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Beyond
Remarkable
ANNUAL REPORT
2018
FINANCIALS
ANNUAL REVENUE
(in millions)
EPS
OPERATING CASH FLOW
(in millions)
$595
$558
$490
$544
$588
$-2.44
$0.41
$0.17
$0.83
$0.54
$118
$106
$102
$118
$111
FY2014* FY2015** FY2016
FY2017
FY2018
FY2014* FY2015** FY2016
FY2017
FY2018
FY2014*
FY2015** FY2016
FY2017
FY2018
BALANCE SHEET DATA (in thousands)
Cash, cash equivalents and investments
Working capital
Total assets
Long-term debt, less current portion
Other long-term liabilities
Total stockholders’ equity
FY2014*
FY2015**
FY2016
FY2017
FY2018
$
$
$
$
$
$
246,868
282,706
948,940
273,293
28,914
535,843
$
$
$
$
$
$
230,328
288,647
929,431
234,746
35,286
551,358
$
$
$
$
$
$
211,810
237,334
$
$
297,134
315,453
$
$
307,923
335,024
911,517
$ 1,011,542
$ 1,085,776
239,177
40,402
528,051
$
$
$
226,524
56,780
605,263
$
$
$
211,114
83,441
665,013
* FY2014 EPS impacted by restructuring and impairment related charges of $181.5M from the strategic decision to reduce the level of investment made in the
optical long-haul market.
** FY2015 EPS impacted by restructuring and impairment related charges of $25.1M from the strategic decision to conclude investment in defense and microwave
communications infrastructure markets.
Semtech Corporation
Fiscal year 2018 represented another exciting year
for Semtech. Net sales increased 8% over the prior
fiscal year and totaled $587.8 million. Our Wireless
and Sensing and Signal Integrity Products Groups both
delivered record annual net sales while our Protection
Products Group achieved its second consecutive year of
strong annual growth, which contributed to fiscal year
2018’s strong operating performance.
Semtech continues to focus on delivering innovative
Analog and Algorithm platforms to several of the
most attractive market segments in the semiconductor
industry. Our focus remains:
INTERNET OF THINGS
The Internet of Things (IoT) is expected to revolutionize
industrial communications by connecting billions of
“things” and delivering unparalleled efficiencies and
intelligence using the Cloud. IoT has opened a huge
opportunity for low power connected sensors.
Semtech’s LoRa Technology is benefiting from its
broadening acceptance for low power wide area
network (LPWAN) connectivity. Several key milestones
achieved during fiscal year 2018 included:
• LoRa Alliance™ membership expanded to include
over 500 companies globally
• More than 50 countries either announced or
completed LoRaWAN™ network deployments
• Gateways deployed exceeded 70,000 worldwide,
and able to support more than 350 million nodes
• Cumulative LoRa®-based nodes deployed equaled
more than 50 million worldwide
CEO LETTER
DATA CENTERS
The emergence of Cloud and hyperscale data centers is
driving a tremendous increase in the demand for high
bandwidth connectivity.
• Semtech’s ClearEdge® CDR and FiberEdge™ PMD
platforms have enjoyed strong acceptance and
contributed to record CDR and PMD net sales in
fiscal year 2018
MOBILITY
The world we live in continues to demand more mobility
driving the need for smaller, faster, feature-rich, and
more efficient mobile device platforms.
• Semtech’s Z-Pak™ platform delivers industry leading
ESD and Surge Protection at the smallest form factors
available
• Semtech’s Proximity Sensing platforms deliver the
uniquely differentiated sensing required to enable
the effective management of powerful radio
emissions in tablets, smartphones and wearables
We exited fiscal year 2018 with solid momentum and
visibility, led by a record number of annual design wins
and a strong portfolio of high-performance analog and
mixed signal platforms. Our customer diversity, end-
market balance, geographical distribution, and focus
on high-growth, attractive markets should enable the
Company to deliver even more remarkable financial
results in fiscal year 2019.
Mohan Maheswaran
President and Chief Executive Officer
Annual Report 2018
INTERNET OF THINGS
1000
The number of proof-of-concepts or
POCs using Semtech’s LoRa Technology
underway throughout the world at the
end of fiscal year 2018
50 MILLION
LoRa®-based end-nodes deployed
worldwide used in both private
and public networks
70,000+
LoRa-based gateways deployed
worldwide at the end of fiscal
year 2018, and expected to reach
200,000 by the end of fiscal
year 2019
27 BILLION*
M2M connections will grow
to 27 billion globally in 2025
*Source: Machina Research
In the coming years, the Internet of Things (IoT) technology phenomenon is expected to equip billions of
everyday objects with connectivity and intelligence for improved analytics, performance, efficiency, and
lifestyle. In fiscal year 2018, Semtech’s LoRa Technology delivered a record net sales performance.
