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

Rhea-AI Summary

Silicon Motion Technology Corporation (SIMO) reported a record third quarter for 2021, achieving net sales of $254.2 million, reflecting a 15% increase quarter-over-quarter and a 102% rise year-over-year. Net income rose to $55.4 million or $1.58 per diluted ADS. The company reached a $1 billion revenue run-rate, a quarter ahead of schedule, driven by strong sales of eMMC+UFS controllers. Gross margin was 50.0%, while operating expenses increased to $58.3 million. A $2.00 annual dividend was declared, marking a 43% increase from the previous year.

Positive

• Achieved record quarterly revenues and earnings per share.
• Net sales increased 102% year-over-year.
• Reached $1 billion in Revenue Run-Rate a quarter ahead of plan.
• eMMC+UFS controller sales surged by 305% to 310% year-over-year.
• Declared a $2.00 annual dividend with a 43% increase.

Negative

• SSD controller sales remained flat quarter-over-quarter.
• SSD solutions sales experienced a decline of 0% to 5% year-over-year.

Financial Highlights

	3Q 2021 GAAP	3Q 2021 Non-GAAP
Net sales	$254.2 million (+15% Q/Q, +102% Y/Y)	$254.2 million (+15% Q/Q, +102% Y/Y)
Gross margin	50.0%	50.2%
Operating margin	27.1%	29.4%
Earnings per diluted ADS	$1.58	$1.70

Business Highlights

• Achieved third consecutive record quarterly revenue and earnings per share
• Reached $1 billion in Revenue Run-Rate, a quarter ahead of plan
• Sales of eMMC+UFS controllers reached new record quarterly high
• SSD controller sales approximately flat Q/Q and increased 70% to 75% Y/Y
• eMMC+UFS controller sales increased 60% to 65% Q/Q and increased 305% to 310% Y/Y
• SSD solutions sales increased 0% to 5% Q/Q and declined 0% to 5% Y/Y
• Launched world's fastest single chip controller for external portable SSDs
  

TAIPEI, Taiwan and MILPITAS, Calif., Oct. 28, 2021 (GLOBE NEWSWIRE) -- Silicon Motion Technology Corporation (NasdaqGS: SIMO) (“Silicon Motion” or the “Company”) today announced its financial results for the quarter ended September 30, 2021. For the third quarter, net sales (GAAP) increased sequentially to $254.2 million from $221.1 million in second quarter 2021. Net income (GAAP) increased to $55.4 million or $1.58 per diluted ADS (GAAP) from net income (GAAP) of $49.5 million or $1.42 per diluted ADS (GAAP) in second quarter 2021.

For the third quarter, net income (non-GAAP) increased to $60.4 million or $1.70 per diluted ADS (non-GAAP) from a net income (non-GAAP) of $52.7 million or $1.50 per diluted ADS (non-GAAP) in second quarter 2021.

Third Quarter 2021 Review
“We continued to optimize our scarce foundry wafer capacity and product allocation to customers and delivered $1 billion in Revenue Run-Rate, a quarter ahead of plan,” said Wallace Kou, President and CEO of Silicon Motion. “Our third quarter results were driven by strong sales of eMMC+UFS controllers used primarily in smartphones and other smart devices.”

Key Financial Results

(in millions, except percentages and per ADS amounts)	GAAP									Non-GAAP
	3Q 2021			2Q 2021			3Q 2020			3Q 2021			2Q 2021			3Q 2020
Revenue	$254.2			$221.1			$126.0			$254.2			$221.1			$126.0
Gross profit		$127.2			$111.1			$61.8			$127.8			$112.9			$61.9
Percent of revenue		50.0%			50.3%			49.1%			50.2%			51.0%			49.1%
Operating expenses	$58.3			$50.7			$36.0			$53.0			$48.4			$32.9
Operating income		$68.9			$60.4			$25.8			$74.8			$64.5			$29.0
Percent of revenue		27.1%			27.3%			20.5%			29.4%			29.2%			23.0%
Earnings per diluted ADS	$1.58			$1.42			$0.70			$1.70			$1.50			$0.76

Other Financial Information

(in millions)	3Q 2021			2Q 2021			3Q 2020
Cash, cash equivalents, restricted cash and short-term investments—end of period	$419.5			$412.3			$368.4
Routine capital expenditures	$5.9			$4.9			$2.6
Dividend payments	$12.2			$12.2			$12.3

During the third quarter, we had $5.9 million of capital expenditures for the routine purchase of software, design tools and other items and $1.4 million for building construction in Hsinchu, Taiwan.

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 August 19, 2021, we paid $12.2 million to shareholders as the fourth installment of our annual dividend. On October 25, 2021, our Board of Directors declared a $2.00 per ADS annual dividend, representing an annual increase of 43%, to be paid in quarterly installments of $0.50 per ADS. The first installment of our annual dividend will be paid on November 24, 2021.  

