Silicon Motion: Fiscal 3Q21 Financial Results
$1 billion in annual revenue run-rate one quarter ahead of plan, but low guidance for next one
This is a Press Release edited by StorageNewsletter.com on November 3, 2021 at 2:03 pm| (in $ million) | 3Q20 | 3Q21 | 9 mo. 20 | 9 mo. 21 |
| Revenue | 126.0 | 254.2 | 395.6 | 657.8 |
| Growth | 102% | 66% | ||
| Net income (loss) | 24.3 | 55.4 | 78.4 | 139.4 |
Silicon Motion Technology Corporation announced its financial results for the quarter ended September 30, 2021.
For 3FQ21, net sales (GAAP) increased sequentially to $254.2 million from $221.1 million in 2FQ21. Net income (GAAP) increased to $55.4 million or $1.58 per diluted ADS (GAAP) from net income (GAAP) of $49.5 million or $1.42 per diluted ADS (GAAP) in 2FQ21. For 3FQ21, net income (non-GAAP) increased to $60.4 million or $1.70 per diluted ADS (non-GAAP) from a net income (non-GAAP) of $52.7 million or $1.50 per diluted ADS (non-GAAP) in 2FQ21.
3FQ21 Review
“We continued to optimize our scarce foundry wafer capacity and product allocation to customers and delivered $1 billion in revenue run-rate, a quarter ahead of plan,” said Wallace Kou, president and CEO. “Our third quarter results were driven by strong sales of eMMC+UFS controllers used primarily in smartphones and other smart devices.”
During 3FQ21, the firm had $5.9 million of capital expenditures for the routine purchase of software, design tools and other items and $1.4 million for building construction in Hsinchu, Taiwan.
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 August 19, 2021, the company paid $12.2 million to shareholders as the 4th installment of its annual dividend. On October 25, 2021, the board declared a $2.00 per ADS annual dividend, representing an annual increase of 43%, to be paid in quarterly installments of $0.50 per ADS. The first installment of the annual dividend will be paid on November 24, 2021.
Business Outlook
“In spite of capped foundry wafer supply this year, we’ve optimized with better product mix, customer allocation and pricing discipline to deliver strong growth,” said Kou. “We believe that our strong design win momentum with leading OEM customers positions us for continued market share gains and relative outperformance next year.”
For 4FQ21, management expects:
* Projected gross margin (non-GAAP) excludes $0.2 million of stock-based compensation.
** Projected operating margin (non-GAAP) excludes $9.2 million to $10.2 million of stock-based compensation.
Comments
Exceptional quarter with revenue growing 15% Q/Q and 102% Y/Y to $254 million, corresponding to a run-rate of annual sales of more than $1 billion.
It's the third consecutive record quarterly revenue (and also earnings per share).
CEO Kou commented:" Since demand from our customers for our products continue to outstrip our ability to supply because of foundry wafer allocation limitations. Our business has now been exposed to end market seasonality patterns and the other changes in the market condition, for example, relating to smartphone RPCS."
"We expect this situation of demanding excess of supply to continue through next year since foundry capacity will likely only start improving in 2023," he continues. "Our order book remains strong and continues to be well in excess of $1.5 billion for next year. We are seeing, however, some adjustment in our order book with the softening of orders for channel market products and strengthening our product for OEM customers. For example, we are seeing demand for SSD by global PC OEM continue to strengthen. While client SSD for retail markets, especially in China, softening. Since we are supply constrained, we have been looking at our revenue run rate for annualized sales targeting. In the third quarter, we delivered $1 billion in revenue run rate a quarter ahead of when we had previously communicated and expect our revenue run rate to increase further in the 4th quarter as we focus on managing our product mix, customer allocation and pricing. We have already received foundry wafer allocation for 2022. That is incremental to what we have this year, and we are confident we can grow ourselves next year toward our $1.5 billion order book. We believe demand will continue to exceed supply next year. But even under this scenario, our revenue growth next year will still be very strong."
SSD controller sales flat Q/Q and increased 70% to 75% Y/Y
The company allocated more production toward EMC and UFS controllers for sales in 3Q21.This well received - this will reverse in 4FQ21 as production and sell shift back toward SSD controllers. In the most recent quarter, SSD controller sales total year more than double Y/Y. The firm is are tracking toward gaining 5 to 10% points of the market share this year.
SSD controller sales were flat sequentially as the company temporarily allocated more wafer supply toward eMMC+UFS controllers for 3FQ21 sales. In 4FQ21, this will change as more wafer supply will be directed toward SSD controller sales.
PCIe Gen5 SSD controllers remain on track and Silicon Motion continues to expect pilot production to begin in 2H22 and volume production in 2H23.
3FQ21 eMMC+UFS controller sales grew 60% to 65% sequentially and increased 305% to 310% Y/Y
Sales approximately doubled sequentially as module maker customers continue expanding their opportunities with OEM in low-cost smartphones and the large fragmented IoT and smart devices markets.
SSD solutions sales increased 0% to 5% Q/Q and declined 0% to 5% Y/Y
This sequential decline is primarily caused by a significant decline in the gross margins of SSD solutions.
The firm has also been working with both NAND flash makers and smartphone OEM on UFS embedded storage that enables the use of lower cost, with the transition from TLC to high-density QLC NAND, and it expects product introduction in the 2023 to 2024 time frame.
For 4FQ21, the company expects revenue to be flat to up 5% sequentially to approximately $254 million to $267 million. Due to production scheduling, SSD controller sales will increase while eMMC+UFS controller sales will decline.
It is expected to gain 5 to 10% points of market share gain in client SSDs this year, which should continue to expand next year as the firm ramps PCIe Gen4 shipments to more NAND and module maker customers for OEMs.
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