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Semtech (SMTC) Q3 Earnings and Sales Surpass Estimates
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Semtech Corporation’s (SMTC - Free Report) third-quarter fiscal 2023 non-GAAP earnings of 65 cents per share beat the Zacks Consensus Estimate by 3.2%. The reported earnings decreased 12.2% year over year and 25.3% sequentially.
Net sales of $177.6 million outpaced the Zacks Consensus Estimate of $175.8 million. The same decreased 8.9% from the prior-year quarter’s level and 15.1% on a sequential basis.
The top-line growth was driven by strength in LoRa business, ClearEdge and Tri-Edge platform and 10G PON products.
SMTC released 12 new products across the portfolio and achieved 2,189 design wins in the fiscal third quarter.
For the fiscal third quarter, shipments in Asia, North America and Europe represented 71%, 15% and 14% of net sales, respectively.
However, macroeconomic headwinds, softness in the consumer markets and COVID-19 related issues in China affected the quarterly performance.
Semtech Corporation Price, Consensus and EPS Surprise
Net revenues from the infrastructure market represented 39% of its total revenues. The metric increased 5% year over year but declined 17% from the prior quarter’s level.
Net revenues from the industrial market, constituting 41% of total net revenues, increased 7% from the prior-year period’s level but decreased 13% sequentially.
Net revenues from the high-end consumer market, accounting for 20% of total revenues, declined 43% year over year and 15% sequentially. The high-end consumer market consists of mobile devices and other consumer systems, each reflecting net revenues of 10%.
Revenues by Product Group
Signal Integrity Product Group’s revenues, contributing 44% to total revenues, increased 2% year over year, driven by growing PON deployments and strong demand in the data center market. Also, the growing global Tri-Edge design wins in 100-gig, 200-gig and 400-gig PAM4 optical modules remain a tailwind. However, weak economic environment in China affected the infrastructure demand and wireless space station business in the reported quarter.
Revenues from its Protection Product Group, accounting for 22% of the total revenues, were down 27% sequentially owing to the weak demand from the Asian smartphone customers. Robust smartphone demand in North America remained a tailwind. The broader industrial protection business performed well in the Americas and Europe markets. Solid design win momentum of Protection Shield solutions remained another positive.
Wireless and Sensing Product Group revenues contributed 34% to total revenues. The same decreased 3% from the prior-year fiscal period’s level. The downside was due to weak demand for LoRa solutions in China. Nevertheless, growing sales of LoRa products in North America and Europe remained a positive.
Operating Results
Non-GAAP gross margin of 65.5% expanded 170 basis points (bps) from the last fiscal year’s quarterly figure.
Adjusted selling, general and administrative expenses for the fiscal third quarter increased 6.6% to $36.5 million from the last fiscal year’s quarterly number. Adjusted product development and engineering expenses decreased 5.1% from the year-ago quarter’s number to $31.6 million.
The non-GAAP operating margin of 27.2% contracted 200 bps from the same quarter’s figure in the last fiscal year.
Balance Sheet and Cash Flow
As of Oct 30, 2022, cash and cash equivalents were $617.8 million compared with $362.2 million on Jul 31, 2022.
Account receivables for the reported fiscal quarter were $80.5 million, up from $71.1 million in second-quarter fiscal 2023.
Long-term debt was $455.1 million, up from $171.9 million in the previous fiscal quarter.
For the reported fiscal quarter, cash flow from operations was $18.2 million compared with $77.3 million in the fiscal second quarter. Free cash flow amounted to $11.1 million compared with $70 million in the prior fiscal quarter.
Guidance
For fourth-quarter fiscal 2023, management expects net sales of $145-$155 million. The Zacks Consensus Estimate for the same is pegged at $166.3 million.
The non-GAAP gross margin is expected to be 64-65%. Also, management projects SG&A expenses of $30.5-$31.5 million, and research and development costs of $29.5-$30.5 million.
The non-GAAP earnings per share are expected within 44-52 cents. The Zacks Consensus Estimate for the same is pegged at 57 cents per share.
Zacks Rank & Stocks to Consider
Currently, Semtech carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader Zacks Computer & Technology sector include Arista Networks (ANET - Free Report) , Airbnb (ABNB - Free Report) and Asure Software (ASUR - Free Report) . While Arista Networks and Asure Software sport a Zacks Rank #1 (Strong Buy), Airbnb carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Arista Networks has lost 3.1% in the year-to-date period. The long-term earnings growth rate for ANET is currently projected at 17.5%.
Airbnb has lost 38.7% in the year-to-date period. ABNB’s long-term earnings growth rate is currently projected at 20.7%.
Asure Software has gained 0.3% in the year-to-date period. The long-term earnings growth rate for ASUR is currently projected at 23%.