Business Outlook
“In spite of capped foundry wafer supply this year, we’ve optimized with better product mix, customer allocation and pricing discipline to deliver strong growth,” said Wallace Kou, President and CEO of Silicon Motion. “We believe that our strong design win momentum with leading OEM customers positions us for continued market share gains and relative outperformance next year.”

For the fourth quarter of 2021, management expects:

	GAAP	Non-GAAP Adjustment	Non-GAAP
Revenue	$254m to $267m +0% to 5% Q/Q	--	$254m to $267m +0% to 5% Q/Q
Gross margin	48.4% to 50.4%	Approximately $0.2m*	48.5% to 50.5%
Operating margin	24.9% to 26.7%	Approximately $9.2m to $10.2m**	28.5% to 30.5%

* Projected gross margin (non-GAAP) excludes $0.2 million of stock-based compensation.
** Projected operating margin (non-GAAP) excludes $9.2 million to $10.2 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 October 28, 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/7896715

Replay Numbers (for 7 days):
USA (Toll Free):		1 855 452 5696
USA (Toll):		1 646 254 3697
Participant Passcode:		7896715

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 Nine Months Ended
	Sep. 30,			Jun. 30,			Sep. 30,			Sep. 30,			Sep. 30,
	2020			2021			2021			2020			2021
	($)			($)			($)			($)			($)
Net sales	126,043			221,103			254,241			395,624			657,743
Cost of sales	64,217			109,969			127,070			201,512			328,179
Gross profit	61,826			111,134			127,171			194,112			329,564
Operating expenses
Research & development	26,378			38,962			44,600			84,624			119,544
Sales & marketing	6,077			7,085			7,749			18,394			21,280
General & administrative	3,528			4,649			5,931			11,019			15,019
Operating income	25,843			60,438			68,891			80,075			173,721
Non-operating income (expense)
Interest income, net	841			336			312			3,896			1,009
Foreign exchange gain (loss), net	551			519			(114	)		(72	)		(404	)
Others, net	(6	)		-			-			15			3
Subtotal	1,386			855			198			3,839			608
Income before income tax	27,229			61,293			69,089			83,914			174,329
Income tax expense	2,962			11,748			13,665			5,522			34,961
Net income	24,267			49,545			55,424			78,392			139,368
Earnings per basic ADS	0.70			1.42			1.59			2.24			4.00
Earnings per diluted ADS	0.70			1.42			1.58			2.24			3.99
Margin Analysis:
Gross margin	49.1	%		50.3	%		50.0	%		49.1	%		50.1	%
Operating margin	20.5	%		27.3	%		27.1	%		20.2	%		26.4	%
Net margin	19.3	%		22.4	%		21.8	%		19.8	%		21.2	%
Additional Data:
Basic ADS	34,832			34,926			34,933			34,960			34,844
Diluted ADS	34,891			34,953			35,023			35,061			34,967

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,
	2020			2021			2021			2020			2021
	($)			($)			($)			($)			($)
Gross profit (GAAP)	61,826			111,134			127,171			194,112			329,564
Gross margin (GAAP)	49.1	%		50.3	%		50.0	%		49.1	%		50.1	%
Stock-based compensation (A)	55			52			111			96			217
SSD solutions restructuring	-			1,679			473			-			3,283
Gross profit (non-GAAP)	61,881			112,865			127,755			194,208			333,064
Gross margin (non-GAAP)	49.1	%		51.0	%		50.2	%		49.1	%		50.6	%
Operating expenses (GAAP)	35,983			50,696			58,280			114,037			155,843
Stock-based compensation (A)	(3,076	)		(2,312	)		(5,059	)		(5,763	)		(10,332	)
SSD solutions restructuring	-			-			(238	)		-			(238	)
Operating expenses (non-GAAP)	32,907			48,384			52,983			108,274			145,273
Operating profit (GAAP)	25,843			60,438			68,891			80,075			173,721
Operating margin (GAAP)	20.5	%		27.3	%		27.1	%		20.2	%		26.4	%
Total adjustments to operating profit	3,131			4,043			5,881			5,859			14,070
Operating profit (non-GAAP)	28,974			64,481			74,772			85,934			187,791
Operating margin (non-GAAP)	23.0	%		29.2	%		29.4	%		21.7	%		28.6	%
Non-operating income (expense) (GAAP)	1,386			855			198			3,839			608
Foreign exchange loss (gain), net	(551	)		(519	)		114			72			404
Non-operating income (expense) (non-GAAP)	835			336			312			3,911			1,012
Net income (GAAP)	24,267			49,545			55,424			78,392			139,368
Total pre-tax impact of non-GAAP adjustments	2,580			3,524			5,995			5,931			14,474
Income tax impact of non-GAAP adjustments	(171	)		(339	)		(1,015	)		(693	)		(2,048	)
Net income (non-GAAP)	26,676			52,730			60,404			83,630			151,794
Earnings per diluted ADS (GAAP)	$0.70			$1.42			$1.58			$2.24			$3.99
Earnings per diluted ADS (non-GAAP)	$0.76			$1.50			$1.70			$2.38			$4.31
Shares used in computing earnings per diluted ADS (GAAP)	34,891			34,953			35,023			35,061			34,967
Non-GAAP Adjustments	163			297			513			88			285
Shares used in computing earnings per diluted ADS (non-GAAP)	35,054			35,250			35,536			35,149			35,252
(A) Excludes stock-based compensation as follows:
Cost of sales	55			52			111			96			217
Research & development	2,163			1,203			3,251			3,937			6,508
Sales & marketing	405			480			616			825			1,502
General & administrative	508			629			1,192			1,001			2,322

