Second Quarter 2013
Financial Highlights
- Net sales increased 2% quarter-over-quarter to US$58.3 million
from US$57.4 million in 1Q13
- Gross margin (non-GAAP1) increased to 48.4% from 41.0% in
1Q13
- Operating expenses (non-GAAP) increased to US$16.8 million from
US$15.6 million in 1Q13
- Operating margin (non-GAAP) increased to 19.7% from 13.7% in
1Q13
- Diluted earnings per ADS (non-GAAP) increased to US$0.27 from
US$0.17 in 1Q13
Business Highlights
- Entered mass production for our new 55nm eMMC 4.5 controller
and secured nine design wins, including several global Android and
Windows 8.1 flagship smartphone and tablets
- Began mass production of our new 55nm UHS-1 SD controller
supporting TLC flash, enabling high-performance, low-cost UHS-1 SD
cards
- Secured two tier-one Japanese OEMs for our FerriSSD solution
for multifunction printers
- Entered mass production for our high-performance CompactFlash
5.0 professional-grade controller with a Japanese and a US-based
flash OEM
TAIPEI, Taiwan, July 30, 2013 (GLOBE NEWSWIRE) – Silicon Motion
Technology Corporation (Nasdaq:SIMO) ("Silicon Motion" or the
"Company") today announced its financial results for the quarter
ended June 30, 2013. For the second quarter of 2013, net sales
increased 2% quarter-over-quarter to US$58.3 million from US$57.4
million in the first quarter of 2013. Net income (non-GAAP)
increased in the second quarter to US$9.2 million or US$0.27 per
diluted ADS from a net income of US$6.0 million or US$0.17 per
diluted ADS in the first quarter of 2013.
Net income (GAAP) for the second quarter of 2013 increased
quarter-over-quarter to US$7.5 million or US$0.22 per diluted ADS
from a net income of US$4.8 million or US$0.14 per diluted ADS in
the first quarter of 2013.
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.
Second Quarter 2013 Financial Review
Commenting on the results of the second quarter, Silicon
Motion's President and CEO, Wallace Kou, said:
"In the second quarter, revenue from New Growth Products
increased by approximately 30% sequentially as a result of stronger
than expected sales of SSD+embedded controllers, in particular,
sales of our eMMC controllers. Strong sales of smartphones and
tablets, both global flagships and low-cost models, in both global
markets and in China, have been driving strong demand for our eMMC
controllers from our flash partners Samsung and SK Hynix. We
believe we have about half of the fast growing China eMMC market.
In the second quarter, due to strong SSD+embedded growth, revenue
from SSD+embedded products was larger than our combined card and
USB flash drive revenue and accounted for over half of our total
controller sales.
While our SSD+embedded sales exceeded expectations, limited
flash availability affected the sales of our card and USB flash
drive controllers, especially to module maker customers. Our LTE
transceiver business also declined in the second quarter as we are
transitioning to next-generation LTE-Advanced transceivers for
Samsung smartphones and tablets."
Sales
Net sales in the second quarter were US$58.3 million, an
increase of 2% compared with the first quarter. For the quarter,
mobile storage products accounted for 80% of net sales and mobile
communications 15% of net sales.
Net sales of our mobile storage products, which primarily
include flash memory cards, USB flash drives, SSD and embedded
flash controllers, increased 8% sequentially in the second quarter
of 2013 to US$46.8 million.
Net sales of mobile communication products, which primarily
include handset transceivers and mobile TV IC solutions, decreased
27% from the first quarter to US$8.7 million in the second quarter
of 2013.
Gross and Operating Margins
Gross margin (non-GAAP) increased to 48.4% in the second quarter
of 2013 from 41.0% in the first quarter of 2013. GAAP gross margin
increased to 48.4% in the second quarter of 2013 from 43.8% in the
first quarter of 2013.
Operating expenses (non-GAAP) in the second quarter of 2013 were
US$16.8 million, which was higher than the US$15.6 million expended
in the first quarter of 2013. Operating margin (non-GAAP) was
19.7%, an increase from 13.7% in the previous quarter. GAAP
operating margin was 17.1% for the second quarter of 2013, an
increase from 12.2% in the first quarter of 2013.
