Silicon Motion: Fiscal 2Q21 Financial Results

(in $ million)	2Q20	2Q21	6 mo. 20	6 mo. 21
Revenue	136.8	221.1	269.6	403.5
*Growth*		62%		*50%*
Net income (loss)	28.3	49.5	54.1	83.9

Silicon Motion Technology Corporation announced its financial results for the quarter ended June 30, 2021.

For this quarter, net sales (GAAP) increased sequentially to $221.1 million from $182.4 million in 1FQ21. Net income (GAAP) increased to $49.5 million or $1.42 per diluted ADS (GAAP) from net income (GAAP) of $34.4 million or $0.98 per diluted ADS (GAAP) in first quarter 2021.

For the same period, net income (non-GAAP) increased to $52.7 million or $1.50 per diluted ADS (non-GAAP) from a net income (non-GAAP) of $38.7 million or $1.11 per diluted ADS (non-GAAP) in 1FQ21

“We delivered better than expected revenue in the second quarter, primarily because of our focus on sales of higher-value products,” said Wallace Kou, president and CEO. “This focus also led to higher than expected gross profitability.“

During the second quarter, the company had $4.9 million of capital expenditures for the routine purchase of software, design tools and other items.

Returning Value to Shareholders
On October 26, 2020, the board of directors declared a $1.40 per ADS annual dividend to be paid in quarterly installments of $0.35 per ADS.

On May 20, 2021, the firm paid $12.2 million to shareholders as the third installment of our annual dividend.

On November 21, 2018, it announced that its board of directors had authorized a new program to repurchase up to $200 million of its ADS over a 24-month period.

On October 26, 2020, the board of directors authorized the extension of the expiration of this program to November 21, 2021.

Since the start of this program, the firm repurchased $84.8 million of its ADSs and $115.2 million remains available for repurchase under the program. There were no share repurchases in the second quarter.

Business outlook
“We are upsizing our previous full-year revenue guidance as we expect to continue our focus of selling higher-value products,” said Kou. “We believe that this focused approach will also lead to better gross profitability and deliver strong SSD controller market share gains.“

Comments

The company achieved second consecutive all-time record quarterly revenue ($221.1 million, +21% Q/Q and +62% Y/Y) much better than expected, and earnings per ADS reached a record at $1.50, 35% higher Q/Q and 84% Y/Y.

Previous guidance at the end of the former quarter was much lower, $192 million to $201 million in revenue, or only +5% to +10% Q/Q.

Company's shares were +2% premarket after these excellent results.

By businesses in 2FQ21:
• Sales of SSD and eMMC+UFS controllers both reached new record quarterly highs. eMMC+UFS controller sales grew 10% to 15% Q/Q and 35% to 40% Y/Y, faster than the overall smartphone market.
• SSD controller revenue increased 30% to 35% Q/Q and 105% to 110% Y/Y.
• SSD solutions sales increased 35% to 40% Q/Q but declined 15% to 20% Y/Y. Ferri products grew yearly, while Shannon products declined sharply.

3FQ3 guidance
Revenue are expected to be between $238 million and $249 million compared to $213.38 million consensus, an increase of 7.5% to 12.5% sequentially following strong SSD and eMMC+UFS controller sales, partially offset by declining SSD solution sales.

FY21 guidance
Previous guidance was between $782 million and $836 million (+45% to 55% Y/Y). Now figures are between $890 million and $917 million (+65% to +70%) vs. a consensus estimates of $811.37 million. Full year gross margin is now expected to be in the range of 49.5% to 50.5% range, much higher than what was previously provided 3 months ago.

Based on its latest sales projection, annual run rate is expected to be already at least $1 billion by this year's fourth quarter. Customers provided the company with purchase orders for the next year, and the order book today already exceeds $1.5 billion.

Earlier this year, the firm communicated 2023 $1 billion sales objective. But it will likely achieve this milestone next year.

Based on its order book, Silicon Motion expects sales of its PCIe Gen3 SSD controller to grow modestly through next year. Its Gen4 controller OEM sales will start in 3FQ21 and it expects sales to ramp rapidly through 2022. Three successive gen of PCIe Gen4 controller solutions will be introduced annually from 2021 to 2023. The firm will start the ramp its first-gen Gen4 with 2 customers, then quickly expand its Gen4 customer base from 2 to 8 next years with its second-gen solution.