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Silicon Motion Announces Results for the Period Ended June 30, 2021

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·18-min read
In this article:
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Financial Highlights

2Q 2021 GAAP

2Q 2021 Non-GAAP

$221.1 million (+21% Q/Q, +62% Y/Y)

$221.1 million (+21% Q/Q, +62% Y/Y)

50.3%

51.0%

27.3%

29.2%

$1.42

$1.50

Business Highlights

  • Achieved second consecutive all-time record quarterly revenue and earnings per share

  • Sales of SSD and eMMC+UFS controllers both reached new record quarterly highs

  • SSD controller sales increased 30% to 35% Q/Q and increased 105% to 110% Y/Y

  • eMMC+UFS controller sales increased 10% to 15% Q/Q and increased 25% to 30% Y/Y

  • SSD solutions sales increased 35% to 40% Q/Q and declined 15% to 20% Y/Y

TAIPEI, Taiwan and MILPITAS, Calif., July 30, 2021 (GLOBE NEWSWIRE) -- Silicon Motion Technology Corporation (NasdaqGS: SIMO) (“Silicon Motion” or the “Company”) today announced its financial results for the quarter ended June 30, 2021. For the second quarter, net sales (GAAP) increased sequentially to $221.1 million from $182.4 million in first quarter 2021. Net income (GAAP) increased to $49.5 million or $1.42 per diluted ADS (GAAP) from net income (GAAP) of $34.4 million or $0.98 per diluted ADS (GAAP) in first quarter 2021.

For the second quarter, net income (non-GAAP) increased to $52.7 million or $1.50 per diluted ADS (non-GAAP) from a net income (non-GAAP) of $38.7 million or $1.11 per diluted ADS (non-GAAP) in first quarter 2021.

Second Quarter 2021 Review
“We delivered better than expected revenue in the second quarter, primarily because of our focus on sales of higher-value products,” said Wallace Kou, President and CEO of Silicon Motion. “This focus also led to higher than expected gross profitability.”

Key Financial Results

(in millions, except percentages and per ADS amounts)

GAAP

Non-GAAP

2Q 2021

1Q 2021

2Q 2020

2Q 2021

1Q 2021

2Q 2020

Revenue

$

221.1

$

182.4

$

136.8

$

221.1

$

182.4

$

136.8

Gross profit

$111.1

$91.3

$68.4

$112.9

$92.4

$68.4

Percent of revenue

50.3

%

50.0

%

50.0

%

51.0

%

50.7

%

50.0

%

Operating expenses

$

50.7

$

46.9

$

38.3

$

48.4

$

43.9

$

38.0

Operating income

$60.4

$44.4

$30.1

$64.5

$48.5

$30.4

Percent of revenue

27.3

%

24.3

%

22.0

%

29.2

%

26.6

%

22.2

%

Earnings per diluted ADS

$

1.42

$

0.98

$

0.80

$

1.50

$

1.11

$

0.81

Other Financial Information

(in millions)

2Q 2021

1Q 2021

2Q 2020

Cash, cash equivalents, restricted cash and short-term investments—end of period

$

412.3

$

371.0

$

379.7

Routine capital expenditures

$

4.9

$

3.3

$

4.1

Dividend payments

$

12.2

$

12.2

$

12.3

During the second quarter, we had $4.9 million of capital expenditures for the routine purchase of software, design tools and other items.

Returning Value to Shareholders
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. On May 20, 2021, we paid $12.2 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. On October 26, 2020, the Board of Directors of the Company authorized the extension of the expiration of this program to November 21, 2021. Since the start of this program, we have repurchased $84.8 million of our ADSs and $115.2 million remains available for repurchase under the program. There were no share repurchases in the second quarter.

Business Outlook
“We are upsizing our previous full-year revenue guidance as we expect to continue our focus of selling higher-value products,” said Wallace Kou, President and CEO of Silicon Motion. “We believe that this focused approach will also lead to better gross profitability and deliver strong SSD controller market share gains.”

For the third quarter of 2021, management expects:

GAAP

Non-GAAP Adjustment

Non-GAAP

Revenue

$238m to $249m
+7.5% to 12.5% Q/Q

--

$238m to $249m
+7.5% to 12.5% Q/Q

Gross margin

48.5% to 50.5%

Approximately $0.1m*

48.5% to 50.5%

Operating margin

25.2% to 27.7%

Approximately $4.6m to $5.6m**

27.5% to 29.5%

* Projected gross margin (non-GAAP) excludes $0.1 million of stock-based compensation.
** Projected operating margin (non-GAAP) excludes $4.6 million to $5.6 million of stock-based compensation.

