Semtech Corporation (SMTC - Free Report) reported strong fiscal first-quarter 2019 results with earnings and revenues beating the Zacks Consensus Estimate.
Non-GAAP earnings of 47 cents per share beat the consensus mark by 1 cent and increased 12% sequentially and 7% year over year. Earnings matched the higher end of the guided range of 45-47 cents per share.
Non-GAAP revenues of $151.9 million increased 7% sequentially and 2% from the prior-year quarter. Revenues were within the guided range of $147-$153 million.
On a year-to-date basis, shares have gained 41.5%, outperforming the industry’s 7.7% rally.
The company’s improved profitability was driven by differentiated growth drivers and diversification strategy. Key growth drivers for Semtech are product differentiation, operational flexibility, and a specific focus on fast-growing segments and regions.
The numbers in detail:
Revenues by End Market
Sales to the enterprise computing end market represented 32% of the total revenues and were up sequentially.
However, sales to the high-end consumer market represented 25% of the total net revenues and were down sequentially. Roughly 17% of the high-end consumer revenues were attributable to mobile devices and 8% to other consumer systems.
The industrial and communications end markets witnessed strong demand, and both increased sequentially, representing 32% and 11% of the total revenues, respectively.
Revenues by Product Group
Signal Integrity Product Group revenues contributed 43% to the total sales and increased 2% sequentially. The strong demand for 100-gigabit per second data center and seasonally higher spending from both the PON and base station markets contributed to the growth.
Protection Product Group represented 27% of the total revenues and was up sequentially. The product benefited from the increasing use of protection for 10-gig Ethernet ports in enterprise cloud switches, and wireless access points and base stations.
Wireless and Sensing Product Group was up 20% sequentially and 17% year over year, contributing 30% to the total revenues.
Bookings
During the quarter, bookings increased sequentially, accounting for roughly 39% of the shipments. Book-to-bill ratio was above 1.
Margins and Net Income
Non-GAAP gross margin was 61.4%, flat sequentially but up 60 basis points (bps) from the year-ago quarter.
Semtech’s adjusted operating expenses of $52.5 million increased 2% sequentially, driven by higher variable compensation expenses.
The net result was an operating margin of 26.9% that was up 160 bps sequentially and 40 bps year over year.
Balance Sheet & Cash Flow
Semtech ended the quarter with cash and cash equivalents of $303.3 million, down from $307.9 million in the previous quarter. Accounts receivables were $65.6 million, up from $53.2 million in the prior quarter. Long-term debt was $206.6 million, down from $211.1 million in the last reported quarter.
During the quarter, cash flow from operations was $35 million, capital expenditure was $4.9 million and free cash flow totaled $30.1 million.
Guidance
For fiscal second-quarter 2019, on a non-GAAP basis, management expects revenues in the range of $155-$167 million. The Zacks Consensus Estimate is pegged at $160.7 million.
Non-GAAP gross profit margin is expected within 61-62%. Management projects SG&A expenses within $27-$28 million, and research and development expenses of $24.5-$25.5 million. Non-GAAP earnings per share are expected in the range of 50-58 cents. The Zacks Consensus Estimate is pegged at 54 cents.
Zacks Rank and Stocks to Consider
Semtech has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Some better-ranked stocks in the technology sector are Littelfuse, Inc. (LFUS - Free Report) , SMC Corporation (SMCAY - Free Report) , both sporting a Zacks Rank #1, while Amazon.com, Inc. (AMZN - Free Report) carries a Zacks Rank #2 (Buy).
Long-term earnings per share growth rate for Littelfuse, SMC and Amazon is projected to be 12%, 13.7% and 30.2%, respectively.
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Semtech Corporation (SMTC - Free Report) reported strong fiscal first-quarter 2019 results with earnings and revenues beating the Zacks Consensus Estimate.
Non-GAAP earnings of 47 cents per share beat the consensus mark by 1 cent and increased 12% sequentially and 7% year over year. Earnings matched the higher end of the guided range of 45-47 cents per share.
Non-GAAP revenues of $151.9 million increased 7% sequentially and 2% from the prior-year quarter. Revenues were within the guided range of $147-$153 million.
On a year-to-date basis, shares have gained 41.5%, outperforming the industry’s 7.7% rally.
The company’s improved profitability was driven by differentiated growth drivers and diversification strategy. Key growth drivers for Semtech are product differentiation, operational flexibility, and a specific focus on fast-growing segments and regions.
The numbers in detail:
Revenues by End Market
Sales to the enterprise computing end market represented 32% of the total revenues and were up sequentially.
However, sales to the high-end consumer market represented 25% of the total net revenues and were down sequentially. Roughly 17% of the high-end consumer revenues were attributable to mobile devices and 8% to other consumer systems.
The industrial and communications end markets witnessed strong demand, and both increased sequentially, representing 32% and 11% of the total revenues, respectively.
Revenues by Product Group
Signal Integrity Product Group revenues contributed 43% to the total sales and increased 2% sequentially. The strong demand for 100-gigabit per second data center and seasonally higher spending from both the PON and base station markets contributed to the growth.
Protection Product Group represented 27% of the total revenues and was up sequentially. The product benefited from the increasing use of protection for 10-gig Ethernet ports in enterprise cloud switches, and wireless access points and base stations.
Wireless and Sensing Product Group was up 20% sequentially and 17% year over year, contributing 30% to the total revenues.
Bookings
During the quarter, bookings increased sequentially, accounting for roughly 39% of the shipments. Book-to-bill ratio was above 1.
Margins and Net Income
Non-GAAP gross margin was 61.4%, flat sequentially but up 60 basis points (bps) from the year-ago quarter.
Semtech’s adjusted operating expenses of $52.5 million increased 2% sequentially, driven by higher variable compensation expenses.
The net result was an operating margin of 26.9% that was up 160 bps sequentially and 40 bps year over year.
Balance Sheet & Cash Flow
Semtech ended the quarter with cash and cash equivalents of $303.3 million, down from $307.9 million in the previous quarter. Accounts receivables were $65.6 million, up from $53.2 million in the prior quarter. Long-term debt was $206.6 million, down from $211.1 million in the last reported quarter.
During the quarter, cash flow from operations was $35 million, capital expenditure was $4.9 million and free cash flow totaled $30.1 million.
Guidance
For fiscal second-quarter 2019, on a non-GAAP basis, management expects revenues in the range of $155-$167 million. The Zacks Consensus Estimate is pegged at $160.7 million.
Non-GAAP gross profit margin is expected within 61-62%. Management projects SG&A expenses within $27-$28 million, and research and development expenses of $24.5-$25.5 million. Non-GAAP earnings per share are expected in the range of 50-58 cents. The Zacks Consensus Estimate is pegged at 54 cents.
Zacks Rank and Stocks to Consider
Semtech has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Some better-ranked stocks in the technology sector are Littelfuse, Inc. (LFUS - Free Report) , SMC Corporation (SMCAY - Free Report) , both sporting a Zacks Rank #1, while Amazon.com, Inc. (AMZN - Free Report) carries a Zacks Rank #2 (Buy).
Long-term earnings per share growth rate for Littelfuse, SMC and Amazon is projected to be 12%, 13.7% and 30.2%, respectively.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Click here for the 6 trades >>
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
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