Semtech Corporation (Nasdaq: SMTC), a high-performance
semiconductor, IoT systems and cloud connectivity service provider,
today reported unaudited financial results for its first quarter of
fiscal year 2024, which ended April 30, 2023.
Highlights for the First Quarter of Fiscal Year 2024
- Net sales of $236.5 million, an increase of 41.2% sequentially
and 17.0% year-over-year
- GAAP gross margin of 43.5% and Non-GAAP gross margin of
48.5%
- GAAP diluted loss per share of $0.46 and Non-GAAP diluted
earnings per share of $0.02
- Published our first Corporate Sustainability Report showcasing
our commitment to sustainability and products for environmental and
social good
- On May 30, 2023, the Company announced the appointment of Paul
H. Pickle as the next Semtech president and chief executive
officer
- On June 6, 2023, the Company entered into a second amendment to
its existing credit agreement that provides, among other things,
additional cushion with respect to certain financial covenants
Results on a GAAP basis for the First Fiscal Quarter
2024
- Net sales were $236.5 million
- GAAP Gross margin was 43.5%
- GAAP SG&A expense was $58.1 million
- GAAP R&D expense was $51.8 million
- GAAP Operating margin was (5.0)%
- GAAP Interest expense was $20.5 million
- GAAP Net loss attributable to common stockholders was $29.4
million or $0.46 diluted loss per 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
2024 (see the list of non-GAAP financial measures and the
reconciliation of these measures to the most comparable GAAP
measures set forth in the tables below under "Supplemental
Information: Reconciliation of GAAP to Non-GAAP Results")
- Non-GAAP Gross margin was 48.5%
- Non-GAAP SG&A expense was $46.2 million
- Non-GAAP R&D expense was $46.5 million
- Non-GAAP Operating margin was 9.3%
- Non-GAAP Net income attributable to common stockholders was
$1.5 million or $0.02 diluted earnings per share
“Semtech exceeded the midpoint of our revenue and earnings
guidance as we see signs of business stabilization,” said Mohan
Maheswaran, Semtech’s President and Chief Executive Officer. “As we
continue to navigate this challenging macro-economic environment,
we are taking steps to improve our operational efficiency and
financial performance while focusing on executing our plans. With
an expanded highly differentiated IoT portfolio, combined with our
best-in-class High Performance Analog portfolio, we are well
positioned to emerge stronger from this current cycle.”
Second Fiscal Quarter 2024 Outlook
Both the GAAP and non-GAAP second fiscal quarter 2024 outlook
below take into account, based on the Company's current estimates,
export restrictions, inflationary pressure and other macroeconomic
conditions. The Company is unable to predict the full impact such
challenges may have on its future results of operations.
GAAP Second Fiscal Quarter 2024 Outlook
- Net sales are expected to be in the range of $233.0 million to
$243.0 million
- GAAP Gross margin is expected to be in the range of 42.6% to
44.8%
- GAAP SG&A expense is expected to be in the range of $63.2
million to $65.2 million
- GAAP R&D expense is expected to be in the range of $48.0
million to $50.0 million
- GAAP Intangible amortization expense is expected to be
approximately $15.9 million
- GAAP Interest and other expense, net is expected to be
approximately $23.2 million
- Fully-diluted share count is expected to be approximately 64.1
million shares
- Share-based compensation is expected to be approximately $12.7
million, categorized as follows: $0.5 million cost of sales, $8.2
million SG&A, and $4.0 million R&D
- Transaction and integration expenses are expected to be
approximately $10.0 million
- Capital expenditures are expected to be approximately $11.1
million
- Depreciation expense is expected to be approximately $9.1
million
Non-GAAP Second Fiscal Quarter 2024 Outlook (see the list
of non-GAAP financial measures and the reconciliation of Non-GAAP
Gross margin, Non-GAAP SG&A expense, and Non-GAAP R&D
expense to the most comparable GAAP measures set forth in the
tables below under "Reconciliation of GAAP to Non-GAAP
Outlook")
- Non-GAAP Gross margin is expected to be in the range of 47.5%
to 49.5%
- Non-GAAP SG&A expense is expected to be in the range of
$45.0 million to $47.0 million
- Non-GAAP R&D expense is expected to be in the range of
$44.0 million to $46.0 million
- Non-GAAP normalized tax rate for fiscal year 2024 is expected
to be approximately 12%
- Non-GAAP Diluted (loss) earnings per share is expected to be in
the range of $(0.02) to $0.06
The Company is unable to include a reconciliation of the
forward-looking non-GAAP normalized tax rate and non-GAAP Diluted
loss per share to the corresponding GAAP measures as this is not
available without unreasonable efforts due to the high variability
and low visibility with respect to the impact of share-based awards
and the amortization of acquisition-related intangible assets that
are excluded from these non-GAAP measures. The Company expects the
variability of the above charges to have a potentially significant
impact on its GAAP financial results.
