” “should,” “will,” “designed to,” “projections,” or
“business outlook,” or other similar expressions constitute
forward-looking statements.
Forward-looking statements involve known and unknown risks and
uncertainties that could cause actual results and events to differ
materially from those projected. Potential factors that could cause
actual results to differ materially from those in the
forward-looking statements include, but are not limited to: the
Company's ability to manage expenses to achieve anticipated shifts
in demand among target customers, and other comparable changes or
protracted weakness in projected or anticipated markets;
competitive changes in the marketplace including, but not limited
to, the pace of growth or adoption rates of applicable products or
technologies; export restrictions and laws affecting the Company's
trade and investments including the adoption and expansion of trade
restrictions including with respect to Huawei, and tariffs or the
occurrence of trade wars; changes in the legal requirements related
to the sale of our products, including developments regarding the
restrictions on future shipments with respect to Huawei; shifts in
focus among target customers, and other comparable changes in
projected or anticipated end-user markets; the Company’s ability to
forecast its effective tax rates due to changing income in higher
or lower tax jurisdictions and other factors that contribute to the
volatility of the Company’s effective tax rates and impact
anticipated tax benefits; the Company’s ability to integrate its
acquisitions and realize expected synergies and benefits from its
acquisitions and dispositions; the continuation and/or pace of key
trends considered to be main contributors to the Company's growth,
such as demand for increased network bandwidth and connectivity,
demand for increasing energy efficiency in the Company's products
or end-use applications of the products, and demand for increasing
miniaturization of electronic components; adequate supply of
components and materials from the Company’s suppliers, to include
disruptions due to natural causes or disasters, weather, or other
extraordinary events; the Company's ability to forecast and achieve
anticipated net sales and earnings estimates in light of periodic
economic uncertainty, to include impacts arising from European,
Asian and global economic dynamics; and the amount and timing of
expenditures for capital equipment. Additionally, forward-looking
statements should be considered in conjunction with the cautionary
statements contained in the risk factors disclosed in the Company's
Annual Report on Form 10-K for the fiscal year ended January 27,
2019, subsequent Quarterly Reports on Form 10-Q, and other filings
with the Securities and Exchange Commission, and in material
incorporated therein, including, without limitation, information
under the captions “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” and “Risk Factors.”
In light of the significant risks and uncertainties inherent in the
forward-looking information included herein that may cause actual
performance and results to differ materially from those predicted,
any such forward-looking information should not be regarded as
representations or guarantees by the Company of future performance
or results, or that its objectives or plans will be achieved or
that any of its operating expectations or financial forecasts will
be realized. Reported results should not be considered an
indication of future performance. Investors are cautioned not to
place undue reliance on any forward-looking information contained
herein, which reflect management’s analysis only as of the date
hereof. Except as required by law, the Company assumes no
obligation to publicly release the results of any update or
revision to any forward-looking statements that may be made to
reflect new information, events or circumstances after the date
hereof or to reflect the occurrence of unanticipated or future
events, or otherwise.
About Semtech
Semtech Corporation is a leading supplier of high performance
analog, mixed-signal semiconductors and advanced algorithms for
high-end consumer, enterprise computing, communications and
industrial equipment. Products are designed to benefit the
engineering community as well as the global community. The Company
is dedicated to reducing the impact it, and its products, have on
the environment. Internal green programs seek to reduce waste
through material and manufacturing control, use of green technology
and designing for resource reduction. Publicly traded since 1967,
Semtech is listed on the NASDAQ Global Select Market under the
symbol SMTC. For more information, visit
http://www.semtech.com.
Semtech, the Semtech logo and LoRa are registered trademarks or
service marks of Semtech Corporation or its subsidiaries.
