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Semtech Announces First Quarter of Fiscal Year 2024 Results

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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 first quarter of fiscal year 2024, which ended April 30, 2023.

Highlights for the First Quarter of Fiscal Year 2024

  • Net sales of $236.5 million, an increase of 41.2% sequentially and 17.0% year-over-year
  • GAAP gross margin of 43.5% and Non-GAAP gross margin of 48.5%
  • GAAP diluted loss per share of $0.46 and Non-GAAP diluted earnings per share of $0.02
  • Published our first Corporate Sustainability Report showcasing our commitment to sustainability and products for environmental and social good
  • On May 30, 2023, the Company announced the appointment of Paul H. Pickle as the next Semtech president and chief executive officer
  • On June 6, 2023, the Company entered into a second amendment to its existing credit agreement that provides, among other things, additional cushion with respect to certain financial covenants

Results on a GAAP basis for the First Fiscal Quarter 2024

  • Net sales were $236.5 million
  • GAAP Gross margin was 43.5%
  • GAAP SG&A expense was $58.1 million
  • GAAP R&D expense was $51.8 million
  • GAAP Operating margin was (5.0)%
  • GAAP Interest expense was $20.5 million
  • GAAP Net loss attributable to common stockholders was $29.4 million or $0.46 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 First 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 48.5%
  • Non-GAAP SG&A expense was $46.2 million
  • Non-GAAP R&D expense was $46.5 million
  • Non-GAAP Operating margin was 9.3%
  • Non-GAAP Net income attributable to common stockholders was $1.5 million or $0.02 diluted earnings per share

“Semtech exceeded the midpoint of our revenue and earnings guidance as we see signs of business stabilization,” said Mohan Maheswaran, Semtech’s President and Chief Executive Officer. “As we continue to navigate this challenging macro-economic environment, we are taking steps to improve our operational efficiency and financial performance while focusing on executing our plans. With an expanded highly differentiated IoT portfolio, combined with our best-in-class High Performance Analog portfolio, we are well positioned to emerge stronger from this current cycle.”

Second Fiscal Quarter 2024 Outlook

Both the GAAP and non-GAAP second fiscal quarter 2024 outlook below take into account, based on 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 Second Fiscal Quarter 2024 Outlook

  • Net sales are expected to be in the range of $233.0 million to $243.0 million
  • GAAP Gross margin is expected to be in the range of 42.6% to 44.8%
  • GAAP SG&A expense is expected to be in the range of $63.2 million to $65.2 million
  • GAAP R&D expense is expected to be in the range of $48.0 million to $50.0 million
  • GAAP Intangible amortization expense is expected to be approximately $15.9 million
  • GAAP Interest and other expense, net is expected to be approximately $23.2 million
  • Fully-diluted share count is expected to be approximately 64.1 million shares
  • Share-based compensation is expected to be approximately $12.7 million, categorized as follows: $0.5 million cost of sales, $8.2 million SG&A, and $4.0 million R&D
  • Transaction and integration expenses are expected to be approximately $10.0 million
  • Capital expenditures are expected to be approximately $11.1 million
  • Depreciation expense is expected to be approximately $9.1 million

Non-GAAP Second 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 47.5% to 49.5%
  • Non-GAAP SG&A expense is expected to be in the range of $45.0 million to $47.0 million
  • Non-GAAP R&D expense is expected to be in the range of $44.0 million to $46.0 million
  • Non-GAAP normalized tax rate for fiscal year 2024 is expected to be approximately 12%
  • Non-GAAP Diluted (loss) earnings per share is expected to be in the range of $(0.02) to $0.06

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 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 first 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 13736081. 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 July 5, 2023 at the same website or by calling (877) 660-6853 and entering conference ID 13736081.

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, 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
  • Amortization of purchased intangibles, impairments and credit loss reserves
  • Restructuring and transaction costs (including costs associated with the acquisition of Sierra Wireless), and other acquisition or disposition-related gains or losses
  • Share-based compensation acceleration expense related to the acquisition of Sierra Wireless
  • Litigation expenses or dispute settlement charges or gains
  • Cumulative other reserves associated with historical activity including environmental and pension
  • Equity method (loss) income
  • Interest income from debt investments

To provide additional insight into the Company’s second 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. The financial statements provided with this release include reconciliations of these non-GAAP financial measures to their most comparable GAAP measures for the first and fourth quarters of fiscal year 2023 and the first quarter of fiscal year 2024, along with a reconciliation of forward-looking non-GAAP measures (other than the non-GAAP normalized tax rate and non-GAAP Diluted (loss) earnings per share) to their most comparable GAAP measures for the second 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 second 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 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; future responses to and effects of public health crises; 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; 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; and the Company’s ability to forecast and achieve anticipated net sales and earnings estimates in light of periodic economic uncertainty. 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 INCOME

(in thousands, except per share data)

(unaudited)

 

 

Three Months Ended

 

April 30,
2023

 

January 29,
2023

 

