Semtech Corporation (Nasdaq: SMTC), a leading supplier of high
performance analog, mixed-signal semiconductors and advanced
algorithms, today reported unaudited financial results for its
second quarter of fiscal year 2019, which ended July 29, 2018. Net
sales computed in accordance with U.S. generally accepted
accounting principles (“GAAP”), increased 25% sequentially and 7%
over the prior year’s period to $163.2 million.
Highlights for the Second Fiscal Quarter 2019
- Record quarterly net sales of
LoRa-related products
- Record quarterly channel point-of-sale
(POS) results
- Record Design wins of approximately
$184 million
- Repurchased 495,609 shares for
approximately $24 million
- Cash flow from operations increased 41%
Q/Q to $49.3 million or 30% of net sales
Results on a GAAP basis for the Second Fiscal Quarter
2019
- Net sales were $163.2 million
- Gross margin was 61.3%
- SG&A expense was $33.5 million
- R&D expense was $28.1 million
- Net income was $25.2 million or $0.37
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. The
Company’s non-GAAP financial measures exclude certain items and are
described below under “Non-GAAP Financial Measures.”
Results on a Non-GAAP Basis for the Second Fiscal Quarter
2019 (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 61.5%
- Non-GAAP SG&A expense was $28.2
million
- Non-GAAP R&D expense was $25.1
million
- Non-GAAP operating margin was
28.9%
- Non-GAAP net income was $37.6 million
or $0.55 per diluted share
Mohan Maheswaran, Semtech’s President and Chief Executive
Officer, stated: “We are pleased to deliver another quarter that
exceeded our expectations as we saw healthy growth from the IoT,
Mobile and Data center markets. Our Growth Engines, led by LoRa’s
global adoption, continue to position the Company well for future
growth. Bookings and design wins remained strong and we entered our
third fiscal quarter with record starting backlog.”
GAAP Third Fiscal Quarter 2019 Outlook
- Net sales are expected to be in the
range of $168.0 million to $178.0 million
- Gross margin is expected to be in the
range of 61.0% to 62.0%
- SG&A expense is expected to be in
the range of $38.2 million to $39.2 million
- R&D expense is expected to be in
the range of $28.0 million to $29.0 million
- Intangible amortization expense is
expected to be approximately $6.5 million
- Interest and other expense is expected
to be approximately $2.0 million
- Effective tax rate is expected to be in
the range of 19% to 21%
- Earnings per diluted share are expected
to be in the range of $0.33 to $0.39
- Fully-diluted share count is expected
to be approximately 68.5 million shares
- Share-based compensation is expected to
be approximately $12.1 million, categorized as follows: $0.4
million cost of sales, $2.5 million R&D and $9.2 million
SG&A
- Capital expenditures are expected to be
approximately $9.0 million
- Depreciation expense is expected to be
approximately $5.9 million
Non-GAAP Third Fiscal Quarter 2019 Outlook (see the list
of non-GAAP items and the reconciliation of these to the most
comparable GAAP measures set forth in the tables below)
- Non-GAAP gross margin is expected to be
in the range of 61.2% to 62.2%
- 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 $25.0 million to $26.0 million
- Non-GAAP interest and other expense is
expected to be approximately $2.0 million
- Non-GAAP effective tax rate is expected
to be in the range of 16% to 20%
- Non-GAAP earnings per diluted share are
expected to be in the range of $0.58 to $0.64
Webcast and Conference Call
Semtech will be hosting a conference call today to discuss its
second quarter fiscal year 2019 results at 2:00 p.m. Pacific time.
An audio webcast will be available on Semtech’s website at
www.semtech.com under the “Investor Relations” section. A replay of
the call will be available through September 28, 2018 at the same
website or by calling (855) 859-2056 and entering conference ID
2395787.
