April 27, 2015 at 6:00 PM EDT
BACK
Silicon Motion Announces Results for the Period Ended March 31, 2015
First Quarter 2015
Financial Highlights
- Net sales increased to
US$80.6 million fromUS$80.5 million in 4Q14 - Gross margin (non-GAAP1) decreased to 52.0% from 52.5% in 4Q14
- Operating expenses (non-GAAP) increased to
US$22.5 million fromUS$21.4 million in 4Q14 - Operating margin (non-GAAP) decreased to 24.1% from 26.0% in 4Q14
- Diluted earnings per ADS (non-GAAP) decreased to
US$0.48 fromUS$0.53 in 4Q14
Business Highlights
- Announced the agreement to acquire Shannon Systems,
China's leading enterprise-class PCIe SSD and storage array solutions provider - SSD controller sales doubled sequentially and is now over 10% of corporate revenue
- SSD controller shipments increased to over one million units a month in March
- Two additional PC OEMs using SSDs with our controllers, increasing the total to five PC OEMs
- Began shipping FerriSSD to a major German luxury automobile maker's infotainment system
GAAP net income for the first quarter increased to
1 Non-GAAP measures represent GAAP measures excluding the impact of stock-based compensation, foreign exchange gain (loss), 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.
First Quarter 2015 Review
Commenting on the results of the first quarter,
"We are off to a solid start in 2015. Our first quarter revenue benefited from strong client SATA 3 SSD controller sales momentum and stable eMMC controller sales. Client SSD controller sales doubled sequentially, now account for over 10% of our corporate revenue and shipments increased to over a million units a month in March. This quarter, our module maker customers aggressively built SSDs for channel markets. Micron and another NAND flash partner ramped sales of their SSDs with our controllers to both channel and OEM markets, and we expect a new major SSD program with our controllers, again for both channel and OEM markets, to begin shipping in the second quarter. Our storage OEM partner began shipping SSDs to three global tier-1 PC OEMs in the first quarter and recently started shipping to two additional OEMs. Our overall embedded products sales rebounded to well over half of total sales.
Separately, I am excited to announce that we have entered into an agreement to acquire Shannon Systems, a leading supplier of innovative enterprise-class PCIe SSD and storage array solutions to
Sales
Net sales in the first quarter were
Net sales of our mobile storage products, which primarily include eMMC, SSD, memory card and USB flash drive controllers, decreased 3% sequentially in the first quarter to
Net sales of mobile communications products, which primarily include LTE transceivers and mobile TV IC solutions, increased 14% sequentially to
Gross and Operating Margins
Gross margin (non-GAAP) decreased to 52.0% in the first quarter as compared to 52.5% in the fourth quarter. GAAP gross margin decreased in the first quarter to 52.0% as compared to 52.4% in the fourth quarter.
Operating expenses (non-GAAP) in the first quarter were
Earnings
Net income (non-GAAP) was
GAAP net income was
Balance Sheet
Cash and cash equivalents, and short-term investments increased at the end of the first quarter to
Cash Flow
Our cash flows were as follows:
3 months ended March 31, 2015 | |
(In US$ millions) | |
Net income | 15.5 |
Depreciation & amortization | 1.9 |
Changes in operating assets and liabilities | (5.4) |
Others | 0.6 |
Net cash provided by (used in) operating activities | 12.6 |
Acquisition of property and equipment | (1.8) |
Others | (0.1) |
Net cash provided by (used in) investing activities | (1.9) |
Dividend | (5.0) |
Others | -- |
Net cash provided by (used in) financing activities | (5.0) |
Effects of changes in foreign currency exchange rates on cash | (0.1) |
Net increase (decrease) in cash and cash equivalents | 5.6 |
During the first quarter, we had
Returning Value to Shareholders
On
Business Outlook:
"The fundamentals of our business have never been stronger and we are excited about starting the next chapter of our growth. We believe that we are gaining share in the client SSD controller market and rapidly winning sockets and new designs with a broad range of OEMs. We remain on track to grow our market leading eMMC business as previously communicated. And with the proposed addition of Shannon Systems, we will be entering the world's largest internet market and will become one of the leading suppliers of enterprise SSDs to leading Chinese internet companies."
For the second quarter of 2015, management expects:
- Revenue to increase 5% to 10% sequentially
- Gross margin (non-GAAP) to be in the 50% to 52% range
- Operating expenses (non-GAAP) of approximately
US$23 to $24 million
For the full-year 2015, management expects:
- Revenue to increase 17% to 25% as compared to full-year 2014
- Gross margin (non-GAAP) to be in the 49.5% to 51.5% range
- Operating expenses (non-GAAP) of approximately
US$91 to $97 million
Conference Call & Webcast:
The Company's management team will conduct a conference call at
Speakers |
Wallace Kou, President & CEO |
Riyadh Lai, CFO |
Jason Tsai, Director of Investor Relations and Strategy |
CONFERENCE CALL ACCESS NUMBERS: |
USA (Toll Free): 1 866 519 4004 |
USA (Toll): 1 845 675 0437 |
Taiwan (Toll Free): 0080 112 6920 |
Participant Passcode: 1518 8506 |
REPLAY NUMBERS (for 7 days): |
USA (Toll Free): 1 855 452 5696 |
USA (Toll): 1 646 254 3697 |
Participant Passcode: 1518 8506 |
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 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$. We do not use financial instruments to manage the impact on our operations from changes in foreign exchange rates, and because our operations are subject to fluctuations in foreign exchange rates, we therefore exclude foreign exchange gains and losses when presenting non-GAAP financial measures.
