January 27, 2014 at 6:00 PM EST
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Silicon Motion Announces Results for the Period Ended December 31, 2013
Fourth Quarter 2013
Financial Highlights
- Net sales decreased 8% quarter-over-quarter to
US$52.5 million fromUS$57.1 million in 3Q13 - Gross margin (non-GAAP1) was unchanged at 48.8% as compared to 3Q13
- Operating expenses (non-GAAP) decreased to
US$13.8 million fromUS$14.9 million in 3Q13 - Operating margin (non-GAAP) decreased to 22.5% from 22.7% in 3Q13
- Diluted earnings per ADS (non-GAAP) decreased to
US$0.30 fromUS$0.32 in 3Q13
Business Highlights
- New LTE-Advanced transceiver undergoing final stage of testing and qualification at
Samsung - Expect to begin sales of our new TLC eMMC 4.5 controller to a third NAND flash partner in the first quarter
- Added 18 additional wins for our eMMC 4.5 controller including two Windows 8 tablets and upcoming global flagship Android devices
- Commercial sampling of our eMMC 5.0 controller (2-3x better IOPS performance as compared to eMMC 4.5) and on-track to begin mass production in the first quarter
- SM2246EN won key projects at major OEM for SATA 3 client SSDs being developed for several global PC vendors' notebook PCs
GAAP net income for the fourth quarter of 2013 decreased quarter-over-quarter to
Fourth Quarter 2013 Financial Review
Commenting on the results of the fourth quarter,
"In the fourth quarter, our revenue declined 8% as expected, with our controller sales declining a milder 3% and RF IC sales declining significantly faster due to the end-of-life of previous generation LTE transceivers and weak mobile TV SoC sales. Our SSD plus embedded sales declined due to seasonally weak eMMC controller sales. Our SSD plus embedded sales however increased about 70% year-over-year. We completed final stages of testing and qualifications at our third NAND flash partner and will begin eMMC sales to this customer in the first quarter. We have also made steady progress towards scaling our SATA 3 client SSD controller sales by securing a win at an important OEM that is developing SSDs with our controllers targeting global tier-one PC vendors. SSD plus embedded controllers became our largest product line earlier this year and accounted for roughly 50% of all our controller sales in the fourth quarter. We are excited about the progress we have been making in transitioning away from removable storage controllers for mature markets towards SSD plus embedded controllers for growth markets and look forward to updating you on our continuing progress and new design wins.
I am pleased to announce that the testing of our new LTE-Advanced transceiver paired with
Sales
Net sales in the fourth quarter were
Net sales of our mobile storage products, which primarily include flash memory card, USB flash drive, SSD and embedded flash controllers, decreased 3% sequentially in the fourth quarter to
Net sales of mobile communications products, which primarily include handset transceivers and mobile TV IC solutions, decreased 41% from the third quarter to
Gross and Operating Margins
Gross margin (non-GAAP) was unchanged at 48.8% in the fourth quarter as compared to the third quarter. GAAP gross margin decreased slightly to 48.5% in the fourth quarter from 48.7% in the third quarter.
