Silicon Motion Technology Corporation (SIMO)

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Silicon Motion Technology Corporation (SIMO)

Q4 2018 Results Earnings Conference Call

January 30, 2019 08:00 AM ET

Company Participants

Jason Tsai - Senior Director, IR and Strategy

Wallace Kou - President and CEO

Riyadh Lai - CFO

Conference Call Participants

Mehdi Hosseini - SIG

Karl Ackerman - Cowen

Gokul Hariharan - JP Morgan

Rajvindra Gill - Needham & Company

Mike Crawford - B. Riley FBR

Anthony Stoss - Craig-Hallum



Good day ladies and gentlemen, and welcome to the Fourth Quarter Silicon Motion Technology Corporation 2018 Earnings Conference Call. My name is Ann and I’ll be your conference modulator for today. At this time, all the participants are in a listen-only mode. Later we’ll conduct a question-and-answer session. Before we begin today’s conference I’ve been asked to read the following forward-looking statements.

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 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 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.

I must advise that this conference is being recorded today Wednesday 30 of January, 2019. I would like to hand the conference over to your first speaker for day, Mr. Jason Tsai, Senior Director of Investor Relations and Strategy. Thank you. Please go ahead.

Jason Tsai

Thank you, and good morning everyone and welcome to Silicon Motion’s fourth 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 fourth 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 US 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 Riyadh will review our financials and provide our outlook later on this call. For the fourth quarter, our sale of $123 million declined 11% sequentially, and we are near the mid-point of our guidance range. Full year 2018 sales were $530 million up 1% year-over-year.

Earnings per ADS for the quarter were $0.83 down 13% sequentially. Full year 2018 earnings per ADS were $3.41, up 21% year-over-year. Let me first talk about our clients SSD business, revenue from clients SSD sales increased about 30% for the full year, much stronger than what we expected in the start of this year, although a bit less than our revised 35% target in Q3.

SSD controller sales to our NAND flash partners did increase by about 35% year-over-year. We believe that demand for SSD grew as NAND flash prices declined meaningful and as the affordability improved. In Q4, we were expecting stable sequential SSD controller sales. Q4 SSD controller sales however declined 20% sequentially as our China module maker customer became more (inaudible) adverse in procuring NAND component and building SSD as falling NAND prices accelerated dramatically, despite NAND flash makers holding back NAND shipment and building inventory. Module maker became more cautious and they now want to try to catch a falling knife.

Looking to 2019, we believe our clients SSD controller sales will continue to grow and NAND prices will fall further. NAND industry supply will grow robustly this year as the yield improve on 96 layer 3D NAND and 64 layer QLC NAND ramps. Demand for all major market segment on the other hand remains soft at today’s and additionally inventory level as a NAND vendor are at an elevated levels.

Read the rest of this transcript on seekingalpha.com