Silicon Motion Announces Results for the Period Ended December 31, 2020

Hsinchu County, TAIWAN, PROVINCE OF CHINA


Financial Highlights

 4Q 2020 GAAP4Q 2020 Non-GAAP
•  Net sales$143.9 million (+14% Q/Q, -6% Y/Y)$143.9 million (+14% Q/Q, -6% Y/Y)
•  Gross margin45.9%49.3%
•  Operating margin0.3%21.9%
•  Earnings per diluted ADS$0.04 $0.86


 Full Year 2020 GAAPFull Year 2020 Non-GAAP
  •  Net sales$539.5 million (+18% Y/Y)$539.5 million (+17% Y/Y)
  •  Gross margin48.2%49.2%
  •  Operating margin14.9%21.8%
  •  Earnings per diluted ADS$2.28$3.24

Business Highlights

  • SSD controller sales: 4Q increased 5% to 10% Q/Q and FY2020 increased 15% to 20% Y/Y
  • eMMC+UFS controller sales: 4Q increased 65% to 70% Q/Q and FY2020 increased 35% to 40% Y/Y
  • SSD solutions sales: 4Q declined 30% to 35% Q/Q and FY2020 increased 35 to 40% Y/Y
  • Launched SM8266, a complete 16-channel PCIe 4.0 NVMe turnkey enterprise SSD controller

TAIPEI, Taiwan and MILPITAS, Calif., Feb. 04, 2021 (GLOBE NEWSWIRE) -- Silicon Motion Technology Corporation (NasdaqGS: SIMO) (“Silicon Motion” or the “Company”) today announced its financial results for the quarter ended December 31, 2020. For the fourth quarter, net sales (GAAP) increased sequentially to $143.9 million from $126.0 million in third quarter 2020. Net income (GAAP) declined to $1.4 million or $0.04 per diluted ADS (GAAP) from a net income (GAAP) of $24.3 million or $0.70 per diluted ADS (GAAP) in third quarter 2020.

For the fourth quarter, net income (non-GAAP) increased to $29.9 million or $0.86 per diluted ADS (non-GAAP) from a net income (non-GAAP) of $26.7 million or $0.76 per diluted ADS (non-GAAP) in third quarter 2020.

Fourth Quarter 2020 Review
“Fourth quarter results were stronger than expected as customer procurement continues to be robust,” said Wallace Kou, President and CEO of Silicon Motion. “Sales of our eMMC+UFS controllers for smartphones and IOT devices were especially strong and our SSD controllers continued to benefit from strong PC demand. Sales of our SSD solutions were however seasonally soft.”

Key Financial Results

(in millions, except percentages and per ADS amounts)

GAAPNon-GAAP
 4Q 2020  3Q 2020  4Q 2019  4Q 2020  3Q 2020  4Q 2019 
Revenue$143.9 $126.0 $153.2 $143.9 $126.0 $153.0 
Gross profit
 $66.0
  $61.8
  $73.6
  $71.0
  $61.9
  $75.4
 
Percent of revenue 45.9%  49.1%  48.1%  49.3%  49.1%  49.3% 
Operating expenses$65.6 $36.0 $46.3 $39.5 $32.9 $38.2 
Operating income
 $0.4
  $25.8
  $27.3
  $31.5
  $29.0
  $37.2
 
Percent of revenue 0.3%  20.5%  17.8%  21.9%  23.0%  24.3% 
Earnings per diluted ADS$0.04 $0.70 $0.73 $0.86 $0.76 $0.96 

Other Financial Information

(in millions)4Q 20203Q 20204Q 2019
Cash, cash equivalents, restricted cash and short-term investments—end of period$369.2$368.4$350.3
Routine capital expenditures$5.6$2.6$3.0
Dividend payments$12.1$12.3$12.1

During the fourth quarter, we had $5.6 million of capital expenditures for the routine purchase of testing equipment, 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 November 25, 2020, we paid $12.1 million to shareholders as the first 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 fourth quarter.

Business Outlook
“We are kicking-off 2021 with what we believe will be an unseasonally strong first quarter and an extremely strong order book for the year, with sales growth currently capped by foundry supply availability,” said Wallace Kou, President and CEO of Silicon Motion. “We are seeing strong, broad-based OEM demand and design activities for our SSD and eMMC+UFS controllers and expect this momentum to carry over to 2022. PC OEMs are driving strong demand for PCIe NVMe SSD controllers and smartphone and IOT OEMs for UFS and eMMC mobile embedded storage controllers.”

For the first quarter of 2021, management expects:

 GAAPNon-GAAP AdjustmentNon-GAAP
Revenue$154m to $161m
7% to 12% Q/Q
--$154m to $161m
7% to 12% Q/Q
Gross margin47.9% to 49.9%Approximately $0.2m*48.0% to 50.0%
Operating margin18.9% to 21.1%Approximately $3.1m to $3.3m**21.0% to 23.0%

* Projected gross margin (non-GAAP) excludes $0.2 million of stock-based compensation.
** Projected operating margin (non-GAAP) excludes $3.1 million to $3.3 million of stock-based compensation.

