Silicon Motion (SIMO) Q4 Earnings Beat, Revenues Up Y/Y

Silicon Motion Technology Corporation (NASDAQ:SIMO) reported fourth-quarter 2019 non-GAAP earnings of 96 cents per American Depositary Share (ADS), which surpassed the Zacks Consensus Estimate by 12.9% and improved 39.1% sequentially. Moreover, the figure improved 17.1% from the year-ago quarter.

Net sales (non-GAAP) increased 32% from the year-ago quarter and improved 35% sequentially to $153 million.

On a GAAP basis, net sales increased 39% from the year-ago figure and improved 24% sequentially to $153.2 million.

The Zacks Consensus Estimate for revenues was pegged at $142 million.

Quarter in Detail

Sales of SSD controllers surged 25% sequentially.

Moreover, revenues from eMMC and UFS controllers improved 70% sequentially, on account of increasing adoption of mobile embedded memory controllers.

Notably, revenues from SSD solutions improved 60% sequentially on improving demand for Shannon and Ferri products.

Margins

Non-GAAP gross margin of 49.3% contracted 50 bps on a year-over-year basis and 90 bps sequentially.

Non-GAAP operating expenses as a percentage of revenues came in at 24.9% expanding 120 bps year over year. The figure contracted 280 bps sequentially.

Consequently, non-GAAP operating margin contracted 210 bps on year-over-year basis to 24.4%. Nonetheless, the figure expanded 230 bps sequentially.

Balance Sheet & Cash Flow

Silicon Motion ended the fourth quarter with cash, cash equivalents, restricted cash and short-term investments of $350.3 million, compared with $337.9 million reported in the prior quarter.

The company generated $29.4 million cash from operations during the reported quarter compared with $4.1 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 Nov 21, 2019, the company paid out $12.1 million as annual dividend to shareholders, which marked its first installment.

Further, on Nov 21, 2018, Silicon Motion announced a new buyback program spread over a two-year period. According to terms of 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 first-quarter 2020, Silicon Motion expects non-GAAP revenues to be in the range of $130 million to $138 million (indicating sequential decline of 15-10%). The Zacks Consensus Estimate is currently pegged at $124.4 million.

Non-GAAP gross margin is anticipated within 44-46%. Non-GAAP operating margin is projected to lie in the range of 18% to 20%.

For 2020, Silicon Motion expects non-GAAP revenues to be in the range of $539 million to $584 million (indicating year-over-year growth of 20-30%). The Zacks Consensus Estimate is currently pegged at $541.64 million.

Non-GAAP gross margin is anticipated within 46-48%. Non-GAAP operating margin is anticipated to lie in the range of 21.5% to 23.5%.

Zacks Rank & Other Stocks to Consider

Currently, Silicon Motion sports a Zacks Rank #1 (Strong Buy).

Alteryx (NYSE:AYX) , Cirrus Logic (NASDAQ:CRUS) and Garmin (NASDAQ:GRMN) are other top-ranked stocks in the broader computer and technology sector, each flaunting a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Alteryx, Cirrus Logic and Garmin is pegged at 39.85%, 15.27% and 7.35%, respectively.

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