Silicon Motion Technology Corp. (SIMO) reported third-quarter 2014 results with non-GAAP earnings per ADS of 57 cents per share, handily surpassing the Zacks Consensus Estimate of 39 cents by 46.2%. Earnings also grew a robust 78.1% from the year-ago figure of 32 cents.
The increase in earnings was driven by strength in the company’s embedded storage products, especially the eMMC, client SSD and industrial SSD controllers. This apart, the company witnessed significant improvement in its LTE transceiver business as Samsung started shipping smartphones and tablets consisting of the Silicon Motion’s LTE-Advanced transceiver to Korean markets.
Quarterly Details
Revenues surged 51.5% year over year and 25% sequentially to $86.6 million. Sales also surpassed the Zacks Consensus Estimate of $81 million. Mobile storage products contributed about 83% of the totals sales while 15% was derived from mobile communications.
Mobile storage products, consisting of eMMC, SSD, memory card and USB flash drive controllers, increased 23% sequentially to $72.2 million.
Mobile communications business marked a rise of 48% sequentially to $12.6 million in the third quarter, with key products being LTE transceivers and mobile TV IC solutions.
Income and Expenses
Gross profit in the quarter came in at $45.7 million, up from $27.8 million in the prior-year quarter. Gross margin also increased to 52.8% from 48.7% in the year-ago quarter.
Silicon Motion’s operating income was $19 million compared with $11.4 million reported in the year-ago quarter. Operating margin inched up to 21.9% from 20% in the prior-year quarter.
The company incurred total general & administrative expenses of approximately $4.2 million, research & development expenditure of $17.7 million and sales & marketing expenses of about $4.7 million.
Other Financial Details
Silicon Motion’s cash and cash equivalents totaled approximately $164.4 million, compared with $160.4 million as on Sep 30, 2013. Shareowners’ equity stood at $294.6 million at the end of the quarter, up from $265 million in the year-ago quarter.
The company’s cash flow from operating activities came in at $14.7 million in the quarter. Silicon Motion reported $6.1 million of capital expenditures.
Outlook
Silicon Motion expects revenues in the fourth-quarter to be seasonally lower, decreasing 5–10% sequentially. The company predicts non-GAAP gross margin within 50–52% and non-GAAP operating expenses in the range of $21–$23 million for the quarter.
However, for full-year 2014 the company expects revenue growth of 27–29%. Driven by the increased backlog in the company’s eMMC and SSD business, management is optimistic regarding 2015 as well.
Zacks Rank
Silicon Motion presently has a Zacks Rank #1 (Strong Buy). Some other worth-considering stocks in the same industry include Ambarella, Inc. (AMBA), SunEdison, Inc. (SUNE) and AO Alpha & Omega Semiconductor, Ltd. (AOSL). While Ambarella and SunEdison sport a Zacks Rank #1 (Strong Buy), AO Alpha & Omega Semiconductor hold a Zacks Rank #2 (Buy).
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