Non-GAAP Financial Measures
To supplement the Company's consolidated financial statements
prepared in accordance with GAAP, this release includes a non-GAAP
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, 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 third fiscal
quarter outlook, this release also includes a presentation of
forward-looking non-GAAP measures. 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 will no longer adjust 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 and the second quarter of fiscal year 2018 will
not be comparable to the previous periods 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 margins 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 second quarter of fiscal year 2018 and the first and second
quarters of fiscal year 2019, 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
third quarter of fiscal year 2019. 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 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 Company’s outlook for the third quarter
of fiscal year 2019, 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 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 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 the impact of trade
restrictions and tariffs; shifts in focus among target customers,
and other comparable changes in projected or anticipated end-user
markets; 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 28, 2018, 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 of
Semtech Corporation or its subsidiaries.
SMTC-F
SEMTECH CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS (Amounts in thousands - except per share amount)
Three Months Ended Six
Months Ended July 29, April 29, July 30,
July 29, July 30, 2018
2018 2017 2018
2017 Q219 Q119
Q218 Q219 Q218 (Unaudited)
(Unaudited) (Unaudited) (Unaudited)
(Unaudited) Net sales $ 163,211
$ 130,429 $ 153,127 $
293,640 $ 296,929 Cost of sales 63,087
58,960 60,891 122,047
119,778
Gross profit 100,124
71,469 92,236 171,593 177,151 Operating
costs and expenses: Selling, general and administrative 33,529
41,406 39,237 74,935 73,252 Product development and engineering
28,079 26,199 27,432 54,278 53,415 Intangible amortization 6,480
6,961 6,675 13,441 12,961 Loss on disposition of business
operations - - - - 375 Changes in the fair value of contingent
earn-out obligations (900 ) - -
(900 ) - Total operating costs and expenses
67,188 74,566 73,344
141,754 140,003
Operating income
(loss) 32,936 (3,097 ) 18,892
29,839 37,148 Interest expense, net (2,200 ) (2,190 )
(2,029 ) (4,390 ) (4,075 ) Non-operating income (expense), net
542 190 (204 ) 732
(836 )
Income (loss) before taxes and equity in net
losses of equity method investments 31,278 (5,097
) 16,659 26,181 32,237 Provision for
taxes 6,082 (17,510 ) 4,095
(11,428 ) 7,852
Net income before equity in
net losses of equity method investments 25,196
12,413 12,564 37,609 24,385 Equity in
net losses of equity method investments (27 ) (31 )
- (58 ) -
Net income
$ 25,169 $ 12,382
$ 12,564 $ 37,551
$ 24,385 Earnings per share: Basic $
0.38 $ 0.19 $ 0.19 $ 0.57 $ 0.37 Diluted $ 0.37 $ 0.18 $ 0.19 $
0.55 $ 0.36 Weighted average number of shares used in
computing earnings per share: Basic 66,063 66,324 65,763 66,194
65,801 Diluted 68,880 68,195 67,470 68,428 67,421
SEMTECH
CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
July 29, January
28, 2018 2018
(Unaudited) ASSETS Current assets: Cash and cash