May 1,
2022

 

Q124

 

Q423

 

Q123

Net sales

$

236,539

 

 

$

167,512

 

 

$

202,149

 

Cost of sales

 

122,738

 

 

 

64,934

 

 

 

71,896

 

Amortization of acquired technology

 

10,855

 

 

 

2,565

 

 

 

1,048

 

Total cost of sales

 

133,593

 

 

 

67,499

 

 

 

72,944

 

Gross profit

 

102,946

 

 

 

100,013

 

 

 

129,205

 

Operating costs and expenses, net:

 

 

 

 

 

Selling, general and administrative

 

58,117

 

 

 

101,952

 

 

 

43,364

 

Product development and engineering

 

51,827

 

 

 

52,899

 

 

 

38,789

 

Intangible amortization

 

4,882

 

 

 

821

 

 

 

 

Total operating costs and expenses, net

 

114,826

 

 

 

155,672

 

 

 

82,153

 

Operating (loss) income

 

(11,880

)

 

 

(55,659

)

 

 

47,052

 

Interest expense

 

(20,510

)

 

 

(6,181

)

 

 

(1,197

)

Interest income

 

1,069

 

 

 

4,043

 

 

 

364

 

Non-operating expense, net

 

(473

)

 

 

(735

)

 

 

(102

)

Investment impairments and credit loss reserves, net

 

(33

)

 

 

(1,532

)

 

 

(24

)

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

 

(31,827

)

 

 

(60,064

)

 

 

46,093

 

(Benefit) provision for taxes

 

(2,417

)

 

 

(9,071

)

 

 

8,069

 

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

 

(29,410

)

 

 

(50,993

)

 

 

38,024

 

Equity method (loss) income

 

(7

)

 

 

(22

)

 

 

24

 

Net (loss) income

 

(29,417

)

 

 

(51,015

)

 

 

38,048

 

Net loss attributable to noncontrolling interest

 

(2

)

 

 

(2

)

 

 

(1

)

Net (loss) income attributable to common stockholders

$

(29,415

)

 

$

(51,013

)

 

$

38,049

 

 

 

 

 

 

 

(Loss) earnings per share:

 

 

 

 

 

Basic

$

(0.46

)

 

$

(0.80

)

 

$

0.59

 

Diluted

$

(0.46

)

 

$

(0.80

)

 

$

0.59

 

 

 

 

 

 

 

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

 

 

 

 

 

Basic

 

63,924

 

 

 

63,864

 

 

 

63,950

 

Diluted

 

63,924

 

 

 

63,924

 

 

 

64,553

 

 

SEMTECH CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

(unaudited)

 

April 30, 2023

 

January 29, 2023

ASSETS

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

164,198

 

$

235,510

Accounts receivable, net

 

145,383

 

 

161,695

Inventories

 

213,234

 

 

207,704

Prepaid taxes

 

11,554

 

 

6,243

Other current assets

 

130,030

 

 

111,634

Total current assets

 

664,399

 

 

722,786

Non-current assets:

 

 

 

Property, plant and equipment, net

 

165,341

 

 

169,293

Deferred tax assets

 

67,490

 

 

63,783

Goodwill

 

1,288,828

 

 

1,281,703

Other intangible assets, net

 

198,784

 

 

215,102

Other assets

 

115,182

 

 

116,961

Total assets

$

2,500,024

 

$

2,569,628

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

74,407

 

$

100,676

Accrued liabilities

 

192,654

 

 

253,075

Current portion of long-term debt

 

42,695

 

 

43,104

Total current liabilities

 

309,756

 

 

396,855

Non-current liabilities:

 

 

 

Deferred tax liabilities

 

4,708

 

 

5,065

Long-term debt

 

1,336,636

 

 

1,296,966

Other long-term liabilities

 

115,715

 

 

114,707

Stockholders’ equity

 

733,028

 

 

755,852

Noncontrolling interest

 

181

 

 

183

Total liabilities & equity

$

2,500,024

 

$

2,569,628

 

SEMTECH CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS AND SUPPLEMENTAL INFORMATION

(in thousands)

(unaudited)

 

 

 

Three Months Ended

 

 

 

April 30,
2023

 

May 1,
2022

Net (loss) income

 

 

$

(29,417

)

 

$

38,048

 

 

 

 

 

 

 

Net cash (used in) provided by operations

 

 

 

(89,987

)

 

 

50,051

 

Net cash used in investing activities

 

 

 

(14,407

)

 

 

(10,315

)

Net cash provided by (used in) financing activities

 

 

 

33,728

 

 

 

(44,153

)

Effect of foreign exchange rate changes on cash and cash equivalents

 

 

 

(646

)

 

 

 

Net decrease in cash and cash equivalents

 

 

 

(71,312

)

 

 

(4,417

)

Cash and cash equivalents at beginning of period

 

 

 

235,510

 

 

 

279,601

 

Cash and cash equivalents at end of period

 

 

$

164,198

 

