May 13, 2009 at 5:31 AM EDT
BACK
CORRECTING AND REPLACING -- Silicon Motion Announces First Quarter Results for the Period Ended March 31, 2009 and Revisions to Fourth Quarter 2008 Results
First Quarter 2009 ------------------ Financial Highlights * Net sales decreased 33% quarter-over-quarter toUS$21.5 million * Gross margin excluding stock-based compensation improved to 44.1% compared with our revised 4Q08 gross margin of 38.5% * Operating expenses excluding stock-based compensation, acquisition- related charges, and one-time items decreased from our revised 4Q08 ofUS$16.5 million to US$10.0 million * Net loss excluding stock-based compensation, acquisition-related charges, foreign exchange gain, and one-time items improved from a revised 4Q08 loss ofUS$3.9 million to a loss ofUS$0.8 million . GAAP net loss decreased fromUS$8.2 million in 4Q08 toUS$1.4 million * Diluted loss per ADS excluding stock-based compensation, acquisition-related charges, foreign exchange gain, and one-time items wereUS$0.03 , an improvement from our revised 4Q08 loss per share ofUS$0.14 . GAAP diluted loss per ADS wasUS$0.05 Business Highlights * Reduced total unit shipments 35% year-over-year and 20% sequentially to approximately 74 million units * Reduced storage controller unit shipments 35% year-over-year and 21% sequentially * Received SSD controller design-win for new MSI netbook PC utilizing a dual SSD and HDD storage solution * Successfully introduced SSD controllers to new markets such as in- car navigation and other consumer electronics devices with our new Hybrid and TurboMLC SSD controllers * Received a design-win for our SSD controller from a global tier one hard drive vendor used in their new SSD product * Received a design-win from a tier one handset vendor for our ISDB-T solution for theBrazil market * Began shipping in volume since January our T-DMB SoC solution to leading handset vendors in Korea includingSamsung , LG andPantech & Curitel
Net loss excluding stock-based compensation, acquisition-related charges, foreign exchange gain, and one-time items decreased in the first quarter to a loss of
Revised Fourth Quarter 2008 Financial Review
When we reported our fourth quarter results in February, we reported unaudited results. Following the report of our results, new material information regarding the deteriorating financial condition of certain customers and more limited growth prospects of several products, which are consequences of on-going weakness in the global economic outlook, came to management's knowledge. The majority of issues were largely related to our mobile communications business. After careful examination, we have revised our fourth quarter results to account for an increase in obsolete inventory reserves together with an increase in reserves for doubtful accounts, described below.
Sales
Fourth quarter 2008 net sales of
Gross and Operating Margins
Revised gross margins, excluding stock-based compensation, decreased from 50.3% to 38.5% due to
Earnings
Revised net loss (GAAP) was
First Quarter 2009 Financial Review (1)
Commenting on the results of the first quarter,
"As noted in our first quarter pre-announcement, our business continues to be affected by the ongoing global economic slowdown, specifically weak end demand, reduced supply of NAND flash components by chipmakers, and more intense competition with other controller makers. Our revenue growth and profitability have been impacted by these unfavorable industry conditions. Such factors also contributed to the need to revise our previously released unaudited results from the fourth quarter.
"The NAND flash industry this year will grow at a historically unprecedented low growth rate. Because of weak consumer demand for NAND flash storage devices, NAND flash chipmakers have been limiting production output by retiring old fabs, operating their fabs at low utilization rates, and ramping more slowly new capacity for the production of next generation flash. While these industry actions have led to a rebound in NAND flash prices, they negatively affect the availability of flash components to our customers, their related procurement of controllers, and our revenues. Additionally, our gross margin was weaker than expected this quarter because of slower transition by the flash industry to next-generation, sub-50nm NAND products and a resulting sales mix with a larger proportion coming from lower margin legacy controllers. This issue was exacerbated by more competition among controller suppliers for a more limited addressable market. Despite challenging near-term market conditions, we remain optimistic about our long-term prospects, continue to execute well in bringing to market next-generation solutions, and expect to benefit from the sales of these next generation solutions in the near future. We continue to make progress towards developing and introducing new products for next generation products such as TLC NAND and controllers to utilize faster interfaces such as USB 3.0 and SD 3.0. We are confident that NAND flash growth will rebound as consumer confidence returns and device makers continue adopting NAND flash as the preferred media for digital data storage.
