Semtech Corporation reports 33.4% Net Income decline in 2018 and 4.1 pp EBITDA Margin decline from 24.1% to 20.0%
03/14/2018 • About Semtech Corporation (
$SMTC) • By InTwits
Semtech Corporation reported FY2018 financial results today. Overall the company's long term financial model is characterised by the following facts:
- EBITDA Margin is quite volatile: 20.0% in FY2018, 24.1% in FY2017, 16.1% in FY2016, 20.0% in FY2015, -2.5% in FY2014
- Semtech Corporation spends a lot for Stock Based Compensation (SBC): average SBC/Revenue for FY2014-FY2018 is 5.4%. Average EBITDA Margin for the same period was 15.3%. In FY2018 SBC/Revenue was even higher: 8.2%
- Semtech Corporation has medium CAPEX intensity: 5 year average CAPEX/Revenue was 5.3%. At the same time it's in pair with industry average of 7.6%
- CAPEX is quite volatile: $91m in FY2018, $64m in FY2017, $49m in FY2016, $22m in FY2015, $23m in FY2014
- In the last 5 years the company invested considerably less than D&A: $150m vs. $308m. In FY2018 this situation was still the same: CAPEX was 35 while D&A was 49
- The company has business model with low profitability: ROIC is 7.8%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
The company's Revenue increased on 8.0%. Revenue growth showed slowdown in FY18Q4 - it was 0.4% YoY. Revenue growth was financed by EBITDA margin decline. EBITDA Margin decreased on 4.1 pp from 24.1% to 20.0% in FY2018.
Gross Margin showed almost no change in FY2018. SG&A as a % of Revenue showed almost no change in FY2018. During FY2014-FY2018 SG&A as a % of Revenue topped in FY2016 at 27.8% and was declining since that time. Stock Based Compensation (SBC) as a % of Revenue increased on 2.5 pp from 5.7% to 8.2% in FY2018.
Net Income margin decreased on 3.8 pp from 10.0% to 6.2% in FY2018. The efficient tax rate was 38.9% in FY2018.
Investments (CAPEX, working capital and M&A)
In FY2018 the company had CAPEX/Revenue of 6.0%. Semtech Corporation showed almost no change in CAPEX/Revenue from FY2015 to FY2018. For the last three years the average CAPEX/Revenue was 4.9%.
Accounts receivable as a % of Revenue showed almost no change in FY2018. Inventories as a % of Revenue showed almost no change at 12.1% in FY2018. Accounts payable as a % of Revenue decreased on 3.3 pp from 19.1% to 15.8% in FY2018.
Semtech Corporation has spent
$18m on M&A in FY2018 which accounts for 3.0% of revenue.
Return on investment
The company operates at low ROIC (7.8%) and ROE (5.7%). ROIC decreased on 2.4 pp from 10.2% to 7.8% in FY2018. ROE decreased on 3.9 pp from 9.6% to 5.7% in FY2018.
Leverage (Debt)
Company's Net Debt / EBITDA is -0.7x and Debt / EBITDA is 1.9x. Debt decreased on 6.0% while cash increased on 3.6%.
Semtech Corporation has no short term refinancing risk: cash is higher than short term debt (1,998.2%).
Valuation and dividends
The company's trades at EV/EBITDA 22.3x and P/E 74.5x.
Management team
Semtech Corporation's CEO Mohan R Maheswaran is a founder and has spent 13 years with the company. CEO total compensation was
$6,464,567 in FY2018 which included
$600,000 salary. Semtech Corporation's CFO is Emeka N Chukwu. Emeka N Chukwu has 12 years tenure at the company.
The company has 1.4% shares owned by insiders. Insider ownership didn't change in 2018.
The company has 1,282 employees. The number of employees decreased slightly on 0.77%. Average revenue per employee in FY2018 was
$458,539 and it increased on 8.8%.
