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2020/07/30
 

Silicon Motion Announces Results for the Period Ended June 30, 2020

Financial Highlights

  2Q 2020 GAAP 2Q 2020 Non-GAAP
Net sales $136.8 million (+3% Q/Q, +38% Y/Y) $136.8 million (+3% Q/Q, +45% Y/Y)
Gross margin 50.0% 50.0%
Operating margin 22.0% 22.2%
Earnings per diluted ADS $0.80 $0.81

Business Highlights

  • SSD controller sales declined about 5% Q/Q and increased about 15% Y/Y
  • eMMC+UFS controller sales increased 30% Q/Q and increased about 140% Y/Y
  • SSD solutions sales declined about 10% Q/Q and increased about 145% Y/Y
  • PCIe Gen4 SSD controller design-wins at five NAND flash makers
  • UFS 3.1 controller design-win at second NAND flash maker

TAIPEI, Taiwan and MILPITAS, Calif., July 30, 2020 (GLOBE NEWSWIRE) -- Silicon Motion Technology Corporation (NasdaqGS: SIMO) (“Silicon Motion” or the “Company”) today announced its financial results for the quarter ended June 30, 2020.  For the second quarter, net sales (GAAP) increased sequentially to $136.8 million from $132.8 million in first quarter 2020. Net income (GAAP) increased to $28.2 million or $0.80 per diluted ADS (GAAP) from net income (GAAP) of $25.9 million or $0.74 per diluted ADS (GAAP) in first quarter 2020.

For the second quarter, net income (non-GAAP) increased to $28.6 million or $0.81 per diluted ADS (non-GAAP) from a net income (non-GAAP) of $28.4 million or $0.80 per diluted ADS (non-GAAP) in first quarter 2020.

Second Quarter 2020 Review
“We are excited that this quarter five NAND flash makers awarded us PCIe Gen4 SSD controller design-wins, and additionally, we secured a second NAND flash maker as a UFS controller customer,” said Wallace Kou, President and CEO of Silicon Motion.  “These design-wins are testaments of our technological leadership and important for our continued growth.  Growth this quarter was driven by very strong sales of UFS controllers.  Sales of our SSD controllers were affected by temporary re-allocation of NAND flash by our customers to hyperscale data centers and Shannon SSDs were softer than expected.”

Key Financial Results

(in millions, except percentages and per ADS amounts) GAAP Non-GAAP
2Q 2020 1Q 2020 2Q 2019 2Q 2020 1Q 2020 2Q 2019
Revenue $ 136.8   $ 132.8   $ 98.8   $ 136.8   $ 132.8   $ 94.3  
Gross profit
Percent of revenue
  $68.4
50.0

%
  $63.9
48.1

%
  $46.1
46.7

%
  $68.4
50.0

%
  $63.9
48.2

%
  $48.5
51.5

%
Operating expenses $ 38.3   $ 39.8   $ 33.9   $ 38.0   $ 37.4   $ 31.2  
Operating income
Percent of revenue
  $30.1
22.0

%
  $24.1
18.1

%
  $12.3
12.4

%
  $30.4
22.2

%
  $26.6
20.0

%
  $17.3
18.4

%
Earnings per diluted ADS $ 0.80   $ 0.74   $ 0.75   $ 0.81   $ 0.80   $ 0.52  

Other Financial Information

(in millions) 2Q 2020 1Q 2020 2Q 2019
Cash, cash equivalents, restricted cash and short-term investments—end of period $ 379.7 $ 371.7 $ 370.4
Routine capital expenditures  $ 4.1 $ 6.4 $ 2.9
Dividend payments $ 12.3 $ 12.3 $ 10.9

During the second quarter, we had $4.1 million of capital expenditures for the routine purchase of software, design tools and other items.  

Returning Value to Shareholders
On October 25, 2019, our Board of Directors declared a $1.40 per ADS annual dividend to be paid in quarterly installments of $0.35 per ADS. On May 21, 2020, we paid $12.3 million to shareholders as the third installment of our annual dividend.

On November 21, 2018, we announced that our Board of Directors had authorized a new program for the Company to repurchase up to $200 million of our ADS over a 24-month period.  In the second quarter, we did not repurchase any of our ADSs.  Since the start of this program, we have repurchased $59.8 million of our ADSs.

