Silicon Motion Technology Corporation (NasdaqGS: SIMO) (“Silicon Motion,” the “Company” or “we”) today announced its financial results for the quarter ended June 30, 2024.  For the second quarter of 2024, net sales (GAAP) increased sequentially to $210.7 million from $189.3 million in the first quarter of 2024. Net income (GAAP) increased to $30.8 million, or $0.91 per diluted American Depositary Share of the Company (“ADS”) (GAAP), from net income (GAAP) of $16.0 million, or $0.48 per diluted ADS (GAAP), in the first quarter of 2024.

For the second quarter of 2024, net income (non-GAAP) increased to $32.5 million, or $0.96 per diluted ADS (non-GAAP), from net income (non-GAAP) of $21.6 million, or $0.64 per diluted ADS (non-GAAP), in the first quarter of 2024.

All financial numbers are in U.S. dollars unless otherwise noted.

Second Quarter of 2024 Review

“Our business was strong in the second quarter of 2024, with revenue above the high-end of our guided range and gross margins at the high-end of expectations,” said Wallace Kou, President and CEO of Silicon Motion. “Our SSD controller revenue increased for the fifth consecutive quarter and strength from our eMMC and UFS business accelerated as smartphone OEMs build in anticipation for a seasonally stronger second half and modest handset industry growth this year. The first half of the year was a strong start to 2024, and we remain confident that our increasing share with flash makers and expanding product portfolio will continue to grow our business and profitability throughout this year.”

Key Financial Results

(in millions, except percentages and per ADS amounts) GAAP Non-GAAP
2Q 2024   1Q 2024   2Q 2023   2Q 2024   1Q 2024   2Q 2023  
Revenue $ 210.7   $ 189.3   $ 140.4   $ 210.7   $ 189.3   $ 140.4  
Gross profitPercent of revenue   $96.845.9 %   $85.145.0 %   $56.440.2 %   $96.846.0 %   $85.245.0 %   $59.742.5 %
Operating expenses $ 66.0   $ 67.2   $ 54.6   $ 62.1   $ 62.5   $ 48.0  
Operating incomePercent of revenue   $30.714.6 %   $18.09.5 %   $1.81.3 %   $34.716.5 %   $22.612.0 %   $11.78.3 %
Earnings per diluted ADS $ 0.91   $ 0.48   $ 0.33   $ 0.96   $ 0.64   $ 0.38  

Other Financial Information

(in millions) 2Q 2024 1Q 2024 2Q 2023
Cash, cash equivalents, restricted cash and short-term investments—end of period $ 343.6 $ 349.3 $ 305.0
Routine capital expenditures $ 6.3 $ 5.0 $ 4.3
Dividend payments $ 16.8 $ 16.8   --

During the second quarter of 2024, we had $10.4 million of capital expenditures, including $6.3 million for the routine purchase of testing equipment, software, design tools and other items, and $4.1 million for building construction in Hsinchu.

Business Outlook“Our new programs with our flash maker customers are expected to further scale throughout this year as the move to increase outsourcing continues to build the foundation for the long-term revenue and profitability growth of our business,” said Wallace Kou, President and CEO of Silicon Motion. “Our highly differentiated controller solutions for PCs and smartphones deliver high performance, higher density and lower cost solid state storage to enable cutting edge applications such as AI-at-the-edge. Despite the softness in the retail SSD market that is evident across the industry, we are confident that we can achieve our previous full-year outlook based on the ongoing strength of our growing NAND OEM business.”

For the third quarter of 2024, management expects:

($ in millions) GAAP Non-GAAP Adjustment Non-GAAP
Revenue $205 to $216 -2.5% to +2.5% Q/Q+19% to 25% Y/Y -- $205 to $216 -2.5% to +2.5% Q/Q+19% to 25% Y/Y
Gross margin 46.0% to 47.0% Approximately $0.1* 46.0% to 47.0%
Operating margin 10.7% to 12.3% Approximately $6.4 to $7.4** 14.3% to 15.3%

* Projected gross margin (non-GAAP) excludes $0.1 million of stock-based compensation.** Projected operating margin (non-GAAP) excludes $6.4 million to $7.4 million of stock-based compensation and dispute related expenses.