Financial and operational results
FY ended 01/28/2018
Semtech Corporation ($SMTC) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 595.0 | 557.9 | 490.2 | 544.3 | 587.8 | 8.0% |
| Gross Profit | 335.2 | 328.8 | 293.1 | 324.9 | 352.0 | 8.3% |
| SG&A | 125.4 | 128.5 | 136.2 | 136.4 | 146.3 | 7.2% |
| EBITDA | -14.8 | 111.6 | 78.9 | 131.1 | 117.7 | -10.2% |
| EBIT | -108.9 | 42.3 | 30.0 | 84.1 | 68.7 | -18.3% |
| Interest expence | 18.2 | 5.9 | 7.8 | 9.3 | | |
| Tax | 36.0 | 8.5 | 8.9 | 18.4 | 23.2 | 26.0% |
| Net Income | -164.5 | 27.9 | 11.5 | 54.7 | 36.4 | -33.4% |
| Stock Based Compensation | 20.4 | 29.6 | 20.5 | 30.8 | 47.9 | 55.5% |
Balance Sheet
|
|---|
| Cash | 243.2 | 230.3 | 211.8 | 297.1 | 307.9 | 3.6% |
| Accounts Receivable | 66.3 | 69.3 | 44.1 | 51.4 | 53.2 | 3.4% |
| Inventory | 60.3 | 73.7 | 63.9 | 65.9 | 71.1 | 7.9% |
| Accounts Payable | 40.0 | 32.4 | 35.5 | 42.0 | 37.2 | -11.3% |
| Short Term Debt | 18.5 | 18.5 | 18.6 | 14.4 | 15.4 | 6.8% |
| Long Term Debt | 273.3 | 234.7 | 239.2 | 226.5 | 211.1 | -6.8% |
Cash flow
|
|---|
| Capex | 37.2 | 31.8 | 13.0 | 32.9 | 35.5 | 7.7% |
| Acquisitions | | 4.9 | 39.2 | | 17.6 | |
Ratios
|
|---|
| Revenue growth | 2.8% | -6.2% | -12.1% | 11.0% | 8.0% | |
| EBITDA growth | -122.9% | -851.5% | -29.2% | 66.1% | -10.2% | |
|
|---|
| Gross Margin | 56.3% | 58.9% | 59.8% | 59.7% | 59.9% | 0.2% |
| EBITDA Margin | -2.5% | 20.0% | 16.1% | 24.1% | 20.0% | -4.1% |
| EBIT Margin | -18.3% | 7.6% | 6.1% | 15.4% | 11.7% | -3.8% |
| SG&A, % of revenue | 21.1% | 23.0% | 27.8% | 25.1% | 24.9% | -0.2% |
| SBC, % of revenue | 3.4% | 5.3% | 4.2% | 5.7% | 8.2% | 2.5% |
| Net Income Margin | -27.6% | 5.0% | 2.3% | 10.0% | 6.2% | -3.8% |
| CAPEX, % of revenue | 6.2% | 5.7% | 2.7% | 6.0% | 6.0% | -0.0% |
|
|---|
| ROIC | -11.8% | 5.1% | 3.7% | 10.2% | 7.8% | -2.4% |
| ROE | -26.7% | 5.1% | 2.1% | 9.6% | 5.7% | -3.9% |
| Net Debt/EBITDA | | 0.2x | 0.6x | -0.4x | -0.7x | -0.3x |
| Interest coverage ratio (ICR) | | 7.1x | 3.8x | 9.0x | |
| Interest expence / Average debt | 6.2% | 2.2% | 3.1% | 3.7% | | |
People
|
|---|
| Insider ownership | 1.4% | 1.4% | 1.4% | 1.4% | 1.4% | 0.0% |
| Employees | 1,455 | 1,456 | 1,335 | 1,292 | 1,282 | -0.8% |
| Revenue/Employee, th. $ | 409 | 383 | 367 | 421 | 459 | 8.8% |
Semtech Corporation ($SMTC) key quoterly financial indicators
| mln. $ | FY18Q1 | FY18Q2 | FY18Q3 | FY18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 144 | 153 | 150 | 141 | | 9.7% | 12.7% | 9.6% | 0.4% |
| EBITDA | 30 | 31 | 30 | 27 | | 17.3% | 8.1% | -40.3% | 1.4% |
| Net Income | 12 | 13 | 13 | -1 | | 71.6% | 39.9% | -56.7% | -116.2% |
Balance Sheet
|
|---|
| Cash | 282 | 278 | 291 | 308 | | 30.3% | 16.3% | -2.3% | 3.6% |
| Short Term Debt | 14 | 14 | 14 | 15 | | -20.3% | -20.3% | -24.3% | 6.8% |
| Long Term Debt | 223 | 219 | 216 | 211 | | -4.8% | -4.5% | -5.7% | -6.8% |
Ratios
|
|---|
| Gross Margin | 59.0% | 60.2% | 59.5% | 60.7% | | -0.8% | 0.1% | 0.4% | 1.1% |
| EBITDA Margin | 20.6% | 20.0% | 20.1% | 19.4% | | 1.3% | -0.8% | -16.8% | 0.2% |
| Net Income Margin | 8.2% | 8.2% | 8.9% | -0.9% | | 3.0% | 1.6% | -13.6% | -6.6% |
Peers in Semiconductors
Below we provide Semtech Corporation benchmarking against other companies in Semiconductors industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| NanoFlex Power Corp ($OPVS) | | | | 72.5% | 354.8% |
