Silicon Motion Announces Results for the Period Ended June 30, 2021

Financial Highlights

	2Q 2021 GAAP	2Q 2021 Non-GAAP
Net sales	$221.1 million (+21% Q/Q, +62% Y/Y)	$221.1 million (+21% Q/Q, +62% Y/Y)
Gross margin	50.3%	51.0%
Operating margin	27.3%	29.2%
Earnings per diluted ADS	$1.42	$1.50

Business Highlights

• Achieved second consecutive all-time record quarterly revenue and earnings per share
• Sales of SSD and eMMC+UFS controllers both reached new record quarterly highs
• SSD controller sales increased 30% to 35% Q/Q and increased 105% to 110% Y/Y
• eMMC+UFS controller sales increased 10% to 15% Q/Q and increased 25% to 30% Y/Y
• SSD solutions sales increased 35% to 40% Q/Q and declined 15% to 20% Y/Y
  

TAIPEI, Taiwan and MILPITAS, Calif., July 30, 2021 (GLOBE NEWSWIRE) -- Silicon Motion Technology Corporation (NasdaqGS: SIMO) (“Silicon Motion” or the “Company”) today announced its financial results for the quarter ended June 30, 2021. For the second quarter, net sales (GAAP) increased sequentially to $221.1 million from $182.4 million in first quarter 2021. Net income (GAAP) increased to $49.5 million or $1.42 per diluted ADS (GAAP) from net income (GAAP) of $34.4 million or $0.98 per diluted ADS (GAAP) in first quarter 2021.

For the second quarter, net income (non-GAAP) increased to $52.7 million or $1.50 per diluted ADS (non-GAAP) from a net income (non-GAAP) of $38.7 million or $1.11 per diluted ADS (non-GAAP) in first quarter 2021.

Second Quarter 2021 Review
“We delivered better than expected revenue in the second quarter, primarily because of our focus on sales of higher-value products,” said Wallace Kou, President and CEO of Silicon Motion. “This focus also led to higher than expected gross profitability.”

Key Financial Results

(in millions, except percentages and per ADS amounts)	GAAP									Non-GAAP
	2Q 2021			1Q 2021			2Q 2020			2Q 2021			1Q 2021			2Q 2020
Revenue	$	221.1		$	182.4		$	136.8		$	221.1		$	182.4		$	136.8
Gross profit		$111.1			$91.3			$68.4			$112.9			$92.4			$68.4
Percent of revenue		50.3	%		50.0	%		50.0	%		51.0	%		50.7	%		50.0	%
Operating expenses	$	50.7		$	46.9		$	38.3		$	48.4		$	43.9		$	38.0
Operating income		$60.4			$44.4			$30.1			$64.5			$48.5			$30.4
Percent of revenue		27.3	%		24.3	%		22.0	%		29.2	%		26.6	%		22.2	%
Earnings per diluted ADS	$	1.42		$	0.98		$	0.80		$	1.50		$	1.11		$	0.81

Other Financial Information

(in millions)	2Q 2021		1Q 2021		2Q 2020
Cash, cash equivalents, restricted cash and short-term investments—end of period	$	412.3	$	371.0	$	379.7
Routine capital expenditures	$	4.9	$	3.3	$	4.1
Dividend payments	$	12.2	$	12.2	$	12.3

During the second quarter, we had $4.9 million of capital expenditures for the routine purchase of software, design tools and other items.

Returning Value to Shareholders
On October 26, 2020, our Board of Directors declared a $1.40 per ADS annual dividend to be paid in quarterly installments of $0.35 per ADS. On May 20, 2021, we paid $12.2 million to shareholders as the third installment of our annual dividend.

On November 21, 2018, we announced that our Board of Directors had authorized a new program for the Company to repurchase up to $200 million of our ADS over a 24-month period. On October 26, 2020, the Board of Directors of the Company authorized the extension of the expiration of this program to November 21, 2021. Since the start of this program, we have repurchased $84.8 million of our ADSs and $115.2 million remains available for repurchase under the program. There were no share repurchases in the second quarter.

Business Outlook
“We are upsizing our previous full-year revenue guidance as we expect to continue our focus of selling higher-value products,” said Wallace Kou, President and CEO of Silicon Motion. “We believe that this focused approach will also lead to better gross profitability and deliver strong SSD controller market share gains.”

