Semtech Announces Second Quarter of Fiscal Year 2014 Results and Expansion of Stock Repurchase Progr

Semtech Announces Second Quarter of Fiscal Year 2014 Results and Expansion of Stock Repurchase Program

  • Record Revenue of $165M, up 9% Year-Over-Year

  • Record Gross Profit of $101M, up 35% Year-Over-Year

  • Record Gross Profit Margin of 61%

  • Net Income up 29% Sequentially

CAMARILLO, Calif.--(BUSINESS WIRE)-- Semtech Corporation (NAS: SMTC) , a leading supplier of analog and mixed-signal semiconductors, today reported unaudited financial results for its fiscal year 2014 second quarter, which ended July 28, 2013. The company also announced that its Board of Directors approved increasing the existing stock repurchase authorization by $50.0 million. Prior to the increase, the company had $42.5 million remaining from the authorization implemented in November 2011.

Net revenue for the second quarter of fiscal year 2014 was $165.0 million, up 9.5 percent from the second quarter of fiscal year 2013 and up 1.6 percent from the first quarter of fiscal year 2014.


Gross profit margin, computed in accordance with U.S. generally accepted accounting principles (GAAP), for the second quarter of fiscal year 2014 was 61.0 percent compared to 49.5 percent in the second quarter of fiscal year 2013 and 59.9 percent in the first quarter of fiscal year 2014.

GAAP net income for the second quarter of fiscal year 2014 was $19.1 million or 28 cents per diluted share. This compares to GAAP net income of $10.0 million or 15 cents per diluted share in the second quarter of fiscal year 2013 and GAAP net income of $14.8 million or 22 cents per diluted share in the first quarter of fiscal year 2014.

To facilitate the complete understanding of comparable financial performance between periods, Semtech also presents performance results net of certain non-cash and one-time items. Semtech's non-GAAP results exclude the following items:

  • Stock-based compensation expense

  • Acquisition related fair value adjustments

  • Transaction and integration related expenses

  • Intangible amortization and impairments

  • Write off of deferred financing costs

  • Release of prior accrued taxes on foreign earnings

Excluding the items listed above, Non-GAAP net income for the second quarter of fiscal year 2014 was $35.8 million or 52 cents per diluted share. Non-GAAP net income was $27.5 million or 41 cents per diluted share in the second quarter of fiscal year 2013 and was $31.3 million or 46 cents per diluted share in the first quarter of fiscal year 2014.

Non-GAAP gross profit margin for the second quarter of fiscal year 2014 was 61.3 percent. Non-GAAP gross profit margin for the second quarter of fiscal year 2013 was 61.2 percent and 61.6 percent in the first quarter of fiscal year 2014.

As of July 28, 2013 Semtech had $242.0 million in cash, cash equivalents and marketable securities, compared to $173.4 million in cash, cash equivalents and marketable securities at the end of the second quarter of fiscal year 2013 and $236.4 million in cash, cash equivalents and marketable securities at the end of the first quarter of fiscal year 2014.

Mohan Maheswaran, Semtech's President and Chief Executive Officer, stated, "Semtech delivered solid second quarter results with record revenue and gross margin. We also expanded operating margin, grew net income and continued to see strong design win activity. We expect our Q3 results to be negatively impacted by both a reduction in demand and inventory corrections at several of our largest smartphone customers. We anticipate that this weakness will continue through most of the second half. However, we remain confident in our ability to manage through any short term demand fluctuations as we head towards our $1 billion revenue goal."

The results announced today are preliminary, as they are subject to customary quarterly review procedures 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 second quarter of fiscal year 2014.

Third Quarter of Fiscal Year 2014 Outlook

  • Net sales are expected to be in the range of $135.0 million to $145.0 million

  • GAAP gross profit margin is expected to be in the range of 58.7% to 59.7%

  • Non-GAAP gross profit margin is expected to be in the range of 59.0% to 60.0%

  • GAAP SG&A expense is expected to be in the range of $30.0 million to $31.5 million

  • GAAP R&D expense is expected to be in the range of $31.0 million to $31.5 million

  • Stock-based compensation expense, which is included in the preceding estimates, is expected to be approximately $6.4 million, categorized as follows: $0.4 million cost of sales, $3.2 million SG&A, and $2.8 million R&D

  • Amortization of acquired intangible assets is expected to be approximately $7.6 million

  • Transaction and integration related expenses of approximately $1.0 million

  • Interest and other expense is expected to be approximately $2.0 million

  • GAAP tax rate is expected to be a benefit in the range of 2.0% to 3.0%

  • Non-GAAP tax rate is expected to be a provision in the range of 9.0% to 11.0%

  • GAAP earnings are expected to be in the range of 13 to 21 cents per diluted share

  • Non-GAAP earnings are expected to be in the range of 31 to 37 cents per diluted share