For the full year 2024, management expects:

($ in millions) GAAP Non-GAAP Adjustment Non-GAAP
Revenue $800 to $830+25% to 30% Y/Y -- $800 to $830+25% to 30% Y/Y
Gross margin 45.9% to 46.9% Approximately $0.6* 46.0% to 47.0%
Operating margin 10.9% to 13.3% Approximately $29.0 to $31.0** 14.8% to 16.8%

* Projected gross margin (non-GAAP) excludes $0.6 million of stock-based compensation and restructuring charge.** Projected operating margin (non-GAAP) excludes $29.0 million to $31.0 million of stock-based compensation, dispute related expenses, restructuring charge and loss from settlement of litigation.

Conference Call & Webcast:The Company’s management team will conduct a conference call at 8:00 am Eastern Time on August 2, 2024. 

Conference Call DetailsParticipants must register in advance to join the conference call using the link provided below. Conference access information (including dial-in information and a unique access PIN) will be provided in the email received upon registration.

Participant Online Registration:https://register.vevent.com/register/BI2fe7e6f51a2f41b7963f31ce9f2d38ce

A webcast of the call will be available on the Company's website at www.siliconmotion.com. 

Discussion of Non-GAAP Financial Measures

To supplement the Company’s unaudited selected financial results calculated in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”), the Company discloses certain non-GAAP financial measures that exclude stock-based compensation and other items, including gross profit (non-GAAP), operating expenses (non-GAAP), operating income (non-GAAP), net income (non-GAAP), and earnings per diluted ADS (non-GAAP). These non-GAAP measures are not in accordance with or an alternative to GAAP and may be different from similarly-titled non-GAAP measures used by other companies.  We believe that these non-GAAP measures have limitations in that they do not reflect all the amounts associated with the Company’s results of operations as determined in accordance with GAAP and that these measures should only be used to evaluate the Company’s results of operations in conjunction with the corresponding GAAP measures.  The presentation of this additional information is not meant to be considered in isolation or as a substitute for the most directly comparable GAAP measure.  We compensate for the limitations of our non-GAAP financial measures by relying upon GAAP results to gain a complete picture of our performance.

Our non-GAAP financial measures are provided to enhance the user’s overall understanding of our current financial performance and our prospects for the future. Specifically, we believe the non-GAAP results provide useful information to both management and investors as these non-GAAP results exclude certain expenses, gains and losses that we believe are not indicative of our core operating results and because they are consistent with the financial models and estimates published by many analysts who follow the Company.  We use non-GAAP measures to evaluate the operating performance of our business, for comparison with our forecasts, and for benchmarking our performance externally against our competitors.  Also, when evaluating potential acquisitions, we exclude the items described below from our consideration of the target’s performance and valuation.  Since we find these measures to be useful, we believe that our investors benefit from seeing the results from management’s perspective in addition to seeing our GAAP results.  We believe that these non-GAAP measures, when read in conjunction with the Company’s GAAP financials, provide useful information to investors by offering:

  • the ability to make more meaningful period-to-period comparisons of the Company’s on-going operating results;
  • the ability to better identify trends in the Company’s underlying business and perform related trend analysis;
  • a better understanding of how management plans and measures the Company’s underlying business; and
  • an easier way to compare the Company’s operating results against analyst financial models and operating results of our competitors that supplement their GAAP results with non-GAAP financial measures.

The following are explanations of each of the adjustments that we incorporate into our non-GAAP measures, as well as the reasons for excluding each of these individual items in our reconciliation of these non-GAAP financial measures:

Stock-based compensation expense consists of non-cash charges related to the fair value of restricted stock units awarded to employees. The Company believes that the exclusion of these non-cash charges provides for more accurate comparisons of our operating results to our peer companies due to the varying available valuation methodologies, subjective assumptions and the variety of award types. In addition, the Company believes it is useful to investors to understand the specific impact of share-based compensation on its operating results.

Restructuring charges relate to the restructuring of our underperforming product lines, principally the write-down of NAND flash, embedded DRAM and SSD inventory valuation and severance payments. 

M&A transaction expenses consist of legal, financial advisory and other fees related to the transaction.

Dispute related expenses consist of legal, consultant and other fees related to the dispute.

