SMTC - Semtech holds gains after beat moves to improve balance sheet

2023-06-08 15:41:27 ET

Semtech ( NASDAQ: SMTC ) pared its early-Thursday gains but was still up 5.3% headed into the close after first-quarter earnings beat expectations on top and bottom lines.

Revenues grew by 17% and the company surprised with positive non-GAAP earrnings per share (of $0.02, when the company had been expected to lose $0.08 per share).

The company also issued a forecast for the second quarter, largely in line with expectations (for net sales of $233M-$243M, and for earnings per share of -$0.02 to $0.06, vs. an expected $0.03).

“Semtech exceeded the midpoint of our revenue and earnings guidance as we see signs of business stabilization,” said President/CEO Mohan Maheswaran. “As we continue to navigate this challenging macroeconomic environment, we are taking steps to improve our operational efficiency and financial performance while focusing on executing our plans."

The best news from the quarter , though, came form the company's debt situation, according to Seeking Alpha analyst and Investing Groups leader Michael Wiggins de Oliveira. Investors started to shun the stock because "there was just too much debt attached to the company," he said.

Expectations were for further cash flow losses that would push its balance sheet to the brink. But another amendment to the credit agreement meant "Semtech has renegotiated its debt covenants with its lenders, thereby providing a cushion to the business over the next two years."

For more detail, dig into Seeking Alpha's transcript of Semtech's earnings call .

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