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Silicon Motion (SIMO) Misses Q3 Earnings & Revenue Estimates

Zacks Equity Research
·4 min read

Silicon Motion Technology Corporation SIMO reported soft third-quarter 2022 results, with both the bottom line and the top line missing the Zacks Consensus Estimate. Revenues declined year over year owing to a challenging macroeconomic environment and lower end-market demand.

Net Income

On a GAAP basis, net income declined to $42.9 million or $1.29 per American depositary share (ADS) from $55.4 million or $1.58 per ADS in the prior-year quarter. The year-over-year decrease was primarily attributable to top-line contraction and higher operating expenses.

Non-GAAP net income was $51.2 million or $1.53 per ADS compared with $60.4 million or $1.70 ADS in the year-ago quarter. The bottom line missed the Zacks Consensus Estimate by 49 cents.

Silicon Motion Technology Corporation Price, Consensus and EPS Surprise

Silicon Motion Technology Corporation price-consensus-eps-surprise-chart | Silicon Motion Technology Corporation Quote

Revenues

Silicon Motion’s quarterly revenues decreased to $250.8 million from $254.2 million in the prior-year quarter. The top line missed the consensus estimate of $279 million. The company experienced relatively flat SSD controller sales as end markets for PC and smartphones remained challenging. However, the ramp-up of PCIe Gen 4 SSD controllers for PC OEMs helped the company partially offset the revenue decline.

Other Details

Non-GAAP gross profit was $119.3 million compared with $127.8 million in the year-ago quarter, driven by a shift in the product mix and pricing concessions. Non-GAAP total operating expenses rose to $56.6 million from $53 million. Non-GAAP operating income was $62.7 million, down from $74.8 million, with respective margins of 25% and 29.4%.

Cash Flow & Liquidity

In the first nine months of 2022, Silicon Motion generated $43.9 million of cash from operating activities compared with $106.1 million in the year-ago period. As of Sep 30, 2022, the company had $199.2 million in cash and cash equivalents with $44.3 million of other liabilities.

Moving Forward

The company is working on the upcoming launch of its next-generation enterprise-class SSD controllers. The company has also commenced initial sales of 3D SSD controllers to flash partners. However, the semiconductor industry is highly competitive, which subjects the company to stiff rivalry from its peer companies such as Micron, Microchip, Marvell and ON Semiconductor. The tense political condition between Taiwan and People’s Republic of China also increases the operating risks of the company.

Zacks Rank & Stocks to Consider

Silicon Motion currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

TESSCO Technologies Incorporated TESS, sporting a Zacks Rank #1, delivered an earnings surprise of 61.9%, on average, in the trailing four quarters. Earnings estimates for TESSCO for the current year have moved up 49.4% since August 2021.

TESSCO offers products to the industry’s top manufacturers in mobile communications, Wi-Fi, wireless backhaul and related products. With more than three decades of experience, it delivers complete end-to-end solutions to the wireless industry.

Ooma Inc. OOMA, carrying a Zacks Rank #2 (Buy), delivered an earnings surprise of 34.7%, on average, in the trailing four quarters. Earnings estimates for Ooma for the current year have moved up 5.4% since March 2022.

Ooma offers communications services and related technologies for businesses and consumers in the United States and Canada. It helps to create powerful connected experiences for businesses and consumers through its smart cloud-based SaaS platform.

Viavi Solutions Inc. VIAV, carrying a Zacks Rank #2, is a solid pick for investors in the broader industry. It delivered a modest earnings surprise of 12.4%, on average, in the trailing four quarters.

Earnings estimates for the current year for Viavi have moved up 7.9% since October 2021, while that for the next year is up 18.7%. It boasts a comprehensive product portfolio that offers end-to-end network visibility and analytics that help build, test, certify, maintain and optimize complex physical and virtual networks. Viavi expects growth to be driven by the secular demand for 5G wireless, fiber and 3D sensing.


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