Silicon Motion Technology Corporation Announces Fourth Quarter and Full-Year Results for the Period Ended December 31, 2005
TAIPEI, Taiwan, Jan 25, 2006 /PRNewswire-FirstCall via COMTEX News Network/ -- In the press release, "Silicon Motion Technology Corporation Announces Fourth Quarter and Full-Year Results for the Period Ended December 31, 2005", distributed by PRNewswire on Jan. 25, 2006, we are advised by the client of the following errors as originally issued inadvertently: 1) In the third paragraph under the section ''Expenses'', the first sentence should read ''Sales and marketing expenses in 4Q05 increased by 45% from 4Q04 and 53% from 3Q05 and represented 6.5% of net sales.'', where the first figure in the original version, ''4%'', should read ''45%''; 2) in the quarterly income statement, the heading for the 3rd column from the right should be in US$, not NT$; 3) In the quarterly income statement, item, net income, under the column Change from 3Q05(%) should be 15% instead of 16%; 4) in the full-year income statement, the heading for the 2nd column from the right should be in US$, not NT$. 5) In the Unaudited Consolidated Balance Sheet, the item Shareholders' equity under Dec. 31, 2005 should read 638,345 instead of 638,34. Full, correct release follows:
Silicon Motion Technology Corporation Announces Fourth Quarter and Full-Year
Results for the Period Ended December 31, 2005 Sales & Net Income Set New Record Fourth Quarter 2005 Financial Highlights: * Revenue grew 14% year-over-year and 17% sequentially to NT$872 million (US$26.1 million) * Gross margin increased from 52.3% in 3Q05 to 53.9% in 4Q05 * Net income increased 164% year-over-year and 15% sequentially to NT$248 million (US$7.4 million) * Diluted earnings per ADS was NT$7.85 (US$0.24), up 116% from NT$3.64 (US$0.11) in 4Q04 and 15% from NT$6.85 (US$0.21) in 3Q05 Fourth Quarter 2005 Business Highlights: * Unit shipments of mobile storage products grew 107% year-over-year and 24% sequentially to 30 million units * Unit shipments of multimedia System-on-Chip (SoC) products grew 754% year-over-year and 133% sequentially to approximately 947,000 units * The Company started volume production of its new high-end SD, MMC, and CF controllers
Silicon Motion Technology Corporation (Nasdaq: SIMO; "the Company"), a leading fabless semiconductor company that designs, develops, and markets universally compatible, high-performance, low-power semiconductor solutions for the multimedia consumer electronics market, today announced its fourth quarter 2005 financial results. Under United States Generally Accepted Accounting Principles (US GAAP), diluted earnings per ADS was NT$7.85 (US$0.24) in the fourth quarter of 2005 (4Q05), an increase of 116% from NT$3.64 (US$0.11) in the same period of the previous year (4Q04) and an increase of 15% from NT$6.85 (US$0.21) in the third quarter of 2005 (3Q05). Net income for 4Q05 was NT$248 million (US$7.4 million), an increase from NT$94 million and NT$215 million in 4Q04 and 3Q05, respectively.
For the full year, diluted earnings per ADS was NT$23.09 (US$0.72), an increase of 124% from NT$10.32 (US$0.32) in 2004. Net income was NT$676 million (US$21.0 million), an increase of 152% from NT$268 million (US$8.5 million) in 2004.
Commenting on the results, Silicon Motion's President and CEO, Wallace Kou, said, "We are pleased with our performance in the fourth quarter despite a particularly challenging environment. There was a shortage of high-density NAND flash memory in October and November. Our top-tier customers who had supply contracts with NAND flash memory manufacturers were able to secure reasonable supply, but many of the second-tier flash memory card and USB flash disk manufacturers experienced considerable difficulty procuring sufficient high-density flash memory. The supply of high density NAND flash memory improved in December. However, by then, many customers were reluctant to place orders because NAND flash memory prices were rather unstable.
