SEMTECH CORP

Semtech Corporation is a leading provider of high-performance semiconductors powering data center networking, Internet of Things (IoT) connectivity and cellular infrastructure solutions, incorporated in Delaware in 1960. The company designs, develops, manufactures and markets a diverse portfolio of products for commercial applications, addressing the global infrastructure, high-end consumer and industrial end markets. The infrastructure end market includes data centers, passive optical networks, base stations, optical networks, servers, carrier networks, switches and routers, cable modems, wireless LAN and other communication infrastructure equipment, and has expanded to support AI-driven applications and general compute data center applications. The high-end consumer end market includes smartphones, tablets, smart glasses, wearables, desktops, notebooks and other consumer equipment. The industrial end market includes IoT applications such as connected spaces, smart utilities, wireless charging, medical, security systems, automotive, industrial and home automation, supply chain management, asset tracking and logistics, analog and digital video broadcast equipment, video-over-IP solutions and other industrial equipment. The semiconductor industry is broadly divided into analog, digital, and mixed-signal semiconductor products, with the analog and mixed-signal industry typically characterized by longer product life cycles than the digital industry. The IoT industry is rapidly evolving and has seen significant growth in recent years, driven by advancements in connectivity technologies and the increasing demand for connected devices across a wide range of vertical markets within IoT. Key trends in IoT include the growing deployment of on-device AI in IoT applications, the increasing adoption of edge computing, and the focus on security and data privacy.

The semiconductor and IoT industries are highly competitive, and Semtech expects competitive pressures to continue. In the semiconductor industry, the company competes based on its ability to capitalize on efficiencies and economies of scale in production and sales, its success in developing new products that implement new technologies, protection of its trade secrets and know-how, and maintaining high product quality and reliability. Semtech is in direct and active competition with numerous manufacturers of varying size, technical capability and financial strength, some of which are much larger and better resourced. In the IoT industry, competitors include large corporations with manufacturing scale and financial resources, as well as small emerging enterprises. Semtech believes its innovation, deep expertise in wireless IoT communications, and the ability to provide an integrated end-to-end IoT solution with security features gives it an opportunity to differentiate itself. The company is a global market leader in wireless cellular embedded modules for IoT with a broad product portfolio, a global footprint, strong relationships with global OEMs and unique software platforms. In the segments where it competes for intelligent wireless routers, Semtech believes its market share is strong, and competition is intensifying. The company has been granted 303 U.S. patents and 541 foreign patents, with expiration dates ranging from 2026 to 2044.

Semtech generates revenue primarily from the sale of its products into various end markets, with revenue recognized when control of these products is transferred to customers, generally when products are shipped and, to a lesser extent, when delivered. Cloud and connectivity services, reported in the IoT Systems and Connectivity segment, are provided on either a subscription or consumption basis. Revenue related to cloud and connectivity services on a subscription basis is recognized ratably over the contract period, while consumption-based revenue is recognized based on customer utilization. Revenues from SIM activation and initial application setup are deferred and recognized over the estimated customer life on a straight-line basis. Licenses for on-premise software are recognized upfront at the point in time when the software is made available to the customer. Revenue from software maintenance, unspecified upgrades and technical support contracts are recognized over the period such items are delivered or services are provided. Net sales made through independent distributors during fiscal years 2026, 2025 and 2024 were 74%, 72% and 66%, respectively. The company's end customers for its silicon solutions are primarily OEMs that produce and sell technology solutions, while its IoT module, router, gateway and managed connectivity solutions ship to IoT device makers and enterprises.