SMTC-F
SEMTECH CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF
INCOME (Amounts in thousands - except per share amount)
Three Months Ended April 28, January
27 April 29 2019
2019 2018 Q120
Q419 Q119 Net sales $
131,354 $ 160,006 $ 130,429 Cost
of sales 50,079 61,139 58,960
Gross profit 81,275 98,867
71,469 Operating costs and expenses: Selling, general and
administrative 38,377 36,875 41,406 Product development and
engineering 27,099 28,493 26,199 Intangible amortization 5,143
6,728 6,961 Changes in the fair value of contingent earn-out
obligations (2,161 ) - - Total
operating costs and expenses 68,458 72,096
74,566
Operating income (loss)
12,817 26,771 (3,097 ) Interest
expense, net (2,467 ) (2,457 ) (2,190 ) Non-operating income, net
1,043 1,909 190
Income
(loss) before taxes and equity in net losses of equity method
investments 11,393 26,223 (5,097 )
(Benefit) provision for taxes (2,312 ) 12,798
(17,510 )
Net income before equity in net losses of
equity method investments 13,705 13,425
12,413 Equity in net losses of equity method investments
(411 ) (85 ) (31 )
Net income $
13,294 $ 13,340 $
12,382 Earnings per share: Basic $ 0.20 $ 0.20
$ 0.19 Diluted $ 0.20 $ 0.20 $ 0.18 Weighted average number
of shares used in computing earnings per share: Basic 66,105 65,525
66,324 Diluted 67,976 68,165 68,195
SEMTECH
CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
April 28, January
27, 2019 2019 (Unaudited) ASSETS
Current assets: Cash and cash equivalents $ 287,302 $ 312,120
Accounts receivable, net 66,459 79,223 Inventories 73,480 63,679
Prepaid taxes 11,186 8,406 Other current assets 18,620
21,876 Total current assets 457,047 485,304
Non-current assets: Property, plant and equipment, net 126,169
118,488 Deferred tax assets 14,365 14,362 Goodwill 351,141 351,141
Other intangible assets, net 31,415 36,558 Other assets
73,273 57,028
Total assets $ 1,053,410
$ 1,062,881 LIABILITIES AND STOCKHOLDERS'
EQUITY Current liabilities: Accounts payable $ 40,713 $ 43,183
Accrued liabilities 39,394 65,023 Deferred revenue 4,942 3,439
Current portion, long term debt 18,281 18,269 Total
current liabilities 103,330 129,914 Non-current liabilities:
Deferred tax liabilities 3,646 3,363 Long term debt, less current
portion 188,270 192,845 Other long-term liabilities 62,938 54,078
Stockholders’ equity 695,226 682,681
Total
liabilities & stockholders' equity $
1,053,410 $ 1,062,881 SEMTECH
CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
AND SUPPLEMENTAL INFORMATION (Amounts in thousands)
Three Months Ended April 28,
April 29 2019 2018
(Unaudited) Net income $ 13,294
$ 12,382 Net cash provided by operating
activities
6,741
35,029 Net cash used in investing activities (15,770 ) (8,797 ) Net
cash used in financing activities
(15,789
) (30,806 )
Net decrease in cash and cash equivalents
(24,818 ) (4,574 ) Cash and cash
equivalents at beginning of period 312,120
307,923
Cash and cash equivalents at end of period
$ 287,302 $ 303,349
Three Months Ended April 28, January
27 April 29 2019 2019
2018 Q120 Q419
Q119 (Unaudited) (Unaudited) Free Cash
Flow: Cash Flow from Operations $
6,741
$ 47,198 $ 35,029 Net Capital Expenditures (15,258 )
(4,124 ) (4,935 )
Free Cash Flow: $
(8,517
) $ 43,074 $ 30,094
SEMTECH CORPORATION SUPPLEMENTAL
INFORMATION: RECONCILIATION OF GAAP TO NON-GAAP RESULTS
(Amounts in thousands - except per share amounts)
Three Months Ended April 28, January 27
April 29 2019 2019
2018 Q120 Q419
Q119 Gross Margin- GAAP 61.9 %
61.8 % 54.8 % Share-based compensation
0.3 % 0.3 % 0.3 %
Adjusted Gross Margin
(Non-GAAP) 62.2 % 62.1
% 55.1 % Three Months
Ended April 28, January 27 April 29
2019 2019 2018
Q120 Q419 Q119 Selling, general and
administrative- GAAP $ 38,377 $
36,875 $ 41,406 Share-based compensation
(8,344 ) (10,264 ) (11,462 ) Transaction and integration related
