Fourth Quarter 2013
Financial Highlights
- Net sales decreased 8% quarter-over-quarter to US$52.5 million
from US$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 from
US$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 from
US$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
Silicon Motion Technology Corporation (Nasdaq:SIMO) ("Silicon
Motion" or the "Company") today announced its financial results for
the quarter ended December 31, 2013. For the fourth quarter of
2013, net sales decreased 8% quarter-over-quarter to US$52.5
million from US$57.1 million in the third quarter of 2013. Net
income (non-GAAP) of US$10.2 million or US$0.30 per diluted ADS in
the fourth quarter of 2013 decreased slightly as compared to
US$10.8 million or US$0.32 per diluted ADS in the third quarter of
2013.
GAAP net income for the fourth quarter of 2013 decreased
quarter-over-quarter to US$5.4 million or US$0.16 per diluted ADS
from a GAAP net income of US$9.6 million or US$0.29 per diluted ADS
in the third quarter of 2013.
Fourth Quarter 2013 Financial Review
Commenting on the results of the fourth quarter, Silicon
Motion's President and CEO Wallace Kou said:
"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 Samsung's new LTE-Advanced
baseband is nearing completion for our first flagship win at
Samsung's 2014 smartphone lineup."
Sales
Net sales in the fourth quarter were US$52.5 million, a decrease
of 8% compared with the third quarter. For the quarter, mobile
storage products accounted for 89% of net sales and mobile
communications 7% of net sales.
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
US$46.9 million.
Net sales of mobile communications products, which primarily
include handset transceivers and mobile TV IC solutions, decreased
41% from the third quarter to US$3.8 million in the fourth
quarter.
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 US$13.8
million, a decrease from the US$14.9 million expended in the third
quarter. Operating margin (non-GAAP) was 22.5%, a decrease from
22.7% in the previous quarter. GAAP operating margin was 13.2% for
the fourth quarter, a decrease from 20.0% in the third quarter.
Other Income and Expenses
Net total other income (non-GAAP) was US$0.5 million, a slight
increase from the US$0.4 million in third quarter. GAAP net total
other income was US$0.6 million, a slight decrease from the US$0.7
million in the third quarter.
Earnings
Net income (non-GAAP) was US$10.2 million for the fourth
quarter, a slight decrease from US$10.8 million in the third
quarter. Diluted earnings per ADS (non-GAAP) were US$0.30 in the
fourth quarter, a slight decrease from US$0.32 per ADS in the third
quarter.
GAAP net income was US$5.4 million for the fourth quarter, a
decrease from a net income of US$9.6 million in the third quarter.
Diluted GAAP earnings per ADS in the fourth quarter were US$0.16, a
decrease from US$0.29 per ADS in the previous quarter.
Balance Sheet
Cash and cash equivalents, and short-term investments of
US$162.5 million at the end of the fourth quarter was a decrease
from US$163.4 million at the end of the third quarter.
Cash Flow
Our cash flows were as follows:
3 months ended December 31,
2013 |
|
|
|
(In US$ 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 US$3.1 million of capital
expenditures primarily relating to the purchase of testing
equipment, software and design tools.
Share Repurchase Program
In January 2013, the Company announced a US$40 million share
repurchase program. We did not repurchase any shares in the fourth
quarter. For 2013, we repurchased 0.9 million ADSs for a total cost
of US$10.0 million at a weighted average price per ADS of
US$11.24.
Business Outlook:
Silicon Motion's President and CEO, Wallace Kou, added:
"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 Samsung and begin
shipments for their new flagship smartphone in the second
quarter."
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
8:00 am Eastern Time on January 28, 2014.
(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): 1 718 354 1231 Taiwan (Toll Free): 0080 112 6920
Participant Passcode: 3024 8783
REPLAY NUMBERS (for 7 days): USA (Toll Free): 1 855 452 5696 USA
(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 Silicon Motion:
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 Silicon Motion, visit
www.siliconmotion.com.
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 Silicon
Motion's expected first quarter 2014 and 2014 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 2013. 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;
decreases in the overall average selling prices of our products;
changes in the relative sales mix of our products; the payment, or
non-payment, of cash dividends in the future at the discretion of
our board of directors; the effect, if any, on the price of our ADS
as a result of the implementation of the announced share repurchase
program; 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, 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 April 30, 2013, as amended on May 29,
2013. We assume no obligation to update any forward-looking
statements, which apply only as of the date of this press
release.
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
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