Silicon Image, Inc. (NASDAQ: SIMG), a leading provider of HD
connectivity solutions, today reported financial results for its
second quarter ended June 30, 2013.
Revenue for the second quarter of 2013 was $73.7 million,
approximately a 19% increase from $62.0 million in the first
quarter of 2013 and a 15% increase from revenue of $63.8 million in
the second quarter of 2012.
“The strong financial results in the quarter demonstrate
continued execution on our strategic plan,” said Camillo Martino,
chief executive officer of Silicon Image, Inc. “During the quarter
we saw continuing adoption of our MHL connectivity solutions in
mobile devices, our CE business stabilized with MHL’s advance into
DTV and home theater markets, and we made solid progress in
realizing the goals we set for our 60GHz wireless technology.”
GAAP net income for the second quarter of 2013 was $4.3 million,
or $0.05 per diluted share, compared with a net loss of $0.6
million, or $0.01 per share, for the first quarter of 2013 and a
net loss of $0.9 million, or $0.01 per share, for the second
quarter of 2012.
Non-GAAP net income for the second quarter of 2013 was $6.5
million, or $0.08 per diluted share, compared with a non-GAAP net
income of $3.2 million, or $0.04 per diluted share, for the first
quarter of 2013 and a non-GAAP net income of $4.3 million, or $0.05
per diluted share, for the second quarter of 2012. Non-GAAP net
income for these periods excludes stock-based compensation expense,
other than temporary impairment of a privately held company
investment, proceeds from legal settlement, amortization of
intangible assets, business acquisition related expenses and
restructuring charges.
A reconciliation of GAAP and non-GAAP items is provided in a
table following the Condensed Consolidated Statements of
Operations.
Pursuant to the accelerated share repurchase (ASR) agreement
entered in November 2012, Silicon Image paid $30.0 million and
received a total of 6,122,845 shares of its common stock by June
14, 2013, the date of the maturity of the ASR agreement. The
company’s cash and short-term investments balance as of June 30,
2013 was $132.2 million.
Silicon Image announced that its Board of Directors has
authorized a new share repurchase plan as a follow-on to its
current plan which currently has $10.3 million remaining for
repurchase. At the conclusion of the company’s existing plan, the
company will commence a new share repurchase plan whereby the
company will be authorized to repurchase its common stock up to an
aggregate purchase of $50 million. The repurchases may occur from
time to time in the open market or in privately negotiated
transactions; provided that the repurchases are made in accordance
with the terms of Rule 10b-18 under the Securities Exchange Act of
1934, as amended. The timing and amount of any repurchase of shares
will be determined by the company, based on its evaluation of
market conditions, cash on hand and other factors, and may be made
under a plan that complies with Rule 10b5-1 of the Securities and
Exchange Act of 1934, as amended.
The authorization for the new share repurchase plan will remain
in effect until the authorized aggregate amount is expended or the
authorization is modified by the Company’s Board of Directors. The
plan may be used as a means to offset dilution or on an
opportunistic basis. The new share repurchase plan does not
obligate the company to acquire any particular amount of stock and
purchases under the program may be commenced or suspended at any
time, or from time to time, without prior notice. Further the stock
repurchase program may be modified, extended or terminated by the
Board at any time.
"We continue to be well positioned in our markets and our
additional $50 million repurchase plan will allow us to continue to
invest in Silicon Image. Further, it demonstrates our commitment to
our shareholders and our confidence in our business going forward,"
said Mr. Martino.