Semtech Corporation
DATA CENTERS
MARKET LEADER
Semtech high-speed optical transceiver ICs
are trusted globally by optical networking
solution providers for data centers
1 BILLION+
Semtech Optical ICs
shipped worldwide
Technology companies continue to break ground on data centers throughout the world to support
the ever-increasing demand for higher bandwidth needed by Cloud computing, social networking,
multimedia streaming, and mobile usage.
Semtech’s comprehensive platform of optical ICs provide superior signal integrity support for the data
center markets which remain one of the more exciting and high-growth segments.
Our highly differentiated portfolio of single and multi-channel products including the ClearEdge® Clock
and Data Recovery (CDR) and FiberEdge™ Physical Media Devices (PMDs), as well as integrated variants,
provide extraordinary solutions for data center and enterprise networking, Passive Optical Network (PON)
or Fiber to the X (FTTX), and wireless infrastructure markets.
Annual Report 2018
MOBILITY
10s OF BILLIONS
UNITS SHIPPED
Z-Pak™-based solution for transient
voltage suppression (TVS) protection
in portable and consumer electronics
2 BILLION+
Protection and Sensing devices
shipped annually for the smartphones
and mobility markets
With each successive generation of IC development and the associated smaller process geometries, Semtech’s
high-performance protection solutions enable customers to more easily achieve smaller form factors, greater
energy-efficiency and portability to meet the demands for today’s leading mobile devices where users demand
ever-increasing mobility from their mobile applications.
Semtech’s electrostatic discharge (ESD) protection products, LinkCharge® wireless charging platform and smart
sensing solutions support the demands for robust, compact and high-performance capabilities. Many of the
leading mobile device manufacturers rely on Semtech’s high-performance protection platforms to protect their
smartphones and other mobile device applications.
Semtech Corporation
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Special Note
Regarding Forward-Looking and Cautionary Statements
This Annual Report on Form 10-K contains "forward-looking statements" within the meaning of the "safe harbor"
provisions of the Private Securities Litigation Reform Act of 1995, as amended, based on our current expectations,
estimates and projections about our operations, industry, financial condition, performance, operating results, and
liquidity. Forward-looking statements are statements other than historical information or statements of current
condition and relate to matters such as future financial performance, future operational performance, the
anticipated impact of specific items on future earnings, and our plans, objectives and expectations. Statements
containing words such as "may," "believe," "anticipate," "expect," "intend," "plan," "project," "estimate," "should,"
"will," "designed to," "projections," or "business outlook," or other similar expressions constitute forward-looking
statements. Forward-looking statements involve known and unknown risks and uncertainties that could cause actual
results and events to differ materially from those projected. Potential factors that could cause actual results to differ
materially from those in the forward-looking statements include, but are not limited to: fluctuation in the Company's
future results; downturns in the business cycle; decreased average selling prices of the Company's products;
reduced demand for the Company's products due to global economic conditions; changes in U.S. and global social,
political, regulatory and economic conditions or in laws and policies governing foreign trade, manufacturing,
development and investment, including potential increases on tariffs of goods imported into the U.S.; business
interruptions; the Company's reliance on a limited number of suppliers and subcontractors for component and
materials; potentially insufficient liability insurance if the Company's products are found to be defective; obsolete
inventories as a result of changes in demand and change in life cycles for the Company’s products; the Company
may be unsuccessful in developing and selling new products; the Company’s products having to undergo a lengthy
and expensive qualification process without any assurance of product sales; the Company's products failing to meet
industry standards; the Company's inability to protect intellectual property rights; the Company suffering losses if
its products infringe the intellectual property rights of others; the Company's need to commit resources to product
production prior to receipt of purchase commitments; increased business risk from foreign customers; the
Company's foreign currency exposures; potential increased tax liabilities and effective tax rate if the Company
needs to repatriate funds held by foreign subsidiaries; export restrictions and laws affecting the Company's trade
and investments; competition against larger, more established entities; increased competition due to industry
consolidation; the loss of any one of the Company's significant customers; volatility of customer demand;
termination of a contract by a distributor; the Company’s inability to effectively control the sales of its products on
the gray market; the Company’s failure to maintain effective internal control over financial reporting or disclosure
controls and procedures; government regulations and other standards that impose operational and reporting
requirements; the Company's failure to comply with applicable environmental regulations; compliance with conflict
