Silicon Motion: Fiscal 4Q23 Financial Results

Business Highlights
• 4FQ23 sales increased 17% Q/Q and increased 1% Y/Y
• SSD controller sales: 4FQ23 increased 15% to 20% Q/Q and increased 0% to 5% Y/Y
• eMMC+UFS controller sales: 4FQ23 increased 25% to 30% Q/Q and increased 20% to 25% Y/Y
• SSD solutions sales: 4FQ23 decreased 5% to 10% Q/Q and decreased 45% to 50% Y/Y
• Announced annual cash dividend of $2.00 per ADS

Silicon Motion Technology Corporation announced its financial results for the quarter ended December 31, 2023.

For 4FQ23, net sales (GAAP) increased sequentially to $202.4 million from $172.3 million in 3FQ23. Net income (GAAP) increased to $21.1 million, or $0.63 per diluted American Depositary Share of the Company (ADS) (GAAP), from net income (GAAP) of $10.6 million, or $0.32 per diluted ADS (GAAP), in 3FQ23.

For 4FQ23, net income (non-GAAP) increased to $31.3 million, or $0.93 per diluted ADS (non-GAAP), from net income (non-GAAP) of $21.1 million, or $0.63 per diluted ADS (non-GAAP), in the 3FQ23.

4FQ23 Review
“Our fourth quarter results exceeded expectations as demand across the majority of our products increased sequentially, driven by holiday season demand and normalizing channel inventory,” said Wallace Kou, president and CEO. “Both eMMC+UFS and SSD controller demand grew strongly in the quarter. We are confident that our teams’ ongoing commitment to deliver controller solutions that enable our customers to service a broader range of markets will continue to drive share gains for us and be the foundation for strong growth in 2024 and beyond.”

Acquisition Update
On May 5, 2022, Silicon Motion and MaxLinear, Inc. entered into a merger agreement, pursuant to which Silicon Motion agreed to be acquired by MaxLinear, with (a) holders of Silicon Motion ordinary shares, par value $0.01, to receive $23.385 in cash and 0.097 shares of MaxLinear common stock, par value $0.0001 for each share that they hold (other than certain customary excluded Shares), and (b) ADS holders to receive $93.54 in cash and 0.388 shares of MaxLinear Common Stock for each ADS that they hold (other than ADSs representing certain customary excluded Shares), in each case, with cash in lieu of any fractional shares of MaxLinear common stock .

On August 31, 2022, shareholders at Silicon Motion’s extraordinary general meeting of shareholders approved the transaction.

On July 26, 2023, the 2 companies received antitrust approval from the State Administration for Market Regulation of the People’s Republic of China. Shortly after receiving SAMR Approval, Silicon Motion received notice from MaxLinear of its purported termination of the merger agreement. MaxLinear did not provide any factual basis for its purported termination, and Silicon Motion believes its actions constituted a willful and material breach of the merger agreement.

Silicon Motion has filed a claim in the Singapore International Arbitration Centre, which is the venue for dispute resolution under the merger agreement, and is pursuing payment of the termination fee of $160 million, together with further substantial damages, interest and costs.

Business Outlook
“We expect sustained growth across our business in 2024, driven by wins with our module maker customers and significant design wins and share gains with our flash maker customers, as they look to outsource more controllers to effectively address a broader range of end-markets,” said Kou. “We are confident that our strong backlog and project ramps will be the foundation for strong growth this year. These new wins for our eMMC+UFS and SSD controllers will grow our relationship with our flash maker partners this year and increase revenue from these customers by approximately 50%.“

For 1FQ24, management expects:

* Projected gross margin (non-GAAP) excludes $0.1 million of stock-based compensation.
** Projected operating margin (non-GAAP) excludes $6.0 million to $7.0 million of stock-based compensation and dispute related
expenses.

For FY24, management expects:

* Projected gross margin (non-GAAP) excludes $0.5 million of stock-based compensation.
** Projected operating margin (non-GAAP) excludes $31.0 million to $33.0 million of stock-based compensation and dispute related expenses.