Semtech Corporation (
) reported second-quarter fiscal 2015 earnings of 35 cents per
share beating the Zacks Consensus Estimate by 6 cents. Adjusted
earnings per share exclude one-time items but include stock-based
Semtech's total revenue was $145.7 million, up 9.6% sequentially
but down 11.7% year over year. Reported revenues were at the higher
end of management's expected range of $138.0 to $146.0 million and
surpassed the Zacks Consensus Estimate of $142.0 million. The
sequential increase was driven by continued strength in the
enterprise computing and communications end markets from
infrastructure build outs and strength in industrial market for
alternative energy applications.
Direct sales represented approximately 60% of the total
second-quarter revenue, while distribution brought in the remaining
In the quarter, bookings improved sequentially, resulting in a
book-to-bill ratio of above 1.
Revenues by Geography
In the second quarter, Asia remained the largest contributor to
Semtech's revenues, with approximately 77% share versus 74% in the
prior quarter. North America accounted for 13% of the revenues,
down from 14% in the prior quarter. Europe contributed the
remaining 10% of the revenues, down from 12% in the prior
Reported gross margin for the quarter was 60.5%, up 170 basis
points (bps) sequentially but down 50 bps from the year-ago
quarter. The sequential increase in gross margin was largely driven
by a higher mix of Signal Integrity product group revenues, higher
manufacturing volumes and absence of restructuring charges which
was recorded in the prior quarter.
Semtech reported operating expenses of $66.2 million, down 13.2%
from $76.3 million in the year-ago quarter. The significant
decrease in operating expenses was due to lower equity stock-based
compensation and restructuring expenses.
As a percentage of sales, selling, general & administrative
(SG&A) expenses increased from the year-ago quarter, while
product development & engineering expenses decreased. The net
result was an operating margin of 15.1%, up from 14.8% in the
Semtech Corporation - Earnings Surprise |
On a GAAP basis, Semtech recorded net profit of $17.9 million
(26 cents per share) compared with $19.1 million (28 cents per
share) in the year-ago quarter.
On a pro-forma basis, Semtech generated net income of $23.3
million or 35 cents compared with $31.8 million or 46 cents in the
Balance Sheet & Cash Flow
Semtech ended the quarter with cash and cash equivalents
(including temporary investments) of $238.7 million versus $241.2
million in the previous quarter. Accounts receivables were $68.5
million, up from $61.7 million in the prior quarter. Days sales
outstanding improved 3 days to 41 days.
Total debt (short-term plus long-term) was $257.6 million versus
$287.2 million in the previous quarter.
During the quarter, cash flow from operations was $38.4 million,
capital expenditure was $6.3 million and free cash flow was $32.1
In the last quarter, the company spent $10 million to buy back
approximately 377,000 shares.
For the third quarter of 2015, management expects revenues in
the range of $142.0 to $152.0 million, while the Zacks Consensus
Estimate is pegged at $153.0 million. Gross profit margin is
expected in the range of 60.2-60.8% on a GAAP basis and 60.5-61.0%
on a non-GAAP basis.
SG&A expense is expected within $31.7-$32.5 million and
research and development expense in the range of $28.5 to $29.1
million on a GAAP basis. The company anticipates stock-based
compensation expense of $8.6 million, amortization of acquired
intangible assets of $6.4 million and interest and other expense of
Accordingly, based on a share count of 67.4 million, GAAP
earnings per share is expected in the range of 22-30 cents and
non-GAAP earnings per share is expected within 42-48 cents. The
Zacks Consensus Estimate is pegged at 39 cents.
Also, for the third quarter, tax rate is expected in the range
of 11-13% on a GAAP basis and 14-16% on a non-GAAP basis. Capital
expenditure is expected to be approximately $10.0 million.
Semtech Corporation manufactures a wide range of analog and
mixed-signal semiconductors, including Standard Semiconductor
Products, Rectifier and Assembly Products and Other Products. The
company reported a decent quarter, with both earnings and revenues
exceeding our expectations.
In the quarter, the company witnessed strong order momentum due
to improvement in end markets. Also, management provided
encouraging earnings guidance, indicating demand visibility, going
We believe the company's new design wins, various product
introductions and solid execution will drive revenue and margin
expansion in the near term. However, challenges in several key end
markets could weigh on the near-term growth prospects.
Currently, Semtech has a Zacks Rank #3 (Hold). Other stocks that
have been performing well and are worth a look include Broadcom
), Analog Devices (
) and Fairchild Semiconductor International Inc.(
). All these stocks carry a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research?
Today, you can download 7 Best Stocks for the Next 30 Days.
Click to get this free report
BROADCOM CORP-A (BRCM): Free Stock Analysis
SEMTECH CORP (SMTC): Free Stock Analysis Report
ANALOG DEVICES (ADI): Free Stock Analysis
FAIRCHILD SEMI (FCS): Free Stock Analysis
To read this article on Zacks.com click here.