First Quarter 2013
Financial Highlights
- Net sales decreased 19% quarter-over-quarter to US$57.4 million
from US$70.6 million in 4Q12
- Gross margin (non-GAAP1) excluding one-time expenses and
benefits was 44%
- Gross margin (non-GAAP) decreased to 41% from 45% in 4Q12
- Operating expenses (non-GAAP) decreased to US$15.6 million from
US$17.8 million in 4Q12
- Operating margin (non-GAAP) decreased to 14% from 20% in
4Q12
- Diluted earnings per ADS (non-GAAP) decreased to US$0.17 from
US$0.36 in 4Q12
Business Highlights
- Secured design-win for our next-generation 55nm eMMC 4.5
controller from tier-1 smartphone OEM for global flagship and from
tier-1Android tablet OEM—both to enter production in 2Q13
- Began shipping our USB 3.0 controller to three leading OEMs in
1Q13
- Won two tier-1 Japanese OEMs for our FerriSSD solution
- Our SD UHS-1 high performance controller reached record high
shipments in 1Q13
- Won new tier-1 Japanese OEM for our SD UHS-1 high performance
controller
- Expect SM2246, our SATA3 SSD controller to enter commercial
sampling in 2Q13
Silicon Motion Technology Corporation (Nasdaq:SIMO) ("Silicon
Motion" or the "Company") today announced its financial results for
the quarter ended March 31, 2013. For the first quarter of 2013,
net sales decreased 19% quarter-over-quarter to US$57.4 million
from US$70.6 million in the fourth quarter of 2012. Net income
(non-GAAP) decreased in the first quarter to US$6.0 million or
US$0.17 per diluted ADS from a net income of US$12.4 million or
US$0.36 per diluted ADS in the fourth quarter of 2012.
Net income (GAAP) for the first quarter of 2013 decreased
quarter-over-quarter to US$4.8 million or US$0.14 per diluted ADS
as compared to a net income of US$7.9 million or US$0.23 per
diluted ADS in the fourth quarter of 2012.
First Quarter 2013 Financial Review
Commenting on the results of the Company's first quarter,
Silicon Motion's President and CEO, Wallace Kou, said:
"In the first quarter, our eMMC controller sales grew much
stronger than expected, increasing nearly 30% sequentially. Our SSD
plus embedded products group, of which eMMC is a part, now accounts
for well over a quarter of our total sales. We have been successful
with our high performance, cost competitive controllers, enabling
our flash partners to grow the embedded market and capture market
share at both tier-1 smartphone OEMs, as well as in the fast
growing China low-cost smartphone market. Eight out of the world's
ten largest (non-iOS) smartphone OEMs are already using eMMC
embedded memory with our controllers.
The strength of our SSD plus embedded business was however
offset by the temporary weakness in several of our other key
products. Our LTE sales declined as Samsung products are in
cyclical transition. The first quarter is typically
seasonally weak for our card and UFD controller sales to our module
maker customers, and our first quarter sales this year followed the
same pattern. In addition, in the first quarter, we were
affected by the rebalancing of our large OEM customer's card
sales. We believe that we are well positioned for renewed
growth as these temporary factors unwind and our SSD plus embedded
products continue their growth."
Sales
Net sales in the first quarter of 2013 were US$57.4 million, a
decrease of 19% compared with the previous quarter. For the
quarter, mobile storage products accounted for 76% of net sales and
mobile communications 21% of net sales.
Net sales of our mobile storage products, which primarily
include flash memory cards, USB flash drives, SSD and embedded
flash controllers, decreased 18% sequentially in the first quarter
of 2013 to US$43.4 million.
Net sales of mobile communication products, which primarily
include handset transceivers and mobile TV IC solutions, decreased
20% from the fourth quarter to US$12.0 million in the first quarter
of 2013.
Gross and Operating Margins
Gross margin (non-GAAP) decreased to 41.0% in the first quarter
of 2013 from 44.6% in the fourth quarter of 2012. GAAP gross margin
increased to 43.8% in the first quarter of 2013 from 43.0% in the
fourth quarter of 2012.
Operating expenses (non-GAAP) in the first quarter of 2013 were
US$15.6 million, which was lower than the US$17.8 million expended
in the fourth quarter of 2012. Research and development
expenditures (non-GAAP) were US$10.1 million, which was lower than
the US$12.3 million in the previous quarter. Selling and marketing
expenses (non-GAAP) were US$2.9 million, which was lower compared
to the US$3.1 million in the previous quarter. General and
administrative expenses (non-GAAP) were US$2.7 million, which was
higher compared to the US$2.4 million in the previous quarter.
Stock-based compensation was US$2.5 million in the first quarter of
2013, lower than the US$3.4 million in the fourth quarter of
2012.
Operating margin (non-GAAP) was 13.7%, a decrease from 19.5% in
the previous quarter. GAAP operating margin was 12.2% for the first
quarter of 2013, a decrease from 13.2% in the fourth quarter.
Other Income and Expenses
Net total other income (non-GAAP) was US$0.6 million, an
increase from US$0.3 million in the fourth quarter. GAAP net total
other income was US$0.3 million, higher than the fourth quarter
amount of US$0.2 million.
