Record Mobile Unit Shipments with GAAP Net
Income Margin Exceeding 11%
Silicon Image, Inc. (NASDAQ:SIMG), a leading provider of HD
connectivity solutions, today reported financial results for its
third quarter ended September 30, 2013.
Revenue for the third quarter of 2013 was $79.3 million,
approximately a 7.6% increase from revenue of $73.7 million in the
second quarter of 2013 and a 7.3% increase from revenue of $73.9
million in the third quarter of 2012.
“We have demonstrated strong earnings through profitable growth
and solid operational execution, driven by our mobile and CE
product revenue which increased 20% year to date,” said Camillo
Martino, chief executive officer of Silicon Image, Inc. “The broad
adoption of the MHL standard is driving growth in both our mobile
and CE businesses and we are also seeing traction for products
using our 60GHz technology. Additionally, we expect the recent
release of MHL 3.0 and HDMI 2.0 specifications to drive renewed
opportunities in our mobile and CE businesses.”
GAAP net income for the third quarter of 2013 was $9.0 million,
or $0.11 per diluted share, compared with a GAAP net income of $4.2
million, or $0.05 per diluted share, for the second quarter of 2013
and a GAAP net loss of $0.4 million, or $0.00 per share, for the
third quarter of 2012.
Non-GAAP net income for the third quarter of 2013 was $9.2
million, or $0.12 per diluted share, compared with a non-GAAP net
income of $6.5 million, or $0.08 per diluted share, for the second
quarter of 2013, and a non-GAAP net income of $8.8 million, or
$0.11 per diluted share, for the third quarter of 2012. Non-GAAP
net income for these periods excludes stock-based compensation
expense, amortization of intangible assets, business acquisition
related expenses, other than temporary impairment of a
privately-held company investment, proceeds from legal settlement,
restructuring charges, impairment of intangible assets and recovery
related to previously written-down inventory.
A reconciliation of GAAP and non-GAAP items is provided in a
table following the Condensed Consolidated Statements of
Operations.
Pursuant to the previously announced share repurchase program,
Silicon Image repurchased 256,000 shares of its common stock at an
average price of approximately $5.40 per share. The company’s cash
and short-term investments balance as of September 30, 2013 was
$134.1 million.
The following are Silicon Image’s financial performance
estimates for the fourth quarter of 2013:
Revenue: $60 million to $62 million
Gross Margin: approximately 58-59% GAAP operating expenses:
approximately $34.5 million Non-GAAP operating expenses:
approximately $31.5 million Diluted shares outstanding:
approximately 79 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
stock-based compensation expense, amortization of intangible
assets, business acquisition related expenses, other than temporary
impairment of a privately-held company investment, proceeds from
legal settlement, restructuring charges, impairment of intangible
assets and recovery related to previously written-down inventory 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 third quarter of 2013 results at 2:00 p.m. Pacific Time
and will webcast the event. To access the conference call, dial
877-941-2068 or 480-629-9712 and enter pass code 4643817. 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 November 12, 2013. To
access the replay, please dial 800-406-7325 or 303-590-3030 and
enter pass code 4643817.
