Semtech Corporation (Nasdaq: SMTC), a leading supplier of high
performance analog and mixed-signal semiconductors and advanced
algorithms, today reported unaudited financial results for its
third quarter of fiscal year 2021, which ended October 25,
2020.
Highlights for the Third Fiscal Quarter 2021
- Q3 FY2021 net sales of $154.1 million increased 7% sequentially
and 9% year-over-year
- Q3 FY2021 diluted GAAP EPS of $0.28 and diluted non-GAAP EPS of
$0.47
- Distributor Point of Sale (POS) increased 8% sequentially and
represented a new quarterly record
- Wireless and Sensing products group net sales increased 32%
sequentially and represented a new record that included record net
sales of our LoRa® platform products
- Announced collaboration with Amazon's Sidewalk platform to
extend home network connectivity for indoor and outdoor smart home
products
- Repurchased 439,921 shares for $24.0 million during Q3
FY2021
Results on a GAAP basis for the Third Fiscal Quarter
2021
- Net sales were $154.1 million
- GAAP Gross margin was 61.0%
- GAAP SG&A expense was $42.9 million
- GAAP R&D expense was $27.9 million
- GAAP Operating margin was 13.9%
- GAAP Net income attributable to common stockholders was $18.5
million or $0.28 per diluted 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 Third Fiscal Quarter
2021 (see the list of non-GAAP items and the reconciliation of
these to the most comparable GAAP items set forth in the tables
below):
- Non-GAAP Gross margin was 61.5%
- Non-GAAP SG&A expense was $32.6 million
- Non-GAAP R&D expense was $24.4 million
- Non-GAAP Operating margin was 24.4%
- Non-GAAP Net income attributable to common stockholders was
$30.8 million or $0.47 per diluted share
Mohan Maheswaran, Semtech’s President and Chief Executive
Officer, stated, “We delivered Fiscal Q3 net sales that were at the
upper-end of our guidance led by another quarterly record from our
LoRa technology platforms and increasing smartphone demand. During
the quarter we announced a collaboration with Amazon for its new
Sidewalk network, further demonstrating the value that LoRa
delivers to the emerging smart-home and consumer use cases.”
Maheswaran continued, "We believe the underlying fundamentals
driving our growth engines in the Infrastructure, IoT and mobile
platform markets remain strong and the Company remains well
positioned for growth."
Fourth Fiscal Quarter 2021 Outlook
Both the GAAP and non-GAAP fourth fiscal quarter 2021 outlook
below take into account, based on the Company's current estimates,
the anticipated, but uncertain, negative impact to the Company of
the COVID-19 pandemic on global economic conditions and on the
Company's business operations, sales and operating results, as well
as export restrictions pertaining to Huawei and certain of its
affiliates imposed by the U.S. government. The Company is unable to
predict the full impact such challenges may have on its future
results of operations.
GAAP Fourth Fiscal Quarter 2021 Outlook
- Net sales are expected to be in the range of $153.0 million to
$163.0 million
- GAAP Gross margin is expected to be in the range of 60.5% to
61.6%
- GAAP SG&A expense is expected to be in the range of $43.1
million to $44.1 million
- GAAP R&D expense is expected to be in the range of $30.5
million to $31.5 million
- GAAP Intangible amortization expense is expected to be
approximately $1.6 million
- GAAP Interest and other expense, net is expected to be
approximately $1.5 million
- GAAP Effective tax rate is expected to be in the range of 10%
to 13%
- GAAP Earnings per diluted share are expected to be in the range
of $0.22 to $0.29
- Fully-diluted share count is expected to be approximately 65.8
million shares
- Share-based compensation is expected to be approximately $16.3
million, categorized as follows: $0.7 million cost of sales, $11.6
million SG&A, and $4.0 million R&D
- Capital expenditures are expected to be approximately $9.3
million
- Depreciation expense is expected to be approximately $6.1
million
Non-GAAP Fourth Fiscal Quarter 2021 Outlook (see the list
of non-GAAP items and the reconciliation of these to the most
comparable GAAP items set forth in the tables below)
- Non-GAAP Gross margin is expected to be in the range of 61.0%
to 62.0%
- Non-GAAP SG&A expense is expected to be in the range of
$31.0 million to $32.0 million
- Non-GAAP R&D expense is expected to be in the range of
$26.5 million to $27.5 million
- Non-GAAP Interest and other expense, net is expected to be
approximately $1.5 million
- Non-GAAP Effective tax rate is expected to be in the range of
15% to 17%
- Non-GAAP Earnings per diluted share are expected to be in the
range of $0.45 to $0.51
Correction of Immaterial Errors
During the fourth quarter of fiscal year 2020, management
identified certain immaterial errors related to share-based
compensation expense of market-based awards granted during fiscal
years 2018, 2019 and 2020. The errors resulted from adjustments to
the grant date fair value of the market-based awards that were
incorrectly accounted for as performance-based awards. The Company
concluded that the impact of these errors was immaterial and has
corrected its consolidated financial statements for these errors
for all prior periods presented in this press release.
