Semtech(SMTC) - 2026 Q2 - Quarterly Results

Executive Summary & Highlights This section outlines Semtech Corporation's Q2 FY26 financial performance and management insights Company Overview Semtech Corporation is a leading provider of high-performance semiconductor, Internet of Things (IoT) systems, and cloud connectivity service solutions, focused on delivering technology for a smarter, more connected, and sustainable planet - Semtech is a leading provider of high-performance semiconductor, IoT systems, and cloud connectivity service solutions[2][22] Q2 FY26 Financial Highlights Semtech reported record net sales of $257.6 million, representing 20% year-over-year growth, with improved non-GAAP adjusted gross and operating margins, and significantly increased non-GAAP adjusted diluted EPS Q2 FY26 Key Financial Highlights | Metric | Q2'26 | Q2'25 | YoY Change | | :-------------------------------- | :------ | :------ | :--------- | | Net sales (million USD) | $257.6 | $215.4 | +20% | | GAAP gross margin (%) | 52.1% | 49.0% | +3.1 pp | | Non-GAAP adjusted gross margin (%) | 53.2% | 50.4% | +2.8 pp | | GAAP operating margin (%) | (6.3)% | 3.6% | -9.9 pp | | Non-GAAP adjusted operating margin (%) | 18.8% | 14.2% | +4.6 pp | | GAAP diluted loss per share (USD) | $(0.31) | $(2.61) | +$2.30 | | Non-GAAP adjusted diluted EPS (USD) | $0.41 | $0.11 | +$0.30 | Management Commentary CEO Hong Hou highlighted strong year-over-year financial performance driven by deep customer engagement, operational discipline, and targeted investments, while CFO Mark Lin noted improved cash flows enabling accelerated debt reduction - CEO Hong Hou attributed strong YoY financial performance to deep customer engagement, operational discipline, and a culture of excellence, positioning the company for high-growth opportunities[3] - CFO Mark Lin emphasized that strong net sales growth and improving profitability resulted in meaningful sequential and year-over-year increases in operating and free cash flows, leading to accelerated debt reduction and a reduced net leverage ratio[3] Financial Results This section details Semtech's Q2 FY26 financial performance, including GAAP and non-GAAP results, and provides the Q3 FY26 outlook Second Quarter Fiscal Year 2026 Results Semtech reported Q2 FY26 net sales of $257.6 million, a GAAP net loss of $(27.1) million due to a goodwill impairment, and a non-GAAP adjusted net income of $36.7 million GAAP Financial Results (Q2'26 vs Q1'26 vs Q2'25) | Metric | Q2'26 | Q1'26 | Q2'25 | | :-------------------------- | :------ | :------ | :------ | | Net sales (million USD) | $257.6 | $251.1 | $215.4 | | Gross margin (%) | 52.1% | 52.3% | 49.0% | | Operating expenses, net (million USD) | $150.3 | $95.3 | $97.7 | | Operating (loss) income (million USD) | $(16.2) | $36.0 | $7.8 | | Operating margin (%) | (6.3)% | 14.3% | 3.6% | | Interest expense, net (million USD) | $4.7 | $6.2 | $28.1 | | Goodwill impairment (million USD) | $42.0 | — | — | | Net (loss) income (million USD) | $(27.1) | $19.3 | $(170.3) | | Diluted (loss) earnings per share (USD) | $(0.31) | $0.22 | $(2.61) | Non-GAAP Financial Results (Q2'26 vs Q1'26 vs Q2'25) | Metric | Q2'26 | Q1'26 | Q2'25 | | :-------------------------- | :------ | :------ | :------ | | Net sales (million USD) | $257.6 | $251.1 | $215.4 | | Adjusted gross margin* (%) | 53.2% | 53.5% | 50.4% | | Adjusted operating expenses, net* (million USD) | $88.4 | $86.6 | $77.9 | | Adjusted operating income* (million USD) | $48.6 | $47.6 | $30.5 | | Adjusted operating margin* (%) | 18.8% | 19.0% | 14.2% | | Adjusted interest expense, net* (million USD) | $4.1 | $5.0 | $20.5 | | Adjusted net income* (million USD) | $36.7 | $33.9 | $8.1 | | Adjusted diluted earnings per share* (USD) | $0.41 | $0.38 | $0.11 | | Adjusted