Webcast and Conference Call
Semtech will be hosting a conference call today to discuss its
first fiscal quarter 2024 results at 2:00 p.m. Pacific time. The
dial-in number for the call is (877) 407-0312. Please use
conference ID 13736081. 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 July 5, 2023 at the same website or by calling
(877) 660-6853 and entering conference ID 13736081.
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 financial measures. The Company’s
non-GAAP measures of gross margin, SG&A expense, R&D
expense, operating margin, net (loss) income attributable to common
stockholders, diluted (loss) earnings per share and normalized tax
rate exclude the following items, if any:
- Amortization of purchased intangibles, impairments and credit
loss reserves
- Restructuring and transaction costs (including costs associated
with the acquisition of Sierra Wireless), and other acquisition or
disposition-related gains or losses
- Share-based compensation acceleration expense related to the
acquisition of Sierra Wireless
- Litigation expenses or dispute settlement charges or gains
- Cumulative other reserves associated with historical activity
including environmental and pension
- Equity method (loss) income
- Interest income from debt investments
To provide additional insight into the Company's second quarter
outlook, this release also includes a presentation of
forward-looking non-GAAP financial measures. Management believes
that the presentation of these non-GAAP measures provides useful
information to investors regarding the Company’s financial
condition and results of operations. These non-GAAP financial
measures are adjusted to exclude the items identified above because
such items are either operating expenses that 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 the Company 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.
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 financial measures to their most comparable GAAP
measures for the first and fourth quarters of fiscal year 2023 and
the first quarter of fiscal year 2024, along with a reconciliation
of forward-looking non-GAAP measures (other than the non-GAAP
normalized tax rate and non-GAAP Diluted (loss) earnings per share)
to their most comparable GAAP measures for the second quarter of
fiscal year 2024. The Company adopted a full-year, normalized tax
rate for the computation of the non-GAAP income tax provision in
order to provide better comparability across the interim reporting
periods by reducing the quarterly variability in non-GAAP tax rates
that can occur throughout the year. In estimating the full-year
non-GAAP normalized tax rate, the Company utilized a full-year
financial projection that considers multiple factors such as
changes to the Company’s current operating structure, existing
positions in various tax jurisdictions, the effect of key tax law
changes, and other significant tax matters to the extent they are
applicable to the full fiscal year financial projection. In
addition to the adjustments described above, this normalized tax
rate excludes the impact of share-based awards and the amortization
of acquisition-related intangible assets. For fiscal year 2024, the
Company’s projected non-GAAP normalized tax rate is 12% and will be
applied to each quarter of fiscal year 2024. The Company’s non-GAAP
normalized tax rate on non-GAAP net income may be adjusted during
the year to account for events or trends that the Company believes
materially impact the original annual non-GAAP normalized tax rate
including, but not limited to, significant changes resulting from
tax legislation, acquisitions, entity structures or operational
changes and other significant events. 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 2024
