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Silicon Motion (SIMO) Q2 Earnings Beat, Revenues Up Y/Y

Zacks Equity Research
·5 min read

Silicon Motion Technology Corporation SIMO reported second-quarter 2020 non-GAAP earnings of 81 cents per American Depositary Share (ADS), which surpassed the Zacks Consensus Estimate by 5.2% and improved 55.8% from the year-ago quarter. Moreover, the bottom line increased 1.3% sequentially.

Net sales (non-GAAP) surged 45% from the year-ago quarter to $136.8 million, outpacing the Zacks Consensus Estimate by 0.5%. Moreover, the figure improved 3% sequentially. Growth was driven by robust uptake of UFS controllers.

Quarter in Detail

Sales of SSD controllers surged 15% year over year but declined 5% sequentially.

Moreover, revenues from eMMC and UFS controllers soared 140% year over year and 30% sequentially.
 

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

Notably, revenues from SSD solutions improved 145% year over year but declined 10% sequentially.

During the reported quarter, the company’s PCIe Gen4 SSD controllers raked in new design wins from five NAND flash makers. Further, Silicon Motion’s UFS controller was selected by a notable NAND flash maker.

Nevertheless, sales of SSD controllers were impeded by “temporary re-allocation of NAND flash” by the company’s customers to hyperscale data centers. Also, Shannon SSD sales were weaker than anticipated.

Margins

Non-GAAP gross margin of 50% contracted 150 basis points (bps) on a year-over-year basis. However, the figure expanded 180 bps sequentially.

Non-GAAP operating expenses as a percentage of revenues were 27.8%, contracting 530 bps year over year. Further, the figure contracted 40 bps sequentially.

Non-GAAP operating margin expanded 380 bps on year-over-year basis and 220 bps sequentially to 22.2%.

Balance Sheet & Cash Flow

As of Jun 30, 2020, Silicon Motion had cash, cash equivalents, restricted cash and short-term investments of $379.7 million, compared with $371.7 million as of Mar 31, 2020.

The company generated $40.2 million cash from operations during the reported quarter compared with $39.6 million in the first quarter.

On Oct 25, 2019, the company’s board declared a new annual dividend of $1.40 per ADS, up from $1.20 in the past year. Quarterly installments to be paid by the company are 35 cents per ADS. Notably, on May 21, 2020, the company paid out $12.3 million as annual dividend to shareholders, which marked its third installment.

Further, 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 per ADS. In the reported quarter, it did not make any repurchases. Under the buyback program, the company has repurchased shares worth $59.8 million.

Bleak Guidance

For third-quarter 2020, Silicon Motion expects non-GAAP revenues in the range of $114-$120 million. The Zacks Consensus Estimate is currently pegged at $140.2 million.

Non-GAAP gross margin is anticipated within 48-50%. Non-GAAP operating margin is projected in the range of 20% to 22%.

Third-quarter revenues are likely to be “temporarily affected by a one-quarter mobile-related inventory adjustment before growth rebounds in the fourth quarter.”

Nevertheless, solid pipeline for SSD controllers for PC OEMs is anticipated to drive growth in the second half of 2020. Moreover, growing clout of latest PCIe NVMe SSD and UFS controllers, and Shannon open-channel SSDs are projected to drive the top-line.

Increased PC sales triggered by online learning and work-from-home wave hold promise. Additionally, positive trends in smartphone embedded storage transitioning from eMMC to UFS controller devices; and shift from HDDs to SSDs across PCs and other client devices bode well.

For 2020, Silicon Motion anticipates non-GAAP revenues to be in the range of $508 million to $521 million (indicating year-over-year growth of 13-16%). The Zacks Consensus Estimate is currently pegged at $548.6 million.

Non-GAAP gross margin is anticipated in the range of 47.5-49.5%. Non-GAAP operating margin is anticipated between 19.3% and 21.3%.

Zacks Rank & Stocks to Consider

Currently, Silicon Motion carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the broader technology sector are Dropbox DBX, Asure Software, Inc. ASUR and Analog Devices ADI. While both Dropbox and Asure Software sport a Zacks Rank #1 (Strong Buy), Analog Devices carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Dropbox, Asure Software, and Analog Devices are scheduled to report earnings on Aug 6, Aug 10 and Aug 19, respectively.

Long-term earnings growth rate of Dropbox, Asure Software, and Analog Devices is pegged at 32.51%, 14% and 13.33%, respectively.

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Analog Devices, Inc. (ADI) : Free Stock Analysis Report
 
Asure Software Inc (ASUR) : Free Stock Analysis Report
 
Silicon Motion Technology Corporation (SIMO) : Free Stock Analysis Report
 
Dropbox, Inc. (DBX) : Free Stock Analysis Report
 
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