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Silicon Motion (SIMO) Q1 Earnings Beat, Revenues Up Y/Y

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Silicon Motion Technology Corporation (SIMO - Free Report) reported first-quarter 2020 non-GAAP earnings of 80 cents per American Depositary Share (ADS), which surpassed the Zacks Consensus Estimate by 12.7% and improved 90.5% from the year-ago quarter. However, the bottom line declined 16.7% sequentially.

Net sales (non-GAAP) increased 49% from the year-ago quarter to $132.8 million. However, the figure declined 13% sequentially.

The Zacks Consensus Estimate for revenues was pegged at $131 million.



Notably, shares of  Silicon Motion have returned 26% in the past year, outperforming the industry’s rally of 9.5%.

Quarter in Detail

Sales of SSD controllers surged 40% year over year but declined 15% sequentially.

Moreover, revenues from eMMC and UFS controllers soared 100% year over year but fell 20% sequentially.

Notably, revenues from SSD solutions improved 70% year over year but declined 15% sequentially.

Margins

Non-GAAP gross margin of 48.2% contracted 200 basis points (bps) on a year-over-year basis and 110 bps sequentially.

Non-GAAP operating expenses as a percentage of revenues came in at 28.1%, contracting 410 bps year over year. However, the figure expanded 320 bps sequentially.

Non-GAAP operating margin expanded 210 bps on year-over-year basis to 20.1%. Nonetheless, the figure contracted 430 bps sequentially.
 

Balance Sheet & Cash Flow

As of Mar 31, 2020, Silicon Motion had cash, cash equivalents, restricted cash and short-term investments of $371.7 million, compared with $350.3 million as of Dec 31, 2019.

The company generated $39.6 million cash from operations during the reported quarter compared with $29.4 million in the previous quarter.

On Oct 25, 2019, the company’s board declared a new annual dividend of $1.40 per ADS, up from $1.20 in the past year. Quarterly installments to be paid by the company are 35 cents per ADS. Notably, on Feb 27, 2020, the company paid out $12.3 million as annual dividend to shareholders, which marked its second installment.

Further, 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 per ADS. In the reported quarter, the company did not make any repurchases. Under the buyback program, the company has repurchased shares worth $59.8 million.

Guidance

For second-quarter 2020, Silicon Motion expects non-GAAP revenues to be in the range of $133 million to $143 million. The Zacks Consensus Estimate is currently pegged at $133.3 million.

Non-GAAP gross margin is anticipated within 47.5-49.5%. Non-GAAP operating margin is projected in the range of 20% to 22%.

For 2020, Silicon Motion has not provided any guidance, citing business uncertainty and “limited visibility” pertaining to coronavirus crisis.

Nevertheless, the company expects to gain from increased PC sales triggered by online learning and work-from-home wave. Further, China’s anticipated economic recovery post lockdown holds promise. Additionally, positive trends in smartphone embedded storage transitioning from eMMC to UFS controller devices; and shift from HDDs to SSDs across PCs and other client devices bode well.

Zacks Rank & Stocks to Consider

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

Netlist, Inc. (NLST - Free Report) , Pixelworks, Inc. (PXLW - Free Report) and InterDigital, Inc. (IDCC - Free Report) are some better-ranked stocks worth considering, in the broader computer and technology sector, each flaunting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for both Netlist, and InterDigital is pegged at 15%, while the same for Pixelworks stands at 20%.

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