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Semtech (SMTC) Earnings and Sales Surpass Estimates in Q3

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·4 min read
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  • SMTC
  • ARW
  • AMD
  • MIME

Semtech Corporation's SMTC third-quarter fiscal 2022 non-GAAP earnings of 74 cents per share surpassed the Zacks Consensus Estimate by 2.8%. The reported earnings increased 13.9% sequentially and 57.5% year over year.

Net sales of $194.9 million increased 5% sequentially and 27% from the prior-year quarter. The same also outpaced the Zacks Consensus Estimate qof $193 million.

Top-line growth was driven by strong momentum across industrial and high-end consumer markets served.

Semtech's LoRa business, Tri-Edge platform, 10G PON products, 5G wireless and broad-based protection platforms contributed well to its quarterly performance.

For the fiscal third quarter, shipments in Asia, North America and Europe represented 78%, 12% and 10% of net sales, respectively.

Semtech Corporation Price, Consensus and EPS Surprise

Semtech Corporation Price, Consensus and EPS Surprise
Semtech Corporation Price, Consensus and EPS Surprise

Semtech Corporation price-consensus-eps-surprise-chart | Semtech Corporation Quote

Revenues by End Market

Net revenues from the infrastructure market, representing 34% of its total revenues, decreased 1% on a sequential basis due to a decline in data center revenues.

Revenues from the industrial market increased 17% from the prior quarter and represented 35% of total net revenues. The sequential increase is driven by strength in LoRa and broad-based protection businesses.

Net revenues from the high-end consumer market represented 31% of total revenues and increased 2% sequentially. The high-end consumer market consists of mobile devices and other consumer systems, representing net revenues of 20% and 11%, respectively.

Revenues by Product Group

Signal Integrity Product Group's revenues contributed 39% to total revenues. The reported figure increased 3% sequentially. The increase was driven by strong demand across PON and base station infrastructure markets.

Revenues from its Protection Product Group represented 29% of the total revenues. The figure was up 14% sequentially and 36% year over year. The increase was driven by strong consumer demand in Asia and North America.

Wireless and Sensing Product Group revenues, which contributed 32% to total revenues, increased 1% sequentially and 23% year over year. The increase was driven by record net sales of LoRa platform products.

Operating Results

The non-GAAP gross margin of 63.8% expanded 230 basis points (bps) year over year, driven by a more favorable product mix.

Fiscal third-quarter adjusted selling, general and administrative expenses increased 4.8% year over year to $34.2 million. Adjusted product development and engineering expenses increased 36.3% from the year-ago quarter to $33.3 million.

The non-GAAP operating margin of 29.2% also expanded 210 bps year over year.

Balance Sheet and Cash Flow

As of Oct 31, 2021, cash and cash equivalents were $276.6 million compared with $262.7 million as of Aug 1, 2021.

Account receivables were $74.3 million, up from $73.1 million in the fiscal second quarter. Long-term debt was $175.6 million, up from $175.4 million in the previous quarter.

For the reported quarter, cash flow from operations was $66.5 million, net capital expenditure was $5.3 million and free cash flow totaled $61.2 million.

In the quarter, the company repurchased 387,163 shares for $30 million.

Guidance

For fourth-quarter fiscal 2022, management expects net sales of $184-$194 million. The Zacks Consensus Estimate for the same is pegged at $187.3 million.

The non-GAAP gross margin is expected to be 63.5-64.5%. Also, management projects SG&A expenses of $34-$35 million, and research and development costs of $32.5-$33.5 million.

Non-GAAP earnings per share are expected to be 65-73 cents. The Zacks Consensus Estimate for the same is pegged at 66 cents.

Zacks Rank & Stocks to Consider

Currently, Semtech carries a Zacks Rank #3 (Hold).

Investors interested in the broader technology sector can consider better-ranked stocks like Advanced Micro Devices AMD, Mimecast Limited MIME and Arrow Electronics ARW. While Arrow currently sports a Zacks Rank #1(Strong Buy), Advanced Micro Devices and Mimecast carry a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here.

Advanced Micro Devices has gained 62.6% on a year-to-date basis. The long-term earnings growth rate for the AMD stock is currently projected at 46.2%.

Mimecast has gained 34.3% on a year-to-date basis. The long-term earnings growth rate for the MIME stock is currently projected at 35%.

Arrow Electronics has gained 23.7% on a year-to-date basis. The long-term earnings growth rate for the ARW stock is currently projected at 27.4%.


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