Semtech Corporation’s SMTC second-quarter fiscal 2025 non-GAAP earnings of 11 cents per share beat the Zacks Consensus Estimate by 10%. The bottom line declined 15.4% year over year.
Net sales of $215.4 million surpassed the Zacks Consensus Estimate of $212.42 million. The figure declined 9.6% from the prior-year quarter’s levels.
However, SMTC provided positive guidance for third-quarter fiscal 2025. At the mid-point, it now expects growth in net sales, gross, operating and adjusted EBITDA margins. This calls for earnings growth in the current quarter.
SMTC’s shares are up 74.2% year to date compared with the industry’s growth of 11.4%. Despite the decline in top- and bottom-line figures, we expect positive guidance to keep the momentum running.
Semtech Corporation Price, Consensus and EPS Surprise
Semtech Corporation price-consensus-eps-surprise-chart | Semtech Corporation Quote
SMTC’s Q2 Top-Line Details
Broad-based weakness in the industrial end-market led to a top-line decline on a year-over-year basis. Softness in the IoT Systems and Connectivity segment was a headwind.
The growing momentum across the infrastructure and high-end consumer end markets benefited the company. Strength in Signal Integrity and Analog Mixed Signal & Wireless segments was a positive.
SMTC's Revenues by End Market
Sales from the infrastructure market were $52.9 million (25% of net sales), exhibiting year-over-year growth of 25%. This was driven by solid demand for Semtech’s FiberEdge TIAs, laser drivers and Tri-Edge 50G PAM4 products that led to strong growth in hyperscale data center sales in the reported quarter.
Sales from the industrial market were $125.3 million (58% of net sales), down 23% from the prior-year period’s tally.
Sales from the high-end consumer market were $37.1 million (17% of net sales), increasing 9% year over year. Strong market demand, along with solid momentum in consumer circuit protection and smart sensing products, drove top-line growth.
SMTC's Revenues by Product Lines
Signal Integrity (28% of net sales) sales were $59.4 million in the reported quarter, up 28.9% year over year.
Analog Mixed Signal & Wireless (37% of net sales) sales were $79.3 million, up 13.3% from the prior-year quarter’s figures.
IoT System and Connectivity (35% of net sales) sales were $76.6 million, down 37.4% on a year-over-year basis.
SMTC's Operating Results
The non-GAAP gross margin of 50.4% expanded 80 basis points (bps) from the year-ago quarter’s tally.
Adjusted selling, general and administrative expenses for the fiscal second quarter declined 3.5% to $41.3 million from the prior-year quarter’s levels.
Adjusted product development and engineering expenses fell 14.7% from the year-ago quarter’s figure to $36.6 million.
The non-GAAP operating margin of 14.2% expanded 60 bps from the prior-year quarter’s tally.
Semtech's Balance Sheet & Cash Flow
As of Jul. 28, 2024, cash and cash equivalents were $115.9 million, down from $128.6 million as of Apr. 28, 2024.
Account receivables for second-quarter fiscal 2025 were $152.9 million, down from $153.9 million in first-quarter fiscal 2025.
The long-term debt was $1.19 billion compared with $1.37 billion in the previous quarter.
In the reported quarter, the company used $4.99 million of cash in operations compared with $89,000 of cash used in operations in the previous fiscal quarter. The free cash flow in the fiscal second quarter was an outflow of $8.41 million.
SMTC Offers Positive Q3 Guidance
For third-quarter fiscal 2025, management expects net sales of $233 million (+/- $5 million). The Zacks Consensus Estimate for the same is pegged at $228.79 million.
The non-GAAP gross margin is expected to be 52% (+/- 50 bps). The non-GAAP operating margin is anticipated to be 17.2% (+/- 80 bps).
The non-GAAP-based earnings per share is expected to be 23 cents (+/- 3 cents). The consensus mark for earnings is pegged at 21 cents per share.
Zacks Rank & Stocks to Consider
Currently, Semtech carries a Zacks Rank #4 (Sell).
Some better-ranked stocks in the broader technology sector are Arista Networks ANET, Badger Meter BMI and Audioeye AEYE, each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Arista Networks’ shares have rallied 46.8% in the year-to-date period. The long-term earnings growth rate for ANET is anticipated to be 17.2%.
Badger Meter’s shares have gained 32.5% in the year-to-date period. The long-term earnings growth rate for BMI is projected at 17.91%.
Shares of Audioeye have surged 342.6% in the year-to-date period. The long-term earnings growth rate for AEYE is expected to be 25%.
Only $1 to See All Zacks' Buys and Sells
We're not kidding.
Several years ago, we shocked our members by offering them 30-day access to all our picks for the total sum of only $1. No obligation to spend another cent.
Thousands have taken advantage of this opportunity. Thousands did not - they thought there must be a catch. Yes, we do have a reason. We want you to get acquainted with our portfolio services like Surprise Trader, Stocks Under $10, Technology Innovators,and more, that closed 228 positions with double- and triple-digit gains in 2023 alone.
See Stocks Now >>Badger Meter, Inc. (BMI) : Free Stock Analysis Report
Semtech Corporation (SMTC) : Free Stock Analysis Report
Arista Networks, Inc. (ANET) : Free Stock Analysis Report
Audioeye, Inc. (AEYE) : Free Stock Analysis Report
To read this article on Zacks.com click here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
