Semtech Corporation (NASDAQ: SMTC) stock lost over 3.6% on November 30th, 2017 (as of 10:04AM EST; Source: yahoo) hurt by the weak third quarter of fiscal 2018 performance. Their GAAP net sales fell 2% on a sequential basis to $150.3 million but rose 10% on a year-over-year basis. Third quarter of fiscal 2018 GAAP gross margin fell 74 basis points sequentially to 59.5%, on the back of rising sequential Comcast Warrant expense, which slightly offset by lower inventory adjustments.
Asia shipments accounted 75% of total net sales. North America comprised 17% and Europe accounted 8%. Overall net sales to distribution represented over 66%, and direct sales accounted over 34%. Third quarter bookings rose sequentially leading to a book-to-bill of over 1.
On Non-GAAP basis, the group’s revenue grew 13% year-over-year in the first nine months of fiscal 2018. Expanding gross margins coupled with operating expense control, drove the group’s earnings three times faster enabling solid operating profit.
As per the Signal Integrity Product Group performance in the third quarter of 2018, net revenues from their Signal Integrity Product Group fell against the earlier, but rose 6% against pcp. This segment accounts over 41% of the group’s total net revenues.
Meanwhile, demand from China infrastructure remained relatively soft through the quarter while the group expects this weakness to continue into Q4. 2.5 gig PON market was weak offseting the solid 10-gig PON market. But Semtech’s PON business reported a year-on-year growth through the first nine months of FY 2018.
Their base station business was hurt mainly by China declined and the group expects the challenging conditions to remain in the fourth quarter of 2017. The group does not forecast a revamp until 5G deployments start in 2019.
On the other hand, Customer interest in their ClearEdge CDR platform remains very strong as the group’s cloud infrastructure customers migrate their optical connectivity links to 100-gigabit per second. The group is witnessing a very good design win momentum in 100-gigabit per second QSFP 28 optical modules used in mega data centers.