During the fourth quarter, we were able to secure additional design wins for our MP3 controllers, especially for use in MP3 players that use card- reader technology. In the first quarter of 2006, we expect to see higher shipments of our MP3 controllers from design wins at manufacturers of card- reader based MP3 players.
During the fourth quarter, we also secured additional design wins for our SD controller that is used in micro-SD cards, and we believe that we have gained market share in small form factor flash memory cards that are used in mobile phones.
To maintain the versatility of our controllers we added and expanded support for Renesas' AG-AND high-performance flash memory that features new memory cell architecture, multi-level technology, and high-speed programming. When Samsung and Hynix's new MLC flash memory enters volume production in the first quarter of 2006, all of our controllers will be ready to support it."
Fourth Quarter 2005 Financial Review (1)
Net sales in the fourth quarter totaled NT$872 million (US$26.1 million), an increase of 14% from the fourth quarter of 2004 and 17% from the third quarter of 2005. By product, net sales from mobile storage products accounted for 84% of total net sales, which was down from 87% in the third quarter of 2005. Net sales from multimedia SoCs represented 16% of total net sales, which was an increase from 13% in 3Q05. Net sales from other products in the current period accounted for less than 1% of net sales.
As % of Total Net Sales 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 Mobile Storage Products 80% 80% 87% 92% 86% 80% 87% 84% Multimedia SoCs 20% 18% 13% 7% 13% 19% 13% 16% Others 0% 2% 0% 1% 1% 1% 0% 0% Total 100% 100% 100% 100% 100% 100% 100% 100%
Net sales from mobile storage products, which include flash memory card controllers and USB 2.0 flash disk controllers, grew 4% from 4Q04 and 13% from 3Q05 to NT$732 million (US$21.9 million). Unit shipments increased 107% from 4Q04 and 24% from 3Q05 to 30 million units. Both the year-over-year and sequential increases were driven by strong demand for the Company's newer generation of SD, MMC, and USB 2.0 flash disk controllers. The average selling price (ASP) per unit declined 12% from 3Q05.
Net sales from multimedia SoC products, which include multimedia display processors and portable audio SoCs, grew 139% from 4Q04 and 44% from 3Q05 to NT$136 million (US$4.1 million). Unit shipments of multimedia SoC products increased 754% from 4Q04 and 133% from 3Q05 to approximately 947,000 units. The ASP per unit for multimedia SoC products declined 40% from 3Q05 primarily because portable audio SoCs, which have lower selling prices compared to multimedia display processors, comprised a greater proportion of the total number of multimedia SoC products sold in the fourth quarter. Increased competition in the portable audio SoC market also contributed to the decline in ASP.
Unit Shipment 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 (thousand units) Mobile Storage Products 4,824 4,913 9,983 14,549 10,912 14,120 24,265 30,146 Multimedia SoCs 112 114 128 111 163 337 407 947 Others 2 34 3 -- 17 59 3 7
The Company's top customers in the quarter included A-Data Technology, All American Semiconductor, ATP Electronics Taiwan, Kingmax Digital, Kingpak Technology, Lexar Media, Macrotron Systems, Microtek Inc, Power Digital Cards, and Samsung Electronics. The Company's top 5 customers accounted for 49% of total net sales in 4Q05, compared to 48% in 3Q05.
The cost of sales in 4Q05 totaled NT$402 million (US$12.0 million), a decrease of 18% from 4Q04 and an increase of 13% from 3Q05. The year-over- year decrease was driven primarily by a decline in total wafer costs. The sequential increase was driven primarily by higher total wafer costs and higher assembly and test costs as a result of the higher sales volume overall. The gross margin for the quarter was 53.9%, up from 35.5% in 4Q04 and from 52.3% in 3Q05.
Total operating expenses in 4Q05, which include sales and marketing expenses, general and administrative (G&A) expenses, research and development (R&D) expenses, and amortization of intangible assets, were NT$207million (US$6.2 million), an increase of 42% from 4Q04 and 13% from 3Q05. Total operating expenses represented 23.7% of net sales, compared to 19.2% and 24.5% of net sales in 4Q04 and 3Q05, respectively. The Company's operating margin increased from 16.3% in 4Q04 and 27.8% in 3Q05 to 30.2% in 4Q05, primarily as a result of increases in our gross margin.