(1,249 ) (41 ) (233 ) Environmental and other reserves and charges
(140 ) (252 ) (346 ) Litigation cost net of recoveries 74
575 (559 )
Adjusted selling, general
and administrative (Non-GAAP) $ 28,718
$ 26,893 $ 28,806
Three Months Ended April 28, January 27
April 29 2019 2019
2018 Q120 Q419 Q119
Product development and engineering- GAAP $
27,099 $ 28,493 $ 26,199
Share-based compensation (2,557 ) (2,121 ) (2,225 ) Transaction and
integration related (186 ) (186 ) (294 )
Adjusted product development and engineering (Non-GAAP)
$ 24,356 $ 26,186
$ 23,680 Three Months
Ended April 28, January 27 April 29
2019 2019 2018
Q120 Q419 Q119 Operating Margin-
GAAP 9.8 % 16.7 % -2.4
% Share-based compensation 8.6 % 8.1 % 10.7 % Intangible
amortization 3.9 % 4.2 % 5.3 % Transaction and integration related
1.1 % 0.1 % 0.5 % Environmental and other reserves and charges 0.1
% 0.2 % 0.3 % Litigation cost net of recoveries -0.1 % -0.4 % 0.4 %
Changes in the fair value of contingent earn-out obligations
-1.6 % 0.0 % 0.0 %
Adjusted Operating Margin
(Non-GAAP) 21.8 % 28.9
% 14.8 % Three Months
Ended April 28, January 27 April 29
2019 2019 2018
Q120 Q419 Q119 GAAP net income
$ 13,294 $ 13,340 $
12,382 Adjustments to GAAP net income: Share-based
compensation 11,328 12,913 14,015 Intangible amortization 5,143
6,728 6,961 Transaction and integration related 1,435 226 527
Environmental and other reserves and charges 140 252 346 Litigation
cost net of recoveries (74 ) (575 ) 559 Changes in the fair value
of contingent earn-out obligations (2,161 ) - - Investment gain
- (1,288 ) -
Total Non-GAAP
adjustments before taxes 15,811 18,256
22,408 Associated tax effect (6,504 ) 5,867 (20,654 ) Equity
in net losses of equity method investments 411
85 31 Total of supplemental information net of
taxes 9,718 24,208 1,785
Non-GAAP net income $ 23,012 $
37,548 $ 14,167
Diluted GAAP earnings per share $ 0.20
$ 0.20 $ 0.18 Adjustments per above
0.14 0.35
0.03 Diluted non-GAAP earnings per share
$ 0.34 $ 0.55 $
0.21 Three Months Ended April
28, January 27 April 29 2019
2019 2018 Q120
Q419 Q119 Comcast Warrant* Impact on Net Sales
$ - $ - $ (21,501 ) Associated tax effect - - 3,678 Impact on EPS $
- $ - $ (0.26 )
*In consideration of discussions held with
the Securities and Exchange Commission we will no longer adjust net
sales for the impact of the Warrant for any comparable historical
periods presented. The Company will instead provide GAAP net sales
for historical periods presented and will separately disclose the
impact of the Warrant on the financial statement line items
impacted by the Warrant.
SEMTECH CORPORATION RECONCILIATION OF GAAP TO
NON-GAAP OUTLOOK Second Quarter of Fiscal Year 2020
Outlook (Amounts in thousands - except per share amounts)
Q2 FY20 Outlook July 28, 2019
Low
High
Gross Margin- GAAP 61.6 % 62.2 % Share-based compensation
0.3 % 0.3 %
Adjusted Gross Margin (Non-GAAP)
61.9 % 62.5 %
Low
High
Selling, general and administrative- GAAP $
37.4 $ 38.4 Share-based compensation (8.4 )
(8.4 ) Transaction and integration related (1.0 )
(1.0 )
Adjusted selling, general and administrative
(Non-GAAP) $ 28.0 $ 29.0
Low
High
Product development and engineering- GAAP $
26.7 $ 27.7 Share-based compensation (2.5 )
(2.5 ) Transaction and integration related (0.2 )
(0.2 )
Adjusted product development and engineering
(Non-GAAP) $ 24.0 $ 25.0
Low
High
Diluted GAAP earnings per share $ 0.11
$ 0.20 Share-based compensation 0.17 0.17
Transaction, restructuring, and acquisition related expenses 0.02
0.02 Amortization of acquired intangibles 0.06 0.06 Associated Tax
Effect (0.04 ) (0.05 )
Diluted adjusted earnings
per share (Non-GAAP) $ 0.32 $
0.40
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190529005880/en/
Sandy HarrisonSemtech Corporation(805)
480-2004webir@semtech.com
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