"Currently there are some bright spots in our business. Our mobile communications product line, primarily our mobile TV and transceiver solutions, has been executing according to plan and delivering on product roadmap and revenue targets. We are seeing early validation of our diversification strategy for our mobile communications business with our recent design-win at a tier one handset vendor for our ISDB-T product for the
(1) Unless otherwise stated, all financial information used in this press release is unaudited, consolidated, prepared in accordancewith US GAAP and denominated in New Taiwan dollars. US dollar amounts are translated for convenience only. Such financial information is generated internally and has not been subjected to the same review and scrutiny, including internal auditing procedures and audit by independent auditors, to which we subject our audited consolidated financial statements, and may vary materially from the audited consolidated financial information for the same period. Any evaluation of the financial information presented in this press release should also take into account our published audited consolidated financial statements and the notes to those statements. In addition, the financial information presented is not necessarily indicative of our results for any future period.
Sales
Net sales in the first quarter totaled
Net sales of mobile storage products, which include flash memory card controllers, USB flash drive controllers, card reader controllers, SSD controllers, and embedded flash controllers, decreased 40% from the fourth quarter of 2008 to
Net sales of mobile communication products, which include mobile TV IC solutions, CDMA RF ICs, and electronic toll collection (ETC) RF ICs, increased 2% from the fourth quarter of 2008 to
Net sales of multimedia SoC products, which include embedded graphics processors, MP3 SoCs, and PC camera SoCs, decreased 28% from the fourth quarter of 2008 to
Gross and Operating Margins
Gross margin excluding stock-based compensation improved from 38.5% in the fourth quarter to 44.1% this quarter. GAAP gross margin increased to 43.8% from 38.3% in the previous quarter.
Operating expenses excluding stock-based compensation, acquisition-related charges, and one-time items was
Operating margin excluding stock-based compensation, acquisition-related charges, and one-time items was a negative 2%, which was improved from the negative 12.5% in the previous quarter. GAAP operating margin was negative 16.7%, which was improved from the negative 25.5% in the previous quarter.
Other Income and Expenses
Net total other income excluding impairment on long-term investment and net foreign exchange gain was
Earnings
Net loss excluding stock-based compensation, acquisition-related charges, net foreign exchange gain, and one-time items was
GAAP net loss was
Balance Sheet
Cash, cash equivalents, and short-term investments increased from
Cash Flow
Our cash flows were as follows:
3 months ended March 31, 2009
-----------------------------
(In US$ millions)
Net income (loss) (1.4)
Depreciation & amortization 2.6
Changes in operating assets and liabilities 7.7
Others 3.7
----
Net cash provided by (used in) operating
activities 12.6
====
Acquisition of property and equipment (0.6)
Others 0.1
Net cash provided by (used in) investing activities (0.5)
====
Others (0.1)
----
Net cash provided by (used in) financing activities (0.1)
====
Effects of changes in foreign currency exchange rates on cash (2.6)
----
Net increase in cash and cash equivalents 9.4
====
Pro-forma adjustment for foreign exchange translation (1.9)
----
Pro-forma net increase in cash and cash equivalents 7.5
====
During the first quarter of 2009,
Business Outlook:
"We believe the supply of NAND flash components by chipmakers will continue to be constrained in the second quarter and do not expect significant improvement until the second half of this year. Even so, given the low utilization rate of the NAND flash industry, any improvement in utilization rates could result in significant increase in the availability of NAND flash components to our customers and increase their procurement of companion controller ICs. We do not believe current high price of flash and related constrained supply are sustainable."