For the third quarter of 2021, management expects:

	GAAP	Non-GAAP Adjustment	Non-GAAP
Revenue	$238m to $249m +7.5% to 12.5% Q/Q	--	$238m to $249m +7.5% to 12.5% Q/Q
Gross margin	48.5% to 50.5%	Approximately $0.1m*	48.5% to 50.5%
Operating margin	25.2% to 27.7%	Approximately $4.6m to $5.6m**	27.5% to 29.5%

* Projected gross margin (non-GAAP) excludes $0.1 million of stock-based compensation.
** Projected operating margin (non-GAAP) excludes $4.6 million to $5.6 million of stock-based compensation.

For full year 2021, management expects:

	GAAP	Non-GAAP Adjustment	Non-GAAP
Revenue	$890m to $917m +65% to 70% Y/Y	--	$890m to $917m +65% to 70% Y/Y
Gross margin	49.1% to 50.2%	Approximately $3.1m to $3.3m*	49.5% to 50.5%
Operating margin	24.9% to 27.2%	Approximately $20.8m to $22.8m**	27.5% to 29.5%

* Projected gross margin (non-GAAP) excludes $0.3 million to $0.5 million of stock-based compensation and $2.8 million of SSD solutions restructuring.
** Projected operating margin (non-GAAP) excludes $18.0 million to $20.0 million of stock-based compensation and $2.8 million of SSD solutions restructuring.

Conference Call & Webcast:

The Company’s management team will conduct a conference call at 8:00 am Eastern Time on July 30, 2021.

Speakers:
Wallace Kou, President & CEO
Riyadh Lai, CFO
Chris Chaney, Director of Investor Relations & Strategy

Conference Call Details
Participants must register in advance to join the conference using the link provided below and should dial in 10 minutes prior to the call start time. Conference access information (including dial-in numbers, the passcode, and a unique access pin) will be provided in the email received upon registration.

Participant Online Registration: http://apac.directeventreg.com/registration/event/9533307

Replay Numbers (for 7 days):
USA (Toll Free):		1 855 452 5696
USA (Toll):		1 646 254 3697
Participant Passcode:		9533307

A webcast of the call will be available on the Company's website at www.siliconmotion.com.

Discussion of Non-GAAP Financial Measures

To supplement the Company’s unaudited selected financial results calculated in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”), the Company discloses certain non-GAAP financial measures that exclude stock-based compensation and other items, including gross profit (non-GAAP), operating expenses (non-GAAP), operating profit (non-GAAP), net income (non-GAAP), and earnings per diluted ADS (non-GAAP). These non-GAAP measures are not in accordance with or an alternative to GAAP, and may be different from non-GAAP measures used by other companies. We believe that these non-GAAP measures have limitations in that they do not reflect all the amounts associated with the Company’s results of operations as determined in accordance with GAAP and that these measures should only be used to evaluate the Company’s results of operations in conjunction with the corresponding GAAP measures. The presentation of this additional information is not meant to be considered in isolation or as a substitute for the most directly comparable GAAP measure. We compensate for the limitations of our non-GAAP financial measures by relying upon GAAP results to gain a complete picture of our performance.

Our non-GAAP financial measures are provided to enhance the user’s overall understanding of our current financial performance and our prospects for the future. Specifically, we believe the non-GAAP results provide useful information to both management and investors as these non-GAAP results exclude certain expenses, gains and losses that we believe are not indicative of our core operating results and because they are consistent with the financial models and estimates published by many analysts who follow the Company. We use non-GAAP measures to evaluate the operating performance of our business, for comparison with our forecasts, and for benchmarking our performance externally against our competitors. Also, when evaluating potential acquisitions, we exclude the items described below from our consideration of the target’s performance and valuation. Since we find these measures to be useful, we believe that our investors benefit from seeing the results from management’s perspective in addition to seeing our GAAP results. We believe that these non-GAAP measures, when read in conjunction with the Company’s GAAP financials, provide useful information to investors by offering:

• the ability to make more meaningful period-to-period comparisons of the Company’s on-going operating results;
• the ability to better identify trends in the Company’s underlying business and perform related trend analysis;
• a better understanding of how management plans and measures the Company’s underlying business; and
• an easier way to compare the Company’s operating results against analyst financial models and operating results of our competitors that supplement their GAAP results with non-GAAP financial measures.

