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2020/11/03
 

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

Financial Highlights

  3Q 2020 GAAP 3Q 2020 Non-GAAP
•  Net sales $126.0 million (-8% Q/Q, +14% Y/Y) $126.0 million (-8% Q/Q, +11% Y/Y)
•  Gross margin 49.1% 49.1%
•  Operating margin 20.5% 23.0%
•  Earnings per diluted ADS $0.70  $0.76

Business Highlights

  • SSD controller sales increased about 20% Q/Q and Y/Y
  • eMMC+UFS controller sales declined about 50% Q/Q and about 10% Y/Y
  • SSD solutions sales declined about 10% Q/Q and increased about 50% Y/Y
  • Repurchased $25.0 million of ADSs
  • PCIe Gen4 SSD controller design-wins with over 10 customers, including 5 NAND flash makers

TAIPEI, Taiwan and MILPITAS, Calif., Nov. 03, 2020 (GLOBE NEWSWIRE) -- Silicon Motion Technology Corporation (NasdaqGS: SIMO) (“Silicon Motion” or the “Company”) today announced its financial results for the quarter ended September 30, 2020.  For the third quarter, net sales (GAAP) decreased sequentially to $126.0 million from $136.8 million in second quarter 2020. Net income (GAAP) decreased to $24.3 million or $0.70 per diluted ADS (GAAP) from net income (GAAP) of $28.2 million or $0.80 per diluted ADS (GAAP) in second quarter 2020.

For the third quarter, net income (non-GAAP) decreased to $26.7 million or $0.76 per diluted ADS (non-GAAP) from net income (non-GAAP) of $28.6 million or $0.81 per diluted ADS (non-GAAP) in second quarter 2020.

Third Quarter 2020 Review
“Our third quarter results exceeded expectations due to stronger sales of SSD controllers,” said Wallace Kou, President and CEO of Silicon Motion.  “And as expected, our eMMC+UFS controller sales declined significantly due to a temporary customer inventory adjustment, while our SSD solutions sales were softer than anticipated.”

Key Financial Results

(in millions, except percentages and per ADS amounts) GAAP Non-GAAP
3Q 2020
  2Q 2020
  3Q 2019
  3Q 2020
  2Q 2020
  3Q 2019
 
Revenue $ 126.0   $ 136.8   $ 110.5   $ 126.0   $ 136.8   $ 113.2  
Gross profit
  Percent of revenue
  $61.8
49.1

%
  $68.4
50.0

%
  $54.8
49.6

%
  $61.9
49.1

%
  $68.4
50.0

%
  $56.4
49.8

%
Operating expenses $ 36.0   $ 38.3   $ 50.2   $ 32.9   $ 38.0   $ 31.4  
Operating income
  Percent of revenue
  $25.8
20.5

%
  $30.1
22.0

%
  $4.6
4.1

%
  $29.0
23.0

%
  $30.4
22.2

%
  $25.0
22.1

%
Earnings per diluted ADS $ 0.70   $ 0.80   $ 0.12   $ 0.76   $ 0.81   $ 0.69  

Other Financial Information

(in millions) 3Q 2020 2Q 2020 3Q 2019
Cash, cash equivalents, restricted cash and short-term investments—end of period $ 368.4 $ 379.7 $ 337.9
Routine capital expenditures $ 2.6 $ 4.1 $ 3.9
Dividend payments $ 12.3 $ 12.3 $ 10.0

During the third quarter, we had $2.6 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 August 20, 2020, we paid $12.3 million to shareholders as the fourth installment of our annual dividend.  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. The first installment of our annual dividend will be paid on November 25, 2020.

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 third quarter, we purchased $25.0 million of our ADSs at an average price of $39.91 per ADS.  Since the start of this program, we have repurchased $84.8 million of our ADSs and $115.2 million remains unused under the program.  On October 26, 2020, the Board of Directors of the Company authorized the extension of the expiration of this program to November 21, 2021.

Business Outlook
“We expect our fourth quarter revenue to rebound as SSD controller sales strengthen further,” said Wallace Kou, President and CEO of Silicon Motion.  “In addition, our eMMC+UFS controllers are making good progress towards recovery in the fourth quarter while SSD solutions are expected to be seasonally down.  We expect our fourth quarter to be a solid finish to an unpredictable year and a good foundation for a stronger 2021.”

For the fourth quarter of 2020, management expects:

  GAAP Non-GAAP Adjustment Non-GAAP
Revenue $130m to $139m
3% to 10% Q/Q
-- $130m to $139m
3% to 10% Q/Q
Gross margin 47.9% to 49.9% Approximately $0.2m* 48.0% to 50.0%
Operating margin 12.3% to 14.4% Approximately $8.4m to $9.4m** 19.5% to 20.5%

* Projected gross margin (non-GAAP) excludes $0.2 million of stock-based compensation.
**Projected operating margin (non-GAAP) excludes $8.4 million to $9.4 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 November 3, 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/4868134

Replay Numbers (for 7 days):

USA (Toll Free): 1 855 452 5696
USA (Toll): 1 646 254 3697
Participant Passcode: 4868134

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.

