Semtech Corporation (NASDAQ:SMTC) Q1 2018 Earnings Conference Call Transcript

May 31, 2017 • 05:00 pm ET

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Semtech Corporation (NASDAQ:SMTC) Q1 2018 Earnings Conference Call Transcript

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Presentation
Operator
operator

Good afternoon. My name is Mandy and I will be your conference operator for today. At this time, I would like to welcome everyone to the Semtech Corporation Quarter One FY '18 Earnings Release Conference Call. (Operator Instructions) Thank you. Sandy Harrison, you may begin your conference.

Executive
Sandy Harrison

Thank you, operator and welcome to Semtech's conference call to discuss our financial results for the first quarter of fiscal year 2018. Speakers for today's call will be Mohan Maheswaran, Semtech's President and Chief Executive Officer and Emeka Chukwu, our Chief Financial Officer. A press release announcing our unaudited results was issued after the market closed today and is available on our website at semtech.com. (Forward-Looking Cautionary Statement)

During the call, we will refer to non-GAAP financial measures that are not prepared in accordance with generally accepted accounting principles. Discussion of why the management team considers such non-GAAP financial measures useful, along with detailed reconciliations of such non-GAAP measures to the most comparable GAAP financial measures, are included in today's press release. All references to financial results in Mohan's and Emeka's formal presentations on this call refer to non-GAAP measures, unless otherwise noted.

With that, I will turn the call over to Semtech's Chief Financial Officer, Emeka Chukwu. Emeka?

Executive
Emeka Chukwu

Thank you, Sandy. Good afternoon, everyone. For Q1 of fiscal 2018, GAAP net sales were $143.8 million, an increase of 3% sequentially and 10% year-over-year. Q1 GAAP net sales included $5.3 million expense for the Comcast warrant. Q1 GAAP gross margin decreased 60 basis points sequentially to 59% as the benefit of a more favorable product mix was offset by the impact of the higher sequential Comcast warrant expense. Q1 GAAP operating expense decreased approximately 2% sequentially due mainly to the timing of expenses. Q1 GAAP tax rate was 24.1% compared to 27.1% in Q4.

For fiscal 2018, we expect our GAAP tax rate to be in the 22% to 26% range. Moving on to the non-GAAP results, which exclude the impact of share-based compensation, amortization of acquired intangibles, acquisition or disposition-related and other non-recurring charges not tied to current operations. Q1 of fiscal 2018 net sales were $149.1 million, a 5% sequential increase on 14% increase year-over-year and represented a sixth consecutive quarter of results above the midpoint of our guidance. In Q1, shipments into Asia represented 75% of total net sales, North America was 18% and Europe was 7%.

The total sales to distribution represented approximately 64%, and the net sales represented approximately 36%. Q1 bookings again increased sequentially and year-over-year and resulted in a book-to-bill firmly above 1. Those bookings accounted for approximately 41% of shipments during the quarter. Q1 fiscal 2018 non-GAAP gross margin was 60.9%, an increase of 40 basis points sequentially due to more favorable mix of products. We expect our Q2 fiscal 2018 non-GAAP gross margin to be flattish to slightly higher sequentially. As a reminder, during our last call, we increased our non-GAAP gross margin target range to 58% to 63% versus our prior range of 55%