Business Outlook
“We expect our third quarter sales to be temporarily affected by a one-quarter mobile-related inventory adjustment before growth rebounds in the fourth quarter,” said Wallace Kou, President and CEO of Silicon Motion.  “All three of our key products continue to track towards solid full-year sales growth, and our order book for SSD controllers for PC OEMs remains very strong in the second half of 2020.  Also, our expanding portfolio of industry-leading PCIe NVMe SSD and UFS controllers, as well as Shannon open-channel SSDs is pointing to solid growth momentum next year.”

For the third quarter of 2020, management expects:

  GAAP Non-GAAP Adjustment Non-GAAP
Revenue

$114m to $120m
-17% to -12% Q/Q
--

$114m to $120m
-17% to -12% Q/Q
Gross margin 47.9% to 49.9% Approximately $0.1m* 48.0% to 50.0%
Operating margin 17.8% to 18.7% Approximately $2.7m to $3.7m** 20.0% to 22.0%

* Projected gross margin (non-GAAP) excludes $0.1 million of stock-based compensation.
**Projected operating margin (non-GAAP) excludes $2.7 million to $3.7 million of stock-based compensation.

For the full year 2020, management expects:

  GAAP Non-GAAP Adjustment Non-GAAP
Revenue

$508m to $521m
+11% to 14% Y/Y
--

$508m to $521m
+13% to 16% Y/Y
Gross margin 47.5% to 49.5% Approximately $0.5m* 47.5% to 49.5%
Operating margin 16.6% to 18.3% Approximately $14m to $16m** 19.3% to 21.3%

* Projected gross margin (non-GAAP) excludes $0.5 million of stock-based compensation.
** Projected operating margin (non-GAAP) excludes $14 million to $16 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 July 30, 2020

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/7682831

Replay Numbers (for 7 days):  
USA (Toll Free): 1 855 452 5696
USA (Toll): 1 646 254 3697
Participant Passcode: 7682831

 

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:

SSD solutions restructuring are charges relate to the restructuring of our underperforming Shannon and Bigtera product lines and include goodwill and intangible assets impairment expenses, the write-down of NAND flash and SSD inventory valuation and customer sales returns and accounts receivable attributable to these product lines.

FCI divestiture refers to the exclusion of revenue, expenses and other items relating to our FCI specialty RF IC product-line, the sale of which was closed on May 31, 2019.  Under GAAP, according to FASB ASU 2014-08, this disposal transaction does not meet the threshold for presenting as a discontinued operation.  We are excluding FCI from our financial results for non-GAAP as we believe this provides investors with enhanced transparency.  Additionally, we are also excluding transaction expenses and long-term investment gains from this asset disposal.

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.

Amortization of intangibles assets consists of non-cash charges that can be impacted by the timing and magnitude of our acquisitions.  The Company considers its operating results without these charges when evaluating its ongoing performance and forecasting its earnings trends, and therefore excludes such charges when presenting non-GAAP financial measures.  The Company believes that the assessment of its operations excluding these costs is relevant to its assessment of internal operations and comparisons to the performance of its competitors.

Litigation expenses consist of legal expenses relating to intellectual property disputes, commercial claims and other types of litigation. While litigation may arise in the ordinary course of our business, we nevertheless consider litigation to be an unusual and unplanned activity and therefore exclude this charge when presenting non-GAAP financial measures.

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 Six Months Ended
    Jun. 30,   Mar. 31,   Jun. 30,   Jun. 30,   Jun. 30,
    2019    2020    2020    2019    2020 
     ($)    ($)    ($)    ($)    ($)
Net Sales   98,846     132,769     136,811     193,540     269,580  
Cost of sales   52,717     68,877     68,417     99,792     137,294  
Gross profit   46,129     63,892     68,394     93,748     132,286  
Operating expenses                    
Research & development   23,939     29,346     28,901     51,955     58,247  
Sales & marketing   6,086     6,493     5,823     13,068     12,316  
General & administrative   3,571     3,959     3,531     7,944     7,490  
Amortization of intangibles assets   255       -        -      510       -   
Operating income   12,278     24,094     30,139     20,271     54,233  
Non-operating income (expense)                    
Interest income, net   1,858     1,732     1,323     3,434     3,055  
Gain on disposal of long-term investments   12,904       -        -      12,904       -   
Foreign exchange gain (loss), net   (68 )   (481 )   (142 )   425     (623 )
Others, net   33     16     6     53     22  
Subtotal   14,727     1,267     1,187     16,816     2,454  
Income before income tax     27,005     25,361     31,326     37,087     56,687  
Income tax expense   521     (554 )   3,115     2,331     2,561  
Net income   26,484     25,915     28,211     34,756     54,126  
                     