equivalents $ 311,334 $ 307,923 Accounts receivable, net 78,376
53,183 Inventories 58,893 71,067 Prepaid taxes 9,347 11,809 Other
current assets 20,346 17,250 Total
current assets 478,296 461,232 Non-current assets: Property,
plant and equipment, net 122,608 124,586 Deferred tax assets 24,244
4,236 Goodwill 346,731 341,897 Other intangible assets, net 46,766
60,207 Other assets 90,125 93,618
Total assets $ 1,108,770 $
1,085,776 LIABILITIES AND STOCKHOLDERS'
EQUITY Current liabilities: Accounts payable $ 37,717 $ 37,208
Accrued liabilities 55,791 60,832 Deferred revenue 5,100 12,758
Current portion, long term debt 17,307 15,410
Total current liabilities 115,915 126,208 Non-current
liabilities: Deferred tax liabilities 15,762 14,682 Long term debt,
less current portion 201,986 211,114 Other long-term liabilities
71,819 68,759 Stockholders’ equity 703,288
665,013
Total liabilities & stockholders' equity
$ 1,108,770 $ 1,085,776
SEMTECH CORPORATION CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS AND SUPPLEMENTAL INFORMATION (Amounts
in thousands)
Six Months Ended July 29,
July 30, 2018 2017
(Unaudited) (Unaudited) Net income
$ 37,551 $ 24,385 Net cash
provided by operating activities 84,367 45,996 Net cash used in
investing activities (21,126 ) (44,027 ) Net cash used in financing
activities (59,830 ) (21,249 )
Net increase
(decrease) in cash and cash equivalents 3,411
(19,280 ) Cash and cash equivalents at beginning of
period 307,923 297,134
Cash and cash
equivalents at end of period $ 311,334
$ 277,854 Three Months
Ended July 29, April 29, July 30,
2018 2018 2017
Q219 Q119 Q218 (Unaudited)
(Unaudited) (Unaudited) Free Cash Flow: Cash
Flow from Operations $ 49,338 $ 35,029 $ 35,637 Net Capital
Expenditures (4,886 ) (4,935 ) (13,777 )
Free Cash Flow: $ 44,452 $
30,094 $ 21,860 SEMTECH
CORPORATION SUPPLEMENTAL INFORMATION: RECONCILIATION OF GAAP
TO NON-GAAP RESULTS (Amounts in thousands - except per share
amounts)
Three Months Ended Six
Months Ended July 29, April 29,
July 30, July 29, July 30,
2018 2018 2017
2018 2017
Q219 Q119 Q218 Q219 Q218
Gross Margin- GAAP 61.3 % 54.8 %
60.2 % 58.4 % 59.7 %
Share-based compensation 0.2 % 0.3 % 0.2 %
0.2 % 0.3 %
Adjusted Gross Margin (Non-GAAP)
61.5 % 55.1 %
60.4 % 58.6 % 60.0
% Three Months Ended Six Months
Ended July 29, April 29, July 30, July
29, July 30, 2018
2018 2017 2018
2017 Q219 Q119
Q218 Q219 Q218 Selling, general and
administrative- GAAP $ 33,529 $
41,406 $ 39,237 $ 74,935
$ 73,252 Share-based compensation (11,378 ) (11,462 )
(10,055 ) (22,840 ) (15,611 ) Transaction and integration related
(264 ) (233 ) (1,133 ) (498 ) (1,619 ) Restructuring Charges - (346
) - (346 ) (429 ) Environmental and other reserves - - (43 ) - (61
) Litigation cost net of recoveries 6,304 (559
) (278 ) 5,744 (328 )
Adjusted
selling, general and administrative (Non-GAAP) $
28,191 $ 28,806 $
27,728 $ 56,995 $
55,204 Three Months Ended Six
Months Ended July 29, April 29, July 30,
July 29, July 30, 2018
2018 2017 2018
2017 Q219 Q119
Q218 Q219 Q218 Product development and
engineering- GAAP $ 28,079 $ 26,199
$ 27,432 $ 54,278 $
53,415 Share-based compensation (2,282 ) (2,225 ) (1,992 )
(4,506 ) (3,877 ) Transaction and integration related (135 ) (294 )
(308 ) (429 ) (721 ) Litigation cost net of recoveries (532
) - - (532 ) -
Adjusted product development and engineering (Non-GAAP)
$ 25,130 $ 23,680
$ 25,132 $ 48,811
$ 48,817 Three Months
Ended Six Months Ended July 29, April 29,
