Semtech (SMTC) Q3 Earnings In Line; Sales Miss Estimates
Zacks Investment Research | Dec 04, 2016 10:31PM ET
Semtech Corporation (NASDAQ:SMTC) reported third-quarter fiscal 2017 earnings of 28 cents per share, in line with the Zacks Consensus Estimate. Adjusted earnings per share exclude one-time items but include stock-based compensation expense.
Shares of Semtech have been steadily treading higher on a year-to-date basis. The stock has returned 60.15% compared with the Zacks Semi-Analog and Mixed industry’s gain of 21.60%.
Revenues
Semtech’s total revenue was $137.2 million, up 0.9% sequentially and 18.5% year over year. The upside was driven by strong demand for the company’s consumer and communication end-markets, partially offset by weakness in the enterprise market.
Reported revenues came within management’s expected range of $134.0 million to $142.0 million but below the Zacks Consensus Estimate of $139.0 million.
Distribution sales represented approximately 64% of total revenue, while direct sales accounted for the rest.
Bookings
During the quarter, bookings increased 48% year over year. However, the book-to-bill ratio was above 1.
Margins
Reported gross margin was 59.1%, down 110 basis points (bps) sequentially and 100 bps year over year. The decline was due to an unfavorable mix.
Semtech’s operating expenses (selling, general and administrative (SG&A) + product development and engineering) of $60.7 million increased 5.4% from $57.6 million in the year-ago quarter. As a percentage of sales, both SG&A, and product development & engineering expenses decreased. The net result was an operating margin of 28.5% compared with 16.3% in the third-quarter of fiscal 2016.
Net Income
On a GAAP basis, Semtech recorded net income of $30.8 million or 46 cents per share versus $10.7 million or 16 cents per share a year ago.
On a pro forma basis, Semtech generated earnings per share of 28 cents compared with 12 cents a year ago.
Balance Sheet & Cash Flow
Semtech ended the quarter with cash and cash equivalents of $298.0 million compared with $238.9 million in the previous quarter. Accounts receivables were $59.2 million, up from $57.0 million in the prior quarter. Days sales outstanding increased by two to 38.
Total debt (short term plus long term) was $247.9 million compared with $247.7 million in the previous quarter.
During the quarter, cash flow from operations was $39.2 million, capital expenditure was $8.4 million and free cash flow totaled $30.8 million.
Guidance
For the fourth quarter of fiscal 2017, on a non-GAAP basis, management expects revenues in the range of $134.0 million to $142.0 million. Gross profit margin is expected within 60.0–60.5%.
Management projects SG&A expense within $27–$28 million, and research and development expense of $24–$25 million.
GAAP earnings per share are expected in the range of 13–17 cents, while non-GAAP earnings are projected within 33–37 cents. The Zacks Consensus Estimate is pegged at 27 cents.
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