Silicon Image, Inc. (NASDAQ: SIMG), a leading provider of HD
connectivity solutions, today reported financial results for its
first quarter ended March 31, 2014.
Revenue for the first quarter of 2014 was $61.6 million,
compared with $61.4 million in the fourth quarter of 2013 and $62.0
million in the first quarter of 2013.
“Silicon Image continues to improve profitability as we execute
on our key initiatives, which include expanding the MHL ecosystem
and driving the success of our 60GHz wireless business,” said
Camillo Martino, chief executive officer of Silicon Image, Inc. “At
Mobile World Congress in February we showcased the latest MHL
product implementations as well as 60GHz wireless technology. Also,
the MHL Consortium announced that over one half billion MHL-enabled
devices have shipped to date. In addition, we are pleased with the
strong initial demand we have seen for our HDMI 2.0 and MHL 3.0 ICs
during the quarter - particularly in our CE business.”
GAAP net loss for the first quarter of 2014 was $0.1 million, or
$0.00 per share, compared with a GAAP net loss of $1.0 million, or
$0.01 per share, for the fourth quarter of 2013 and a GAAP net loss
of $0.7 million, or $0.01 per share, for the first quarter of
2013.
Non-GAAP net income for the first quarter of 2014 was $4.3
million, or $0.05 per diluted share, compared with a non-GAAP net
income of $4.1 million, or $0.05 per diluted share, for the fourth
quarter of 2013, and a non-GAAP net income of $3.1 million, or
$0.04 per diluted share, for the first quarter of 2013. Non-GAAP
net income for these periods excludes stock-based compensation
expense, amortization of intangible assets, strategic initiative
and acquisition related expenses, restructuring charges and
recovery of certain unsalable inventory.
A reconciliation of GAAP and non-GAAP items is provided in a
table following the Condensed Consolidated Statements of
Operations.
The following are Silicon Image’s financial performance
estimates for the second quarter of 2014:
Revenue: $71 million to
$76 million Gross Margin:
approximately 56.5%
GAAP operating expenses: approximately $36 million Non-GAAP
operating expenses: approximately $32.5 million Diluted shares
outstanding: approximately 80.5 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
stock-based compensation expense, amortization of intangible
assets, strategic initiative and acquisition related expenses,
restructuring charges and recovery of certain unsalable 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 first quarter of 2014 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 4678792. The
webcast and replay will be accessible on Silicon Image's investor
relations website at http://www.SiliconImage.com.
A replay of the conference call will be available within two
hours of the conclusion of the conference call through May 13,
2014. To access the replay, please dial 800-406-7325 or
303-590-3030 and enter pass code 4678792.
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 March
31, December 31, March 31, 2014
2013 2013 Revenue: Product
$
46,766 $ 46,949 $ 50,341 Licensing
14,795
14,428 11,698 Total revenue
61,561 61,377 62,039
Cost of
revenue and operating expenses: Cost of product revenue
(1)(2)(3)
24,795 22,897 25,798 Cost of licensing revenue
20 267 267 Research and development (4)
16,957 19,787
18,558 Selling, general and administrative (5)
16,865 16,046
16,402 Amortization of acquisition-related intangible assets
208 230 251 Restructuring expense (6)
129
1,307 (7) Total cost of revenue and
operating expenses
58,974 60,534
61,269 Income from operations
2,587 843 770 Interest
income and other, net
18 144
391 Income before provision for income taxes and equity in
net loss of an unconsolidated affiliate
2,605 987 1,161
Income tax expense
2,554 1,837 1,742 Equity in net loss of
an unconsolidated affiliate
150 114
123 Net loss
$ (99) $ (964)
$ (704) Net loss per share – basic and diluted
$ (0.00) $ (0.01) $ (0.01) Weighted average shares –
basic and diluted
77,858 77,417 77,421 (1) Includes
restructuring expense
$ - $ 284 $ - (2) Includes
amortization of acquisition-related intangible assets
$
225 $ 225 $ 250 (3) Includes stock-based compensation
expense
$ 173 $ 152 $ 135 (4) Includes stock-based
compensation expense
$ 913 $ 852 $ 1,018 (5) Includes
stock-based compensation expense
$ 1,951 $ 1,687 $
1,771 (6) Includes stock-based compensation expense
$
30 $ - $ -
SILICON IMAGE, INC. GAAP NET
LOSS TO NON-GAAP NET INCOME RECONCILIATION (In thousands,
except per share amounts) Unaudited
Three Months Ended March 31, December 31,
March 31, 2014 2013 2013
GAAP net loss
$ (99 ) $ (964 ) $ (704 )
Non-GAAP adjustments: Stock-based compensation expense (1)
3,067 2,691 2,924 Amortization of intangible assets (2)
433 455 501 Amortization of intangible assets of an
unconsolidated affiliate (2)
40 40 35 Strategic initiative
and acquisition related expenses (2)
- 1,000 - Restructuring
expense (3)
99 1,591 (7 ) Recovery of certain unsalable
inventory (3)
- (825 )
- Non-GAAP net income before tax adjustments
3,540 3,988 2,749 Tax adjustments (4)
726
89 395 Non-GAAP
net income
$ 4,266 $ 4,077
$ 3,144 Non-GAAP net income per share — basic
$ 0.05 $ 0.05 $ 0.04 Non-GAAP net income per share —
