Second Quarter 2014
Financial Highlights
- Net sales increased 31% quarter-over-quarter to US$69.4 million
from US$52.8 million in 1Q14
- Gross margin (non-GAAP1) increased to 52.2% from 48.6% in
1Q14
- Operating expenses (non-GAAP) increased to US$19.9 million from
US$16.9 million in 1Q14
- Operating margin (non-GAAP) increased to 23.5% from 16.7% in
1Q14
- Diluted earnings per ADS (non-GAAP) increased to US$0.41 from
US$0.16 in 1Q14
Business Highlights
- Highest Mobile Storage revenue in our corporate history
- SSD+Embedded revenue is now well over half of total
revenue
- eMMC controller revenue grew 65% sequentially
- Our eMMC controllers are now shipping in devices of all top ten
non-iOS smartphone OEMs
- Secured new SATA 3 client SSD platform-win targeting global PC
OEMs by our SSD OEM customer for 1H 2015 mass production
- Secured SATA 3 client SSD controller design-win with 2nd NAND
flash vendor and additional SSD controller design-win with 1st NAND
flash vendor, both for 1H 2015 mass production
- Began shipping LTE-Advanced transceiver to our Korean handset
OEM partner
- Secured two additional LTE-Advanced transceiver design-wins
with Korean handset OEM
Silicon Motion Technology Corporation (NasdaqGS: SIMO) ("Silicon
Motion" or the "Company") today announced its financial results for
the quarter ended June 30, 2014. For the second quarter, net sales
increased 31% quarter-over-quarter to US$69.4 million from US$52.8
million in the first quarter. Net income (non-GAAP) of US$14.1
million or US$0.41 per diluted ADS in the second quarter increased
as compared to US$5.4 million or US$0.16 per diluted ADS in the
first quarter.
GAAP net income for the second quarter increased
quarter-over-quarter to US$13.9 million or US$0.41 per diluted ADS
from a GAAP net income of US$3.8 million or US$0.11 per diluted ADS
in the first quarter.
_________
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.
Second Quarter 2014 Financial Review
Commenting on the results of the second quarter, Silicon
Motion's President and CEO Wallace Kou said:
"The second quarter was an outstanding quarter for the Company
as all our new growth products contributed to strong 31% sequential
growth. Our SSD plus embedded revenue grew over 55% and accounted
for well over 50% of total revenue. Within our SSD plus embedded
products, both our eMMC controllers and SATA 3 client SSD
controllers grew strongly. Our eMMC controllers grew 65% as one of
our Korean NAND flash partners increased its global eMMC market
share more rapidly than anticipated and our other NAND flash
partner continued ramping its new TLC eMMC. Our eMMC controllers
are now used in the devices manufactured by all of the top ten
non-iOS smartphone OEMs, two more than last quarter. Our SSD
controller sales also grew stronger than expected as our module
maker customers aggressively marketed SSDs with our controllers to
consumers. Additionally this quarter, we expanded our pipeline of
SSD design-wins with OEMs by securing a new SSD platform-win
targeting PC OEMs by our SSD OEM partner, a new NAND flash vendor
customer and a new project with our first NAND flash OEM. We
believe these new SSD and embedded controller businesses should
scale through next year.
"In the second quarter, we began initial sales of our
LTE-Advanced transceiver to our Korean handset partner and secured
two additional design wins for mass production in the third quarter
of this year."
Sales
Net sales in the second quarter were US$69.4 million, an
increase of 31% compared with the first quarter. For the quarter,
mobile storage products accounted for 85% of net sales and mobile
communications 12% of net sales.
Net sales of our mobile storage products, which primarily
include flash memory card, USB flash drive, SSD and embedded flash
controllers, increased 30% sequentially in the second quarter to
US$58.8 million.
Net sales of mobile communications products, which primarily
include handset transceivers and mobile TV IC solutions, increased
54% sequentially to US$8.6 million in the second quarter.
Gross and Operating Margins
Gross margin (non-GAAP) increased to 52.2% in the second quarter
as compared to 48.6% in the first quarter. GAAP gross margin
increased in the second quarter to 52.2% as compared to 48.5% in
the first quarter.
Operating expenses (non-GAAP) in the second quarter were US$19.9
million, an increase from US$16.9 million in the first quarter.
