Silicon Motion: Fiscal 3Q15 Financial Results

Silicon Motion Technology Corporation announced financial results for its third fiscal quarter ended September 30, 2015.

Fiscal 3Q15 Financial Highlights:

• Net sales increased 9% sequentially to $95.4 million1 from $87.2 million in 2Q15
• Gross margin (non-GAAP) increased to 51.6% from 51.0% in 2Q15
• Operating expenses (non-GAAP) increased to $25.8 million from $22.9 million in 2Q15
• Operating margin (non-GAAP) decreased to 24.5% from 24.8% in 2Q15
• Diluted earnings per ADS (non-GAAP) increased to $0.57 from $0.51 in 2Q15

Business Highlights

• Highest quarterly revenue in corporate history
• Client SSD controller sales increased over 40% sequentially to account for 20% of total revenue, up from 15% last quarter
• Began shipping to SK Hynix our eMMC controller that can manage TLC flash
• Secured two additional automotive OEMs for Ferri embedded storage solution
• Began shipping Shannon Systems enterprise-grade PCIe SSDs to two new customers in China: one of the largest e-commerce companies and a leading payment service provider

For the third quarter, net sales increased sequentially to $95.4 million from $87.2 million in the second quarter. Net income (non-GAAP) increased sequentially to $20.1 million or $0.57 per diluted ADS from a net income (non-GAAP) of $17.8 million or $0.51 per diluted ADS in the second quarter.

GAAP net income for the third quarter decreased to $13.2 million or $0.38 per diluted ADS from a GAAP net income of $18.2 million or S$0.53 per diluted ADS in the second quarter.

Third Quarter 2015 Review
“Our third quarter sales grew by 9% sequentially, led by robust sales of our Embedded Products which grew approximately 25%, accounting for more than 60% of our total sales in the quarter,” said Wallace Kou, president and CEO. “Within our Embedded Products, our client SSD controller sales grew over 40% sequentially as our sales to two NAND flash partners and many module maker customers continued to expand and now represent approximately 20% of total sales. Our Embedded Product sales also grew because our eMMC controller sales rebounded due to increased orders from SK Hynix for new smartphone OEM design-wins and we began consolidating sales of Shannon Systems enterprise-grade SSDs.”

* Mobile Storage products include Embedded Storage products (eMMC and SSD controllers and Ferri and Shannon storage solutions) and Expandable Storage products (SD and USB flash drive controllers).  
** Mobile Communications products include LTE transceivers and mobile TV ICs.

During the third quarter, we had $4.6 million of capital expenditures, with $2.3 million spent on the purchase of additional facilities and $2.3 million for the purchase of software and design tools. We paid $20.8 million as part of our payments for the acquisition of Shannon Systems.

On July 27, 2015 the board of directors of the company declared a $0.15 per ADS quarterly dividend. On August 26, we recorded $5.2 million as dividend payments to our shareholders.

Business Outlook
“We expect our fourth quarter revenue to increase modestly as robust Embedded Storage sales growth is offset by slower sales of our Specialty RF ICs and Expandable Storage products,” said Kou. “In the fourth quarter, we expect strong growth from our client SSD controller and Shannon enterprise-grade PCIe SSD sales and stable eMMC controller sales.”  

For the fourth quarter of 2015, management expects:

• Revenue to increase 0% to 3% sequentially
• Gross margin (non-GAAP) to be in the 50% to 52% range
• Operating expenses (non-GAAP) of approximately $25 to $27 million

To hear the earnings call webcast