EBITDA* (million USD) | $56.5 | $55.4 | $40.5 | | Adjusted EBITDA margin* (%) | 21.9% | 22.1% | 18.8% | Third Quarter Fiscal Year 2026 Outlook For Q3 FY26, Semtech projects net sales of $266.0 million (±$5.0 million), with non-GAAP adjusted diluted EPS of $0.44 (±$0.03) and strong adjusted operating and EBITDA margins Q3 FY26 Non-GAAP Financial Outlook | Metric | Q3'26 Outlook | | :-------------------------- | :-------------- | | Net sales (million USD) | $266.0M (±$5.0M) | | Adjusted gross margin* (%) | 53.0% (±50 bps) | | Adjusted operating expenses, net* (million USD) | $88.8M (±$1.0M) | | Adjusted operating income* (million USD) | $52.2M (±$3.0M) | | Adjusted operating margin* (%) | 19.6% (±80 bps) | | Adjusted interest and other expense, net* (million USD) | $(5.0)M | | Adjusted normalized tax rate* (%) | 15% | | Adjusted diluted earnings per share* (USD) | $0.44 (±$0.03) | | Adjusted EBITDA* (million USD) | $60.0M (±$3.0M) | | Adjusted EBITDA margin* (%) | 22.5% (±80 bps) | | Non-GAAP diluted share count* (million) | 91.6M | Non-GAAP Financial Measures This section defines Semtech's non-GAAP financial measures and provides detailed reconciliations to their GAAP equivalents Definition and Rationale Semtech uses various non-GAAP measures to supplement GAAP results, excluding items like share-based compensation and goodwill impairment, to provide a clearer view of core operational performance and enhance comparability - Non-GAAP measures exclude share-based compensation, intangible amortization, transaction/integration costs, restructuring, litigation costs, and goodwill impairment[10][12] - Management believes these exclusions provide useful information by reflecting core results and enhancing comparability between periods, despite some excluded items potentially being recurring[11][13][14] - A full-year normalized non-GAAP tax rate of 15% is projected for fiscal year 2026 to reduce quarterly variability and improve comparability[15] Reconciliation of GAAP to Non-GAAP Results This section provides detailed reconciliations from GAAP to Non-GAAP figures for gross margin, operating expenses, operating income, net income, diluted EPS, and EBITDA across Q2'26, Q1'26, and Q2'25, illustrating the specific adjustments made for each metric Gross Margin Reconciliation This subsection reconciles GAAP gross margin to non-GAAP adjusted gross margin, detailing adjustments for compensation and amortization | Metric | Q2'26 | Q1'26 | Q2'25 | | :-------------------------- | :------ | :------ | :------ | | Gross margin (GAAP) (%) | 52.1% | 52.3% | 49.0% | | Share-based compensation (%) | 0.2% | 0.3% | 0.3% | | Amortization of acquired technology (%) | 0.9% | 0.9% | 1.1% | | Adjusted gross margin (Non-GAAP) (%) | 53.2% | 53.5% | 50.4% | Operating Expenses and Income Reconciliation This subsection reconciles GAAP operating expenses and income to their non-GAAP adjusted counterparts, outlining various excluded items Operating Expenses, Net Reconciliation | Metric | Q2'26 | Q1'26 | Q2'25 | | :------------------------------------ | :------ | :------ | :------ | | Operating expenses, net (GAAP) (million USD) | $150.3 | $95.3 | $97.7 | | Share-based compensation (million USD) | $(16.7) | $(6.1) | $(16.4) | | Intangible amortization (million USD) | $(0.1) | $(0.1) | $(0.3) | | Transaction and integration related costs, net (million USD) | $(1.2) | $(1.1) | $(1.5) | | Restructuring and other reserves, net (million USD) | $(1.5) | $(1.2) | $(1.5) | | Litigation costs, net (million USD) | $(0.4) | $(0.2) | $(0.1) | | Goodwill impairment (million USD) | $(42.0) | — | — | | Adjusted operating expenses, net (Non-GAAP) (million USD) | $88.4 | $86.6 | $77.9 | Operating Income Reconciliation | Metric | Q2'26 | Q1'26 | Q2'25 | | :-------------------------- | :------ | :------ | :------ | | Operating (loss) income (GAAP) (million USD) | $(16.2) | $36.0 | $7.8 | | Share-based compensation (million USD) | $17.3 | $6.8 | $17.1 | | Intangible amortization (million USD) | $2.4 | $2.4 | $2.6 | | Transaction and integration related costs, net (million USD) | $1.2 | $1.1 | $1.5 | | Restructuring and other reserves, net (million USD) | $1.5 | $1.2 | $1.5 | | Litigation costs, net (million USD) | $0.4 | $0.2 | $0.1 | | Goodwill impairment (million USD) | $42.0 | — | — | | Adjusted operating income (Non-GAAP) (million USD) | $48.6 | $47.6 | $30.5 | Net Income and EPS Reconciliation This subsection reconciles GAAP net income and diluted EPS to their non-GAAP adjusted equivalents, including tax effects and other adjustments Net Income Reconciliation | Metric | Q2'26 | Q1'26 | Q2'25 | | :------------------------------------ | :------ | :------ | :------ | | Net (loss) income (GAAP) (million USD) | $(27.1) | $19.3 | $(170.3) | | Total Non-GAAP adjustments before taxes (million USD) | $65.3 | $12.9 | $175.6 | | Associated tax effect (million USD) | $(1.7) | $2.7 | $2.8 | | Equity method loss (income) (million USD) | $0.1 | $(1.0) | — | | Adjusted net income (Non-GAAP) (million USD) | $36.7 | $33.9 | $8.1 | Diluted EPS Reconciliation | Metric | Q2'26 | Q1'26 | Q2'25 | | :------------------------------------ | :------ | :------ | :------ | | Diluted (loss) earnings per share (GAAP) (USD) | $(0.31) | $0.22 | $(2.61) | | Adjustments per above (USD) | $0.72 | $0.16 | $2.72 | | Adjusted diluted earnings per share (Non-GAAP) (USD) | $0.41 | $0.38 | $0.11 | Adjusted EBITDA Reconciliation This subsection provides a reconciliation from GAAP net income to non-GAAP adjusted EBITDA, detailing various adjustments | Metric | Q2'26 | Q1'26 | Q2'25 | | :-------------------------- | :------ | :------ | :------ | | Net (loss) income (GAAP) (million USD) | $(27.1) | $19.3 | $(170.3) | | Interest expense (million USD) | $5.2 | $6.6 | $28.6 | | Interest income (million USD) | $(0.5) | $(0.4) | $(0.4) | | Provision for income taxes (million USD) | $4.8 | $8.7 | $4.2 | | Equity method loss (income) (million USD) | $0.1 | $(1.0) | — | | Share-based compensation (million USD) | $17.3 | $6.8 | $17.1 | | Depreciation and amortization (million USD) | $10.3 | $10.2 | $12.6 | | Goodwill impairment (million USD) | $42.0 | — | — | | Adjusted EBITDA (Non-GAAP) (million USD) | $56.5 | $55.4 | $40.5 | Supplemental Information This section provides additional context, including webcast details, forward-looking statements, notes on results, and a company overview Webcast and Conference Call Details Semtech hosted a conference call on August 25, 2025, to discuss Q2 FY26 results, with webcast and replay information available on its Investor Relations website - A conference call was held on August 25, 2025, at 1:30 p.m. Pacific time to discuss Q2 FY26 results[9] - Webcast and supplemental materials are available on Semtech's Investor Relations website, with a replay accessible until September 22, 2025[9] Forward-Looking and Cautionary Statements This section contains standard forward-looking statements regarding future financial and operational performance, subject to known and unknown risks and uncertainties, cautioning investors against undue reliance - The press release contains forward-looking statements about future financial performance, operational performance, growth trends, and company plans[17][18] - Potential risks include industry volatility, rapid decrease in average selling prices, supply chain disruptions, failure to develop new products, intellectual property issues, R&D investment needs, competition, and difficulties integrating acquisitions like Sierra Wireless[19] - Investors are cautioned against undue reliance on