Loss from settlement of litigation relates to an expense accrued in connection with a settlement of a lawsuit.

Foreign exchange loss (gain) consists of translation gains and/or losses of non-US$ denominated current assets and current liabilities, as well as certain other balance sheet items which result from the appreciation or depreciation of non-US$ currencies against the US$. We do not use financial instruments to manage the impact on our operations from changes in foreign exchange rates, and because our operations are subject to fluctuations in foreign exchange rates, we therefore exclude foreign exchange gains and losses when presenting non-GAAP financial measures.

Unrealized holding loss (gain) on investments relates to the net change in fair value of long-term investments.

Silicon Motion Technology CorporationConsolidated Statements of Income(in thousands, except percentages and per ADS data, unaudited)
 
  For Three Months Ended   For the Six Months Ended
  Jun. 30,   Mar. 31,   Jun. 30,   Jun. 30,   Jun. 30,
  2023   2024   2024   2023   2024
   ($)    ($)    ($)    ($)    ($)
Net Sales 140,361     189,311     210,670     264,430     399,981  
Cost of sales 83,938     104,191     113,893     155,704     218,084  
Gross profit 56,423     85,120     96,777     108,726     181,897  
Operating expenses                  
Research & development 41,336     54,392     50,788     76,186     105,180  
Sales & marketing 7,248     6,304     6,777     13,853     13,081  
General & administrative 6,021     6,474     7,215     11,384     13,689  
Loss from settlement of litigation -     -     1,250     -     1,250  
Operating income 1,818     17,950     30,747     7,303     48,697  
Non-operating income (expense)                  
Interest income, net 2,736     3,066     4,175     4,546     7,241  
Foreign exchange gain (loss), net 1,223     588     245     1,461     833  
Unrealized holding gain(loss) on investments 6,135     (1,608 )   1,855     10,881     247  
Subtotal 10,094     2,046     6,275     16,888     8,321  
Income before income tax 11,912     19,996     37,022     24,191     57,018  
Income tax expense (benefit) 868     3,980     6,201     2,997     10,181  
Net income 11,044     16,016     30,821     21,194     46,837  
                   
Earnings per basic ADS 0.33     0.48     0.92     0.64     1.39  
Earnings per diluted ADS 0.33     0.48     0.91     0.63     1.39  
                   
Margin Analysis:                  
Gross margin 40.2 %   45.0 %   45.9 %   41.1 %   45.5 %
Operating margin 1.3 %   9.5 %   14.6 %   2.8 %   12.2 %
Net margin 7.9 %   8.5 %   14.6 %   8.0 %   11.7 %
                   
Additional Data:                  
Weighted avg. ADS equivalents 33,409     33,508     33,684     33,292     33,596  
Diluted ADS equivalents 33,438     33,701     33,697     33,410     33,687  

Silicon Motion Technology CorporationReconciliation of GAAP to Non-GAAP Operating Results(in thousands, except percentages and per ADS data, unaudited)
 
  For Three Months Ended   For the Six Months Ended
  Jun. 30,   Mar. 31,   Jun. 30,   Jun. 30,   Jun. 30,
2023   2024   2024   2023   2024
 ($)    ($)    ($)    ($)    ($)
Gross profit (GAAP)   56,423       85,120       96,777       108,726       181,897  
  Gross margin (GAAP)   40.2 %     45.0 %     45.9 %     41.1 %     45.5 %
Stock-based compensation (A)   71       72       14       206       86  
Restructuring charges   3,222       -       46       3,259       46  
Gross profit (non-GAAP)    59,716       85,192       96,837       112,191       182,029  
  Gross margin (non-GAAP)   42.5 %     45.0 %     46.0 %     42.4 %     45.5 %
                   
Operating expenses (GAAP)   54,605       67,170       66,030       101,423       133,200  
Stock-based compensation (A)   (2,359 )     (3,093 )     (371 )     (7,709 )     (3,464 )
M&A transaction expenses   (1,548 )     -       -       (2,185 )     -  
Dispute related expenses   -       (1,532 )     (2,277 )     -       (3,809 )
Restructuring charges   (2,664 )     -       -       (3,920 )     -  
Loss from settlement of litigation   -       -       (1,250 )     -       (1,250 )
Operating expenses (non-GAAP)   48,034       62,545       62,132       87,609       124,677  
                   
