Semtech (SMTC) Misses Earnings in 4Q15; Revenues In Line - Analyst Blog

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Semtech CorporationSMTC reported fourth-quarter fiscal 2015 earnings of 22 cents per share missing the Zacks Consensus Estimate by a penny. Adjusted earnings per share exclude one-time items but include stock-based compensation expense.


Semtech's total revenue was $130.4 million, down 12% sequentially but up 3.1% year over year. Reported revenues were at the higher end of management's expected range of $128.0 to $132.0 million and came roughly in line with the Zacks Consensus Estimate of $130.0 million. The sequential decrease was due to seasonality and weakness witnessed in the company's Korean handset customers.

Direct sales represented approximately 43% of the total revenue, while distribution accounted for the remaining 57%.


In the quarter, bookings improved sequentially, but book-to-bill ratio was slightly below 1.


Reported gross margin was 56.1%, down 390 basis points (bps) sequentially but up 1,360 bps from the year-ago quarter. The sequential decrease in gross margin was largely due to a lower mix of Signal Integrity product group revenues and special charges incurred during the quarter.

Semtech reported operating expenses of $86.9 million, a 60.6% plunge from $220.5 million in the year-ago quarter. 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 10.6% versus 131.8% in the comparable quarter last year.

Net Income

Semtech Corporation - Earnings Surprise | FindTheCompany

On a GAAP basis, Semtech recorded net loss of $15.4 million or 23 cents per share loss compared with loss of $210.8 million or $3.12 per share loss in the year-ago quarter.

On a pro-forma basis, Semtech generated net income of $15.0 million or 22 cents compared with $11.7 million or 17 cents a year ago.

Balance Sheet & Cash Flow

Semtech ended the quarter with cash and cash equivalents of $230.3 million versus $232.5 million in the previous quarter. Accounts receivables were $69.3 million, down from $78.3 million in the prior quarter. Days sales outstanding increased 7 days to 52 days.

Total debt (short-term plus long-term) was $253.3 million versus $252.9 million in the earlier quarter.

During the quarter, cash flow from operations was $11.6 million, capital expenditure came in at $6.3 million and free cash flow was $5.3 million.

The company did not repurchase any stock in the quarter and the outstanding stock repurchase authorization amount remained at $15 million.


For the first quarter of fiscal 2016, management expects revenues in the range of $130.0 to $136.0 million, while the Zacks Consensus Estimate is pegged at $132.0 million. Gross profit margin is expected to range within 59.2%-59.7% on a GAAP basis and 60.0%-60.4% on a non-GAAP basis.

SG&A expense is expected within $34.8-$35.8 million and research and development expense in the $29.8 to $30.8 million range on a GAAP basis. The company anticipates stock-based compensation expense of $7.8 million, amortization of acquired intangible assets of $6.7 million and interest and other expense of $1.8 million.

Accordingly, based on a share count of 67.2 million, GAAP earnings per share are expected in the range of 5-7 cents and non-GAAP earnings per share are expected within 27-30 cents. The Zacks Consensus Estimate stands at 30 cents.

Also, tax rate is projected in the range of 17%-19% on a GAAP basis and 14%-16% on a non-GAAP basis. Capital expenditure is likely to be approximately $6.0 million.

Our Recommendation

Semtech Corporation manufactures a wide range of analog and mixed-signal semiconductors, including Standard Semiconductor Products, Rectifier and Assembly Products and Other Products.

In the quarter, Semtech made a couple of acquisitions, such as EnVerv Incorporated and Triune Systems, which boosted its long-range powerline communications and wireless charging technologies. Also, the company undertook many restructuring initiatives to focus on important growth areas and reduce operating expenses.

We believe that the company's new design wins, product introductions and solid execution will drive revenue growth 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). Some better-ranked stocks in the same space are Advanced Energy Industries, Inc. AEIS , Autobytel Inc ABTL and PetMed Express, Inc. PETS . All these stocks sport a Zacks Rank #1 (Strong Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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