 

$

275,184

 

 

 

 

 

 

 

 

Three Months Ended

 

April 30,
2023

 

January 29,
2023

 

May 1,
2022

 

Q124

 

Q423

 

Q123

Free Cash Flow:

 

 

 

 

 

Cash Flow from Operations

$

(89,987

)

 

$

(18,799

)

 

$

50,051

 

Net Capital Expenditures

 

(13,977

)

 

 

(5,680

)

 

 

(8,315

)

Free Cash Flow

$

(103,964

)

 

$

(24,479

)

 

$

41,736

 

 

Three Months Ended

(in thousands)

April 30, 2023

Net sales by reportable segment:

 

 

 

Signal Integrity Products Group

$

41,646

 

18

%

Advanced Protection and Sensing Products Group

 

36,057

 

15

%

IoT System Products Group

 

134,576

 

57

%

IoT Connected Services Group

 

24,260

 

10

%

Total net sales by reportable segment

$

236,539

 

100

%

 

Three Months Ended

(in thousands)

April 30, 2023

Net sales by end market:

 

 

 

Infrastructure

$

39,000

 

16

%

High-End Consumer

 

21,594

 

9

%

Industrial

 

175,945

 

75

%

Total net sales by end market

$

236,539

 

100

%

 

SEMTECH CORPORATION

SUPPLEMENTAL INFORMATION: RECONCILIATION OF GAAP TO NON-GAAP RESULTS

(in thousands, except per share data)

(unaudited)

 

 

Three Months Ended

 

April 30,
2023

 

January 29,
2023

 

May 1,
2022

 

Q124

 

Q423

 

Q123

Gross Margin–GAAP

 

43.5

%

 

 

59.7

%

 

 

63.9

%

Share-based compensation

 

0.2

%

 

 

0.4

%

 

 

0.4

%

Amortization of acquired technology

 

4.6

%

 

 

1.5

%

 

 

0.5

%

Share-based compensation acceleration expense

 

%

 

 

0.5

%

 

 

%

Restructuring and other reserves

 

0.2

%

 

 

0.2

%

 

 

%

Adjusted Gross Margin (Non-GAAP)

 

48.5

%

 

 

62.3

%

 

 

64.8

%

 

 

 

 

 

 

 

Three Months Ended

 

April 30,
2023

 

January 29,
2023

 

May 1,
2022

 

Q124

 

Q423

 

Q123

Selling, general and administrative–GAAP

$

58,117

 

 

$

101,952

 

 

$

43,364

 

Share-based compensation

 

(4,502

)

 

 

(7,801

)

 

 

(6,132

)

Transaction and integration related costs, net

 

(7,068

)

 

 

(22,513

)

 

 

(495

)

Share-based compensation acceleration expense

 

 

 

 

(33,937

)

 

 

 

Restructuring and other reserves, net

 

(337

)

 

 

(8,850

)

 

 

(500

)

Litigation costs, net

 

(26

)

 

 

(13

)

 

 

(181

)

Adjusted selling, general and administrative (Non-GAAP)

$

46,184

 

 

$

28,838

 

 

$

36,056

 

 

 

 

 

 

 

 

Three Months Ended

 

April 30,
2023

 

January 29,
2023

 

May 1,
2022

 

Q124

 

Q423

 

Q123

Product development and engineering–GAAP

$

51,827

 

 

$

52,899

 

 

$

38,789

 

Share-based compensation

 

(3,539

)

 

 

(3,592

)

 

 

(3,986

)

Transaction and integration related costs, net

 

(534

)

 

 

(25

)

 

 

 

Share-based compensation acceleration expense

 

 

 

 

(11,010

)

 

 

 

Restructuring and other reserves, net

 

(1,226

)

 

 

(397

)

 

 

 

Adjusted product development and engineering (Non-GAAP)

$

46,528

 

 

$

37,875

 

 

$

34,803

 

 

 

 

 

 

 

 

Three Months Ended

 

April 30,
2023

 

January 29,
2023

 

May 1,
2022

 

Q124

 

Q423

 

Q123

Operating Margin–GAAP

 

(5.0

)%

 

 

(33.2

)%

 

 

23.3

%

Share-based compensation

 

3.6

%

 

 

7.2

%

 

 

5.5

%

Intangible amortization

 

6.6

%

 

 

2.0

%

 

 

0.5

%

Transaction and integration related costs, net

 

3.2

%

 

 

13.5

%

 

 

0.2

%

Share-based compensation acceleration expense

 

%

 

 

27.3

%

 

 

%

Restructuring and other reserves, net

 

0.9

%

 

 

5.7

%

 

 

0.2

%

Litigation costs, net

 

%

 

 

%

 

 

0.1

%

Adjusted Operating Margin (Non-GAAP)

 

9.3

%

 

 

22.5

%

 

 

29.8

%

 

Contacts

Anojja Shah

Semtech Corporation

(630) 390-6413

Anojja.Shah@semtech.com

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