Silicon Motion(SIMO) - 2022 Q4 - Annual Report

Revenue and Sales - In 2022, 45% to 50% of Silicon Motion's net sales were from SSD controllers, 35% to 40% from eMMC and UFS controllers, and 5% to 10% from SSD solutions[124]. - Sales to the five largest customers represented approximately 67% of net revenue in 2022, with significant customers including Micron and SK Hynix[128]. - Approximately 79% of Silicon Motion's sales in 2022 were attributable to its direct sales force[130]. - Total revenue for the year ended December 31, 2022, increased by 3% to $945.9 million from $922.1 million in the prior year[159]. - In 2022, the company's net sales increased by 3% year-over-year to approximately US$945.9 million, with Mobile Storage revenue rising by 2% and SSD controller sales decreasing by 5% to 10%[184]. - The company expects higher net sales generally in the second half of each year due to increased demand during year-end holiday seasons[163]. Expenses and Profitability - Research and development expenses for Silicon Motion were approximately US$188.5 million in 2022, up from US$164.3 million in 2021[135]. - Total operating expenses increased by 17% to $251.9 million from $214.9 million in the prior year[159]. - Operating profit decreased by 13% to $213.9 million from $245.9 million in the prior year[159]. - Diluted earnings per ADS decreased by 9.6% to $5.17 from $5.72 in the prior year[159]. - Gross profit as a percentage of revenue decreased by 0.8 percentage points to 49.2% from 50.0% in the prior year[159]. - Gross profit as a percentage of net sales decreased to 49% in 2022 from 50% in 2021, primarily due to significant inventory value write-downs related to SSD solutions[185]. Research and Development - The company has 2,490 patents and 1,203 pending applications worldwide as of March 31, 2023[135]. - Research and development expenses increased by 15% year-over-year to approximately US$188.5 million in 2022, with salary and benefits rising by 8% to approximately US$106.7 million[186]. Cash Flow and Investments - Net cash provided by operating activities was approximately US$83.9 million for 2022, down 52.0% from US$174.7 million in 2021[199]. - Net cash used in investing activities was approximately US$32.9 million in 2022, compared to US$28.2 million in 2021, indicating an increase of 26.4%[201]. - Net cash used in financing activities rose significantly to approximately US$183.1 million in 2022, compared to US$99.7 million in 2021, an increase of 83.7%[202]. - Cash and cash equivalents decreased by US$127.9 million to approximately US$232.2 million as of December 31, 2022, compared to the previous year[195]. Tax and Legal Matters - The total amount of unrecognized tax benefits as of December 31, 2022, was US$37.1 million, with accrued interest and penalties of US$6.8 million[176]. - The total amount of valuation allowance for deferred tax assets as of December 31, 2022, was US$20.2 million[175]. - The company has obtained a tax concession from the Cayman Islands for a period of 20 years from March 1, 2005, exempting it from taxes on profits, income, or gains[287]. - The company does not have a comprehensive income tax treaty with the United States, which may affect tax implications for U.S. holders[268]. Shareholder and Stock Information - The company repurchased 1.6 million ADSs for US$128.8 million at an average price of US$79.18 per ADS in 2022[205]. - The company repurchased $178.9 million of its ADSs at an average price of $81.91 per ADS under a $200 million repurchase plan announced in December 2021[316]. - As of March 31, 2023, there were 133,629,072 ordinary shares outstanding[250]. - No shareholder holds more than 5% of the company's outstanding ordinary shares[252]. Employee and Management Information - As of December 31, 2022, the total number of employees was 1,643, with 1,262 in Research and Development, representing a growth of 18.5% from 1,065 in 2021[246]. - The aggregate compensation for directors and senior executive officers for the year ended December 31, 2022, was approximately US$5.85 million[237]. - The company has no collective bargaining arrangements with employees and considers employee relations to be good[247]. Corporate Governance - The board of directors has established an audit committee, a compensation committee, and a nominating and corporate governance committee[229]. - The audit committee is responsible for overseeing the financial reporting processes and the audits of consolidated financial statements[230]. - The compensation committee reviews the performance and development of management in achieving corporate goals[231]. - The independent registered public accountants for the company are Deloitte & Touche, who have served since 2021[310]. Market and Competition - The company expects increased competition in the semiconductor market due to rapid technological changes and evolving industry standards[141].