Operating expenses (non-GAAP) in the fourth quarter were
Other Income and Expenses
Net total other income (non-GAAP) was
Earnings
Net income (non-GAAP) was
GAAP net income was
Balance Sheet
Cash and cash equivalents, and short-term investments of
Cash Flow
Our cash flows were as follows:
3 months ended December 31, 2013 | |
(In US$ millions) | |
Net income | 5.4 |
Depreciation & amortization | 1.8 |
Stock-based compensation | 4.9 |
Changes in operating assets and liabilities | (2.7) |
Others | (0.2) |
Net cash provided by (used in) operating activities | 9.2 |
Acquisition of property and equipment | (3.1) |
Others | (0.1) |
Net cash provided by (used in) investing activities | (3.2) |
Dividend | (4.9) |
Others | - |
Net cash provided by (used in) financing activities | (4.9) |
Effects of changes in foreign currency exchange rates on cash | 0.2 |
Net increase (decrease) in cash and cash equivalents | 1.3 |
During the fourth quarter, we had
Share Repurchase Program
In
Business Outlook:
"2013 was a transitional year. In 2014, with our SSD plus embedded products now our largest product line and targeting growth markets, we believe that we are well positioned for renewed growth. We currently anticipate, however, that revenues in the first quarter will decline due primarily to seasonal weak card and USB flash drive sales. Sales will recover as the year progresses when new eMMC programs ramp, eMMC sales to our third flash partner scale, and our SATA 3 SSD controllers enter the global PC OEM food chain. We expect to successfully complete testing of our new LTE-Advanced transceiver with
For the first quarter of 2014, management expects:
- Revenue to be down 0% to 10% sequentially
- Gross margin (non-GAAP) to be in the 48% to 50% range
- Operating expenses (non-GAAP) of approximately
US$16 to US$18 million
For the full year 2014, management expects:
- Revenue to increase 5% to 15% as compared to full-year 2013
- Gross margin (non-GAAP) to be in the 48% to 50% range
- Operating expenses (non-GAAP) of approximately
US$70 to US$75 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 StrategyCONFERENCE CALL ACCESS NUMBERS:
USA (Toll Free): 1 866 519 4004USA (Toll): 1 718 354 1231Taiwan (Toll Free): 0080 112 6920
Participant Passcode: 3024 8783REPLAY NUMBERS (for 7 days):
USA (Toll Free): 1 855 452 5696USA (Toll): 1 646 254 3697
Participant Passcode: 3024 8783
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 other 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 to 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 of these individual items in our reconciliation of these non-GAAP financial measures:
Stock-based compensation expense consists of non-cash charges related 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 of share-based compensation on its operating results.
Foreign exchange gains and losses consist of translation gains and/or losses of non-US$ denominated current assets and current liabilities, as well as certain other balance sheet items which result from the appreciation or depreciation of non-US$ currencies against the US$. We do not use financial instruments to manage the impact on our operations from changes in foreign exchange rates, and because our operations are subject to fluctuations in foreign exchange rates, we therefore exclude foreign exchange gains and losses when presenting non-GAAP financial measures.
Other non-recurring items:
– Litigation expenses consist of legal expenses relating to intellectual property disputes, commercial claims and other types of litigation. While litigation may arise in the ordinary course of our business, we nevertheless consider litigation to be an unusual, non-recurring and unplanned activity and therefore exclude this charge when presenting non-GAAP financial measures.
– Vendor dispute charges relate to the write down of certain unsalable inventory due to defects in the components provided by our vendor. These parts were supplied to us at a quality below levels previously specified and agreed. All parts known to be defective have been identified and are within our control. We have resolved this matter with our vendor and recovered in 1Q 2013 the full value of the inventory being written off. This charge (as well as the amount recovered) has been excluded from our non-GAAP results as we believe this is an unusual, non-recurring and unplanned activity.