Other Income and Expenses
Net total other income (non-GAAP) was US$0.4 million, a decrease
from US$0.6 million in the first quarter of 2013. GAAP net total
other income was US$0.3 million, similar to the first quarter of
2013.
Earnings
Net income (non-GAAP) was US$9.2 million for the second quarter
of 2013, an increase from US$6.0 million in the first quarter of
2013. Diluted earnings per ADS (non-GAAP) were US$0.27 in the
second quarter, an increase from US$0.17 in the first quarter of
2013.
GAAP net income was US$7.5 million for the second quarter of
2013, an increase from the net income of US$4.8 million in the
first quarter of 2013. Diluted GAAP earnings per ADS in the second
quarter of 2013 were US$0.22, an increase from US$0.14 in the
previous quarter.
Balance Sheet
Cash and cash equivalents, and short-term investments decreased
to US$156.4 million at the end of the second quarter of 2013, a
decrease from US$166.0 million at the end of the first quarter of
2013.
Cash Flow |
Our cash flows were as
follows: |
3 months ended June 30,
2013 |
|
(In US$ millions) |
Net income |
7.5 |
Depreciation & amortization |
1.6 |
Changes in operating assets and
liabilities |
16.4 |
Others |
1.7 |
Net cash provided by (used in) operating
activities |
27.2 |
Acquisition of property and equipment |
(6.6) |
Others |
0.1 |
Net cash provided by (used in) investing
activities |
(6.5) |
|
|
Dividend |
(5.0) |
Share Repurchase |
(10.0) |
Others |
0.1 |
Net cash provided by (used in) financing
activities |
(14.9) |
Effects of changes in foreign currency
exchange rates on cash |
(0.4) |
Net increase (decrease) in cash and cash
equivalents |
5.4 |
During the second quarter of 2013, we had US$6.6 million of
capital expenditures primarily relating to the purchase of
additional office space, and to a lesser degree, the purchase of
testing equipment, software and design tools.
Share Repurchase Program
On January 22, 2013, the Company announced a US$40 million share
repurchase program. In the second quarter, we repurchased 0.9
million ADSs for a total cost of US$10.0 million. The weighted
average price per ADS repurchased was US$11.24.
Business Outlook:
Silicon Motion's President and CEO, Wallace Kou, added:
"The continuing growth of our SSD+embedded controllers and the
transition away from our card and USB flash drive controllers is
improving our long-term prospects. The markets for our SSD+embedded
products are growing rapidly and we are expanding our product
portfolio and customer base to address these market opportunities.
We expect sales of our SSD+embedded products to continue growing in
the third quarter, offsetting weakness caused by ongoing flash
tightness and more limited consumer demand for cards and USB flash
drives."
For the third quarter of 2013, management expects:
- Revenue to decrease 2.5% to increase 2.5% sequentially
- Revenue (excluding LTE transceiver revenue) to increase 2% to
7% sequentially
- Gross margin (non-GAAP) to be in the 47% to 49% range
- Operating expenses (non-GAAP) of approximately US$17.5 to
US$19.5 million
For the full year 2013, management expects:
- Revenue (excluding LTE transceiver revenue) to decrease 5% to
10% compared with full year 2012 (excluding LTE transceiver
revenue)
- Gross margin (non-GAAP) to be in the 46% to 48% range
- Operating expenses (non-GAAP) of approximately US$70 to US$73
million
Conference Call & Webcast:
The Company's management team will conduct a conference call at
8:00 am Eastern Time on July 30, 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): 1 845 675 0437 Taiwan (Toll Free):
0080 112 6920 Participant Passcode: 1204 6176
REPLAY NUMBERS (for 7 days): USA (Toll Free): 1 855 452 5696 USA
(Toll): 1 646 254 3697 Participant Passcode: 1204 6176
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$. We do not use financial instruments to
manage the impact on our operations from changes in foreign
exchange rates, and because our operations are subject to
fluctuations in foreign exchange rates, we therefore exclude
foreign exchange gains and losses when presenting non-GAAP
financial measures.
Other non-recurring items:
– Litigation expenses consist of legal expenses relating to
intellectual property disputes, commercial claims and other types
of litigation. While litigation may arise in the ordinary course of
our business, we nevertheless consider litigation to be an unusual,
non-recurring and unplanned activity and therefore exclude this
charge when presenting non-GAAP financial measures.
