Silicon Motion Announces Results for the Period Ended December 31, 2011
Fourth Quarter 2011
TAIPEI, Taiwan, Feb. 3, 2012 (GLOBE NEWSWIRE) -- Silicon Motion Technology Corporation (Nasdaq:SIMO) ("Silicon Motion" or the "Company") today announced its financial results for the quarter ended December 31, 2011. For the fourth quarter of 2011, net sales increased 6% quarter-over-quarter to US$67.1 million from US$63.2 million in the third quarter of 2011. Net income (non-GAAP) increased in the fourth quarter to US$16.1 million or US$0.47 per diluted ADS from a net income of US$13.6 million or US$0.40 per diluted ADS in the third quarter of 2011.
Net income (GAAP) for the fourth quarter decreased quarter-over-quarter to US$12.2 million or US$0.37 per diluted ADS from a net income of US$18.3 million or US$0.56 per diluted ADS in the third quarter of 2011.
 Non-GAAP represents GAAP excluding the impact of stock-based compensation, acquisition-related charges, foreign exchange gain (loss), litigation expenses, gains from settlement of litigation, and impairment of long-term assets. 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.
Fourth Quarter 2011 Financial Review
Commenting on the results of the fourth quarter, Silicon Motion's President and CEO, Wallace Kou, said:
"We are excited to report that the US$67.1 million revenue for the fourth quarter and the US$224.3 million revenue for full year 2011 are the highest quarterly and annual revenue in the Company's history. Revenue for full year 2011 grew a strong 69% when compared to 2010. We delivered stellar sales this quarter while at the same time increasing gross margins. Our revenue this quarter benefited from continued strength of our mobile storage OEM business together with unexpected growth from our module maker business. These strengths more than offset the expected, temporary mobile communications slowdown in the quarter.
Our mobile storage OEM sales increased by 35% sequentially and accounted for 50% of our overall flash controller sales in the fourth quarter as our NAND flash maker and tier-1 consumer electronics OEM customers ramped device sales for the year-end holiday season. In addition to strong OEM sales, our module maker sales also increased by a solid 10% sequentially as module makers took advantage of another quarter of benign NAND flash market conditions to build memory cards and USB flash drives for sales primarily targeting China and other emerging markets. Our investments in R&D for leading-edge controller technology continue to pay dividends as our ASPs increased by 6% sequentially and 13% compared to the fourth quarter 2010. Over 65% of our controller sales are for the 2X nm class of NAND flash, including controllers for the newest 19 to 21nm class of NAND flash. Sales of TLC controllers increased over 60% sequentially to account for almost 50% of our overall controller sales. We began mass production of our eMMC controllers in December and are progressing our projects with our NAND flash partners and module maker customers to ramp our eMMC revenue throughout 2012.
As per our prior guidance, our mobile communications business declined as our LTE transceiver sales reverted this quarter to a more normalized rate of growth after Samsung's accelerated product build in the third quarter. We are pleased with the growth of our LTE transceiver business last year and have already secured over five LTE design wins that are expected to enter mass production in the first half of 2012. We believe the product quality of and demand for Samsung's next-generation LTE handsets and tablets remain unmatched in the marketplace and we are excited about our LTE transceiver growth in 2012. In the fourth quarter of 2011, Samsung began shipping the Galaxy Nexus handset to Verizon using our LTE and CDMA EV-DO transceivers. The Galaxy Nexus is one of the top selling handsets at Verizon Wireless."
Net sales in the fourth quarter were US$67.1 million, an increase of 6% compared with the previous quarter. For the quarter, mobile storage products accounted for 70% of net sales, mobile communications 22% of net sales and multimedia SoCs 4% of net sales.
Net sales of our mobile storage products, which primarily include flash memory cards, USB flash drives, SSD and embedded flash controllers, increased 21% sequentially in the fourth quarter to US$47.0 million.
Net sales of mobile communication products, which primarily include handset transceivers and mobile TV IC solutions, decreased 28% from the third quarter of 2011 to US$14.6 million this quarter.
Net sales of multimedia SoC products, which are primarily embedded graphics processors, decreased 22% from the third quarter of 2011 to US$3.0 million in the fourth quarter.
Gross and Operating Margins
Gross margin (non-GAAP) increased to 49.8% in the fourth quarter from 49.4% in the third quarter of 2011. GAAP gross margin increased to 49.7% in the fourth quarter from 49.3% in the third quarter of 2011.
Operating expenses (non-GAAP) were US$16.6 million, which was higher than the US$14.8 million expended in the third quarter. Research and development expenditures (non-GAAP) were US$10.8 million, which was higher than the US$8.8 million in the previous quarter. Selling and marketing expenses (non-GAAP) were US$3.6 million, which was higher compared to the US$3.3 million in the previous quarter. General and administrative expenses (non-GAAP) were US$2.2 million, which was lower compared to the US$2.7 million in the previous quarter. Stock-based compensation was US$2.8 million in the fourth quarter, which was less than the US$2.9 million in the third quarter. There were no acquisition-related charges in the fourth quarter.