  • Fully diluted share count is expected to be approximately 69.0 million shares

  • Capital expenditures are expected to be approximately $10.0 million

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, net income and earnings per diluted share and free cash flow. To provide additional insight into the Company's second quarter outlook, this release includes a presentation of forward-looking non-GAAP earnings per diluted share. A further discussion of these non-GAAP financial measures can be found above. The non-GAAP gross profit, net income and earnings per diluted share measures exclude stock-based compensation, 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 GAAP results for the second quarter of fiscal years 2014 and 2013 and the first quarter of fiscal year 2014; and a reconciliation of forward-looking earnings per diluted share for the third quarter of fiscal year 2014. These additional 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 Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended. 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. These forward-looking statements are identified by the use of such terms and phrases as "intends," "goal," "estimate, "expect," "project," "plans," "anticipates," "should," "will," "designed to," "believe," and other similar expressions which generally identify 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. Important factors that could cause actual results to differ materially include, but are not limited to: 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, 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 market place, 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, or related extraordinary weather 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 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 January 27, 2013, in the Company's other filings with the SEC, and in material incorporated therein by reference. In light of the significant uncertainties inherent in the forward-looking information included herein, any such forward-looking information should not be regarded as representations by the Company that its objectives or plans will be achieved or that any of its operating expectations or financial forecasts will be realized. Investors are cautioned not to place undue reliance on any forward-looking information contained herein. The Company assumes no obligation to update or revise any forward-looking statements, whether as a result of new information, 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.

Semtech and the Semtech logo are marks of Semtech Corporation.

SEMTECH CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

(Table in thousands - except per share amount)

Three Months Ended

Six Months Ended

July 28,

April 28,

July 29,

July 28,

July 29,

2013

2013

2012

2013

2012

Q2 2014

Q1 2014

Q2 2013

FY 2014

FY 2013

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

Net sales

$

165,010

$

162,407

$

150,704

$

327,417

$

267,346

Cost of sales

64,302

65,120

76,179

129,422

137,484

Gross profit

100,708

97,287

74,525

197,995

129,862

Operating costs and expenses:

Selling, general and administrative

33,315

34,794

31,220

68,109

76,038

Product development and engineering

33,125

34,559

32,613

67,684

56,696

Intangible amortization and impairments

9,811

7,856

7,977

17,667

13,555

Total operating costs and expenses

76,251

77,209

71,810

153,460

146,289

Operating income (loss)

24,457

20,078

2,715

44,535

(16,427

)

Interest expense

(10,584

)

(4,060

)

(3,442

)

(14,644

)

(4,955

)

Interest income and other (expense), net

(198

)

(807

)

(590

)

(1,005

)

(706

)

Income (loss) before taxes

13,675

15,211

(1,317

)

28,886

(22,088

)

(Benefit) provision for taxes

(5,437

)

434

(11,339

)

(5,003

)

(34,319

)

Net income

$

19,112

$

14,777

$

10,022

$

33,889

$

12,231

Earnings per share:

Basic

$

0.28

$

0.22

$

0.15

$

0.50

$

0.19

Diluted

$

0.28

$

0.22

$

0.15

$

0.49

$

0.18

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

Basic

67,614

66,956

65,587

67,285

65,435

Diluted

69,090

68,579

67,165

68,813

67,207

SEMTECH CORPORATION

CONSOLIDATED BALANCE SHEETS

(Table in thousands)

July 28,

January 27,

2013

2013

(Unaudited)

ASSETS

Current assets:

Cash and cash equivalents

$

237,060

$

223,192

Temporary investments

-

4,973

Accounts receivable, net

80,595

69,160

Inventories

78,214

74,878

Deferred tax assets

7,334

7,473

Prepaid taxes

7,073

7,794

Other current assets

19,214

18,523

Total current assets

429,490

405,993

Property, plant and equipment, net

113,314

101,837

Long-term investments

4,923

7,907

Deferred income taxes

40,828

33,563

Goodwill

393,584

393,584

Other intangible assets, net

187,916

206,058

Other assets

19,595

22,071

Total assets

$

1,189,650

$

1,171,013

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable

$

50,404

$

51,991

Accrued liabilities

36,866

49,276

Deferred revenue

5,398

3,745

Current portion - long term debt

18,385

48,449

Deferred tax liabilities

3,245

4,221

Total current liabilities

114,298

157,682

Deferred tax liabilities - non-current

3,636

2,042

Long term debt - less current

282,157

282,286

Other long-term liabilities

39,073

34,177

Stockholders' equity

750,486

694,826

Total liabilities & stockholders' equity

$

1,189,650

$

1,171,013

SEMTECH CORPORATION

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(Table in thousands)

Six Months Ended

July 28,

July 29,

2013

2012

(Unaudited)

(Unaudited)

Cash flows from operating activities:

Net income

$

33,889

$

12,231

Adjustments to reconcile net income to net cash provided by operating activities, net of effects of acquisitions:

Depreciation, amortization and impairments

28,937

22,545

Effect of acquisition fair value adjustments

121

28,600

Accretion of deferred financing costs and debt discount

1,010

1,081

Writeoff of deferred financing costs and debt discount

8,773

-

Deferred income taxes

(6,529

)

(12,425

)

Stock-based compensation

14,782

10,245

Excess tax benefits on stock based compensation

-

(2,913

)

(Gain) loss on disposition of property, plant, and equipment

(27

)

85

Changes in assets and liabilities

(22,511

)

(47,578

)

Net cash provided by operating activities

58,445

11,871

Cash flows from investing activities:

Purchase of available-for-sale investments

(1,050

)

(10,106

)

Proceeds from sales and maturities of available-for-sale investments

8,998

103,199

Proceeds from sales of property, plant, and equipment

57

-

Purchase of property, plant, and equipment

(23,565

)

(10,715

)

Purchase of intangible assets

(2,583

)

-

Acquisitions, net of cash acquired

-

(491,717

)

Net cash used in investing activities

(18,143

)