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Semtech Announces First Quarter of Fiscal Year 2018 Results


CAMARILLO, Calif., May 31, 2017 (GLOBE NEWSWIRE) -- Semtech Corporation (Nasdaq:SMTC), a leading supplier of analog and mixed-signal semiconductors, today reported unaudited financial results for its first quarter of fiscal year 2018, which ended April 30, 2017.  Net sales computed in accordance with U.S. generally accepted accounting principles ("GAAP"), were $143.8 million, after being reduced by $5.3 million of share-based compensation associated with the previously-announced issuance of a Warrant to Comcast.  Excluding the offset associated with the Warrant, net sales were $149.1 million ("non-GAAP net sales").

Highlights for the First Fiscal Quarter 2018

Results on a GAAP basis for the First Fiscal Quarter 2018

($ millions except for earnings per diluted share data)

To facilitate a complete understanding of comparable financial performance between periods, the Company also presents performance results net of certain non-cash items and items that are not considered reflective of the Company's core results over time.  The Company's non-GAAP measures of net sales, gross margin, net income, earnings per diluted share, and free cash flow exclude certain items as described below under "Non-GAAP Financial Measures."

Results on a non-GAAP basis for the First Fiscal Quarter 2018 (see the list of non-GAAP items and the reconciliation of these to the most relevant GAAP items set forth in the tables below): 

($ millions except for earnings per diluted share data)

Mohan Maheswaran, Semtech's President and Chief Executive Officer stated, "We are pleased with the strong start to fiscal year 2018 with Q1 non-GAAP net sales and profitability coming in at the upper end of our guidance.  Demand remains strong for several of our key growth platforms highlighted by record quarterly results from both our 100G ClearEdge™ platforms for cloud and hyper-scale datacenter applications, and our LoRa® wireless platforms." Maheswaran continued, "I am excited by the number of opportunities we are seeing from our target markets that include datacenters, mobile devices and particularly IoT, where our LoRa platform continues to gain tremendous momentum. We expect this broad-based strength to continue and contribute to a record annual financial performance for the year."  

GAAP Second Quarter of Fiscal Year 2018 Outlook

Non-GAAP Second Quarter of Fiscal Year 2018 Outlook

Webcast and Conference Call

Semtech will be hosting a conference call today to discuss its first quarter of fiscal year 2018 results at 2:00 p.m. Pacific time.  An audio webcast will be available on Semtech's website at www.Semtech.com under the "Investor Relations" section.  A replay of the call will be available through July 1, 2017 at the same website or by calling (855) 859-2056 and entering conference ID 81685059.

Non-GAAP Financial Measures

To supplement the Company's consolidated financial statements prepared in accordance with GAAP, this release includes a non-GAAP presentation of net sales, gross margin, net income, earnings per diluted share, and free cash flow.  The Company's measure of free cash flow is calculated as cash flow from operations less net capital expenditures.  The Company's non-GAAP measures of net sales, gross margin, net income and earnings per diluted share exclude the following items, if any:

To provide additional insight into the Company's second quarter outlook, this release also includes a presentation of forward-looking non-GAAP measures including net sales, gross margin, effective tax rate and earnings per diluted share. 

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 results for first and fourth quarters of fiscal year 2017 and the first quarter of fiscal year 2018 along with a reconciliation of forward-looking earnings per diluted share to its most comparable GAAP measure for the second quarter of fiscal year 2018.  The Company is unable to include a reconciliation of the forward-looking non-GAAP measures of non-GAAP tax rate to the corresponding GAAP measure as these are not available without unreasonable efforts due to the high variability and low visibility with respect to the charges which is 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 second quarter of fiscal year 2018 outlook, 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 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; the Company's ability to manage expenses to achieve anticipated shifts in demand among target customers, and other comparable changes or protracted weakness in projected or anticipated markets; competitive changes in the marketplace including, but not limited to, the pace of growth or adoption rates of applicable products or technologies; shifts in focus among target customers, and other comparable changes in projected or anticipated end-user markets; the Company's ability to integrate its acquisitions and realize expected synergies and benefits from its acquisitions and dispositions; the Company's ability to accurately forecast the amount and timing of the share-based compensation associated with the vesting of the Warrant issued to Comcast; the continuation and/or pace of key trends considered to be main contributors to the Company's growth, such as demand for increased network bandwidth and connectivity, demand for increasing energy efficiency in the Company's products or end-use applications of the products, and demand for increasing miniaturization of electronic components; adequate supply of components and materials from the Company's suppliers, to include disruptions due to natural causes or disasters, weather, or other extraordinary events; 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 European, Asian and global economic dynamics; and the amount and timing of expenditures for capital equipment.  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 29, 2017, 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 analog and mixed-signal semiconductors for high-end consumer, enterprise computing, communications and industrial equipment.  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 services marks, and ClearEdge is a trademark or service mark, of Semtech Corporation or its subsidiaries.

