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Silicon Motion Announces Results for the Period Ended September 30, 2021

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·18 min read
In this article:
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Financial Highlights

3Q 2021 GAAP

3Q 2021 Non-GAAP

  • Net sales

$254.2 million (+15% Q/Q, +102% Y/Y)

$254.2 million (+15% Q/Q, +102% Y/Y)

  • Gross margin

50.0%

50.2%

  • Operating margin

27.1%

29.4%

  • Earnings per diluted ADS

$1.58

$1.70

Business Highlights

  • Achieved third consecutive record quarterly revenue and earnings per share

  • Reached $1 billion in Revenue Run-Rate, a quarter ahead of plan

  • Sales of eMMC+UFS controllers reached new record quarterly high

  • SSD controller sales approximately flat Q/Q and increased 70% to 75% Y/Y

  • eMMC+UFS controller sales increased 60% to 65% Q/Q and increased 305% to 310% Y/Y

  • SSD solutions sales increased 0% to 5% Q/Q and declined 0% to 5% Y/Y

  • Launched world's fastest single chip controller for external portable SSDs

TAIPEI, Taiwan and MILPITAS, Calif., Oct. 28, 2021 (GLOBE NEWSWIRE) -- Silicon Motion Technology Corporation (NasdaqGS: SIMO) (“Silicon Motion” or the “Company”) today announced its financial results for the quarter ended September 30, 2021. For the third quarter, net sales (GAAP) increased sequentially to $254.2 million from $221.1 million in second quarter 2021. Net income (GAAP) increased to $55.4 million or $1.58 per diluted ADS (GAAP) from net income (GAAP) of $49.5 million or $1.42 per diluted ADS (GAAP) in second quarter 2021.

For the third quarter, net income (non-GAAP) increased to $60.4 million or $1.70 per diluted ADS (non-GAAP) from a net income (non-GAAP) of $52.7 million or $1.50 per diluted ADS (non-GAAP) in second quarter 2021.

Third Quarter 2021 Review
“We continued to optimize our scarce foundry wafer capacity and product allocation to customers and delivered $1 billion in Revenue Run-Rate, a quarter ahead of plan,” said Wallace Kou, President and CEO of Silicon Motion. “Our third quarter results were driven by strong sales of eMMC+UFS controllers used primarily in smartphones and other smart devices.”

Key Financial Results

(in millions, except percentages and per ADS amounts)

GAAP

Non-GAAP

3Q 2021

2Q 2021

3Q 2020

3Q 2021

2Q 2021

3Q 2020

Revenue

$254.2

$221.1

$126.0

$254.2

$221.1

$126.0

Gross profit

$127.2

$111.1

$61.8

$127.8

$112.9

$61.9

Percent of revenue

50.0%

50.3%

49.1%

50.2%

51.0%

49.1%

Operating expenses

$58.3

$50.7

$36.0

$53.0

$48.4

$32.9

Operating income

$68.9

$60.4

$25.8

$74.8

$64.5

$29.0

Percent of revenue

27.1%

27.3%

20.5%

29.4%

29.2%

23.0%

Earnings per diluted ADS

$1.58

$1.42

$0.70

$1.70

$1.50

$0.76

Other Financial Information

(in millions)

3Q 2021

2Q 2021

3Q 2020

Cash, cash equivalents, restricted cash and short-term investments—end of period

$419.5

$412.3

$368.4

Routine capital expenditures

$5.9

$4.9

$2.6

Dividend payments

$12.2

$12.2

$12.3

During the third quarter, we had $5.9 million of capital expenditures for the routine purchase of software, design tools and other items and $1.4 million for building construction in Hsinchu, Taiwan.

Returning Value to Shareholders
On October 26, 2020, our Board of Directors declared a $1.40 per ADS annual dividend to be paid in quarterly installments of $0.35 per ADS. On August 19, 2021, we paid $12.2 million to shareholders as the fourth installment of our annual dividend. On October 25, 2021, our Board of Directors declared a $2.00 per ADS annual dividend, representing an annual increase of 43%, to be paid in quarterly installments of $0.50 per ADS. The first installment of our annual dividend will be paid on November 24, 2021.