Webcast and Conference Call
Semtech will be hosting a conference call today to discuss its
third fiscal quarter 2021 results at 2:00 p.m. Pacific time. 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 December 30,
2020 at the same website or by calling (877) 660-6853 and entering
conference ID 13704538.
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 metrics. The Company’s non-GAAP
measures of gross margin, SG&A expenses, R&D expenses,
operating margin, effective tax rate, net income attributable to
common stockholders and earnings per diluted share exclude the
following items, if any:
- Share-based compensation
- Amortization of purchased intangibles, impairments and credit
loss reserves
- Restructuring, transaction and other acquisition or
disposition-related gains or losses
- Litigation expenses or dispute settlement charges or gains
- Cumulative other reserves associated with historical activity
including environmental and pension
- Equity in net gains or losses of equity method investments
- Loss on early extinguishment of debt
- Non-cash interest income from debt investments
To provide additional insight into the Company's fourth quarter
outlook, this release also includes a presentation of
forward-looking non-GAAP measures. Management believes that the
presentation of these non-GAAP financial measures provide useful
information to investors regarding the Company’s financial
condition and results of operations because these non-GAAP
financial measures are adjusted to exclude the items identified
above because such items are either operating expenses which 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 we 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. The financial
statements provided with this release include reconciliations of
these non-GAAP measures to their most comparable GAAP measures for
the third quarter of fiscal year 2020 and the second and third
quarters of fiscal year 2021, along with a reconciliation of
forward-looking non-GAAP measures (other than the non-GAAP
effective tax rate) to their most comparable GAAP measures for the
fourth quarter of fiscal year 2021. The Company is unable to
include a reconciliation of the forward-looking non-GAAP measure of
the non-GAAP effective tax rate to the corresponding GAAP measure
as this is not available without unreasonable efforts due to the
high variability and low visibility with respect to the charges
that are excluded from this non-GAAP measure. We expect the
variability of the above charges to have a potentially significant
impact on our GAAP financial results. 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 fourth quarter of fiscal year 2021
outlook; the negative impact of the COVID-19 pandemic on global
economic conditions and on the Company's business operations, sales
and operating results; the Company’s expectations concerning the
negative impact on the Company’s results of operations from its
inability to ship certain products and provide certain support
services due to the export restrictions including export
restrictions with respect to Huawei and certain of its affiliates;
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
uncertainty surrounding the impact and duration of the COVID-19
pandemic on global economic conditions and on the Company's
business and results of operations; export restrictions and laws
affecting the Company's trade and investments including with
respect to Huawei and certain of its affiliates, and tariffs or the
occurrence of trade wars; 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; the Company’s ability to forecast
its effective tax rates due to changing income in higher or lower
tax jurisdictions and other factors that contribute to the
volatility of the Company’s effective tax rates and impact
anticipated tax benefits; and the Company's ability to forecast and
achieve anticipated net sales and earnings estimates in light of
periodic economic uncertainty, to include impacts arising from
Asian, European and global economic dynamics. Additionally,
forward-looking statements should be considered in conjunction with
the cautionary statements contained in the risk factors disclosed
in the Company's Annual Report on Form 10-K for the fiscal year
ended January 26, 2020, subsequent Quarterly Reports on Form 10-Q,
and other filings with the Securities and Exchange Commission, and
in material incorporated therein, including, without limitation,
information under the captions “Management’s Discussion and
Analysis of Financial Condition and Results of Operations” and
“Risk Factors.” 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 is a leading supplier of high performance
analog, mixed-signal semiconductors and advanced algorithms for
infrastructure, high-end consumer, and industrial end markets.