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 Nine Months Ended
September 30, 2013 June 30, 2013
September 30, 2012 September 30, 2013
September 30, 2012 Revenue: Product
$
66,337 $ 63,681 $ 62,197
$ 180,359 $ 156,679
Licensing
12,974 9,998
11,722
34,670
36,081 Total revenue
79,311 73,679
73,919
215,029
192,760
Cost of revenue and operating
expenses: Cost of product revenue (1)
33,222 31,023
30,760
90,043 79,710 Cost of licensing revenue
185
162 99
614 406 Research and development (2)
18,424
20,225 17,848
57,207 60,067 Selling, general and
administrative (3)
16,191 16,097 14,834
48,690 45,167
Amortization and impairment of acquisition-related intangible
assets
405 230 496
886 1,488 Restructuring expense
483 -
73
476 164
Total cost of revenue and operating expenses
68,910 67,737
64,110
197,916
187,002 Income from operations
10,401 5,942
9,809
17,113 5,758 Proceeds from legal settlement
-
1,275 -
1,275 - Other than temporary impairment of a
privately-held company investment
- (1,500 ) (7,467 )
(1,500 ) (7,467 ) Interest income and other, net
168 500
323
1,059
1,106 Income before provision for income taxes and equity in
net loss of an unconsolidated affiliate
10,569 6,217 2,665
17,947 (603 ) Income tax expense
1,488 1,888 2,464
5,118 8,521 Equity in net loss of an unconsolidated
affiliate
116 136
609
375
1,803 Net income (loss)
$ 8,965
$ 4,193 $ (408 )
$ 12,454
$ (10,927 ) Net income (loss) per share
– basic
$ 0.12 $ 0.05 $ (0.00 )
$ 0.16
$ (0.13 ) Net income (loss) per share – diluted
$
0.11 $ 0.05 $ (0.00 )
$ 0.16 $ (0.13 )
Weighted average shares – basic
77,530 77,245 82,504
77,399 82,647 Weighted average shares – diluted
78,995 78,713 82,504
78,783 82,647 (1)
Includes stock-based compensation expense
$ 163 $ 153
$ 97
$ 451 $ 419 (2) Includes stock-based
compensation expense
$ 879 $ 827 $ 812
$
2,724 $ 2,714 (3) Includes stock-based compensation expense
$ 1,440 $ 1,438 $ 1,124
$ 4,649 $ 3,896
SILICON IMAGE, INC. GAAP NET INCOME (LOSS) TO
NON-GAAP NET INCOME RECONCILIATION (In thousands, except per
share amounts) Unaudited
Three Months Ended Nine
Months Ended September 30, 2013 June
30, 2013 September 30, 2012 September
30, 2013 September 30, 2012 GAAP net
income (loss)
$ 8,965 $ 4,193 $ (408 )
$
12,454 $ (10,927 ) Non-GAAP adjustments: Stock-based
compensation expense (1)
2,482 2,418 2,033
7,824
7,029 Amortization of intangible assets (2)
480 480 671
1,461 1,663 Amortization of intangible assets of an
unconsolidated affiliate (2)
52 41 134
128 402
Business strategic initiative and acquisition related expenses (2)
- - 201
- 3,257 Other than temporary impairment of a
privately-held company investment (3)
- 1,500 7,467
1,500 7,467 Proceeds from legal settlement (3)
-
(1,275 ) -
(1,275 ) - Restructuring expense (3)
483 - 73
476 164 Impairment of intangible assets (3)
175 - -
175 - Recovery related to previously
written-down inventory (3)
(960 )
- -
(960 ) - Non-GAAP net
income before tax adjustments
11,677 7,357 10,171
21,783 9,055 Tax adjustments (4)
(2,462
) (886 ) (1,327 )
(2,953 ) 3,248
Non-GAAP net income
$ 9,215 $
6,471 $ 8,844
$ 18,830
$ 12,303 Non-GAAP net income per
share — basic
$ 0.12 $ 0.08 $ 0.11
$
0.24 $ 0.15 Non-GAAP net income per share — diluted
$
0.12 $ 0.08 $ 0.11
$ 0.24 $ 0.15 Weighted
average shares — basic
77,530 77,245 82,504
77,399
82,647 Weighted average shares — diluted
78,995 78,713
83,353
78,783 83,702 Stock-based compensation expense
is composed of the following: Cost of revenue
$ 163 $
153 $ 97
$ 451 $ 419 Research and development
879 827 812
2,724 2,714 Selling, general and
administrative
1,440
1,438 1,124
4,649
3,896 Total
$
2,482 $ 2,418 $
2,033
$ 7,824 $ 7,029
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 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, (iii) restructuring and
related costs, (iv) impairment of intangible assets and
(v) recovery related to previously written-down inventory.
