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Silicon Motion (SIMO) Q4 Earnings & Revenues Top Estimates

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Silicon Motion Technology Corporation (SIMO - Free Report) reported fourth-quarter 2020 non-GAAP earnings of 86 cents per American Depositary Share (ADS), which surpassed the Zacks Consensus Estimate by 22.9%. However, the bottom line deteriorated 10.4% from the year-ago quarter’s figure but increased 13.2% sequentially.

Net sales (non-GAAP) of $143.9 million beat the Zacks Consensus Estimate by 0.6%. On a year-over-year basis, sales declined 6%. Weaker sales of SSD solutions owing to seasonality offset higher sales of SSD controllers as well as eMMC and UFS controllers.  However, net sales increased 14% sequentially in the fourth quarter.

Performance in Detail

Management noted that sales of SSD controllers surged in the range of 5-10% sequentially. During the reported quarter, the company rolled out an enterprise-grade PCIe 4.0 NVMe hardware and firmware turnkey SSD controller solution –– SM8266. The offering will enable manufacturers accelerate time taken to introduce new enterprise SSD products (especially for data centers) in the market.

 

Notably, revenues from SSD solutions declined between 30% and 35% quarter over quarter whereas revenues from eMMC and UFS controllers improved in the range of 65-70% sequentially.

In 2020, sales of SSD controllers increased 15-20% year over year, while SSD solutions’ sales rallied 35-40% year over year. For full year, sales of eMMC and UFS controllers also rose 35-40% on a year-over-year basis.

Margins

Non-GAAP gross margin of 49.3% remained unchanged on a year-over-year basis but expanded 20 basis points (bps) sequentially.

Non-GAAP operating expenses, as a percentage of revenues, came in at 27.4%, expanding 250 bps year over year and 130 bps sequentially.

Non-GAAP operating margin contracted 240 bps on a year-over-year basis and 110 bps sequentially to 21.9%.

Balance Sheet & Cash Flow

As of Dec 31, 2020, Silicon Motion had cash, cash equivalents, restricted cash and short-term investments of $369.2 million compared with $368.4 million as of Sep 30, 2020.

The company generated $20.4 million cash from operations during the reported quarter compared with $30.2 million in the third quarter.

On Oct 26, 2020, the company’s board of directors approved $1.40 per ADS of annual dividend, slated to be paid in quarterly installments of 35 cents per ADS. On Nov 25, 2020, the company paid out $12.1 million as dividend to shareholders, which marked its first installment.

On Nov 21, 2018, Silicon Motion announced a new buyback program spread over a two-year period. Per the program, the company will repurchase approximately $200 million ADS. In the reported quarter, the company did not repurchase any ADSs.

Under the buyback program, the company has repurchased shares worth $84.8 million of ADSs, with $115.2 million remaining untapped under the program. On Oct 26, 2020, the board of directors approved the extension of the conclusion of the program to Nov 21, 2021.

A Look At 2020 Numbers

Silicon Motion reported non-GAAP revenues of $539.5 million in 2020, up 17% from 2019 tally.

Non-GAAP earnings per ADS were $3.24, up 29.1% from $2.51 reported in 2019.

Non-GAAP gross margin contracted 100 bps to 49.2%, while non-GAAP operating margin expanded 170 bps to 21.8%.

For 2020, Silicon Motion generated cash flow from operations of $115.9 million compared with $77.7 million in the previous year.

Encouraging Guidance

For first-quarter 2021, Silicon Motion expects non-GAAP revenues in the range of $154-$161 million. The Zacks Consensus Estimate is currently pegged at $133.8 million.

Non-GAAP gross margin is anticipated in the range of 48-50%. Non-GAAP operating margin is projected in the range of 21-23%.

First-quarter revenues are likely to reflect gains from strong sales of eMMC and UFS controllers and continued momentum in SSD controller sales.

Notably, increased PC sales triggered by online learning and work-from-home wave hold promise. Strong PC shipments are expected to benefit the company’s PCIe NVMe SSD controllers.

For 2021, Silicon Motion expects non-GAAP revenues to be $650-$700 million. The Zacks Consensus Estimate is currently pegged at $592.04 million.

Non-GAAP gross margin is anticipated in the band of 47-49%. Non-GAAP operating margin is projected in the range of 24-26%.

Zacks Rank & Other Stocks to Consider

Currently, Silicon Motion carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks in the broader technology sector are Take Two Interactive (TTWO - Free Report) , CDW Corporation (CDW - Free Report) , and CrowdStrike (CRWD - Free Report) . All stocks carry a Zacks Rank #2. You can see the complete list of today's Zacks #1 (Strong Buy) Rank stocks here.

Take Two Interactive, CDW and CrowdStrike are scheduled to release earnings on Feb 8, Feb 10, and Mar 16, respectively.

Long term earnings growth rate for Take Two Interactive, CDW, And CrowdStrike are currently pegged at 12%, 13.1% and 25%, respectively.

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