July 30, July 29, July 30, 2018
2018 2017
2018 2017 Q219
Q119 Q218 Q219 Q218 Operating
Margin- GAAP 20.2 % -2.4 %
12.3 % 10.2 % 12.5 %
Share-based compensation 8.6 % 10.7 % 8.1 % 9.5 % 6.8 % Intangible
amortization 4.0 % 5.3 % 4.4 % 4.6 % 4.4 % Loss on disposition of
business operations 0.0 % 0.0 % 0.0 % 0.0 % 0.1 % Transaction and
integration related 0.2 % 0.5 % 1.0 % 0.3 % 0.8 % Restructuring
Charges 0.0 % 0.3 % 0.0 % 0.1 % 0.1 % Environmental and other
reserves 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % Litigation cost net of
recoveries -3.5 % 0.4 % 0.2 % -1.8 % 0.1 % Changes in the fair
value of contingent earn-out obligations -0.6 % 0.0 %
0.0 % -0.3 % 0.0 %
Adjusted Operating
Margin (Non-GAAP) 28.9 %
14.8 % 26.0 % 22.6
% 24.8 % Three Months
Ended Six Months Ended July 29, April 29,
July 30, July 29, July 30, 2018
2018 2017
2018 2017 Q219
Q119 Q218 Q219 Q218 GAAP net
income $ 25,169 $ 12,382 $
12,564 $ 37,551 $ 24,385
Adjustments to GAAP net income: Share-based compensation 13,966
14,015 12,328 27,980 20,333 Intangible amortization 6,480 6,961
6,675 13,441 12,961 Loss on disposition of business operations - -
- - 375 Transaction and integration related 399 527 1,443 927 2,340
Restructuring Charges - 346 - 346 429 Environmental and other
reserves - - 43 - 61 Litigation cost net of recoveries (5,772 ) 559
278 (5,212 ) 328 Changes in the fair value of contingent earn-out
obligations (900 ) - - (900 ) - Investment gain -
- (750 ) - (750 )
Total Non-GAAP adjustments before taxes 14,173
22,408 20,017 36,582 36,077 Associated
tax effect (1,741 ) (20,654 ) (2,332 ) (22,395 ) (4,341 ) Equity in
net losses of equity method investments 27 31
- 58 - Total of
supplemental information net of taxes 12,459
1,785 17,685 14,245
31,736
Non-GAAP net income $ 37,628
$ 14,167 $ 30,249
$ 51,796 $ 56,121
Diluted GAAP earnings per share $ 0.37
$ 0.18 $ 0.19 $ 0.55
$ 0.36 Adjustments per above
0.18
0.03 0.26
0.21 0.47 Diluted non-GAAP
earnings per share $ 0.55 $
0.21 $ 0.45 $ 0.76
$ 0.83 Three Months
Ended Six Months Ended July 29, April 29,
July 30, July 29, July 30, 2018
2018 2017
2018 2017 Q219
Q119 Q218 Q219 Q218 Comcast
Warrant* Impact on Net Sales $ - $ (21,501 ) $ (3,197 ) $
(21,501 ) $ (8,477 ) Associated tax effect - 3,678 1,200 3,678
3,011 Impact on EPS $ - $ (0.26 ) $ (0.03 ) $ (0.26 ) $ (0.08 )
*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 Third Quarter
of Fiscal Year 2019 Outlook (Amounts in thousands - except per
share amounts)
Q3 FY19 Outlook October
28, 2018
Low
High
Gross Margin- GAAP 61.0 % 62.0 % Share-based compensation
0.2 % 0.2 %
Adjusted Gross Margin (Non-GAAP)
61.2 % 62.2 %
Low
High
Selling, general and administrative- GAAP $
38.2 $ 39.2 Share-based compensation (9.2 )
(9.2 ) 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 $
28.0 $ 29.0 Share-based compensation (2.5 )
(2.5 ) Transaction and integration related (0.5 )
(0.5 )
Adjusted product development and engineering
(Non-GAAP) $ 25.0 $ 26.0
Low
High
GAAP EPS $ 0.33 $ 0.39
Share-based compensation 0.18 0.18 Transaction, restructuring, and
acquisition related expenses 0.02 0.02 Amortization of acquired
intangibles 0.09 0.09 Associated Tax Effect (0.04 )
(0.04 )
Adjusted EPS (Non-GAAP) $ 0.58
$ 0.64
View source
version on businesswire.com: https://www.businesswire.com/news/home/20180829005701/en/
Sandy HarrisonSemtech Corporation(805)
480-2004webir@semtech.com
Semtech (NASDAQ:SMTC)
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