Semtech Corporation’s (SMTC - Free Report) fiscal second-quarter 2020 non-GAAP earnings of 38 cents per share surpassed the Zacks Consensus Estimate by a couple of cents. The reported earnings increased 11.8% sequentially but decreased 30.9% year over year.
Non-GAAP revenues of $137.1 million increased 4.4% sequentially but decreased 16% from the prior-year quarter. The sequential increase was driven by growth in IoT and hyper scale data center markets.
Revenues surpassed the Zacks Consensus Estimate by 1.78% and came within the guided range of $128-$142 million.
Its key growth drivers are product differentiation, operational flexibility, and specific focus on fast-growing segments and regions.
Semtech Corporation Price, Consensus and EPS Surprise
Let’s delve into the numbers in detail:
Revenues by End Market
Sales to the enterprise computing end market, which represented 27% of its total revenues, increased 4% on a sequential basis.
Also, industrial and communications end markets increased 24% and 4% sequentially, representing 36% and 10% of the total revenues, respectively. The industrial market was driven by strong growth from the LoRa business.
However, sales to the high-end consumer market represented 33% of total revenues, decreasing 15% sequentially due to lower smartphone demand. Roughly 16% of high-end consumer revenues were attributable to mobile devices and 11% to other consumer systems.
Revenues by Product Group
Signal Integrity Product Group revenues contributed 40% to total sales and increased 10% sequentially. The increase was driven by strength in data center and wireless space station markets. However, the PON market remained soft.
Revenues from Protection Product Group represented 29% of the total revenues and were up 4% sequentially, driven by increase in broad-based demand from industrial, automotive, and consumer markets.
Revenues from Wireless and Sensing Product Group, which contributed 30% to total revenues, were flat sequentially.
Bookings
Bookings, which accounted for roughly 41% of shipments, increased on a sequential basis during the quarter. The book-to-bill ratio was above 1.
Margins and Net Income
Non-GAAP gross margin was 62.2%, flat sequentially but up 70 basis points (bps) from the year-ago quarter.
Semtech’s adjusted operating expenses of $30.4 million were up 7.8% on a year-over-year basis and 5.9% sequentially.
As a result, its operating margin of 22.9% was up 110 bps sequentially but down 600 bps year over year.
Balance Sheet & Cash Flow
Semtech ended the quarter with cash and cash equivalents of $287.8 million versus $287.3 million in the fiscal first quarter. Accounts receivables were $58.6 million, down from $66.5 million in the fiscal first quarter. Long-term debt was $183.7 million, down from $188.3 million in the fiscal first quarter.
During the quarter, cash flow from operations was $33.4 million, capital expenditure amounted to $1.6 million and free cash flow totaled $31.7 million.
Guidance
For fiscal third-quarter 2020, management expects revenues in the range of $135-$145 million. The corresponding Zacks Consensus Estimate for the quarter is pegged at $149.5 million.
Non-GAAP gross profit margin is expected within 61.4-62%. Management projects SG&A expenses within $28-$29 million, and research and development costs in the range of $24-$25 million. Non-GAAP earnings per share are expected in the range of 38-42 cents. The Zacks Consensus Estimate for the same is pegged at 46 cents.
Zacks Rank and Stocks to Consider
Semtech currently has a Zacks Rank #4 (Sell). Some better-ranked stocks in the broader technology sector include Alphabet Inc. (GOOGL - Free Report) , Itron, Inc. (ITRI - Free Report) and Teradyne, Inc. (TER - Free Report) , 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 for Alphabet, Itron and Teradyne is currently projected at 17.5%, 25% and 11.4%, respectively.
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Semtech Corporation’s (SMTC - Free Report) fiscal second-quarter 2020 non-GAAP earnings of 38 cents per share surpassed the Zacks Consensus Estimate by a couple of cents. The reported earnings increased 11.8% sequentially but decreased 30.9% year over year.
Non-GAAP revenues of $137.1 million increased 4.4% sequentially but decreased 16% from the prior-year quarter. The sequential increase was driven by growth in IoT and hyper scale data center markets.
Revenues surpassed the Zacks Consensus Estimate by 1.78% and came within the guided range of $128-$142 million.
Its key growth drivers are product differentiation, operational flexibility, and specific focus on fast-growing segments and regions.
Semtech Corporation Price, Consensus and EPS Surprise
Let’s delve into the numbers in detail:
Revenues by End Market
Sales to the enterprise computing end market, which represented 27% of its total revenues, increased 4% on a sequential basis.
Also, industrial and communications end markets increased 24% and 4% sequentially, representing 36% and 10% of the total revenues, respectively. The industrial market was driven by strong growth from the LoRa business.
However, sales to the high-end consumer market represented 33% of total revenues, decreasing 15% sequentially due to lower smartphone demand. Roughly 16% of high-end consumer revenues were attributable to mobile devices and 11% to other consumer systems.
Revenues by Product Group
Signal Integrity Product Group revenues contributed 40% to total sales and increased 10% sequentially. The increase was driven by strength in data center and wireless space station markets. However, the PON market remained soft.
Revenues from Protection Product Group represented 29% of the total revenues and were up 4% sequentially, driven by increase in broad-based demand from industrial, automotive, and consumer markets.
Revenues from Wireless and Sensing Product Group, which contributed 30% to total revenues, were flat sequentially.
Bookings
Bookings, which accounted for roughly 41% of shipments, increased on a sequential basis during the quarter. The book-to-bill ratio was above 1.
Margins and Net Income
Non-GAAP gross margin was 62.2%, flat sequentially but up 70 basis points (bps) from the year-ago quarter.
Semtech’s adjusted operating expenses of $30.4 million were up 7.8% on a year-over-year basis and 5.9% sequentially.
As a result, its operating margin of 22.9% was up 110 bps sequentially but down 600 bps year over year.
Balance Sheet & Cash Flow
Semtech ended the quarter with cash and cash equivalents of $287.8 million versus $287.3 million in the fiscal first quarter. Accounts receivables were $58.6 million, down from $66.5 million in the fiscal first quarter. Long-term debt was $183.7 million, down from $188.3 million in the fiscal first quarter.
During the quarter, cash flow from operations was $33.4 million, capital expenditure amounted to $1.6 million and free cash flow totaled $31.7 million.
Guidance
For fiscal third-quarter 2020, management expects revenues in the range of $135-$145 million. The corresponding Zacks Consensus Estimate for the quarter is pegged at $149.5 million.
Non-GAAP gross profit margin is expected within 61.4-62%. Management projects SG&A expenses within $28-$29 million, and research and development costs in the range of $24-$25 million. Non-GAAP earnings per share are expected in the range of 38-42 cents. The Zacks Consensus Estimate for the same is pegged at 46 cents.
Zacks Rank and Stocks to Consider
Semtech currently has a Zacks Rank #4 (Sell). Some better-ranked stocks in the broader technology sector include Alphabet Inc. (GOOGL - Free Report) , Itron, Inc. (ITRI - Free Report) and Teradyne, Inc. (TER - Free Report) , 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 for Alphabet, Itron and Teradyne is currently projected at 17.5%, 25% and 11.4%, respectively.
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2018, while the S&P 500 gained +15.8%, five of our screens returned +38.0%, +61.3%, +61.6%, +68.1%, and +98.3%.
This outperformance has not just been a recent phenomenon. From 2000 – 2018, while the S&P averaged +4.8% per year, our top strategies averaged up to +56.2% per year.
See their latest picks 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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