Fourth Year of Consecutive Revenue Growth
Silicon Image, Inc. (NASDAQ:SIMG), a leading provider of HD
connectivity solutions, today reported financial results for its
fourth quarter and fiscal year ended December 31, 2013.
Revenue for fiscal year 2013 was $276.4 million, an increase of
approximately 9.5% over fiscal year 2012 of $252.4 million. Revenue
for the fourth quarter of 2013 was $61.4 million, compared with
$59.6 million in the fourth quarter of 2012 and $79.3 million in
the third quarter of 2013.
“We remain focused on enhancing shareholder value. 2013 was
another year of growth for Silicon Image. We increased earnings per
share by more than 30% and also generated more than $33 million in
free cash flow,” said Camillo Martino, chief executive officer of
Silicon Image, Inc. “We drove new product development, and saw the
introduction of new versions of the MHL® and HDMI® standards, which
will create additional opportunities for growth. Looking ahead, we
expect continued growth in the MHL ecosystem and we are excited
about the opportunities for our 60GHz wireless technology.”
GAAP net loss for the fourth quarter of 2013 was $1.0 million,
or $0.01 per share, compared with a GAAP net income of $9.0
million, or $0.11 per diluted share, for the third quarter of 2013
and a GAAP net loss of $0.3 million, or $0.00 per share, for the
fourth quarter of 2012. GAAP net income for fiscal year 2013 was
$11.5 million, or $0.15 per diluted share, compared with a net loss
for fiscal year 2012 of $11.2 million, or $0.14 per share.
Non-GAAP net income for the fourth quarter of 2013 was $4.1
million, or $0.05 per diluted share, compared with a non-GAAP net
income of $9.2 million, or $0.12 per diluted share, for the third
quarter of 2013, and a non-GAAP net income of $6.2 million, or
$0.08 per diluted share, for the fourth quarter of 2012. Non-GAAP
net income for fiscal year 2013 was $22.9 million, or $0.29 per
diluted share, compared with a net income for fiscal year 2012 of
$18.5 million, or $0.22 per share. 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 write-down (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.
Pursuant to the previously announced share repurchase program,
Silicon Image repurchased approximately 308,000 shares of its
common stock for $1.6 million at an average price of approximately
$5.27 per share during the fourth quarter of 2013. The company’s
cash and short-term investments balance as of December 31, 2013 was
$138.2 million.
The following are Silicon Image’s financial performance
estimates for the first quarter of 2014:
Revenue:
$58 million to $62 million
Gross Margin:
59% - 60%
GAAP operating expenses: approximately $34.5 million Non-GAAP
operating expenses: approximately $31 million Diluted shares
outstanding: approximately 79 million Non-GAAP tax rate:
approximately 28% 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 write-down (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 fiscal 2013 and fourth 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 4662072. 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 February 13, 2014. To access the replay, please
dial 800-406-7325 or 303-590-3030 and enter pass code 4662072.
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 Twelve Months Ended December 31,
September 30, December 31, December 31,
December 31,
2013 2013 2012 2013
2012
Revenue: Product
$ 46,949 $ 66,337 $ 46,808
$ 227,308 $ 203,487 Licensing
14,428
12,974 12,796
49,098 48,877 Total revenue
61,377 79,311
59,604
276,406 252,364
Cost of revenue and operating expenses: Cost of
product revenue (1)(2)(3)
22,897 33,222 30,105
112,940 109,815 Cost of licensing revenue
267 185 220
881 626 Research and development (4)
19,787 18,424
17,305
76,994 77,372 Selling, general and administrative (5)
16,046 16,191 12,279
64,736 57,446 Restructuring
expense
1,307 483 (54 )
1,783 110 Amortization and
impairment of acquisition-related intangible assets
230 405 (889 )
1,116 599 Total cost of revenue
and operating expenses
60,534
