TechDogs-"Semtech Announces Second Quarter Of Fiscal Year 2024 Results"

Manufacturing Technology

Semtech Announces Second Quarter Of Fiscal Year 2024 Results

By Business Wire

Business Wire
Overall Rating

CAMARILLO, Calif.--(BUSINESS WIRE)--Semtech Corporation (Nasdaq: SMTC), a high-performance semiconductor, IoT systems and cloud connectivity service provider, today reported unaudited financial results for its second quarter of fiscal year 2024, which ended July 30, 2023.

Highlights for the Second Quarter of Fiscal Year 2024

  • Net sales of $238.4 million, an increase of 0.8% sequentially and 13.9% year-over-year
  • GAAP gross margin of 42.3% and Non-GAAP gross margin of 49.6%
  • GAAP diluted loss per share of $5.97 and Non-GAAP diluted earnings per share of $0.11
  • Cloud data center net sales grew 114% sequentially
  • High-end consumer net sales grew 58% sequentially
  • Effective June 30, 2023, Paul H. Pickle became Semtech's president and chief executive officer
  • On September 8, 2023, the Company announced the appointment of Mark Lin as the next Semtech executive vice president and chief financial officer

Results on a GAAP basis for the Second Fiscal Quarter 2024

  • Net sales were $238.4 million
  • GAAP Gross margin was 42.3%
  • GAAP SG&A expense was $65.0 million
  • GAAP R&D expense was $51.4 million
  • GAAP Operating margin was (125.9)%
  • GAAP Depreciation expense was $6.6 million
  • GAAP Intangible amortization expense was $15.4 million
  • GAAP Interest expense was $24.2 million
  • GAAP Net loss attributable to common stockholders was $382.0 million or $5.97 diluted loss per share

To facilitate a complete understanding of comparable financial performance between periods, the Company also presents performance results that exclude certain non-cash items and items that are not considered reflective of the Company’s core results over time. These non-GAAP financial measures exclude certain items and are described below under “Non-GAAP Financial Measures.”

Results on a Non-GAAP basis for the Second Fiscal Quarter 2024 (see the list of non-GAAP financial measures and the reconciliation of these measures to the most comparable GAAP measures set forth in the tables below under "Supplemental Information: Reconciliation of GAAP to Non-GAAP Results")

  • Non-GAAP Gross margin was 49.6%
  • Non-GAAP SG&A expense was $42.8 million
  • Non-GAAP R&D expense was $43.0 million
  • Non-GAAP Operating margin was 13.6%
  • Non-GAAP Interest expense was $23.4 million
  • Non-GAAP Net income attributable to common stockholders was $7.0 million or $0.11 diluted earnings per share

In the recent quarter, our net sales aligned with our projections and our non-GAAP gross margin and earnings per share each exceeded our estimates, largely due to focused cost-saving initiatives,” said Paul H. Pickle, Semtech’s president and chief executive officer. “I have had the opportunity to recognize our company's distinct capabilities in the High-Performance Analog and IoT sectors and the dedication of a very talented team. While we remain cautious given the current challenges of broader economic uncertainties and high channel inventory, I am confident that our ongoing operational refinements and strong presence in key markets keep us poised to recover as economic conditions evolve.”

Third Fiscal Quarter 2024 Outlook

Both the GAAP and non-GAAP third fiscal quarter 2024 outlook below take into account the Company's current estimates, export restrictions, inflationary pressure and other macroeconomic conditions. The Company is unable to predict the full impact such challenges may have on its future results of operations.

GAAP Third Fiscal Quarter 2024 Outlook

  • Net sales are expected to be in the range of $190.0 million to $210.0 million
  • GAAP Gross margin is expected to be in the range of 41.5% to 44.0%
  • GAAP SG&A expense is expected to be in the range of $54.2 million to $56.2 million
  • GAAP R&D expense is expected to be in the range of $53.4 million to $55.4 million
  • GAAP Intangible amortization expense is expected to be approximately $14.9 million
  • GAAP Interest and other expense, net is expected to be approximately $24.3 million
  • Fully-diluted share count is expected to be approximately 64.2 million shares
  • Share-based compensation is expected to be approximately $12.1 million, categorized as follows: $0.5 million cost of sales, $8.2 million SG&A, and $3.4 million R&D
  • Transaction, integration and restructuring expenses are expected to be approximately $15.0 million
  • GAAP capital expenditures are expected to be approximately $6.0 million
  • GAAP depreciation expense is expected to be approximately $7.9 million

