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Semtech Announces Third Quarter of Fiscal Year 2015 Results


CAMARILLO, Calif.--(BUSINESS WIRE)-- Semtech Corporation (Nasdaq: SMTC), a leading supplier of analog and mixed-signal semiconductors, today reported unaudited financial results for its third quarter of fiscal year 2015, which ended October 26, 2014. The Company also announced that its Board of Directors approved an increase of the existing stock repurchase authorization to $50.0 million. Prior to the increase, the Company had $21.6 million remaining from the authorization that was expanded in August 2013.

Net sales for the third quarter of fiscal year 2015 were $148.9 million, up 2 percent from the second quarter of fiscal year 2015 and up 6 percent from the third quarter of fiscal year 2014.

Gross profit margin, computed in accordance with U.S. generally accepted accounting principles ("GAAP"), for the third quarter of fiscal year 2015 was 60.0 percent compared to 60.5 percent in the second quarter of fiscal year 2015 and 59.1 percent in the third quarter of fiscal year 2014.

GAAP net income for the third quarter of fiscal year 2015 was $17.6 million or $0.26 per diluted share. This compares to GAAP net income of $17.9 million or $0.26 per diluted share in the second quarter of fiscal year 2015 and GAAP net income of $12.5 million or $0.18 per diluted share in the third quarter of fiscal year 2014.

To facilitate the complete understanding of comparable financial performance between periods, the Company also presents performance results net of certain non-cash and one-time items or other expenses which would not otherwise have been incurred by the Company in the normal course of its business operations or are not reflective of the Company's core results over time. The Company's non-GAAP results exclude the following items:

Excluding the items listed above, non-GAAP net income for the third quarter of fiscal year 2015 was $30.8 million or $0.46 per diluted share. Non-GAAP net income was $28.3 million or $0.42 per diluted share in the second quarter of fiscal year 2015 and was $24.1 million or $0.35 per diluted share in the third quarter of fiscal year 2014.

Non-GAAP gross profit margin for the third quarter of fiscal year 2015 was 60.3 percent. Non-GAAP gross profit margin for the second quarter of fiscal year 2015 was 60.8 percent and 59.4 percent in the third quarter of fiscal year 2014.

As of October 26, 2014, the Company had $233.0 million in cash, cash equivalents and marketable securities. This compares to $246.9 million in cash, cash equivalents and marketable securities at the end of fiscal year 2014.

Mohan Maheswaran, Semtech's President and Chief Executive Officer, stated "We were pleased to deliver solid earnings and operating leverage despite a challenging demand environment and weak bookings. Strength in the high-end consumer and industrial end-markets offset weakness from other markets." Maheswaran added, "We are encouraged by the number of new opportunities we are seeing from emerging markets and the quality of the design-win momentum we are seeing with several of our newer platforms which should contribute strongly to the Company's growth prospects in FY16."

The results announced today are preliminary, as they are subject to the Company finalizing its closing procedures and customary quarterly review by the Company's independent registered public accounting firm. As such, these results are subject to revision until the Company will have filed its Quarterly Report on Form 10-Q for the third quarter of fiscal year 2015.

Fourth Quarter of Fiscal Year 2015 Outlook

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 gross profit margin, net income and earnings per diluted share and free cash flow. To provide additional insight into the Company's fourth quarter outlook, this release includes a presentation of forward-looking non-GAAP measures including gross profit margin, tax rate and earnings per diluted share. The non-GAAP gross profit margin, net income and earnings per diluted share measures exclude stock-based compensation expense, amortization of acquired intangible assets and the other items detailed above. The non-GAAP presentation of free cash flow excludes capital expenditures. These non-GAAP 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 the second quarter of fiscal year 2015 and third quarter of fiscal year 2014 and a reconciliation of forward-looking earnings per diluted share to its most comparable GAAP measure for the fourth quarter of fiscal year 2015. 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 our current expectations, estimates and projections about our 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, future operational performance, the anticipated impact of specific items on future earnings, and our 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: potential differences between the unaudited results disclosed in this release and the Company's final results for the quarter when disclosed in its Quarterly Report on Form 10-Q as a result of the completion of the Company's financial closing procedures, final adjustments, review by the Company's independent registered public accounting firm and other developments arising between now and the disclosure of the final results; 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, 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; 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; adequate supply of components and materials from our suppliers, and of our products from our third-party manufacturers, to include disruptions due to natural causes or disasters, weather, or other extraordinary events; the Company's ability to forecast and achieve anticipated revenues and earnings estimates in light of periodic economic uncertainty, to include impacts arising from European, Asian and global economic dynamics; the Company's ability to manage expenses to achieve anticipated amounts; and the amount and timing of expenditures for capital equipment deemed necessary or advisable by the Company. Additionally, forward-looking statements should be considered in conjunction with the cautionary statements contained in the "Risk Factors" section and elsewhere in the Company's Annual Report on Form 10-K for the fiscal year ended 2014, including, without limitation, information under the captions "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Risk Factors", in the Company's other filings with the Securities and Exchange Commission, and in material incorporated therein by reference. 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, 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.