For the second quarter of 2009, management expects:
* Revenue to be up 5% to 15% sequentially * Non-GAAP and GAAP gross margin to be in the 44% to 46% range * Operating expenses excluding stock-based compensation, acquisition- related charges, and one-time items of approximatelyUS$12 to US$13 million
Conference Call & Webcast:
The Company's management team will conduct a conference call at
(Speakers)Wallace Kou , President & CEO Riyadh Lai, CFOJason Tsai , Director of Investor Relations and Strategy PRE-REGISTRATION: https://www.theconferencingservice.com/prereg/key.process?key=P3WGBWU68 CONFERENCE CALL ACCESS NUMBERS: USA (Toll Free): 1 888 679 8035 USA (Toll): 1 617 213 4848Taiwan (Toll Free): 0080 144 4360 Participant Passcode: 7516 1629 REPLAY NUMBERS (for 7 days): USA (Toll Free): 1 888 286 8010 USA (Toll): 1 617 801 6888 Participant Passcode: 8355 6666
A webcast of the call will be available on the Company's website at www.siliconmotion.com.
Discussion of Non-GAAP Financial Measures
To supplement the Company's unaudited selected financial results calculated in accordance with U.S. Generally Accepted Accounting Principles ("GAAP"), the Company discloses certain non-GAAP financial measures that exclude stock-based compensation, acquisition-related charges and one-time items, including non-GAAP cost of sales, non-GAAP gross profit, non-GAAP selling, general, and administrative expenses, non-GAAP operating income, non-GAAP net income, and non-GAAP earnings per diluted ADS. These non-GAAP measures are not in accordance with or an alternative for GAAP, and may be different from non-GAAP measures used by other companies. We believe that these non-GAAP measures have limitations in that they do not reflect all the amounts associated with the Company's results of operations as determined in accordance with GAAP and that these measures should only be used to evaluate the Company's results of operations in conjunction with the corresponding GAAP measures. The presentation of this additional information is not meant to be considered in isolation or as a substitute for the most directly comparable GAAP measure. We compensate for the limitations of our non-GAAP financial measures by relying upon GAAP results to gain a complete picture of our performance.
Our non-GAAP financial measures are provided to enhance the user's overall understanding of our current financial performance and our prospects for the future. Specifically, we believe the non-GAAP results provide useful information to both management and investors as these non-GAAP results exclude certain expenses, gains and losses that we believe are not indicative of our core operating results and because it is consistent with the financial models and estimates published by many analysts who follow the Company. We use non-GAAP measures to evaluate the operating performance of our business, for comparison with our forecasts, and for benchmarking our performance externally against our competitors. Also, when evaluating potential acquisitions, we exclude the items described below from our consideration of the target's performance and valuation. Since we find these measures to be useful, we believe that our investors benefit from seeing the results from management's perspective in addition to seeing our GAAP results. We believe that these non-GAAP measures, when read in conjunction with the Company's GAAP financials, provide useful information to investors by offering:
-- the ability to make more meaningful period-to-period comparisons
of the Company's on-going operating results;
-- the ability to better identify trends in the Company's underlying
business and perform related trend analysis;
-- a better understanding of how management plans and measures the
Company's underlying business; and
-- an easier way to compare the Company's operating results against
analyst financial models and operating results of our competitors
that supplement their GAAP results with non-GAAP financial
measures.
The following are explanations of each of the adjustments that we incorporate into our non-GAAP measures, as well as the reasons for excluding each or these individual items in our reconciliation of these non-GAAP financial measures:
Stock-based compensation expense consists of non-cash charges incurred as a result of the Company's adoption of SFAS 123R relating to the fair value of stock options and restricted stock units awarded to employees. The Company believes that the exclusion of these non-cash charges provides for more accurate comparisons of our operating results to our peer companies due to the varying available valuation methodologies, subjective assumptions and the variety of award types. In addition, the Company believes it is useful to investors to understand the specific impact the application of SFAS 123R has on its operating results.
