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Silicon Motion Technology Corporation (SIMO)

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Silicon Motion Technology Corporation (SIMO)

Q2 2018 Earnings Conference Call

August 1, 2018 8:00 AM ET

Executives

Jason Tsai - Investor Relations

Wallace Kou - President and Chief Executive Officer

Riyadh Lai - Chief Financial Officer

Analysts

Karl Ackerman - Cowen & Co.

Mike Burton - The Benchmark Co., LLC

Sujeeva Desilva - ROTH Capital Partners

Rajvindra Gill - Needham & Company, LLC

Mike Crawford - B. Riley & Co., LLC

Gokul Hariharan - JP Morgan

Mehdi Hosseini - Susquehanna Financial Group

Charlie Chan - Morgan Stanley Research

Presentation

Operator

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 limitation, 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 risk 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 any change 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.

Ladies and gentlemen, thank you for standing by, and welcome to Silicon Motion Technology Corporation Q2 2018 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 Wednesday August 1, 2018.

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

Jason Tsai

Thank you, and good morning. Welcome everyone to Silicon Motion’s second quarter 2018 financial results conference call and webcast. My name is Jason Tsai, and 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 our key business developments. Riyadh will then discuss our second quarter financial results and provide our outlook. We’ll then conclude with Q&A.

Before we get started, I’d like to remind you of our 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 us today. I will first update you on our business, and then Riyadh will review our financials and provide our outlook later on this call.

We are pleased to report second quarter revenue of $138.1 million, which is up 6% sequentially and up 4% year-over-year. Earning per ADS this quarter was $0.92, an increase of 29% both sequentially and year-over-year. This quarter, our SSD controller grew approximately 5% sequentially. With rapid growing NAND supply and increasingly variable NAND prices, flash maker are more focused on SSD opportunity and raising their sales projections.

As a result of flash partners’ improved SSD growth outlook, we are increasing our full-year SSD controller sales growth to, at least, 30%, with sale accelerating in Q3. Additionally, during this quarter, we grew our pipeline of SSD controller projects at our 3D NAND flash partners Intel, Micron and WD by over 50% sequentially and more than double compared to last year. The majority of our pipeline of new SSD program are for PCIE, NVMe and now include those are used 64, 72 and 96-layer TLC and QLC 3D NAND with production running from this quarter all the way through 2020.

NAND prices have fallen meaningfully since the start of this year. Dollar per gigabyte cost of NAND has been falling and will continue to fall rapidly with current high-volume 64 and 72-layer 3D NAND production. Scaling of 4 bits per cell QLC NAND and migration to 96-layer and upcoming higher layer count NAND. Since the NAND industry is very competitive with now seven suppliers, the benefit of increasing lower NAND costs is quickly passed to device OEM and consumers.

Read the rest of this transcript on seekingalpha.com