Business Outlook
“In spite of capped foundry wafer supply this year, we’ve optimized with better product mix, customer allocation and pricing discipline to deliver strong growth,” said Wallace Kou, President and CEO of Silicon Motion. “We believe that our strong design win momentum with leading OEM customers positions us for continued market share gains and relative outperformance next year.”

For the fourth quarter of 2021, management expects:

GAAP

Non-GAAP Adjustment

Non-GAAP

Revenue

$254m to $267m
+0% to 5% Q/Q

--

$254m to $267m
+0% to 5% Q/Q

Gross margin

48.4% to 50.4%

Approximately $0.2m*

48.5% to 50.5%

Operating margin

24.9% to 26.7%

Approximately $9.2m to $10.2m**

28.5% to 30.5%

* Projected gross margin (non-GAAP) excludes $0.2 million of stock-based compensation.
** Projected operating margin (non-GAAP) excludes $9.2 million to $10.2 million of stock-based compensation.

Conference Call & Webcast:

The Company’s management team will conduct a conference call at 8:00 am Eastern Time on October 28, 2021.

Speakers:
Wallace Kou, President & CEO
Riyadh Lai, CFO
Chris Chaney, Director of Investor Relations & Strategy

Conference Call Details
Participants must register in advance to join the conference using the link provided below and should dial in 10 minutes prior to the call start time. Conference access information (including dial-in numbers, the passcode, and a unique access pin) will be provided in the email received upon registration.

Participant Online Registration: http://apac.directeventreg.com/registration/event/7896715

Replay Numbers (for 7 days):

USA (Toll Free):

1 855 452 5696

USA (Toll):

1 646 254 3697

Participant Passcode:

7896715

A webcast of the call will be available on the Company's website at www.siliconmotion.com.

Discussion of Non-GAAP Financial Measures

To supplement the Company’s unaudited selected financial results calculated in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”), the Company discloses certain non-GAAP financial measures that exclude stock-based compensation and other items, including gross profit (non-GAAP), operating expenses (non-GAAP), operating profit (non-GAAP), net income (non-GAAP), and earnings per diluted ADS (non-GAAP). These non-GAAP measures are not in accordance with or an alternative to GAAP, and may be different from non-GAAP measures used by other companies. We believe that these non-GAAP measures have limitations in that they do not reflect all the amounts associated with the Company’s results of operations as determined in accordance with GAAP and that these measures should only be used to evaluate the Company’s results of operations in conjunction with the corresponding GAAP measures. The presentation of this additional information is not meant to be considered in isolation or as a substitute for the most directly comparable GAAP measure. We compensate for the limitations of our non-GAAP financial measures by relying upon GAAP results to gain a complete picture of our performance.

Our non-GAAP financial measures are provided to enhance the user’s overall understanding of our current financial performance and our prospects for the future. Specifically, we believe the non-GAAP results provide useful information to both management and investors as these non-GAAP results exclude certain expenses, gains and losses that we believe are not indicative of our core operating results and because they are consistent with the financial models and estimates published by many analysts who follow the Company. We use non-GAAP measures to evaluate the operating performance of our business, for comparison with our forecasts, and for benchmarking our performance externally against our competitors. Also, when evaluating potential acquisitions, we exclude the items described below from our consideration of the target’s performance and valuation. Since we find these measures to be useful, we believe that our investors benefit from seeing the results from management’s perspective in addition to seeing our GAAP results. We believe that these non-GAAP measures, when read in conjunction with the Company’s GAAP financials, provide useful information to investors by offering:

  • the ability to make more meaningful period-to-period comparisons of the Company’s on-going operating results;

  • the ability to better identify trends in the Company’s underlying business and perform related trend analysis;

  • a better understanding of how management plans and measures the Company’s underlying business; and

  • an easier way to compare the Company’s operating results against analyst financial models and operating results of our competitors that supplement their GAAP results with non-GAAP financial measures.