Silicon Motion Technology Corporation | |||
Consolidated Statements of Income | |||
(in thousands, except percentages and per ADS data, unaudited) | |||
For the Three Months Ended | |||
Dec. 31, 2012 (US$) |
Sep. 30, 2013 (US$) |
Dec. 31, 2013 (US$) |
|
Net Sales | 70,605 | 57,132 | 52,489 |
Cost of sales | 40,251 | 29,312 | 27,045 |
Gross profit | 30,354 | 27,820 | 25,444 |
Operating expenses | |||
Research & development | 14,296 | 10,469 | 12,339 |
Sales & marketing | 3,799 | 3,274 | 3,578 |
General & administrative | 2,968 | 2,656 | 2,592 |
Operating income | 9,291 | 11,421 | 6,935 |
Non-operating income (expense) | |||
Gain on sale of investments | - | 3 | 1 |
Interest income, net | 400 | 415 | 483 |
Foreign exchange gain (loss),net | (49) | 306 | 73 |
Others, net | (118) | 10 | 7 |
Subtotal | 233 | 734 | 564 |
Income before income tax | 9,524 | 12,155 | 7,499 |
Income tax expense (benefit) | 1,595 | 2,576 | 2,083 |
Net income | 7,929 | 9,579 | 5,416 |
Basic earnings per ADS | $0.24 | $0.29 | $0.16 |
Diluted earnings per ADS | $0.23 | $0.29 | $0.16 |
Margin Analysis: | |||
Gross margin | 43.0% | 48.7% | 48.5% |
Operating margin | 13.2% | 20.0% | 13.2% |
Net margin | 11.2% | 16.8% | 10.3% |
Additional Data: | |||
Weighted avg. ADS equivalents2 | 32,468 | 32,879 | 32,899 |
Diluted ADS equivalents | 33,820 | 33,318 | 33,670 |
Silicon Motion Technology Corporation | |||
Reconciliation of GAAP to Non-GAAP Operating Results | |||
(in thousands, except percentages and per ADS data, unaudited) | |||
For the Three Months Ended | |||
Dec. 31, 2012 (US$) |
Sep. 30, 2013 (US$) |
Dec. 31, 2013 (US$) |
|
GAAP net income | 7,929 | 9,579 | 5,416 |
Stock-based compensation: | |||
Cost of sales | 107 | 38 | 160 |
Research and development | 2,030 | 853 | 3,152 |
Sales and marketing | 688 | 402 | 891 |
General and administrative | 532 | 203 | 656 |
Total stock-based compensation | 3,357 | 1,496 | 4,859 |
Non-recurring items: | |||
Vendor dispute | 1,057 | - | - |
Litigation expenses | 31 | 63 | (5) |
Foreign exchange loss (gain),net | 49 | (306) | (73) |
Non-GAAP net income | 12,423 | 10,832 | 10,197 |
Shares used in computing non-GAAP diluted earnings per ADS | 34,518 | 33,637 | 34,065 |
Non-GAAP diluted earnings per ADS | $0.36 | $0.32 | $0.30 |
Non-GAAP gross margin | 44.6% | 48.8% | 48.8% |
Non-GAAP operating margin | 19.5% | 22.7% | 22.5% |
Silicon Motion Technology Corporation | ||
Consolidated Statements of Income | ||
(in thousands, except percentages, and per ADS data, unaudited) | ||
For the Year Ended | ||
Dec. 31, 2012 (US$) |
Dec. 31, 2013 (US$) |
|
Net Sales | 281,371 | 225,308 |
Cost of sales | 149,650 | 118,698 |
Gross profit | 131,721 | 106,610 |
Operating expenses | ||
Research & development | 50,975 | 46,460 |
Sales & marketing | 15,919 | 13,597 |
General & administrative | 12,157 | 11,250 |
Operating income | 52,670 | 35,303 |
Non-operating income ( expense ) | ||
Gain on sale of investments | 2 | 4 |
Interest income, net | 1,372 | 1,735 |
Foreign exchange gain (loss),net | 390 | (25) |
Others, net | (100) | 131 |
Subtotal | 1,664 | 1,845 |
Income before income tax | 54,334 | 37,148 |
Income tax expense | 7,117 | 9,772 |
Net income | 47,217 | 27,376 |
Basic earnings per ADS | $1.46 | $0.83 |
Diluted earnings per ADS | $1.40 | $0.81 |
Margin Analysis: | ||
Gross margin | 46.8% | 47.3% |
Operating margin | 18.7% | 15.7% |
Weighted average ADS: | ||
Basic | 32,315 | 33,065 |
Diluted | 33,626 | 33,642 |
Silicon Motion Technology Corporation | ||
Reconciliation of GAAP to Non-GAAP Operating Results | ||
(in thousands, except percentages and per ADS data, unaudited) | ||
For the Year Ended | ||
Dec. 31, 2012 (US$) |
Dec. 31, 2013 (US$) |
|