The following are explanations of each of the adjustments that we incorporate into our non-GAAP measures, as well as the reasons for excluding each of these individual items in our reconciliation of these non-GAAP financial measures:

Stock-based compensation expense consists of non-cash charges related to the fair value of restricted stock units awarded to employees. The Company believes that the exclusion of these non-cash charges provides for more accurate comparisons of our operating results to our peer companies due to the varying available valuation methodologies, subjective assumptions and the variety of award types. In addition, the Company believes it is useful to investors to understand the specific impact of share-based compensation on its operating results.

SSD solutions restructuring are charges relate to the restructuring of our underperforming Shannon product lines and include goodwill impairment expenses, and the write-down of NAND flash and SSD inventory valuation.

Foreign exchange gains and losses consist of translation gains and/or losses of non-US$ denominated current assets and current liabilities, as well as certain other balance sheet items which result from the appreciation or depreciation of non-US$ currencies against the US$. We do not use financial instruments to manage the impact on our operations from changes in foreign exchange rates, and because our operations are subject to fluctuations in foreign exchange rates, we therefore exclude foreign exchange gains and losses when presenting non-GAAP financial measures.

Silicon Motion Technology Corporation
Consolidated Statements of Income
(in thousands, except percentages and per ADS data, unaudited)

	For Three Months Ended									For the Six Months Ended
	Jun. 30,			Mar. 31,			Jun. 30,			Jun. 30,			Jun. 30,
	2020			2021			2021			2020			2021
	($)			($)			($)			($)			($)
Net sales	136,811			182,399			221,103			269,580			403,502
Cost of sales	68,417			91,140			109,969			137,294			201,109
Gross profit	68,394			91,259			111,134			132,286			202,393
Operating expenses
Research & development	28,901			35,982			38,962			58,247			74,944
Sales & marketing	5,823			6,446			7,085			12,316			13,531
General & administrative	3,531			4,439			4,649			7,490			9,088
Operating income	30,139			44,392			60,438			54,233			104,830
Non-operating income (expense)
Interest income, net	1,323			361			336			3,055			697
Foreign exchange gain (loss), net	(142	)		(808	)		519			(623	)		(289	)
Others, net	6			3			-			22			3
Subtotal	1,187			(444	)		855			2,454			411
Income before income tax	31,326			43,948			61,293			56,687			105,241
Income tax expense	3,115			9,548			11,748			2,561			21,296
Net income	28,211			34,400			49,545			54,126			83,945
Earnings per basic ADS	0.80			0.99			1.42			1.54			2.41
Earnings per diluted ADS	0.80			0.98			1.42			1.54			2.40
Margin Analysis:
Gross margin	50.0	%		50.0	%		50.3	%		49.1	%		50.2	%
Operating margin	22.0	%		24.3	%		27.3	%		20.1	%		26.0	%
Net margin	20.6	%		18.9	%		22.4	%		20.1	%		20.8	%
Additional Data:
Basic ADS	35,146			34,674			34,926			35,024			34,800
Diluted ADS	35,164			34,924			34,953			35,147			34,939

Silicon Motion Technology Corporation
Reconciliation of GAAP to Non-GAAP Operating Results
(in thousands, except percentages and per ADS data, unaudited)