Earnings per basic ADS   0.75     0.74     0.80     0.98     1.54  
Earnings per diluted ADS   0.75     0.74     0.80     0.98     1.54  
                     
Margin Analysis:                    
Gross margin   46.7 %   48.1 %   50.0 %   48.4 %   49.1 %
Operating margin   12.4 %   18.1 %   22.0 %   10.5 %   20.1 %
Net margin   26.8 %   19.5 %   20.6 %   18.0 %   20.1 %



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 Six Months Ended
    Jun. 30,   Mar. 31,   Jun. 30,   Jun. 30,   Jun. 30,
  2019   2020   2020   2019   2020
   ($)    ($)    ($)    ($)    ($)
Revenue (GAAP)     98,846       132,769       136,811       193,540       269,580  
FCI divestiture     (4,566 )     -       -       (10,359 )     -  
Revenue (non-GAAP)     94,280       132,769       136,811       183,181       269,580  
                     
Gross profit (GAAP)     46,129       63,892       68,394       93,748       132,286  
  Gross margin (GAAP)     46.7 %     48.1 %     50.0 %     48.4 %     49.1 %
Stock-based compensation (A)     7       38       3       102       41  
SSD solutions restructuring     4,985       -       -       4,985       -  
FCI divestiture     (2,597 )     -       -       (5,675 )     -  
Gross profit (non-GAAP)     48,524       63,930       68,397       93,160       132,327  
  Gross margin (non-GAAP)     51.5 %     48.2 %     50.0 %     50.9 %     49.1 %
                     
Operating expenses (GAAP)     33,851       39,798       38,255       73,477       78,053  
Stock-based compensation (A)     (275 )     (2,444 )     (243 )     (4,369 )     (2,687 )
Amortization of intangible assets     (255 )     -       -       (510 )     -  
Litigation expense     -       -       -       2       -  
FCI divestiture     (2,102 )     -       -       (8,688 )     -  
Operating expenses (non-GAAP)     31,219       37,354       38,012       59,912       75,366  
                     
Operating profit (GAAP)     12,278       24,094       30,139       20,271       54,233  
  Operating margin (GAAP)     12.4 %     18.1 %     22.0 %     10.5 %     20.1 %
Total adjustments to operating profit     5,027       2,482       246       12,977       2,728  
Operating profit (non-GAAP)     17,305       26,576       30,385       33,248       56,961  
  Operating margin (non-GAAP)     18.4 %     20.0 %     22.2 %     18.2 %     21.1 %
                     
Non-operating income (expense) (GAAP)     14,727       1,267       1,187       16,816       2,454  
Foreign exchange loss (gain), net     68       481       142       (425 )     623  
Gain on disposal of long-term investments     (495 )     -       -       (495 )     -  
FCI divestiture     (12,405 )     -       -       (12,418 )     -  
Non-operating income (expense) (non-GAAP)     1,895       1,748       1,329       3,478       3,077  
                     
Net income (GAAP)     26,484       25,915       28,211       34,756       54,126  
Total pre-tax impact of non-GAAP adjustments     (7,805 )     2,963       388       (361 )     3,351  
Income tax impact of non-GAAP  adjustments     (76 )     (524 )     2       (750 )     (522 )
Net income (non-GAAP)     18,603       28,354       28,601       33,645       56,955  
                     
Earnings per diluted ADS (GAAP)   $ 0.75     $ 0.74     $ 0.80     $ 0.98     $ 1.54  
Earnings per diluted ADS (non-GAAP)   $ 0.52     $ 0.80     $ 0.81     $ 0.95     $ 1.62  
                     
Shares used in computing earnings per diluted ADS (GAAP)     35,536       35,246       35,164       35,505       35,147  
Non-GAAP Adjustments     29       63       36       56       49  
Shares used in computing earnings per diluted ADS (non-GAAP)     35,565       35,309       35,200       35,561       35,196  
                     
(A) Excludes stock-based compensation as follows:                    
Cost of Sales     7       38       3       102       41  
Research & development     128       1,655       118       2,823       1,773  
Sales & marketing     107       335       85       662       420  
General & administrative     40       454       40       884       494  



