Financial Highlights
Silicon Motion Technology Corporation (NasdaqGS: SIMO) (“Silicon
Motion” or the “Company”) today announced its financial results for
the quarter ended March 31, 2017. For the first quarter, net
sales decreased 12% sequentially to $127.3 million from $144.2
million in the fourth quarter. Net income (GAAP) decreased to $23.5
million or $0.65 per diluted ADS (GAAP) from a net income (GAAP) of
$26.2 million or $0.73 per diluted ADS (GAAP) in the fourth
quarter.
For the first quarter, net income (non-GAAP)
decreased to $25.1 million or $0.70 per diluted ADS (non-GAAP) from
a net income (non-GAAP) of $33.9 million or $0.95 per diluted ADS
(non-GAAP) in the fourth quarter.
First Quarter 2017 Review “As
expected, our sales in the first quarter was affected by seasonal
weakness and ongoing tightness in NAND flash availability,” said
Wallace Kou, President and CEO of Silicon Motion. “Sales of our
client SSD controllers were seasonally weak, our eMMC controllers
were seasonally flat and our SSD solutions declined due to NAND
flash shortage.”
Sales
(in millions, except percentages) |
1Q 2017 |
4Q 2016 |
1Q 2016 |
Sales |
Mix |
Sales |
Mix |
Sales |
Mix |
Mobile Storage* Q/Q Y/Y |
$116.5-11%12% |
92 |
% |
$130.3-11%49% |
90 |
% |
$104.019%63% |
92 |
% |
Mobile Communications** |
$ |
9.3 |
7 |
% |
$ |
12.5 |
9 |
% |
$ |
7.0 |
6 |
% |
Others |
$ |
1.5 |
1 |
% |
$ |
1.4 |
1 |
% |
$ |
1.7 |
2 |
% |
Total revenue Q/Q Y/Y |
$127.3-12%13% |
100 |
% |
$144.2-9%47% |
100 |
% |
$112.715%40% |
100 |
% |
* Mobile Storage products include Embedded
Storage products (eMMC and client SSD controllers and enterprise
and industrial SSD solutions) and Expandable Storage products (SD
and USB flash drive controllers) ** Mobile
Communications products include mobile TV SoCs and handset
transceivers
Key Financial Results
(in millions, except percentages and per ADS
amounts) |
GAAP |
Non-GAAP |
1Q 2017 |
4Q 2016 |
1Q 2016 |
1Q 2017 |
4Q 2016 |
1Q 2016 |
Revenue |
$ |
127.3 |
|
$ |
144.2 |
|
$ |
112.7 |
|
$ |
127.3 |
|
$ |
144.2 |
|
$ |
112.7 |
|
Gross profit Percent of revenue |
|
$64.850.9 |
% |
|
$72.150.0 |
% |
|
$57.050.6 |
% |
|
$64.951.0 |
% |
|
$72.350.2 |
% |
|
$57.050.6 |
% |
Operating expenses |
$ |
34.8 |
|
$ |
37.3 |
|
$ |
29.3 |
|
$ |
31.2 |
|
$ |
28.5 |
|
$ |
26.8 |
|
Operating income Percent of revenue |
|
$30.023.6 |
% |
|
$34.924.2 |
% |
|
$27.724.6 |
% |
|
$33.626.4 |
% |
|
$43.830.4 |
% |
|
$30.226.8 |
% |
Earnings per diluted ADS |
$ |
0.65 |
|
$ |
0.73 |
|
$ |
0.65 |
|
$ |
0.70 |
|
$ |
0.95 |
|
$ |
0.68 |
|
Other Financial Information
(in millions) |
1Q 2017 |
4Q 2016 |
1Q 2016 |
Cash and cash equivalents, and short-term investments |
$ |
304.4 |
$ |
277.8 |
$ |
191.0 |
Bank loans |
$ |
25.0 |
$ |
25.0 |
|
-- |
Capital expenditures |
$ |
3.1 |
$ |
2.5 |
$ |
2.0 |
Dividend payments |
$ |
7.1 |
$ |
7.1 |
$ |
5.3 |
Loan repayments |
|
-- |
$ |
10.0 |
|
-- |
During the first quarter, we had $3.1 million of
capital expenditures for the routine purchase of software and
design tools.