Operating margin (non-GAAP) was 23.5%, an increase from 16.7% in
the previous quarter. GAAP operating margin was 22.7% for the
second quarter, an increase from 14.2% in the first quarter.
Other Income and Expenses
Net total other income (non-GAAP) was US$0.5 million, unchanged
from the first quarter. GAAP net total other income was US$1.0
million, an increase from US$0.2 million in the first quarter.
Earnings
Net income (non-GAAP) was US$14.1 million for the second
quarter, an increase from US$5.4 million in the first quarter.
Diluted earnings per ADS (non-GAAP) were US$0.41 in the second
quarter, an increase from US$0.16 per ADS in the first quarter.
GAAP net income was US$13.9 million for the second quarter, an
increase from US$3.8 million in the first quarter. Diluted GAAP
earnings per ADS in the second quarter were US$0.41, an increase
from US$0.11 per ADS in the previous quarter.
Balance Sheet
Cash and cash equivalents, and short-term investments increased
at the end of the second quarter to US$160.9 million from US$158.6
million at the end of the first quarter.
Cash Flow
Our cash flows were as follows:
3 months ended June 30,
2014 |
|
(In US$ millions) |
Net income |
13.9 |
Depreciation & amortization |
1.6 |
Changes in operating assets and
liabilities |
(2.2) |
Others |
(0.3) |
Net cash provided by (used in)
operating activities |
13.0 |
Acquisition of property and equipment |
(1.5) |
Others |
(4.7) |
Net cash provided by (used in)
investing activities |
(6.2) |
Dividend |
(5.0) |
Others |
0.1 |
Net cash provided by (used in)
financing activities |
(4.9) |
Effects of changes in foreign currency
exchange rates on cash |
0.4 |
Net increase (decrease) in cash
and cash equivalents |
2.3 |
During the second quarter, we had US$1.5 million of capital
expenditures primarily relating to the purchase of software and
design tools.
Returning Value to Shareholders
On April 22, 2014 the Board of Directors of the Company declared
a US$0.15 per ADS quarterly dividend. On May 16, we paid $5.0
million as dividend payments to our shareholders.
Business Outlook:
Silicon Motion's President and CEO, Wallace Kou, added:
"While we are pleased with our robust 2014 year-to-date
performance and our expectations for the balance of this year, we
are also looking forward to 2015 and are excited by our growing
pipeline of SATA 3 client SSD and eMMC design-wins at major
OEMs. We believe that we will increase our eMMC controller
market share to 25% this year and have secured new programs with
our NAND flash partners to drive strong continued eMMC growth next
year. We now have one SSD OEM and two NAND flash partners with
multiple new SSD program-wins that we believe will all start
ramping in 1H 2015."
For the third quarter of 2014, management expects:
- Revenue to increase 15% to 20% sequentially
- Gross margin (non-GAAP) to be in the 50% to 52% range
- Operating expenses (non-GAAP) of approximately US$21 to US$23
million
For the full year 2014, management expects:
- Revenue to increase 22% to 27% year-over-year
- Gross margin (non-GAAP) to be in the 49.5% to 51.5% range
- Operating expenses (non-GAAP) of approximately US$78 to US$80
million
Conference Call & Webcast:
The Company's management team will conduct a conference call at
8:00 am Eastern Time on July 29, 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): 1 845 675 0437 |
Taiwan (Toll Free): 0080 112 6920 |
Participant Passcode: 6983 1835 |
|
REPLAY NUMBERS (for 7 days): |
USA (Toll Free): 1 855 452 5696 |
USA (Toll): 1 646 254 3697 |
Participant Passcode: 6983 1835 |
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$. We do not use financial
instruments to manage the impact on our operations from changes in
foreign exchange rates, and because our operations are subject to
fluctuations in foreign exchange rates, we therefore exclude
foreign exchange gains and losses when presenting non-GAAP
financial measures.
Other non-recurring items:
- Litigation expenses consist of legal expenses relating to
intellectual property disputes, commercial claims and other types
of litigation. While litigation may arise in the ordinary course of
our business, we nevertheless consider litigation to be an unusual,
non-recurring and unplanned activity and therefore exclude this
charge when presenting non-GAAP financial measures.