Operating profit (GAAP)   1,818       17,950       30,747       7,303       48,697  
  Operating margin (GAAP)   1.3 %     9.5 %     14.6 %     2.8 %     12.2 %
Total adjustments to operating profit   9,864       4,697       3,958       17,279       8,655  
Operating profit (non-GAAP)   11,682       22,647       34,705       24,582       57,352  
  Operating margin (non-GAAP)   8.3 %     12.0 %     16.5 %     9.3 %     14.3 %
                   
Non-operating income (expense) (GAAP)   10,094       2,046       6,275       16,888       8,321  
Foreign exchange loss (gain), net   (1,223 )     (588 )     (245 )     (1,461 )     (833 )
Unrealized holding loss (gain) on investments   (6,135 )     1,608       (1,855 )     (10,881 )     (247 )
                   
Non-operating income (expense) (non-GAAP)   2,736       3,066       4,175       4,546       7,241  
                   
Net income (GAAP)   11,044       16,016       30,821       21,194       46,837  
Total pre-tax impact of non-GAAP adjustments   2,506       5,717       1,858       4,937       7,575  
Income tax impact of non-GAAP adjustments   (965 )     (147 )     (218 )     (2,383 )     (365 )
Net income (non-GAAP)   12,585       21,586       32,461       23,748       54,047  
                   
Earnings per diluted ADS (GAAP) $ 0.33     $ 0.48     $ 0.91     $ 0.63     $ 1.39  
Earnings per diluted ADS (non-GAAP) $ 0.38     $ 0.64     $ 0.96     $ 0.71     $ 1.60  
                   
Shares used in computing earnings per diluted ADS (GAAP)   33,438       33,701       33,697       33,410       33,687  
Non-GAAP adjustments   115       26       18       141       23  
Shares used in computing earnings per diluted ADS (non-GAAP)   33,553       33,727       33,715       33,551       33,710  
                   
(A) Excludes stock-based compensation as follows:                  
Cost of sales   71       72       14       206       86  
Research & development   1,315       2,143       94       5,183       2,237  
Sales & marketing   435       347       173       976       520  
General & administrative   609       603       104       1,550       707  

Silicon Motion Technology CorporationConsolidated Balance Sheet  (In thousands, unaudited)
 
  Jun. 30,   Mar. 31,   Jun. 30,
  2023   2024   2024
   ($)    ($)    ($)
Cash and cash equivalents 249,830   294,814   289,175
Accounts receivable (net) 166,020   186,154   191,692
Inventories 250,524   253,316   240,811
Refundable deposits – current 49,480   49,610   51,036
Prepaid expenses and other current assets 15,916   17,944   31,460
Total current assets 731,770   801,838   804,174
Long-term investments 19,767   15,489   17,301
Property and equipment (net) 156,962   174,420   179,550
Other assets 38,077   32,529   29,121
Total assets 946,576   1,024,276   1,030,146
           
Accounts payable 12,529   64,810   36,411
Income tax payable 31,272   10,702   14,103
Accrued expenses and other current liabilities 78,771   135,425   134,947
Total current liabilities 122,572   210,937   185,461
Other liabilities 64,562   59,883   60,182
Total liabilities 187,134   270,820   245,643
Shareholders’ equity 759,442   753,456   784,503
Total liabilities & shareholders’ equity 946,576   1,024,276   1,030,146

Silicon Motion Technology CorporationCondensed Consolidated Statements of Cash Flows(in thousands, unaudited)
 
  For Three Months Ended   For the Six Months Ended
  Jun. 30,   Mar. 31,   Jun. 30,   Jun. 30,   Jun. 30,
  2023   2024   2024   2023   2024
   ($)    ($)    ($)    ($)    ($)
Net income 11,044     16,016     30,821     21,194     46,837  
Depreciation & amortization 5,381     5,608     5,802     10,989     11,411  
Stock-based compensation 2,430     3,165     385     7,915     3,550  
Investment losses (gain) & disposals (5,945 )   1,608     (1,855 )   (10,691 )   (247 )
Changes in operating assets and liabilities 23,134     (18,586 )   (13,660 )   13,609     (32,246 )
Net cash provided by operating activities 36,044     7,811     21,493     43,016     29,305  
                   