Products are designed to benefit the engineering community as well
as the global community. The Company is dedicated to reducing the
impact it, and its products, have on the environment. Internal
green programs seek to reduce waste through material and
manufacturing control, use of green technology and designing for
resource reduction. Publicly traded since 1967, Semtech is listed
on the NASDAQ Global Select Market under the symbol SMTC. For more
information, visit http://www.semtech.com.
Semtech, the Semtech logo and LoRa are registered trademarks or
service marks of Semtech Corporation or its subsidiaries.
SMTC-F
SEMTECH CORPORATION
CONDENSED CONSOLIDATED
STATEMENTS OF INCOME
(in thousands, except per share
data)
(unaudited)
Three Months Ended
Nine Months Ended
October 25,
2020
July 26,
2020
October 27,
2019
October 25,
2020
October 27,
2019
Q321
Q221
Q320
Q321
Q320
Net sales
$
154,082
$
143,660
$
141,011
$
430,444
$
409,511
Cost of sales
60,021
55,409
54,763
167,371
157,104
Gross profit
94,061
88,251
86,248
263,073
252,407
Operating costs and expenses:
Selling, general and administrative
42,891
38,255
37,777
115,746
120,074
Product development and engineering
27,890
29,220
26,976
84,696
80,012
Intangible amortization
1,798
2,020
3,770
6,658
12,821
Changes in the fair value of contingent
earn-out obligations
—
—
(152
)
(33
)
(2,313
)
Total operating costs and expenses
72,579
69,495
68,371
207,067
210,594
Operating income
21,482
18,756
17,877
56,006
41,813
Interest expense
(1,008
)
(1,252
)
(2,183
)
(3,819
)
(7,247
)
Non-operating (expense) income, net
(236
)
(176
)
644
11
2,900
Investment impairments and credit loss
reserves
(335
)
(1,485
)
—
(5,450
)
—
Income before taxes and equity in net
(losses) gains of equity method investments
19,903
15,843
16,338
46,748
37,466
(Benefit) provision for taxes
1,580
(416
)
2,693
2,523
8,638
Net income before equity in net
(losses) gains of equity method investments
18,323
16,259
13,645
44,225
28,828
Equity in net (losses) gains of equity
method investments
159
(137
)
352
11
109
Net income
18,482
16,122
13,997
44,236
28,937
Net loss attributable to noncontrolling
interest
(5
)
(3
)
—
(11
)
—
Net income attributable to common
stockholders
$
18,487
$
16,125
$
13,997
$
44,247
$
28,937
Earnings per share:
Basic
$
0.28
$
0.25
$
0.21
$
0.68
$
0.44
Diluted
$
0.28
$
0.24
$
0.21
$
0.67
$
0.43
Weighted average number of shares used in
computing earnings per share:
Basic
65,136
65,084
66,387
65,270
66,337
Diluted
65,967
66,004
67,318
66,050
67,630
SEMTECH CORPORATION
CONDENSED CONSOLIDATED BALANCE
SHEETS
(in thousands)
(unaudited)
October 25, 2020
January 26, 2020
ASSETS
Current assets:
Cash and cash equivalents
$
262,271
$
293,324
Accounts receivable, net
58,700
61,927
Inventories
78,367
73,010
Prepaid taxes
22,677
10,718
Other current assets
25,731
21,757
Total current assets
447,746
460,736
Non-current assets:
Property, plant and equipment, net
127,472
124,418
Deferred tax assets
24,983
20,094
Goodwill
351,141
351,141
Other intangible assets, net
13,354
20,012
Other assets
83,276
76,032
Total assets