Sales and marketing expenses in 4Q05 increased by 45% from 4Q04 and 53% from 3Q05 and represented 6.5% of net sales. The year-over-year increase was primarily driven by higher salary and benefits that are associated with increased headcount, as well as higher promotional expenses. The increase was offset by reductions in total sales commissions and professional fees. The sequential increase was primarily due to higher salary and benefit expenses and higher commissions.
General and administrative expenses in 4Q05 increased 70% year-over-year, declined 31% sequentially, and represented 3.8% of net sales. The year-over- year increase was primarily due to higher salary and benefits from the higher headcount and was offset by decreases in professional fees and the reserve for bad debt. The sequential decrease was primarily due to decreases in professional fees and bad debt reserves and was offset by the higher salary and benefits.
Research and development expenses in 4Q05 increased 62% year-over-year and 21% sequentially and represented 13.2% of net sales. The year-over-year and sequential increases were driven by higher salary and benefits arising from higher R&D headcount and higher project costs that were a result of a greater number of R&D projects under development. Higher travel expenses and professional fees also contributed to the year-over-year and sequential increases.
The company-wide headcount increased 8% from 224 at the end of 3Q05 to 242 at the end of 4Q05. A large majority of the headcount increase took place in the Research and Development department. Separately, Jerry Shun, who was in charge of the Company's worldwide sales and marketing team, resigned from the Company to pursue other interests. Arthur Yeh, Julia Chen, and Vincent Sun, who are in charge of the Company's Asia, US, and Japan & Europe sales teams respectively, have assumed Jerry's responsibilities while the Company searches for a replacement.
Net income totaled NT$248 million (US$7.4 million) in 4Q05, an increase of 164% from NT$94 million in 4Q04 and an increase of 15% from NT$215 million in 3Q05. The net margin was 28.5%, up from 12.3% in 4Q04 but down slightly from 28.8% in 3Q05. Diluted earnings per ADS were NT$7.85 (US$0.24), up 116% from NT$3.64 (US$0.11) in 4Q04 and up 15% from NT$6.85 (US$0.21) in 3Q05.
At the end of the fourth quarter of 2005, the Company had NT$1,559 million (US$47.5 million) in cash and cash equivalent funds and NT$1,181 million (US$36.0 million) in short-term investments. Accounts receivable (A/R) increased from NT$479 million at the end of 3Q05 to NT$573 million (US$17.5 million) at the end of 4Q05. The average A/R turnover days increased from 47 days to 55 days. Inventory increased from NT$232 million at the end of 3Q05 to NT$279 million (US$8.5 million) at the end of 4Q05. The average inventory turnover had a slight increase, from 56 days to 58 days. Total assets grew from NT$3,832 million at the end of 3Q05 to NT$4,090 million (US$124.7 million) at the end of 4Q05.
Current liabilities increased from NT$582 million at the end of 3Q05 to NT$631 million (US$19.2 million) at the end of 4Q05, primarily due to increases in tax payables and accrued expenses. There was no material change in the Company's long-term liabilities.
There were 122.612 million ordinary shares outstanding at the end of 4Q05, which was equivalent to 30.653 million American Depositary Shares.
The first quarter is traditionally a slower business environment for Silicon Motion given that much of the Company's products are used in consumer electronic devices. Additionally, due to the Chinese New Year holiday, there are fewer business days in the first quarter for many customers who manufacture flash memory cards and USB flash disk drives. As a result, the Company currently expects sales in the first quarter of 2006 to be approximately US$20-$21 million, which represents a 19%-23% sequential decline, but still a 23%-29% year-over-year increase. The Company estimates that the operating margin in 1Q06, excluding the impact of stock option expenses, will be approximately flat from the 4Q05 level. As a result of adopting FAS 123R, stock option expenses in the first quarter are expected to be approximately $0.59 million.