Earnings
Net income (non-GAAP) was US$6.0 million for the first quarter
of 2013, a decrease from US$12.4 million in the fourth quarter.
Diluted earnings per ADS (non-GAAP) were US$0.17 in the first
quarter, a decrease from US$0.36 in the fourth quarter.
GAAP net income was US$4.8 million for the first quarter of
2013, a decrease from the net income of US$7.9 million in the
fourth quarter. Diluted GAAP earnings per ADS in the first quarter
of 2013 were US$0.14, a decrease from US$0.23 in the previous
quarter.
Balance Sheet
Cash and cash equivalents and short-term investments declined to
US$166.0 million at the end of the first quarter of 2013, from
US$169.6 million at the end of the fourth quarter. The decline is
partially the result of the Company's first quarterly cash dividend
which was paid in the first quarter.
Cash Flow |
|
Our cash flows were as follows: |
|
3 months ended Mar 31,
2013 |
|
(In US$ millions) |
Net income |
4.8 |
Depreciation & amortization |
1.5 |
Changes in operating assets and
liabilities |
(6.9) |
Others |
3.9 |
Net cash provided by (used in) operating
activities |
3.3 |
Acquisition of property and equipment |
(1.8) |
Others |
0.1 |
Net cash provided by (used in) investing
activities |
(1.7) |
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 |
(3.7) |
During the first quarter of 2013, we had US$1.8 million of
capital expenditures primarily relating to the prepayments made to
purchase a building and the purchase of testing equipment, software
and design tools.
Business Outlook:
Silicon Motion's President and CEO, Wallace Kou, added:
"Our business is rapidly transitioning from our traditional card
and USB flash controller products to SSD plus embedded
products. As we further transition our business towards SSD
plus embedded products this year, we believe the non-LTE part of
our business, which is approximately 85% of our sales last year,
should grow in the range of 0 to 10% this year. For the second
quarter, we expect sales of our non-LTE products in aggregate to
grow 10 to 20% sequentially. Our LTE products are moving to
next-generation solutions and until design wins are secured, we are
unable to provide revenue targets. At a minimum though, we
believe we can achieve $15 million in LTE revenue in 2013."
For the second quarter of 2013, management expects:
- Revenue to increase 5% to 10% sequentially
- Revenue (excluding LTE transceiver revenue) to increase 10% to
20% sequentially
- Gross margin (non-GAAP) to be in the 45% to 47% range
- Operating expenses (non-GAAP) of approximately US$17 to US$18
million
For the full year 2013, management expects:
- Revenue (excluding LTE transceiver revenue) to be flat to
increase 10% compared with full year 2012 (excluding LTE
transceiver revenue)
- Gross margin (non-GAAP) to be in the 46% to 48% range
(excluding one-time items)
- Operating expenses (non-GAAP) of approximately US$72 to US$76
million
Conference Call & Webcast:
The Company's management team will conduct a conference call at
8:00 am Eastern Time on April 26, 2013.
(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: 3129 2908
REPLAY NUMBERS (for 7 days):
USA (Toll Free): 1 855 452 5696
USA (Toll): 1 646 254 3697
Participant Passcode: 3129 2908
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 prior to January 1, 2012,
consist of translation gains and/or losses of non-NT$ denominated
current assets and current liabilities, as well as certain other
balance sheet items which result from the appreciation or
depreciation of non-NT$ currencies against the NT$. Beginning
January 1, 2012, due to a change in functional currency of our
largest operating subsidiary, we changed our reporting currency
from the NT$ to US$ and subsequently our foreign exchange gains and
losses now 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$. We do not use financial instruments to
manage the impact on our operations from changes in foreign
exchange rates, and because our operations are subject to
fluctuations in foreign exchange rates, we therefore exclude
foreign exchange gains and losses when presenting non-GAAP
financial measures.
Other non-recurring items:
– Litigation expenses consist of legal expenses relating to
intellectual property disputes, commercial claims and other types
of litigation. While litigation may arise in the ordinary course of
our business, we nevertheless consider litigation to be an unusual,
non-recurring and unplanned activity and therefore exclude this
charge when presenting non-GAAP financial measures.
– Vendor dispute charges relate to the write down of certain
unsalable inventory due to defects in the components provided by
our vendor. These parts were supplied to us at a quality below
levels previously specified and agreed. All parts known to be
defective have been identified and are within our control. We
have resolved this matter with our vendor and recovered in 1Q 2013
the full value of the inventory being written off. This charge (as
well as the amount recovered) has been excluded from our non-GAAP
results as we believe this is an unusual, non-recurring and
unplanned activity.
