Silicon Motion Technology Corporation (SIMO)

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Silicon Motion Technology Corporation (SIMO)

Q4 2016 Earnings Conference Call

January 24, 2017 08:00 ET


Jason Tsai - Senior Director, Investor Relations and Strategy

Wallace Kou - President and Chief Executive Officer

Riyadh Lai - Chief Financial Officer


Mehdi Hosseini - SIG

Anthony Stoss - Craig-Hallum

Suji Desilva - ROTH Capital

Mike Burton - Brean Capital

Betsy Van Hees - Loop Capital Markets

Jaeson Schmidt - Lake Street Capital Markets

Mike Crawford - B. Riley & Company

Rajvindra Gill - Needham & Company

Tom Sepenzis - Northland



Ladies and gentlemen thank you for standing by and welcome to the Silicon Motion Technology Corp. Fourth Quarter 2016 Earnings Conference Call. At this time, all participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. [Operator Instructions] I must advise you that this conference is being recorded today, Tuesday, January 24, 2017.

This conference call contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 as amended. Such forward-looking statements include, without limitations, statements regarding trends in the semiconductor industry and our future results of operations, financial conditions and business prospects. 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 and our results 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, continued competitive pressure in the semiconductor industry and the effect of such pressure on prices, unpredictable changes in technology and consumer demand for multimedia consumer electronics, the state of and any changes in our relationship with our major customers, and changes in political, economic, legal and social conditions in Taiwan.

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. We assume no obligation to update any forward-looking statements, which apply only as of the date of this conference call.

I would now like to hand the conference over to your first speaker today, Mr. Jason Tsai. Thank you. Please go ahead.

Jason Tsai

Thank you. Good morning, everyone. Welcome to Silicon Motion’s fourth quarter 2016 financial results conference call and webcast. My name is Jason Tsai. With me here is Wallace Kou, our President and CEO and Riyadh Lai, our Chief Financial Officer.

The agenda for today is as follows. Wallace will start with a review of some of our recent business developments. Riyadh will then discuss our fourth quarter financial results and provide our outlook. We will then conclude with Q&A.

Before we get started, I’d like to remind you of the Safe Harbor policy, which was read at the start of this call. For a comprehensive overview of the risks involved in investing in our securities, please refer to our filings with the U.S. SEC. For more details on our financial results, please refer to our press release which was filed on Form 6-K after the close of market yesterday. This webcast will be available for replay on our website, www.siliconmotion.com for a limited time.

To enhance investors’ understanding of our ongoing economic performance, we will discuss non-GAAP information during this call. We use non-GAAP financial measures internally to evaluate and manage our operations. We have therefore chosen to provide this information to enable you to perform comparisons of our operating results in a manner similar to how we analyze our own operating results. The reconciliation of the GAAP to non-GAAP financial data can be found in our earnings release issued yesterday. We ask that you review it in conjunction with this call.

With that, I will turn the call over to Wallace.

Wallace Kou

Thank you, Jason. Hello, everyone and thank you for joining our earnings call. 2016 was an outstanding year and we ended the year with a strong fourth quarter. Our fourth quarter revenue of $144 million was the high end of our expectation and is a 47% increase from the same period a year ago. For full year 2016, revenue increased by 54% to $556 million, a record high. Our fourth quarter operation margin expenditure is 30%, and earnings per share were $0.95. For the full year, EPS increased 73% to a record $3.64. Riyadh will discuss our financial results in greater detail later on the call.

The need for more advanced controller technology has been evident now for many years as NAND’s improving affordability had come to the cost of becoming increasingly weak and difficult to manage. As the industry moved to 3D NAND and layer count increases from four 30 and 40 layers to 60 and 70 layers this year and nearly 100 years in the QLC 4 bits per cell NAND over the next 1 to 2 years. Unique new problem will continue to arise that will put a limit on controller technology. As 3D NAND layer count increases, data corruption will get worse from time usage and temperature in these data retention issues. The effect of [indiscernible] circuitry noises and data read/write interference, increasing data corruption issues will require better controller technologies. Our expertise in managing these and other NAND flash component issues in different applications, we use solutions optimized for performance, lower power, cost and ease-of-use. Our customers see our solution unique and unparalleled in the industry.

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