68,910
58,966
258,450
245,968 Income from operations
843 10,401 638
17,956 6,396 Proceeds from legal settlement
- - -
1,275 - Other than temporary impairment of a privately-held
company investment
- - -
(1,500 ) (7,467 )
Interest income and other, net
144
168 555
1,203
1,661 Income before provision for income taxes
and equity in net loss of an unconsolidated affiliate
987
10,569 1,193
18,934 590 Income tax expense
1,837
1,488 1,458
6,955 9,979 Equity in net loss of an
unconsolidated affiliate
114 116
-
489 1,803
Net income (loss)
$ (964 ) $
8,965 $ (265 )
$ 11,490 $
(11,192 ) Net income (loss) per share – basic
$
(0.01 ) $ 0.12 $ (0.00 )
$ 0.15 $ (0.14
) Net income (loss) per share – diluted
$ (0.01
) $ 0.11 $ (0.00 )
$ 0.15 $ (0.14 ) Weighted
average shares – basic
77,417 77,530 79,564
77,399
81,872 Weighted average shares – diluted
77,417 78,995
79,564
79,065 81,872 (1) Includes restructuring
expense
$ 284 $ - $ -
$ 284 $ - (2)
Includes amortization of acquisition-related intangible assets
$ 225 $ 250 $ 250
$ 975 $ 425 (3)
Includes stock-based compensation expense
$ 152 $ 163
$ 104
$ 603 $ 523 (4) Includes stock-based
compensation expense
$ 852 $ 879 $ 871
$
3,576 $ 3,585 (5) Includes stock-based compensation expense
$ 1,687 $ 1,440 $ 1,200
$ 6,336 $ 5,096
SILICON IMAGE, INC. GAAP NET INCOME (LOSS) TO
NON-GAAP NET INCOME RECONCILIATION (In thousands, except per
share amounts) Unaudited
Three Months Ended Twelve Months Ended
December 31,
September 30,
December 31, December 31,
December 31,
2013
2013
2012 2013
2012
GAAP net income (loss)
$ (964) $ 8,965 $ (265)
$
11,490 $ (11,192) Non-GAAP adjustments: Stock-based
compensation expense (1)
2,691 2,482 2,175
10,515
9,204 Amortization of intangible assets (2)
455 480 (639)
1,916 1,024 Amortization of intangible assets of an
unconsolidated affiliate (2)
40 52 -
168 402
Strategic initiative and acquisition related expenses (2)
1,000 - -
1,000 3,257 Restructuring expense (3)
1,591 483 (54)
2,067 110 Other than temporary
impairment of a privately-held company investment (3)
- - -
1,500 7,467 Impairment of intangible asset (3)
- 175
-
175 - Write-down (recovery) of certain unsalable inventory
(3)
(825) (960) 6,245
(1,785) 6,245 Proceeds from
legal settlement (3)
- - -
(1,275)
Non-GAAP net income before tax adjustments
3,988 11,677 7,462
25,771 16,517 Tax adjustments (4)
89 (2,462) (1,218)
(2,864) 2,030
Non-GAAP net income
$ 4,077 $ 9,215 $ 6,244
$ 22,907 $ 18,547 Non-GAAP net income per
share — basic
$ 0.05 $ 0.12 $ 0.08
$ 0.30 $ 0.23
Non-GAAP net income per share — diluted
$ 0.05 $ 0.12 $ 0.08
$ 0.29 $ 0.22 Weighted average shares — basic
77,417
77,530 79,564
77,399 81,872 Weighted average shares —
diluted
78,990 78,995 80,389
79,065 82,871
Stock-based compensation expense is composed of the following: Cost
of revenue
$ 152 $ 163 $ 104
$ 603 $ 523 Research and
development
852 879 871
3,576 3,585 Selling, general
and administrative
1,687 1,440 1,200
6,336 5,096 Total
$ 2,691 $ 2,482
$ 2,175
$ 10,515 $ 9,204
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. 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 million towards acquiring these
employees. In October 2012, we executed a warrant purchase
agreement with a privately-held company which give us an option to
purchase the privately-held company’s preferred stock. We also
agreed to pay specific amounts to the privately-held company if
certain conditions were met. 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) 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) write-down (recovery) of certain unsalable 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 was recorded 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. In the fourth quarter of 2012, we
wrote-down certain unsalable inventory, for which we were seeking
recovery from the vendor who supplied the inventory. In the third
quarter of 2013, we entered into a settlement with a vendor and
received recovery related to previously written-down inventory in
the third and fourth quarter of 2013. The inventory write-down and
