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Silicon Motion (SIMO) Q2 Earnings & Revenues Top Estimates

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Silicon Motion Technology Corporation SIMO reported second-quarter 2021 non-GAAP earnings of $1.50 per American Depositary Share (ADS), which surpassed the Zacks Consensus Estimate by 11.1%. The bottom line increased 85.2% from the year-ago quarter’s figure and rose 35.1% sequentially.

Net sales (non-GAAP) of $221.1 million beat the Zacks Consensus Estimate by 8.4%. On a year-over-year basis, sales rallied 61.6% driven by higher sales of SSD controllers as well as eMMC and UFS controllers. Net sales also increased 21.2% sequentially in the second quarter.

Performance in Detail

Management noted that sales of SSD controllers rallied 30-35% sequentially.

Revenues from SSD solutions increased 30-40% quarter over quarter. Revenues from eMMC and UFS controllers rose 10-15% sequentially.

In the second quarter of 2021, sales of SSD controllers surged 105-110% year over year, while sales of eMMC and UFS controllers increased 25-30% on a year-over-year basis. In the quarter under review, SSD solutions’ sales declined 15-20% year over year.

Silicon Motion Technology Corporation Price, Consensus and EPS Surprise

Silicon Motion Technology Corporation Price, Consensus and EPS Surprise
Silicon Motion Technology Corporation Price, Consensus and EPS Surprise

Silicon Motion Technology Corporation price-consensus-eps-surprise-chart | Silicon Motion Technology Corporation Quote

Margins

Non-GAAP gross margin of 51% expanded 100 basis points (bps) on a year-over-year basis and expanded 30 bps sequentially.

Non-GAAP operating expenses, as a percentage of revenues, came in at 21.9%, contracting 590 bps year over year and 220 bps sequentially.

Non-GAAP operating margin expanded 700 bps on a year-over-year basis and 260 bps sequentially to 29.2%.

Balance Sheet & Cash Flow

As of Jun 30, 2021, Silicon Motion had cash, cash equivalents, restricted cash and short-term investments of $412.3 million compared with $371 million as of Mar 31, 2021.

The company generated $60 million cash from operations during the reported quarter compared with $17.4 million in the previous quarter.

On Oct 26, 2020, the company’s board of directors approved $1.40 per ADS of annual dividend, slated to be paid out in quarterly installments of 35 cents per ADS. On May 20, 2021, the company paid out $12.2 million as dividend to shareholders, which marked its third installment.

On Nov 21, 2018, Silicon Motion announced a new buyback program spread over a two-year period. Per the program, the company will repurchase approximately $200 million ADS. In the reported quarter, the company did not repurchase any ADSs.

Under the buyback program, the company repurchased shares worth $84.8 million of ADSs, with $115.2 million remaining untapped under the program. On Oct 26, 2020, the board of directors approved the extension of the conclusion of the program to Nov 21, 2021.

A Look at Guidance

For third-quarter 2021, Silicon Motion expects non-GAAP revenues in the range of $238-$249 million. The Zacks Consensus Estimate is currently pegged at $215 million.

Non-GAAP gross margin is anticipated in the range of 48.5-50.5%. Non-GAAP operating margin is projected in the range of 27.5-29.5%.

For 2021, Silicon Motion now expects non-GAAP revenues in the range of $890-$917 million compared with the previous view of $782-$836 million. The Zacks Consensus Estimate is currently pegged at $816.6 million.

Revenues are likely to reflect benefit from focus on sales of higher value products, noted the company.

Continued momentum in PC sales triggered by online learning and work-from-home wave hold promise. Strong PC shipments are expected to benefit the company’s PCIe NVMe SSD controllers.

Non-GAAP gross margin is anticipated in the band of 49.5-50.5% compared with earlier guidance of 47-49%. Non-GAAP operating margin is projected in the range of 27.5-29.5% compared with the range of 26-28% anticipated previously.

Zacks Rank & Stocks to Consider

Currently, Silicon Motion carries a Zacks Rank #3 (Hold).

Some better-ranked stocks worth considering in the broader technology sector are Avnet AVT, CyberArk Software CYBR and Digital Turbine APPS. Avnet and Digital Turbine sport a Zacks Rank #1 (Strong Buy), while CyberArk carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here.

Digital Turbine, Avnet and CyberArk are scheduled to release earnings on Aug 9, Aug 11 and Aug 12, respectively.

Long-term earnings growth rate for CyberArk, Avnet and Digital Turbine is currently pegged at 12.2%, 22.7% and 50%, respectively.


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