Semtech Corporation

’s

SMTC

fourth-quarter fiscal 2022 non-GAAP earnings of 70 cents per share surpassed the Zacks Consensus Estimate by 1.5%. The reported earnings increased 37.3% year over year but declined 5.4% sequentially.

Net sales of $190.6 million also outpaced the Zacks Consensus Estimate by 0.7%. The same increased 15.7% from the prior-year quarter but decreased 2.3% on a sequential basis.

The top-line growth was driven by strong momentum across industrial and infrastructure markets served.

Semtech’s LoRa business, Tri-Edge platform, 10G PON products, 5G wireless and broad-based protection platforms contributed well to its quarterly performance.

Further, the company released 10 new products and achieved 3,237 new design wins in the fourth quarter. This remained a positive.

For the fiscal fourth quarter, shipments in Asia, North America and Europe represented 78%, 13% and 9% of net sales, respectively.

Revenues by End Market

Net revenues from the infrastructure market, representing 36% of its total revenues, increased 14% from the prior-year period.

Revenues from the industrial market represented 39% of total net revenues. Revenues increased 38% year over year.

Net revenues from the high-end consumer market, representing 25% of total revenues, increased 6% year over year. The high-end consumer market consists of mobile devices and other consumer systems, representing net revenues of 13% and 12%, respectively.

Revenues by Product Group

Signal Integrity Product Group’s revenues contributed 39% to total revenues. The reported figure increased 21% year over year, driven by strong demand in the PON business. Also, growing Tri-Edge design wins across multiple geographies in 100-gig, 200-gig and 400-gig PAM4 optical modules remain a tailwind.

Revenues from its Protection Product Group represented 28% of the total revenues. The figure was up 11% year over year driven by robust demand for broad-based protection products.

Wireless and Sensing Product Group revenues, which contributed 33% to total revenues, increased 13% year over year. The increase was driven by record net sales of LoRa platform products.

Operating Results

Non-GAAP gross margin of 64.5% expanded 300 basis points (bps) year over year.

Fiscal fourth-quarter adjusted selling, general and administrative expenses increased 2.5% year over year to $34.2 million. Adjusted product development and engineering expenses also increased 19.1% from the year-ago quarter to $34.5 million.

Non-GAAP operating margin of 28.5% expanded 480 bps year over year.

Balance Sheet and Cash Flow

As of Jan 30, 2021, cash and cash equivalents were $279.6 million compared with $276.6 million on Oct 31, 2021.

Account receivables for the reported quarter were $71.5 million, down from $74.3 million in the fiscal third quarter.

Long-term debt was $171.7 million, down from $175.6 million in the previous quarter.

For the reported quarter, cash flow from operations was $51 million compared with $66.5 million in the third quarter. Net capital expenditure was up $8.1 million from $5.3 million in the previous quarter. Free cash flow amounted to $42.9 million compared with $61.2 million in the prior quarter.

Guidance

For first-quarter fiscal 2023, management expects net sales of $195-$205 million. The Zacks Consensus Estimate for the same is pegged at $191.1 million.

Non-GAAP gross margin is expected to be 64.2-65.2%. Also, management projects SG&A expenses of $36-$37 million, and research and development costs of $34.5-$35.5 million.

Non-GAAP earnings per share are expected within 72-80 cents. The Zacks Consensus Estimate for the same is pegged at 70 cents per share.

Further, management expects data center revenues, protection revenues, and wireless and sensing product group revenues to increase in the fiscal first quarter.

Zacks Rank & Stocks to Consider

Currently, Semtech carries a Zacks Rank #3 (Hold).

Investors interested in the broader technology sector can consider some better-ranked stocks like

Advanced Micro Devices


AMD

,

Apple


AAPL

and

Analog Devices


ADI

. While Advanced Micro Devices and Apple currently sport a Zacks Rank #1 (Strong Buy), Analog Devices carries a Zacks Rank #2 (Buy). You can see


the complete list of today’s Zacks #1 Rank stocks here


.

Advanced Micro Devices has gained 47.7% in the past year. The long-term earnings growth rate for AMD is currently projected at 29.1%.

Apple has gained 32.4% in the past year. The long-term earnings growth rate for AAPL is currently projected at 12.5%.

Analog Devices has gained 6.1% in the past year. The long-term earnings growth rate for ADI is currently projected at 12.3%.

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