outlook; the Company’s expectations concerning the negative impact
on the Company’s results of operations from export restrictions,
inflationary pressure and other macroeconomic conditions; 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
inherent risks, costs and uncertainties associated with integrating
Sierra Wireless successfully and risks of not achieving all or any
of the anticipated benefits, or the risk that the anticipated
benefits may not be fully realized or take longer to realize than
expected; the uncertainty surrounding the impact and duration of
supply chain constraints and any associated disruptions; future
responses to and effects of public health crises; export
restrictions and laws affecting the Company's trade and
investments, and tariffs or the occurrence of trade wars; worldwide
economic and political disruptions, including as a result of
inflation and the current conflict between Russia and Ukraine;
tightening credit conditions related to the United States banking
system concerns; competitive changes in the marketplace including,
but not limited to, the pace of growth or adoption rates of
applicable products or technologies; downturns in the business
cycle; decreased average selling prices of the Company’s products;
the Company’s reliance on a limited number of suppliers and
subcontractors for components and materials; changes in projected
or anticipated end-user markets; the Company’s ability to forecast
its annual non-GAAP normalized tax rate due to material changes
that could occur during the fiscal year, which could include, but
are not limited to, significant changes resulting from tax
legislation, acquisitions, entity structures or operational changes
and other significant events; and the Company's ability to forecast
and achieve anticipated net sales and earnings estimates in light
of periodic economic uncertainty. Additionally, forward-looking
statements should be considered in conjunction with the cautionary
statements contained in the risk factors disclosed in the Company's
filings with the Securities and Exchange Commission (the "SEC"),
including the Company's Annual Report on Form 10-K for the fiscal
year ended January 29, 2023, filed with the SEC on March 30, 2023,
as such risk factors may be updated, amended or superseded from
time to time by subsequent reports the Company files with the SEC.
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 (Nasdaq: SMTC) is a high-performance
semiconductor, IoT systems and Cloud connectivity service provider
dedicated to delivering high quality technology solutions that
enable a smarter, more connected and sustainable planet. Our global
teams are dedicated to empowering solution architects and
application developers to develop breakthrough products for the
infrastructure, industrial and consumer markets. To learn more
about Semtech technology, visit us at Semtech.com or follow us on
LinkedIn or Twitter.
Semtech and the Semtech logo are registered trademarks or
service marks of Semtech Corporation or its subsidiaries.
SMTC-F
SEMTECH CORPORATION
CONDENSED CONSOLIDATED
STATEMENTS OF INCOME
(in thousands, except per share
data)
(unaudited)
Three Months Ended
April 30, 2023
January 29,
2023
May 1, 2022
Q124
Q423
Q123
Net sales
$
236,539
$
167,512
$
202,149
Cost of sales
122,738
64,934
71,896
Amortization of acquired technology
10,855
2,565
1,048
Total cost of sales
133,593
67,499
72,944
Gross profit
102,946
100,013
129,205
Operating costs and expenses, net:
Selling, general and administrative
58,117
101,952
43,364
Product development and engineering
51,827
52,899
38,789
Intangible amortization
4,882
821
—
Total operating costs and expenses,
net
114,826
155,672
82,153
Operating (loss) income
(11,880
)
(55,659
)
47,052