Semtech operates and accounts for results in three reportable segments: Signal Integrity, Analog Mixed Signal and Wireless, and IoT Systems and Connectivity. The Signal Integrity segment designs, develops, manufactures and markets a portfolio of optical and copper data communications and video transport products used in a wide variety of infrastructure and industrial applications, including integrated circuits for data centers, enterprise networks, PON, and wireless base station optical transceivers, with high-speed interfaces ranging from 100Mbps to 1.6Tbps. Net sales for Signal Integrity were $322.608 million in fiscal year 2026, $261.747 million in fiscal year 2025, and $177.033 million in fiscal year 2024. The Analog Mixed Signal and Wireless segment designs, develops, manufactures and markets high-performance protection devices (transient voltage suppressors) and specialized sensing products, as well as a portfolio of specialized radio frequency products including LoRa devices and wireless radio frequency technology, and power product devices. Net sales for Analog Mixed Signal and Wireless were $373.444 million in fiscal year 2026, $322.899 million in fiscal year 2025, and $260.264 million in fiscal year 2024. The IoT Systems and Connectivity segment designs, develops, operates and markets a comprehensive product portfolio of IoT solutions including modules, gateways, routers, and connected services, with modules available in a variety of form factors and connectivity options including LTE-M, NB-IoT and 5G. Net sales for IoT Systems and Connectivity were $353.923 million in fiscal year 2026, $324.641 million in fiscal year 2025, and $431.461 million in fiscal year 2024.

The company's products are sold primarily to customers in the infrastructure, high-end consumer and industrial end markets. As a percentage of total net sales, infrastructure represented 30% in fiscal year 2026, 27% in fiscal year 2025, and 19% in fiscal year 2024. High-end consumer represented 15% in fiscal year 2026, 16% in fiscal year 2025, and 14% in fiscal year 2024. Industrial represented 55% in fiscal year 2026, 57% in fiscal year 2025, and 67% in fiscal year 2024. Net sales in the U.S. represented 18%, 21% and 24% of net sales in fiscal years 2026, 2025 and 2024, respectively. Net sales to customers located in China (including Hong Kong) comprised 47% of net sales in fiscal year 2026. Net sales to customers located in Taiwan comprised 6% of net sales in fiscal year 2026. Customer A accounted for 11% of net sales in fiscal year 2026 and 10% in fiscal year 2025. Customer B accounted for 14% of net sales in fiscal year 2026, 13% in fiscal year 2025, and 10% in fiscal year 2024.

On March 3, 2026, Semtech completed the acquisition of HieFo Corporation in an all-cash transaction representing a total purchase consideration of approximately $34.0 million. On October 10, 2025, the company issued and sold $402.5 million in aggregate principal amount of 0% Convertible Senior Notes due 2030 in a private placement. On October 7, 2025, the company entered into exchange agreements with certain holders of the 2027 Notes, using approximately $220.6 million of the net proceeds from the 2030 Notes, together with the issuance of 3,036,192 shares of common stock as consideration for the exchange of approximately $219.0 million aggregate principal amount of the 2027 Notes and accrued interest, recognizing an induced conversion expense of $17.6 million. On October 7, 2025, the company also entered into exchange agreements with holders of the 2028 Notes, using approximately $63.1 million of the net proceeds from the 2030 Notes, together with the issuance of 2,217,394 shares of common stock as consideration for the exchange of the remaining $62.0 million aggregate principal amount of the 2028 Notes and accrued interest, recognizing an induced conversion expense of $3.6 million. The company did not repurchase any shares of its common stock under its stock repurchase program during fiscal year 2026, and as of January 25, 2026, the remaining authorization under the program was $209.4 million. On April 24, 2025, the company entered into the Fourth Amendment to the Credit Agreement, increasing the total available borrowing capacity under the Revolving Credit Facility by $117.5 million, increasing the total facility size to $455.0 million.

Total net sales for fiscal year 2026 were $1,049.975 million, an increase of 15% compared to $909.287 million for fiscal year 2025, primarily driven by higher net sales across all major end markets. Gross profit increased to $542.144 million in fiscal year 2026 from $456.528 million in fiscal year 2025, with gross margin improving to 51.6% from 50.2%. Net loss attributable to common stockholders was $40.376 million for fiscal year 2026, compared to a net loss of $161.896 million for fiscal year 2025. Diluted loss per share was $0.46 for fiscal year 2026, compared to $2.26 for fiscal year 2025. Net cash provided by operating activities was $181.168 million in fiscal year 2026, compared to $57.987 million in fiscal year 2025.

