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Semtech Corporation’s (SMTC - Free Report) fourth-quarter fiscal 2023 non-GAAP earnings of 47 cents per share missed the Zacks Consensus Estimate by 2.1%. The reported earnings decreased by 32.9% year over year.
Net sales of $167.5 million outpaced the Zacks Consensus Estimate of $150 million. The same decreased by 12.1% from the prior-year quarter’s level.
Macroeconomic headwinds, including export restrictions, inflationary pressure and supply-chain constraints, were overhangs for the company during the reported quarter.
Weak demand environments across the end markets were a major concern.
Nevertheless, positive contributions from the Sierra acquisition remained a tailwind. Notably, Sierra Wireless generated $15 million in sales post-acquisition in the fiscal fourth quarter, without which net sales would stand at $152.5 million.
For the fiscal fourth quarter, shipments to Asia, North America and Europe represented 68%, 13% and 19% of net sales, respectively.
Semtech Corporation Price, Consensus and EPS Surprise
Net revenues from the infrastructure market represented 37% of its total revenues and exhibited a decline of 18% year over year.
Net revenues from the industrial market, constituting 40% of total net revenues, decreased 18% from the prior-year period’s level.
Net revenues from the high-end consumer market, which accounted for 23% of total revenues, declined 26% year over year. The high-end consumer market consists of mobile devices and other consumer systems, which accounted for 9% and 14% of market revenues, respectively.
Operating Results
Non-GAAP gross margin of 62.3% expanded 220 basis points (bps) from the last fiscal year’s quarterly figure.
Adjusted selling, general and administrative expenses for the fiscal fourth quarter decreased 15.6% to $28.8 million from the last fiscal year’s quarterly number. Adjusted product development and engineering expenses increased 9.7% from the year-ago quarter to $37.9 million.
The non-GAAP operating margin of 22.5% contracted 600 bps from the same quarter’s figure in the last fiscal year.
Balance Sheet and Cash Flow
As of Jan 29, 2022, cash and cash equivalents were $235.5 million, down from $617.8 million as of Oct 30, 2022.
Account receivables for the reported fiscal quarter were $161.7 million, up from $80.5 million in third-quarter fiscal 2023.
Long-term debt was $1.3 billion, significantly higher than $455.1 million in the previous fiscal quarter.
In the reported fiscal quarter, the company used $18.8 million in cash in operations compared with $18.2 million in cash it generated from operations in the fiscal third quarter. Free cash flow in the fiscal fourth quarter was an outflow of $24.5 million.
Guidance
For first-quarter fiscal 2024, management expects net sales of $230-$240 million.
The non-GAAP gross margin is expected to be 47.5-49.5%. Also, management projects SG&A expenses of $47-$49 million and research and development costs of $50-$52 million.
The non-GAAP loss per share is expected in the band of 11-4 cents.
Zacks Rank & Stocks to Consider
Currently, Semtech carries a Zacks Rank #4 (Hold).
Some better-ranked stocks in the broader technology sector are Arista Networks (ANET - Free Report) , Salesforce (CRM - Free Report) and Analog Devices (ADI - Free Report) . While Arista Networks and Salesforce sport a Zacks Rank #1 (Strong Buy), Analog Devices carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Arista Networks shares have gained 16.9% in the past year. The long-term earnings growth rate for ANET is currently projected at 14.17%.
Salesforce shares have lost 7.4% in the past year. CRM’s long-term earnings growth rate is currently projected at 16.75%.
Analog Devices shares have gained 14.5% in the past year. The long-term earnings growth rate for ADI is currently projected at 12.25%.
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Semtech's (SMTC) Q4 Earnings Miss, Sales Surpass Estimates
Semtech Corporation’s (SMTC - Free Report) fourth-quarter fiscal 2023 non-GAAP earnings of 47 cents per share missed the Zacks Consensus Estimate by 2.1%. The reported earnings decreased by 32.9% year over year.
Net sales of $167.5 million outpaced the Zacks Consensus Estimate of $150 million. The same decreased by 12.1% from the prior-year quarter’s level.
Macroeconomic headwinds, including export restrictions, inflationary pressure and supply-chain constraints, were overhangs for the company during the reported quarter.
Weak demand environments across the end markets were a major concern.
Nevertheless, positive contributions from the Sierra acquisition remained a tailwind. Notably, Sierra Wireless generated $15 million in sales post-acquisition in the fiscal fourth quarter, without which net sales would stand at $152.5 million.
For the fiscal fourth quarter, shipments to Asia, North America and Europe represented 68%, 13% and 19% of net sales, respectively.
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 37% of its total revenues and exhibited a decline of 18% year over year.
Net revenues from the industrial market, constituting 40% of total net revenues, decreased 18% from the prior-year period’s level.
Net revenues from the high-end consumer market, which accounted for 23% of total revenues, declined 26% year over year. The high-end consumer market consists of mobile devices and other consumer systems, which accounted for 9% and 14% of market revenues, respectively.
Operating Results
Non-GAAP gross margin of 62.3% expanded 220 basis points (bps) from the last fiscal year’s quarterly figure.
Adjusted selling, general and administrative expenses for the fiscal fourth quarter decreased 15.6% to $28.8 million from the last fiscal year’s quarterly number. Adjusted product development and engineering expenses increased 9.7% from the year-ago quarter to $37.9 million.
The non-GAAP operating margin of 22.5% contracted 600 bps from the same quarter’s figure in the last fiscal year.
Balance Sheet and Cash Flow
As of Jan 29, 2022, cash and cash equivalents were $235.5 million, down from $617.8 million as of Oct 30, 2022.
Account receivables for the reported fiscal quarter were $161.7 million, up from $80.5 million in third-quarter fiscal 2023.
Long-term debt was $1.3 billion, significantly higher than $455.1 million in the previous fiscal quarter.
In the reported fiscal quarter, the company used $18.8 million in cash in operations compared with $18.2 million in cash it generated from operations in the fiscal third quarter. Free cash flow in the fiscal fourth quarter was an outflow of $24.5 million.
Guidance
For first-quarter fiscal 2024, management expects net sales of $230-$240 million.
The non-GAAP gross margin is expected to be 47.5-49.5%. Also, management projects SG&A expenses of $47-$49 million and research and development costs of $50-$52 million.
The non-GAAP loss per share is expected in the band of 11-4 cents.
Zacks Rank & Stocks to Consider
Currently, Semtech carries a Zacks Rank #4 (Hold).
Some better-ranked stocks in the broader technology sector are Arista Networks (ANET - Free Report) , Salesforce (CRM - Free Report) and Analog Devices (ADI - Free Report) . While Arista Networks and Salesforce sport a Zacks Rank #1 (Strong Buy), Analog Devices carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Arista Networks shares have gained 16.9% in the past year. The long-term earnings growth rate for ANET is currently projected at 14.17%.
Salesforce shares have lost 7.4% in the past year. CRM’s long-term earnings growth rate is currently projected at 16.75%.
Analog Devices shares have gained 14.5% in the past year. The long-term earnings growth rate for ADI is currently projected at 12.25%.