Interest expense
(20,510
)
(6,181
)
(1,197
)
Interest income
1,069
4,043
364
Non-operating expense, net
(473
)
(735
)
(102
)
Investment impairments and credit loss
reserves, net
(33
)
(1,532
)
(24
)
(Loss) income before taxes and equity
method (loss) income
(31,827
)
(60,064
)
46,093
(Benefit) provision for taxes
(2,417
)
(9,071
)
8,069
Net (loss) income before equity method
(loss) income
(29,410
)
(50,993
)
38,024
Equity method (loss) income
(7
)
(22
)
24
Net (loss) income
(29,417
)
(51,015
)
38,048
Net loss attributable to noncontrolling
interest
(2
)
(2
)
(1
)
Net (loss) income attributable to
common stockholders
$
(29,415
)
$
(51,013
)
$
38,049
(Loss) earnings per share:
Basic
$
(0.46
)
$
(0.80
)
$
0.59
Diluted
$
(0.46
)
$
(0.80
)
$
0.59
Weighted average number of shares used in
computing (loss) earnings per share:
Basic
63,924
63,864
63,950
Diluted
63,924
63,924
64,553
SEMTECH CORPORATION
CONDENSED CONSOLIDATED BALANCE
SHEETS
(in thousands)
(unaudited)
April 30, 2023
January 29, 2023
ASSETS
Current assets:
Cash and cash equivalents
$
164,198
$
235,510
Accounts receivable, net
145,383
161,695
Inventories
213,234
207,704
Prepaid taxes
11,554
6,243
Other current assets
130,030
111,634
Total current assets
664,399
722,786
Non-current assets:
Property, plant and equipment, net
165,341
169,293
Deferred tax assets
67,490
63,783
Goodwill
1,288,828
1,281,703
Other intangible assets, net
198,784
215,102
Other assets
115,182
116,961
Total assets
$
2,500,024
$
2,569,628
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable
$
74,407
$
100,676
Accrued liabilities
192,654
253,075
Current portion of long-term debt
42,695
43,104
Total current liabilities
309,756
396,855
Non-current liabilities:
Deferred tax liabilities
4,708
5,065
Long-term debt
1,336,636
1,296,966
Other long-term liabilities
115,715
114,707
Stockholders’ equity
733,028
755,852
Noncontrolling interest
181
183
Total liabilities & equity
$
2,500,024
$
2,569,628
SEMTECH CORPORATION
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS AND SUPPLEMENTAL INFORMATION
(in thousands)
(unaudited)
Three Months Ended
April 30, 2023
May 1, 2022
Net (loss) income
$
(29,417
)
$
38,048
Net cash (used in) provided by
operations
(89,987
)
50,051
Net cash used in investing activities
(14,407
)
(10,315
)
Net cash provided by (used in) financing
activities
33,728
(44,153
)
Effect of foreign exchange rate changes on
cash and cash equivalents
(646
)
—
Net decrease in cash and cash
equivalents
(71,312
)
(4,417
)
Cash and cash equivalents at beginning of
period
235,510
279,601
Cash and cash equivalents at end of
period
$
164,198
$
275,184
Three Months Ended
April 30, 2023
January 29,
2023
May 1, 2022
Q124
Q423
Q123
Free Cash Flow:
Cash Flow from Operations
$
(89,987
)
$
(18,799
)
$
50,051
Net Capital Expenditures
(13,977
)
(5,680
)
(8,315
)
Free Cash Flow
$
(103,964
)
$
(24,479
)
$
41,736
Three Months Ended
(in thousands)
April 30, 2023
Net sales by reportable
segment:
Signal Integrity Products Group
$
41,646
18
%
Advanced Protection and Sensing Products
Group
36,057
15
%
IoT System Products Group
134,576
57
%
IoT Connected Services Group
24,260
10
%
Total net sales by reportable
segment
$
236,539
100
%
Three Months Ended
(in thousands)
April 30, 2023
Net sales by end market:
Infrastructure
$
39,000
16
%
High-End Consumer
21,594
9
%
Industrial
175,945
75
%
Total net sales by end market
$
236,539
100
%
SEMTECH CORPORATION
SUPPLEMENTAL INFORMATION:
RECONCILIATION OF GAAP TO NON-GAAP RESULTS
(in thousands, except per share
data)
(unaudited)
Three Months Ended
April 30, 2023
January 29,
2023
May 1, 2022
Q124
Q423
Q123
Gross Margin–GAAP
43.5
%
59.7
%
63.9
%
Share-based compensation
0.2
%
0.4
%
0.4
%
Amortization of acquired technology
4.6
%
1.5
%
0.5
%
Share-based compensation acceleration