minerals regulations; increase in the Company’s cost of doing business as a result of having to comply with the
codes of conduct of certain of the Company’s customers and suppliers; volatility of the Company’s effective tax rate;
changes in tax laws and review by taxing authorities; taxation of the Company in other jurisdictions; the Company’s
limited experience with government contracting; potential government investigations and inquiries; loss of the
Company's key personnel; risks associated with companies the Company has acquired in the past and may acquire
in the future and the Company's ability to successfully integrate acquired businesses and benefit from expected
synergies; the Company may be required to recognize additional impairment charges; losses in the value of
investments in entities we do not control; the receipt of inaccurate, incomplete, or untimely financial information
from entities in which we have an interest for which we are required to consolidate; the Company may be adversely
affected by new accounting pronouncements; the Company's ability to generate cash to service its debt obligations;
restrictive covenants in the Company's credit agreement which may restrict its ability to pursue its business
strategies; the Company's reliance on certain critical information systems for the operation of its business; costs
J
associated with the Company's indemnification of certain customers, distributors and other parties; the Company's
common stock price could be subject to extreme price fluctuations; the impact on the Company’s common stock
price if securities or industry analysts do not publish reports about the Company’s business or adversely change
their recommendations regarding the Company’s common stock; anti-takeover provisions in the Company’s
organizational documents could make an acquisition of the Company more difficult; the Company is subject to
litigation risks which may be costly to defend. Additionally, forward-looking statements should be considered in
conjunction with the cautionary statements contained in this Annual Report on Form 10-K, including, without
limitation, information under the captions "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Risk Factors" and additional factors that accompany the related forward-looking
statements in this Annual Report on Form 10-K, in the Company's other filings with the Securities and Exchange
Commission ("SEC"), and in material incorporated herein and therein by reference. In light of the significant risks
and uncertainties inherent in the forward-looking information included herein that may cause actual performance
and results to differ materially from those predicted, any such forward-looking information should not be regarded
as representations or guarantees by the Company of future performance or results, or that its objectives or plans
will be achieved, or that any of its operating expectations or financial forecasts will be realized. Reported results
should not be considered an indication of future performance. Investors are cautioned not to place undue reliance
on any forward-looking information contained herein, which reflect management's analysis only as of the date
hereof. Except as required by law, the Company assumes no obligation to publicly release the results of any update
or revision to any forward-looking statement that may be made to reflect new information, events or circumstances
after the date hereof or to reflect the occurrence of unanticipated or future events, or otherwise.
In addition to regarding forward-looking statements with caution, you should consider that the preparation of the
consolidated financial statements requires us to draw conclusions and make interpretations, judgments, assumptions
and estimates with respect to certain factual, legal, and accounting matters. Our consolidated financial statements
might have been materially impacted if we had reached different conclusions or made different interpretations,
judgments, assumptions or estimates.
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(1)On October 5, 2016, we issued a warrant (the "Warrant") to Comcast Cable Communications Management LLC ("Comcast") to purchase
up to 1,086,957 shares (the "Warrant Shares") of our common stock. The Warrant was issued by us to Comcast in connection with an
agreement between the parties regarding the intended trial deployment by Comcast of a low-power wide-area Network ("LPWAN") in the
United States, based on our LoRa Technology. The Warrant is accounted for as equity and the cost is recognized as an offset to net sales over
the respective performance period which is expected to be completed by April 2019. The Warrant consists of five performance tranches. The
cost associated with each tranche is recognized based on the fair value at each reporting date until vesting which is the measurement date.
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(1)Premier is a distributor with a concentration of sales to Samsung. The above percentages represent our estimate of the sales activity related to Samsung that
is passing through this distributor.
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You should carefully consider and evaluate all of the information in this Annual Report on Form 10-K, including the risk
factors listed below. The risks described below are not the only ones facing our Company. Additional risks not now known to us
or that we currently deem immaterial may also impair our business operations. If any of these risks actually occur, our business
could be materially harmed. If our business is harmed, the trading price of our common stock could decline.