| MoSys, Inc. ($MOSY) | | -18.4% | 37.2% | 46.8% | 87.7% |
| SMART Global Holdings, Inc. ($SGH) | | | -16.9% | 42.5% | 69.3% |
| Micron Technology, Inc. ($MU) | | -1.0% | -23.4% | 63.9% | 49.5% |
| Adesto Technologies Corporation ($IOTS) | | 4.3% | 1.6% | 27.6% | 48.8% |
| |
|---|
| Median (67 companies) | 54.6% | 9.7% | 5.2% | 10.9% | 4.7% |
|---|
| Semtech Corporation ($SMTC) | | -6.2% | -12.1% | 11.0% | 8.0% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| CEVA, Inc. ($CEVA) | 90.2% | 90.9% | 91.6% | 92.1% | 89.8% |
| NVE Corporation ($NVEC) | 77.9% | 80.3% | 76.1% | 78.5% | 79.0% |
| Rambus, Inc. ($RMBS) | 85.9% | 84.7% | 80.1% | 79.9% | 76.8% |
| Universal Display Corporation ($OLED) | 76.0% | 64.2% | 83.9% | 80.8% | 75.5% |
| Intermolecular, Inc. ($IMI) | 48.3% | 57.4% | 66.5% | 67.5% | 70.3% |
| |
|---|
| Median (65 companies) | 45.3% | 47.0% | 47.2% | 48.6% | 50.4% |
|---|
| Semtech Corporation ($SMTC) | 56.3% | 58.9% | 59.8% | 59.7% | 59.9% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| NVE Corporation ($NVEC) | 58.8% | 66.0% | 61.8% | 65.6% | 65.1% |
| Micron Technology, Inc. ($MU) | 31.7% | 35.0% | 25.4% | 47.9% | 65.0% |
| NXP Semiconductors N.V. ($NXPI) | 25.7% | 41.5% | 21.6% | 46.2% | 49.9% |
| Texas Instruments Incorporated ($TXN) | 39.7% | 42.0% | 43.5% | 46.7% | 48.6% |
| Intel Corp ($INTC) | 42.8% | 41.0% | 35.2% | 41.7% | 45.7% |
| |
|---|
| Median (66 companies) | 9.9% | 11.3% | 9.2% | 10.7% | 9.8% |
|---|
| Semtech Corporation ($SMTC) | -2.5% | 20.0% | 16.1% | 24.1% | 20.0% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Alpha and Omega Semiconductor Limited ($AOSL) | 3.0% | 6.6% | 6.5% | 12.2% | 42.2% |
| Renesola Ltd. ($SOL) | 3.5% | 0.0% | 0.0% | 78.0% | 41.7% |
| First Solar, Inc. ($FSLR) | 7.6% | 4.0% | 7.9% | 17.5% | 33.0% |
| Sigma Designs Inc ($SIGM) | 11.0% | 6.5% | 6.2% | 14.1% | 29.3% |
| Micron Technology, Inc. ($MU) | 19.0% | 24.8% | 46.9% | 23.3% | 29.2% |
| |
|---|
| Median (66 companies) | 3.6% | 4.0% | 3.7% | 4.7% | 4.4% |
|---|
| Semtech Corporation ($SMTC) | 6.2% | 5.7% | 2.7% | 6.0% | 6.0% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| SMART Global Holdings, Inc. ($SGH) | | | 2.5% | 21.5% | 51.7% |
| Texas Instruments Incorporated ($TXN) | 25.1% | 29.8% | 34.9% | 43.1% | 47.5% |
| Micron Technology, Inc. ($MU) | 18.8% | 15.8% | 0.8% | 21.5% | 42.9% |
| Applied Materials Inc ($AMAT) | 15.8% | 15.2% | 19.0% | 31.2% | 36.4% |
| NVIDIA Corporation ($NVDA) | 9.2% | 13.3% | 13.1% | 27.3% | 35.3% |
| |
|---|
| Median (73 companies) | 5.7% | 3.8% | 1.4% | 3.2% | 3.0% |
|---|
| Semtech Corporation ($SMTC) | -11.8% | 5.1% | 3.7% | 10.2% | 7.8% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| MACOM Technology Solutions Holdings, Inc. ($MTSI) | 25.4x | 3.3x | 3.0x | 7.2x | 98.6x |
| Inphi Corporation ($IPHI) | | -6.4x | 4.5x | 33.7x | 32.2x |
| JinkoSolar Holding Company Limited ($JKS) | 4.2x | 3.3x | 4.1x | 11.0x | 8.2x |
| Lattice Semiconductor Corporation ($LSCC) | -1.8x | | 6.5x | 19.0x | 3.9x |
| Renesola Ltd. ($SOL) | 7.0x | 35.0x | 123.6x | 2.3x | 3.3x |
| |
|---|
| Median (45 companies) | -0.5x | -0.3x | -0.0x | 0.4x | 0.3x |
|---|
| Semtech Corporation ($SMTC) | | 0.2x | 0.6x | -0.4x | -0.7x |