- Vendor dispute charges relate to the write down of certain
unsalable inventory due to defects in the components provided by
our vendor. These parts were supplied to us at a quality below
levels previously specified and agreed. All parts known to be
defective have been identified and are within our control. We
have resolved this matter with our vendor and recovered in 1Q 2013
the full value of the inventory being written off. This charge (as
well as the amount recovered) has been excluded from our non-GAAP
results as we believe this is an unusual, non-recurring and
unplanned activity.
Silicon Motion Technology
Corporation |
Consolidated Statements of
Income |
(in thousands, except
percentages and per ADS data, unaudited) |
|
|
|
|
|
For the Three Months
Ended |
|
Jun. 30, 2013
(US$) |
Mar. 31, 2014
(US$) |
Jun. 30, 2014
(US$) |
Net Sales |
58,322 |
52,848 |
69,411 |
Cost of sales |
30,122 |
27,224 |
33,210 |
Gross profit |
28,200 |
25,624 |
36,201 |
Operating expenses |
|
|
|
Research & development |
12,012 |
11,907 |
13,786 |
Sales & marketing |
3,363 |
3,591 |
3,575 |
General &
administrative |
2,876 |
2,630 |
3,085 |
Operating income |
9,949 |
7,496 |
15,755 |
|
|
|
|
Non-operating income (expense) |
|
|
|
|
|
|
|
Gain on sale of
investments |
-- |
1 |
1 |
Interest income, net |
384 |
474 |
548 |
Foreign exchange gain (loss),
net |
(93) |
(230) |
450 |
Others, net |
2 |
2 |
1 |
Subtotal |
293 |
247 |
1,000 |
Income before income tax |
10,242 |
7,743 |
16,755 |
Income tax expense |
2,698 |
3,915 |
2,810 |
Net income |
7,544 |
3,828 |
13,945 |
|
|
|
|
Basic earnings per ADS |
$0.23 |
$0.12 |
$0.41 |
Diluted earnings per ADS |
$0.22 |
$0.11 |
$0.41 |
|
|
|
|
Margin Analysis: |
|
|
|
Gross margin |
48.4% |
48.5% |
52.2% |
Operating margin |
17.1% |
14.2% |
22.7% |
Net margin |
12.9% |
7.2% |
20.1% |
|
|
|
|
Additional Data: |
|
|
|
Weighted avg. ADS equivalents2 |
33,199 |
33,184 |
33,738 |
Diluted ADS equivalents |
33,529 |
33,963 |
34,063 |
|
|
|
|
2 Assumes all
outstanding ordinary shares are represented by ADSs. Each ADS
represents four ordinary shares. |
|
Silicon Motion Technology
Corporation |
Reconciliation of GAAP to
Non-GAAP Operating Results |
(in thousands, except
percentages and per ADS data, unaudited) |
|
|
|
|
|
For the Three
Months Ended |
|
Jun. 30, 2013
(US$) |
Mar. 31, 2014
(US$) |
Jun. 30, 2014
(US$) |
GAAP net income |
7,544 |
3,828 |
13,945 |
Stock-based
compensation: |
|
|
|
Cost of sales |
33 |
58 |
15 |
Research and development |
821 |
1,068 |
289 |
Sales and marketing |
383 |
214 |
83 |
General and administrative |
192 |
205 |
43 |
Total stock-based
compensation |
1,429 |
1,545 |
430 |
|
|
|
|
Non-recurring items: |
|
|
|
Litigation expenses |
87 |
(239) |
146 |
Foreign exchange loss (gain),
net |
93 |
230 |
(450) |
Non-GAAP net income |
9,153 |
5,364 |
14,071 |
|
|
|
|
Shares used in computing non-GAAP
diluted earnings per ADS |
33,965 |
34,104 |
34,130 |
|
|
|
|
Non-GAAP diluted earnings per
ADS |
$0.27 |
$0.16 |
$0.41 |
|
|
|
|
Non-GAAP gross margin |
48.4% |
48.6% |
52.2% |
Non-GAAP operating margin |
19.7% |
16.7% |
23.5% |
|
|
|
|
|
Silicon Motion Technology
Corporation |
Consolidated Statements of
Income |
(in thousands, except
percentages, and per ADS data, unaudited) |
|
|
|
|
For the Six
Months Ended |
|
Jun. 30, 2013
(US$) |
Jun. 30, 2014
(US$) |
Net Sales |
115,687 |
122,259 |
Cost of sales |
62,341 |
60,434 |
Gross profit |
53,346 |
61,825 |
Operating expenses |
|
