Semtech Corporation reports 54.2% Net Income decline in 2020 and 7.2 pp EBITDA Margin decline from 24.7% to 17.6%
03/11/2020 • About Semtech Corporation (
$SMTC) • By InTwits
Semtech Corporation reported FY2020 financial results today. Here are the key drivers of the company's long term financial model:
- Semtech Corporation has low CAPEX intensity: 5 year average CAPEX/Revenue was 4.3%. At the same time it's in pair with industry average of 5.5%
- CAPEX is quite volatile: $23m in FY2020, $17m in FY2019, $35m in FY2018, $33m in FY2017, $13m in FY2016
- The company has potentially unprofitable business model: ROIC is 6.0%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
The company's Revenue dropped on 12.7%. Revenue decline showed acceleration in FY20Q4 - it was 13.8% YoY. During FY2016-FY2020 Revenue growth topped in FY2017 at 11.0% and was decelerating since that time. Revenue decline was worsened by EBITDA margin decline. EBITDA Margin decreased on 7.2 pp from 24.7% to 17.6% in FY2020.
Gross Margin increased slightly on 1.4 pp from 60.1% to 61.5% in FY2020. During FY2016-FY2020 Gross Margin bottomed in FY2017 at 59.7% and was growing since that time. SG&A as a % of Revenue increased on 6.6 pp from 23.2% to 29.8% in FY2020. During FY2016-FY2020 SG&A as a % of Revenue bottomed in FY2019 at 23.2%.
Net Income margin decreased on 5.3 pp from 11.1% to 5.8% in FY2020.
Investments (CAPEX, working capital and M&A)
The company's CAPEX/Revenue was 4.2% in FY2020. CAPEX/Revenue decreased slightly on 1.8 pp from 6.0% in FY2017 to 4.2% in FY2020. It's average CAPEX/Revenue for the last three years was 4.3%.
Return on investment
The company operates at low ROIC (6.0%) and ROE (4.7%). ROIC decreased on 5.7 pp from 11.8% to 6.0% in FY2020. ROE decreased on 5.6 pp from 10.3% to 4.7% in FY2020.
Leverage (Debt)
Company's Net Debt / EBITDA is -0.9x and Debt / EBITDA is 2.1x. Debt decreased on 2.3% while cash decreased on 6.0%.
Semtech Corporation has no short term refinancing risk: cash is higher than short term debt (8,961.9%).
Valuation and dividends
The company's trades at EV/EBITDA 20.1x and P/E 63.5x.
Management team
The company's CEO Mohan R Maheswaran has spent 14 years with the company. Semtech Corporation's CFO is Emeka N Chukwu. Emeka N Chukwu has 14 years tenure at the company.
Financial and operational results
FY ended 01/26/2020
Semtech Corporation ($SMTC) key annual financial indicators| mln. $ | 2016 | 2017 | 2018 | 2019 | 2020 | 2020/2019 |
|---|
P&L
|
|---|
| Revenue | 490.2 | 544.3 | 587.8 | 627.2 | 547.5 | -12.7% |
| Gross Profit | 293.1 | 324.9 | 352.0 | 377.0 | 336.7 | -10.7% |
| SG&A | 136.2 | 136.4 | 146.3 | 145.2 | 163.1 | 12.3% |
| EBITDA | 78.9 | 131.1 | 117.7 | 155.1 | 96.3 | -37.9% |
