Semtech (NASDAQ: SMTC ) reported first-quarter financial results on Tuesday. The transcript from the company's first-quarter earnings call has been provided below. This transcript is brought to you by Benzinga APIs. For real-time access to our entire catalog, please visit https://www.benzinga.com/apis/ for a consultation. Access the full call at https://www.webcast-eqs.com/login/semtechq1_27 Summary Amundi Smart Overnight Rtn UCITS ETF Acc reported record quarterly revenue of $291 million, reflecting a 6% sequential and 16% year-over-year increase, driven by strong performance in data centers and LORA. The company is in the final stages of divesting its cellular module business as part of its portfolio optimization initiatives. Amundi Smart Overnight Rtn UCITS ETF Acc anticipates a 35% sequential revenue growth in Q2 for its data center segment, supported by accelerating shipments of 800G and 1.6T components. Management highlighted successful strategic engagements and design wins with major hyperscalers and module manufacturers, contributing to strong bookings and backlog. The company plans to invest in R&D to drive growth and deepen solution differentiation, specifically targeting coherent light, CPO, LoRa, and sensors. Full Transcript OPERATOR Welcome to Semtech Corporation's first quarter 2027 earnings conference call. At this time, all participants are in a listen only mode. Following our prepared remarks, there will be a question and answer session. Please be advised that today's conference call is being recorded. I would now like to hand the conference over to Mitch Hawes, Senior Vice President President of Investor Relations for Semtech. Please go ahead. Mitch Hawes (Senior Vice President of Investor Relations) Thank you and welcome to Semtech's first quarter 2027 financial results conference call. Participants on today's conference call are Hong Ho, President and Chief Executive Officer, and Mark Lin, Executive Vice President and Chief Financial Officer. Today, after the market close, we released our unaudited financial results for the first quarter ended April 26, 2026 which are posted along with an earnings call presentation to our investor relations website at investors.semtech.com Today's call will include various remarks about future expectations, plans and prospects which comprise forward looking statements. Please refer to today's press release and see slide 2 of the earnings presentation as well as the Risk Factors section of our most recent annual report on Form 10-K for a number of risk factors that could cause our actual results and events to differ materially from those anticipated or projected on today's call, you should consider these risk factors in conjunction with our forward looking statements. We will refer primarily to non Generally Accepted Accounting Principles (GAAP) financial measures during today's call and we will also be referring to results for first quarter of fiscal year 2027. Unless otherwise noted, please see today's press Release and slides 3 and 4 of the earnings presentation for important information regarding notes on our non Generally Accepted Accounting Principles (GAAP) financial presentation. The press release and earnings presentation also include reconciliations of our Generally Accepted Accounting Principles (GAAP) and non Generally Accepted Accounting Principles (GAAP) financial measures. With that, I will turn the call over to Hong. Hong Ho (President and Chief Executive Officer) Thank you, Mitch Good afternoon to all of you joining today. Semtech is off to an exceptional start in fiscal year 2027, delivering record quarterly revenue supported by very strong bookings and backlog. We drove strong sequential and year over year revenue and earnings growth, expanded our data center and LoRa Design WIN pipeline, all while advancing our R&D and strategic initiatives. We believe we have built a robust foundation to solidify and expand our presence in key markets. My strong conviction in Semtech's positioning is rooted in the transformation we have seen across Semtech employees, motivation to engage and partner across the ecosystem, and appreciation for the benefits of collaboration. The time I have invested has been energizing and I have appreciated opportunities to join my Semtech colleagues in meeting with hyperscalers, device designers, end customers, module manufacturers and our technical partners to understand their technology roadmap firsthand. Those conversations shaped our R&D priorities and gave us first insights into where the industry is heading and how Semtech can remain at the forefront. My team and I spent time with the key suppliers and distributors to round out our understanding of how Semtech can partner with our customers to win from design to Delivery looking at Q1 revenue was $291 million, up 6% sequentially and up 16% year over year, driven by continued outperformance in both Data center and Alora. Adjusted diluted earnings per share were 51 cents, up 34% year over year. In addition to delivering strong revenue and earnings growth, we laser focused on executing our portfolio optimization initiatives. We are pleased to report that divestiture process for our cellular module business is at its final stages. Discussions which are transition and integration in nature are progressing well. We remain confident this business is a compelling opportunity to for the right acquirer and we look forward to bringing this process and transaction to a successful close. Now let me move on to a discussion of our end markets for Q1 Infrastructure. Net sales were $98.8 million, up 14% sequentially, up 36% year over year, strongly supported by our growing data center business. Our net sales for Data center in Q1 were a record $71.6 million, up 14% sequentially and up 39% year over year, benefiting from strong demand across our broad portfolio, the result of sustainably increased customer engagement, portfolio alignment and supply assurance. The strength is anchored by our strong position in our 800 gig fiber edge portfolio. Demand for leading PIA solutions is exceptionally strong, growing across a wide range of transceiver programs. Based on our differentiated technology and ability to supply, both established and emerging module suppliers have qualified us on several new sockets, some on a sole source basis. We understand this module suppliers are winning shares in key mega data center deployments on 800 gig linear pluggable optics or LPO. Our fiber edge, linear TIA and driver solutions are deployed by several leading hyperscalers across both the US and in China, which contributed to sequential LPO revenue growth, a trend we expect to accelerate over time. We remain confident our foundation in 800 gig will continue to drive revenue growth throughout this year, further augmented by significant opportunities at a 1.6T shipments launching in Q2 and gaining momentum in the second half of the year. On 1.6T optical we generated significant design wins with the major optical module makers for their 1.6T transceivers incorporating the latest generation DSPs. This contributed to exceptionally strong bookings and backlog to support module ramps in the second half of the year. We're also seeing increased convection from hyperscalers around 1.6T linear receive optics or LRO and LPO as a preferred solution for a first layer scale out fabric due to the substantial power savings. Looking further ahead, we are participating in the development of the Multi-protocol Optoelectronic (MPO) or near package optics MSA and to see NPO as a meaningful content expansion opportunity for Semtech at 800 gig and 1.6T. Successes in LPO and LRO gave hyperscalers confidence in the next evolution of high density and low power optical solutions. We're also developing derivative components with the same core IP in different form factors to support several Multi-protocol Optoelectronic (MPO) projects for leading hyperscalers. We are actively participating in and support External Package Optics (XPO) MSA and the many External Package Optics (XPO) module designs incorporate our fiber Edge chips as they do in On-Silicon Optical Platform (OSOP) modules. We believe External Package Optics (XPO) provides a very compelling alternative to Co-packaged Optics (CPO) scale out by leveraging liquid cooled capabilities, proven technologies and components and establish the innovative optical module ecosystem. External Package Optics (XPO) can provide significant rack space savings along with improved serviceability and better reliability. On the copper side, we are very enthusiastic on copper edge deployment. Active Copper Cable (ACC) continues to gain meaningful traction. Customers evaluating Active Copper Cable (ACC) against incumbent solutions are seeing compelling advantages in link margin versus direct attached and power savings versus DSP based solutions consistent with our expectations in in Q1 we started shipping copper edge 1.6T ICs to our cable partners for deployment at a US hyperscaler in onboard integration applications including active backplane. Copper Edge linear equalizers are gaining momentum. Just as we were confident of Active Copper Cable (ACC)'s acceptance and ramp in the market, we have increased the confidence this engagement will convert into design wins and widespread market adoption. Based on our engagement across different sectors of the industry, we believe we are creating a multi year pipeline of copper edge opportunities, design wins and revenue. Looking forward, we are excited by the opportunity from the HIFO acquisition we completed in March. HIFO is reported in in our signal integrity product segment and its indium phosphide photonic products are reported in the data center end market. This product are a strategic building block in 1.6T and 3.2T optical modules and a key pillar in our strategy to support next generation data center requirements. We believe our GAIN chips has become the industry standard providing higher power and serving as reliable building blocks in tunable lasers for coherent modulation applications in Metro and data center interconnects. GAIN chip demand currently exceeded our supply but our capacity expansion plan is on schedule. We believe our continuous wave of CW laser design is uniquely differentiated to deliver higher conversion efficiency, superb far field beam profile and over temperature performance and narrower len width. These lasers have been sampled to and evaluated by several major module manufacturers for coherent light modules in scale across applications. Concurrently, we are optimizing our laser drivers and TIAs for coherent light applications. We plan to provide a comprehensive suite of photonic and electronic component solutions for this emerging high volume applications. In addition, we are also working with key customers to make dense wavelength division multiplexing of Dense Wavelength Division Multiplexing (DWDM) lasers optimized for emerging Co-packaged Optics (CPO) scale up applications based on the newly established Open Compute Interface MSA. This is exactly the kind of strategic investment we believe creates durable and compounded value. Not