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 intangible assets consist 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.

Gain on disposal of long-term investments relate to gains from our sale of FCI, our specialty RF IC product line, and the sale of our investment in ProGrade, a professional-grade memory card manufacturer.

 
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,  
  2019     2020     2020     2019     2020  
   ($)      ($)      ($)      ($)      ($)  
Net Sales 110,518     136,811     126,043     304,058     395,624  
Cost of sales 55,727     68,417     64,217     155,519     201,512  
Gross profit 54,791     68,394     61,826     148,539     194,112  
Operating expenses                  
Research & development 24,439     28,901     26,378     76,394     84,624  
Sales & marketing 5,922     5,823     6,077     18,990     18,394  
General & administrative 3,648     3,531     3,528     11,593     11,019  
Amortization of intangible assets 255     -     -     766     -  
Impairment of goodwill and intangible assets 15,970     -     -     15,970     -  
Operating income 4,557     30,139     25,843     24,826     80,075  
Non-operating income (expense)                  
Interest income, net 1,751     1,323     841     5,187     3,896  
Gain on disposal of long-term investments 38     -     -     12,941     -  
Foreign exchange gain (loss), net (362 )   (142 )   551     64     (72 )
Others, net 6     6     (6 )   59     15  
Subtotal 1,433     1,187     1,386     18,251     3,839  
Income before income tax 5,990     31,326     27,229     43,077     83,914  
Income tax expense 1,777     3,115     2,962     4,108     5,522  
Net income 4,213     28,211     24,267     38,969     78,392  
                   
Earnings per basic ADS 0.12     0.80     0.70     1.10     2.24  
Earnings per diluted ADS 0.12     0.80     0.70     1.10     2.24  
                   
Margin Analysis:                  
Gross margin 49.6 %   50.0 %   49.1 %   48.9 %   49.1 %
Operating margin 4.1 %   22.0 %   20.5 %   8.2 %   20.2 %
Net margin 3.8 %   20.6 %   19.3 %   12.8 %   19.8 %
                   


 
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,
 
  2019       2020       2020       2019       2020  
 ($)
     ($)
     ($)
     ($)
     ($)
 
Gross profit (GAAP)   54,791       68,394       61,826       148,539       194,112  
  Gross margin (GAAP)   49.6 %     50.0 %     49.1 %     48.9 %     49.1 %
Stock-based compensation (A)   50       3       55       164       96  
SSD solutions restructuring   1,572       -       -       6,557       -  
Gross profit (non-GAAP)  (B)   56,413       68,397       61,881       155,260       194,208  
  Gross margin (non-GAAP)  (C)   49.8 %     50.0 %     49.1 %     50.6 %     49.1 %
                   
Operating expenses (GAAP)   50,234       38,255       35,983       123,713       114,037  
Stock-based compensation (A)   (2,561 )     (243 )     (3,076 )     (7,077 )     (5,763 )
Amortization of intangible assets   (255 )     -       -       (766 )     -  
SSD solutions restructuring   (15,970 )     -       -       (15,970 )     -  
Litigation expense   -       -       -       2       -  
Operating expenses (non-GAAP)  (B)   31,448       38,012       32,907       99,902       108,274  
                   
Operating profit (GAAP)   4,557       30,139       25,843       24,826       80,075  
  Operating margin (GAAP)   4.1 %     22.0 %     20.5 %     8.2 %     20.2 %
Total adjustments to operating profit   20,408       246       3,131       30,532       5,859  
Operating profit (non-GAAP)  (B)   24,965       30,385       28,974       55,358       85,934  
  Operating margin (non-GAAP)  (C)   22.1 %     22.2 %     23.0 %     18.1 %     21.7 %
                   
Non-operating income (expense) (GAAP)   1,433       1,187       1,386       18,251       3,839  
Foreign exchange loss (gain), net   362       142       (551 )     (64 )     72  
Gain on disposal of long-term investments   (38 )     -       -       (12,941 )     -  
Non-operating income (expense) (non-GAAP)  (B)   1,757       1,329       835       5,246       3,911  
                   
Net income (GAAP)   4,213       28,211       24,267       38,969       78,392  
Total pre-tax impact of non-GAAP adjustments (B)   20,732       388       2,580       17,527       5,931  
Income tax impact of non-GAAP adjustments (B)   (521 )     2       (171 )     (1,279 )     (693 )
Net income (non-GAAP) (B), (C)   24,424       28,601       26,676       55,217       83,630  
                   
Earnings per diluted ADS (GAAP) $0.12     $0.80     $0.70     $1.10     $2.24  
Earnings per diluted ADS (non-GAAP)  (B), (C) $0.69     $0.81     $0.76     $1.56     $2.38  
                   
Shares used in computing earnings per diluted ADS (GAAP)   35,153       35,164       34,891       35,388       35,061  
Non-GAAP Adjustments   139       36       163       84       88  
Shares used in computing earnings per diluted ADS (non-GAAP)   35,292       35,200       35,054       35,472       35,149  
                   