– Vendor dispute charges relate to the write down of certain
unsalable inventory due to defects in the components provided by
our vendor. These parts were supplied to us at a quality below
levels previously specified and agreed. All parts known to be
defective have been identified and are within our control. We
have resolved this matter with our vendor and recovered in 1Q 2013
the full value of the inventory being written off. This charge (as
well as the amount recovered) has been excluded from our non-GAAP
results as we believe this is an unusual, non-recurring and
unplanned activity.
Silicon Motion
Technology Corporation |
Consolidated Statements of
Income |
(in thousands, except
percentages and per ADS data, unaudited) |
|
|
For the Three Months
Ended |
|
Jun. 30, 2012
(US$) |
Mar. 31, 2013
(US$) |
Jun. 30, 2013
(US$) |
Net Sales |
69,678 |
57,365 |
58,322 |
Cost of sales |
35,596 |
32,219 |
30,122 |
Gross profit |
34,082 |
25,146 |
28,200 |
Operating expenses |
|
|
|
Research & development |
13,337 |
11,640 |
12,012 |
Sales & marketing |
4,013 |
3,382 |
3,363 |
General & administrative |
3,229 |
3,126 |
2,876 |
Operating income |
13,503 |
6,998 |
9,949 |
|
|
|
|
Non-operating income (expense) |
|
|
|
Interest income, net |
324 |
453 |
384 |
Foreign exchange gain (loss),net |
(513) |
(311) |
(93) |
Others, net |
-- |
112 |
2 |
Subtotal |
(189) |
254 |
293 |
Income before income tax |
13,314 |
7,252 |
10,242 |
Income tax expense (benefit) |
2,657 |
2,415 |
2,698 |
Net income |
10,657 |
4,837 |
7,544 |
|
|
|
|
Basic earnings per ADS |
$0.33 |
$0.15 |
$0.23 |
Diluted earnings per ADS |
$0.32 |
$0.14 |
$0.22 |
|
|
|
|
Margin Analysis: |
|
|
|
Gross margin |
48.9% |
43.8% |
48.4% |
Operating margin |
19.4% |
12.2% |
17.1% |
Net margin |
15.3% |
8.4% |
12.9% |
|
|
|
|
Additional Data: |
|
|
|
Weighted avg. ADS equivalents2 |
32,407 |
33,283 |
33,199 |
Diluted ADS equivalents |
33,475 |
34,051 |
33,529 |
|
|
|
|
2 Assumes all outstanding
ordinary shares are represented by ADSs. Each ADS represents
four ordinary shares. |
|
Silicon Motion Technology
Corporation |
Reconciliation of GAAP to
Non-GAAP Operating Results |
(in thousands, except
percentages and per ADS data, unaudited) |
|
For the Three
Months Ended |
|
Jun. 30, 2012
(US$) |
Mar. 31, 2013
(US$) |
Jun. 30, 2013
(US$) |
GAAP net income |
10,657 |
4,837 |
7,544 |
Stock-based
compensation: |
|
|
|
Cost of sales |
114 |
77 |
33 |
Research and development |
2,068 |
1,525 |
821 |
Sales and marketing |
709 |
521 |
383 |
General and administrative |
554 |
355 |
192 |
Total stock-based
compensation |
3,445 |
2,478 |
1,429 |
|
|
|
|
Non-recurring items: |
|
|
|
Vendor dispute |
-- |
(1,717) |
-- |
Litigation expenses |
-- |
104 |
87 |
Foreign exchange loss
(gain),net |
513 |
311 |
93 |
Non-GAAP net income |
14,615 |
6,013 |
9,153 |
|
|
|
|
Shares used in computing non-GAAP
diluted earnings per ADS |
34,543 |
34,502 |
33,965 |
|
|
|
|
Non-GAAP diluted earnings per
ADS |
$0.42 |
$0.17 |
$0.27 |
|
|
|
|
Non-GAAP gross margin |
49.1% |
41.0% |
48.4% |
Non-GAAP operating margin |
24.3% |
13.7% |
19.7% |
|
Silicon Motion Technology
Corporation |
Consolidated Statements of
Income |
(in thousands, except
percentages, and per ADS data, unaudited) |
|
For the Six
Months Ended |
|
Jun. 30, 2012
(US$) |
Jun. 30, 2013
(US$) |
Net Sales |
133,700 |
115,687 |
Cost of sales |
67,975 |
62,341 |
Gross profit |
