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Semtech Q2 Earnings Beat: Can Positive Q3 Guidance Lift Shares?
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Semtech Corporation’s (SMTC - Free Report) second-quarter fiscal 2025 non-GAAP earnings of 11 cents per share beat the Zacks Consensus Estimate by 10%. The bottom line declined 15.4% year over year.
Net sales of $215.4 million surpassed the Zacks Consensus Estimate of $212.42 million. The figure declined 9.6% from the prior-year quarter’s levels.
However, SMTC provided positive guidance for third-quarter fiscal 2025. At the mid-point, it now expects growth in net sales, gross, operating and adjusted EBITDA margins. This calls for earnings growth in the current quarter.
SMTC’s shares are up 74.2% year to date compared with the industry’s growth of 11.4%. Despite the decline in top- and bottom-line figures, we expect positive guidance to keep the momentum running.
Semtech Corporation Price, Consensus and EPS Surprise
Broad-based weakness in the industrial end-market led to a top-line decline on a year-over-year basis. Softness in the IoT Systems and Connectivity segment was a headwind.
The growing momentum across the infrastructure and high-end consumer end markets benefited the company. Strength in Signal Integrity and Analog Mixed Signal & Wireless segments was a positive.
SMTC's Revenues by End Market
Sales from the infrastructure market were $52.9 million (25% of net sales), exhibiting year-over-year growth of 25%. This was driven by solid demand for Semtech’s FiberEdge TIAs, laser drivers and Tri-Edge 50G PAM4 products that led to strong growth in hyperscale data center sales in the reported quarter.
Sales from the industrial market were $125.3 million (58% of net sales), down 23% from the prior-year period’s tally.
Sales from the high-end consumer market were $37.1 million (17% of net sales), increasing 9% year over year. Strong market demand, along with solid momentum in consumer circuit protection and smart sensing products, drove top-line growth.
SMTC's Revenues by Product Lines
Signal Integrity (28% of net sales) sales were $59.4 million in the reported quarter, up 28.9% year over year.
Analog Mixed Signal & Wireless (37% of net sales) sales were $79.3 million, up 13.3% from the prior-year quarter’s figures.
IoT System and Connectivity (35% of net sales) sales were $76.6 million, down 37.4% on a year-over-year basis.
SMTC's Operating Results
The non-GAAP gross margin of 50.4% expanded 80 basis points (bps) from the year-ago quarter’s tally.
Adjusted selling, general and administrative expenses for the fiscal second quarter declined 3.5% to $41.3 million from the prior-year quarter’s levels.
Adjusted product development and engineering expenses fell 14.7% from the year-ago quarter’s figure to $36.6 million.
The non-GAAP operating margin of 14.2% expanded 60 bps from the prior-year quarter’s tally.
Semtech's Balance Sheet & Cash Flow
As of Jul. 28, 2024, cash and cash equivalents were $115.9 million, down from $128.6 million as of Apr. 28, 2024.
Account receivables for second-quarter fiscal 2025 were $152.9 million, down from $153.9 million in first-quarter fiscal 2025.
The long-term debt was $1.19 billion compared with $1.37 billion in the previous quarter.
In the reported quarter, the company used $4.99 million of cash in operations compared with $89,000 of cash used in operations in the previous fiscal quarter. The free cash flow in the fiscal second quarter was an outflow of $8.41 million.
SMTC Offers Positive Q3 Guidance
For third-quarter fiscal 2025, management expects net sales of $233 million (+/- $5 million). The Zacks Consensus Estimate for the same is pegged at $228.79 million.
The non-GAAP gross margin is expected to be 52% (+/- 50 bps). The non-GAAP operating margin is anticipated to be 17.2% (+/- 80 bps).
The non-GAAP-based earnings per share is expected to be 23 cents (+/- 3 cents). The consensus mark for earnings is pegged at 21 cents per share.
Zacks Rank & Stocks to Consider
Currently, Semtech carries a Zacks Rank #4 (Sell).
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Semtech Q2 Earnings Beat: Can Positive Q3 Guidance Lift Shares?
Semtech Corporation’s (SMTC - Free Report) second-quarter fiscal 2025 non-GAAP earnings of 11 cents per share beat the Zacks Consensus Estimate by 10%. The bottom line declined 15.4% year over year.
