|SIMO Q3 results are out. Lets see|
The results? Looks pretty much in line with pre-announced numbers on the income statement, revenues, gross margins and EPS in line with the pre-announcement.
Hard for me to understand the balance sheet. They appear to have paid down their $25 loan. And their cash position appears to have increased by $27m (from $306m last Q to $333m now). So that's positive cash flow of $52m. But....the cash flow statement only has $37m cash from ops, and the financing and investing cash flows are negative. I don't quite understand how they can pay down $25m in debt and increase cash by $27m when operating cash flows were only $37m. Anyway, it apears to have happened, I will let them explain it.
The future? Seems almost exactly in line with what I wrote in the previous posts. Next Q revenues should be $130m to $36m and operating profit margin flat to up. So.....the 2017 business outlook is unchanged from 3 months ago, and the EPS growth is dependent on revenue growth. I guess that's OK, at least they aren't ramping absolute expenses. If they can keep operating expenses at this level, then there is lots of leverage in their business model. If revenues ramp, EPS should ramp faster.
I think it's basically an in line report.
They do say this good stuff in the commentary "This quarter, NAND flash industry supply increased materially. “We expect our business to gradually rebound in the fourth quarter, and rebound further next year due to increasing availability of 64L 3D NAND and more competitive NAND pricing,” said Wallace Kou, President and CEO of Silicon Motion. “In the fourth quarter, we expect our Ferri and Shannon SSD solutions customers to take advantage of improving supply of NAND flash to procure more than originally forecasted. We expect our client SSD controller sales to increase strongly in the fourth quarter as our pipeline of 2nd generation PCIe NVMe client SSD controllers start entering production.”
Lets see, shares out declined by 260,000 shares to 35.54m shares. I think the Q3 share count number is the average share count in the Q. So.....it was 35.8 million at the end of Q2, a month passed before they announced the share repurchase on Aug 1st, so they only had two months to purchase, and so....I think that means they had 35.8m shares on June 30, then Q3 starts and they still have 35.8m shares on Jul 30 before the buyback, and 35.41m shares on Aug 30 and 35.41m shares on Sep 30th. (35.8 + 35.41m + 35.41m)/3 = 35.54m shars in the release.
So it means they bought back 390,000 shares in Q3, lets say the price was $45, that's about $17m of shares repurchased. The math works with making the Q3 share count be the average amount over the course of the quarter, but another $17m cash out the door doesn't jive with their cash on the balance sheet going up by $27m with a debt paydown of $25m and now a share repurchase on $27m.
Yup, the balance sheet is a bit of a mystery to me, gonna have to wait for that one. Anyways, it's a tech stock, who cares about the balance sheet?
So we're still waiting for the NAND price reductions which occur when 3D NAND production ramps. That ramp happened in Q3, and one would think it can only accelerate each quarter from here. So....this report is good in that it keep the very positive NAND environment on the horizon, stocks like to look forward.
My biggest concern just from this report is that eMMC declined 20% sequentially. and in the discussion of the positive future outlook eMMC is not mentioned. Maybe SK Hynix is going it alone with UFS 2.1 controllers? Who knows? Smartphone sales are doing OK, and SIMO's segment (cheap Chinese smartphones) are selling better than the industry, so it's hard to understand why eMMC is not doing really well unless SIMO is losing market share in Chinese smartphone NAND controllers.
I like it that Shannon and Ferri are described as doing better than expected. Hopefully SIMO can grow this business for a few years and then sell it for a nice premium. This space is a device maker space, and doesn't really fit in well with SIMO the component maker. Lots of NAND makers want to own these enterprise SSD products, I would hope SIMO can sell the Ferri/Shannon group to someone for a good price. Over the long term, it seems like the NAND makers are going to win the enterprise device battle, so holding Shannon/Ferri long term is a losing idea, even though the next few years might be great.