Our first quarter cash flows were as
follows:
3 months ended Mar. 31, 2017 |
|
(In $
millions) |
|
Net
income (GAAP) |
23.5 |
|
Depreciation & amortization |
2.5 |
|
Changes in operating assets and liabilities |
5.4 |
|
Others |
5.5 |
|
Net cash provided by operating activities |
36.9 |
|
Acquisition of property and equipment |
(3.1 |
) |
Net cash used in investing activities |
(3.1) |
|
Dividend |
(7.1) |
|
Others |
0.4 |
|
Net cash
used in financing activities |
(6.7) |
|
Effects of changes in foreign currency exchange rates on cash |
0.9 |
|
Net increase in cash and cash equivalents |
28.0 |
|
Returning Value to ShareholdersOn October 24,
2016, the Board of Directors of the Company declared a $0.80 per
ADS annual dividend to be paid in quarterly installments of $0.20
per ADS. On February 23, 2017, we paid $7.1 million to
shareholders as the second installment of our annual
dividend.
Business Outlook“We expect our sales to begin to
pick up in the second quarter, with anticipated growth from our
embedded storage products,“ said Wallace Kou, President and CEO of
Silicon Motion. “We continue to believe NAND flash supply will
increase more meaningfully in the second half of this year and our
business will rebound accordingly.”
For the second quarter of 2017, management
expects:
|
GAAP |
Non-GAAP Adjustment |
Non-GAAP |
Revenue |
$134m to $140m5% to 10% Q/Q |
-- |
$134m to $140m5% to 10% Q/Q |
Gross margin |
48.5% to 50.5% |
-- |
48.5% to 50.5% |
Operating margin |
24.6% to 26.7% |
Approximately $1.1m to 1.2m* |
25.5 to 27.5% |
*Operating margin (non-GAAP) excludes $0.5 million of
amortization of intangible assets, and $0.6 million to $0.7 million
of stock-based compensation.
For the full year 2017, management expects:
|
GAAP |
Non-GAAP Adjustment |
Non-GAAP |
Revenue |
$556m to $612m0% to +10% Y/Y |
-- |
$556m to $612m0% to +10% Y/Y |
Gross margin |
49% to 51% |
Approximately $0.5m* |
49% to 51% |
Operating margin |
24.3% to 26.4% |
Approximately $17.9m to 18.9m** |
27.5% to 29.5% |
* Gross margin (non-GAAP) excludes $0.5 million of stock-based
compensation.** Operating margin (non-GAAP) excludes $2.1 million
of amortization of intangible assets, $0.3 million of litigation
expense, and $15.5 million to $16.5 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 April 28, 2017.
SpeakersWallace Kou, President & CEORiyadh
Lai, CFOJason Tsai, Senior Director of Investor Relations and
Strategy
CONFERENCE CALL ACCESS NUMBERS:USA (Toll Free):
1 866 519 4004USA (Toll): 1 845 675 0437 Taiwan
(Toll Free): 0080 112 6920Participant Passcode: 188 6995
REPLAY NUMBERS (for 7 days):USA (Toll Free): 1
855 452 5696USA (Toll): 1 646 254 3697 Participant
Passcode: 188 6995
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 it is 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.
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$. We do not use financial
instruments to manage the impact on our operations from changes in
foreign exchange rates, and because our operations are subject to
fluctuations in foreign exchange rates, we therefore exclude
foreign exchange gains and losses when presenting non-GAAP
financial measures.
Impairment of long-term investments relates to the
other-than-temporary, non-operating write down of the Company's
minority stake investments. We do not consider these investments,
which were made before 2007, to be strategic and exclude the
performance of these investments when evaluating our ongoing
performance and forecasting our earnings trends, and therefore
excluding losses (and gains) from the investments when presenting
non-GAAP financial measures.