|
Research & development |
23,652 |
25,693 |
Sales & marketing |
6,745 |
7,166 |
General &
administrative |
6,002 |
5,715 |
Operating income |
16,947 |
23,251 |
|
|
|
Non-operating expense (income) |
|
|
Gain on sale of
investments |
-- |
2 |
Interest income, net |
837 |
1,022 |
Foreign exchange gain (loss),
net |
(404) |
220 |
Others, net |
114 |
3 |
Subtotal |
547 |
1,247 |
Income before income tax |
17,494 |
24,498 |
Income tax expense |
5,113 |
6,725 |
Net income |
12,381 |
17,773 |
|
|
|
Basic earnings per ADS |
$0.37 |
$0.53 |
Diluted earnings per ADS |
$0.37 |
$0.52 |
|
|
|
Margin Analysis: |
|
|
Gross margin |
46.1% |
50.6% |
Operating margin |
14.7% |
19.0% |
|
|
|
Weighted average ADS: |
|
|
Basic |
33,241 |
33,461 |
Diluted |
33,790 |
34,013 |
|
Silicon Motion Technology
Corporation |
Reconciliation of GAAP to
Non-GAAP Operating Results |
(in thousands, except
percentages and per ADS data, unaudited) |
|
|
|
|
For the Six
Months Ended |
|
Jun. 30, 2013
(US$) |
Jun. 30, 2014
(US$) |
GAAP net income |
12,381 |
17,773 |
Stock-based
compensation: |
|
|
Cost of sales |
110 |
73 |
Research and development |
2,346 |
1,357 |
Sales and marketing |
904 |
297 |
General and administrative |
547 |
248 |
Total stock-based
compensation |
3,907 |
1,975 |
|
|
|
Non-recurring items: |
|
|
Vendor dispute |
(1,717) |
-- |
Litigation expenses |
191 |
(93) |
Foreign exchange loss (gain),
net |
404 |
(220) |
|
|
|
Non-GAAP net income |
15,166 |
19,435 |
|
|
|
Shares used in computing non-GAAP
diluted earnings per ADS |
34,233 |
34,117 |
|
|
|
Non-GAAP diluted earnings per
ADS |
$0.44 |
$0.57 |
|
|
|
Non-GAAP gross margin |
44.7% |
50.6% |
Non-GAAP operating margin |
16.7% |
20.6% |
|
|
|
Silicon Motion Technology
Corporation |
Consolidated Balance
Sheet |
(In thousands, unaudited) |
|
|
|
|
|
Jun. 30, 2013
(US$) |
Mar. 31, 2014
(US$) |
Jun. 30, 2014
(US$) |
Cash and cash equivalents |
156,358 |
157,841 |
160,204 |
Short-term investments |
-- |
727 |
743 |
Accounts receivable (net) |
32,143 |
37,441 |
41,732 |
Inventories |
29,330 |
30,982 |
45,185 |
Refundable deposits - current |
15,215 |
15,310 |
19,829 |
Deferred income tax assets (net) |
552 |
-- |
631 |
Prepaid expenses and other current
assets |
2,788 |
2,586 |
3,872 |
Total current assets |
236,386 |
244,887 |
272,196 |
|
|
|
|
Long-term investments |
133 |
133 |
133 |
Property and equipment (net) |
29,170 |
30,211 |
30,234 |
Goodwill and intangible assets (net) |
35,461 |
35,471 |
35,481 |
Other assets |
4,283 |
4,513 |
4,814 |
Total assets |
305,433 |
315,215 |
342,858 |
|
|
|
|
Accounts payable |
16,216 |
14,199 |
27,922 |
Income tax payable |
4,635 |
10,766 |
9,291 |
Accrued expenses and other current
liabilities |
23,308 |
13,651 |
18,451 |
Total current liabilities |
44,159 |
38,616 |
55,664 |
Other liabilities |
3,449 |
5,671 |
6,325 |
Total liabilities |
47,608 |
44,287 |
61,989 |
Shareholders' equity |
257,825 |
270,928 |
280,869 |
Total liabilities & shareholders'
equity |
305,433 |
315,215 |
342,858 |
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 third quarter of 2014 and full year 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 second quarter of 2014.
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, 2014. We assume no obligation
to update any forward-looking statements, which apply only as of
the date of this press release.
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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