Net sales of $215.4 million surpassed the Zacks Consensus Estimate of $212.42 million. The figure declined 9.6% from the prior-year quarter’s levels.
However, SMTC provided positive guidance for third-quarter fiscal 2025. At the mid-point, it now expects growth in net sales, gross, operating and adjusted EBITDA margins. This calls for earnings growth in the current quarter.
SMTC’s shares are up 74.2% year to date compared with the industry’s growth of 11.4%. Despite the decline in top- and bottom-line figures, we expect positive guidance to keep the momentum running.
Semtech Corporation Price, Consensus and EPS Surprise
Semtech Corporation price-consensus-eps-surprise-chart | Semtech Corporation Quote
SMTC’s Q2 Top-Line Details
Broad-based weakness in the industrial end-market led to a top-line decline on a year-over-year basis. Softness in the IoT Systems and Connectivity segment was a headwind.
The growing momentum across the infrastructure and high-end consumer end markets benefited the company. Strength in Signal Integrity and Analog Mixed Signal & Wireless segments was a positive.
SMTC's Revenues by End Market
Sales from the infrastructure market were $52.9 million (25% of net sales), exhibiting year-over-year growth of 25%. This was driven by solid demand for Semtech’s FiberEdge TIAs, laser drivers and Tri-Edge 50G PAM4 products that led to strong growth in hyperscale data center sales in the reported quarter.
Sales from the industrial market were $125.3 million (58% of net sales), down 23% from the prior-year period’s tally.
Sales from the high-end consumer market were $37.1 million (17% of net sales), increasing 9% year over year. Strong market demand, along with solid momentum in consumer circuit protection and smart sensing products, drove top-line growth.
SMTC's Revenues by Product Lines
Signal Integrity (28% of net sales) sales were $59.4 million in the reported quarter, up 28.9% year over year.
Analog Mixed Signal & Wireless (37% of net sales) sales were $79.3 million, up 13.3% from the prior-year quarter’s figures.
IoT System and Connectivity (35% of net sales) sales were $76.6 million, down 37.4% on a year-over-year basis.
SMTC's Operating Results
The non-GAAP gross margin of 50.4% expanded 80 basis points (bps) from the year-ago quarter’s tally.
Adjusted selling, general and administrative expenses for the fiscal second quarter declined 3.5% to $41.3 million from the prior-year quarter’s levels.
Adjusted product development and engineering expenses fell 14.7% from the year-ago quarter’s figure to $36.6 million.
The non-GAAP operating margin of 14.2% expanded 60 bps from the prior-year quarter’s tally.
Semtech's Balance Sheet & Cash Flow
As of Jul. 28, 2024, cash and cash equivalents were $115.9 million, down from $128.6 million as of Apr. 28, 2024.
Account receivables for second-quarter fiscal 2025 were $152.9 million, down from $153.9 million in first-quarter fiscal 2025.
The long-term debt was $1.19 billion compared with $1.37 billion in the previous quarter.
In the reported quarter, the company used $4.99 million of cash in operations compared with $89,000 of cash used in operations in the previous fiscal quarter. The free cash flow in the fiscal second quarter was an outflow of $8.41 million.
SMTC Offers Positive Q3 Guidance
For third-quarter fiscal 2025, management expects net sales of $233 million (+/- $5 million). The Zacks Consensus Estimate for the same is pegged at $228.79 million.
The non-GAAP gross margin is expected to be 52% (+/- 50 bps). The non-GAAP operating margin is anticipated to be 17.2% (+/- 80 bps).
The non-GAAP-based earnings per share is expected to be 23 cents (+/- 3 cents). The consensus mark for earnings is pegged at 21 cents per share.
Zacks Rank & Stocks to Consider
Currently, Semtech carries a Zacks Rank #4 (Sell).
Some better-ranked stocks in the broader technology sector are Arista Networks (ANET - Free Report) , Badger Meter (BMI - Free Report) and Audioeye (AEYE - Free Report) , each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Arista Networks’ shares have rallied 46.8% in the year-to-date period. The long-term earnings growth rate for ANET is anticipated to be 17.2%.
Badger Meter’s shares have gained 32.5% in the year-to-date period. The long-term earnings growth rate for BMI is projected at 17.91%.
Shares of Audioeye have surged 342.6% in the year-to-date period. The long-term earnings growth rate for AEYE is expected to be 25%.