Semtech Posts Strong 4Q - Analyst Blog
March 07 2013 - 4:20AM
Zacks
Semtech
Corporation (SMTC) reported fourth-quarter 2013 earnings
of 39 cents per share, surpassing the Zacks Consensus Estimate of
34 cents. Adjusted earnings per share exclude one-time items, but
include stock-based compensation expense.
Revenues
Semtech’s total revenue was $150.6
million, up 44.8% year over year. Reported revenues were toward the
higher end of the management’s expectation range of $146.0 million
to $152.0 million.
Direct sales represented
approximately 60% of total fourth-quarter revenues, while
distribution brought in the balance 40%.
Bookings
In the quarter, bookings grew
across all end markets and the book to bill ratio was above 1.
Total bookings accounted for approximately 41% of shipments during
the quarter.
Revenue by
Geography
In the fourth quarter, Asia
remained the largest contributor to Semtech’s revenues, with a
share of around 71%. North America accounted for 17% of the
revenues, with the remaining 12% coming from Europe.
Margins
Reported gross margin for the
quarter was 58.4%, up 100 basis points (bps) from the year-ago
quarter and down 180 bps sequentially. The sequential decrease in
gross margin was due to lower IP licensing revenues compared with
the prior quarter.
Semtech reported operating expenses
of $67.3 million, which were 47.3% higher than the year-ago
quarter’s $45.7 million. Operating margin was 8.2%, down from 11.4%
in the year-ago quarter due to higher-than-expected operating
expenses. As a percentage of sales, product development and
engineering expenses increased from the year-ago quarter, while
selling, general and administrative (SG&A) expenses
declined.
Net Income
On a GAAP basis, Semtech recorded
net income of $13.1 million (19 cents per share) compared with
$12.4 million (19 cents per share) in the year-ago quarter and
$16.6 million (25 cents per share) in the previous quarter.
On a pro forma basis, Semtech
generated net income of $26.7 million compared with $15.8 million
in the year-ago comparable quarter. Pro forma earnings per share
came in at 39 cents compared with 24 cents in the year-ago
quarter.
Balance Sheet
Semtech ended the fourth quarter
with cash and cash equivalents (including temporary investments)
balance of $228.2 million versus $210.0 million in the previous
quarter. Accounts receivables were $69.2 million, down from $72.8
million in the prior quarter. Days sales outstanding were 43 days,
up from 42 days in the last quarter.
During the quarter, cash flow from
operations was $35.2 million, free cash flow was $30.0 million and
capital expenditure was $5.2 million. The company spent $7.5
million to repurchase approximately 263,000 shares.
Guidance
For the first quarter of 2014,
management expects revenues in the range of $154.0 million to
$162.0 million. Gross profit margin is expected in the range of
59.2%–59.8% on a GAAP basis and 61.0%–61.5% on a non-GAAP basis,
flat year over year.
Selling, general and administrative
(SG&A) expense is expected in the range of $35.4–$35.9 million
and research and development (R&D) expense is expected in the
range of $32.3 million to $32.8 million on a GAAP basis. The
company anticipates stock-based compensation expense of $8.8
million, intangibles amortization charges of $7.8 million,
transaction and other integration related expenses of approximately
$1.7 million and interest and other expense of $4.1 million.
Accordingly, based on a share count
of 68.0 million, GAAP EPS is expected in the range of 17 cents to
24 cents and non-GAAP EPS is expected to be 43–49 cents.
Also, for the first quarter, the
tax rate is expected to be approximately nil to 2% on a GAAP basis.
Capital expenditure is expected to be approximately $10.0
million.
Our
Recommendation
Semtech Corporation is a
manufacturer of a wide range of analog and mixed-signal
semiconductors, including Standard Semiconductor Products,
Rectifier and Assembly Products and Other Products. The company
reported a robust quarter with earnings beating our
expectations.
In the quarter, the company
performed strongly with bookings increasing across all end markets
and book-to-bill ratio of above 1 reflecting strong growth.
Management’s first-quarter guidance was above the analysts’
estimates, reflecting improvement in discrete analog.
We remain optimistic about the
company’s long-term prospects, solid execution and its decision to
reduce operating expenses going forward.
Currently, Semtech has a Zacks Rank
#3 (Hold). Other stocks in the sector that have been performing
well and are worth a look include RDA Microelectronics,
Inc (RDA), Supertex Inc (SUPX) and
Microchip Technology Inc. (MCHP). While RDA
Microelectronics and Supertex carry a Zacks Rank #1 (Strong Buy),
Microchip Technology carries a Zacks Rank #2 (Buy)
MICROCHIP TECH (MCHP): Free Stock Analysis Report
RDA MICROEL-ADR (RDA): Free Stock Analysis Report
SEMTECH CORP (SMTC): Free Stock Analysis Report
SUPERTEX INC (SUPX): Free Stock Analysis Report
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