For full-year 2006, the Company believes that demand for small form factor flash memory cards will be strong, especially for use in mobile phones. Additionally, Silicon Motion's newer MP3 controllers and USB flash disk controllers should enhance the Company's competitive position in the markets in which these products compete. As a result, the Company believes it will see continued growth in its products, including flash memory controllers for use in small form factor flash memory cards, USB 2.0 flash disk controllers, and MP3 controllers. Given these factors, the Company estimates that its full-year earnings per ADS will be approximately $0.90-$1.00.
Webcast of Conference Call:
The Company's management team will conduct a conference call at 10:00 am Eastern Time on January 26. A webcast of this conference call will be accessible on the Company's web site at http://www.siliconmotion.com.
Silicon Motion Technology Corporation Consolidated Statements of Income (in thousands, except percentages, per share data, and share count) (unaudited) For the For the For the For the Change Change 3 Months 3 Months 3 Months 3 Months from from Ended Ended Ended Ended 4Q04 3Q05 Dec. 31, Sep. 30, Dec. 31, Dec. 31, (%) (%) 2004(NT$) 2005(NT$) 2005(NT$) 2005(US$) (2) Net Sales 763,030 747,012 872,472 26,089 14 17 Cost of sales 492,161 356,688 402,282 12,029 (18) 13 Gross profit 270,869 390,324 470,190 14,060 74 20 Operating expenses Research & development 71,195 95,690 115,342 3,449 62 21 Sales & marketing 39,229 37,372 57,071 1,707 45 53 General & administrative 19,585 48,489 33,300 996 70 (31) Amort. of intangible assets 4,440 1,126 1,125 34 (75) -- Impair. of intangible assets 11,718 -- -- -- -- -- Subtotal 146,167 182,677 206,838 6,185 42 13 Operating income 124,702 207,647 263,352 7,875 111 26 Non-operating income (expense) Gain on sale of investments 4,538 3,394 3,880 116 (15) 14 Interest income (net) 236 11,725 13,920 417 5,798 19 Foreign exchange gain (loss) 17,086 4,710 (2,711) (81) (116) (158) Others (3,665) (6,356) 520 15 114 (108) Subtotal 18,195 13,473 15,609 467 (14) 16 Income before tax 142,897 221,120 278,961 8,342 95 26 Income tax expense 48,847 6,021 30,585 915 (37) 408 Net income $94,050 $215,099 $248,376 $7,427 164 15 Basic earnings per ADS NT$3.64 NT$7.02 NT$8.10 0.24 Diluted earnings per ADS NT$3.64 NT$6.85 NT$7.85 0.24 Margin Analysis: Gross margin 35.5% 52.3% 53.9% Operating margin 16.3% 27.8% 30.2% Net margin 12.3% 28.8% 28.5% Additional Data: Weighted average ADS equivalents (thousand)(3) 25,838 30,653 30,653 Diluted ADS equivalents (thousand) 25,838 31,389 31,644 Silicon Motion Technology Corporation Consolidated Statements of Income (in thousands, except percentages, per share data, and share count) (unaudited) For the For the For the 3 Months Year Year Ended Ended Ended Dec. 31, Dec. 31, Dec. 31, 2004(NT$) 2005(NT$) 2005(US$) Change(%) Net Sales 2,166,727 2,686,492 83,613 24 Cost of sales 1,274,410 1,342,585 41,786 5 Gross profit 892,317 1,343,907 41,827 51 Operating expenses Research & development 238,485 373,548 11,626 57 Sales & marketing 141,136 157,278 4,895 11 General & administrative 103,303 129,141 4,019 25 Amortization of intangible assets 17,758 4,501 140 (75) Impairment of intangible assets 11,718 -- -- -- Subtotal 512,400 664,468 20,680 30 Operating income 379,917 679,439 21,147 79 Non-operating income (expense) Gain on sale of investments 10,135 13,002 405 28 Interest income (net) 477 26,693 831 5,496 Foreign exchange gain (loss) 13,719 1,811 56 (87) Others (3,144) (5,589) (175) 78 Subtotal 21,187 35,917 1,117 70 Income before tax 401,104 715,356 22,264 78 Income tax expense 133,101 39,713 1,236 (70) Net income NT$268,003 NT$675,643 US$21,028 152 Basic earnings