diluted
$ 0.05 $ 0.05 $ 0.04 Weighted average shares
— basic
77,858 77,417 77,421 Weighted average shares —
diluted
80,100 78,990 78,433 Stock-based compensation
expense is composed of the following: Cost of revenue
$
173 $ 152 $ 135 Research and development
913 852
1,018 Selling, general and administrative
1,951 1,687 1,771
Restructuring expense
30 -
- Total
$ 3,067
$ 2,691 $ 2,924
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)
Strategic Initiative and Acquisition
Related Items: We exclude certain expense items resulting from our
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) 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 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. In the fourth quarter of fiscal 2013,
as a result of us executing an agreement with a specific customer,
one of the earn-out conditions were met and we paid the
privately-held company $1.0 million. 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 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) restructuring
and related costs and (ii) recovery of certain unsalable
inventory. It is difficult to estimate the amount or timing of
these items in advance. Restructuring charges result from events
which arise from unforeseen circumstances, which often occur
outside of the ordinary course of continuing operations. In the
fourth quarter of 2013, we received recovery related to previously
written-down inventory. The inventory recovery is unusual and
one-time event, which we do not expect to recur. 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 months
ended March 31, 2014, December 31, 2013 and 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
March
31, 2014 December 31, 2013 ASSETS Current Assets:
Cash and cash equivalents
$ 84,980 $ 82,220
Short-term investments
53,154 56,003 Accounts receivable,
net
37,128 34,729 Inventories
15,325 11,727 Prepaid
expenses and other current assets
6,146 7,733 Deferred
income taxes
202 191 Total current assets
196,935 192,603 Property and equipment, net
14,016
14,676 Deferred income taxes, non-current
1,300 4,368
Intangible assets, net
9,600 10,348 Goodwill
21,646
21,646 Other assets
8,319 8,498 Total assets
$ 251,816 $ 252,139
LIABILITIES AND
STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable
$ 13,441 $ 12,894 Accrued and other current
liabilities
18,641 20,622 Deferred margin on sales to
distributors
8,700 9,634 Deferred license revenue
1,417 2,742 Total current liabilities
42,199
45,892 Other long-term liabilities
14,303
16,522 Total liabilities
56,502 62,414 Stockholders’ equity
195,314 189,725 Total liabilities and
stockholders’ equity
$ 251,816 $ 252,139
SILICON IMAGE, INC. CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS (In thousands) Unaudited
Three
Months Ended March 31, 2014 2013 Cash
flows from operating activities: Net loss
$ (99)
$ (704) Adjustments to reconcile net loss to cash provided by (used
in) operating activities: Depreciation
1,573 1,573
Stock-based compensation expense
3,067 2,924 Amortization of
investment premium
248 328 Tax benefits from employee
stock-based transactions
44 8 Amortization of intangible
assets
748 702 Deferred income taxes
(11) - Excess
tax benefits from employee stock-based transactions
(44) (8)
Realized gain on sale of short-term investments
- (9) Equity
in net loss of unconsolidated affiliate
150 123 Others
(24) 560 Changes in assets and liabilities: Accounts
receivable
(2,375) (3,138) Inventories
(3,598)
(3,013) Prepaid expenses and other assets
1,616 904 Accounts
payable
786 8,286 Accrued and other liabilities
(1,029) (2,506) Deferred margin on sales to distributors
(934) 2,875 Deferred license revenue
(1,325)
125 Cash provided by (used in) operating activities
(1,207) 9,030
Cash flows from
investing activities: Proceeds from sales of short-term
investments
7,535 13,027 Purchases of short-term investments
(4,964) (5,431) Purchases of property and equipment
(1,256) (835) Cash paid for assets purchased from a
privately-held company
- (300) Purchase of intellectual
properties
- (378) Cash provided by
investing activities
1,315 6,083
Cash flows from financing activities: Proceeds from employee
stock program
3,334 2,606 Excess tax benefits from employee
stock-based transactions
44 8 Repurchase of restricted stock
units for income tax withholding
(713) (653) Payment to
acquire treasure shares
(11) - Cash paid to settle
contingent consideration liabilities
(9)
(45) Cash provided by financing activities
2,645 1,916 Effect of exchange rate changes on
cash and cash equivalents
7 (134) Net
increase in cash and cash equivalents
2,760 16,895
Cash and cash equivalents — beginning of
period
82,220 29,069
Cash and cash equivalents — end of
period
$ 84,980 $ 45,964
Supplemental cash flow
information: Cash payment for income taxes
$
(1,773) $ (1,655) Restricted stock units vested
$
1,895 $ 1,649 Property and equipment and other assets
purchased but not paid for
$ 247 $ 1,418 Unrealized
gain (loss) on short-term investments
$ 8 $ (132)
Silicon Image, Inc.Media Relations:Gabriele Collier,
408-616-4088Gabriele.Collier@siliconimage.comInvestor
Relations:Alex Chervet,
408-616-4153Alex.Chervet@siliconimage.com
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