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Semtech (SMTC) Q3 Earnings and Sales Surpass Estimates
Semtech Corporation’s (SMTC - Free Report) third-quarter fiscal 2023 non-GAAP earnings of 65 cents per share beat the Zacks Consensus Estimate by 3.2%. The reported earnings decreased 12.2% year over year and 25.3% sequentially.
Net sales of $177.6 million outpaced the Zacks Consensus Estimate of $175.8 million. The same decreased 8.9% from the prior-year quarter’s level and 15.1% on a sequential basis.
The top-line growth was driven by strength in LoRa business, ClearEdge and Tri-Edge platform and 10G PON products.
SMTC released 12 new products across the portfolio and achieved 2,189 design wins in the fiscal third quarter.
For the fiscal third quarter, shipments in Asia, North America and Europe represented 71%, 15% and 14% of net sales, respectively.
However, macroeconomic headwinds, softness in the consumer markets and COVID-19 related issues in China affected the quarterly performance.
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 represented 39% of its total revenues. The metric increased 5% year over year but declined 17% from the prior quarter’s level.
Net revenues from the industrial market, constituting 41% of total net revenues, increased 7% from the prior-year period’s level but decreased 13% sequentially.
Net revenues from the high-end consumer market, accounting for 20% of total revenues, declined 43% year over year and 15% sequentially. The high-end consumer market consists of mobile devices and other consumer systems, each reflecting net revenues of 10%.
Revenues by Product Group
Signal Integrity Product Group’s revenues, contributing 44% to total revenues, increased 2% year over year, driven by growing PON deployments and strong demand in the data center market. Also, the growing global Tri-Edge design wins in 100-gig, 200-gig and 400-gig PAM4 optical modules remain a tailwind. However, weak economic environment in China affected the infrastructure demand and wireless space station business in the reported quarter.
Revenues from its Protection Product Group, accounting for 22% of the total revenues, were down 27% sequentially owing to the weak demand from the Asian smartphone customers. Robust smartphone demand in North America remained a tailwind. The broader industrial protection business performed well in the Americas and Europe markets. Solid design win momentum of Protection Shield solutions remained another positive.
Wireless and Sensing Product Group revenues contributed 34% to total revenues. The same decreased 3% from the prior-year fiscal period’s level. The downside was due to weak demand for LoRa solutions in China. Nevertheless, growing sales of LoRa products in North America and Europe remained a positive.
Operating Results
Non-GAAP gross margin of 65.5% expanded 170 basis points (bps) from the last fiscal year’s quarterly figure.
Adjusted selling, general and administrative expenses for the fiscal third quarter increased 6.6% to $36.5 million from the last fiscal year’s quarterly number. Adjusted product development and engineering expenses decreased 5.1% from the year-ago quarter’s number to $31.6 million.
The non-GAAP operating margin of 27.2% contracted 200 bps from the same quarter’s figure in the last fiscal year.
Balance Sheet and Cash Flow
As of Oct 30, 2022, cash and cash equivalents were $617.8 million compared with $362.2 million on Jul 31, 2022.
Account receivables for the reported fiscal quarter were $80.5 million, up from $71.1 million in second-quarter fiscal 2023.
Long-term debt was $455.1 million, up from $171.9 million in the previous fiscal quarter.
For the reported fiscal quarter, cash flow from operations was $18.2 million compared with $77.3 million in the fiscal second quarter. Free cash flow amounted to $11.1 million compared with $70 million in the prior fiscal quarter.
Guidance
For fourth-quarter fiscal 2023, management expects net sales of $145-$155 million. The Zacks Consensus Estimate for the same is pegged at $166.3 million.
The non-GAAP gross margin is expected to be 64-65%. Also, management projects SG&A expenses of $30.5-$31.5 million, and research and development costs of $29.5-$30.5 million.
The non-GAAP earnings per share are expected within 44-52 cents. The Zacks Consensus Estimate for the same is pegged at 57 cents per share.
Zacks Rank & Stocks to Consider
Currently, Semtech carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader Zacks Computer & Technology sector include Arista Networks (ANET - Free Report) , Airbnb (ABNB - Free Report) and Asure Software (ASUR - Free Report) . While Arista Networks and Asure Software sport a Zacks Rank #1 (Strong Buy), Airbnb carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Arista Networks has lost 3.1% in the year-to-date period. The long-term earnings growth rate for ANET is currently projected at 17.5%.
Airbnb has lost 38.7% in the year-to-date period. ABNB’s long-term earnings growth rate is currently projected at 20.7%.
Asure Software has gained 0.3% in the year-to-date period. The long-term earnings growth rate for ASUR is currently projected at 23%.