October 24, 2012 at 6:01 PM EDT
BACK
Silicon Motion Announces Results for the Period Ended September 30, 2012
Third Quarter 2012
Financial Highlights
- Net sales increased 11% quarter-over-quarter to
US$77.1 million fromUS$69.7 million in 2Q12 - Gross margin (non-GAAP1) decreased to 46.4% from 49.1% in 2Q12
- Operating expenses (non-GAAP) decreased to
US$15.8 million fromUS$17.2 million in 2Q12 - Operating margin (non-GAAP) increased to 25.9% from 24.3% in 2Q12
- Diluted earnings per ADS (non-GAAP) increased to
US$0.54 fromUS$0.42 in 2Q12
Business Highlights
- Achieved highest quarterly revenue and EPS (non-GAAP) in the Company's history
- Sales of New Growth Products (LTE and SSD plus embedded products) increased 39% sequentially and accounted for 40% of total revenue
- Both LTE product and eMMC controllers sales increased sequentially
- Card controller sales increased 21% sequentially
- Six new Samsung LTE smartphones with our LTE transceivers are entering production in the fourth quarter
- eMMC shipments are tracking towards 5 to 10% market share for full year 2012
- eMMC design-wins have expanded beyond smartphones to include tablets and smart TVs, all expected to enter production in the fourth quarter
Net income (GAAP) for the third quarter increased quarter-over-quarter to
Third Quarter 2012 Financial Review
Commenting on the results of the third quarter,
"
Our card controller business rebounded with a 21% sequential growth as our OEM customers increased procurement of controllers specifically for bundled cards. This very strong card controller growth was not enough to offset weakness at our other Core Products, principally USB flash drive controllers, mobile TV solutions, and CDMA EV-DO transceivers for the
Sales
Net sales in the third quarter were
Net sales of our mobile storage products, which primarily include flash memory cards, USB flash drives, SSD and embedded flash controllers, increased 4% sequentially in the third quarter to
Net sales of mobile communication products, which primarily include handset transceivers and mobile TV IC solutions, increased 40% from the second quarter of 2012 to
Gross and Operating Margins
Gross margin (non-GAAP) decreased to 46.4% in the third quarter from 49.1% in the second quarter of 2012. GAAP gross margin decreased to 46.3% in the third quarter from 48.9% in the second quarter of 2012.
Operating expenses (non-GAAP) were
Operating margin (non-GAAP) was 25.9%, an increase from 24.3% in the previous quarter. GAAP operating margin was 21.5% for the third quarter, an increase from 19.4% in the second quarter.
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 increased to
Cash Flow | ||
Our cash flows were as follows: | ||
3 months ended September 30, 2012 | ||
(In US$ millions) | ||
Net income | 15.6 | |
Depreciation & amortization | 1.5 | |
Changes in operating assets and liabilities | 12.7 | |
Others | 3.5 | |
Net cash provided by (used in) operating activities | 33.3 | |
Acquisition of property and equipment | (1.0) | |
Others | -- | |
Net cash provided by (used in) investing activities | (1.0) | |
Others | -- | |
Net cash provided by (used in) financing activities | -- | |
Effects of changes in foreign currency exchange rates on cash | 0.7 | |
Net increase (decrease) in cash and cash equivalents | 33.0 |
During the third quarter of 2012, we had
Business Outlook:
"Our third quarter sales were stronger than expected principally because of accelerated LTE transceiver orders by Samsung. While originally we were anticipating sequential revenue growth in the fourth quarter, we are now anticipating a slight decrease due to some LTE transceiver sales planned for the fourth quarter having been sold in the third quarter. We are expecting modest growth from our card controllers and similar revenue from our eMMC controllers in the fourth quarter. Based on our fourth quarter revenue guidance, our full year revenue should grow 25 to 27%."
For the fourth quarter of 2012, management expects:
- Revenue to be down 3% to 9% sequentially
- Gross margin (non-GAAP) to be in the 44% to 46% range
- Operating expenses (non-GAAP) of approximately
US$17 to US$18 million
Conference Call & Webcast:
The Company's management team will conduct a conference call at
(Speakers)
Riyadh Lai, CFO
CONFERENCE CALL ACCESS NUMBERS:
Participant Passcode: 4234 3488
REPLAY NUMBERS (for 7 days):
Participant Passcode: 4234 3488
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.
