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Silicon Motion: Fiscal 1Q16 Financial Results

Impressive Taiwanese company in SSDs and controllers

(in $ million) 1Q15 1Q16 Growth
Revenue
80.6 112.7 40%
Net income (loss) 15.5 23.0  

Financial Highlights

  • Net sales of $112.7 million (up 15% Q/Q and up 40% Y/Y)
  • Gross margin (non-GAAP1) of 50.6% (compared to 50.1% in 4Q15 and 52.0% in 1Q15)
  • Operating margin (non-GAAP) of 26.8% (compared to 24.4% in 4Q15 and 24.1% in 1Q15)
  • Diluted earnings per ADS (non-GAAP) of $0.68 (compared to $0.55 in 4Q15 and $0.48 in 1Q15)

Business Highlights

  • Highest quarterly revenue, net income (non-GAAP) and EPS (non-GAAP) in our corporate history
  • Embedded storage product sales increased 35% Q/Q and accounted for almost 80% of total revenue
  • Client SSD controller sales increased 35% Q/Q
    eMMC controller sales increased 30% Q/Q
  • Enterprise plus industrial SSD solution sales increased 50% Q/Q
  • PCIe NVMe SSD controller, which had previously secured design-wins at several NAND flash partners, began late stage testing at two partners

Silicon Motion Technology Corporation announced its financial results for the quarter ended March 31, 2016. 

For the first quarter, net sales increased sequentially to $112.7 million from $98.0 million in the fourth quarter.

Net income (non-GAAP) increased to $24.3 million or $0.68 per diluted ADS from a net income (non-GAAP) of $19.7 million or $0.55 per diluted ADS in the fourth quarter.

GAAP net income for the first quarter increased to $23.0 million or $0.65 per diluted ADS from a GAAP net income of $13.4 million or $0.38 per diluted ADS in the fourth quarter.

First Quarter 2016 Review
First quarter sales exceeded our original guidance due to stronger than expected orders for our client SSD and eMMC controllers and enterprise plus industrial SSDs,” said Wallace Kou, president and CEO. “During the quarter, we continued to scale our client SSD controller sales to our NAND flash partners who are seeing growing adoption of SSDs at PC OEMs and are also growing their market share at these OEMs. In turn, we are further extending our client SSD controller market share leadership. Sales of our eMMC controllers grew rapidly in the first quarter as smartphone OEM build activity picked-up and our NAND flash partner aggressively targeted the faster growing low-cost segment.  Sles of our enterprise and industrial SSD solutions ramped as we started shipping our customized solutions in large volume to a leading Chinese e-commerce company.”

silicon motion
* Mobile Storage products include embedded storage products (eMMC and SSD controllers and enterprise plus industrial SSDs) and expandable storage products (SD and USB flash drive controllers)  
** Mobile Communications products include mobile TV SoCs and handset transceivers

Returning Value to Shareholders
On November 2, 2015, the board of directors of the company declared a $0.60 per ADS annual dividend to be paid in quarterly installments of $0.15 per ADS. On February 17, 2016, the first installment was paid and we recorded $5.3 million as dividend payments to our shareholders.

Business Outlook
We expect demand for our embedded storage products to grow further in the second quarter and to remain strong through this year as we continue our efforts to increase our business further with our NAND flash partners,” said Kou. “Demand for client SSDs is very strong as adoption of SSDs by PC OEMs continues to increase at the expense of HDDs. Demand for Android smartphones remains solid and we believe that device sales should grow modestly this year. Finally, we believe that we are well positioned with our enterprise SSDs customized for the data centers of leading Chinese Internet companies and industrial SSDs tailored for Japanese OEMs.

For the second quarter of 2016, management expects:

  • Revenue to increase 5% to 10% sequentially
  • Gross margin (non-GAAP) to be in the 47% to 49% range
  • Operating margin (non-GAAP) to be in the 22% to 24% range

For the full-year 2016, management expects:

  • Revenue to increase 27% to 32% as compared to full-year 2015
  • Gross margin (non-GAAP) to be in the 49% to 51% range
  • Operating margin (non-GAAP) to be in the 24% to 26% range

Comments

Abstracts of the earnings call transcript:

Wallace Kou, president and CEO:
"Revenue increased 15% sequentially to $130 million, the highest quarterly revenue in our company history and our third consecutive quarter of revenue growth.
"As we had highlighted in the past, most of our client SSD controller supply last year were managing MLC flash. This year, most of our client SSD controller supply will be for managing TLC flash. Most of our new product introduction this year however will be for managing 3D flash.
"We expect all six NAND flash makers to be supplying 3D flash by the end of this year and their 3D output will scale next year, as they are manufacturing processes become more mature and yield improve."

Riyadh Lai, CFO:
"We ended Q1 with 1,025 employees, 52 more than at the end of the previous quarter. Most of our new hires are R&D engineers.
"Our cash, cash equivalents, and short-term investments increased to $191 million in Q1 from $185.2 million in Q4.
"For the full-year, we expect sales of our SSD solutions to double to $50 million to $60 million as we scale our Shannon enterprise grade PCI SSDs with Chinese Internet companies and our Ferri SSDs with Japanese OEMs."

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