September 9, 2020
U.S. Securities and Exchange Commission (“Commission” or “Staff”)
c/o Ms. Melissa Raminpour and Ms. Heather Clark
Division of Corporation Finance
Office of Manufacturing
Washington, DC 20549
| Re: | Silicon Motion Technology Corporation |
Form 6-K furnished April 29, 2020
Form 6-K furnished July 30, 2020
File No. 000-51380
Dear Ms. Raminpour and Ms. Clark:
Reference is made to the letter received from the Commission dated August 25, 2020 regarding Form 6-Ks dated April 29, 2020 and July 30, 2020 of Silicon Motion Technology Corporation (the “Company”).
For your convenience, we have included your comments in this response letter in bold form and keyed our response accordingly. The Company’s response to the comments is as follows.
Form 6-K furnished July 30, 2020
Comment:
1. We note from your response to our prior comment 3 that you will change your presentation in future filings to present your non-GAAP measures “without appearing to be a full non-GAAP income statement.” However, we note that your presentation did not change from your Q1 2020 results furnished on April 29, 2020 to your Q2 2020 results furnished on July 30, 2020, after the date of our letter on July 9, 2020. In this regard, please provide us with your proposed disclosure in future Forms 6-K.
Response:
We acknowledge the Staff’s comments and respectfully note that non-GAAP presentation were not revised in our Q2 2020 results as we replied to the Commission on August 14th, after the release of our Q2 2020 results on July 30th. In our reply, we agreed to change in future filings the presentation of non-GAAP measures without appearing to be a full non-GAAP income statement. We provide as an exhibit to this letter our proposed revised disclosure in future Forms 6-K.
| 8F, #36 Taiyuan St., Jhubei, Hsinchu 30265, Taiwan | Tel: +886-3-552-6888 | Fax: +886-3-552-6988 | ||
| www.siliconmotion.com |
Comment:
2. We note your response to our prior comment 4 that you will “discontinue the presentation of FCI divestiture adjustments in subsequent periods when for sequential or year-after- year comparisons, past periods no longer include FCI operating results and the gain from divestiture.” However, we continue to believe that as the FCI divested operations did not meet the criteria for being presented as discontinued operations pursuant to ASC 205-20, your non-GAAP measures appear to substitute individually tailored recognition and measurement methods for those of GAAP. Therefore, as originally stated, please revise your non-GAAP presentations to comply with Question 100.04 of the Non-GAAP C&DIs by removing the FCI divestiture adjustments. Please be advised that the revenue example discussed in Question 100.04 is only one example of a tailored measure. Note that alternatively, you may adjust for just the gain from the divestiture, given that it was a one-time, non-cash charge.
Response:
We acknowledge the Staff’s comments that FCI divestiture adjustments included in our non-GAAP measures could be construed as an individually tailored accounting principle and will remove this from future non-GAAP presentations. We will instead provide a summary of the impact on individual line items of the FCI divestiture separately so investors can reconcile with our previous non-GAAP disclosures and continue to evaluate our business consistently without FCI. Please refer to the exhibit to this letter for our proposed presentation in future Forms 6-K.
Should you have any questions or wish to discuss the foregoing in further detail, please feel free to contact the undersigned.
| Sincerely, | ||
| SILICON MOTION TECHNOLOGY CORPORATION | ||
| By | /s/ Riyadh Lai | |
| Riyadh Lai, Chief Financial Officer | ||
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Exhibit
Silicon Motion Technology Corporation
Reconciliation of GAAP to Non-GAAP Operating Results
(in thousands, except percentages and per ADS data, unaudited)
| For Three Months Ended | For the Six Months Ended | |||||||||||||||||||
| Jun. 30, | Mar. 31, | Jun. 30, | Jun. 30, | Jun. 30, | ||||||||||||||||
| 2019 | 2020 | 2020 | 2019 | 2020 | ||||||||||||||||
| ($) | ($) | ($) | ($) | ($) | ||||||||||||||||
| Gross profit (GAAP) |