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. To date in 2012, we have incurred no Acquisition-related charges. Historical acquisition-related charges include the following:
– Amortization of intangible assets relates to the amortization of core technology, customer relationship, and other intangibles acquired as part of an acquisition.
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.
Foreign exchange gains and losses prior to
Silicon Motion Technology Corporation | |||
Consolidated Statements of Income | |||
(in thousands, except percentages and per ADS data, unaudited) | |||
For the Three Months Ended | |||
Sep. 30, 2011 | Jun. 30, 2012 | Sep. 30, 2012 | |
(US$) | (US$) | (US$) | |
Net Sales | 63,217 | 69,678 | 77,066 |
Cost of sales | 32,059 | 35,596 | 41,424 |
Gross profit | 31,158 | 34,082 | 35,642 |
Operating expenses | |||
Research & development | 10,514 | 13,337 | 12,076 |
Sales & marketing | 3,962 | 4,013 | 4,234 |
General & administrative | 3,186 | 3,229 | 2,776 |
Operating income | 13,496 | 13,503 | 16,556 |
Non-operating income (expense) | |||
Gain on sale of investments | 3 | -- | 1 |
Interest income, net | 147 | 324 | 378 |
Foreign exchange gain (loss),net | 7,595 | (513) | 362 |
Others, net | 6 | -- | 17 |
Subtotal | 7,751 | (189) | 758 |
Income before income tax | 21,247 | 13,314 | 17,314 |
Income tax expense (benefit) | 2,970 | 2,657 | 1,692 |
Net income | 18,277 | 10,657 | 15,622 |
Basic earnings per ADS | $0.59 | $0.33 | $0.48 |
Diluted earnings per ADS | $0.56 | $0.32 | $0.46 |
Margin Analysis: | |||
Gross margin | 49.3% | 48.9% | 46.3% |
Operating margin | 21.4% | 19.4% | 21.5% |
Net margin | 28.9% | 15.3% | 20.3% |
Additional Data: | |||
Weighted avg. ADS equivalents 2 | 30,960 | 32,407 | 32,428 |
Diluted ADS equivalents | 32,456 | 33,475 | 33,647 |
Silicon Motion Technology Corporation | |||
Reconciliation of GAAP to Non-GAAP Operating Results | |||
(in thousands, except percentages and per ADS data, unaudited) | |||
For the Three Months Ended | |||
Sep. 30, 2011 |
Jun. 30, 2012 |
Sep. 30, 2012 |
|
(US$) | (US$) | (US$) | |
GAAP net income | 18,277 | 10,657 | 15,622 |
Stock-based compensation: | |||
Cost of sales | 81 | 114 | 114 |
Research and development | 1,674 | 2,068 | 2,092 |
Sales and marketing | 707 | 709 | 679 |
General and administrative | 470 | 554 | 543 |
Total stock-based compensation | 2,932 | 3,445 | 3,428 |
Litigation expenses | 29 | -- | -- |
Foreign exchange loss (gain),net | (7,595) | 513 | (362) |
Non-GAAP net income | 13,643 | 14,615 | 18,688 |
Shares used in computing non-GAAP diluted earnings per ADS | 33,946 | 34,543 | 34,547 |
Non-GAAP diluted earnings per ADS | $0.40 | $0.42 | $0.54 |
Non-GAAP gross margin | 49.4% | 49.1% | 46.4% |
Non-GAAP operating margin | 26.0% | 24.3% | 25.9% |
Silicon Motion Technology Corporation | ||
Consolidated Statements of Income | ||
(in thousands, except percentages, and per ADS data, unaudited) | ||
For the Nine Months Ended | ||
Sep. 30, | Sep. 30, | |
2011 | 2012 | |
(US$) | (US$) | |
Net Sales | 157,117 | 210,766 |
Cost of sales | 82,285 | 109,399 |
Gross profit | 74,832 | 101,367 |
Operating expenses | ||
Research & development | 28,174 | 36,678 |
Sales & marketing | 10,244 | 12,120 |
General & administrative | 8,760 | 9,189 |
Amortization of intangible assets | 793 | -- |