Semtech is focused on three secular trends that drive its growth strategy: enabling a smarter, more sustainable planet through IoT solutions; addressing the demand for higher bandwidth and performance with lower power consumption; and supporting greater mobility in an increasingly connected world. The increasing adoption of LoRa technology for low power wide-area networks is providing connectivity solutions that enable IoT networks, with the growing deployment of on-device AI in IoT applications further strengthening this opportunity as edge AI architectures transmit processed insights rather than raw sensor data, making the long-range, low-power characteristics of LoRa an ideal complement to AI-enabled IoT devices across industrial, security, smart city applications and more. The portfolio of optical and copper connectivity solutions continues to address the demand for greater bandwidth and higher performance while using less power by global hyper-scale data center customers, and the rapid expansion of AI workloads has driven infrastructure suppliers to accelerate investments in high-speed connectivity using 5G wireless and PON technology. The trend toward adoption of finer silicon geometries has accelerated across all categories of end systems, making them increasingly vulnerable to electrical and electromagnetic threats, driving increased adoption of protection solutions. The increasing demand for smaller, lower-powered higher performance mobile platforms with more enjoyable organic light-emitting diode displays has benefited protection and proximity sensing solutions. The company supplies cellular wireless devices and provides services in the wireless communications and information technology industries, enabling connectivity for IoT solutions through cellular and short-range wireless technologies including 3G, 4G, 5G NR standards, LPWA standards such as LTE-M and NB-IoT, and wireless local area network technologies such as Wi-Fi and Bluetooth, and GNSS positioning. IoT connectivity services optimize and simplify North American and Asia Pacific deployments with multi-carrier options for IoT deployments in the U.S., Canada, Mexico, Australia, and New Zealand and a single point of accountability for connectivity management, and also accelerate global IoT deployments by providing a solution for customers to maintain a secure connection to assets throughout the world.

The company is conducting a portfolio rationalization review, which has included identifying non-core assets in an effort to align its portfolio with its strategic vision and preferred margin profile. As part of this review, Semtech is reviewing potential strategic alternatives for certain of its non-core assets, and has publicly announced its intention to divest its cellular module business, which represents a substantial portion of its IoT Systems and Connectivity segment. No decision has been made regarding any strategic alternative or any particular asset and there is no assurance that the exploration of strategic alternatives will result in any transactions, nor any specified timeline. The company also completed the acquisition of HieFo Corporation on March 3, 2026, in an all-cash transaction representing a total purchase consideration of approximately $34.0 million, and now operates foundries that produce certain semiconductor devices used across data center interconnects and intra-data center interconnects, utilizing a combination of internal manufacturing capabilities and third-party foundries as part of a 'fab-lite' business model.

The filing does not contain specific margin and cost outlook targets or efficiency targets with exact figures.

The company outsources most of its manufacturing to third-party foundries, assembly and test contractors and electronics manufacturing services partners, with finished silicon wafers purchased from third-party wafer foundries primarily located in the U.S., China, Israel, Japan and Taiwan. Following the HieFo Acquisition, Semtech now operates foundries that produce certain semiconductor devices and utilizes a combination of internal manufacturing capabilities and third-party foundries as part of a 'fab-lite' business model, maintaining and expanding internal process development capabilities. The company uses various manufacturing processes including Bipolar, CMOS, RF-CMOS and Silicon Germanium BiCMOS processes. IoT Systems products designs are primarily managed internally, maintaining management of design engineering, software engineering, manufacturing engineering and manufacturing test development. Development and production facilities in Colorado Springs, Colorado provide assembly and services for a portion of very small form factor protection devices. Third-party subcontractors perform almost all other assembly and test operations, with a majority conducted by contractors located in China, Malaysia, Taiwan and Vietnam. As of January 25, 2026, year-over-year headcount increased from 1,838 to 1,920 full-time employees worldwide, with 1,437 employees based outside the U.S., including 977 employees in research and development, 338 employees in operations, and 605 employees in selling, general and administrative.

The filing does not specify R&D spending levels, capital expenditure plans, share repurchase authorization amounts, or dividend policy with exact forward-looking figures beyond what has been disclosed in the financial results.