46,129 | 63,892 | 68,394 | 93,748 | 132,286 | |||||||||||||||
| Gross margin (GAAP) |
46.7 | % | 48.1 | % | 50.0 | % | 48.4 | % | 49.1 | % | ||||||||||
| Stock-based compensation (A) |
7 | 38 | 3 | 114 | 41 | |||||||||||||||
| SSD solutions restructuring |
4,985 | — | — | 4,985 | — | |||||||||||||||
| Gross profit (non-GAAP) (B) |
51,121 | 63,930 | 68,397 | 98,847 | 132,327 | |||||||||||||||
| Gross margin (non-GAAP) (C) |
51.7 | % | 48.2 | % | 50.0 | % | 51.1 | % | 49.1 | % | ||||||||||
| Operating expenses (GAAP) |
33,851 | 39,798 | 38,255 | 73,477 | 78,053 | |||||||||||||||
| Stock-based compensation (A) |
(219 | ) | (2,444 | ) | (243 | ) | (4,515 | ) | (2,687 | ) | ||||||||||
| Amortization of intangible assets |
(255 | ) | — | — | (510 | ) | — | |||||||||||||
| Litigation expense |
— | — | — | 2 | — | |||||||||||||||
| Operating expenses (non-GAAP) (B) |
33,377 | 37,354 | 38,012 | 68,454 | 75,366 | |||||||||||||||
| Operating profit (GAAP) |
12,278 | 24,094 | 30,139 | 20,271 | 54,233 | |||||||||||||||
| Operating margin (GAAP) |
12.4 | % | 18.1 | % | 22.0 | % | 10.5 | % | 20.1 | % | ||||||||||
| Total adjustments to operating profit |
5,466 | 2,482 | 246 | 10,122 | 2,728 | |||||||||||||||
| Operating profit (non-GAAP) (B) |
17,744 | 26,576 | 30,385 | 30,393 | 56,961 | |||||||||||||||
| Operating margin (non-GAAP) (C) |
18.0 | % | 20.0 | % | 22.2 | % | 15.7 | % | 21.1 | % | ||||||||||
| Non-operating income (expense) (GAAP) |
14,727 | 1,267 | 1,187 | 16,816 | 2,454 | |||||||||||||||
| Foreign exchange loss (gain), net |
68 | 481 | 142 | (425 | ) | 623 | ||||||||||||||
| Gain on disposal of long-term investments |
(12,904 | ) | — | — | (12,904 | ) | — | |||||||||||||
| Non-operating income (expense) (non-GAAP) (B) |
1,891 | 1,748 | 1,329 | 3,487 | 3,077 | |||||||||||||||
| Net income (GAAP) |
26,484 | 25,915 | 28,211 | 34,756 | 54,126 | |||||||||||||||
| Total pre-tax impact of non-GAAP adjustments (B) |
(7,370 | ) | 2,963 | 388 | (3,207 | ) | 3,351 | |||||||||||||
| Income tax impact of non-GAAP adjustments (B) |
(79 | ) | (524 | ) | 2 | (758 | ) | (522 | ) | |||||||||||
| Net income (non-GAAP) (B), (C) |
19,035 | 28,354 | 28,601 | 30,791 | 56,955 | |||||||||||||||
| Earnings per diluted ADS (GAAP) |
$ | 0.75 | $ | 0.74 | $ | 0.80 | $ | 0.98 | $ | 1.54 | ||||||||||
| Earnings per diluted ADS (non-GAAP) (B), (C) |
$ | 0.54 | $ | 0.80 | $ | 0.81 | $ | 0.87 | $ | 1.62 | ||||||||||
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| Shares used in computing earnings per diluted ADS (GAAP) |
35,536 | 35,246 | 35,164 | 35,505 | 35,147 | |||||||||||||||
| Non-GAAP Adjustments |
32 | 63 | 36 | 63 | 49 | |||||||||||||||
| Shares used in computing earnings per diluted ADS (non-GAAP) |
35,568 | 35,309 | 35,200 | 35,568 | 35,196 | |||||||||||||||
| (A) Excludes stock-based compensation as follows: |
||||||||||||||||||||
| Cost of Sales |
7 | 38 | 3 | 114 | 41 | |||||||||||||||
| Research & development |
112 | 1,655 | 118 | 2,939 | 1,773 | |||||||||||||||
| Sales & marketing |
70 | 335 | 85 | 678 | 420 | |||||||||||||||
| General & administrative |
37 | 454 | 40 | 898 | 494 | |||||||||||||||
| (B) FCI divestiture items previously excluded from non-GAAP: |
||||||||||||||||||||
| Revenue |
4,566 | — | — | 10,359 | — | |||||||||||||||
| Gross Profit |
2,597 | — | — | 5,687 | — | |||||||||||||||
| Operating Expenses |
2,158 | — | — | 8,542 | — | |||||||||||||||
| Operating Profit(Loss) |
439 | — | — | (2,855 | ) | — | ||||||||||||||
| Non-Operating Income(Expense) |
(4 | ) | — | — | 9 | — | ||||||||||||||
| Taxes |
3 | — | — | 8 | — | |||||||||||||||
| Net income(Loss) |
432 | — | — | (2,854 | ) | — | ||||||||||||||
| EPS |
0.01 | — | — | (0.08 | ) | — | ||||||||||||||
| (C) Reconciliation with previous non-GAAP disclosures: |
||||||||||||||||||||
| Revenue (non-GAAP) less FCI |
94,280 | 132,769 | 136,811 | 183,181 | 269,580 | |||||||||||||||
| Gross Margin (non-GAAP) less FCI |
51.5 | % | 48.2 | % | 50.0 | % | 50.9 | % | 49.1 | % | ||||||||||
| Operating Margin (non-GAAP) less FCI |
18.4 | % | 20.0 | % | 22.2 | % | 18.2 | % | 21.1 | % | ||||||||||
| Earnings per diluted ADS (non-GAAP) less FCI |
$ | 0.52 | $ | 0.80 | $ | 0.81 | $ | 0.95 | $ | 1.62 |
4