As discussed earlier in "Special Note Regarding Forward-Looking and Cautionary Statements," this Annual Report on Form
10-K contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from
those anticipated in these forward-looking statements as a result of such risks and uncertainties and certain factors including
the risks faced by us described below and elsewhere in this Annual Report on Form 10-K, including, without limitation,
information under the section "Management's Discussion and Analysis of Financial Condition and Results of Operations" and
additional factors that accompany the related forward-looking statements in this Annual Report on Form 10-K, in the
Company's other filings with the SEC, and in material incorporated herein and therein by reference. In light of the significant
risks and uncertainties inherent in the forward-looking information included herein that may cause actual performance and
results to differ materially from those predicted, any such forward-looking information should not be regarded as
representations or guarantees by the Company of future performance or results, or that its objectives or plans will be achieved
or that any of its operating expectations or financial forecasts will be realized. Reported results should not be considered an
indication of future performance. Investors are cautioned not to place undue reliance on any forward-looking information
contained herein, which reflect management's analysis only as of the date hereof. Except as required by law, the Company
assumes no obligation to publicly release the results of any update or revision to any forward-looking statements that may be
made to reflect new information, events or circumstances after the date hereof or to reflect the occurrence of unanticipated or
future events, or otherwise.
Risks Relating to General Business Conditions
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Risks Relating to Sales, Marketing and Competition
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(1)Premier is a distributor with a concentration of sales to Samsung. The above percentages represent our estimate of the sales activity related to Samsung that
is passing through this distributor.
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tem 1B.
Unresolved
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nts
N
None.
It
tem 2.
Properties
O
ur corporate he
w
was completed i
eadquarters is l
in 2002. The pa
located in Cam
arcel on which
marillo, Californ
h our headquart
nia where we o
ters is located c
own an approx
can accommod
ximately 87,600
date substantial
0 square foot f
l expansion.
facility that
A
As of January 28
ar
re summarized
8, 2018, we ow
in the followin
wned or leased
ng table:
multiple prope
erties. The loca
ations and prim
mary functions
of significant p
properties
(1)
Our Corporate He
en
ntered into among S
gent and as swing l
ag
Headquarters have
Semtech Corporat
line lender and let
been pledged to se
ecure our obligatio
tion, the guarantor
rs party thereto, th
r.
tter of credit issuer
ons under the Ame
he lenders party th
ended and Restated
hereto and HSBC B
d Credit Agreemen
Bank USA, Nationa
nt dated November
al Association, as
r 15, 2016
administrative
In
n addition to th
Administrative o
A
ou
ur future cash f
he properties l
offices at vario
flows. Our leas
listed in the ab
ous locations in
ses expire at va
bove table, we
n the U.S. and
arious dates thr
e also lease Sa
internationally
rough 2027.
ales and Mark
y under operati
keting, Researc
ing leases, non
ch and Develo
ne of which are
opment, and
e material to
W
We believe that
eplacement and
re
our existing le
d additional spa
ased and owne
ace will be ava
ed space is mor
ailable in the fu
re than adequat
uture on comme
ate for our curre
ercially reason
ent operations,
nable terms as c
, and that suitab
circumstances
ble
warrant.
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(1)The Company acquired AptoVision on July 1, 2017 and Triune on March 4, 2015. Refer to Note 3 to our Consolidated Financial Statements included in
Item 8 of this report.
(2) The Company has re-aligned resources and infrastructure, resulting in restructuring expense of $6.3 million, $2.3 million and $4.5 million in fiscal years
2018, 2017 and 2016, respectively, included in selling, general and administrative.
JE
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The following discussion and analysis of our financial condition and operating results should be read in conjunction with
Item 6 "Selected Consolidated Financial Data" and our Consolidated Financial Statements and related Notes included
elsewhere in this Annual Report on Form 10-K.
This Annual Report on Form 10-K contains "forward-looking statements" within the meaning of the "safe harbor" provisions of
the Private Securities Litigation Reform Act of 1995, as amended, based on our current expectations, estimates and projections
about our operations, industry, financial condition, performance, operating results, and liquidity. Forward-looking statements
are statements other than historical information or statements of current condition and relate to matters such as future
financial performance, future operational performance, the anticipated impact of specific items on future earnings, and our
plans, objectives and expectations. Statements containing words such as "may," "believe," "anticipate," "expect," "intend,"
"plan," "project," "estimate," "should," "will," "designed to," "projections," or "business outlook," or other similar expressions
constitute forward-looking statements. Forward-looking statements involve known and unknown risks and uncertainties that
could cause actual results and events to differ materially from those projected. Please see Special Note Regarding Forward-
Looking and Cautionary Statements elsewhere in this Annual Report on Form 10-K for potential factors that could cause
actual results to differ materially from those in the forward-looking statements.
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Fiscal Year 2017 Compared With Fiscal Year 2016
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