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Semtech and the Semtech logo are registered marks of Semtech Corporation.

 
SEMTECH CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

(Table in thousands - except per share amount)

 
           
Three Months Ended Nine Months Ended
October 26, July 27, October 27, October 26, October 27,
2014 2014 2013 2014 2013
Q3 2015 Q2 2015 Q3 2014 Q3 2015 Q3 2014
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
 
Net sales $ 148,890 $ 145,742 $ 141,026 $ 427,491 $ 468,443
Cost of sales   59,564     57,521     57,615     171,860     187,037  
Gross profit 89,326 88,221 83,411 255,631 281,406
Operating costs and expenses:
Selling, general and administrative 31,692 31,547 30,849 94,935 98,958
Product development and engineering 28,401 28,173 31,948 84,387 99,632
Intangible amortization and impairments 6,423 6,444 7,349 19,292 25,016
Restructuring charges   -     -     -     1,001     -  
Total operating costs and expenses   66,516     66,164     70,146     199,615     223,606  
Operating income 22,810 22,057 13,265 56,016 57,800
Interest expense (1,462 ) (1,588 ) (1,818 ) (4,437 ) (16,462 )
Interest income and other (expense), net   216     (345 )   (259 )   (407 )   (1,264 )
Income before taxes 21,564 20,124 11,188 51,172 40,074
Provision (benefit) for taxes   3,941     2,226     (1,265 )   7,784     (6,268 )
Net income $ 17,623   $ 17,898   $ 12,453   $ 43,388   $ 46,342  
 
Earnings per share:
Basic $ 0.26 $ 0.27 $ 0.18 $ 0.65 $ 0.69
Diluted $ 0.26 $ 0.26 $ 0.18 $ 0.64 $ 0.67
 
Weighted average number of shares used in computing earnings per share:
Basic 67,162 67,208 67,792 67,223 67,454
Diluted 67,654 67,850 68,871 67,791 68,819
 
 
 
SEMTECH CORPORATION
CONSOLIDATED BALANCE SHEETS
(Table in thousands)
 
October 26, January 26,
2014 2014
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 232,486 $ 243,194
Accounts receivable, net 78,323 66,333
Inventories 60,459 60,267
Deferred tax assets 2,989 2,946
Prepaid taxes 2,900 4,993
Other current assets   17,428     15,863  
Total current assets 394,585 393,596
 
Property, plant and equipment, net 119,498 110,121
Long-term investments 550 3,674
Deferred income taxes 89 348
Goodwill 276,898 276,898
Other intangible assets, net 121,418 140,944
Other assets   28,819     23,359  
Total assets $ 941,857   $ 948,940  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 39,856 $ 40,016
Accrued liabilities 43,302 44,148
Deferred revenue 7,859 7,267
Current portion - long term debt 18,544 18,529
Deferred tax liabilities   925     930  
Total current liabilities 110,486 110,890
 
Deferred tax liabilities - non-current

9,949

3,626
Long term debt - less current 234,384 273,293
Other long-term liabilities

27,542

25,288
Stockholders' equity   559,496     535,843  
Total liabilities & stockholders' equity $ 941,857   $ 948,940  

 

 

 
SEMTECH CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Table in thousands)
           
Nine Months Ended
October 26, October 27,
2014 2013
(Unaudited) (Unaudited)
 
 
Net income $ 43,388 $ 46,342
 
Net cash provided by operating activities 94,529 87,384
Net cash used in investing activities (26,912 ) (24,827 )
Net cash used in financing activities   (78,325 )   (48,356 )
Net increase (decrease) in cash and cash equivalents (10,708 ) 14,201
Cash and cash equivalents at beginning of period   243,194     223,192  
Cash and cash equivalents at end of period $ 232,486   $ 237,393  
 
 
SEMTECH CORPORATION
SUPPLEMENTAL INFORMATION - NOTES TO CONSOLIDATED GAAP STATEMENTS OF INCOME
(Tables in thousands - except per share amounts)
 
Three Months Ended Nine Months Ended
October 26, July 27, October 27, October 26, October 27,
2014 2014 2013 2014 2013
Stock-based Compensation Expense Q3 2015 Q2 2015 Q3 2014 Q3 2015 Q3 2014
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Cost of sales $ 391 $ 355 $ 413 $ 1,109 $ 1,146
Selling, general and administrative

