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Silicon Motion (SIMO) Q1 Earnings & Revenues Beat Estimates

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Silicon Motion Technology Corporation (SIMO - Free Report) reported first-quarter 2021 non-GAAP earnings of $1.11 per American Depositary Share (ADS), which surpassed the Zacks Consensus Estimate by 18.1%. Moreover, the bottom line increased 38.8% from the year-ago quarter’s figure and increased 29.1% sequentially.

Net sales (non-GAAP) of $182.4 million beat the Zacks Consensus Estimate by 1.3%. On a year-over-year basis, sales rallied 37% driven by higher sales of SSD controllers as well as eMMC and UFS controllers.  Net sales also increased 27% sequentially in the first quarter.

Performance in Detail

Management noted that sales of SSD controllers surged in the range of 25-30% sequentially.

Notably, revenues from SSD solutions increased between 0% and 5% quarter over quarter. Revenues from eMMC and UFS controllers rose in the range of 30-35% sequentially.


In the first quarter of 2021, sales of SSD controllers increased 45-50% year over year, while sales of eMMC and UFS controllers surged 50-55% on a year-over-year basis. In the quarter under review, SSD solutions’ sales declined 40-45% year over year.

Margins

Non-GAAP gross margin of 50.7% expanded 250 basis points (bps) on a year-over-year basis and expanded 140 basis points (bps) sequentially.

Non-GAAP operating expenses, as a percentage of revenues, came in at 24.1%, contracting 410 bps year over year and 330 bps sequentially.

Non-GAAP operating margin expanded 660 bps on a year-over-year basis and 470 bps sequentially to 26.6%.

Balance Sheet & Cash Flow

As of Mar 31, 2021, Silicon Motion had cash, cash equivalents, restricted cash and short-term investments of $371 million compared with $369.2 million as of Dec 31, 2020.

The company generated $17.4 million cash from operations during the reported quarter compared with $21.7 million in the fourth quarter.

On Oct 26, 2020, the company’s board of directors approved $1.40 per ADS of annual dividend, slated to be paid out in quarterly installments of 35 cents per ADS. On Feb 26, 2021, the company paid out $12.2 million as dividend to shareholders, which marked its second 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 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.

Encouraging Guidance

For second-quarter 2021, Silicon Motion expects non-GAAP revenues in the range of $192-$201 million. The Zacks Consensus Estimate is currently pegged at $172.2 million.

Non-GAAP gross margin is anticipated in the range of 48-50%. Non-GAAP operating margin is projected in the range of 26-28%.

Second-quarter revenues are likely to reflect gains from strong sales of eMMC and UFS controllers as well as continued momentum in SSD controller sales, backed by strong foundry supply availability.

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 now expects non-GAAP revenues in the range of $782-$836 million compared with the previous view of $650-$700 million. The Zacks Consensus Estimate is currently pegged at $704.5 million.

Non-GAAP gross margin is anticipated in the band of 47-49%. Non-GAAP operating margin is projected in the range of 26-28%.

Zacks Rank & Stocks to Consider

Currently, Silicon Motion carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology sector worth consideration are Agilent Technologies (A - Free Report) , Pure Storage (PSTG - Free Report) and NVIDIA (NVDA - Free Report) . All the stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Agilent scheduled to report quarterly results on May 25, while NVIDIA and Pure Storage are slated to announce results on May 26.

Long-term earnings growth rate of Agilent, Pure Storage and NVIDIA is pegged at 9%, 52.2% and 15.1%, respectively.

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