The following are Silicon Image’s financial performance
estimates for the third quarter of 2013:
Revenue: $78 million to $81 million Gross Margin:
approximately 56-57% GAAP operating expenses: approximately $38
million Non-GAAP operating expenses: approximately $35 million
Diluted shares outstanding: approximately 78.5 million Non-GAAP tax
rate: approximately 30% of non-GAAP pre-tax income
Use of Non-GAAP Financial Information
Silicon Image presents and discusses gross margin, operating
expenses, net income (loss) and basic and diluted net income (loss)
per share in accordance with Generally Accepted Accounting
Principles (GAAP), and on a non-GAAP basis for informational
purposes only. Silicon Image believes that non-GAAP reporting,
giving effect to the adjustments shown in the attached
reconciliation, provides meaningful information and therefore uses
non-GAAP reporting to supplement its GAAP reporting and internally
in evaluating operations, managing and monitoring performance, and
determining bonus compensation. Further, Silicon Image uses
non-GAAP information as certain non-cash charges such as
amortization of intangibles, stock based compensation, other than
temporary impairment of a privately held company investment,
proceeds from legal settlement, business acquisition related
expenses and restructuring charges do not reflect the cash
operating results of the business. Silicon Image has chosen to
provide this supplemental information to investors, analysts and
other interested parties to enable them to perform additional
analyses of its operating results and to illustrate the results of
operations giving effect to such non-GAAP adjustments. The non-GAAP
financial information presented herein should be considered
supplemental to, and not as a substitute for, or superior to,
financial measures calculated in accordance with GAAP.
Conference Call
Silicon Image will host an investor conference call today to
discuss its second quarter of 2013 results at 2:00 p.m. Pacific
Time and will webcast the event. To access the conference call,
dial 877-941-1427 or 480-629-9664 and enter pass code 4627225. The
webcast and replay will be accessible on Silicon Image's investor
relations website at http://ir.siliconimage.com. A replay of the
conference call will be available within two hours of the
conclusion of the conference call through August 14, 2013. To
access the replay, please dial 800-406-7325 or 303-590-3030 and
enter pass code 4627225.
About Silicon Image, Inc.
Silicon Image is a leading provider of connectivity
solutions that enable the reliable distribution and
presentation of high-definition content for mobile, consumer
electronics, and PC markets. The company delivers its
technology via semiconductor and intellectual property
products that are compliant with global industry standards and
feature market leading Silicon Image innovations such as
InstaPort™ and InstaPrevue™. Silicon Image's products are deployed
by the world's leading electronics manufacturers in devices such as
mobile phones, tablets, DTVs, Blu-ray Disc™ players, audio-video
receivers, digital cameras, as well as desktop and notebook PCs.
Silicon Image has driven the creation of the highly successful
HDMI® and DVI™ industry standards, the latest standard for
mobile devices - MHL®, and the leading 60GHz wireless HD video
standard - WirelessHD®. Via its wholly-owned subsidiary,
Simplay Labs, Silicon Image offers manufacturers
comprehensive standards interoperability and compliance
testing services. For more information, visit us
at http://www.siliconimage.com.
Silicon Image and the Silicon Image logo are trademarks,
registered trademarks or service marks of Silicon Image, Inc. in
the United States and/or other countries. All other trademarks and
registered trademarks are the property of their respective owners
in the United States and/or other countries.
Forward-Looking Statements
This press release contains forward-looking statements within
the meaning of federal securities laws and regulations. These
forward-looking statements include, but are not limited to,
statements related to Silicon Image's future operating results,
including revenue, gross margin, operating expenses, tax rates,
company growth, progress and stock repurchases. These
forward-looking statements involve risks and uncertainties,
including the risks of uncertain economic conditions, competition
in our markets, Silicon Image's ability to deliver financial
performance in-line with its stated goals and other risks and
uncertainties described from time to time in Silicon Image's
filings with the U.S. Securities and Exchange Commission (SEC).
These risks and uncertainties could cause the actual results to
differ materially from those anticipated by these forward-looking
statements. In addition, see the Risk Factors section of the most
recent Form 10-K and 10-Q filed by Silicon Image with the SEC.
These forward-looking statements are made on the date of this press
release, and Silicon Image assumes no obligation to update any such
forward-looking information.