just a single product win but a platform capability that strengthens our position across a broad spectrum of optical architectures. Our customers are building to work. Semtech is uniquely positioned at this intersection with a portfolio that spans scale up, scale out and scale across, addressing the full hyperscale interconnect stack across both near term deployment and next generation architectures at 800Gig, 1.6 T3.2T and beyond. Finally, given the strength and the depth of our backlog, expanding design win momentum and the 1.6T fiber edge and copper edge inflection building into the second half, we are targeting 35% sequential revenue growth in Q2 for data center which would represent 85% growth over the same period last year. Based on the current order trend, we expect accelerating demand throughout fiscal year 2027 and beyond. Now moving to the high end consumer end market. Net sales for Q1 was $38.4 million, up 5% sequentially and up 8% year over year. Our TVS business continues to demonstrate impressive resilience and momentum with revenue growth outpacing underlying handset volumes. We continue winning shares and expanding content at premium brand handset manufacturers. Our differentiated technology is aligned with the right customers and the alignment is translating into consistent design win momentum that we expect to continue beyond handset. We are actively expanding the TVS franchise in into higher value applications. Our newest surge switch solution is the industry's first circuit protection device to deliver near constant clamping voltage for high voltage power delivery applications, addressing a meaningful protection gap as more demanding power standards extend into rugged mobile devices and high performance portable systems. These are environments that require consistent reliable protection across extreme temperature range and operating conditions and our solution is purpose built to meet that bar. We see this as a natural and incremental content expansion that broadens the TVS opportunity beyond our core handset market, we continue to expand our per se. Capacitive sensor design wins in specific absorption rate and smart variable applications. The addition of the force sensor business enriches our high end consumer portfolio, expand application verticals and pull through some cap and TVS sales with the same customer base. The synergies have played out as we planned for the high end consumer end market. We expect sequential revenue growth driven by improving seasonality layered on top of the share and content gains that are becoming a defining characteristic of this business. Moving to our industrial end market, Q1 industrial net sales were $153.9 million up 2% sequentially and up 8% year over year driven by another great quarter for LoRa. LoRa enabled net sales were $44.5 million up 12% quarter over quarter and up 14% year over year supported by continued expansion across several application verticals such as smart utilities, smart building, smart city and asset management. As edge AI transitions from concept to deployment reality, LoRa is emerging as a key enabler. Our fourth generation LoRa platform delivers dual band capability while dramatically expanding Data throughput to 2.6Mbps, a step change increase that unlocks a new AI application classes at the same time, LoRa maintains the best in class sensitivity, multi protocol flexibility and ultra low power consumption that defines a LoRa advantage. Preserving the extended reach and the long battery life our customers depend on, we are seeing LoRa gaining traction across a broadened set of use cases. Hong Ho (President and Chief Executive Officer) LoRa connected public safety sensors can now transmit high fidelity audio and AI verification rather than simple alert in healthcare. Fall detection systems can relay visual confirmation before dispatching responders in industrial environments. Predictive maintenance sensors can analyze vibration, thermal and acoustic profile with a level of detail that legacy low power sensors could not support. We have established three distinct and complementary pillars of low power connectivity platforms. LoRawan for industrial and commercial deployments, LoRa with multiple protocol flexibility for smart home and security market and Amazon Sidewalk for mass market consumer applications. Together these growth vectors give rise to accelerated growth in our LoRa business as we target LoRa revenue at an all time high with greater than 15% sequential quarterly revenue growth for Q2, our Internet of Things (IoT) systems and connectivity business recorded Q1 net sales of $88.3 million down 2% sequentially and up 2% year over year. Hong Ho (President and Chief Executive Officer) Our newly released AirLink RX400 and EX400 routers are generating strong industry reception. These are industry Leading low power 5G cellular system purpose built for mission critical applications and the feedback from customers has been consistently positive. I recently attended our annual AirLink Partner Summit alongside National Carriers Integration Partners and Value Added Resellers and the enthusiasm for both router performance and our upgraded AirLink management software was clear. Hong Ho (President and Chief Executive Officer) The close collaboration with our channel partners positioned us to scale successful use cases from regional to national deployment and accelerate this high margin business. We are off to a strong start and the momentum is building. Our ... Full story available on Benzinga.com
Semtech Q1 2027 Earnings Call Transcript