Purchase of property & equipment (10,085 )   (10,749 )   (10,427 )   (23,635 )   (21,176 )
Net cash used in investing activities (10,085 )   (10,749 )   (10,427 )   (23,635 )   (21,176 )
                   
Dividend payments (15 )   (16,808 )   (16,820 )   (15 )   (33,629 )
Net cash used in financing activities (15 )   (16,808 )   (16,820 )   (15 )   (33,629 )
                   
Net increase (decrease) in cash, cash equivalents & restricted cash 25,944     (19,746 )   (5,754 )   19,366     (25,500 )
Effect of foreign exchange changes (1,273 )   35     86     (1,450 )   121  
Cash, cash equivalents & restricted cash—beginning of period 280,300     368,990     349,279     287,055     368,990  
Cash, cash equivalents & restricted cash—end of period 304,971     349,279     343,611     304,971     343,611  

About Silicon Motion:

We are the global leader in supplying NAND flash controllers for solid state storage devices.  We supply more SSD controllers than any other company in the world for servers, PCs and other client devices and are the leading merchant supplier of eMMC and UFS embedded storage controllers used in smartphones, IoT devices and other applications.  We also supply customized high-performance hyperscale data center and specialized industrial and automotive SSD solutions.  Our customers include most of the NAND flash vendors, storage device module makers and leading OEMs.  For further information on Silicon Motion, visit us at www.siliconmotion.com.

Forward-Looking Statements:

This press release contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “continue,” or the negative of these terms or other comparable terminology. Although such statements are based on our own information and information from other sources we believe to be reliable, you should not place undue reliance on them. These statements involve risks and uncertainties, and actual market trends or our actual results of operations, financial condition or business prospects may differ materially from those expressed or implied in these forward-looking statements for a variety of reasons. Potential risks and uncertainties include, but are not limited to the unpredictable volume and timing of customer orders, which are not fixed by contract but vary on a purchase order basis; the loss of one or more key customers or the significant reduction, postponement, rescheduling or cancellation of orders from one or more customers; general economic conditions or conditions in the semiconductor or consumer electronics markets; the impact of inflation on our business and customer’s businesses and any effect this has on economic activity in the markets in which we operate; the functionalities and performance of our information technology (“IT”) systems, which are subject to cybersecurity threats and which support our critical operational activities, and any breaches of our IT systems or those of our customers, suppliers, partners and providers of third-party licensed technology; the effects on our business and our customer’s business taking into account the ongoing U.S.-China tariffs and trade disputes; the uncertainties associated with any future global or regional pandemic; the continuing tensions between Taiwan and China including enhanced military activities; decreases in the overall average selling prices of our products; changes in the relative sales mix of our products; changes in our cost of finished goods; supply chain disruptions that have affected us and our industry as well as other industries on a global basis; the payment, or non-payment, of cash dividends in the future at the discretion of our board of directors and any announced planned increases in such dividends; changes in our cost of finished goods; the availability, pricing, and timeliness of delivery of other components and raw materials used in the products we sell given the current raw material supply shortages being experienced in our industry; our customers’ sales outlook, purchasing patterns, and inventory adjustments based on consumer demands and general economic conditions; any potential impairment charges that may be incurred related to businesses previously acquired or divested in the future; our ability to successfully develop, introduce, and sell new or enhanced products in a timely manner; and the timing of new product announcements or introductions by us or by our competitors. For additional discussion of these risks and uncertainties and other factors, please see the documents we file from time to time with the U.S. Securities and Exchange Commission, including our Annual Report on Form 20-F filed with the U.S. Securities and Exchange Commission on April 30, 2024. Other than as required under the securities laws, we do not intend, and do not undertake any obligation to, update or revise any forward-looking statements, which apply only as of the date of this press release.

Silicon Motion Investor Contacts:
Tom Sepenzis Selina Hsieh
Senior Director of IR & Strategy Investor Relations
tsepenzis@siliconmotion.com ir@siliconmotion.com
   
Media Contact:  
Dan Scorpio, H/Advisors Abernathy  
Dan.scorpio@h-advisors.global  
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