Silicon Motion: Fiscal 3Q23 Financial Results

Highlights of 3FQ23

• Sales increased 23% Q/Q and decreased 31% Y/Y
• SSD controller sales: Increased 5% to 10% Q/Q and decreased 10% to 15% Y/Y
• eMMC+UFS controller sales: Increased 100% to 105% Q/Q and decreased 40% to 45% Y/Y
• SSD solutions sales: Decreased 5% to 10% Q/Q and decreased 30% to 35% Y/Y

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

For 3FQ23, net sales (GAAP) increased sequentially to $172.3 million from $140.4 million in 2FQ23. Net income (GAAP) decreased to $10.6 million, or $0.32 per diluted American Depositary Share of the company (ADS) (GAAP), from net income (GAAP) of $11.0 million, or $0.33 per diluted ADS (GAAP), in 2FQ23.

For 3FQ23, net income (non-GAAP) increased to $21.1 million, or $0.63 per diluted ADS (non-GAAP), from net income (non-GAAP) of $12.6 million, or $0.38 per diluted ADS (non-GAAP), in 2FQ23.

3FQ23 review
“We’re pleased with our strong performance in the third quarter as we began to see inventory levels in the channel normalize and OEM order patterns accelerate ahead of the anticipated holiday season demand,” said Wallace Kou, president and CEO. “eMMC+UFS sales rebounded while our SSD controller sales again saw sequential growth. Our continuing investment in technology leadership in storage controllers has expanded our customer base for SSD and eMMC+UFS controllers and diversified our end-markets, leading to more stable and sustainable long-term growth.”

During 3FQ23, the company had $17.1 million of capital expenditures, including $6.3 million for the routine purchase of testing equipment, software, design tools and other items, and $10.8 million for building construction in Hsinchu, Taiwan.

Acquisition update
On May 5, 2022, the company and MaxLinear, Inc. entered into a merger agreement, pursuant to which Silicon Motion agreed to be acquired by MaxLinear, with (a) holders of Silicon Motion 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 two companies received antitrust approval from the State Administration for Market Regulation of the People’s Republic of China. Shortly after receiving this approval, Silicon Motion received notice from MaxLinear of its purported termination of the Merger Agreement. MaxLinear did not provide any factual basis for its purported termination, and Silicon Motion believes its actions constituted a willful and material breach of the merger agreement. Silicon Motion has filed a claim in the Singapore International Arbitration Centre, which is the venue for dispute resolution under the merger agreement, and is pursuing payment of the termination fee of $160 million, further substantial damages, interest and costs.

Business outlook
“We expect our business to continue to rebound in 4FQ23 as channel inventory normalizes and OEM demand further improves, leading to better-than-seasonal sequential revenue growth,” said Kou. “Order patterns and visibility have improved significantly since the start of this year and with inventory levels normalizing and a strong pipeline of design wins, we are well positioned to deliver growth in 2024.”

For 4FQ23, management expects revenue between $190 million and $198 million or +10% to +15% Q/Q.