Silicon Motion (SIMO) Q3 Earnings Beat, Revenues Decline Y/Y
Silicon Motion Technology Corporation SIMO reported modest third-quarter 2023 results, with the bottom and top lines beating the respective Zacks Consensus Estimate. However, the leading developer of microcontroller ICs for NAND flash storage devices witnessed a top-line contraction year over year. Despite improvement in inventory, signs of market recovery weakness in some business segments negatively impacted the top line.
Net Income
On a GAAP basis, net income was $10.6 million or 32 cents per American depositary share (ADS) compared with $42.9 million or $1.29 per ADS in the prior-year quarter. The significant year-over-year downturn in net sales led to a decline in the bottom line.
Non-GAAP net income was $21.1 million or 63 cents per ADS, down from $51.2 million or $1.53 per ADS in the year-ago quarter. The bottom line beat the Zacks Consensus Estimate by 5 cents.
Silicon Motion Technology Corporation Price, Consensus and EPS Surprise
Silicon Motion Technology Corporation price-consensus-eps-surprise-chart | Silicon Motion Technology Corporation Quote
Revenues
Quarterly revenues decreased to $172.3 million from the year-ago quarter’s tally of $250.8 million. However, the top line surpassed the Zack Consensus Estimate by $7 million.
Despite a reduction in channel inventory levels, the persistence of demand softness impeded revenue growth during the quarter. However, the company is witnessing signs of a market recovery, driven by positive trends in PC market.
Orders from OEM increased in anticipation of rising demand in the upcoming holiday season. eMMC+UFS sales recorded solid sequential improvement. Management’s continuous investments in technology innovation expanded its client base and strengthened its position in the storage controller market.
Other Details
Non-GAAP gross profit aggregated $73.3 million compared with $119.3 million in the year-ago quarter, with respective margins of 42.5% and 47.6%. The decline was primarily attributable to lower revenues year over year. Non-GAAP operating expenses decreased to $49.5 million from $56.6 million. Non-GAAP operating income fell from $62.7 million to $23.8 million, with margins of 25% and 13.8%, respectively.
Cash Flow & Liquidity
During the September quarter, Silicon Motion generated $64.9 million of cash from operating activities compared with a cash flow of $42.6 million in the year-ago period. As of Sep 30, 2023, the company had $295.4 million in cash and cash equivalents with $62.1 million of other liabilities.
In the third quarter of 2023, the company’s capital expenditure totaled $17.1 million. This includes $6.3 million for the routine procurement of testing equipment, software, design tools and other goods and another $10.8 million for building construction in Hsinchu.
Outlook
For fourth-quarter 2023, management estimates non-GAAP revenues in the range of $190-198 million. Non-GAAP gross margin is expected to be around 42.5-43.5%. Operating margin is anticipated in the band of 13.5-15.5%. The company expects channel inventory will further normalize in the fourth quarter with improvement in demand.
Zacks Rank & Other Stocks to Consider
Silicon Motion currently carries a Zacks Rank #2 (Buy).
Model N Inc MODN, sporting a Zacks Rank #1 (Strong Buy) at present, delivered an earnings surprise of 21.26%, on average, in the trailing four quarters. In the last reported quarter, it pulled off an earnings surprise of 45.83%. You can see the complete list of today’s Zacks #1 Rank stocks here.
It provides revenue management solutions for life sciences and technology companies, including applications for configure, price, quote, rebates management and regulatory compliance.
NVIDIA Corporation NVDA, currently sporting a Zacks Rank #1, delivered an earnings surprise of 9.79%, on average, in the trailing four quarters. In the last reported quarter, it pulled off an earnings surprise of 29.19%.
NVIDIA is the worldwide leader in visual computing technologies and the inventor of the graphic processing unit or GPU. Over the years, the company’s focus has evolved from PC graphics to artificial intelligence-based solutions that now support high-performance computing, gaming and virtual reality platforms.
Arista Networks, Inc. ANET, presently carrying a Zacks Rank #2, is likely to benefit from strong momentum and diversification across its top verticals and product lines. The company has a software-driven, data-centric approach to help customers build their cloud architecture and enhance their cloud experience. Arista has delivered an earnings surprise of 12%, on average, in the trailing four quarters.
It holds a leadership position in 100-gigabit Ethernet switching share in port for the high-speed data center segment. Arista is increasingly gaining market traction in 200 and 400-gig high-performance switching products and is well-positioned for healthy growth in the data-driven cloud networking business with proactive platforms and predictive operations.
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