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. We recognized impairment of an
intangible asset because the sum of its estimated future
undiscounted cash flows used to test for recoverability is less
than its carrying value. We entered into a settlement with a vendor
and received a recovery related to previously written-down
inventory. 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 nine months ended
September 30, 2013 and September 30, 2012 and the three months
ended June 30, 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
September 30, 2013 December 31, 2012 ASSETS
Current Assets: Cash and cash equivalents
$ 79,283 $
29,069 Short-term investments
54,801 78,398 Accounts
receivable, net
41,407 37,936 Inventories
14,001
11,268 Prepaid expenses and other current assets
7,805 8,105
Deferred income taxes
1,039 841 Total current
assets
198,336 165,617 Property and equipment, net
14,381 14,840 Deferred income taxes, non-current
4,144 4,144 Intangible assets, net
11,118 11,452
Goodwill
21,646 21,646 Other assets
8,596
9,043 Total assets
$ 258,221 $ 226,742
LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities:
Accounts payable
$ 18,721 $ 10,690 Accrued and other
current liabilities
20,259 19,600 Deferred margin on sales
to distributors
10,245 10,340 Deferred license revenue
2,579 2,185 Total current liabilities
51,804 42,815 Other long-term liabilities
16,918 16,827 Total liabilities
68,722 59,642
Stockholders’ equity
189,499 167,100 Total
liabilities and stockholders’ equity
$ 258,221 $
226,742
SILICON IMAGE, INC. CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS (In thousands) Unaudited
Nine Months Ended September 30, 2013
2012 Cash flows from operating activities: Net income
(loss)
$ 12,454 $ (10,927 ) Adjustments to reconcile
net income (loss) to cash provided by operating activities:
Depreciation
4,699 4,536 Stock-based compensation expense
7,824 7,029 Amortization of investment premium
805
1,574 Tax benefits from employee stock-based transactions
345 524 Amortization and impairment of intangible assets
2,354 1,819 Excess tax benefits from employee stock-based
transactions
(345 ) (524 ) Non-operating proceeds
from legal settlement
(1,275 ) - Other than temporary
impairment of a privately-held company investment
1,500
7,467 Equity in net loss of unconsolidated affiliate
375
1,803 Others
409 339 Changes in assets and liabilities:
Accounts receivable
(4,126 ) (14,559 ) Inventories
(2,733 ) (8,441 ) Prepaid expenses and other assets
(189 ) 3,545 Accounts payable
8,168 5,062
Accrued and other liabilities
853 558 Deferred margin on
sales to distributors
436 2,609 Deferred license revenue
(95 ) 582 Cash provided
by operating activities
31,459
2,996
Cash flows from investing activities: Proceeds
from sales of short-term investments
56,829 67,286 Purchases
of short-term investments
(33,770 ) (55,367 )
Purchases of property and equipment
(4,075 ) (6,634 )
Proceeds from legal settlement
1,275 - Investment in
privately-held companies
(1,500 ) (7,250 ) Cash paid
for assets purchased from a privately-held company
(300
) - Purchase of intellectual properties
(1,891
) (915 ) Other
103 -
Cash provided by (used in) investing activities
16,671 (2,880 )
Cash flows from
financing activities: Proceeds from employee stock program
5,375 4,958 Excess tax benefits from employee stock-based
transactions
345 524 Repurchases of restricted stock units
for income tax withholding
(1,905 ) (2,120 )
Repurchases of common stock
(1,383 ) (6,401 ) Other
(81 ) - Cash provided by
(used in) financing activities
2,351
(3,039 ) Effect of exchange rate changes on cash and cash
equivalents
(267 ) (24 ) Net
increase (decrease) in cash and cash equivalents
50,214
(2,947 ) Cash and cash equivalents — beginning of period
29,069 37,125 Cash and cash
equivalents — end of period
$ 79,283 $
34,178
Supplemental cash flow information: Cash
payment for income taxes
$ (4,681 ) $ (4,730 )
Restricted stock units vested
$ 5,401 $ 6,114
Property and equipment and other assets purchased but not paid for
$ 416 $ 1,592 Unrealized gain (loss) on
available-for-sale securities
$ (413 ) $ 162
MEDIA CONTACT:Silicon Image, Inc.Gabriele Collier,
408-616-4088gcollier@siliconimage.comorINVESTOR CONTACT:Investor
Relations – The Blueshirt GroupMike Bishop,
415-217-4968mike@blueshirtgroup.com
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