| EBIT | 30.0 | 84.1 | 68.7 | | | |
| Interest expence | 7.8 | 9.3 | | | | |
| Tax | 8.9 | 18.4 | 23.2 | | | |
| Net Income | 11.5 | 54.7 | 36.4 | 69.6 | 31.9 | -54.2% |
| Stock Based Compensation | 20.5 | 30.8 | 47.9 | | | |
Balance Sheet
|
|---|
| Cash | 211.8 | 297.1 | 307.9 | 312.1 | 293.3 | -6.0% |
| Accounts Receivable | 44.1 | 51.4 | 53.2 | | | |
| Inventory | 63.9 | 65.9 | 71.1 | | | |
| Accounts Payable | 35.5 | 42.0 | 37.2 | | | |
| Short Term Debt | 18.6 | 14.4 | 15.4 | 18.3 | 3.3 | -82.1% |
| Long Term Debt | 239.2 | 226.5 | 211.1 | 192.8 | 202.9 | 5.2% |
Cash flow
|
|---|
| Capex | 13.0 | 32.9 | 35.5 | 17.1 | 23.1 | 35.2% |
| Acquisitions | 39.2 | | 17.6 | | | |
Ratios
|
|---|
| Revenue growth | -12.1% | 11.0% | 8.0% | 6.7% | -12.7% | |
| EBITDA growth | -29.2% | 66.1% | -10.2% | 31.8% | -37.9% | |
|
|---|
| Gross Margin | 59.8% | 59.7% | 59.9% | 60.1% | 61.5% | 1.4% |
| EBITDA Margin | 16.1% | 24.1% | 20.0% | 24.7% | 17.6% | -7.2% |
| EBIT Margin | 6.1% | 15.4% | 11.7% | | |
| SG&A, % of revenue | 27.8% | 25.1% | 24.9% | 23.2% | 29.8% | 6.6% |
| SBC, % of revenue | 4.2% | 5.7% | 8.2% | | |
| Net Income Margin | 2.3% | 10.0% | 6.2% | 11.1% | 5.8% | -5.3% |
| CAPEX, % of revenue | 2.7% | 6.0% | 6.0% | 2.7% | 4.2% | 1.5% |
|
|---|
| ROIC | 3.7% | 10.2% | 7.8% | 11.8% | 6.0% | -5.7% |
| ROE | 2.1% | 9.6% | 5.7% | 10.3% | 4.7% | -5.6% |
| Net Debt/EBITDA | 0.6x | -0.4x | -0.7x | -0.7x | -0.9x | -0.3x |
| Interest coverage ratio (ICR) | 3.8x | 9.0x | | | |
| Interest expence / Average debt | 3.0% | 3.7% | | | | |
People
|
|---|
| Insider ownership | 1.4% | 1.4% | 1.4% | | | |
| Employees | 1,335 | 1,292 | 1,282 | | | |
| Revenue/Employee, th. $ | 367 | 421 | 459 | | | |
Semtech Corporation ($SMTC) key quoterly financial indicators
| mln. $ | FY20Q1 | FY20Q2 | FY20Q3 | FY20Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 131 | 137 | 141 | 138 | | 0.7% | -16.0% | -18.7% | -13.8% |
| EBITDA | 24 | 23 | 29 | 21 | | 158.4% | -49.6% | -47.4% | -47.6% |
| Net Income | 13 | 2 | 14 | 3 | | 3.0% | -91.3% | 15.1% | -78.5% |
Balance Sheet
|
|---|
| Cash | 287 | 288 | 283 | 293 | | -5.3% | -7.5% | -9.3% | -6.0% |
| Short Term Debt | 22 | 22 | 22 | 3 | | 37.5% | 28.9% | 21.3% | -82.1% |
| Long Term Debt | 197 | 191 | 186 | 203 | | -4.7% | -5.3% | -5.8% | 5.2% |
Ratios
|
|---|
| Gross Margin | 61.9% | 61.9% | 61.2% | 61.1% | | 7.1% | 0.5% | -0.2% | -0.7% |
| EBITDA Margin | 18.4% | 16.5% | 20.4% | 15.0% | | 11.2% | -11.1% | -11.1% | -9.7% |
| Net Income Margin | 9.7% | 1.6% | 9.9% | 2.1% | | 0.2% | -13.8% | 2.9% | -6.4% |
Peers in Semiconductors
Below you can find Semtech Corporation benchmarking vs. other companies in Semiconductors industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.