SILICON IMAGE, INC. CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS (In thousands, except per share
amounts) Unaudited
Three
Months Ended Six Months Ended June 30, 2013
March 31, 2013 June 30, 2012 June
30, 2013 June 30, 2012 Revenue: Product
$ 63,681 $ 50,341 $ 51,458
$ 114,022 $ 94,482
Licensing
9,998 11,698 12,380
21,696
24,359 Total revenue
73,679 62,039
63,838
135,718 118,841
Cost of revenue and
operating expenses: Cost of product revenue (1)
31,023
25,798 25,851
56,821 48,950 Cost of licensing revenue
162 267 182
429 307 Research and development (2)
20,225 18,558 20,512
38,783 42,219 Selling, general
and administrative (3)
16,097 16,402 14,196
32,499
30,333 Amortization of acquisition-related intangible assets
230 251 496
481 992 Restructuring expense
-
(7) 86
(7) 91 Total cost of revenue and
operating expenses
67,737 61,269 61,323
129,006 122,892 Income (loss) from operations
5,942 770 2,515
6,712 (4,051) Proceeds from legal
settlement
1,275 - -
1,275 - Other than temporary
impairment of a privately-held company investment
(1,500) -
-
(1,500) - Interest income and other, net
500
391 245
891 783 Income (loss) before provision
for income taxes and equity in net loss of an unconsolidated
affiliate
6,217 1,161 2,760
7,378 (3,268) Income tax
expense
1,888 1,742 3,109
3,630 6,057 Equity in net
loss of an unconsolidated affiliate
- - 594
- 1,194 Net income (loss)
$ 4,329 $
(581) $ (943)
$ 3,748 $ (10,519) Net income
(loss) per share – basic
$ 0.06 $ (0.01) $ (0.01)
$
0.05 $ (0.13) Net income (loss) per share – diluted
$
0.05 $ (0.01) $ (0.01)
$ 0.05 $ (0.13) Weighted average
shares – basic
77,245 77,421 82,719
76,934 82,720
Weighted average shares – diluted
78,713 77,421 82,719
78,353 82,720 (1) Includes stock-based compensation
expense
$ 153 $ 135 $ 104
$ 288 $ 322 (2) Includes
stock-based compensation expense
$ 827 $ 1,018 $ 742
$
1,845 $ 1,902 (3) Includes stock-based compensation expense
$ 1,438 $ 1,771 $ 862
$ 3,209 $ 2,772
SILICON IMAGE, INC. GAAP NET INCOME (LOSS) TO NON-GAAP
NET INCOME RECONCILIATION (In thousands, except per share
amounts) Unaudited
Three Months
Ended Six Months Ended June 30, 2013
March 31, 2013 June 30, 2012 June 30,
2013 June 30, 2012 GAAP net income (loss)
$
4,329 $ (581) $ (943)
$ 3,748 $ (10,519) Non-GAAP
adjustments: Stock-based compensation expense (1)
2,418
2,924 1,708
5,342 4,996 Other than temporary impairment of a
privately-held company investment (3)
1,500 - -
1,500
- Proceeds from legal settlement (3)
(1,275) - -
(1,275) - Amortization of intangible assets (2)
480
501 496
981 992 Amortization of intangible assets of an
unconsolidated affiliate (2)
- - 134
- 268 Business
strategic initiative and acquisition related expenses (2)
-
- 1,528
- 3,056 Restructuring expense (3)
-
(7) 86
(7) 91 Non-GAAP net income (loss)
before tax adjustments
7,452 2,837 3,009
10,289
(1,116) Tax adjustments (4)
(914) 368 1,274
(546) 4,575 Non-GAAP net income
$ 6,538
$ 3,205 $ 4,283
$ 9,743 $ 3,459
Non-GAAP net income (loss) per share — basic
$ 0.08 $ 0.04 $
0.05
$ 0.13 $ 0.04 Non-GAAP net income (loss) per share —
diluted
$ 0.08 $ 0.04 $ 0.05
$ 0.12 $ 0.04 Weighted
average shares — basic
77,245 77,421 82,719
76,934
82,720 Weighted average shares — diluted
78,713 78,433
83,444
78,353 83,643 Stock-based compensation expense
is composed of the following: Cost of revenue
$ 153 $ 135 $
104
$ 288 $ 322 Research and development
827 1,018
742
1,845 1,902 Selling, general and administrative
1,438 1,771 862
3,209 2,772
Total
$ 2,418 $ 2,924 $ 1,708
$ 5,342
$ 4,996
Discussion of Non-GAAP Financial Measures
(1) Stock-Based Compensation Related Items: Stock-based
compensation expense relates primarily to equity awards, such as
stock options and restricted stock units. Stock-based compensation
is a non-cash expense that varies in amount from period to period
and is dependent on market forces that are often beyond our
control. As such, management excludes this item from our internal
operating forecasts and models. Management believes that non-GAAP
measures adjusted for stock-based compensation provide investors
with a basis to measure our core performance against the
performance of other companies without the variability created by
stock-based compensation as a result of the variety of equity
awards used by companies and the varying methodologies and
subjective assumptions used in determining such non-cash
expense.