For the full year 2021, management expects:

 GAAPNon-GAAP AdjustmentNon-GAAP
Revenue$650m to $700m
20% to 30% Y/Y
--$650m to $700m
20% to 30% Y/Y
Gross margin47.0% to 49.0%Approximately $0.3m*47.0% to 49.0%
Operating margin21.5% to 24.0%Approximately $14.0m to $16.0m**24.0% to 26.0%

* Projected gross margin (non-GAAP) excludes $0.3 million of stock-based compensation.
** Projected operating margin (non-GAAP) excludes $14.0 million to $16.0 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 February 4, 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/4467365

Replay Numbers (for 7 days): 
USA (Toll Free):1 855 452 5696
USA (Toll):1 646 254 3697
Participant Passcode:4467365

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 related 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.

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.

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 Year Ended
  Dec. 31,  Sep. 30,  Dec. 31,  Dec. 31,  Dec. 31,
  2019  2020  2020  2019  2020 
   ($)  ($)  ($)  ($)  ($)
Net Sales 153,196  126,043  143,897  457,253  539,521 
Cost of sales 79,563  64,217  77,853  235,081  279,365 
Gross profit 73,633  61,826  66,044  222,172  260,156 
Operating expenses          
Research & development 33,911  26,378  37,160  110,305  121,784 
Sales & marketing 6,118  6,077  6,411  25,108  24,805 
General & administrative 6,285  3,528  4,585  17,878  15,604 
Amortization of intangibles assets -  -  -  766  - 
Impairment of goodwill and intangible assets -  -  17,489  15,970  17,489 
Operating income 27,319  25,843  399  52,145  80,474 
Non-operating income (expense)          
Interest income, net 1,561  841  729  6,748  4,625 
Gain on disposal of long-term investments -  -  (293) 12,941  (293)
Foreign exchange gain (loss), net 84  551  692  148  619 
Others, net 33  (6) 117  92  133 
Subtotal 1,678  1,386  1,245  19,929  5,084 
Income before income tax 28,997  27,229  1,644  72,074  85,558 
Income tax expense 3,567  2,962  290  7,676  5,812 
Net income 25,430  24,267  1,354  64,398  79,746 
           
Earnings per basic ADS 0.73  0.70  0.04  1.83  2.29 
Earnings per diluted ADS 0.73  0.70  0.04  1.82  2.28 
           
Margin Analysis:          
Gross margin 48.1% 49.1% 45.9% 48.6% 48.2%
Operating margin 17.8% 20.5% 0.3% 11.4% 14.9%
Net margin 16.6% 19.3% 0.9% 14.1% 14.8%
                


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 Year Ended
  Dec. 31,  Sep. 30,  Dec. 31,  Dec. 31,  Dec. 31,
  2019 
  2020   2020   2019   2020 
  ($)  ($)  ($)  ($)  ($)
Gross profit (GAAP) 73,633  61,826  66,044  222,172  260,156 
Gross margin (GAAP) 48.1% 49.1% 45.9% 48.6% 48.2%
Stock-based compensation (A) 141  55  157  305  253 
SSD solutions restructuring 1,618  -  4,772  8,175  4,772 
Gross profit (non-GAAP) (B) 75,392  61,881  70,973  230,652  265,181 
Gross margin (non-GAAP) (C) 49.3% 49.1% 49.3% 50.2% 49.2%
              
Operating expenses (GAAP) 46,314  35,983  65,645  170,027  179,682 
Stock-based compensation (A) (7,209) (3,076) (8,572) (14,286) (14,335)
Amortization of intangible assets -  -  -  (766) - 
SSD solutions restructuring (928) -  (17,613) (16,898) (17,613)
Litigation expense -  -  -  2  - 
Operating expenses (non-GAAP) (B) 38,177  32,907  39,460  138,079  147,734 
           
Operating profit (GAAP) 27,319  25,843  399  52,145  80,474 
Operating margin (GAAP) 17.8% 20.5% 0.3% 11.4% 14.9%
Total adjustments to operating profit 9,896  3,131  31,114  40,428  36,973 
Operating profit (non-GAAP) (B) 37,215  28,974  31,513  92,573  117,447 
Operating margin (non-GAAP) (C) 24.3% 23.0% 21.9% 20.1% 21.8%
           
Non-operating income (expense) (GAAP) 1,678  1,386  1,245  19,929  5,084 
Foreign exchange loss (gain), net (84) (551) (692) (148) (619)
Gain on disposal of long-term investments -  -  293  (12,941) 293 
Non-operating income (expense) (non-GAAP) (B) 1,594  835               846  6,840  4,758 
           
Net income (GAAP) 25,430  24,267  1,354  64,398  79,746 
Total pre-tax impact of non-GAAP adjustments (B) 9,812  2,580  30,715  27,339  36,647 
Income tax impact of non-GAAP adjustments (B) (1,430) (171) (2,152) (2,708) (2,845)
Net income (non-GAAP) (B), (C) 33,812  26,676  29,917  89,029  113,548 
           
