) reported first-quarter 2014 earnings of 35 cents per share,
missing the Zacks Consensus Estimate of 38 cents. Adjusted
earnings per share exclude one-time items but include stock-based
Semtech's total revenue was $162.4 million, up 39.2% year over
year. Reported revenues were slightly above management expected
range of $154.0 million to $162.0 million.
Direct sales represented approximately 61% of total first quarter
revenues, while distribution brought in the balance 39%.
In the quarter, bookings grew across all end markets, with
high-end consumer enterprise computing and communications being
particularly strong. Book-to-bill ratio was also above 1. Total
bookings accounted for approximately 47% of shipments during the
quarter, up from 41% in the last quarter.
Revenues by Geography
In the first quarter, Asia remained the largest contributor to
Semtech's revenues, with a share of around 73% versus 71% in the
prior quarter. North America accounted for 16% of the revenues,
down from 17% in the prior quarter. Europe contributed the
remaining 11% of revenues.
Reported gross margin for the quarter was 59.9%, up 150 basis
points (bps) sequentially and 1,250 bps from the year-ago
quarter. The increase in gross margin was driven by lower
amortization of fair value adjustment for acquired inventory as
well as higher volumes.
Semtech reported operating expenses of $69.4 million, which were
0.7% higher than the year-ago quarter's $68.9 million. The
increase was due to higher payroll-related expenses from
increased work hours and new product expenses.
As a percentage of sales, product development and engineering
expenses increased from the year-ago quarter, while selling,
general and administrative (SG&A) expenses declined. The net
result was an operating margin of 12.4%, up from (16.4%) in the
On a GAAP basis, Semtech recorded net income of $14.8 million (22
cents per share) compared with $2.2 million (3 cents per share)
in the year-ago quarter and $13.1 million (19 cents per share) in
the previous quarter.
On a pro forma basis, Semtech generated net income of $24.2
million compared with $15.9 million in the year-ago comparable
quarter. Pro forma earnings per share came in at 35 cents
compared with 24 cents in the year-ago quarter.
Balance Sheet & Cash Flow
Semtech ended the first quarter with cash and cash equivalents
(including temporary investments) balance of $230.4 million
versus $228.2 million in the previous quarter. Accounts
receivables were $80.2 million, up from $69.2 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 $17.2 million,
free cash flow was $6.4 million and capital expenditure was $10.7
In the last quarter, the company did not repurchase any shares.
For the second quarter of 2014, management expects revenues in
the range of $164.0 million to $172.0 million, up 3.4%
sequentially at the midpoint. Gross profit margin is expected in
the range of 60.8%-61.3% on a GAAP basis and 61.0%-61.5% on a
Selling, general and administrative (SG&A) expense is
expected in the range of $35.7-$36.2 million and research and
development (R&D) expense is expected in the range of $32.7
million to $33.2 million on a GAAP basis. The company anticipates
stock-based compensation expense of $8.8 million, intangibles
amortization charges of $8.4 million, amortization of acquired
intangible assets of $7.3 million, transaction and other
integration related expenses of approximately $1.4 million and
interest and other expense of $10.7 million.
Accordingly, based on a share count of 69.0 million, GAAP EPS is
expected in the range of 21 cents to 29 cents and non-GAAP EPS is
expected to be 50-56 cents.
Also, for the second quarter, tax rate is expected to be
approximately 12% on a GAAP basis. Capital expenditure is
expected to be approximately $12.5 million.
Semtech Corporation manufactures a wide range of analog and
mixed-signal semiconductors, including Standard Semiconductor
Products, Rectifier and Assembly Products and Other Products.
Though the company's earnings missed our expectations, both
revenues and earnings were above the prior-year figures.
In the quarter, the company performed strongly with bookings
increasing across all end markets and book-to-bill ratio of above
1 reflecting strong growth. Management's second-quarter guidance
was up sequentially, reflecting improvement in discrete analog.
We remain optimistic about the company's long-term prospects,
solid execution and its constant focus to reduce operating
expenses going forward.
Currently, Semtech has a Zacks Rank #2 (Buy). Other stocks that
have been performing well and are worth a look include
), all carrying a Zacks Rank #2 (Buy).
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