) reported third quarter 2013 earnings of 46 cents per share,
surpassing the Zacks Consensus Estimate of 35 cents. The adjusted
earnings per share exclude one-time items, but include
stock-based compensation expense.
Semtech's total revenue was $160.9 million, up 29.9% year over
year. Reported revenue was above the management's expectation
range of $148.0 million to $154.0 million. Third quarter revenue
included $8.1 million of IP licensing revenue.
Direct sales represented approximately 64% of total third
quarter revenue while distribution brought in the balance
In the quarter, bookings grew across all end markets. Total
bookings accounted for approximately 46% of shipments during the
Revenue by Geography
In the third quarter, Asia remained the largest contributor to
Semtech's revenues, with a share of around 68%. North America
accounted for another 20%, with the balance coming from
Reported gross margin for the quarter was 60.2%, up 100 basis
points (bps) from 59.2% in the comparable year-ago quarter. The
increase in gross margin was driven primarily by a lower
amortization of deferred value inventory adjustment related to
the Gennum acquisition. A favorable revenue mix also contributed
to higher gross margin in the quarter.
Semtech reported operating expenses of $69.0 million, which
were 51.3% higher than the year-ago quarter's $45.6 million.
Operating margin was 12.2%, down from 18.7% in the year-ago
quarter due to higher-than-expected operating expenses. As a
percentage of sales, both selling, general and administrative
(SG&A) expense as well as product development and engineering
expenses increased from the year-ago quarter.
On a fully diluted GAAP basis, Semtech recorded net income of
$16.6 million (25 cents per share) compared with $27.0 million
(40 cents per share) in the year-ago quarter and $10.0 million
(15 cents per share) in the previous quarter.
On a pro forma basis, Semtech generated net income of $30.9
million compared with $31.8 million in the year-ago comparable
quarter. Fully diluted pro forma earnings per share came in at 46
cents, compared with 47 cents in the year-ago quarter.
Semtech ended the quarter with cash and cash equivalents
(including temporary investments) balance of $210.0 million
versus $165.9 million in the previous quarter. Accounts
receivables were $72.8 million, down from $77.3 million in the
prior quarter. Days sales outstanding were 42 days, down from 43
days in the last quarter.
During the quarter, cash flow from operations was $54.9
million, free cash flow was $47.5 million and capital expenditure
was $7.4 million. The company did not spend any amount on share
repurchases in the third quarter.
For the fourth quarter, management expects revenue in the
range of $146.0 million to $152.0 million. Gross profit margin is
expected to be in the range of 58.3%-58.9% on a GAAP basis and
61.5%-62.0% on a non-GAAP basis.
Selling, general and administrative expense is expected to be
in the range of $32.3-$32.8 million and research and development
(R&D) expense is expected in the range of $31.6 million to
$32.1 million on a GAAP basis. The company anticipates
stock-based compensation expense of $6.9 million, intangibles
amortization charges of $8.2 million, transaction and other
acquisition related expenses of approximately $1.3 million,
reorganization and integration related expenses of $1.2 million,
and interest and other expense of $4.4 million.
Accordingly, based on a share count of 68.0 million, GAAP EPS
is expected in the range of 13 cents to 17 cents and non-GAAP EPS
is expected to be 41-45 cents.
Also, for the fourth quarter, the tax rate is expected to be
approximately 0%-2% on a GAAP basis. Capital expenditure is
expected to be approximately $7.0 million.
Semtech Corporation is a manufacturer of a wide range of
analog and mixed-signal semiconductors, including Standard
Semiconductor Products, Rectifier and Assembly Products and Other
Products. The company reported a robust quarter with earnings
beating our expectations.
In the quarter, the company performed strongly with bookings
increasing across all end markets and book-to-bill ratio above 1.
However, we believe management provided a conservative fourth
quarter revenue guidance, reflecting macro uncertainty and
weakness in discrete analog.
We remain optimistic about the company's long-term prospects,
solid execution and its decision to reduce operating expenses
The company faces stiff competition, particularly from
Analog Devices, Inc.
STMicroelectronics NV (
Texas Instruments Inc.
Currently, Semtech has a Zacks Rank #3 (Hold).
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