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

    Jun. 30,   Mar. 31,   Jun. 30,
    2019   2020   2020
     ($)    ($)    ($)
Cash and cash equivalents   342,930   344,012   350,790
Short-term investments   2,309   2,673   3,876
Accounts receivable (net)   80,782   89,662   93,825
Inventories   79,252   104,133   103,835
Refundable deposits – current   24,074   24,084   24,089
Prepaid expenses and other current assets   17,663   21,939   23,778
Total current assets   547,010   586,503   600,193
Long-term investments   3,000   3,000   5,000
Property and equipment (net)   97,981   100,822   102,156
Goodwill and intangible assets (net)   33,714   17,489   17,489
Other assets   13,911   12,110   11,556
 Total assets   695,616   719,924   736,394
             
Accounts payable   37,845   45,778   34,209
Income tax payable   1,346   1,340   3,642
Accrued expenses and other current liabilities   54,183   82,306   78,244
  Total current liabilities   93,374   129,424   116,095
Other liabilities   31,884   25,870   27,202
Total liabilities   125,258   155,294   143,297
Shareholders’ equity   570,358   564,630   593,097
Total liabilities & shareholders’ equity   695,616   719,924   736,394



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

    For Three Months Ended   For Six Months Ended
    Jun. 30,   Mar. 31,   Jun. 30,   Jun. 30,   Jun. 30,
    2019    2020    2020    2019    2020 
     ($)    ($)    ($)    ($)    ($)
Net income   26,484     25,915     28,211     34,756     54,126  
Depreciation & amortization   3,329     3,237     3,363     6,622     6,600  
Stock-based compensation   227     2,482     246     4,630     2,728  
Investment impairment, losses & disposals   (12,913 )   (14 )   33     (12,921 )   19  
Changes in operating assets and liabilities   23,061     7,990     (6,151 )   10,447     1,839  
Others     (9 )     -      (1 )   (18 )   (1 )
Net cash provided by operating activities   40,179     39,610     25,701     43,516     65,311  
                     
Purchase of property & equipment   (2,929 )   (6,396 )   (4,134 )   (4,123 )   (10,530 )
Purchase of long-term investments     -        -      (2,000 )     -      (2,000 )
Disposal of long-term investments   45,704       -        -        45,704       -   
Net cash provided by (used in) investing activities   42,775     (6,396 )   (6,134 )   41,581     (12,530 )
                     
Dividend payments   (10,937 )   (12,278 )   (12,278 )   (21,873 )   (24,556 )
Share repurchases     -        -        -      (1,216 )     -   
Net cash used in financing activities   (10,937 )   (12,278 )   (12,278 )   (23,089 )   (24,556 )
                     
Net increase in cash, cash equivalents & restricted cash   72,017     20,936     7,289     62,008     28,225  
Effect of foreign exchange changes   (847 )   (114 )   (550 )   (1,000 )   (664 )
Cash, cash equivalents & restricted cash—beginning of period   296,965     348,253     369,075     307,127     348,253  
Cash, cash equivalents & restricted cash—end of period   368,135     369,075     375,814     368,135     375,814  


About Silicon Motion:
We are the global leader in supplying NAND flash controllers for solid state storage devices and the merchant leader in supplying SSD controllers.  We have the broadest portfolio of controller technologies and our controllers are widely used in storage products such as SSDs and eMMC+UFS devices, which are found in data centers, PCs, smartphones, and commercial and industrial applications. We have shipped over six billion NAND controllers in the last ten years, more than any other company in the world.  We also supply customized high-performance hyperscale data center and industrial 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 third quarter of 2020 and full year 2020 expectations of revenue, gross margin and operating expenses, all of which reflect management’s estimates based on information available at this 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 third quarter of 2020 and full year 2020. 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 these 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 any uncertainties associated with the ongoing global outbreak of COVID-19; 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 our customers’ products; 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 June 12, 2020.  We assume no obligation to update any forward-looking statements, which apply only as of the date of this press release.

Investor Contact:
Christopher Chaney
Director, Investor Relations & Strategy
E-mail: CChaney@siliconmotion.com 
Investor Contact:
Selina Hsieh
Investor Relations
E-mail: ir@siliconmotion.com
   
Media Contact:
Sara Hsu
Project Manager
E-mail: sara.hsu@siliconmotion.com
 

 

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