Silicon Motion: Fiscal 1Q14 Financial Results

Silicon Motion Technology Corporation announced its financial results for the quarter ended March 31, 2014.

For the first quarter, net sales increased 1% quarter-over-quarter to $52.8 million from $52.5 million in the fourth quarter of 2013.

Net income (non-GAAP) of $5.4 million or $0.16 per diluted ADS in the first quarter decreased as compared to $10.2 million or $0.30 per diluted ADS in the fourth quarter of 2013.

GAAP net income for the first quarter decreased quarter-over-quarter to $3.8 million or $0.11 per diluted ADS from a GAAP net income of $5.4 million or $0.16 per diluted ADS in the fourth quarter of 2013.

First Quarter 2014 Financial Review
Commenting on the results of the first quarter, Silicon Motion’s president and CEO Wallace Kou said: “We are off to an excellent start for 2014. I am pleased to report solid first quarter results that reflect strength from across most of our products. Our SSD+embedded sales increased sequentially in the first quarter and grew by over 60% as compared to the same period a year ago. In the first quarter, we began commercial sales of our TLC eMMC 4.5 controllers to our third NAND flash partner, converted the majority of our eMMC controller sales to eMMC 4.5, and began mass production of our next generation eMMC 5.0 controller. I am also pleased with the progress we are making in securing new wins for our SATA 3 client SSD controller which recently began shipping to numerous U.S., Taiwan, and China module makers for their channel market SSD solutions. Separately, our SSD OEM partner has been making solid progress marketing their SSD solutions with our controllers and has secured an important first design-win with a tier-one PC OEM. In addition, we secured an important design win with one of our flash partners for our SSD controller.

“We recently secured our first design-win for our LTE-Advanced transceiver with a leading Korean handset OEM and will begin commercial sales of this new transceiver in the second quarter. We are actively working on securing additional wins.”

Sales
Net sales in the first quarter were $52.8 million, an increase of 1% compared with the fourth quarter of 2013. For the quarter, mobile storage products accounted for 85% of net sales and mobile communications 10% of net sales.

Net sales of our mobile storage products, which primarily include flash memory card, USB flash drive, SSD and embedded flash controllers, decreased 4% sequentially in the first quarter to $45.1 million.

Net sales of mobile communications products, which primarily include handset transceivers and mobile TV IC solutions, increased 47% from the fourth quarter of 2013 to $5.5 million in the first quarter.

Gross and Operating Margins
Gross margin (non-GAAP) decreased slightly to 48.6% in the first quarter as compared to the fourth quarter of 2013. GAAP gross margin remained unchanged at 48.5% in the first quarter as compared to the fourth quarter of 2013.

Operating expenses (non-GAAP) in the first quarter were $16.9 million, an increase from the $13.8 million expended in the fourth quarter of 2013. Operating margin (non-GAAP) was 16.7%, a decrease from 22.5% in the previous quarter. GAAP operating margin was 14.2% for the first quarter, an increase from 13.2% in the fourth quarter of 2013.

Other Income and Expenses
Net total other income (non-GAAP) was $0.5 million, unchanged from the fourth quarter of 2013. GAAP net total other income was $0.2 million, a decrease from the $0.6 million in the fourth quarter of 2013.

Earnings
Net income (non-GAAP) was $5.4 million for the first quarter, a decrease from $10.2 million in the fourth quarter of 2013. Diluted earnings per ADS (non-GAAP) were $0.16 in the first quarter, a decrease from $0.30 per ADS in the fourth quarter of 2013.

GAAP net income was $3.8 million for the first quarter, a decrease from a net income of $5.4 million in the fourth quarter of 2013. Diluted GAAP earnings per ADS in the first quarter were $0.11, a decrease from $0.16 per ADS in the previous quarter.

Balance Sheet
Cash and cash equivalents, and short-term investments of $158.6 million at the end of the first quarter were a decrease from $162.5 million at the end of the fourth quarter of 2013.

Returning Value to Shareholders
In January 2013, the company announced a $40 million share repurchase program. It did not repurchase any shares in the first quarter of 2014. On January 28, 2014 the board of directors of the company declared a $0.15 per ADS quarterly dividend. On February 25, we paid $5.0 million as dividend payments to our shareholders.

Business Outlook
Silicon Motion’s president and CEO, Wallace Kou, added: “We are off to a solid start and are confident about growing our business this year as we have already met the milestones that we had set: begin commercial sales of our eMMC controllers to our third NAND flash partner, secure our first SATA 3 client SSD controller design-win with a tier-1 global PC OEM, and win our first LTE-Advanced transceiver project with our Korean handset OEM partner. These are important achievements for us, and we believe we are well positioned for growth this year and next as we build on these milestones and further expand our business.”

For the second quarter of 2014, management expects:

• Revenue to increase 10% to 15% sequentially
• Gross margin (non-GAAP) to be in the 48% to 50% range
• Operating expenses (non-GAAP) of approximately $18 to $20 million

For the full year 2014, management expects:

• Revenue to increase 5% to 15% year-over-year
• Gross margin (non-GAAP) to be in the 48% to 50% range
• Operating expenses (non-GAAP) of approximately $74 to $79 million