subsequent recovery are unusual and one-time events, 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 and twelve months ended
December 31, 2013 and 2012 and the three months ended September 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
December 31, 2013 December 31, 2012
ASSETS Current Assets: Cash and cash equivalents
$
82,220 $ 29,069 Short-term investments
56,003 78,398
Accounts receivable, net
34,729 37,936 Inventories
11,727 11,268 Prepaid expenses and other current assets
7,733 8,105 Deferred income taxes
191
841
Total current assets
192,603 165,617 Property and equipment, net
14,676
14,840 Deferred income taxes, non-current
4,368 4,144
Intangible assets, net
10,348 11,452 Goodwill
21,646
21,646 Other assets
8,498 9,043 Total assets
$ 252,139 $ 226,742
LIABILITIES AND
STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable
$ 12,894 $ 10,690 Accrued and other current
liabilities
20,622 19,600 Deferred margin on sales to
distributors
9,634 10,340 Deferred license revenue
2,742 2,185 Total current liabilities
45,892
42,815 Other long-term liabilities
16,522
16,827 Total liabilities
62,414 59,642 Stockholders’ equity
189,725 167,100 Total liabilities and
stockholders’ equity
$ 252,139 $ 226,742
SILICON IMAGE, INC. CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS (In thousands) Unaudited
Year Ended December 31, 2013 2012
Cash flows from operating activities: Net income (loss)
$ 11,490 $ (11,192 ) Adjustments to reconcile net
income (loss) to cash provided by operating activities:
Depreciation
6,270 6,107 Stock-based compensation expense
10,515 9,204 Amortization of investment premium
1,048
1,995 Tax benefits from employee stock-based transactions
354 498 Amortization and impairment of intangible assets
3,124 1,331 Deferred income taxes
426 429 Excess tax
benefits from employee stock-based transactions
(354
) (498 ) 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
489 1,803 Others
152
201 Changes in assets and liabilities: Accounts receivable
2,818 (10,503 ) Inventories
(459 ) (1,206 )
Prepaid expenses and other assets
94 1,124 Accounts payable
2,208 (529 ) Accrued and other liabilities
941 (3,581
) Deferred margin on sales to distributors
557 2,531
Deferred license revenue
(706 )
(505 ) Cash provided by operating activities
39,192
4,676
Cash flows from investing
activities: Proceeds from sales of short-term investments
62,699 104,765 Purchases of short-term investments
(41,053 ) (60,612 ) Purchases of property and
equipment
(5,761 ) (8,885 ) Proceeds from legal
settlement
1,275 - Investment in privately-held companies
(1,500 ) (8,750 ) Cash paid for assets purchased from
a privately-held company
(300 ) (1,200 ) Advances for
intellectual properties
(2,031 ) (1,242 ) Other
103 - Cash provided by
investing activities
13,432
24,076
Cash flows from financing activities: Proceeds
from employee stock program
5,545 5,631 Excess tax benefits
from employee stock-based transactions
354 498 Repurchase of
restricted stock units for income tax withholding
(1,981
) (2,179 ) Payment to acquire treasure shares
(3,005
) (39,684 ) Cash paid to settle contingent consideration
liabilities
(81 ) (1,054 ) Cash
provided by (used in) financing activities
832
(36,788 ) Effect of exchange rate changes on cash and
cash equivalents
(305 ) (20 )
Net increase (decrease) in cash and cash equivalents
53,151
(8,056 ) Cash and cash equivalents — beginning of year
29,069 37,125 Cash and cash
equivalents — end of year
$ 82,220 $
29,069
Supplemental cash flow information: Cash
payment for income taxes
$ (6,476 ) $ (6,389 )
Restricted stock units vested
$ 5,617 $ 6,276
Property and equipment and other assets purchased but not paid for
$ 668 $ 2,380 Unrealized gain (loss) on
available-for-sale securities
$ (223 ) $ 40
Silicon Image, Inc.Corporate
Communications:Gabriele Collier,
408-616-4088Gabriele.Collier@siliconimage.comInvestor
Relations:Alex Chervet,
408-616-4153Alex.Chervet@siliconimage.com
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