The company faces risks from the cyclical nature of the semiconductor industry, which has experienced significant downturns often in connection with maturing product cycles or a decline in general economic conditions, and the severity, timing and duration of these downturns may be exacerbated by broader macroeconomic conditions including inflationary pressures, elevated interest rates, reduced capital spending and geopolitical uncertainty. The average selling prices of products in the company's markets have historically declined significantly over the life of the product, and pricing pressures may be further intensified during periods of weak or uncertain macroeconomic conditions, uneven end-market demand or customer inventory corrections. The company also faces risks from a growing concentration of demand in AI-related semiconductors, which may increase exposure to cyclical industry trends and competitive pressures, as hyperscale cloud providers are generally indirect customers and AI infrastructure spending is increasingly concentrated among a limited number of such providers whose requirements may evolve rapidly. Additionally, the company is subject to export restrictions and laws affecting trade and investments, which may limit its ability to sell to certain customers, and sales to customers located in China (including Hong Kong) comprised 47% of net sales in fiscal year 2026, exposing the company to adverse changes in general economic conditions in China.

The company faces risks from the potential divestiture of its cellular module business, which represents a substantial portion of its IoT Systems and Connectivity segment, as the divestiture process may take many months or longer to complete and could disrupt normal business operations, including key employee attrition, disruption of customer relationships, and the need to separate shared operational resources. The company also faces risks associated with its indebtedness, including under the Credit Agreement which contains restrictive covenants that impose significant operating and financial restrictions, and the company was in compliance with all covenants as of January 25, 2026. The accounting method for the Notes could adversely affect financial condition and results, and conversion of the Notes may dilute the ownership interest of stockholders or otherwise depress the price of common stock. The company also faces risks from the integration of the Sierra Wireless acquisition, having encountered difficulties that have adversely impacted the ability to realize anticipated benefits, including reduced business levels due to macroeconomic and industry conditions, and may be required to record additional impairments of goodwill allocated to this business.

The company faces material risks from the cyclical nature of the semiconductor industry, which has experienced significant downturns that may be exacerbated by broader macroeconomic conditions including inflationary pressures, elevated interest rates, and geopolitical uncertainty, and the average selling prices of products have historically declined rapidly over the life of the product. A growing concentration of demand in AI-related semiconductors may increase exposure to cyclical industry trends and competitive pressures, as hyperscale cloud providers are generally indirect customers and AI infrastructure spending is increasingly concentrated among a limited number of providers. Sales to customers located in China (including Hong Kong) comprised 47% of net sales in fiscal year 2026, exposing the company to adverse changes in general economic conditions in China, trade restrictions, and potential government actions requiring use of local suppliers. The company's indebtedness, including $100.5 million of 1.625% Convertible Senior Notes due 2027 and $402.5 million of 0% Convertible Senior Notes due 2030 outstanding as of January 25, 2026, subjects it to restrictive covenants in the Credit Agreement, including a maximum consolidated leverage ratio and a minimum interest expense coverage ratio, and failure to meet these covenants could result in acceleration of debt. The company recorded $84.8 million of goodwill impairment in fiscal year 2026 and $755.6 million in fiscal year 2024, and may be required to recognize additional impairment charges in the future if earnings forecasts or strategic direction changes.

Management's message emphasizes the company's commitment to advancing its role as a leading provider of disruptive platforms that enable customers to deliver solutions to create a smarter planet, focusing on three secular trends: enabling a smarter, more sustainable planet through IoT solutions; addressing the demand for higher bandwidth and performance with lower power consumption; and supporting greater mobility in an increasingly connected world. The tone reflects a focus on strategic portfolio rationalization, including the announced intention to divest the cellular module business and the completion of the HieFo Acquisition to enhance the 'fab-lite' business model. Management highlights the company's strong financial performance with net sales of $1,049.975 million for fiscal year 2026, an increase of 15% compared to $909.287 million for fiscal year 2025, and gross profit increasing to $542.144 million from $456.528 million. The strategic priorities emphasized include leveraging rare analog and mixed-signal design expertise, continuing to release new products and achieve new design wins, focusing on fast-growing market segments and regions, and leveraging outsourced manufacturing capacity.