(A) Excludes stock-based compensation as follows:                  
Cost of Sales   50       3       55       164       96  
Research & development   1,811       118       2,163       4,750       3,937  
Sales & marketing   320       85       405       999       825  
General & administrative   430       40       508       1,328       1,001  
                   
(B) FCI divestiture items previously excluded from non-GAAP:                  
Revenue   -       -       -       10,359       -  
Gross Profit   -       -       -       5,687       -  
Operating Expenses   -       -       -       8,542       -  
Operating Profit   -       -       -       (2,855 )     -  
Non-Operating Income   -       -       -       9       -  
Taxes   -       -       -       8       -  
Net income   -       -       -       (2,854 )     -  
EPS   -       -       -       (0.08 )     -  
                       
(C) Reconciliation with previous non-GAAP disclosures:                    
Revenue (GAAP)   110,518       136,811       126,043       304,058       395,624  
SSD solutions restructuring   2,656       -       -       2,656       -  
Revenue (non-GAAP)   113,174       136,811       126,043       306,714       395,624  
FCI   -       -       -       (10,359 )     -  
Revenue (non-GAAP) less FCI   113,174       136,811       126,043       296,355       395,624  
Gross Margin (non-GAAP) less FCI   49.8 %     50.0 %     49.1 %     50.5 %     49.1 %
Operating Margin (non-GAAP) less FCI   22.1 %     22.2 %     23.0 %     19.7 %     21.7 %
EPS (non-GAAP) less FCI $0.69     $0.81     $0.76     US$1.64     $2.38  


 
Silicon Motion Technology Corporation
Consolidated Balance Sheet
(In thousands, unaudited)
 
  Sep. 30   Jun. 30,   Sep. 30,
  2019   2020   2020
   ($)    ($)    ($)
Cash and cash equivalents 308,191   350,790   341,281
Short-term investments 4,664   3,876   1,951
Accounts receivable (net) 90,332   93,825   95,519
Inventories 87,840   103,835   107,426
Refundable deposits – current 24,078   24,089   24,094
Prepaid expenses and other current assets 17,903   23,778   24,643
Total current assets 533,008   600,193   594,914
Long-term investments 3,000   5,000   5,000
Property and equipment (net) 98,749   102,156   102,046
Goodwill and intangible assets (net) 17,489   17,489   17,489
Other assets 14,002   11,556   10,984
Total assets 666,248   736,394   730,433
           
Accounts payable 32,457   34,209   37,148
Income tax payable 1,293   3,642   5,870
Accrued expenses and other current liabilities 48,200   78,244   65,500
Total current liabilities 81,950   116,095   108,518
Other liabilities 31,810   27,202   26,207
Total liabilities 113,760   143,297   134,725
Shareholders’ equity 552,488   593,097   595,708
Total liabilities & shareholders’ equity 666,248   736,394   730,433
           


 
Silicon Motion Technology Corporation
Condensed Consolidated Statements of Cash Flows
(in thousands, unaudited)
 
  For Three Months Ended   For Nine Months Ended
  Sep. 30,     Jun. 30,     Sep. 30,     Sep. 30,     Sep. 30,  
  2019     2020     2020     2019     2020  
   ($)      ($)      ($)      ($)      ($)  
Net income 4,213     28,211     24,267     38,969     78,392  
Depreciation & amortization 3,244     3,363     3,322     9,865     9,922  
Stock-based compensation 2,611     246     3,131     7,241     5,859  
Goodwill & intangible assets impairment 15,970     -     -     15,970     -  
Investment impairment, losses & disposals (44 )   33     1     (12,989 )   7  
Changes in operating assets and liabilities (21,925 )   (6,151 )   (552 )   (12,694 )   1,287  
Others 11     (1 )   22     19     35  
Net cash provided by operating activities 4,080     25,701     30,191     46,381     95,502  
                   
Purchase of property & equipment (3,925 )   (4,134 )   (2,618 )   (8,049 )   (13,148 )
Purchase of long-term investments -     (2,000 )   -     -     (2,000 )
Disposal of long-term investments 38     -     -     45,742     0  
Net cash provided by (used in) investing activities (3,887 )   (6,134 )   (2,618 )   37,693     (15,148 )
                   
Dividend payments (10,009 )   (12,278 )   (12,280 )   (31,882 )   (36,835 )
Share repurchases (25,015 )   -     (25,013 )   (25,015 )   (25,013 )
Net cash used in financing activities (35,024 )   (12,278 )   (37,293 )   (56,897 )   (61,848 )
                   
Net increase (decrease) in cash, cash equivalents & restricted cash (34,831 )   7,289     (9,720 )   27,177     18,506  
Effect of foreign exchange changes (24 )   (550 )   323     (1,024 )   (342 )
Cash, cash equivalents & restricted cash—beginning of period 368,135     369,075     375,814     307,127     348,253  
Cash, cash equivalents & restricted cash—end of period 333,280     375,814     366,417     333,280     366,417  
                             

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 fourth 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 fourth 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: 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  

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