Semtech Corporation (SMTC - Free Report) reported strong fiscal fourth-quarter 2019 results, wherein earnings and revenues beat the respective Zacks Consensus Estimate.
Non-GAAP earnings of 55 cents per share beat the consensus mark by a penny. However, the reported earnings decreased 12.7% sequentially but increased 37.5% year over year.
Non-GAAP revenues of $160 million decreased 7.8% sequentially but increased 13.8% from the prior-year quarter. The year-over-year increase was driven by growth in IoT, data center and mobile markets. Revenues surpassed the Zacks Consensus Estimate by 0.12% and came within the guided range of $155-$165 million.
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.
Let’s delve into the numbers in detail:
Revenues by End Market
Sales to the enterprise computing end market, which represented 33% of its total revenues, increased on a sequential basis.
Sales to the high-end consumer market represented 24% of the total revenues, decreasing sequentially. Roughly 16% of high-end consumer revenues were attributable to mobile devices and 8% to other consumer systems.
The industrial and communications end markets both decreased sequentially, representing 32% and 11% of the total revenues, respectively.
Revenues by Product Group
Signal Integrity Product Group revenues contributed 45% to total sales and increased 2% sequentially. Continued strength in data center demand, PON, base station and video markets contributed to the growth.
Protection Product Group represented 26% of the total revenues and was down 21% sequentially. This was due to year-end inventory reduction efforts, and lower global demand for smartphones and other consumer equipment.
Wireless and Sensing Product Group, which contributed 29% to the total revenues, was down 9% sequentially but up 22% year over year.
Bookings
Bookings, which accounted for roughly 45% of the shipments, decreased on a sequential basis during the quarter. The book-to-bill ratio was below 1.
Margins and Net Income
Non-GAAP gross margin was 62.1%, up 40 basis points (bps) sequentially and 110 bps from the year-ago quarter.
Semtech’s adjusted operating expenses of $53.8 million increased 3.5% on a year-over-year basis. As a percentage of sales, selling, general and administrative expenses decreased, while product development and engineering expenses increased.
As a result, its operating margin of 28.9% was down 150 bps sequentially but up 440 bps year over year.
Balance Sheet & Cash Flow
Semtech ended the quarter with cash and cash equivalents of $312.1 million versus $312.2 million in the fiscal third quarter. Accounts receivables were $79.2 million, down from $83.8 million in the fiscal third quarter. Long-term debt was $192.8 million, down from $197.4 million in the fiscal third quarter.
During the quarter, cash flow from operations was $47.2 million, capital expenditure amounted to $4.1 million and free cash flow totaled $43.1 million.
Guidance
For fiscal first-quarter 2020, management expects revenues in the range of $125-$135 million.
Non-GAAP gross profit margin is expected within 61.9-62.5%. Management projects SG&A expenses within $26.5-$27.5 million, and research and development expenses in the range of $24.5-$25.5 million. Non-GAAP earnings per share are expected in the range of 30-36 cents.
Zacks Rank and Stocks to Consider
Semtech currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader technology sector include Expedia Group, Inc. (EXPE - Free Report) , AMETEK, Inc. (AME - Free Report) and Inphi Corporation , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Long-term earnings growth rate for Expedia, AMETEK and Inphi is projected at 13.4%, 9.6% and 28.4%, respectively.
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Semtech Corporation (SMTC - Free Report) reported strong fiscal fourth-quarter 2019 results, wherein earnings and revenues beat the respective Zacks Consensus Estimate.
Non-GAAP earnings of 55 cents per share beat the consensus mark by a penny. However, the reported earnings decreased 12.7% sequentially but increased 37.5% year over year.
Non-GAAP revenues of $160 million decreased 7.8% sequentially but increased 13.8% from the prior-year quarter. The year-over-year increase was driven by growth in IoT, data center and mobile markets. Revenues surpassed the Zacks Consensus Estimate by 0.12% and came within the guided range of $155-$165 million.
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.
Let’s delve into the numbers in detail:
Revenues by End Market
Sales to the enterprise computing end market, which represented 33% of its total revenues, increased on a sequential basis.
Sales to the high-end consumer market represented 24% of the total revenues, decreasing sequentially. Roughly 16% of high-end consumer revenues were attributable to mobile devices and 8% to other consumer systems.
The industrial and communications end markets both decreased sequentially, representing 32% and 11% of the total revenues, respectively.
Revenues by Product Group
Signal Integrity Product Group revenues contributed 45% to total sales and increased 2% sequentially. Continued strength in data center demand, PON, base station and video markets contributed to the growth.
Protection Product Group represented 26% of the total revenues and was down 21% sequentially. This was due to year-end inventory reduction efforts, and lower global demand for smartphones and other consumer equipment.
Wireless and Sensing Product Group, which contributed 29% to the total revenues, was down 9% sequentially but up 22% year over year.
Bookings
Bookings, which accounted for roughly 45% of the shipments, decreased on a sequential basis during the quarter. The book-to-bill ratio was below 1.
Margins and Net Income
Non-GAAP gross margin was 62.1%, up 40 basis points (bps) sequentially and 110 bps from the year-ago quarter.
Semtech’s adjusted operating expenses of $53.8 million increased 3.5% on a year-over-year basis. As a percentage of sales, selling, general and administrative expenses decreased, while product development and engineering expenses increased.
As a result, its operating margin of 28.9% was down 150 bps sequentially but up 440 bps year over year.
Balance Sheet & Cash Flow
Semtech ended the quarter with cash and cash equivalents of $312.1 million versus $312.2 million in the fiscal third quarter. Accounts receivables were $79.2 million, down from $83.8 million in the fiscal third quarter. Long-term debt was $192.8 million, down from $197.4 million in the fiscal third quarter.
During the quarter, cash flow from operations was $47.2 million, capital expenditure amounted to $4.1 million and free cash flow totaled $43.1 million.
Guidance
For fiscal first-quarter 2020, management expects revenues in the range of $125-$135 million.
Non-GAAP gross profit margin is expected within 61.9-62.5%. Management projects SG&A expenses within $26.5-$27.5 million, and research and development expenses in the range of $24.5-$25.5 million. Non-GAAP earnings per share are expected in the range of 30-36 cents.
Zacks Rank and Stocks to Consider
Semtech currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader technology sector include Expedia Group, Inc. (EXPE - Free Report) , AMETEK, Inc. (AME - Free Report) and Inphi Corporation , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Long-term earnings growth rate for Expedia, AMETEK and Inphi is projected at 13.4%, 9.6% and 28.4%, respectively.
Is Your Investment Advisor Fumbling Your Financial Future?
See how you can more effectively safeguard your retirement with a new Special Report, “4 Warning Signs Your Investment Advisor Might Be Sabotaging Your Financial Future.”
Click to get it free >>
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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