Semtech Corporation (SMTC)

Interest coverage

		Jan 31, 2025	Oct 31, 2024	Jul 31, 2024	Apr 30, 2024	Jan 31, 2024	Jan 28, 2024	Oct 31, 2023	Oct 29, 2023	Jul 31, 2023	Jul 30, 2023	Apr 30, 2023	Jan 31, 2023	Jan 29, 2023	Oct 31, 2022	Oct 30, 2022	Jul 31, 2022	May 1, 2022	Apr 30, 2022	Jan 31, 2022	Jan 30, 2022
Earnings before interest and tax (EBIT) (ttm)	US$ in thousands	-80,946	-731,270	-1,369,015	-1,241,787	-1,259,931	-938,590	-618,739	-624,682	-663,975	-420,851	-82,627	-31,841	84,416	187,390	196,365	201,621	179,994	170,892	160,462	154,042
Interest expense (ttm)	US$ in thousands	91,608	101,995	105,522	99,710	99,252	101,827	101,133	98,222	78,837	66,948	44,999	23,819	18,897	6,138	5,128	5,127	5,703	5,739	5,607	5,318
Interest coverage		-0.88	-7.17	-12.97	-12.45	-12.69	-9.22	-6.12	-6.36	-8.42	-6.29	-1.84	-1.34	4.47	30.53	38.29	39.33	31.56	29.78	28.62	28.97

January 31, 2025 calculation

Interest coverage = EBIT (ttm) ÷ Interest expense (ttm)
= $-80,946K ÷ $91,608K
= -0.88

The interest coverage ratio of Semtech Corporation has exhibited significant fluctuations over the period reported. Starting from January 30, 2022, where the interest coverage ratio stood at 28.97, the company's ability to cover its interest expenses remained relatively stable, hovering around the high 20s and low 30s, indicating a healthy ability to meet its interest obligations.

However, a noticeable decline in the interest coverage ratio was observed after January 31, 2023, reaching negative values, which implies that Semtech Corporation faced challenges in meeting its interest payments solely from its operating income. The downward trend continued through subsequent periods, with the ratio staying negative until at least January 31, 2025.

This decline in the interest coverage ratio raises concerns about the company's financial health and ability to service its debt efficiently. Investors and stakeholders may perceive the negative interest coverage ratios as a red flag regarding the company's financial stability and potential liquidity issues that could impact its creditworthiness. Monitoring this ratio closely becomes essential for assessing Semtech Corporation's ability to manage its debt obligations and maintain a sustainable financial position in the future.