The following are explanations of each of the adjustments that we incorporate into our non-GAAP measures, as well as the reasons for excluding each of these individual items in our reconciliation of these non-GAAP financial measures:

Stock-based compensation expense consists of non-cash charges related to the fair value of restricted stock units awarded to employees. The Company believes that the exclusion of these non-cash charges provides for more accurate comparisons of our operating results to our peer companies due to the varying available valuation methodologies, subjective assumptions and the variety of award types. In addition, the Company believes it is useful to investors to understand the specific impact of share-based compensation on its operating results.

SSD solutions restructuring are charges relate to the restructuring of our underperforming Shannon product lines and include goodwill impairment expenses, and the write-down of NAND flash and SSD inventory valuation.

Foreign exchange gains and losses consist of translation gains and/or losses of non-US$ denominated current assets and current liabilities, as well as certain other balance sheet items which result from the appreciation or depreciation of non-US$ currencies against the US$. We do not use financial instruments to manage the impact on our operations from changes in foreign exchange rates, and because our operations are subject to fluctuations in foreign exchange rates, we therefore exclude foreign exchange gains and losses when presenting non-GAAP financial measures.

Silicon Motion Technology Corporation
Consolidated Statements of Income
(in thousands, except percentages and per ADS data, unaudited)

For Three Months Ended

For the Nine Months Ended

Sep. 30,

Jun. 30,

Sep. 30,

Sep. 30,

Sep. 30,

2020

2021

2021

2020

2021

($)

($)

($)

($)

($)

Net sales

126,043

221,103

254,241

395,624

657,743

Cost of sales

64,217

109,969

127,070

201,512

328,179

Gross profit

61,826

111,134

127,171

194,112

329,564

Operating expenses

Research & development

26,378

38,962

44,600

84,624

119,544

Sales & marketing

6,077

7,085

7,749

18,394

21,280

General & administrative

3,528

4,649

5,931

11,019

15,019

Operating income

25,843

60,438

68,891

80,075

173,721

Non-operating income (expense)

Interest income, net

841

336

312

3,896

1,009

Foreign exchange gain (loss), net

551

519

(114

)

(72

)

(404

)

Others, net

(6

)

-

-

15

3

Subtotal

1,386

855

198

3,839

608

Income before income tax

27,229

61,293

69,089

83,914

174,329

Income tax expense

2,962

11,748

13,665

5,522

34,961

Net income

24,267

49,545

55,424

78,392

139,368

Earnings per basic ADS

0.70

1.42

1.59

2.24

4.00

Earnings per diluted ADS

0.70

1.42

1.58

2.24

3.99

Margin Analysis:

Gross margin

49.1

%

50.3

%

50.0

%

49.1

%

50.1

%

Operating margin

20.5

%

27.3

%

27.1

%

20.2

%

26.4

%

Net margin

19.3

%

22.4

%

21.8

%

19.8

%

21.2

%

Additional Data:

Basic ADS

34,832

34,926

34,933

34,960

34,844

Diluted ADS

34,891

34,953

35,023

35,061

34,967


Silicon Motion Technology Corporation
Reconciliation of GAAP to Non-GAAP Operating Results
(in thousands, except percentages and per ADS data, unaudited)

For Three Months Ended

For the Nine Months Ended

Sep. 30,

Jun. 30,

Sep. 30,

Sep. 30,

Sep. 30,

2020

2021

2021

2020

2021

($)

($)

($)

($)

($)

Gross profit (GAAP)

61,826

111,134

127,171

194,112

329,564

Gross margin (GAAP)

49.1

%

50.3

%

50.0

%

49.1

%

50.1

%

Stock-based compensation (A)

55

52

111

96

217

SSD solutions restructuring

-

1,679

473

-

3,283

Gross profit (non-GAAP)

61,881

112,865

127,755

194,208

333,064

Gross margin (non-GAAP)

49.1

%

51.0

%

50.2

%

49.1

%

50.6

%

Operating expenses (GAAP)

35,983

50,696

58,280

114,037

155,843

Stock-based compensation (A)

(3,076

)

(2,312

)

(5,059

)

(5,763

)

(10,332

)

SSD solutions restructuring

-

-

(238

)

-

(238

)

Operating expenses (non-GAAP)