Earnings per diluted ADS (GAAP) $0.73  $0.70  $0.04  $1.82  $2.28 
Earnings per diluted ADS (non-GAAP) (B), (C) $0.96  $0.76  $0.86  $2.51  $3.24 
           
Shares used in computing earnings per diluted ADS (GAAP) 35,021  34,891  34,761  35,296  34,978 
Non-GAAP Adjustments 171  163  219  106  121 
Shares used in computing earnings per diluted ADS (non-GAAP) 35,192  35,054  34,980  35,402  35,099 
           
(A) Excludes stock-based compensation as follows:          
Cost of Sales 141  55  157  305  253 
Research & development 5,178  2,163  6,196  9,927  10,132 
Sales & marketing 790  405  933  1,789  1,758 
General & administrative 1,241  508  1,443  2,570  2,445 
           
(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) 153,196  126,043  143,897  457,253  539,521 
SSD solutions restructuring (162) -  -  2,494  - 
Revenue (non-GAAP) 153,034  126,043  143,897  459,747  539,521 
FCI -  -  -  (10,359) - 
Revenue (non-GAAP) less FCI 153,034  126,043  143,897  449,388  539,521 
Gross Margin (non-GAAP) less FCI 49.3% 49.1% 49.3% 50.1% 49.2%
Operating Margin (non-GAAP) less FCI 24.3% 23.0% 21.9% 21.2% 21.8%
EPS (non-GAAP) less FCI $0.96  $0.76  $0.86  US$2.60 $3.24 
               


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

       
  Dec. 31, Sep. 30,  Dec. 31,
  2019 2020 2020
   ($)  ($)  ($)
Cash and cash equivalents 323,166 341,281 342,961
Short-term investments 2,010 1,951 -
Accounts receivable (net) 108,734 95,519 115,800
Inventories 88,439 107,426 110,162
Refundable deposits – current 24,085 24,094 24,098
Prepaid expenses and other current assets 18,765 24,643 13,948
Total current assets 565,199 594,914 606,969
Long-term investments 3,000 5,000 5,000
Property and equipment (net) 98,488 102,046 105,496
Goodwill and intangible assets (net) 17,489 17,489 -
Other assets 13,553 10,984 24,595
Total assets 697,729 730,433 742,060
       
Accounts payable 30,687 37,148 44,535
Income tax payable 2,465 5,870 6,886
Accrued expenses and other current liabilities 98,336 65,500 107,323
Total current liabilities 131,488 108,518 158,744
Other liabilities 29,457 26,207 25,574
Total liabilities 160,945 134,725 184,318
Shareholders’ equity 536,784 595,708 557,742
Total liabilities & shareholders’ equity 697,729 730,433 742,060
       


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

     
  For Three Months Ended For the Year Ended
  Dec. 31,  Sep. 30,  Dec. 31,  Dec. 31,  Dec. 31,
  2019  2020  2020  2019  2020 
   ($)  ($)  ($)  ($)  ($)
Net income 25,430  24,267  1,354  64,398  79,746 
Depreciation & amortization 3,347  3,322  3,640  13,213  13,562 
Stock-based compensation 7,350  3,131  8,729  14,591  14,589 
Goodwill & intangible assets impairment -  -  17,489  15,970  17,489 
Investment impairment, losses & disposals (16) 1  260  (12,908) 267 
Changes in operating assets and liabilities (6,075) (552) (11,158) (17,553) (9,871)
Others 63  22  79              (16) 113 
Net cash provided by operating activities 30,099  30,191  20,393  77,695  115,895 
           
Purchase of property & equipment (2,966) (2,618) (5,636) (11,015) (18,784)
Purchase of long-term investments -  -  -  -  (2,000)
Disposal of long-term investments -  -  -  45,683  - 
Net cash provided by (used in) investing activities (2,966) (2,618) (5,636) 34,668  (20,784)
           
Dividend payments (12,147) (12,280) (12,065) (44,029) (48,901)
Share repurchases -  (25,013) -  (26,231) (25,013)
Net cash used in financing activities (12,147) (37,293) (12,065) (70,260) (73,914)
           
Net increase (decrease) in cash, cash equivalents & restricted cash 14,986  (9,720) 2,692  42,103  21,197 
Effect of foreign exchange changes (13) 323  102  (977) (239)
Cash, cash equivalents & restricted cash—beginning of period 333,280  375,814  366,417  307,127  348,253 
Cash, cash equivalents & restricted cash—end of period 348,253  366,417  369,211  348,253  369,211 
                

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 first 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 first 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 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 ChaneySelina Hsieh
Director, Investor Relations & StrategyInvestor Relations
E-mail: cchaney@siliconmotion.comE-mail: ir@siliconmotion.com
  
Media Contact: 
Sara Hsu 
Project Manager 
E-mail: sara.hsu@siliconmotion.com