Operating margin (non-GAAP) was 25.1%, a decrease from 26.0% in the previous quarter. GAAP operating margin was 21.0% for the fourth quarter, a decrease from the 21.4% in the third quarter.
Other Income and Expenses
Net total other income (non-GAAP) was US$0.2 million, unchanged from the third quarter. GAAP net total other expense was US$0.8 million, a decrease from a net total other income of US$7.8 million in the third quarter. The decrease in GAAP net total other income was primarily due to a foreign exchange loss in the fourth quarter of US$1.1 million compared to a foreign exchange gain in the third quarter of US$7.6 million.
Net income (non-GAAP) was US$16.1 million this quarter, an increase from US$13.6 million in the third quarter. Diluted earnings per ADS (non-GAAP) were US$0.47 in the fourth quarter, an increase from US$0.40 in the third quarter.
GAAP net income was US$12.2 million during the fourth quarter, a decrease from the net income of US$18.3 million in the third quarter. Diluted GAAP earnings per ADS in the fourth quarter were US$0.37, a decrease from US$0.56 in the previous quarter.
Cash, cash equivalents, and short-term investments increased to US$91.7 million at the end of the fourth quarter from US$69.8 million at the end of the third quarter of 2011.
Our cash flows were as follows:
During the fourth quarter of 2011, we had US$2.2 million of capital expenditures primarily relating to the purchase of testing equipment, software and design tools.
Silicon Motion's President and CEO, Wallace Kou, added:
For the first quarter of 2012, management expects:
For the full year 2012, management expects:
Conference Call & Webcast:
The Company's management team will conduct a conference call at 8:00 am Eastern Time on February 3, 2012.
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 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.
Acquisition-related charges consist of non-cash charges that can be impacted by the timing and magnitude of our acquisitions. We consider our operating results without these charges when evaluating our ongoing performance and forecasting our earnings trends, and therefore exclude such charges when presenting non-GAAP financial measures. We believe that the assessment of our operations excluding these costs is relevant to our assessment of internal operations and comparisons to the performance of our competitors. Acquisition-related charges include the following:
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 these types of charges when presenting non-GAAP financial measures.
Gain from settlement of litigation relates to the one-time payment in connection with a favorable settlement of certain litigation with ASE and ANP.
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$. 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.
Impairment of long-term investments relates to the other-than-temporary, non-operating write down of the Company's minority stake investments. We do not consider these investments, which were made before 2007, to be strategic and exclude the performance of these investments when evaluating our ongoing performance and forecasting our earnings trends, and therefore excluding losses (and gains) from the investments when presenting non-GAAP financial measures.
Assumes all outstanding ordinary shares are represented by ADSs. Each ADS represents four ordinary shares.
About Silicon Motion:
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, and embedded flash applications. Our mobile communications business is composed primarily of handset transceivers and mobile TV IC solutions. Our multimedia SoCs business is composed primarily of embedded graphics processors.
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 Silicon Motion's expected first quarter 2012 revenue, gross margin and operating expenses, all of which reflect management's estimates based on information available at this time of this press release. While Silicon Motion believes these estimates to be meaningful, these amounts could differ materially from actual reported amounts for the fourth quarter. Forward-looking statements also include, without limitation, statements regarding trends in the multimedia consumer electronics market and our future results of operations, financial condition and business prospects. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "expect," "intend," "plan," "anticipate," "believe," "estimate," "predict," "potential," "continue," or the negative of these terms or other comparable terminology. Although such statements are based on our own information and information from other sources we believe to be reliable, you should not place undue reliance on them. These statements involve risks and uncertainties, and actual market trends or our actual results of operations, financial condition or business prospects may differ materially from those expressed or implied in these forward looking statements for a variety of reasons. Potential risks and uncertainties include, but are not limited to the unpredictable volume and timing of customer orders, which are not fixed by contract but vary on a purchase order basis; the loss of one or more key customers or the significant reduction, postponement, rescheduling or cancellation of orders from these customers; general economic conditions or conditions in the semiconductor or consumer electronics markets including any effects of the general global economic slowdown beginning in 2007; decreases in the overall average selling prices of our products; changes in the relative sales mix of our products; changes in our cost of finished goods; the availability, pricing, and timeliness of delivery of other components and raw materials used in our customers' products; our customers' sales outlook, purchasing patterns, and inventory adjustments based on consumer demands and general economic conditions, including the general global economic slowdown which began in 2007 as it effects the Company, its customers and consumers; our ability to successfully develop, introduce, and sell new or enhanced products in a timely manner; and the timing of new product announcements or introductions by us or by our competitors. For additional discussion of these risks and uncertainties and other factors, please see the documents we file from time to time with the Securities and Exchange Commission, including our Annual Report on Form 20-F filed on June 30, 2011. We assume no obligation to update any forward-looking statements, which apply only as of the date of this press release.
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