For full year 2021, management expects:

GAAP

Non-GAAP Adjustment

Non-GAAP

Revenue

$890m to $917m
+65% to 70% Y/Y

--

$890m to $917m
+65% to 70% Y/Y

Gross margin

49.1% to 50.2%

Approximately $3.1m to $3.3m*

49.5% to 50.5%

Operating margin

24.9% to 27.2%

Approximately $20.8m to $22.8m**

27.5% to 29.5%

* Projected gross margin (non-GAAP) excludes $0.3 million to $0.5 million of stock-based compensation and $2.8 million of SSD solutions restructuring.
** Projected operating margin (non-GAAP) excludes $18.0 million to $20.0 million of stock-based compensation and $2.8 million of SSD solutions restructuring.

Conference Call & Webcast:

The Company’s management team will conduct a conference call at 8:00 am Eastern Time on July 30, 2021.

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/9533307

Replay Numbers (for 7 days):

USA (Toll Free):

1 855 452 5696

USA (Toll):

1 646 254 3697

Participant Passcode:

9533307

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:

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.

SSD solutions restructuring are charges relate to the restructuring of our underperforming Shannon product lines and include goodwill impairment expenses, and the write-down of NAND flash and SSD inventory valuation.

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,

2020

2021

2021

2020

2021

($)

($)

($)

($)

($)

Net sales

136,811

182,399

221,103

269,580

403,502

Cost of sales

68,417

91,140

109,969

137,294

201,109

Gross profit

68,394

91,259

111,134

132,286

202,393

Operating expenses

Research & development

28,901

35,982

38,962

58,247

74,944

Sales & marketing

5,823

6,446

7,085

12,316

13,531

General & administrative

3,531

4,439

4,649

7,490

9,088

Operating income

30,139

44,392

60,438

54,233

104,830

Non-operating income (expense)

Interest income, net

1,323

361

336

3,055

697

Foreign exchange gain (loss), net

(142

)

(808

)

519

(623

)

(289

)

Others, net

6

3

-

22

3

Subtotal

1,187

(444

)

855

2,454

411

Income before income tax

31,326

43,948

61,293

56,687

105,241

Income tax expense

3,115

9,548

11,748

2,561

21,296

Net income

28,211

34,400

49,545

54,126

83,945

Earnings per basic ADS

0.80

0.99

1.42

1.54

2.41

Earnings per diluted ADS

0.80

0.98

1.42

1.54

2.40

Margin Analysis:

Gross margin

50.0

%

50.0

%

50.3

%

49.1

%

50.2

%

Operating margin

22.0

%

24.3

%

27.3

%

20.1

%

26.0

%

Net margin

20.6

%

18.9

%

22.4

%

20.1

%

20.8

%

Additional Data:

Basic ADS

35,146

34,674

34,926

35,024

34,800

Diluted ADS

35,164

34,924

34,953

35,147

34,939


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,

2020

2021

2021

2020

2021

($)

($)

($)

($)

($)

Gross profit (GAAP)

68,394

91,259

111,134

132,286

202,393

Gross margin (GAAP)

50.0

%

50.0

%

50.3

%

49.1

%

50.2

%

Stock-based compensation (A)

3

54

52

41

106

SSD solutions restructuring

-

1,131

1,679

-

2,810

Gross profit (non-GAAP)

68,397

92,444

112,865

132,327

205,309

Gross margin (non-GAAP)

50.0

%

50.7

%

51.0

%

49.1

%

50.9

%

Operating expenses (GAAP)

38,255

46,867

50,696

78,053

97,563

Stock-based compensation (A)

(243

)

(2,961

)

(2,312

)

(2,687

)

(5,273

)

Operating expenses (non-GAAP)

38,012

43,906

48,384

75,366

92,290

Operating profit (GAAP)

30,139

44,392

60,438

54,233

104,830

Operating margin (GAAP)

22.0

%

24.3

%

27.3

%

20.1

%

26.0

%

Total adjustments to operating profit

246

4,146

4,043

2,728

8,189

Operating profit (non-GAAP)

30,385

48,538

64,481

56,961

113,019

Operating margin (non-GAAP)

22.2

%

26.6

%

29.2

%

21.1

%

28.0

%

Non-operating income (expense) (GAAP)

1,187

(444

)

855

2,454

411

Foreign exchange loss (gain), net

142

808

(519

)

623

289

Non-operating income (expense) (non-GAAP)

1,329

364

336

3,077

700

Net income (GAAP)