Silicon Motion Technology Corporation |
Consolidated Statements of Income |
(in thousands, except percentages and per ADS data,
unaudited) |
|
|
For the Three Months
Ended |
|
Mar. 31, 2016
($) |
Dec. 31, 2016
($) |
Mar. 31, 2017
($) |
Net
Sales |
|
112,682 |
|
|
144,198 |
|
|
127,292 |
|
Cost of
sales |
|
55,721 |
|
|
72,080 |
|
|
62,466 |
|
Gross
profit |
|
56,961 |
|
|
72,118 |
|
|
64,826 |
|
Operating
expenses |
|
|
|
Research
& development |
|
19,198 |
|
|
26,038 |
|
|
24,338 |
|
Sales
& marketing |
|
6,215 |
|
|
5,651 |
|
|
5,758 |
|
General
& administrative |
|
3,349 |
|
|
5,048 |
|
|
4,220 |
|
Amortization of intangibles assets |
|
526 |
|
|
526 |
|
|
526 |
|
Operating
income |
|
27,673 |
|
|
34,855 |
|
|
29,984 |
|
Non-operating
income (expense) |
|
|
|
Interest
income, net |
|
425 |
|
|
623 |
|
|
759 |
|
Foreign
exchange gain (loss), net |
|
60 |
|
|
112 |
|
|
(347 |
) |
Impairment of long-term investments |
|
- |
|
|
(13 |
) |
|
- |
|
Others,
net |
|
- |
|
|
(4 |
) |
|
(11 |
) |
Subtotal |
|
485 |
|
|
718 |
|
|
401 |
|
Income before
income tax |
|
28,158 |
|
|
35,573 |
|
|
30,385 |
|
Income tax
expense |
|
5,144 |
|
|
9,416 |
|
|
6,874 |
|
Net
income |
|
23,014 |
|
|
26,157 |
|
|
23,511 |
|
|
|
|
|
Earnings per
basic ADS |
$ |
0.66 |
|
$ |
0.74 |
|
$ |
0.66 |
|
Earnings per
diluted ADS |
$ |
0.65 |
|
$ |
0.73 |
|
$ |
0.65 |
|
|
|
|
|
Margin Analysis: |
|
|
|
Gross
margin |
|
50.6 |
% |
|
50.0 |
% |
|
50.9 |
% |
Operating
margin |
|
24.6 |
% |
|
24.2 |
% |
|
23.6 |
% |
Net
margin |
|
20.4 |
% |
|
18.1 |
% |
|
18.5 |
% |
|
|
|
|
Additional Data: |
|
|
|
Weighted avg.
ADS equivalents2 |
|
35,014 |
|
|
35,324 |
|
|
35,446 |
|
Diluted ADS
equivalents |
|
35,412 |
|
|
35,623 |
|
|
35,972 |
|
|
|
|
|
2 Assumes all outstanding ordinary shares are
represented by ADSs. Each ADS represents four ordinary
shares.
Silicon Motion Technology Corporation |
Reconciliation of GAAP to Non-GAAP Operating
Results |
(in thousands, except percentages and per ADS data,
unaudited) |
|
|
For the Three Months Ended |
|
|
Mar. 31, 2016
($) |
Dec. 31, 2016
($) |
Mar. 31, 2017
($) |
Gross
profit (GAAP) |
|
|
56,961 |
|
|
72,118 |
|
|
64,826 |
|
Gross margin (GAAP) |
|
|
50.6 |
% |
|
50.0 |
% |
|
50.9 |
% |
Stock-based compensation expense (A) |
|
|
43 |
|
|
199 |
|
|
67 |
|
Gross
profit (non-GAAP) |
|
|
57,004 |
|
|
72,317 |
|
|
64,893 |
|
Gross margin (non-GAAP) |
|
|
50.6 |
% |
|
50.2 |
% |
|
51.0 |
% |
|
|
|
|
|
Operating expenses (GAAP) |
|
|
29,288 |
|
|
37,263 |
|
|
34,842 |
|
Stock-based compensation expense (A) |
|
|
(1,946 |
) |
|
(8,228 |
) |
|
(3,068 |
) |
Amortization of intangible assets |
|
|
(526 |
) |
|
(526 |
) |
|
(526 |
) |
Litigation expense |
|
|
(39 |
) |
|
(2 |
) |
|
- |
|
Operating expenses (non-GAAP) |
|
|
26,777 |
|
|
28,507 |
|
|
31,248 |
|
|
|
|
|
|
Operating profit (GAAP) |
|
|
27,673 |
|
|
34,855 |
|
|
29,984 |
|
Operating margin (GAAP) |
|
|
24.6 |
% |
|
24.2 |
% |
|
23.6 |
% |
Total
adjustments to operating profit |
|
|
2,554 |
|
|
8,955 |
|
|
3,661 |
|
Operating profit (non-GAAP) |
|
|
30,227 |
|
|
43,810 |
|
|
33,645 |
|
Operating margin (non-GAAP) |
|
|
26.8 |
% |
|
30.4 |
% |
|
26.4 |
% |
|
|
|
|
|
Non-operating income (expense) (GAAP) |
|
|
485 |
|
|
718 |
|
|
401 |
|
Foreign
exchange loss (gain), net |
|
|
(60 |
) |
|
(112 |
) |
|
347 |
|
Impairment of long-term investments |
|
|
- |
|
|
13 |
|
|
- |
|
Non-operating income (expense) (non-GAAP) |
|
|
425 |
|
|
619 |
|
|
748 |
|
|
|
|
|
|
Net
income (GAAP) |
|
|
23,014 |
|
|
26,157 |
|
|
23,511 |
|
Total
pre-tax impact of non-GAAP adjustments |
|
|
2,494 |
|
|
8,856 |
|
|
4,008 |
|
Income
tax impact of non-GAAP adjustments |
|
|
(1,204 |
) |
|
(1,147 |
) |
|
(2,386 |