		For Three Months Ended												For the Six Months Ended
		Jun. 30,				Mar. 31,				Jun. 30,				Jun. 30,				Jun. 30,
		2020				2021				2021				2020				2021
		($)				($)				($)				($)				($)
Gross profit (GAAP)			68,394				91,259				111,134				132,286				202,393
Gross margin (GAAP)			50.0	%			50.0	%			50.3	%			49.1	%			50.2	%
Stock-based compensation (A)			3				54				52				41				106
SSD solutions restructuring			-				1,131				1,679				-				2,810
Gross profit (non-GAAP)			68,397				92,444				112,865				132,327				205,309
Gross margin (non-GAAP)			50.0	%			50.7	%			51.0	%			49.1	%			50.9	%
Operating expenses (GAAP)			38,255				46,867				50,696				78,053				97,563
Stock-based compensation (A)			(243	)			(2,961	)			(2,312	)			(2,687	)			(5,273	)
Operating expenses (non-GAAP)			38,012				43,906				48,384				75,366				92,290
Operating profit (GAAP)			30,139				44,392				60,438				54,233				104,830
Operating margin (GAAP)			22.0	%			24.3	%			27.3	%			20.1	%			26.0	%
Total adjustments to operating profit			246				4,146				4,043				2,728				8,189
Operating profit (non-GAAP)			30,385				48,538				64,481				56,961				113,019
Operating margin (non-GAAP)			22.2	%			26.6	%			29.2	%			21.1	%			28.0	%
Non-operating income (expense) (GAAP)			1,187				(444	)			855				2,454				411
Foreign exchange loss (gain), net			142				808				(519	)			623				289
Non-operating income (expense) (non-GAAP)			1,329				364				336				3,077				700
Net income (GAAP)			28,211				34,400				49,545				54,126				83,945
Total pre-tax impact of non-GAAP adjustments			388				4,954				3,524				3,351				8,478
Income tax impact of non-GAAP adjustments			2				(695	)			(339	)			(522	)			(1,034	)
Net income (non-GAAP)			28,601				38,659				52,730				56,955				91,389
Earnings per diluted ADS (GAAP)		$	0.80			$	0.98			$	1.42			$	1.54			$	2.40
Earnings per diluted ADS (non-GAAP)		$	0.81			$	1.11			$	1.50			$	1.62			$	2.60
Shares used in computing earnings per diluted ADS (GAAP)			35,164				34,924				34,953				35,147				34,939
Non-GAAP adjustments			36				45				297				49				171
Shares used in computing earnings per diluted ADS (non-GAAP)			35,200				34,969				35,250				35,196				35,110
(A) Excludes stock-based compensation as follows:
Cost of sales			3				54				52				41				106
Research & development			118				2,056				1,203				1,773				3,259
Sales & marketing			85				406				480				420				886
General & administrative			40				499				629				494				1,128

Silicon Motion Technology Corporation
Consolidated Balance Sheet
(In thousands, unaudited)

		Jun. 30,		Mar. 31,		Jun. 30,
		2020		2021		2021
		($)		($)		($)
Cash and cash equivalents		350,790		350,125		357,119
Short-term investments		3,876		-		-
Accounts receivable (net)		93,825		136,244		145,583
Inventories		103,835		113,432		150,617
Refundable deposits – current		24,089		18,693		48,760
Prepaid expenses and other current assets		23,778		25,140		26,742
Total current assets		600,193		643,634		728,821
Long-term investments		5,000		5,000		6,500
Property and equipment (net)		102,156		103,948		106,841
Goodwill and intangible assets (net)		17,489		-		-
Other assets		11,556		10,832		17,093
Total assets		736,394		763,414		859,255
Accounts payable		34,209		44,112		77,126
Income tax payable		3,642		12,817		19,071
Accrued expenses and other current liabilities		78,244		85,533		86,559
Total current liabilities		116,095		142,462		182,756
Other liabilities		27,202		26,193		29,859
Total liabilities		143,297		168,655		212,615
Shareholders’ equity		593,097		594,759		646,640
Total liabilities & shareholders’ equity		736,394		763,414		859,255

Silicon Motion Technology Corporation
Condensed Consolidated Statements of Cash Flows
(in thousands, unaudited)