Intangible amortization consists of non-cash charges that can be impacted by the timing and magnitude of our acquisitions. The Company considers its operating results without these charges when evaluating its ongoing performance and forecasting its earnings trends, and therefore excludes such charges when presenting non-GAAP financial measures. The Company believes that the assessment of its operations excluding these costs is relevant to its assessment of internal operations and comparisons to the performance of its competitors.
Litigation expenses consist of the legal expenses relating to complaints
Impairment of long-term investment relates to the other-than-temporary, non-operating write down of the Company's minority stake investments in
Foreign exchange gains and losses consists of translation gains and/or losses of non-NT$ denominated current assets and current liabilities, as well as certain other balance sheet items which result from the appreciation or depreciation of non-NT$ currencies against the NT$.
Silicon Motion Technology Corporation
Consolidated Statements of Income
(in thousands, except percentages and per share data, unaudited)
For the Three Months Ended
-------------------------------
Mar. 31, Dec. 31, Mar. 31,
2008 2008 2009
(NT$) (NT$) (NT$)
--------- --------- ---------
Net Sales 1,586,074 1,063,687 732,024
Cost of sales 776,945 655,820 411,162
--------- --------- ---------
Gross profit 809,129 407,867 320,862
Operating expenses
Research & development 226,207 267,215 219,762
Sales & marketing 81,581 97,842 79,688
General & administrative 136,509 260,811 95,887
Loss on impairment of property and
equipment -- 4,852 --
Amortization of intangibles assets 48,806 47,901 47,877
--------- --------- ---------
Operating income (loss) 316,026 (270,754) (122,352)
Non-operating income (expense)
Gain on sale of investments 9,249 738 157
Unrealized holding gain (loss) on
marketable securities (1,122) (673) --
Interest income (net) 10,541 8,698 5,517
Impairment on long-term investment -- (69,253) --
Foreign exchange gain (loss) (81,944) 65,464 86,433
Others 155 279 (148)
--------- --------- ---------
Subtotal (63,121) 5,253 91,959
--------- --------- ---------
Income before tax 252,905 (265,501) (30,393)
Income tax expense 1,939 5,251 17,436
--------- --------- ---------
Net income (loss) 250,966 (270,752) (47,829)
========= ========= =========
Basic earnings (loss) per ADS $7.58 ($9.83) ($1.75)
Diluted earnings (loss) per ADS $7.48 ($9.83) ($1.72)
Margin Analysis:
Gross margin 51.0% 38.3% 43.83%
Operating margin 19.9% (25.5%) (16.7%)
Net margin 15.8% (25.5%) (6.5%)
Additional Data:
Weighted avg. ADS equivalents(2) 33,093 27,531 27,354
Diluted ADS equivalents 33,546 27,556 27,783
For the Three Months Ended
-------------------------------
Mar. 31, Dec. 31, Mar. 31,
2008 2008 2009
(US$) (US$) (US$)
--------- --------- ---------
Net Sales 50,329 32,272 21,543
Cost of sales 24,654 19,897 12,100
--------- --------- ---------
Gross profit 25,675 12,375 9,443
Operating expenses
Research & development 7,177 8,107 6,467
Sales & marketing 2,589 2,969 2,345
General & administrative 4,332 7,913 2,822
Loss on impairment of property and
equipment -- 147 --
Amortization of intangibles assets 1,549 1,453 1,409
--------- --------- ---------
Operating income (loss) 10,028 (8,214) (3,600)
Non-operating income (expense)
Gain on sale of investments 293 22 5
Unrealized holding gain (loss) on
marketable securities (36) (20) --
Interest income (net) 335 264 161
Impairment on long-term investment -- (2,101) --
Foreign exchange gain (loss) (2,600) 1,986 2,544
Others 5 8 (4)
--------- --------- ---------
Subtotal (2,003) 159 2,706
--------- --------- ---------
Income before tax 8,025 (8,055) (894)
Income tax expense 62 159 513
--------- --------- ---------
Net income (loss) 7,963 (8,214) (1,407)
========= ========= =========
Basic earnings (loss) per ADS $0.24 ($0.30) ($0.05)
Diluted earnings (loss) per ADS $0.24 ($0.30) ($0.05)
Margin Analysis:
Gross margin 51.0% 38.3% 43.83%
Operating margin 19.9% (25.5%) (16.7%)
Net margin 15.8% (25.5%) (6.5%)
Additional Data:
Weighted avg. ADS equivalents(2) 33,093 27,531 27,354
Diluted ADS equivalents 33,546 27,556 27,783
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(2) Assumes all outstanding ordinary shares are represented by ADSs.