32,907

48,384

52,983

108,274

145,273

Operating profit (GAAP)

25,843

60,438

68,891

80,075

173,721

Operating margin (GAAP)

20.5

%

27.3

%

27.1

%

20.2

%

26.4

%

Total adjustments to operating profit

3,131

4,043

5,881

5,859

14,070

Operating profit (non-GAAP)

28,974

64,481

74,772

85,934

187,791

Operating margin (non-GAAP)

23.0

%

29.2

%

29.4

%

21.7

%

28.6

%

Non-operating income (expense) (GAAP)

1,386

855

198

3,839

608

Foreign exchange loss (gain), net

(551

)

(519

)

114

72

404

Non-operating income (expense) (non-GAAP)

835

336

312

3,911

1,012

Net income (GAAP)

24,267

49,545

55,424

78,392

139,368

Total pre-tax impact of non-GAAP adjustments

2,580

3,524

5,995

5,931

14,474

Income tax impact of non-GAAP adjustments

(171

)

(339

)

(1,015

)

(693

)

(2,048

)

Net income (non-GAAP)

26,676

52,730

60,404

83,630

151,794

Earnings per diluted ADS (GAAP)

$0.70

$1.42

$1.58

$2.24

$3.99

Earnings per diluted ADS (non-GAAP)

$0.76

$1.50

$1.70

$2.38

$4.31

Shares used in computing earnings per diluted ADS (GAAP)

34,891

34,953

35,023

35,061

34,967

Non-GAAP Adjustments

163

297

513

88

285

Shares used in computing earnings per diluted ADS (non-GAAP)

35,054

35,250

35,536

35,149

35,252

(A) Excludes stock-based compensation as follows:

Cost of sales

55

52

111

96

217

Research & development

2,163

1,203

3,251

3,937

6,508

Sales & marketing

405

480

616

825

1,502

General & administrative

508

629

1,192

1,001

2,322


Silicon Motion Technology Corporation
Consolidated Balance Sheet
(In thousands, unaudited)

Sep. 30,

Jun. 30,

Sep. 30,

2020

2021

2021

($)

($)

($)

Cash and cash equivalents

341,281

357,119

364,071

Short-term investments

1,951

-

-

Accounts receivable (net)

95,519

145,583

184,984

Inventories

107,426

150,617

161,010

Refundable deposits – current

24,094

48,760

48,507

Prepaid expenses and other current assets

24,643

26,742

26,398

Total current assets

594,914

728,821

784,970

Long-term investments

5,000

6,500

8,507

Property and equipment (net)

102,046

106,841

110,289

Goodwill and intangible assets (net)

17,489

-

-

Other assets

10,984

17,093

17,808

Total assets

730,433

859,255

921,574

Accounts payable

37,148

77,126

66,380

Income tax payable

5,870

19,071

31,190

Accrued expenses and other current liabilities

65,500

86,559

85,584

Total current liabilities

108,518

182,756

183,154

Other liabilities

26,207

29,859

31,198

Total liabilities

134,725

212,615

214,352

Shareholders’ equity

595,708

646,640

707,222

Total liabilities & shareholders’ equity

730,433

859,255

921,574


Silicon Motion Technology Corporation
Condensed Consolidated Statements of Cash Flows
(in thousands, unaudited)

For Three Months Ended

For the Nine Months Ended

Sep. 30,

Jun. 30,

Sep. 30,

Sep. 30,

Sep. 30,

2020

2021

2021

2020

2021

($)

($)

($)

($)

($)

Net income

24,267

49,545

55,424

78,392

139,368

Depreciation & amortization

3,322

4,059

4,180

9,922

12,125

Stock-based compensation

3,131

2,364

5,170

5,859

10,549

Investment impairment, losses & disposals

1

-

2

7

204

Changes in operating assets and liabilities

(552

)

4,058

(36,117

)

1,287

(56,191

)

Others

22

-

-

35

-

Net cash provided by operating activities

30,191

60,026

28,659

95,502

106,055

Purchase of property & equipment

(2,618

)

(4,926

)

(7,329

)

(13,148

)

(15,585

)

Purchase of long-term investments

-

(1,500

)