Silicon Motion Technology Corporation Consolidated Balance Sheet (In thousands, unaudited)
	Sep. 30,		Jun. 30,		Sep. 30,
	2020		2021		2021
	($)		($)		($)
Cash and cash equivalents	341,281		357,119		364,071
Short-term investments	1,951		-		-
Accounts receivable (net)	95,519		145,583		184,984
Inventories	107,426		150,617		161,010
Refundable deposits – current	24,094		48,760		48,507
Prepaid expenses and other current assets	24,643		26,742		26,398
Total current assets	594,914		728,821		784,970
Long-term investments	5,000		6,500		8,507
Property and equipment (net)	102,046		106,841		110,289
Goodwill and intangible assets (net)	17,489		-		-
Other assets	10,984		17,093		17,808
Total assets	730,433		859,255		921,574
Accounts payable	37,148		77,126		66,380
Income tax payable	5,870		19,071		31,190
Accrued expenses and other current liabilities	65,500		86,559		85,584
Total current liabilities	108,518		182,756		183,154
Other liabilities	26,207		29,859		31,198
Total liabilities	134,725		212,615		214,352
Shareholders’ equity	595,708		646,640		707,222
Total liabilities & shareholders’ equity	730,433		859,255		921,574

Silicon Motion Technology Corporation Condensed Consolidated Statements of Cash Flows (in thousands, unaudited)
		For Three Months Ended									For the Nine Months Ended
		Sep. 30,			Jun. 30,			Sep. 30,			Sep. 30,			Sep. 30,
		2020			2021			2021			2020			2021
		($)			($)			($)			($)			($)
Net income		24,267			49,545			55,424			78,392			139,368
Depreciation & amortization		3,322			4,059			4,180			9,922			12,125
Stock-based compensation		3,131			2,364			5,170			5,859			10,549
Investment impairment, losses & disposals		1			-			2			7			204
Changes in operating assets and liabilities		(552	)		4,058			(36,117	)		1,287			(56,191	)
Others		22			-			-			35			-
Net cash provided by operating activities		30,191			60,026			28,659			95,502			106,055
Purchase of property & equipment		(2,618	)		(4,926	)		(7,329	)		(13,148	)		(15,585	)
Purchase of long-term investments		-			(1,500	)		(2,007	)		(2,000	)		(3,506	)
Net cash provided by (used in) investing activities		(2,618	)		(6,426	)		(9,336	)		(15,148	)		(19,091	)
Dividend payments		(12,280	)		(12,201	)		(12,204	)		(36,835	)		(36,604	)
Share repurchases		(25,013	)		-			-			(25,013	)		-
Net cash used in financing activities		(37,293	)		(12,201	)		(12,204	)		(61,848	)		(36,604	)
Net increase (decrease) in cash, cash equivalents & restricted cash		(9,720	)		41,399			7,119			18,506			50,360
Effect of foreign exchange changes		323			(57	)		23			(342	)		(119	)
Cash, cash equivalents & restricted cash—beginning of period		375,814			370,968			412,310			348,253			369,211
Cash, cash equivalents & restricted cash—end of period		366,417			412,310			419,452			366,417			419,452

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 fourth 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 fourth 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; the recent increases in tensions between Taiwan and China including enhanced military activities; 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

FAQ

What were Silicon Motion's 3Q 2021 earnings results?

In 3Q 2021, Silicon Motion reported net sales of $254.2 million, net income of $55.4 million, and earnings of $1.58 per diluted ADS.

How much did Silicon Motion's revenue increase year-over-year in 3Q 2021?

Silicon Motion's revenue increased by 102% year-over-year in 3Q 2021.

What is the significance of Silicon Motion's $1 billion revenue run-rate?

The $1 billion revenue run-rate signifies strong growth and demand, achieved a quarter ahead of plan.

What was the gross margin reported by Silicon Motion for 3Q 2021?

Silicon Motion reported a gross margin of 50.0% for 3Q 2021.

What dividends were declared by Silicon Motion after 3Q 2021?

Silicon Motion declared a $2.00 annual dividend, a 43% increase from the prior year, to be paid in quarterly installments.