Each ADS represents four ordinary shares.
Silicon Motion Technology Corporation
Reconciliation of GAAP to Non-GAAP Operating Results
(in thousands, except percentages and per share data, unaudited)
For the Three Months Ended
-------------------------------
Mar. 31, Dec. 31, Mar. 31,
2008 2008 2009
(NT$) (NT$) (NT$)
--------- --------- ---------
GAAP net income (loss) 250,966 (270,752) (47,829)
Stock-based compensation:
Cost of sales 3,086 1,552 2,118
Research and development 35,113 31,321 28,053
Sales and marketing 12,743 14,536 11,270
General and administrative 16,697 20,544 15,105
--------- --------- ---------
Total stock-based compensation 67,639 67,953 56,546
--------- --------- ---------
Acquisition related charges:
Amortization of intangible assets 48,806 47,901 47,877
Litigation expenses 18,720 16,882 1,290
Loss on impairment of property and
equipment -- 4,852 --
Foreign exchange loss (gain) 81,944 (65,464) (86,433)
Impairment on long-term investment -- 69,253 --
--------- --------- ---------
Non-GAAP net income (loss) 468,075 (129,375) (28,549)
========= ========= =========
Shares used in computing non-GAAP
basic earnings per ADS 33,093 27,531 27,354
========= ========= =========
Shares used in computing non-GAAP
diluted earnings per ADS 34,640 28,583 28,853
========= ========= =========
Non-GAAP basic earnings (loss)
per ADS $14.14 ($4.70) ($1.04)
========= ========= =========
Non-GAAP diluted earnings (loss)
per ADS $13.51 ($4.53) ($0.99)
========= ========= =========
Non-GAAP gross margin 51.2% 38.5% 44.1%
Non-GAAP operating margin 28.4% (12.5%) (2.3%)
For the Three Months Ended
-------------------------------
Mar. 31, Dec. 31, Mar. 31,
2008 2008 2009
(US$) (US$) (US$)
--------- --------- ---------
GAAP net income (loss) 7,963 (8,214) (1,407)
Stock-based compensation:
Cost of sales 98 47 62
Research and development 1,114 950 826
Sales and marketing 404 441 332
General and administrative 530 624 445
--------- --------- ---------
Total stock-based compensation 2,146 2,062 1,665
--------- --------- ---------
Acquisition related charges:
Amortization of intangible assets 1,549 1,453 1,409
Litigation expenses 594 512 38
Loss on impairment of property and
equipment -- 147 --
Foreign exchange loss (gain) 2,600 (1,986) (2,544)
Impairment on long-term investment -- 2,101 --
--------- --------- ---------
Non-GAAP net income (loss) 14,852 (3,925) (839)
========= ========= =========
Shares used in computing non-GAAP
basic earnings per ADS 33,093 27,531 27,354
========= ========= =========
Shares used in computing non-GAAP
diluted earnings per ADS 34,640 28,583 28,853
========= ========= =========
Non-GAAP basic earnings (loss)
per ADS $0.45 ($0.14) ($0.03)
========= ========= =========
Non-GAAP diluted earnings (loss)
per ADS $0.43 ($0.14) ($0.03)
========= ========= =========
Non-GAAP gross margin 51.2% 38.5% 44.1%
Non-GAAP operating margin 28.4% (12.5%) (2.3%)
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Note: The Company maintains its accounts and expresses its financial
statements in New Taiwan dollars. For convenience only, U.S. dollar
amounts presented in the income statement have been translated from
New Taiwan dollars, using an average exchange rate of NT$31.51 to
US$1 for 1Q08, NT$32.96 to US$1 for 4Q08, and NT$33.98 to US$1 for
1Q09 based on the average of the historical exchange rate of the
Oanda Corporation . Amounts from the balance sheet have been
translated using the ending exchange rate for the period. The
exchange rate was NT$32.76 to US$1 at the end of 4Q08 and NT$34.06
to US$1 at the end of 1Q09.