SMTC-F

  
SEMTECH CORPORATION 
CONSOLIDATED STATEMENTS OF OPERATIONS 
(Table in thousands - except per share amount) 
       
 Three Months Ended 
 April 30, January 29,  May 1, 
  2017   2017    2016  
 Q1 2018 Q4 2017 Q1 2017 
 (Unaudited)   (Unaudited) 
        
Net sales$   143,802   $   140,031   $   131,145   
Cost of sales 58,887     56,533     52,621  
Gross profit 84,915    83,498    78,524   
Operating costs and expenses:      
Selling, general and administrative 33,586     35,005     33,715  
Product development and engineering 25,983     26,203     25,172  
Intangible amortization 6,286     6,284     6,403  
Changes in the fair value of contingent earn-out obligations   -      (53)    (33) 
Loss (gain) on disposition of business operations   375     (477)    -   
Restructuring charges   429     1,248     -   
Total operating costs and expenses 66,659    68,210   65,257  
Operating income   18,256      15,288      13,267   
Interest expense, net (2,046)    (3,443)    (1,930) 
Non-operating expense, net (632)    (850)    (45) 
Income before taxes    15,578      10,995      11,292   
Provision for taxes    3,757      2,975     4,405  
Net income $   11,821   $   8,020   $   6,887   
       
Earnings  per share:      
Basic$  0.18  $  0.12  $  0.11  
Diluted$  0.18  $  0.12  $  0.11  
       
Weighted average number of shares used in computing earnings per share:      
Basic 65,839   65,716   65,144  
Diluted 67,376   66,757   65,552  
       
       
        
SEMTECH CORPORATION 
CONSOLIDATED BALANCE SHEETS 
(Table in thousands) 
       
 April 30, January 29,   
  2017   2017    
 (Unaudited)     
ASSETS      
Current assets:      
Cash and cash equivalents$  281,550  $  297,134    
Accounts receivable, net   55,912     51,441    
Inventories   76,750     65,872     
Deferred tax assets   54     -     
Prepaid taxes   3,150     5,563     
Other current assets   18,247     18,418    
Total current assets   435,663     438,428    
       
Non-current assets:      
Property, plant and equipment, net   110,317     108,910    
Deferred tax assets   5,496      5,493    
Goodwill   329,703     329,703    
Other intangible assets, net   55,487     61,773    
Other assets   70,586      67,235    
Total assets $   1,007,252   $   1,011,542     
       
LIABILITIES AND STOCKHOLDERS' EQUITY      
Current liabilities:      
Accounts payable$  39,324  $  41,960    
Accrued liabilities   39,177     54,524    
Deferred revenue   12,358     12,059    
Current portion - long term debt   14,442     14,432    
Total current liabilities   105,301     122,975    
       
Non-current liabilities:      
Deferred tax liabilities - non-current   10,071     6,881    
Long term debt - less current   222,910     226,524    
Other long-term liabilities   51,852     49,899    
Stockholders' equity   617,118     605,263    
Total liabilities & stockholders' equity$   1,007,252   $   1,011,542     
       
       
       
SEMTECH CORPORATION 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS 
(Table in thousands) 
       
 Three Months Ended   
 April 30, May 1,   
  2017   2016    
 (Unaudited) (Unaudited)   
       
Net income $   11,821   $   6,887     
       
Net cash provided by operating activities   10,359     13,801    
Net cash used in investing activities   (9,919)    (2,713)   
Net cash used in financing activities   (16,024)    (6,869)   
Net (decrease) increase in cash and cash equivalents   (15,584)    4,219    
Cash and cash equivalents at beginning of period   297,134     211,810    
Cash and cash equivalents at end of period$   281,550   $   216,029     
       