Non-GAAP Third Fiscal Quarter 2024 Outlook (see the list of non-GAAP financial measures and the reconciliation of Non-GAAP Gross margin, Non-GAAP SG&A expense, and Non-GAAP R&D expense to the most comparable GAAP measures set forth in the tables below under "Reconciliation of GAAP to Non-GAAP Outlook")

  • Non-GAAP Gross margin is expected to be in the range of 47.0% to 49.0%
  • Non-GAAP SG&A expense is expected to be in the range of $36.0 million to $38.0 million
  • Non-GAAP R&D expense is expected to be in the range of $45.0 million to $47.0 million
  • Non-GAAP normalized tax rate for fiscal year 2024 is expected to be approximately 12%
  • Non-GAAP Diluted loss per share is expected to be in the range of $0.22 to $0.09

The Company is unable to include a reconciliation of the forward-looking non-GAAP normalized tax rate and non-GAAP Diluted loss per share to the corresponding GAAP measures as this is not available without unreasonable efforts due to the high variability and low visibility with respect to the impact of transaction, integration and restructuring expenses, share-based awards and the amortization of acquisition-related intangible assets that are excluded from these non-GAAP measures. The Company expects the variability of the above charges to have a potentially significant impact on its GAAP financial results.

Webcast and Conference Call

Semtech will be hosting a conference call today to discuss its second fiscal quarter 2024 results at 2:00 p.m. Pacific time. The dial-in number for the call is (877) 407-0312. Please use conference ID 13736082. An audio webcast will be available on Semtech’s website at www.semtech.com in the “Investor Relations” section under “Investor News.” A replay of the call will be available through October 11, 2023 at the same website or by calling (877) 660-6853 and entering conference ID 13736082.

Non-GAAP Financial Measures

To supplement the Company's consolidated financial statements prepared in accordance with GAAP, this release includes a presentation of select non-GAAP financial measures. The Company’s non-GAAP measures of gross margin, SG&A expense, R&D expense, operating margin, interest expense, net (loss) income attributable to common stockholders, diluted (loss) earnings per share and normalized tax rate exclude the following items, if any:

  • Share-based compensation
  • Intangible amortization
  • Transaction and integration related costs or recoveries (including costs associated with the acquisition of Sierra Wireless)
  • Restructuring and other reserves, including cumulative other reserves associated with historical activity including environmental and pension
  • Litigation costs or dispute settlement charges or recoveries
  • Gain on sale of business
  • Equity method income or loss
  • Investment gains, losses, reserves and impairments, including interest income from debt investment
  • Write-off of deferred financing costs and debt discount
  • Goodwill impairment
  • Amortization of inventory step-up

To provide additional insight into the Company's third quarter outlook, this release also includes a presentation of forward-looking non-GAAP financial measures. Management believes that the presentation of these non-GAAP measures provides useful information to investors regarding the Company’s financial condition and results of operations. These non-GAAP financial measures are adjusted to exclude the items identified above because such items are either operating expenses that would not otherwise have been incurred by the Company in the normal course of the Company’s business operations, or are not reflective of the Company’s core results over time. These excluded items may include recurring as well as non-recurring items, and no inference should be made that all of these adjustments, charges, costs or expenses are unusual, infrequent or non-recurring. For example: certain restructuring and integration-related expenses (which consist of employee termination costs, facility closure or lease termination costs, and contract termination costs) may be considered recurring given the Company’s ongoing efforts to be more cost effective and efficient; certain acquisition and disposition-related adjustments or expenses may be deemed recurring given the Company's regular evaluation of potential transactions and investments; and certain litigation expenses or dispute settlement charges or gains (which may include estimated losses for which the Company may have established a reserve, as well as any actual settlements, judgments, or other resolutions against, or in favor of, the Company related to litigation, arbitration, disputes or similar matters, and insurance recoveries received by the Company related to such matters) may be viewed as recurring given that the Company may from time to time be involved in, and may resolve, litigation, arbitration, disputes, and similar matters.

Notwithstanding that certain adjustments, charges, costs or expenses may be considered recurring, in order to provide meaningful comparisons, the Company believes that it is appropriate to exclude such items because they are not reflective of the Company's core results and tend to vary based on timing, frequency and magnitude.