28,211

34,400

49,545

54,126

83,945

Total pre-tax impact of non-GAAP adjustments

388

4,954

3,524

3,351

8,478

Income tax impact of non-GAAP adjustments

2

(695

)

(339

)

(522

)

(1,034

)

Net income (non-GAAP)

28,601

38,659

52,730

56,955

91,389

Earnings per diluted ADS (GAAP)

$

0.80

$

0.98

$

1.42

$

1.54

$

2.40

Earnings per diluted ADS (non-GAAP)

$

0.81

$

1.11

$

1.50

$

1.62

$

2.60

Shares used in computing earnings per diluted ADS (GAAP)

35,164

34,924

34,953

35,147

34,939

Non-GAAP adjustments

36

45

297

49

171

Shares used in computing earnings per diluted ADS (non-GAAP)

35,200

34,969

35,250

35,196

35,110

(A) Excludes stock-based compensation as follows:

Cost of sales

3

54

52

41

106

Research & development

118

2,056

1,203

1,773

3,259

Sales & marketing

85

406

480

420

886

General & administrative

40

499

629

494

1,128


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

Jun. 30,

Mar. 31,

Jun. 30,

2020

2021

2021

($)

($)

($)

Cash and cash equivalents

350,790

350,125

357,119

Short-term investments

3,876

-

-

Accounts receivable (net)

93,825

136,244

145,583

Inventories

103,835

113,432

150,617

Refundable deposits – current

24,089

18,693

48,760

Prepaid expenses and other current assets

23,778

25,140

26,742

Total current assets

600,193

643,634

728,821

Long-term investments

5,000

5,000

6,500

Property and equipment (net)

102,156

103,948

106,841

Goodwill and intangible assets (net)

17,489

-

-

Other assets

11,556

10,832

17,093

Total assets

736,394

763,414

859,255

Accounts payable

34,209

44,112

77,126

Income tax payable

3,642

12,817

19,071

Accrued expenses and other current liabilities

78,244

85,533

86,559

Total current liabilities

116,095

142,462

182,756

Other liabilities

27,202

26,193

29,859

Total liabilities

143,297

168,655

212,615

Shareholders’ equity

593,097

594,759

646,640

Total liabilities & shareholders’ equity

736,394

763,414

859,255


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

For Three Months Ended

For the Six Months Ended

Jun. 30,

Mar. 31,

Jun. 30,

Jun. 30,

Jun. 30,

2020

2021

2021

2020

2021

($)

($)

($)

($)

($)

Net income

28,211

34,400

49,545

54,126

83,945

Depreciation & amortization

3,363

3,886

4,059

6,600

7,945

Stock-based compensation

246

3,015

2,364

2,728

5,379

Investment impairment, losses & disposals

33

203

-

19

203

Changes in operating assets and liabilities

(6,151

)

(24,132

)

4,058

1,839

(20,074

)

Others

(1

)

-

-

(1

)

-

Net cash provided by operating activities

25,701

17,372

60,026

65,311

77,398

Purchase of property & equipment

(4,134

)

(3,330

)

(4,926

)

(10,530

)

(8,256

)

Purchase of long-term investments

(2,000

)

-

(1,500

)

(2,000

)

(1,500

)

Net cash used in investing activities

(6,134

)

(3,330

)

(6,426

)

(12,530

)

(9,756

)

Dividend payments

(12,278

)

(12,199

)

(12,201

)

(24,556

)

(24,400

)

Net cash used in financing activities

(12,278

)

(12,199

)

(12,201

)

(24,556

)

(24,400

)

Net increase (decrease) in cash, cash equivalents & restricted cash

7,289

1,843

41,399

28,225

43,242

Effect of foreign exchange changes

(550

)

(86

)

(57

)

(664

)

(143

)

Cash, cash equivalents & restricted cash—beginning of period

369,075

369,211

370,968

348,253

369,211

Cash, cash equivalents & restricted cash—end of period

375,814

370,968

412,310

375,814

412,310


About Silicon Motion:

We are the global leader in supplying NAND flash controllers for solid state storage devices. We supply more SSD controllers than any other company in the world for servers, PCs and other client devices and are the leading merchant supplier of eMMC and UFS embedded storage controllers used in smartphones, IoT devices and other applications. We also supply customized high-performance hyperscale data center and specialized industrial and automotive 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 2021 and full year 2021 expectations of revenue, gross margin and operating expenses, all of which reflect management’s estimates based on information available at the 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 2021 and full year 2021. 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 one or more 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 the 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 the products we sell given the current raw material supply shortages being experienced in our industry; 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 May 12, 2021. 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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