Other non-recurring items:
- Litigation expenses consist of legal expenses relating to intellectual property disputes, commercial claims and other types of litigation. While litigation may arise in the ordinary course of our business, we nevertheless consider litigation to be an unusual, non-recurring and unplanned activity and therefore exclude this charge when presenting non-GAAP financial measures.
- Acquisition costs consist of direct costs of acquisitions, such as transaction fees, which vary significantly and are unique to each acquisition. The Company does not acquire businesses on a predictable cycle, so we have excluded the effect of these costs in calculating our non-GAAP operating expenses and net income.
Silicon Motion Technology Corporation | |||
Consolidated Statements of Income | |||
(in thousands, except percentages and per ADS data, unaudited) | |||
For the Three Months Ended | |||
Mar. 31, 2014 | Dec. 31, 2014 | Mar. 31, 2015 | |
(US$) | (US$) | (US$) | |
Net Sales | 52,848 | 80,503 | 80,646 |
Cost of sales | 27,224 | 38,306 | 38,723 |
Gross profit | 25,624 | 42,197 | 41,923 |
Operating expenses | |||
Research & development | 11,907 | 17,528 | 16,355 |
Sales & marketing | 3,591 | 4,434 | 4,309 |
General & administrative | 2,630 | 3,410 | 3,440 |
Operating income | 7,496 | 16,825 | 17,819 |
Non-operating income (expense) | |||
Gain on sale of investments | 1 | 1 | 1 |
Interest income, net | 474 | 613 | 514 |
Foreign exchange gain (loss), net | (230) | (451) | 150 |
Others, net | 2 | (4) | (4) |
Subtotal | 247 | 159 | 661 |
Income before income tax | 7,743 | 16,984 | 18,480 |
Income tax expense | 3,915 | 4,911 | 3,018 |
Net income | 3,828 | 12,073 | 15,462 |
Basic earnings per ADS | $ 0.12 | $ 0.36 | $ 0.45 |
Diluted earnings per ADS | $ 0.11 | $ 0.35 | $ 0.44 |
Margin Analysis: | |||
Gross margin | 48.5% | 52.4% | 52.0% |
Operating margin | 14.2% | 20.9% | 22.1% |
Net margin | 7.2% | 15.0% | 19.2% |
Additional Data: | |||
Weighted avg. ADS equivalents2 | 33,184 | 33,892 | 34,068 |
Diluted ADS equivalents | 33,963 | 34,471 | 34,751 |
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 ADS data, unaudited) | |||
For the Three Months Ended | |||
Mar. 31, 2014 | Dec. 31, 2014 | Mar. 31, 2015 | |
(US$) | (US$) | (US$) | |
GAAP net income | 3,828 | 12,073 | 15,462 |
Stock-based compensation: | |||
Cost of sales | 60 | 99 | 38 |
Research and development | 1,092 | 2,583 | 978 |
Sales and marketing | 219 | 701 | 263 |
General and administrative | 210 | 624 | 259 |
Total stock-based compensation | 1,581 | 4,007 | 1,538 |
Non-recurring items: | |||
Litigation expenses | (191) | (6) | 8 |
Acquisition costs | -- | 30 | 134 |
Foreign exchange loss (gain), net | 1,285 | 2,422 | (573) |
Non-GAAP net income | 6,503 | 18,526 | 16,569 |
Shares used in computing non-GAAP diluted earnings per ADS | 34,104 | 34,650 | 34,818 |
Non-GAAP diluted earnings per ADS | $ 0.19 | $ 0.53 | $ 0.48 |
Non-GAAP gross margin | 48.6% | 52.5% | 52.0% |
Non-GAAP operating margin | 16.7% | 26.0% | 24.1% |
Silicon Motion Technology Corporation | |||
Consolidated Balance Sheet | |||
(In thousands, unaudited) | |||
Mar. 31, 2014 | Dec. 31, 2014 | Mar. 31, 2015 | |
(US$) | (US$) | (US$) | |
Cash and cash equivalents | 157,841 | 194,211 | 199,836 |
Short-term investments | 727 | 703 | 712 |
Accounts receivable (net) | 37,441 | 28,742 | 41,114 |
Inventories | 30,982 | 44,076 | 46,158 |
Refundable deposits - current | 15,310 | 19,322 | 19,280 |
Prepaid expenses and other current assets | 2,586 | 3,386 | 3,532 |
Total current assets | 244,887 | 290,440 | 310,632 |
Long-term investments | 133 | 133 | 133 |
Property and equipment (net) | 30,211 | 35,537 | 35,022 |
Goodwill and intangible assets (net) | 35,471 | 35,467 | 35,466 |
Other assets | 4,513 | 5,345 | 5,549 |
Total assets | 315,215 | 366,922 | 386,802 |
Accounts payable | 14,199 | 14,246 | 21,096 |
Income tax payable | 10,766 | 17,696 | 20,267 |
Accrued expenses and other current liabilities | 13,651 | 24,513 | 22,822 |
Total current liabilities | 38,616 | 56,455 | 64,185 |
Other liabilities | 5,671 | 6,367 | 6,658 |
Total liabilities | 44,287 | 62,822 | 70,843 |
Shareholders' equity | 270,928 | 304,100 | 315,959 |
Total liabilities & shareholders' equity | 315,215 | 366,922 | 386,802 |
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 LTE 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
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