4,620

3,448 $ 3,449

12,132

11,879
Product development and engineering   2,924     2,472   $ 2,967     7,815     8,585  
Total stock-based compensation expense $ 7,935   $ 6,274   $ 6,829   $ 21,056   $ 21,610  
 
 
Three Months Ended Nine Months Ended
October 26, July 27, October 27, October 26, October 27,
2014 2014 2013 2014 2013
Gross Profit - Reconciliation GAAP to Non-GAAP Q3 2015 Q2 2015 Q3 2014 Q3 2015 Q3 2014
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
 
GAAP gross profit $ 89,326 $ 88,221 $ 83,411 $ 255,631 $ 281,406
Adjustments to GAAP gross profit:
Stock-based compensation expense 391 355 413 1,109 1,146
Acquisition related fair value adjustments - - - - 2,408
Impairment charges   -     -     -     1,056     -  
Non-GAAP gross profit $ 89,717   $ 88,576   $ 83,824   $ 257,796   $ 284,960  
 
 
Three Months Ended Nine Months Ended
October 26, July 27, October 27, October 26, October 27,
2014 2014 2013 2014 2013
Net Income - Reconciliation GAAP to Non-GAAP Q3 2015 Q2 2015 Q3 2014 Q3 2015 Q3 2014
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
 
GAAP net income $ 17,623 $ 17,898 $ 12,453 $ 43,388 $ 46,342
 
Adjustments to GAAP net income:
Stock-based compensation expense $ 7,935 $ 6,274 $ 6,829 $ 21,056 $ 21,610
Acquisition related fair value adjustments 314 339 338 993 3,424
Transaction and integration related expenses (997 ) 58 607 (496 ) 2,043
Intangible amortization and impairments 6,423 6,444 7,349 19,292 25,016
Environmental reserve 235 - - 235 -
Writeoff of deferred financing cost - - - - 8,773
Restructuring charges - - - 1,001 -
Impairment charges - - - 1,052 -
         
Total before tax adjustment 13,910 13,115 15,123 43,133 60,866
Associated tax effect   (685 )   (2,740 )   (3,477 )   (5,636 )   (16,082 )
Total of supplemental information net of taxes   13,225     10,375     11,646     37,497     44,784  
Non-GAAP net income $ 30,848   $ 28,273   $ 24,099   $

80,885

  $ 91,126  
 
Diluted GAAP earnings per share $ 0.26 $ 0.26 $ 0.18 $ 0.64 $ 0.67
Adjustments per above   0.20     0.16     0.17     0.55     0.65  
Diluted non-GAAP earnings per share $ 0.46   $ 0.42   $ 0.35   $ 1.19   $ 1.32  

           
Three Months Ended Nine Months Ended
October 26, July 27, October 27, October 26, October 27,
2014 2014 2013 2014 2013
Tax Impact Associated With Supplemental Information Q3 2015 Q2 2015 Q3 2014 Q3 2015 Q3 2014
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Adjustments to GAAP net income:
Stock-based compensation expense $ 714 $ 1,101 $ 1,293 3,179 $ 5,092
Acquisition related fair value adjustments - - 111 - 747
Transaction and integration related expenses 174 183 202

494

679
Intangible amortization and impairments 1,828 1,552 1,871 4,880 6,362
Restructuring charges 24 (30 ) -

334

-
Impairment charges - - - 84 -
Valuation allowance (2,139 ) (66 ) - (3,419 ) -
Environmental reserve 84 - - 84 -
Writeoff of deferred financing cost   -     -     -     -     3,202
Total of associated tax effect $ 685   $ 2,740   $ 3,477   $ 5,636   $ 16,082
 
 
Three Months Ended
October 26, July 27, October 27,
2014 2014 2013
Q3 2015 Q2 2015 Q3 2014
(Unaudited) (Unaudited) (Unaudited)
Free Cash Flow:
Cash Flow from Operations $ 33,392 $ 38,368 $ 28,939
Net Capital Expenditure   (12,797 )   (6,283 )   (7,185 )
Free Cash Flow: $ 20,595   $ 32,085   $ 21,754  
 
 
Q4 FY15 Earnings Per Share Guidance
GAAP to Non-GAAP Reconciliation (net of tax)
Low High
GAAP EPS 0.14 0.16
 
Stock based compensation expense 0.09 0.09
Amortization of acquired intangibles 0.09 0.09
   
Non-GAAP EPS   0.32     0.34  

Semtech Corporation
Sandy Harrison
(805) 480-2004
webir@semtech.com

Source: Semtech Corporation

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