Release Date: October 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Silicon Motion Technology Corp (SIMO, Financial) reported its sixth consecutive quarter of gross margin expansion, reaching the high end of its guided range.
- The company experienced a significant year-over-year revenue growth of over 60% from NAND maker customers, driven by new product introductions and strategic partnerships.
- Silicon Motion is well-positioned for long-term growth with the introduction of new products like PCIe 5.0 controllers and MonTitan enterprise-class solutions.
- The company is expanding its market share in high-end PC, automotive, and other markets, with new design wins and product ramps expected in 2025.
- Silicon Motion's expertise in QLC NAND technology positions it as a key beneficiary of the growing adoption of QLC NAND across various markets.
Negative Points
- The company faces near-term challenges due to high NAND prices and lower consumer spending driven by inflationary pressures.
- There is continued weakness in the retail aftermarket for SSDs, impacting overall sales performance.
- Silicon Motion anticipates a sequential revenue decline of 5% to 10% in the fourth quarter due to weaker-than-seasonal smartphone and PC sales.
- Operating expenses increased in the third quarter due to expected tape-out expenses for new product development.
- The company acknowledges the uncertainty in the market, particularly regarding the recovery of retail demand and the impact of inflation on consumer electronics.
Q & A Highlights
Q: What gives you confidence that the current weakness won't continue into early 2025, especially since Q1 is typically weak?
A: Wallace Kou, President and CEO, stated that while they cannot guarantee a recovery in Q1 due to inflation and high NAND prices, they see progress from module and industrial customers. They expect more bookings from late Q1 or early Q2, with new programs in the PC and smartphone markets, suggesting a more exciting 2025.
Q: Why not increase cash dividends to show confidence in new products?
A: Wallace Kou explained that the share repurchase program is evaluated by the Board, and they aim to return cash to shareholders fairly. They maintain a cautious approach due to potential legal expenses and focus on business growth.
Q: Can you summarize the growth expectations for 2025 with new products like PCIe Gen5 and MonTitan?
A: Wallace Kou highlighted that PCIe Gen5 is expected to ramp up with high-end market share reaching 50-60% by 2026. UFS 4 will transition to mainstream, and MonTitan is projected to contribute 10% of total revenue by 2026-2027. They are confident in significant revenue growth from these products.
Q: Are the PCIe 5 ramps staggered or aligned with new PC processors?
A: Wallace Kou noted that for PC OEMs, the ramps align with their requirements, while retail ramps may start by late this year or Q1 next year. They expect to reach a maximum around 15% by 2026, with potential to gain more NAND maker opportunities.
Q: Will gross margins return to historical levels, and could they exceed those levels with new opportunities?
A: Jason Tsai, CFO, confirmed they expect gross margins to return to 48-50% by early next year. With higher ASPs and margins from new products, there is potential for margins to exceed historical levels in the long term.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
