Semtech Corporation (NASDAQ: SMTC) stock rose 4.7% on 29th November 2018 (As of 11:02 am GMT-5; Source: Google finance) after the company posted better than expected results for the third quarter of 2019. Q3 bookings softened from the record levels of the previous two quarters, and resulted in a book-to-bill below one. Trans [ph] bookings accounted for approximately 37% of shipments during the quarter. The distributor business remains balanced, with 59% of the total POS coming from the high-end consumer and enterprise computing end markets, and 41% of total POS coming from the industrial and communications end markets. Further, Q3 fiscal 2019 non-GAAP gross margin increased 20 basis points sequentially to 61.7% as expected. In fiscal 2020, SMTC expect the gross margin to remain stable with an upward by the company driven mostly by end-market mix. Q3 non-GAAP operating expense increased 2% sequentially to $54.3 million in line with expectations.

Moreover, in Q3, cash flow from operations increased 94% from the same period a year ago to $52 million or 30% of net sales. Free cash flow was 28% of net sales, in line with the upwardly revised target range of 25% to 30%. The cash and investments was $312 million and the debt balance was approximately $216 million, resulting in a net cash position of $96 million. SMTC repurchased approximately $30 million of the stock during the quarter and the stock repurchase authorization now stands at approximately $217 million.
SMTC in the third quarter of FY 19 has reported the adjusted earnings per share of 63 cents, beating the analysts’ estimates for the adjusted earnings per share of 61 cents. The company had reported the adjusted revenue growth of 15 percent to $173.55 billion in the third quarter of FY 19, beating the analysts’ estimates for revenue by 0.21%. In Q3, shipments into Asia represented 77% of net sales, North America represented 16%, and Europe represented 7%. Total direct sales represented approximately 31%, and sales to distribution represented approximately 69%.

For the fourth quarter of FY 19, SMTC expects Non-GAAP Gross margin to be in the range of 61.5% to 62.5%, Non-GAAP SG&A expense is expected to be in the range of $26.5 million to $27.5 million, Non-GAAP R&D expense is expected to be in the range of $24.5 million to $25.5 million, Non-GAAP Interest and other expense is expected to be approximately $2.0 million, Non-GAAP Effective tax rate is expected to be in the range of 16% to 20% and Non-GAAP Earnings per diluted share are expected to be in the range of $0.53 to $0.57