|
Silicon Motion Technology
Corporation |
Consolidated Statements of
Income |
(in thousands, except
percentages and per ADS data, unaudited) |
|
|
|
For the Three Months
Ended |
|
Mar. 31, 2012 |
Dec. 31, 2012 |
Mar. 31, 2013 |
|
(US$) |
(US$) |
(US$) |
Net Sales |
64,022 |
70,605 |
57,365 |
Cost of sales |
32,379 |
40,251 |
32,219 |
Gross profit |
31,643 |
30,354 |
25,146 |
Operating expenses |
|
|
|
Research & development |
11,265 |
14,296 |
11,640 |
Sales & marketing |
3,873 |
3,799 |
3,382 |
General & administrative |
3,184 |
2,968 |
3,126 |
Operating income |
13,321 |
9,291 |
6,998 |
|
|
|
|
Non-operating income (expense) |
|
|
|
Gain on sale of investments |
1 |
-- |
-- |
Interest income, net |
270 |
400 |
453 |
Foreign exchange gain
(loss),net |
589 |
(49) |
(311) |
Others, net |
1 |
(118) |
112 |
Subtotal |
861 |
233 |
254 |
Income before income tax |
14,182 |
9,524 |
7,252 |
Income tax expense |
1,173 |
1,595 |
2,415 |
Net income |
13,009 |
7,929 |
4,837 |
|
|
|
|
Basic earnings per ADS |
$0.41 |
$0.24 |
$0.15 |
Diluted earnings per ADS |
$0.39 |
$0.23 |
$0.14 |
|
|
|
|
Margin Analysis: |
|
|
|
Gross margin |
49.4% |
43.0% |
43.8% |
Operating margin |
20.8% |
13.2% |
12.2% |
Net margin |
20.3% |
11.2% |
8.4% |
|
|
|
|
Additional Data: |
|
|
|
Weighted avg. ADS equivalents2 |
31,956 |
32,468 |
33,283 |
Diluted ADS equivalents |
33,562 |
33,820 |
34,051 |
|
Silicon Motion Technology
Corporation |
Reconciliation of GAAP to
Non-GAAP Operating Results |
(in thousands, except
percentages and per ADS data, unaudited) |
|
For the Three
Months Ended |
|
Mar. 31, 2012 |
Dec. 31, 2012 |
Mar. 31, 2013 |
|
(US$) |
(US$) |
(US$) |
GAAP net income |
13,009 |
7,929 |
4,837 |
Stock-based
compensation: |
|
|
|
Cost of sales |
41 |
107 |
77 |
Research and development |
863 |
2,030 |
1,525 |
Sales and marketing |
418 |
688 |
521 |
General and
administrative |
249 |
532 |
355 |
Total stock-based
compensation |
1,571 |
3,357 |
2,478 |
|
|
|
|
|
|
|
|
Non-recurring items: |
|
|
|
Vendor
dispute |
-- |
1,057 |
(1,717) |
Litigation expenses |
-- |
31 |
104 |
Foreign exchange loss
(gain),net |
(589) |
49 |
311 |
Non-GAAP net income |
13,991 |
12,423 |
6,013 |
|
|
|
|
Shares used in computing non-GAAP
diluted earnings per ADS |
34,228 |
34,518 |
34,502 |
|
|
|
|
Non-GAAP diluted earnings per
ADS |
$0.41 |
$0.36 |
$0.17 |
|
|
|
|
Non-GAAP gross margin |
49.5% |
44.6% |
41.0% |
Non-GAAP operating margin |
23.3% |
19.5% |
13.7% |
|
|
|
|
|
Silicon Motion Technology
Corporation |
Consolidated Balance
Sheet |
(In thousands,
unaudited) |
|
Mar. 31, |
Dec. 31, |
Mar. 31, |
|
2012 |
2012 |
2013 |
|
(US$) |
(US$) |
(US$) |
Cash and cash equivalents |
94,737 |
154,734 |
151,001 |
Short-term investments |
|
14,882 |
14,993 |
Accounts receivable (net) |
41,226 |
35,983 |
32,269 |
Inventories |
35,115 |
32,143 |
29,060 |
Refundable deposits - current |
15,221 |
15,283 |
15,241 |
Deferred income tax assets (net) |
3,777 |
2,369 |
739 |
Prepaid expenses and other current
assets |
2,893 |
3,018 |
4,156 |
Total current assets |
192,969 |
258,412 |
247,459 |
|
|
|
|
Long-term investments |
178 |
178 |
178 |
Property and equipment (net) |
24,138 |
23,386 |
23,604 |
Goodwill and intangible assets(net) |
35,462 |
35,472 |
35,465 |
Other assets |
4,733 |
4,298 |
4,341 |
Total assets |
257,480 |
321,746 |
311,047 |
|
|
|
|
Accounts payable |
17,451 |
26,642 |
19,313 |
Income tax payable |
4,183 |
4,668 |
5,171 |
Accrued expenses and other current
liabilities |
16,310 |
25,087 |
19,020 |
Total current liabilities |
37,944 |
56,397 |
43,504 |
Other liabilities |
3,276 |
3,083 |
3,379 |
Total liabilities |
41,220 |
59,480 |
46,883 |
Shareholders' equity |
216,260 |
262,266 |
264,164 |
Total liabilities & shareholders'
equity |
257,480 |
321,746 |
311,047 |
About Silicon Motion:
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 Silicon
Motion's expected second quarter 2013 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 first 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; demand, adoption and sales of our New
Growth Products; the effect, if any, on the price of our ADS as a
result of the implementation, if at all, 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, 2012, as amended on May 15,
2012. 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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