65,725 |
53,346 |
Operating expenses |
|
|
Research & development |
24,602 |
23,652 |
Sales & marketing |
7,886 |
6,745 |
General & administrative |
6,413 |
6,002 |
Operating income |
26,824 |
16,947 |
|
|
|
Non-operating expense (income) |
|
|
Gain on sale of investments |
1 |
-- |
Interest income, net |
594 |
837 |
Foreign exchange gain (loss),net |
76 |
(404) |
Others, net |
1 |
114 |
Subtotal |
672 |
547 |
Income before income tax |
27,496 |
17,494 |
Income tax expense |
3,830 |
5,113 |
Net income |
23,666 |
12,381 |
|
|
|
Basic earnings per ADS |
$0.74 |
$0.37 |
Diluted earnings per ADS |
$0.71 |
$0.37 |
|
|
|
Margin Analysis: |
|
|
Gross margin |
49.2% |
46.1% |
Operating margin |
20.1% |
14.7% |
|
|
|
Weighted average ADS: |
|
|
Basic |
32,182 |
33,241 |
Diluted |
33,519 |
33,790 |
|
Silicon Motion Technology
Corporation |
Reconciliation of GAAP to
Non-GAAP Operating Results |
(in thousands, except
percentages and per ADS data, unaudited) |
|
|
For the Six
Months Ended |
|
Jun. 30, 2012
(US$) |
Jun. 30, 2013
(US$) |
GAAP net income |
23,666 |
12,381 |
Stock-based
compensation: |
|
|
Cost of sales |
155 |
110 |
Research and development |
2,931 |
2,346 |
Sales and marketing |
1,127 |
904 |
General and administrative |
803 |
547 |
Total stock-based
compensation |
5,016 |
3,907 |
|
|
|
Non-recurring items: |
|
|
Vendor dispute |
-- |
(1,717) |
Litigation expenses |
-- |
191 |
Foreign exchange loss (gain),
net |
(76) |
404 |
|
|
|
Non-GAAP net income |
28,606 |
15,166 |
|
|
|
Shares used in computing non-GAAP
diluted earnings per ADS |
34,385 |
34,233 |
|
|
|
Non-GAAP diluted earnings per
ADS |
$0.83 |
$0.44 |
|
|
|
Non-GAAP gross margin |
49.3% |
44.7% |
Non-GAAP operating margin |
23.8% |
16.7% |
|
Silicon Motion Technology
Corporation |
Consolidated Balance
Sheet |
(In thousands,
unaudited) |
|
|
Jun. 30, 2012
(US$) |
Mar. 31, 2013
(US$) |
Jun. 30, 2013
(US$) |
Cash and cash equivalents |
113,579 |
151,001 |
156,358 |
Short-term investments |
-- |
14,993 |
-- |
Accounts receivable (net) |
41,602 |
32,269 |
32,143 |
Inventories |
32,796 |
29,060 |
29,330 |
Refundable deposits - current |
15,198 |
15,241 |
15,215 |
Deferred income tax assets (net) |
2,591 |
739 |
552 |
Prepaid expenses and other current |
|
|
|
assets |
2,321 |
4,156 |
2,788 |
Total current assets |
208,087 |
247,459 |
236,386 |
|
|
|
|
Long-term investments |
178 |
178 |
133 |
Property and equipment (net) |
24,107 |
23,604 |
29,170 |
Goodwill and intangible assets(net) |
35,459 |
35,465 |
35,461 |
Other assets |
4,798 |
4,341 |
4,283 |
Total assets |
272,629 |
311,047 |
305,433 |
|
|
|
|
Accounts payable |
15,436 |
19,313 |
16,216 |
Income tax payable |
2,181 |
5,171 |
4,635 |
Accrued expenses and other current
liabilities |
21,301 |
19,020 |
23,308 |
Total current liabilities |
38,918 |
43,504 |
44,159 |
Other liabilities |
3,533 |
3,379 |
3,449 |
Total liabilities |
42,451 |
46,883 |
47,608 |
Shareholders' equity |
230,178 |
264,164 |
257,825 |
Total liabilities & shareholders'
equity |
272,629 |
311,047 |
305,433 |
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 third 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 second quarter. 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 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.
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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