(2,007

)

(2,000

)

(3,506

)

Net cash provided by (used in) investing activities

(2,618

)

(6,426

)

(9,336

)

(15,148

)

(19,091

)

Dividend payments

(12,280

)

(12,201

)

(12,204

)

(36,835

)

(36,604

)

Share repurchases

(25,013

)

-

-

(25,013

)

-

Net cash used in financing activities

(37,293

)

(12,201

)

(12,204

)

(61,848

)

(36,604

)

Net increase (decrease) in cash, cash equivalents & restricted cash

(9,720

)

41,399

7,119

18,506

50,360

Effect of foreign exchange changes

323

(57

)

23

(342

)

(119

)

Cash, cash equivalents & restricted cash—beginning of period

375,814

370,968

412,310

348,253

369,211

Cash, cash equivalents & restricted cash—end of period

366,417

412,310

419,452

366,417

419,452

About Silicon Motion:
We are the global leader in supplying NAND flash controllers for solid state storage devices. We supply more SSD controllers than any other company in the world for servers, PCs and other client devices and are the leading merchant supplier of eMMC and UFS embedded storage controllers used in smartphones, IoT devices and other applications. We also supply customized high-performance hyperscale data center and specialized industrial and automotive SSD solutions. Our customers include most of the NAND flash vendors, storage device module makers and leading OEMs. For further information on Silicon Motion, visit us at www.siliconmotion.com.

Forward-Looking Statements:
This press release contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including without limitation, statements about Silicon Motion’s currently expected fourth quarter of 2021 and full year 2021 expectations of revenue, gross margin and operating expenses, all of which reflect management’s estimates based on information available at the time of this press release. While Silicon Motion believes these estimates to be meaningful, these amounts could differ materially from actual reported amounts for the fourth quarter of 2021 and full year 2021. Forward-looking statements also include, without limitation, statements regarding trends in the semiconductor or consumer electronics markets and our future results of operations, financial condition and business prospects. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “continue,” or the negative of these terms or other comparable terminology. Although such statements are based on our own information and information from other sources we believe to be reliable, you should not place undue reliance on them. These statements involve risks and uncertainties, and actual market trends or our actual results of operations, financial condition or business prospects may differ materially from those expressed or implied in these forward-looking statements for a variety of reasons. Potential risks and uncertainties include, but are not limited to the unpredictable volume and timing of customer orders, which are not fixed by contract but vary on a purchase order basis; the loss of one or more key customers or the significant reduction, postponement, rescheduling or cancellation of orders from one or more customers; general economic conditions or conditions in the semiconductor or consumer electronics markets; the effects on our business and our customer’s business taking into account the ongoing US-China tariffs and trade disputes together with the uncertainties associated with the ongoing global outbreak of COVID-19; the recent increases in tensions between Taiwan and China including enhanced military activities; decreases in the overall average selling prices of our products; changes in the relative sales mix of our products; changes in our cost of finished goods; the payment, or non-payment, of cash dividends in the future at the discretion of our board of directors and any announced planned increases in such dividends; changes in our cost of finished goods; the availability, pricing, and timeliness of delivery of other components and raw materials used in the products we sell given the current raw material supply shortages being experienced in our industry; our customers’ sales outlook, purchasing patterns, and inventory adjustments based on consumer demands and general economic conditions; any potential impairment charges that may be incurred related to businesses previously acquired or divested in the future; our ability to successfully develop, introduce, and sell new or enhanced products in a timely manner; and the timing of new product announcements or introductions by us or by our competitors. For additional discussion of these risks and uncertainties and other factors, please see the documents we file from time to time with the Securities and Exchange Commission, including our Annual Report on Form 20-F filed on May 12, 2021. We assume no obligation to update any forward-looking statements, which apply only as of the date of this press release.

Investor Contact:

Investor Contact:

Christopher Chaney

Selina Hsieh

Director, Investor Relations & Strategy

Investor Relations

E-mail: CChaney@siliconmotion.com

E-mail: ir@siliconmotion.com

Media Contact:

Sara Hsu

Project Manager

E-mail: sara.hsu@siliconmotion.com