These non-GAAP financial measures are provided to enhance the user's overall understanding of the Company's comparable financial performance between periods. In addition, the Company’s management generally excludes the items noted above when managing and evaluating the performance of the business. In the financial statements provided with this release, the Company also presents free cash flow. Free cash flow, which may be positive or negative, is a non-GAAP financial measure defined as cash flows provided by (used in) operations less net capital expenditures. The Company considers free cash flow generated in any period to be a useful indicator of the availability of cash for, among other things, investing in the Company’s business, making strategic acquisitions, repaying debt or strengthening the balance sheet.

The financial statements provided with this release include reconciliations of these non-GAAP financial measures to their most comparable GAAP measures for the second and first quarters of fiscal year 2024 and the second quarter of fiscal year 2023, along with a reconciliation of forward-looking non-GAAP measures (other than the non-GAAP normalized tax rate and non-GAAP Diluted loss per share) to their most comparable GAAP measures for the third quarter of fiscal year 2024. The Company adopted a full-year, normalized tax rate for the computation of the non-GAAP income tax provision in order to provide better comparability across the interim reporting periods by reducing the quarterly variability in non-GAAP tax rates that can occur throughout the year. In estimating the full-year non-GAAP normalized tax rate, the Company utilized a full-year financial projection that considers multiple factors such as changes to the Company’s current operating structure, existing positions in various tax jurisdictions, the effect of key tax law changes, and other significant tax matters to the extent they are applicable to the full fiscal year financial projection. In addition to the adjustments described above, this normalized tax rate excludes the impact of share-based awards and the amortization of acquisition-related intangible assets. For fiscal year 2024, the Company’s projected non-GAAP normalized tax rate is 12% and will be applied to each quarter of fiscal year 2024. The Company’s non-GAAP normalized tax rate on non-GAAP net income may be adjusted during the year to account for events or trends that the Company believes materially impact the original annual non-GAAP normalized tax rate including, but not limited to, significant changes resulting from tax legislation, acquisitions, entity structures or operational changes and other significant events. These additional non-GAAP financial measures should not be considered substitutes for any measures derived in accordance with GAAP and may be inconsistent with similar measures presented by other companies.

Forward-Looking and Cautionary Statements

This press release contains "forward-looking statements" within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, as amended, based on the Company’s current expectations, estimates and projections about its operations, industry, financial condition, performance, results of operations, and liquidity. Forward-looking statements are statements other than historical information or statements of current condition and relate to matters such as future financial performance including the third quarter of fiscal year 2024 outlook; the Company’s expectations concerning the negative impact on the Company’s results of operations from export restrictions, inflationary pressure and other macroeconomic conditions; future operational performance; the anticipated impact of specific items on future earnings; and the Company’s plans, objectives and expectations. Statements containing words such as “may,” “believes,” “anticipates,” “expects,” “intends,” “plans,” “projects,” “estimates,” “should,” “will,” “designed to,” “projections,” or “business outlook,” or other similar expressions constitute forward-looking statements.

Forward-looking statements involve known and unknown risks and uncertainties that could cause actual results and events to differ materially from those projected. Potential factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to: the Company's ability to comply with the covenants under the agreements governing its indebtedness; the Company's ability to forecast and achieve anticipated net sales and earnings estimates in light of periodic economic uncertainty; the inherent risks, costs and uncertainties associated with integrating Sierra Wireless successfully and risks of not achieving all or any of the anticipated benefits, or the risk that the anticipated benefits may not be fully realized or take longer to realize than expected; the uncertainty surrounding the impact and duration of supply chain constraints and any associated disruptions; export restrictions and laws affecting the Company's trade and investments, and tariffs or the occurrence of trade wars; worldwide economic and political disruptions, including as a result of inflation and the current conflict between Russia and Ukraine; tightening credit conditions related to the United States banking system concerns; competitive changes in the marketplace including, but not limited to, the pace of growth or adoption rates of applicable products or technologies; downturns in the business cycle; decreased average selling prices of the Company’s products; the Company’s reliance on a limited number of suppliers and subcontractors for components and materials; changes in projected or anticipated end-user markets; future responses to and effects of public health crises; and the Company’s ability to forecast its annual non-GAAP normalized tax rate due to material changes that could occur during the fiscal year, which could include, but are not limited to, significant changes resulting from tax legislation, acquisitions, entity structures or operational changes and other significant events. Additionally, forward-looking statements should be considered in conjunction with the cautionary statements contained in the risk factors disclosed in the Company's filings with the Securities and Exchange Commission (the "SEC"), including the Company's Annual Report on Form 10-K for the fiscal year ended January 29, 2023, filed with the SEC on March 30, 2023, as such risk factors may be updated, amended or superseded from time to time by subsequent reports the Company files with the SEC. In light of the significant risks and uncertainties inherent in the forward-looking information included herein that may cause actual performance and results to differ materially from those predicted, any such forward-looking information should not be regarded as representations or guarantees by the Company of future performance or results, or that its objectives or plans will be achieved or that any of its operating expectations or financial forecasts will be realized. Reported results should not be considered an indication of future performance. Investors are cautioned not to place undue reliance on any forward-looking information contained herein, which reflect management’s analysis only as of the date hereof. Except as required by law, the Company assumes no obligation to publicly release the results of any update or revision to any forward-looking statements that may be made to reflect new information, events or circumstances after the date hereof or to reflect the occurrence of unanticipated or future events, or otherwise.