expense
—
%
0.5
%
—
%
Restructuring and other reserves
0.2
%
0.2
%
—
%
Adjusted Gross Margin
(Non-GAAP)
48.5
%
62.3
%
64.8
%
Three Months Ended
April 30, 2023
January 29,
2023
May 1, 2022
Q124
Q423
Q123
Selling, general and
administrative–GAAP
$
58,117
$
101,952
$
43,364
Share-based compensation
(4,502
)
(7,801
)
(6,132
)
Transaction and integration related costs,
net
(7,068
)
(22,513
)
(495
)
Share-based compensation acceleration
expense
—
(33,937
)
—
Restructuring and other reserves, net
(337
)
(8,850
)
(500
)
Litigation costs, net
(26
)
(13
)
(181
)
Adjusted selling, general and
administrative (Non-GAAP)
$
46,184
$
28,838
$
36,056
Three Months Ended
April 30, 2023
January 29,
2023
May 1, 2022
Q124
Q423
Q123
Product development and
engineering–GAAP
$
51,827
$
52,899
$
38,789
Share-based compensation
(3,539
)
(3,592
)
(3,986
)
Transaction and integration related costs,
net
(534
)
(25
)
—
Share-based compensation acceleration
expense
—
(11,010
)
—
Restructuring and other reserves, net
(1,226
)
(397
)
—
Adjusted product development and
engineering (Non-GAAP)
$
46,528
$
37,875
$
34,803
Three Months Ended
April 30, 2023
January 29,
2023
May 1, 2022
Q124
Q423
Q123
Operating Margin–GAAP
(5.0
)%
(33.2
)%
23.3
%
Share-based compensation
3.6
%
7.2
%
5.5
%
Intangible amortization
6.6
%
2.0
%
0.5
%
Transaction and integration related costs,
net
3.2
%
13.5
%
0.2
%
Share-based compensation acceleration
expense
—
%
27.3
%
—
%
Restructuring and other reserves, net
0.9
%
5.7
%
0.2
%
Litigation costs, net
—
%
—
%
0.1
%
Adjusted Operating Margin
(Non-GAAP)
9.3
%
22.5
%
29.8
%
SEMTECH CORPORATION
SUPPLEMENTAL INFORMATION:
RECONCILIATION OF GAAP TO NON-GAAP RESULTS (CONTINUED)
(in thousands, except per share
data)
(unaudited)
Three Months Ended
April 30, 2023
January 29,
2023
May 1, 2022
Q124
Q423
Q123
GAAP net (loss) income attributable to
common stockholders
$
(29,415
)
$
(51,013
)
$
38,049
Adjustments to GAAP net (loss) income
attributable to common stockholders:
Share-based compensation
8,404
12,020
10,893
Intangible amortization
15,737
3,386
1,048
Transaction and integration related costs,
net
7,651
22,642
495
Share-based compensation acceleration
expense
—
45,749
—
Restructuring and other reserves
2,060
9,536
500
Litigation costs, net
26
13
181
Investment (gains) losses, reserves and
impairments, net
(317
)
1,190
(324
)
Total Non-GAAP adjustments before
taxes
33,561
94,536
12,793
Associated tax effect
(2,625
)
(13,208
)
1,003
Equity method loss (income)
7
22
(24
)
Total of supplemental information, net of
taxes
30,943
81,350
13,772
Non-GAAP net income attributable to
common stockholders
$
1,528
$
30,337
$
51,821
GAAP diluted (loss) earnings per
share
$
(0.46
)
$
(0.80
)
$
0.59
Adjustments per above
0.48
1.27
0.21
Non-GAAP diluted earnings per
share
$
0.02
$
0.47
$
0.80
SEMTECH CORPORATION
RECONCILIATION OF GAAP TO
NON-GAAP OUTLOOK
Second Quarter of Fiscal Year
2024 Outlook
(in millions, except per share
data)
Q2 FY24 Outlook
July 30, 2023
Low
High
Gross Margin–GAAP
42.6
%
44.8
%
Share-based compensation
0.2
%
0.2
%
Amortization of acquired intangibles
4.7
%
4.5
%
Adjusted Gross Margin
(Non-GAAP)
47.5
%
49.5
%
Low
High
Selling, general and
administrative–GAAP
$
63.2
$
65.2
Share-based compensation
(8.2
)
(8.2
)
Transaction and integration related
(10.0
)
(10.0
)
Adjusted selling, general and
administrative (Non-GAAP)
$
45.0
$
47.0
Low
High
Product development and
engineering–GAAP
$
48.0
$
50.0
Share-based compensation
(4.0
)
(4.0
)
Adjusted product development and
engineering (Non-GAAP)
$
44.0
$
46.0
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230607005732/en/
Anojja Shah Semtech Corporation (630) 390-6413
Anojja.Shah@semtech.com
Semtech (NASDAQ:SMTC)
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