Semtech Corporation (NASDAQ: SMTC) stock rose over 0.2% in the pre-market session of December 4th, 2019 (Source: Google finance) after the company posted better than expected results for the third quarter of FY 20. In the third quarter, the shipments into Asia formed 75% of net sales, North America represented 16%, and Europe represented 9%. Total direct sales formed approximately 24%, and sales to distribution represented approximately 76%. Turns bookings had accounted for about 42% of shipments during the third quarter. Q3 GAAP gross margin had declined 70 basis points sequentially to 61.2%, on the back of lower absorption associated with our efforts to reduce our inventory levels. For the third quarter, the company has reported the Non-GAAP Gross margin of 61.6%, Non-GAAP SG&A expense of $28.5 million, Non-GAAP R&D expense was $24.4 million, Non-GAAP Operating margin of 24.0% and Non-GAAP net income was $27.4 million. The third quarter is marked by strong quarter on quarter growth on the back of a strong recovery in demand for the PON products, and higher demand for the LoRa and the hyper scale data center platforms. The company’s distribution business continues to be balanced with 55% of the total POS coming from the high-end consumer and enterprise computing end markets, and 45% of total POS coming from the industrial and communications end markets.
SMTC in the third quarter of FY 20 has reported the adjusted earnings per share of 41 cents, beating the analysts’ estimates for the adjusted earnings per share of 39 cents, according to the Zacks Consensus Estimate. The company had reported the adjusted revenue growth of 3 percent sequentially to $141.01 million in the third quarter of FY 20, beating the analysts’ estimates for revenue by 0.76%.
For the fourth quarter 2020, the company expects Non-GAAP Gross margin to be in the range of 61% to 62%, Non-GAAP SG&A expense is expected to be in the range of $28 million to $29 million, Non-GAAP R&D expense is expected to be in the range of $24 million to $25 million, Non-GAAP Interest and other expense, net is expected to be approximately $1.5 million, Non-GAAP Effective tax rate is expected to be in the range of 13% to 17% and Non-GAAP Earnings per diluted share are expected to be in the range of $0.33 to $0.39. The company expects fourth quarter 2020 Capital expenditures to be approximately $5.5 million and Depreciation expense is expected to be approximately $5.8 million.