Silicon Motion: Fiscal 4Q19 Financial Results

(in $ million)	4Q18	4Q19	FY18	FY19
Revenue	123.4	153.2	530.3	457.3
*Growth*		24%		*-14%*
Net income (loss)	15.1	25.4	98.1	64.4

• Total controller sales grew Q/Q to a record high
• SSD controller sales increased about 25% Q/Q to a record high
• eMMC+UFS controller sales increased about 70% Q/Q
• SSD solutions sales increased about 60% Q/Q

Silicon Motion Technology Corporation announced its financial results for the quarter ended December 31, 2019.

For the fourth quarter, net sales (GAAP) increased sequentially to $153.2 million from $110.5 million in 3FQ19.

Net income (GAAP) increased to $25.4 million or $0.73 per diluted ADS (GAAP) from net income (GAAP) of $4.2 million or $0.12 per diluted ADS (GAAP) in 3FQ19.

For FQ19, net income (non-GAAP) increased to $33.8 million or $0.96 per diluted ADS (non-GAAP) from a net income (non-GAAP) of $24.4 million or $0.69 per diluted ADS (non-GAAP) in 3FQ19.

4FQ19 Review
“In the fourth quarter, sales momentum accelerated with strong sequential growth led by our three key products,” said Wallace Kou, president and CEO. “We delivered record high SSD controller sales, both for the quarter and the year. Additionally, our eMMC+UFS mobile embedded memory controller sales continued to grow strongly, and our SSD solutions sales also posted strong growth with both Shannon and Ferri SSDs up sequentially.”

During 4FQ19, the company had $2.3 million of capital expenditures for the routine purchase of software, design tools and other items.

On October 25, 2019, the board of directors declared a $1.40 per ADS annual dividend to be paid in quarterly installments of $0.35 per ADS. On November 21, 2019, the firm paid $12.1 million to shareholders as the first installment of our annual dividend.

On November 21, 2018, the company announced that its board had authorized a new program to repurchase up to $200 million of its ADS over a 24month period. In 4FQ19, it did not repurchase any of its ADSs. Since the start of this program, it has repurchased $59.8 million of its ADSs.

Business Outlook
“This year, we expect all 3 of our key products to contribute to our overall growth,” said Kou. “We expect our SSD controller sales, now representing over half of total revenue, to continue to deliver solid growth as we expand our OEM exposure. We anticipate that our eMMC+UFS controller sales will return to growth this year as UFS adoption in smartphones increases. We believe that our SSD solutions will also return to growth this year as Chinese hyperscalers adopt more of our open-channel SSDs in their data centers and as our differentiated industrial SSDs diversify further into automotive, data networking and other applications. Finally, there is significant uncertainty relating to the recent coronavirus outbreak and its effect on demand and our supply chain; this business outlook incorporates related information that we have at this time.”

For 1FQ20, management expects non GAAP revenue between $130 to $138 million or -15% to -10% Q/Q.

Comments

4FQ19 global revenue grew 39% Q/Q and 24% Y/Y to $153 million.

SSD controllers
Sales reached record highs for the quarter and the year. They were up 25% Q/Q for 4FQ19 and up 20% for the year. 50% to 60% of total sales are generated by SSD controllers up from 40% last year, primarily for client devices, but also for initial sales of firm's enterprise grade controllers. Customers' controller procurement and forecast suggests that strong demand for SSD will continue in 2020.

The firm said it owns one-third of the overall client SSD controller market and believe it should be able to increase this to 40% in the next few years by growing share of the wallet at current NAND flash and module maker customers. Sales of enterprise grade SSD controller grew further in the 4FQ19 by sales to Alibaba and Baidu as well as to US customer on the enterprise market.

In 1FQ20, the company expects a seasonal decline in sales of SSD controllers. For the full year, it expects these products to grow 15% to 25%.

eMMC+UFS controller
Sales grew 70% Q/Q after growing 40% in 3FQ19 and 20% in 2FQ19. FY19 sales were down about 30% due to the sharp drop in the sales in 1FQ19 and accounted for 20% to 25% of total revenue, down from 25% to 30% last year. eMMC controller sales fell sharply at the start of 2019 because of Korean customer risk. Since then, firm's UFS program for its US customers has scaled rapidly and sales to Chinese market customers have grown.

1FQ20, Silicon Motion expects mobile eMMC+UFS controller sales to decline seasonally. For FY20, it expects eMMC+UFS controller sales to grow 35% to 40% and SSD solution sales to grow 50% to 100%, with growth from Shannon and Ferri SSDs. Ferri chip scale industrial SSD delivered strong bit growth in 2019, but revenues declined because of falling ASP per bit. In 2020, the firm expects Ferri SSD growth to continue.

SSD solutions
Sales grew 30% Q/Q in 4FQ19 following a 45% increase in 3FQ19. FY19 SSD solutions are down 50% largely due to one-year delay in the launch of Shannon open-channel SSD and low NAND ASP offsetting strong it growth of Ferri industrial SSD. In 3FQ19, the manufacturer started shipping Shannon open-channel SSD to Alibaba and Baidu

In 4FQ19, SSD solutions increased 60% sequentially. For FY19, they declined 50% and accounted for 10% of total revenue, down from 20% last year.

Silicon Motion had $350 million of cash, cash equivalents, restricted cash and short-term investments at the end of 4FQ19 compared to $338 million at the end of 3FQ19 and $311 million a year ago.

In 1FQ20, it expects revenue to decline 10% to 15% sequentially to $130 million to $138 million with strong SSD solutions growth, more than offset by seasonal decline of SSD and eMMC+UFS controllers.

For FY20, it expects sales to increase 20% to 30%, led by growth from all of its 3 main products.