Silicon Motion: Fiscal 4Q22 Financial Results

Business Highlights

• 4FQ22 sales decreased 20% Q/Q and 24% Y/Y and FY22 sales grew 3% Y/Y
• SSD controller sales: 4FQ22 approximately flat Q/Q and FY22 decreased 5% to 10% Y/Y
• eMMC+UFS controller sales: 4FQ22 decreased 35% to 40% Q/Q and FY22 grew 15% to 20% Y/Y
• SSD solutions sales: 4FQ22 grew 20% to 25% Q/Q and FY2022 grew 30% to 35% Y/Y
• Both SSD and eMMC+UFS controllers outperformed PC and smartphone markets
• 30% FY22 SSD controller sales growth into the PC OEM market

Silicon Motion Technology Corporation announced its financial results for the quarter ended December 31, 2022.

For 4FQ22, net sales (GAAP) decreased sequentially to $200.8 million from $250.8 million in 3FQ22. Net income (GAAP) decreased to $23.5 million, or $0.71 per diluted American Depositary Share (GAAP), from net income (GAAP) of $42.9 million, or $1.29 per diluted ADS (GAAP), in 3FQ22.

For 4FQ22, net income (non-GAAP) decreased to $41.1 million, or $1.22 per diluted ADS (non-GAAP), from net income (non-GAAP) of $51.2 million, or $1.53 per diluted ADS (non-GAAP), in 3FQ22.

Wallace Kou, president and CEO, commented: “For full-year 2022, despite challenging end-markets, we grew our sales 3%, which outperformed the PC and smartphone markets, both of which posted double-digit declines during the period.

“Our sales of SSD controllers decreased 5 to 10% for the year, however, this outcome is still much better than the performance of the PC market generally. More importantly, our sales to the OEM market, for SSDs used in the manufacture of PCs, grew 30% as our extensive PCIe Gen 4 design-wins scaled. Two-thirds of our controllers are now for the OEM market, up from less than half in the prior year. The channel market for SSDs sold in the after-market, a big part of which is in China, decreased due to both weak demand from the extensive Covid-related lockdowns in China and rapidly falling NAND-prices. In 2023, we expect our PCIe Gen 4 SSD controllers for OEMs to scale further, boosted by the recent roll-out of technology upgrades to enhance SSD efficiency. We are also optimistic about recovery from the re-opening of China and from more stable NAND prices.

“Our sales of eMMC+UFS controllers grew 15 to 20% for the year, better than the sharp downturn in the smartphone market. However, sales in the fourth quarter were hampered by excess inventory at certain NAND flash customers which could take a few quarters to resolve.

“With softness in our sales this quarter and lower than normal sales visibility, we are taking steps to reduce our operating cost structure, protect our profitability and enhance the opportunity for a rebound. Actions that we have implemented relate to strategic review of product performance, as well as compensation and tape-out expenses. These initiatives are important because, while we are well placed for eventual market recovery when supply chains work down inventory and NAND supply/demand becomes more balanced, we anticipate that sales could soften further in the near term as these market dynamics play out.”

During 4FQ22, the firm had $7.6 million of capital expenditures, including $3.5 million for the routine purchase of testing equipment, software, design tools and other items, and $4.1 million for building construction in Hsinchu.

Acquisition Update
On May 5, 2022, Silicon Motion agreed to be acquired by MaxLinear, Inc. with Silicon Motion ADS holders to receive $93.54 in cash and 0.388 shares of common stock, par value $0.0001, of MaxLinear for each ADS that they hold. On June 27, 2022, the transaction’s waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, expired and, unless the transaction closes after June 27, 2023, no further approval is required under the HSR Act. On August 31, 2022, security holders at Silicon Motion’s Extraordinary General Meeting approved the transaction. In September 2022, the 2 companies, which had previously filed with China’s State Administration for Market Regulation (SAMR) under the simplified procedures, refiled under the normal procedures as advised by SAMR. They cannot predict with certainty the length of review under the normal procedure, but both parties continue to expect a final determination by SAMR in 2CQ23 or 3CQ23, or even later. Closing of the transaction is subject to certain customary closing conditions, including regulatory approval from SAMR and, if closing occurs after June 27, 2023, an additional filing under the HSR Act.