$
1,047,972
$
1,052,433
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable
$
47,338
$
48,009
Accrued liabilities
58,535
50,632
Total current liabilities
105,873
98,641
Non-current liabilities:
Deferred tax liabilities
877
3,600
Long term debt
183,075
194,743
Other long-term liabilities
81,521
78,249
Stockholders’ equity
676,391
676,954
Noncontrolling interest
235
246
Total liabilities & equity
$
1,047,972
$
1,052,433
SEMTECH CORPORATION
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS AND SUPPLEMENTAL INFORMATION
(in thousands)
(unaudited)
Nine Months Ended
October 25,
2020
October 27,
2019
Net income
$
44,236
$
28,937
Net cash provided by operations
91,676
73,361
Net cash used in investing activities
(32,399
)
(29,672
)
Net cash used in financing activities
(90,330
)
(72,752
)
Net decrease in cash and cash
equivalents
(31,053
)
(29,063
)
Cash and cash equivalents at beginning of
period
293,324
312,120
Cash and cash equivalents at end of
period
$
262,271
$
283,057
Three Months Ended
October 25,
2020
July 26,
2020
October 27,
2019
Q321
Q221
Q320
Free Cash Flow:
Cash Flow from Operations
$
28,377
$
37,216
$
33,268
Net Capital Expenditures
(7,168
)
(6,968
)
(3,516
)
Free Cash Flow
$
21,209
$
30,248
$
29,752
SEMTECH CORPORATION
SUPPLEMENTAL INFORMATION:
RECONCILIATION OF GAAP TO NON-GAAP RESULTS
(in thousands, except per share
data)
(unaudited)
Three Months Ended
Nine Months Ended
October 25,
2020
July 26,
2020
October 27,
2019
October 25,
2020
October 27,
2019
Q321
Q221
Q320
Q321
Q320
Gross Margin–GAAP
61.0
%
61.4
%
61.2
%
61.1
%
61.6
%
Share-based compensation
0.5
%
0.4
%
0.4
%
0.4
%
0.4
%
Adjusted Gross Margin
(Non-GAAP)
61.5
%
61.8
%
61.6
%
61.5
%
62.0
%
Three Months Ended
Nine Months Ended
October 25,
2020
July 26,
2020
October 27,
2019
October 25,
2020
October 27,
2019
Q321
Q221
Q320
Q321
Q320
Selling, general and
administrative–GAAP
$
42,891
$
38,255
$
37,777
$
115,746
$
120,074
Share-based compensation
(9,404
)
(9,501
)
(9,323
)
(24,864
)
(27,794
)
Transaction and integration related
(292
)
(249
)
258
(626
)
(977
)
Restructuring and other reserves
—
(502
)
—
(502
)
(2,711
)
Litigation cost, net of recoveries
(558
)
(105
)
(205
)
(809
)
(930
)
Adjusted selling, general and
administrative (Non-GAAP)
$
32,637
$
27,898
$
28,507
$
88,945
$
87,662
Three Months Ended
Nine Months Ended
October 25,
2020
July 26,
2020
October 27,
2019
October 25,
2020
October 27,
2019
Q321
Q221
Q320
Q321
Q320
Product development and
engineering–GAAP
$
27,890
$
29,220
$
26,976
$
84,696
$
80,012
Share-based compensation
(3,480
)
(3,135
)
(3,180
)
(9,505
)
(8,283
)
Transaction and integration related
—
—
593
87
360
Adjusted product development and
engineering (Non-GAAP)
$
24,410
$
26,085
$
24,389
$
75,278
$
72,089
Three Months Ended
Nine Months Ended
October 25,
2020
July 26,
2020
October 27,
2019
October 25,
2020
October 27,
2019
Q321
Q221
Q320
Q321
Q320
Operating Margin–GAAP
13.9
%
13.1
%
12.7
%
13.0
%
10.2
%
Share-based compensation
8.8
%
9.2
%
9.2
%
8.4
%
9.1
%
Intangible amortization
1.2
%
1.4
%
2.7
%
1.5
%
3.1
%