Silicon Motion Technology Corporation
Consolidated Balance Sheet
(In thousands)
(Unaudited)
Dec. 31, Mar. 31, Dec. 31, Mar. 31,
2008 2009 2008 2009
(NT$) (NT$) (US$) (US$)
---------- ---------- ---------- ----------
Cash and cash equivalents 1,586,941 1,905,598 48,441 55,948
Short-term investments 112,505 54,103 3,434 1,588
Accounts receivable
(net) 923,717 755,706 28,196 22,188
Inventories 638,566 503,343 19,492 14,778
Refundable deposits --
current 85,368 80,555 2,606 2,365
Deferred income tax
assets (net) 55,276 50,112 1,688 1,471
Prepaid expenses and
other current assets 155,527 80,357 4,748 2,360
---------- ---------- ---------- ----------
Total current assets 3,557,900 3,429,774 108,605 100,698
Long-term investments 50,369 50,616 1,538 1,486
Property and equipment
(net) 911,885 892,317 27,835 26,198
Goodwill and intangible
assets (net) 2,641,504 2,590,064 80,632 76,044
Other assets 282,994 218,452 8,638 6,414
---------- ---------- ---------- ----------
Total assets $7,444,652 $7,181,223 $ 227,248 $ 210,840
========== ========== ========== ==========
Accounts payable 378,624 340,037 11,558 9,983
Income tax payable 212,513 159,915 6,487 4,695
Accrued expenses and
other current liabilities 456,710 355,073 13,940 10,425
---------- ---------- ---------- ----------
Total current liabilities 1,047,847 855,025 31,985 25,103
Long-term liabilities 60,702 59,554 1,853 1,748
Other liabilities 46,511 40,216 1,420 1,181
---------- ---------- ---------- ----------
Total liabilities 1,155,060 954,795 35,258 28,032
Shareholders' equity 6,289,592 6,226,428 191,990 182,808
---------- ---------- ---------- ----------
Total liabilities &
shareholders' equity $7,444,652 $7,181,223 $ 227,248 $ 210,840
========== ========== ========== ==========
About
We are a fabless semiconductor company that designs, develops and markets high performance, low-power semiconductor solutions for the multimedia consumer electronics market. We have three major product lines: mobile storage, mobile communications, and multimedia SoCs. Our mobile storage business is composed of microcontrollers used in NAND flash memory storage products such as flash memory cards, USB flash drives, SSDs, embedded flash applications, and card readers. Our mobile communications business is composed of mobile TV IC solutions, CDMA RF ICs, and electronic toll collection RF ICs. Our multimedia SoCs business is composed of products that support portable multimedia players, DAB systems, PC cameras, and embedded graphics applications.
Forward-Looking Statements:
This press release contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including without limitation, statements about
CONTACT:Silicon Motion Investor Contact:Jason Tsai , Director of IR and Strategy +1 408 519 7259 Fax: +1 408 519 7101 jtsai@siliconmotion.comSelina Hsieh +886 3 552 6888 x2311 Fax: +886 3 560 0336 ir@siliconmotion.com Media Contact:Sara Hsu , Project Manager +886 2 2219 6688 x3509 Fax: +886 2 2219 6868 sara.hsu@siliconmotion.com