Operating income | 26,861 | 43,380 |
Non-operating income ( expense ) | ||
Gain on sale of investments | 5 | 2 |
Interest income, net | 296 | 972 |
Foreign exchange gain (loss),net | 6,875 | 438 |
Others, net | 10 | 18 |
Subtotal | 7,186 | 1,430 |
Income before income tax | 34,047 | 44,810 |
Income tax expense | 4,801 | 5,522 |
Net income | 29,246 | 39,288 |
Basic earnings per ADS | $0.95 | $1.22 |
Diluted earnings per ADS | $0.91 | $1.17 |
Margin Analysis: | ||
Gross margin | 47.6% | 48.1% |
Operating margin | 17.1% | 20.6% |
Weighted average ADS: | ||
Basic | 30,676 | 32,264 |
Diluted | 32,018 | 33,561 |
Silicon Motion Technology Corporation | ||
Reconciliation of GAAP to Non-GAAP Operating Results | ||
(in thousands, except percentages and per ADS data, unaudited) | ||
For the Nine Months Ended | ||
Sep. 30, | Sep. 30, | |
2011 | 2012 | |
(US$) | (US$) | |
GAAP net income | 29,246 | 39,288 |
Stock-based compensation: | ||
Cost of sales | 176 | 269 |
Research and development | 3,497 | 5,023 |
Sales and marketing | 1,378 | 1,806 |
General and administrative | 1,048 | 1,346 |
Total stock-based compensation | 6,099 | 8,444 |
Acquisition related charges: | ||
Amortization of intangible assets | 793 | -- |
Litigation expenses | 40 | -- |
Foreign exchange loss (gain), net | (6,875) | (438) |
Non-GAAP net income | 29,303 | 47,294 |
Shares used in computing non-GAAP diluted earnings per ADS | 33,248 | 34,439 |
Non-GAAP diluted earnings per ADS | $0.88 | $1.37 |
Non-GAAP gross margin | 47.7% | 48.2% |
Non-GAAP operating margin | 21.5% | 24.6% |
Silicon Motion Technology Corporation | |||
Consolidated Balance Sheet | |||
(In thousands, unaudited) | |||
Sep. 30, | Jun. 30, | Sep. 30, | |
2011 | 2012 | 2012 | |
(US$) | (US$) | (US$) | |
Cash and cash equivalents | 66,852 | 113,579 | 146,570 |
Short-term investments | 2,954 | -- | -- |
Accounts receivable (net) | 35,659 | 41,602 | 37,593 |
Inventories | 29,209 | 32,796 | 36,801 |
Refundable deposits - current | 15,173 | 15,198 | 15,240 |
Deferred income tax assets (net) | 1,801 | 2,591 | 2,565 |
Prepaid expenses and other current assets | 2,673 | 2,321 | 3,248 |
Total current assets | 154,321 | 208,087 | 242,017 |
Long-term investments | 177 | 178 | 178 |
Property and equipment (net) | 23,810 | 24,107 | 23,490 |
Goodwill and intangible assets(net) | 38,334 | 35,459 | 35,465 |
Other assets | 5,699 | 4,798 | 4,835 |
Total assets | 222,341 | 272,629 | 305,985 |
Accounts payable | 14,717 | 15,436 | 27,502 |
Income tax payable | 1,843 | 2,181 | 3,506 |
Accrued expenses and other current liabilities | 15,350 | 21,301 | 21,216 |
Total current liabilities | 31,910 | 38,918 | 52,224 |
Other liabilities | 2,707 | 3,533 | 3,922 |
Total liabilities | 34,617 | 42,451 | 56,146 |
Shareholders' equity | 187,724 | 230,178 | 249,839 |
Total liabilities & shareholders' equity | 222,341 | 272,629 | 305,985 |
Note: Our 1Q11, 2Q11 and 3Q11 US$ financial numbers are translated from NT$, as previously disclosed. Beginning
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 two major product lines, mobile storage and mobile communications. 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.
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, 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.
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