Transaction and integration related
0.1
%
0.1
%
(0.6
)%
0.2
%
0.2
%
Restructuring and other reserves
—
%
0.3
%
—
%
0.1
%
0.7
%
Litigation cost, net of recoveries
0.4
%
0.1
%
0.1
%
0.2
%
0.2
%
Changes in the fair value of contingent
earn-out obligations
—
%
—
%
(0.1
)%
—
%
(0.6
)%
Adjusted Operating Margin
(Non-GAAP)
24.4
%
24.2
%
24.0
%
23.4
%
22.9
%
SEMTECH CORPORATION
SUPPLEMENTAL INFORMATION:
RECONCILIATION OF GAAP TO NON-GAAP RESULTS (CONTINUED)
(in thousands, except per share
data)
(unaudited)
Three Months Ended
Nine Months Ended
October 25,
2020
July 26,
2020
October 27,
2019
October 25,
2020
October 27,
2019
Q321
Q221
Q320
Q321
Q320
GAAP net income attributable to common
stockholders
$
18,487
$
16,125
$
13,997
$
44,247
$
28,937
Adjustments to GAAP net income
attributable to common stockholders:
Share-based compensation
13,538
13,186
13,055
36,103
37,458
Intangible amortization
1,798
2,020
3,770
6,658
12,821
Transaction and integration related
292
249
(851
)
539
617
Restructuring and other reserves
—
502
—
502
2,711
Litigation cost, net of recoveries
558
105
205
809
930
Changes in the fair value of contingent
earn-out obligations
—
—
(152
)
(33
)
(2,313
)
Investment gains, losses, reserves and
impairments
61
729
—
4,420
—
Total Non-GAAP adjustments before
taxes
16,247
16,791
16,027
48,998
52,224
Associated tax effect
(3,763
)
(4,848
)
(2,276
)
(11,183
)
(5,175
)
Equity in net losses (gains) of equity
method investments
(159
)
137
(352
)
(11
)
(109
)
Total of supplemental information, net of
taxes
12,325
12,080
13,399
37,804
46,940
Non-GAAP net income attributable to
common stockholders
$
30,812
$
28,205
$
27,396
$
82,051
$
75,877
Diluted GAAP earnings per share
$
0.28
$
0.24
$
0.21
$
0.67
$
0.43
Adjustments per above
0.19
0.19
0.20
0.57
0.69
Diluted non-GAAP earnings per
share
$
0.47
$
0.43
$
0.41
$
1.24
$
1.12
SEMTECH CORPORATION
RECONCILIATION OF GAAP TO
NON-GAAP OUTLOOK
Fourth Quarter of Fiscal Year
2021 Outlook
(in millions, except per share
data)
Q4 FY21 Outlook
January 31, 2021
Low
High
Gross Margin–GAAP
60.5
%
61.6
%
Share-based compensation
0.5
%
0.4
%
Adjusted Gross Margin
(Non-GAAP)
61.0
%
62.0
%
Low
High
Selling, general and
administrative–GAAP
$
43.1
$
44.1
Share-based compensation
(11.6
)
(11.6
)
Transaction and integration related
(0.5
)
(0.5
)
Adjusted selling, general and
administrative (Non-GAAP)
$
31.0
$
32.0
Low
High
Product development and
engineering–GAAP
$
30.5
$
31.5
Share-based compensation
(4.0
)
(4.0
)
Adjusted product development and
engineering (Non-GAAP)
$
26.5
$
27.5
Low
High
Diluted GAAP earnings per share
$
0.22
$
0.29
Share-based compensation
0.25
0.25
Transaction, restructuring, and
acquisition related expenses
0.01
0.01
Amortization of acquired intangibles
0.02
0.02
Associated tax effect
(0.05
)
(0.06
)
Diluted adjusted earnings per share
(Non-GAAP)
$
0.45
$
0.51
View source
version on businesswire.com: https://www.businesswire.com/news/home/20201202005903/en/
Sandy Harrison Semtech Corporation (805) 480-2004
webir@semtech.com
Semtech (NASDAQ:SMTC)
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