GAAP net income | 47,217 | 27,376 |
Stock-based compensation: | ||
Cost of sales | 375 | 308 |
Research and development | 7,055 | 6,351 |
Sales and marketing | 2,494 | 2,197 |
General and administrative | 1,878 | 1,406 |
Total stock-based compensation | 11,802 | 10,262 |
Acquisition related charges: | ||
Amortization of intangible assets | - | - |
Non-recurring items: | ||
Vendor dispute | 1,057 | (1,717) |
Litigation expenses | 31 | 249 |
Foreign exchange loss (gain), net | (390) | 25 |
Non-GAAP net income | 59,717 | 36,195 |
Shares used in computing non-GAAP diluted earnings per ADS | 34,459 | 34,042 |
Non-GAAP diluted earnings per ADS | $1.73 | $1.06 |
Non-GAAP gross margin | 47.3% | 46.7% |
Non-GAAP operating margin | 23.3% | 19.6% |
Silicon Motion Technology Corporation | |||
Consolidated Balance Sheet | |||
(In thousands, unaudited) | |||
Dec. 31, 2012 (US$) |
Sep. 30, 2013 (US$) |
Dec. 31, 2013 (US$) |
|
Cash and cash equivalents | 154,734 | 160,430 | 161,720 |
Short-term investments | 14,882 | 2,946 | 742 |
Accounts receivable (net) | 35,983 | 30,444 | 30,963 |
Inventories | 32,143 | 28,816 | 33,666 |
Refundable deposits - current | 15,283 | 15,280 | 15,299 |
Deferred income tax assets (net) | 2,369 | 1,111 | 1,278 |
Prepaid expenses and other current | |||
assets | 3,018 | 4,696 | 2,870 |
Total current assets | 258,412 | 243,723 | 246,538 |
Long-term investments | 178 | 133 | 133 |
Property and equipment (net) | 23,386 | 28,780 | 30,195 |
Goodwill and intangible assets(net) | 35,472 | 35,471 | 35,474 |
Other assets | 4,298 | 4,327 | 4,423 |
Total assets | 321,746 | 312,434 | 316,763 |
Accounts payable | 26,642 | 13,533 | 14,661 |
Income tax payable | 4,668 | 7,309 | 8,189 |
Accrued expenses and other current liabilities | 25,087 | 22,676 | 17,826 |
Total current liabilities | 56,397 | 43,518 | 40,676 |
Other liabilities | 3,083 | 3,921 | 5,390 |
Total liabilities | 59,480 | 47,439 | 46,066 |
Shareholders' equity | 262,266 | 264,995 | 270,697 |
Total liabilities & shareholders' equity | 321,746 | 312,434 | 316,763 |
About
We are a fabless semiconductor company that designs, develops and markets high performance, low-power semiconductor solutions to OEMs and other customers in the mobile storage and mobile communications markets. For the mobile storage market, our key products are microcontrollers used in solid state storage devices such as SSDs, eMMCs and other embedded flash applications, as well as removable storage products. For the mobile communications market, our key products are handset transceivers and mobile TV IC solutions. Our products are widely used in smartphones, tablets, and industrial and commercial applications. For further information on
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
1 Non-GAAP measures represent GAAP measures excluding the impact of stock-based compensation, acquisition-related charges, foreign exchange gain (loss), litigation expenses, gains from settlement of litigation, impairment of long-term assets, and other non-recurring items. For reconciliation of non-GAAP to GAAP results and further discussion, see accompanying financial tables and the note "Discussion of Non-GAAP Financial Measures" at the end of this press release.
2 Assumes all outstanding ordinary shares are represented by ADSs. Each ADS represents four ordinary shares.
CONTACT: Investor Contact:Jason Tsai Director of IR and Strategy Tel: +1 408 519 7259 Fax: +1 408 519 7101 E-mail: jtsai@siliconmotion.com Investor Contact:Selina Hsieh Investor Relations Tel: +886 3 552 6888 x2311 Fax: +886 3 560 0336 E-mail: ir@siliconmotion.com Media Contact:Sara Hsu Project Manager Tel: +886 2 2219 6688 x3509 Fax: +886 2 2219 6868 E-mail: sara.hsu@siliconmotion.com