Silicon Motion: Fiscal 4Q21 Financial Results

(in $ million)	4Q20	4Q21	FY20	FY21
Revenue	143.9	264.4	539.5	922.1
*Growth*		*84%*		*71%*
Net income (loss)	1.4	60.6	79.7	199,9

Silicon Motion Technology Corporation announced its financial results for the quarter ended December 31, 2021.

Business Highlights
• Achieved all-time records for full-year revenue and earnings per share
• Sales of SSD controllers reached new record quarterly high
• SSD controller sales: 4Q increased 15% to 20% Q/Q and FY21 increased 75% to 80% Y/Y
• eMMC+UFS controller sales: 4Q declined 5% to 10% Q/Q and FY21 increased 105% to 110% Y/Y
• SSD solutions sales: 4Q increased 5% to 10% Q/Q and FY21 declined 5% to 10% Y/Y
• Increased annual dividend by 43% to $2.00 per ADS
• Announced new $200 million 6-month share repurchase program and repurchased $50 million

For 4FQ21, net sales increased to $264.4 million from $254.2 million in 3FQ21. Net income (GAAP) increased to $60.6 million or $1.73 per diluted ADS (GAAP) from a net income (GAAP) of $55.4 million or $1.58 per diluted ADS (GAAP) in 3FQ21.
For 4FQ21, net income (non-GAAP) increased to $67.5 million or $1.90 per diluted ADS (non-GAAP) from a net income (non-GAAP) of $60.4 million or $1.70 per diluted ADS (non-GAAP) in 3FQ21.

3FQ21 review
“We were supply constrained for most of 2021, including the fourth quarter,” said Wallace Kou, president and CEO. “Nevertheless, we were able to create significant incremental value throughout the year by optimizing our limited foundry wafer supply, which led to solid consecutive sequential quarterly revenue and earnings growth and very strong full year operating results.”

During 4FQ21, the company had $11.2 million of capital expenditures, including $8.3 million for the routine purchase of testing equipment, software, design tools and other items and $2.9 million for building construction in Hsinchu and Taipei.

Returning value to shareholders
On October 25, 2021, the board of directors declared a $2.00 per ADS annual dividend, 43% higher than its previous dividend, to be paid in quarterly installments of $0.50 per ADS. On November 24, 2021, it paid $17.4 million to shareholders as the first installment of the new annual dividend.

On December 7, 2021, it announced that its board of directors had authorized a new program to repurchase up to $200 million of its ADSs over a 6-month period. In December 2021, it repurchased $50.0 million of our ADSs at an average price of $89.85.

Business outlook
“After delivering record operating results in 2021, we are optimistic that 2022 could be another banner year,” said Kou. “This year, similar to last year, we further expanded and strengthened our SSD controller program engagements with PC OEMs and eMMC/UFS controllers for smartphones, automotive applications and IoT/smart devices. We are adding to this positive momentum the upcoming launch of our next-gen enterprise SSD controllers.”

Comments

For 4FQ21, net sales increased 4% to $264.4 million from $254.2 million in 3FQ21 after expecting last quarter between $254 million to $267 million.

They were up 84% Y/Y, and the full year sales grew 71%.

Despite these increasing sales, the company could not meet the full demand of customers who are building SSD and other store devices for OEM in many categories of applications. It was not able to meet their full demand because its business was supply constrained, constrained by limited availability of foundry wafer supply necessary for fabricating RICs. Now, supply continued to be very tight and it's not expected this situation will change this year.

SSD controller sales grew 15 to 20% Q/Q in 4FQ21, reversing 3FQ21 - flat sequential - as the firm allocated production back to SSD controllers. Full year SSD controller sales grew 75 to 80%, exceeding the market's growth rate. Four-year SSD controller sales accounted for 55% to 60% of total sales.

The portion of SSD controller using OEM program grew to account for over half of SSD controller sales in 2H21, higher than one-third the year before. To address company's controller for channel market, Silicon Motion anticipates the significance of OEM program to grow further and account for close to two-thirds of its overall SSD controller sales this year. Last year, it saw the continued ramp-up in sales of its PCIe Gen3 SSD controller, which have been adopted by PC OEMs.

It's preparing for the launch of its third-gen PCIe Gen4 controller next year. It's on track to begin sampling SM8366 PCIe Gen5 SSD controller in 2H21.

For the full year, SSD solutions sales declined 5% to 10% and accounted for 5% to 10% of total sales.

eMMC+UFS controller sales declined 5% to 10% sequentially, reversing 3FQ21 sharp sequential growth. Full year eMMC+UFS sales grew between 105% and 110%, exceeding market growth. Full year eMMC+UFS sales accounted for approximately 30 to 35% of total sales. Sales of UFS controller grew strongly as US NAND flash customers continue to expand aggressively to build their market position with smartphone OEMs.

The company had $405.5 million of cash, cash equivalents, restricted cash, and short-term investments at the end of 4FQ21, comparable to the $419.4 million at the end of 3FQ21.

For 1FQ22, management expects revenue of $225 million to $238 million, -10% to -15% Q/Q, +23% to 30% Y/Y. This sequential decline is primarily the result of 2 factors: timing of wafer supply and China channel market inventory cleanup. The firm received meaningful incremental wafer supply this year, but the timing of the availability of supply is not linear and will impact 1FQ22. Wafer supply for certain key nodes in 1FQ22 will be less than in 4FQ21, which means the firm will have fewer high-demand parts to sell.

For FY22, it expects sales of $1,110 million to $1,200 million, or +20% to +30% Y/Y.