		For Three Months Ended									For the Six Months Ended
		Jun. 30,			Mar. 31,			Jun. 30,			Jun. 30,			Jun. 30,
		2020			2021			2021			2020			2021
		($)			($)			($)			($)			($)
Net income		28,211			34,400			49,545			54,126			83,945
Depreciation & amortization		3,363			3,886			4,059			6,600			7,945
Stock-based compensation		246			3,015			2,364			2,728			5,379
Investment impairment, losses & disposals		33			203			-			19			203
Changes in operating assets and liabilities		(6,151	)		(24,132	)		4,058			1,839			(20,074	)
Others		(1	)		-			-			(1	)		-
Net cash provided by operating activities		25,701			17,372			60,026			65,311			77,398
Purchase of property & equipment		(4,134	)		(3,330	)		(4,926	)		(10,530	)		(8,256	)
Purchase of long-term investments		(2,000	)		-			(1,500	)		(2,000	)		(1,500	)
Net cash used in investing activities		(6,134	)		(3,330	)		(6,426	)		(12,530	)		(9,756	)
Dividend payments		(12,278	)		(12,199	)		(12,201	)		(24,556	)		(24,400	)
Net cash used in financing activities		(12,278	)		(12,199	)		(12,201	)		(24,556	)		(24,400	)
Net increase (decrease) in cash, cash equivalents & restricted cash		7,289			1,843			41,399			28,225			43,242
Effect of foreign exchange changes		(550	)		(86	)		(57	)		(664	)		(143	)
Cash, cash equivalents & restricted cash—beginning of period		369,075			369,211			370,968			348,253			369,211
Cash, cash equivalents & restricted cash—end of period		375,814			370,968			412,310			375,814			412,310

About Silicon Motion:

We are the global leader in supplying NAND flash controllers for solid state storage devices.  We supply more SSD controllers than any other company in the world for servers, PCs and other client devices and are the leading merchant supplier of eMMC and UFS embedded storage controllers used in smartphones, IoT devices and other applications.  We also supply customized high-performance hyperscale data center and specialized industrial and automotive SSD solutions.  Our customers include most of the NAND flash vendors, storage device module makers and leading OEMs.  For further information on Silicon Motion, visit us at www.siliconmotion.com.

Forward-Looking Statements:
This press release contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including without limitation, statements about Silicon Motion’s currently expected third quarter of 2021 and full year 2021 expectations of revenue, gross margin and operating expenses, all of which reflect management’s estimates based on information available at the time of this press release. While Silicon Motion believes these estimates to be meaningful, these amounts could differ materially from actual reported amounts for the third quarter of 2021 and full year 2021. Forward-looking statements also include, without limitation, statements regarding trends in the semiconductor or consumer electronics markets and our future results of operations, financial condition and business prospects. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “continue,” or the negative of these terms or other comparable terminology. Although such statements are based on our own information and information from other sources we believe to be reliable, you should not place undue reliance on them. These statements involve risks and uncertainties, and actual market trends or our actual results of operations, financial condition or business prospects may differ materially from those expressed or implied in these forward-looking statements for a variety of reasons. Potential risks and uncertainties include, but are not limited to the unpredictable volume and timing of customer orders, which are not fixed by contract but vary on a purchase order basis; the loss of one or more key customers or the significant reduction, postponement, rescheduling or cancellation of orders from one or more customers; general economic conditions or conditions in the semiconductor or consumer electronics markets; the effects on our business and our customer’s business taking into account the ongoing US-China tariffs and trade disputes together with the uncertainties associated with the ongoing global outbreak of COVID-19; decreases in the overall average selling prices of our products; changes in the relative sales mix of our products; changes in our cost of finished goods; the payment, or non-payment, of cash dividends in the future at the discretion of our board of directors and any announced planned increases in such dividends; changes in our cost of finished goods; the availability, pricing, and timeliness of delivery of other components and raw materials used in the products we sell given the current raw material supply shortages being experienced in our industry; our customers’ sales outlook, purchasing patterns, and inventory adjustments based on consumer demands and general economic conditions; any potential impairment charges that may be incurred related to businesses previously acquired or divested in the future; our ability to successfully develop, introduce, and sell new or enhanced products in a timely manner; and the timing of new product announcements or introductions by us or by our competitors. For additional discussion of these risks and uncertainties and other factors, please see the documents we file from time to time with the Securities and Exchange Commission, including our Annual Report on Form 20-F filed on May 12, 2021. We assume no obligation to update any forward-looking statements, which apply only as of the date of this press release.

Investor Contact:		Investor Contact:
Christopher Chaney		Selina Hsieh
Director, Investor Relations & Strategy		Investor Relations
E-mail: CChaney@siliconmotion.com		E-mail: ir@siliconmotion.com

Media Contact:
Sara Hsu
Project Manager
E-mail: sara.hsu@siliconmotion.com