About Semtech

Semtech Corporation (Nasdaq: SMTC) is a high-performance semiconductor, IoT systems and cloud connectivity service provider dedicated to delivering high quality technology solutions that enable a smarter, more connected and sustainable planet. Our global teams are dedicated to empowering solution architects and application developers to develop breakthrough products for the infrastructure, industrial and consumer markets. To learn more about Semtech technology, visit us at Semtech.com or follow us on LinkedIn or Twitter.

Semtech and the Semtech logo are registered trademarks or service marks of Semtech Corporation or its subsidiaries.

SMTC-F

SEMTECH CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)

Three Months Ended

Six Months Ended

July 30,
2023

April 30,
2023

July 31,
2022

July 30,
2023

July 31,
2022

Q224

Q124

Q223

Q224

Q223

Net sales

$

238,372

$

236,539

$

209,254

$

474,911

$

411,403

Cost of sales

127,071

122,738

73,435

249,809

145,331

Amortization of acquired technology

10,573

10,855

1,048

21,428

2,096

Total cost of sales

137,644

133,593

74,483

271,237

147,427

Gross profit

100,728

102,946

134,771

203,674

263,976

Operating costs and expenses, net:

Selling, general and administrative

65,024

58,117

48,119

123,141

91,483

Product development and engineering

51,387

51,827

40,601

103,214

79,390

Intangible amortization

4,871

4,882

9,753

Gain on sale of business

(17,986

)

(17,986

)

Goodwill impairment

279,555

279,555

Total operating costs and expenses, net

400,837

114,826

70,734

515,663

152,887

Operating (loss) income

(300,109

)

(11,880

)

64,037

(311,989

)

111,089

Interest expense

(24,171

)

(20,510

)

(1,259

)

(44,681

)

(2,456

)

Interest income

674

1,069

555

1,743

919

Non-operating expense, net

(1,566

)

(473

)

(430

)

(2,039

)

(532

)

Investment impairments and credit loss reserves, net

(227

)

(33

)

429

(260

)

405

(Loss) income before taxes and equity method (loss) income

(325,399

)

(31,827

)

63,332

(357,226

)

109,425

Provision (benefit) for taxes

56,592

(2,417

)

12,019

54,175

20,088

Net (loss) income before equity method (loss) income

(381,991

)

(29,410

)

51,313

(411,401

)

89,337

Equity method (loss) income

(12

)

(7

)

283

(19

)

307

Net (loss) income

(382,003

)

(29,417

)

51,596

(411,420

)

89,644

Net loss attributable to noncontrolling interest

(1

)

(2

)

(2

)

(3

)

(3

)

Net (loss) income attributable to common stockholders

$

(382,002

)

$

(29,415

)

$

51,598

$

(411,417

)

$

89,647

(Loss) earnings per share:

Basic

$

(5.97

)

$

(0.46

)

$

0.81

$

(6.43

)

$

1.41

Diluted

$

(5.97

)

$

(0.46

)

$

0.81

$

(6.43

)

$

1.39

Weighted average number of shares used in computing (loss) earnings per share:

Basic

64,005

63,924

63,500

63,964

63,725

Diluted

64,005

63,924

63,977

63,964

64,270

SEMTECH CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

(unaudited)

July 30, 2023

January 29, 2023

ASSETS

Current assets:

Cash and cash equivalents

$

147,912

$

235,510

Accounts receivable, net

159,097

161,695

Inventories

180,231

207,704

Prepaid taxes

7,669

6,243

Other current assets

135,029

111,634

Total current assets

629,938

722,786

Non-current assets:

Property, plant and equipment, net

161,329

169,293

Deferred tax assets

14,075

63,783

Goodwill

1,017,444

1,281,703

Other intangible assets, net

183,401

215,102

Other assets

112,413

116,961

Total assets

$

2,118,600

$

2,569,628

LIABILITIES AND EQUITY

Current liabilities:

Accounts payable

$

52,473

$

100,676

Accrued liabilities

215,694

253,075

Current portion of long-term debt

52,890

43,104

Total current liabilities

321,057

396,855

Non-current liabilities:

Deferred tax liabilities

4,755

5,065

Long-term debt

1,330,614

1,296,966

Other long-term liabilities

95,159

114,707

Stockholders’ equity

366,835

755,852

Noncontrolling interest

180

183

Total liabilities & equity

$

2,118,600

$

2,569,628

SEMTECH CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS AND SUPPLEMENTAL INFORMATION

(in thousands)

(unaudited)

Six Months Ended

July 30,
2023

July 31,
2022

Net (loss) income

$

(411,420

)

$

89,644

Net cash (used in) provided by operations

(101,992

)

127,329

Net cash (used in) provided by investing activities

(19,577

)

10,216

Net cash provided by (used in) financing activities

34,727

(54,996

)

Effect of foreign exchange rate changes on cash and cash equivalents

(756

)

Net (decrease) increase in cash and cash equivalents

(87,598

)

82,549

Cash and cash equivalents at beginning of period

235,510

279,601

Cash and cash equivalents at end of period

$

147,912

$

362,150

Three Months Ended

July 30,
2023

April 30,
2023

July 31,
2022

Q224

Q124

Q223

Free Cash Flow:

Cash Flow from Operations

$

(12,005

)

$

(89,987

)

$

77,278

Net Capital Expenditures

(6,920

)

(13,977

)

(7,268

)

Free Cash Flow

$

(18,925

)

$

(103,964

)

$

70,010

Three Months Ended

July 30,
2023

April 30,
2023

July 31,
2022

Q224

Q124

Q223

Net sales by reportable segment:

Signal Integrity Products Group

$

46,507

20

%

$

41,646

18

%

$

87,355

42

%

Advanced Protection and Sensing Products Group

48,521

20

%

36,057

15

%

65,275

31

%

IoT System Products Group

119,455

50

%

134,576

57

%

56,624

27

%

IoT Connected Services Group

23,889

10

%

24,260

10

%

%

Total net sales by reportable segment

$

238,372

100

%

$

236,539

100

%

$

209,254

100

%

Three Months Ended

July 30,
2023

April 30,
2023

July 31,
2022

Q224

Q124

Q223

Net sales by end market:

Infrastructure

$

42,369

18

%

$

39,000

16

%

$

84,533

40

%

High-End Consumer

34,016

14

%

21,594

9

%

41,009

20

%

Industrial

161,987

68

%

175,945

75

%

83,712

40

%

Total net sales by end market

$

238,372

100

%

$

236,539

100

%

$

209,254

100

%


Contacts

Sara Kesten
Semtech Corporation
(805) 480-2004
webir@semtech.com


Read full story here

First published on Thu, Sep 14, 2023

Enjoyed what you read? Great news – there’s a lot more to explore!

Dive into our content repository of the latest tech news, a diverse range of articles spanning introductory guides, product reviews, trends and more, along with engaging interviews, up-to-date AI blogs and hilarious tech memes!

Also explore our collection of branded insights via informative white papers, enlightening case studies, in-depth reports, educational videos and exciting events and webinars from leading global brands.

Head to the TechDogs homepage to Know Your World of technology today!

Disclaimer - Reference to any specific product, software or entity does not constitute an endorsement or recommendation by TechDogs nor should any data or content published be relied upon. The views expressed by TechDogs’ members and guests are their own and their appearance on our site does not imply an endorsement of them or any entity they represent. Views and opinions expressed by TechDogs’ Authors are those of the Authors and do not necessarily reflect the view of TechDogs or any of its officials. All information / content found on TechDogs’ site may not necessarily be reviewed by individuals with the expertise to validate its completeness, accuracy and reliability.

Tags:

Semtech Corporation Cloud Connectivity Service Semiconductor IoT Systems

References:

Join The Discussion

  • Dark
  • Light