per ADS NT$10.32 NT$23.70 Diluted earnings per ADS NT$10.32 NT$23.09 Margin Analysis: Gross margin 41.2% 50.0% Operating margin 17.5% 25.3% Net margin 12.4% 25.2% Additional Data: Weighted average ADS equivalents outstanding (thousand) 25,763 28,509 Diluted ADS equivalents (thousand) 25,840 29,265 Silicon Motion Technology Corporation Consolidated Balance Sheet (NT$ thousands) (unaudited) Dec. 31, Sep. 30, Dec. 31, 2004 2005 2005 Cash and cash equivalents 727,165 1,624,817 1,558,998 Short-term investments 154,428 993,382 1,180,950 Accounts receivable, net 449,572 478,878 573,498 Inventories 509,149 232,341 278,528 Refundable deposits - current 107,527 95,000 60,000 Deferred income tax assets, net 35,330 7,798 48,858 Prepaid expenses and other current assets 68,337 214,583 222,563 Total current assets 2,051,508 3,646,799 3,923,395 Long-term investments 3,142 3,142 15,954 Property and equipment (net) 65,657 82,064 83,734 Intangible assets, net 6,843 3,468 2,342 Other assets 39,887 96,289 65,047 Total assets NT$2,167,037 NT$3,831,762 NT$4,090,472 Accounts payable 545,818 353,485 318,841 Income tax payable 78,133 64,518 104,744 Accrued expenses and other current liabilities 88,139 164,114 207,509 Total current liabilities 712,090 582,117 631,094 Accrued pension cost 4,813 7,855 5,365 Other long-term liabilities 1,901 1,467 1,886 Total liabilities 718,804 591,439 638,345 Shareholders' equity 1,448,233 3,240,323 3,452,127 Total liabilities & shareholders' equity NT$2,167,037 NT$3,831,762 NT$4,090,472 About Silicon Motion:
Silicon Motion Technology Corporation is a leading fabless semiconductor company that designs, develops, and markets universally compatible, high- performance, low-power semiconductor solutions for the multimedia consumer electronics market. The Company's semiconductor solutions include controllers used in mobile storage media, such as flash memory cards and USB flash drives, and multimedia systems on a chip, or SoCs, used in digital media devices such as MP3 players, PC cameras, PC notebooks and broadband multimedia phones.
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. Such forward-looking statements 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, our belief in the outcome of any claim or lawsuit, including our claim against one of our subcontractors for the inventory loss that we sustained during a fire at the subcontractor's factory; 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 multimedia consumer electronics markets; 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; 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 the registration statement on Form F-1 filed on June 24, 2005, as amended. We assume no obligation to update any forward- looking statements, which apply only as of the date of this press release.
(1) Note: Unless otherwise stated, all financial information used in this press release is unaudited, consolidated, prepared in accordance with 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. (2) 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$33.4419 to US$1 for the fourth quarter of 2005 and NT$32.1312 to US$1 for full- year 2005 based on the average of the noon buying rate for cable transfers of the NT dollar as certified for customs purposes by the Federal Reserve Bank of New York. (3) Assumes all outstanding ordinary shares are represented by ADSs. Each ADS represents four ordinary shares.
SOURCE Silicon Motion Technology Corporation
Investors: Richard Wei, Chief Financial Officer, +886-3-552-6888 x2886, or fax: +886-3-552-6988, firstname.lastname@example.org, or, Media: Sara Hsu, Project Manager, +886-2-2219-6688 x3509, or, fax: +886-2-2219-6868, email@example.com, both of Silicon Motion Technology Corporation