Top companies by Revenue growth, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Inphi Corporation ($IPHI) | - | 30.8% | -15.4% | 24.2% | 86.8% |
| Sequans Communications S.A. ($SQNS) | - | 5.9% | -16.6% | -23.3% | 65.0% |
| MaxLinear, Inc ($MXL) | - | 8.4% | -8.4% | -17.6% | 50.9% |
| Advanced Micro Devices, Inc. ($AMD) | - | 21.6% | 23.3% | 4.0% | 45.0% |
| Kopin Corporation ($KOPN) | - | 23.0% | -12.1% | 20.7% | 35.9% |
| |
|---|
| Median (43 companies) | 1.2% | 10.9% | 4.4% | -3.2% | 2.8% |
|---|
| Semtech Corporation ($SMTC) | - | 11.0% | 8.0% | 6.7% | -12.7% |
Top companies by Gross margin, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| CEVA, Inc. ($CEVA) | 91.6% | 92.1% | 89.8% | 88.4% | 89.3% |
| Universal Display Corporation ($OLED) | 83.9% | 80.8% | 75.5% | 78.5% | 80.1% |
| Rambus, Inc. ($RMBS) | 80.1% | 79.9% | 76.8% | 77.1% | 75.0% |
| Analog Devices, Inc. ($ADI) | 65.1% | 59.9% | 68.3% | 67.0% | 65.9% |
| MoSys, Inc. ($MOSY) | 49.0% | 46.9% | 61.8% | 61.0% | 65.7% |
| |
|---|
| Median (43 companies) | 47.2% | 48.6% | 50.2% | 50.4% | 49.2% |
|---|
| Semtech Corporation ($SMTC) | 59.8% | 59.7% | 59.9% | 60.1% | 61.5% |
Top companies by EBITDA margin, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Texas Instruments Incorporated ($TXN) | 43.5% | 46.7% | 48.6% | 47.5% | 47.6% |
| Intel Corp ($INTC) | 35.2% | 41.7% | 45.7% | 45.9% | 46.7% |
| Broadcom Inc. ($AVGO) | 19.9% | 40.4% | 44.2% | 40.9% | 46.2% |
| Universal Display Corporation ($OLED) | 44.8% | 51.6% | 35.3% | 48.0% | 45.9% |
| Analog Devices, Inc. ($ADI) | 36.2% | 32.1% | 43.2% | 42.1% | 42.0% |
| |
|---|
| Median (41 companies) | 9.2% | 10.7% | 9.3% | 12.9% | 17.3% |
|---|
| Semtech Corporation ($SMTC) | 16.1% | 24.1% | 20.0% | 24.7% | 17.6% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Micron Technology, Inc. ($MU) | 46.9% | 23.3% | 29.2% | 41.8% | 38.4% |
| Sequans Communications S.A. ($SQNS) | 11.8% | 13.3% | 22.9% | 29.6% | 27.1% |
| Intel Corp ($INTC) | 16.2% | 18.8% | 21.4% | 22.5% | 18.6% |
| First Solar, Inc. ($FSLR) | 7.9% | 17.5% | 33.0% | 21.8% | 15.4% |
| Power Integrations, Inc. ($POWI) | 3.1% | 7.5% | 5.9% | 5.7% | 14.5% |
| |
|---|
| Median (40 companies) | 3.7% | 4.7% | 4.2% | 3.8% | 3.6% |
|---|
| Semtech Corporation ($SMTC) | 2.7% | 6.0% | 6.0% | 2.7% | 4.2% |
Top companies by ROIC, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Texas Instruments Incorporated ($TXN) | 34.9% | 43.1% | 47.5% | 39.7% | 38.2% |
| Applied Materials Inc ($AMAT) | 19.0% | 31.2% | 36.4% | 27.7% | 32.1% |
| Advanced Micro Devices, Inc. ($AMD) | -21.7% | 7.3% | 21.6% | 21.5% | 31.8% |
| QUALCOMM Incorporated ($QCOM) | 15.8% | 5.7% | 2.2% | 38.0% | 28.1% |
| NVIDIA Corporation ($NVDA) | 13.1% | 27.3% | 35.3% | 36.9% | 22.7% |
| |
|---|
| Median (45 companies) | 1.4% | 3.2% | 2.2% | 2.2% | 5.3% |
|---|
| Semtech Corporation ($SMTC) | 3.7% | 10.2% | 7.8% | 11.8% | 6.0% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| SunPower Corporation ($SPWR) | - | - | - | - | 8.2x |
| MACOM Technology Solutions Holdings, Inc. ($MTSI) | 3.0x | 7.2x | 98.6x | - | 6.6x |
| Rambus, Inc. ($RMBS) | -0.1x | -0.1x | - | - | 5.9x |
| Inphi Corporation ($IPHI) | 4.5x | 33.7x | 32.2x | 4.5x | 3.4x |
| Canadian Solar Inc. ($CSIQ) | 11.3x | 6.8x | 2.7x | 3.4x | 3.3x |
| |
|---|
| Median (31 companies) | -0.0x | 0.4x | 0.3x | 0.5x | 0.5x |
|---|
| Semtech Corporation ($SMTC) | 0.6x | -0.4x | -0.7x | -0.7x | -0.9x |