(2) Business Strategic Initiative and Acquisition Related Items:
We exclude certain expense items resulting from our business
strategic initiative and acquisitions including the following, when
applicable:(i) amortization of purchased intangible assets
associated with our acquisitions; or relating to our unconsolidated
affiliates and (ii) business strategic initiative and
acquisition-related charges. The amortization of purchased
intangible assets associated with our acquisitions results in our
recording expenses in our GAAP financial statements that were
already expensed by the acquired company before the acquisition and
for which we have not expended cash. Moreover, had we internally
developed the products acquired, the amortization of intangible
assets, and the expenses of uncompleted research and development
would have been expensed in prior periods. Accordingly, we analyze
the performance of our operations in each period without regard to
such expenses. In addition, our business strategic initiatives and
acquisitions result in non-continuing operating expenses, which
would not otherwise have been incurred by us in the normal course
of our business operations. During January 2012, we established a
research and development center in Hyderabad, India, whereby we
hired 75 employees from our subcontractor and had to incur a
onetime fee of approximately $3.056 million towards acquiring these
employees. We amortized this fee over the first two quarters of
2012 amounting to $1,528 million per quarter. We do not expect a
fee of similar nature to be paid in our normal course of business
and consider it infrequent and non-recurring. We believe that
providing non-GAAP information for business strategic initiative
and acquisition-related expense items in addition to the
corresponding GAAP information allows the users of our financial
statements to better review and understand the historic and current
results of our continuing operations, and also facilitates
comparisons to less acquisitive peer companies.
(3) Other Items: We exclude certain other items that are the
result of either unique or unplanned events including the
following, when applicable:(i) other than temporary
impairment of a privately held company investment, (ii)
proceeds from legal settlement and (iii) restructuring and
related costs. It is difficult to estimate the amount or timing of
these items in advance. Other than temporary impairment of a
privately held company investment due to the conclusion that the
possibility is remote that we will exercise our warrants to
purchase the entity’s preferred stock or that we will realize any
other value from these investments. Proceeds from legal settlement
relates to our acquisition of SiBEAM, Inc on May 16, 2011. We do
not expect the payment of similar nature to be received in our
normal course of business and consider it infrequent and
non-recurring. Restructuring charges result from events which arise
from unforeseen circumstances, which often occur outside of the
ordinary course of continuing operations. Although these events are
reflected in our GAAP financials, these unique transactions may
limit the comparability of our on-going operations with prior and
future periods. As such, we believe that these expenses do not
accurately reflect the underlying performance of our continuing
operations for the period in which they are incurred. We assess our
operating performance both with these amounts included and
excluded, and by providing this information, we believe the users
of our financial statements are better able to understand the
financial results of what we consider our continuing
operations.
(4) Tax adjustments: For the three and six months ended June 20,
2013 and June 30, 2012 and the three months ended March 31, 2013,
our non-GAAP tax rate was approximately 30% of non-GAAP pre-tax
income. Non-GAAP tax rate is primarily based on net expected cash
flow for income taxes.