) |
Net
income (non-GAAP) |
|
|
24,305 |
|
|
33,866 |
|
|
25,133 |
|
|
|
|
|
|
Earnings per diluted ADS (GAAP) |
|
$ |
0.65 |
|
$ |
0.73 |
|
$ |
0.65 |
|
Earnings per diluted ADS (non-GAAP) |
|
$ |
0.68 |
|
$ |
0.95 |
|
$ |
0.70 |
|
|
|
|
|
|
Shares used in computing earnings per diluted ADS
(GAAP) |
|
|
35,412 |
|
|
35,623 |
|
|
35,972 |
|
Non-GAAP
Adjustments |
|
|
115 |
|
|
201 |
|
|
79 |
|
Shares used in computing earnings per diluted ADS
(non-GAAP) |
|
|
35,527 |
|
|
35,824 |
|
|
36,051 |
|
|
|
|
|
|
(A)
Excludes stock-based compensation as follows: |
|
|
|
|
Cost of
Sales |
|
|
43 |
|
|
199 |
|
|
67 |
|
Research
& development |
|
|
1,165 |
|
|
5,076 |
|
|
1,850 |
|
Sales
& marketing |
|
|
450 |
|
|
1,476 |
|
|
609 |
|
General & administrative |
|
|
331 |
|
|
1,676 |
|
|
609 |
|
Silicon Motion Technology Corporation |
Consolidated Balance Sheet |
(In thousands, unaudited) |
|
|
|
|
|
Mar.
31,2016 ($) |
Dec.
31,2016 ($) |
Mar.
31,2017 ($) |
Cash and cash
equivalents |
186,189 |
274,483 |
302,462 |
Short-term
investments |
4,818 |
3,302 |
1,900 |
Accounts receivable (net) |
77,277 |
73,599 |
60,456 |
Inventories |
72,774 |
71,887 |
75,934 |
Refundable deposits –
current |
19,302 |
44,393 |
44,269 |
Prepaid expenses and other current assets |
4,587 |
9,236 |
10,279 |
Total
current assets |
364,947 |
476,900 |
495,300 |
Long-term investments |
133 |
120 |
120 |
Property and equipment
(net) |
49,598 |
47,892 |
48,292 |
Goodwill and intangible
assets (net) |
75,469 |
73,883 |
73,369 |
Other
assets |
4,743 |
7,231 |
5,708 |
Total
assets |
494,890 |
606,026 |
622,789 |
|
|
|
|
Accounts payable |
46,851 |
31,739 |
30,860 |
Loans |
- |
25,000 |
25,000 |
Income tax payable |
16,728 |
20,271 |
24,909 |
Accrued expenses and
other current liabilities |
48,240 |
68,976 |
52,937 |
Total
current liabilities |
111,819 |
145,986 |
133,706 |
Other
liabilities |
13,314 |
17,277 |
18,187 |
Total
liabilities |
125,133 |
163,263 |
151,893 |
Shareholders’ equity |
369,757 |
442,763 |
470,896 |
Total liabilities &
shareholders’ equity |
494,890 |
606,026 |
622,789 |
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 solutions and ship over 750 million
NAND controllers annually, more than any other company in the
world. Our controllers are widely used in embedded storage
products such as SSDs and eMMCs which are found in smartphones, PCs
and industrial and commercial applications. We also supply
specialized high-performance hyperscale datacenter 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 second quarter of 2017 and full year 2017
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 second
quarter of 2017 and full year 2017. Forward-looking statements also
include, without limitation, statements regarding trends in the
multimedia consumer electronics market 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;
decreases in the overall average selling prices of our products;
changes in the relative sales mix of our products; our ability to
continue to successfully integrate our 2015 acquisition of Shannon
Systems; 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; 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, its customers and consumers; 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 April 29, 2016. We assume no obligation to
update any forward-looking statements, which apply only as of the
date of this press release.
Investor Contact:
Jason Tsai
Senior Director of IR and Strategy
E-mail: jtsai@siliconmotion.com
Investor Contact:
Selina Hsieh
Investor Relations
E-mail: ir@siliconmotion.com
Media Contact:
Sara Hsu
Project Manager
E-mail: sara.hsu@siliconmotion.com
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