forward-looking information, which is subject to significant risks and uncertainties detailed in SEC filings[20] Notes on Reported Results The reported amounts are preliminary and subject to finalization for the Form 10-Q filing, with specific quarter-end dates defined for Q2'26, Q1'26, and Q2'25 - Reported results are preliminary and subject to finalization for the Form 10-Q filing for the quarter ended July 27, 2025[21] - Q2'26 refers to the quarter ended July 27, 2025; Q1'26 to April 27, 2025; and Q2'25 to July 28, 2024[21] About Semtech Semtech Corporation (Nasdaq: SMTC) is a leading provider of high-performance semiconductor, IoT systems, and cloud connectivity service solutions, dedicated to delivering technology for a smarter, more connected, and sustainable planet - Semtech Corporation is a leading provider of high-performance semiconductor, IoT systems, and cloud connectivity service solutions[22] - The company is dedicated to delivering technology solutions for a smarter, more connected, and sustainable planet, serving infrastructure, industrial, and consumer markets[22] Condensed Consolidated Financial Statements (Unaudited) This section presents Semtech's unaudited consolidated statements of operations, balance sheets, and cash flow information Statements of Operations The unaudited condensed consolidated statements of operations show Q2'26 net sales of $257.6 million and a GAAP net loss of $(27.1) million, significantly impacted by a $42.0 million goodwill impairment charge Condensed Consolidated Statements of Operations (GAAP) | Metric | Q2'26 | Q1'26 | Q2'25 | | :------------------------------------ | :------ | :------ | :------ | | Net sales (million USD) | $257.6 | $251.1 | $215.4 | | Total cost of sales (million USD) | $123.5 | $119.8 | $109.9 | | Gross profit (million USD) | $134.1 | $131.3 | $105.5 | | Total operating expenses, net (million USD) | $150.3 | $95.3 | $97.7 | | Operating (loss) income (million USD) | $(16.2) | $36.0 | $7.8 | | Goodwill impairment (million USD) | $42.0 | — | — | | Net (loss) income (million USD) | $(27.1) | $19.3 | $(170.3) | | Diluted (loss) earnings per share (USD) | $(0.31) | $0.22 | $(2.61) | Balance Sheets As of July 27, 2025, total assets were $1,405.9 million, with increased current assets and decreased total liabilities, notably a reduction in goodwill due to an impairment charge Condensed Consolidated Balance Sheets | Metric | July 27, 2025 | January 26, 2025 | | :-------------------------- | :-------------- | :--------------- | | Total current assets (million USD) | $614.9 | $585.5 | | Total non-current assets (million USD) | $791.0 | $833.8 | | Total assets (million USD) | $1,405.9 | $1,419.3 | | Total current liabilities (million USD) | $243.1 | $283.0 | | Total non-current liabilities (million USD) | $609.8 | $593.8 | | Stockholders' equity (million USD) | $552.9 | $542.4 | | Total liabilities & equity (million USD) | $1,405.9 | $1,419.3 | - Goodwill decreased from $533.1 million to $492.2 million, reflecting the impairment charge in Q2'26[27][5] - Current portion of long-term debt reduced from $45.6 million to zero, contributing to the decrease in total current liabilities[27] Supplemental Cash Flow Information Net cash provided by operating activities significantly improved to $44.4 million in Q2'26, and free cash flow turned positive, reaching $41.5 million, demonstrating strong sequential and year-over-year growth Supplemental Cash Flow Information | Metric | Q2'26 | Q1'26 | Q2'25 | | :------------------------------------ | :------ | :------ | :------ | | Net cash provided by (used in) operating activities (million USD) | $44.4 | $27.8 | $(5.0) | | Net capital expenditures (million USD) | $(2.9) | $(1.7) | $(3.4) | | Free cash flow (million USD) | $41.5 | $26.2 | $(8.4) |