Silicon Motion: Fiscal 2Q23 Financial Results

2FQ23 business highlights

• Sales increased 13% Q/Q and decreased 44% Y/Y
• SSD controller sales increased 5% to 10% Q/Q and decreased 30% to 35% Y/Y
• eMMC+UFS controller sales increased 45% to 50% Q/Q and decreased 65% to 70% Y/Y
• SSD solutions sales decreased 5% to 10% Q/Q and decreased 25% to 30% Y/Y

Silicon Motion Technology Corporation announced its financial results for the quarter ended June 30, 2023.

For this quarter, net sales increased sequentially to $140.4 million from $124.1 million in 1FQ23.

Net income (GAAP) increased to $11.0 million, or $0.33 per diluted American Depositary Share of the company (GAAP), from net income (GAAP) of $10.2 million, or $0.30 per diluted ADS (GAAP), in 1FQ23. For 2FQ23, net income (non-GAAP) increased to $12.6 million, or $0.38 per diluted ADS (non-GAAP), from net income (non-GAAP) of $11.2 million, or $0.33 per diluted ADS (non-GAAP), in 1FQ23.

Wallace Kou, president and CEO commented: “Our business in 2FQ23 improved as inventory levels at our customers and at PC and handset OEMs continue to come down. We are continuing to see improving order patterns with many of our customers, leading to better visibility and giving us greater conviction for a market recovery towards the end of this year. This led us to accelerate and pull-in design activity this quarter to ensure that we have the right products for our customers to be better positioned and be more competitive later this year. While this has reduced our operating profitability in the second quarter, we believe that these investments will drive stronger revenue growth later this year and expect our operating expense growth will moderate in the second half to deliver higher operating margins throughout the rest of 2023. While 1FH23 was challenging, we are optimistic that the industry is well positioned for recovery and growth in 2FH23. We continue to work closely with our customers to ensure that our roadmaps are aligned to deliver the best-in-class controllers for their storage solutions powering PCs and mobile devices. We are optimistic that inventory levels in the industry will continue to come down as end-market demand stabilizes and improves. We expect that 3FQ23 sales will grow 15% to 20% Q/Q, and our gross margin will be similar or slightly improved Q/Q. We believe that we are well positioned to drive long-term growth of our business and increase our profitability levels.”

Acquisition update
On May 5, 2022, Silicon Motion agreed to be acquired by MaxLinear, Inc. with (a) holders of its 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 in the People’s Republic of China. After this approval, Silicon Motion received from MaxLinear a notice of purported termination of the transaction.

Silicon Motion believes that it has complied with its obligations under the merger agreement and it has not suffered a material adverse effect, and as a result that the termination notice is not valid. It expects MaxLinear to abide by its obligations under the merger agreement and intends to vigorously enforce its rights thereunder.