       
       
SEMTECH CORPORATION 
SUPPLEMENTAL INFORMATION - NOTES TO CONSOLIDATED GAAP STATEMENTS OF INCOME 
(Tables in thousands - except per share amounts)  
       
 Three Months Ended 
 April 30, January 29, May 1, 
  2017   2017   2016  
Share-based PaymentsQ1 2018 Q4 2017 Q1 2017 
 (Unaudited)   (Unaudited) 
Revenue offset$  5,280  $  1,727  $  -   
Cost of sales   564     482     377  
Selling, general and administrative   5,557     6,018     3,853  
Product development and engineering   1,885     1,402   1,477  
Total share-based compensation expense$  13,286   $  9,629  $  5,707  
       
       
 Three Months Ended 
 April 30, January 29, May 1, 
  2017   2017    2016  
Gross Profit - Reconciliation GAAP to Non-GAAPQ1 2018 Q4 2017 Q1 2017 
 (Unaudited)   (Unaudited) 
       
GAAP gross profit$   84,915   $   83,498   $   78,524   
Adjustments to GAAP gross profit:      
Revenue: share-based payment- Comcast Warrant 5,280     1,727     -   
Cost of sales: other share-based payments   564     482     377  
Acquisition related fair value adjustments   -      -      -   
Non-GAAP gross profit$   90,759    $   85,707   $   78,901   
       
       
 Three Months Ended 
 April 30, January 29, May 1, 
  2017   2017   2016  
Net Income - Reconciliation GAAP to Non-GAAPQ1 2018 Q4 2017 Q1 2017 
 (Unaudited)   (Unaudited) 
       
GAAP net income$   11,821   $   8,020   $   6,887   
       
Adjustments to GAAP net income:      
Share-based compensation $  13,286  $  9,629  $  5,707  
Intangible amortization   6,286     6,284     6,403  
Loss (gain) on disposition of business operations   375     (438)    -   
Transaction and related expenses, including debt refinance costs   406     1,827     736  
Acquisition related earn-out   559     191      1,293  
Environmental and other reserves   -      570     1,000  
Litigation cost net of recoveries   -      289     (1,512) 
Restructuring charges   429     1,248     -   
Total Non-GAAP adjustments before taxes   21,341      19,600     13,627  
Associated tax effect   (3,820)    (3,144)    (999) 
Total of supplemental information net of taxes   17,521     16,456     12,628  
Non-GAAP net income$   29,342   $   24,476   $   19,515   
        
Diluted GAAP earnings per share$  0.18  $  0.12  $  0.11  
Adjustments per above   0.26     0.25     0.19  
Diluted non-GAAP earnings per share$  0.44  $  0.37  $  0.30  
       
       
 Three Months Ended 
 April 30, January 29, May 1, 
  2017   2017   2016  
Tax Impact Associated With Supplemental InformationQ1 2018 Q4 2017 Q1 2017 
 (Unaudited)   (Unaudited) 
Adjustments to GAAP net income:      
Share-based compensation$  4,153  $  2,886  $  1,429  
Valuation allowance against deferred tax assets   (2,356)    (2,537)    (2,232) 
Other   2,023     2,795     1,802  
Total of associated tax effect$  3,820  $  3,144  $  999  
       
       
       
 Three Months Ended 
 April 30, January 29, May 1, 
  2017   2017   2016  
 Q1 2018 Q4 2017 Q1 2017 
 (Unaudited)   (Unaudited) 
Free Cash Flow:      
Cash Flow from Operations$  10,359  $  32,918  $  13,801  
Net Capital Expenditure (5,175)  (19,166)  (2,713) 
Free Cash Flow:$   5,184   $   13,752   $   11,088   
       
       
Q2FY18 EPS Guidance Range Reconciliation      
GAAP to Non-GAAP Reconciliation (net of tax)      
 Low  High   
GAAP EPS   0.20     0.26    
       
Stock based compensation expense   0.15     0.15    
Transaction, restructuring, and acquisition related expenses   0.01     0.01     
Amortization of acquired intangibles   0.07     0.07    
Non-GAAP EPS$  0.43  $  0.49    
       
Contact:

Sandy Harrison

Semtech Corporation

(805) 480-2004

webir@semtech.com

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Source: Semtech Corporation

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