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Semtech's (SMTC) Q1 Earnings and Sales Surpass Estimates

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Semtech Corporation’s (SMTC - Free Report) first-quarter fiscal 2023 non-GAAP earnings of 80 cents per share surpassed the Zacks Consensus Estimate by 5.3%. The reported earnings increased 50.9% year over year and 14.3% sequentially.

Net sales of $202.2 million also outpaced the Zacks Consensus Estimate by 1.2%. The same increased 18.7% from the prior-year quarter and 6.1% on a sequential basis.

The top-line growth was driven by strong momentum across the industrial and infrastructure markets served.

Semtech’s LoRa business, Tri-Edge platform, 10G and 2.5G PON products plus 5G and systems protection platforms contributed well to its quarterly performance.

Further, SMTC released 9 new products across the portfolio and achieved 3,200 design wins in the fiscal first quarter.

For the fiscal first quarter, shipments in Asia, North America and Europe represented 76%, 13% and 11% of net sales, respectively.

Semtech Corporation Price, Consensus and EPS Surprise

Semtech Corporation Price, Consensus and EPS Surprise

Semtech Corporation price-consensus-eps-surprise-chart | Semtech Corporation Quote

Revenues by End Market

Net revenues from the infrastructure market were $76.2 million, representing 37% of its total revenues. The metric increased 24% year over year and 11% from the prior quarter’s level.

Net revenues from the industrial market, representing 39% of total net revenues, were $78.1 million. Revenues increased 42% from the prior-year period’s level and 4% sequentially.

Net revenues from the high-end consumer market, representing 24% of total revenues, were $47.8 million. Revenues rose 2% sequentially but declined 11% year over year. The high-end consumer market consists of mobile devices and other consumer systems, both reflecting net revenues of 12%.

Revenues by Product Group

Signal Integrity Product Group’s revenues amounted to $79.3 million, contributing 40% to total revenues. The reported figure increased 19% year over year, driven by strong demand in the PON and data center markets. Also, the growing global Tri-Edge design wins in 100-gig, 200-gig and 400-gig PAM4 optical modules remain a tailwind.

Revenues from its Protection Product Group accounting for 27% of the total revenues, were $55.5 million. The figure was up 23% year over year. The increase was driven by robust smartphone demand and broad consumer demand.

Wireless and Sensing Product Group revenues were $67.3 million, contributing 33% to total revenues. The same increased 15% from the prior-year period’s level. The upside was driven by record net sales of LoRa platform products.

Operating Results

Non-GAAP gross margin of 64.8% expanded 280 basis points (bps) year over year.

Adjusted selling, general and administrative expenses for the fiscal first quarter increased 16% year over year to $36.1 million. Adjusted product development and engineering expenses also increased 5.4% from the year-ago quarter’s number to $34.8 million.

Non-GAAP operating margin of 29.8% expanded 550 bps from the same quarter’s figure last year.

Balance Sheet and Cash Flow

As of May 1, 2022, cash and cash equivalents were $275.2 million compared with $279.6 million on Jan 30, 2021.

Account receivables for the reported quarter were $66.4 million, down from $71.5 million in fourth-quarter fiscal 2021.

Long-term debt was $181.8 million, up from $171.7 million in the previous quarter.

For the reported quarter, cash flow from operations was $50 million compared with $51 million in the fiscal fourth quarter. Net capital expenditure was up $8.3 million from $8.1 million in the previous quarter. Free cash flow amounted to $41.7 million compared with $42.9 million in the prior quarter.

Guidance

For second-quarter fiscal 2023, management expects net sales of $203-$213 million. The Zacks Consensus Estimate for the same is pegged at $208.6 million.

Non-GAAP gross margin is expected to be 64.5-65.9%. Also, management projects SG&A expenses of $36-$37 million, and research and development costs of $35-$36 million.

Non-GAAP earnings per share are expected within 80-90 cents. The Zacks Consensus Estimate for the same is pegged at 84 cents per share.

Zacks Rank & Stocks to Consider

Currently, Semtech carries a Zacks Rank #3 (Hold). Investors interested in the broader technology sector can consider some better-ranked stocks like Avnet (AVT - Free Report) , Monolithic Power Systems (MPWR - Free Report) and MaxLinear (MXL - Free Report) . While Avnet and Monolithic Power Systems sport a Zacks Rank #1 (Strong Buy), MaxLinear carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Avnet has gained 9.3% in the past year. The long-term earnings growth rate for AVT is currently projected at 37.2%.

Monolithic Power Systems has gained 33.4% in the past year. The long-term earnings growth rate for MPWR is currently projected at 25%.

MaxLinear has rallied 7.8% in the past year. The long-term earnings growth rate for MXL is currently projected at 20%.

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