SILICON IMAGE, INC. CONDENSED CONSOLIDATED BALANCE
SHEETS (In thousands) Unaudited
June
30, 2013 December 31, 2012 ASSETS Current Assets:
Cash and cash equivalents
$ 75,946 $ 29,069 Short-term
investments
56,229 78,398 Accounts receivable, net
27,228 37,936 Inventories
16,002 11,268 Prepaid
expenses and other current assets
6,370 8,105 Deferred
income taxes
1,039 841 Total current assets
182,814
165,617 Property and equipment, net
14,231 14,840 Deferred
income taxes, non-current
4,144 4,144 Intangible assets, net
12,338 11,452 Goodwill
21,646 21,646 Other assets
7,549 9,043 Total assets
$ 242,722 $ 226,742
LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities:
Accounts payable
$ 15,383 $ 10,690 Accrued and other current
liabilities
16,470 19,600 Deferred margin on sales to
distributors
13,407 10,340 Deferred license revenue
2,183 2,185 Total current liabilities
47,443 42,815
Other long-term liabilities
17,553 16,827 Total liabilities
64,996 59,642 Stockholders’ equity
177,726 167,100
Total liabilities and stockholders’ equity
$ 242,722 $
226,742
SILICON IMAGE, INC. CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Unaudited
Six Months Ended June 30, 2013
2012 Cash flows from operating activities: Net income
(loss)
$ 3,748 $ (10,519) Adjustments to reconcile net
income (loss) to cash provided by (used in) operating activities:
Depreciation
3,127 3,060 Stock-based compensation expense
5,342 4,996 Amortization of investment premium
578
1,062 Tax benefits from employee stock-based transactions
182 472 Amortization of intangible assets
1,384 992
Excess tax benefits from employee stock-based transactions
(182) (472) Non-operating proceeds from legal settlement
(1,275) - Other than temporary impairment of a
privately-held company investment
1,500 - Equity in net loss
of unconsolidated affiliate
- 1,194 Others
140 473
Changes in assets and liabilities: Accounts receivable
10,421 (9,805) Inventories
(4,734) (6,985) Prepaid
expenses and other assets
1,418 3,114 Accounts payable
4,536 7,085 Accrued and other liabilities
(2,316)
(2,343) Deferred margin on sales to distributors
3,067 6,904
Deferred license revenue
41 (6) Cash provided by
(used in) operating activities
26,977 (778)
Cash
flows from investing activities: Proceeds from sales of
short-term investments
48,330 46,167 Purchases of short-term
investments
(26,588) (38,978) Purchases of property and
equipment
(2,466) (3,950) Proceeds from legal settlement
1,275 - Investment in privately-held companies
(500)
(4,000) Cash paid for assets purchased from a privately-held
company
(300) - Purchase of intellectual properties
(1,513) (732) Cash provided by (used in) investing
activities
18,238 (1,493)
Cash flows from
financing activities: Proceeds from employee stock program
3,090 2,855 Excess tax benefits from employee stock-based
transactions
182 472 Repurchases of restricted stock units
for income tax withholding
(1,332) (1,916) Repurchases of
common stock
- (5,118) Other
(45) - Cash
provided by (used in) financing activities
1,895
(3,707) Effect of exchange rate changes on cash and cash
equivalents
(233) (36) Net increase (decrease) in
cash and cash equivalents
46,877 (6,014) Cash and cash
equivalents — beginning of period
29,069 37,125 Cash
and cash equivalents — end of period
$ 75,946 $
31,111
Supplemental cash flow information: Cash payment for
income taxes
$ (2,705) $ (2,944) Restricted stock units
vested
$ 3,902 $ 5,558 Property and equipment and other
assets purchased but not paid for
$ 688 $ 906 Unrealized
gain (loss) on available-for-sale securities
$ (435) $ 66
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