Silicon Motion: Fiscal 3Q14 Financial Results

Silicon Motion Technology Corporation announced its financial results for the quarter ended September 30, 2014.

For the third quarter, net sales increased 25% quarter-over-quarter to $86.6 million from $69.4 million in the second quarter.

Net income (non-GAAP) of $19.7 million or $0.57 per diluted ADS in the third quarter increased as compared to $14.1 million or $0.41 per diluted ADS in the second quarter.

GAAP net income for the third quarter increased quarter-over-quarter to $14.6 million or $0.43 per diluted ADS from a GAAP net income of $13.9 million or $0.41 per diluted ADS in the second quarter.

Commenting on the results of the third quarter, Silicon Motion’s president and CEO Wallace Kou said: “In the third quarter, we grew our total sales by 25% sequentially to $86.6 million, the highest quarterly revenue in the company’s history. Our rapid growth was led by 25% sequential revenue growth from our largest product family, our embedded storage products, comprised primarily of eMMC, client SSD and industrial SSD controllers.

“Our eMMC controller revenue continued to grow strongly this quarter as SK Hynix, our largest eMMC controller customer, further expanded its eMMC market share by increasing sales to Chinese OEMs that are expanding production of low-cost smartphones for emerging growth markets. Separately, our SATA 3 client SSD controllers are becoming increasingly significant in the retail aftermarket and we expect to scale our share within the PC OEM SSD market beginning early 2015. Our storage OEM customer is already shipping in limited volume cache SSDs using our controllers to three global PC OEMs and has full-size SSD design-wins with these PC OEMs, with sales to begin in early 2015. We also have SSD controller platform wins with three NAND flash vendors-one more than last quarter-for initial sales to begin in early 2015.

“We are pleased by the rebound of our LTE transceiver business as Samsung began shipping to the Korean market a number of new smartphones and tablets using our LTE-Advanced transceiver, including the highly anticipated Galaxy Alpha, Galaxy Note 4 and Galaxy Note 4 Edge.”

Net sales in the third quarter were $86.6 million, an increase of 25% compared with the second quarter. For the quarter, mobile storage products accounted for 83% of net sales and mobile communications 15% of net sales.

Net sales of mobile storage products, which are primarily include eMMC, SSD, memory card and USB flash drive controllers, increased 23% sequentially in the third quarter to $72.2 million.

Net sales of mobile communications products, which primarily include LTE transceivers and mobile TV IC solutions, increased 48% sequentially to $12.6 million in the third quarter.

Gross margin (non-GAAP) increased to 52.9% in the third quarter as compared to 52.2% in the second quarter. GAAP gross margin increased in the third quarter to 52.8% as compared to 52.2% in the second quarter.

Operating expenses (non-GAAP) in the third quarter were $22.1 million, an increase from $19.9 million in the second quarter. Operating margin (non-GAAP) was 27.3%, an increase from 23.5% in the previous quarter. GAAP operating margin was 21.9% for the third quarter, a decrease from 22.7% in the second quarter.

Total other income (non-GAAP) was $0.5 million, unchanged from the second quarter. GAAP net total other income was $0.1 million, a decrease from $1.0 million in the second quarter.

Earnings net income (non-GAAP) was $19.7 million for the third quarter, an increase from $14.1 million in the second quarter. Diluted earnings per ADS (non-GAAP) were $0.57 in the third quarter, an increase from $0.41 per ADS in the second quarter.

GAAP net income was $14.6 million for the third quarter, an increase from $13.9 million in the second quarter. Diluted GAAP earnings per ADS in the third quarter were $0.43, an increase from $0.41 per ADS in the second quarter.

Cash and cash equivalents, and short-term investments increased at the end of the third quarter to $165.2 million from $160.9 million at the end of the second quarter.

Business Outlook
Silicon Motion’s president and CEO, Wallace Kou, added: “Our 4Q sales will be seasonally down, similar to past years. Overall, 2014 is a strong year for Silicon Motion as we believe that we will grow our revenue by 27 to 29% this year. We are well positioned for 2015 based on our growing pipeline of design wins in the eMMC and SSD growth markets. Presently, we believe that 2015 will show further growth, with incremental growth from our two eMMC NAND flash partners and from many SSD business engagements with three NAND flash partners, a storage OEM, and many module makers.”

For the fourth quarter of 2014, management expects:

• Revenue to decrease 5% to 10% sequentially
• Gross margin (non-GAAP) to be in the 50% to 52% range
• Operating expenses (non-GAAP) of approximately $21 to $23 million

To read the earnings call transcript