Silicon Image Announces Fourth Quarter and Fiscal Year 2012 Earnings MHLInstalled Base Grew to 220 Million Products Business Wire SUNNYVALE, Calif. -- February 5, 2013 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, 2012. Revenue for the fourth quarter of 2012 was $59.6 million, approximately a 2% increase from revenue of $58.7 million in the fourth quarter of 2011, and a 19% decrease from $73.9 million in the third quarter of 2012. Revenue for fiscal year 2012 was $252.4 million compared with $221.0 million for fiscal year 2011. “During 2012, Silicon Image achieved a significant number of milestones,” said Camillo Martino, chief executive officer of Silicon Image, Inc. “We shipped nearly 200 million product units, including more than 140 million MHL transmitters for smartphones and tablets. We also successfully launched our UltraGig™ product line, a complete 60GHz WirelessHD® solution for mobile devices.” GAAP net loss for the fourth quarter of 2012 was $0.3 million, or $0.00 per diluted share, compared with a net loss of $0.4 million, or $0.00 per diluted share, for the third quarter of 2012 and a net loss of $10.2 million, or $0.12 per diluted share, for the fourth quarter of 2011. GAAP net loss for fiscal year 2012 was $11.2 million, or $0.14 per diluted share, compared with a net loss for fiscal year 2011 of $11.6 million, or $0.14 per diluted share. Non-GAAP net income for the fourth quarter of 2012 was $6.2 million, or $0.08 per diluted share, compared with a net income of $8.8 million, or $0.11 per diluted share, for the third quarter of 2012 and a net income of $4.8 million, or $0.06 per diluted share, for the fourth quarter of 2011. Non-GAAP net income for fiscal year 2012 was $18.5 million, or $0.22 per share, compared with a net income for fiscal year 2011 of $16.4 million, or $0.20 per diluted share. Non-GAAP net income for these periods excludes stock-based compensation expense, impairment of investment in an unconsolidated affiliate, impairment of intangible asset, write-off certain unsalable inventory, amortization of intangible assets, restructuring charges, business acquisition related expenses and reversal of a subsidiary’s foreign currency translation adjustment. “Our non-GAAP net income exceeded our expectations for the quarter, and our revenue for the full year increased 14% from the year before,” said Mr. Martino. “Additionally, our non-GAAP earnings per share grew year over year and we remain committed to executing our strategy as planned and driving shareholder value.” During the fourth quarter of 2012, pursuant to the share repurchase plan announced in April 2012, Silicon Image repurchased approximately 751,000 shares of its common stock for approximately $3.3 million. In addition, pursuant to the $30 million accelerated share repurchase agreement entered in November 2012, Silicon Image received approximately 5 million shares of its common stock and expects to receive an additional 1 million to 1.5 million shares when the program concludes. The company’s cash and short-term investments balance as of December 31, 2012 was $107.5 million. 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 first quarter of 2013: Revenue: approximately $59 million to $61 million Gross Margin: approximately 58% GAAP operating expenses: approximately $37.5 million Non-GAAP operating expenses: approximately $34.5 million Diluted shares outstanding: approximately 77 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, impairment of investment in an unconsolidated affiliate, impairment of intangible asset, write-off certain unsalable inventory, restructuring charges, business acquisition related expenses and reversal of a subsidiary’s foreign currency translation adjustment 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 fourth quarter of 2012 results at 2:00 p.m. Pacific Time and will webcast the event. To access the conference call, dial 877-941-8416 or 480-629-9808 and enter pass code 4588511. 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 February 19, 2013. To access the replay, please dial 800-406-7325 or 303-590-0303 and enter pass code 4558851. 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 consumer electronics, mobile, 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 September December December December 31, 30, 31, 31, 31, 2012 2012 2011 2012 2011 Revenue: Product $ 46,808 $ 62,197 $ 45,029 $ 203,487 $ 174,234 Licensing 12,796 11,722 13,704 48,877 46,775 Total revenue 59,604 73,919 58,733 252,364 221,009 Cost of revenue and operating expenses: Cost of product 30,105 30,760 22,824 109,815 90,035 revenue (1) Cost of licensing 220 99 150 626 794 revenue Research and 17,305 17,848 17,646 77,372 66,533 development (2) Selling, general and administrative 12,279 14,834 13,865 57,446 55,277 (3) Amortization of acquisition-related (889) 496 496 599 1,585 intangible assets Restructuring (54) 73 812 110 2,269 expense Impairment of - - 8,500 - 8,500 intangible asset Total cost of revenue and 58,966 64,110 64,293 245,968 224,993 operating expenses Income (loss) from 638 9,809 (5,560) 6,396 (3,984) operations Impairment of investment in an - (7,467) - (7,467) - unconsolidated affiliate Interest income and 555 323 384 1,661 1,918 other, net Income (loss) before provision for income taxes and equity in net 1,193 2,665 (5,176) 590 (2,066) loss of an unconsolidated affiliate Income tax expense 1,458 2,464 4,047 9,979 8,583 Equity in net loss of an - 609 994 1,803 994 unconsolidated affiliate Net loss $ (265) $ (408) $ (10,217) $ (11,192) $ (11,643) Net loss per share $ (0.00) $ (0.00) $ (0.12) $ (0.14) $ (0.14) – basic and diluted Weighted average shares – basic and 79,564 82,504 82,050 81,872 80,603 diluted (1) Includes stock-based $ 104 $ 97 $ 84 $ 523 $ 670 compensation expense (2) Includes stock-based $ 871 $ 812 $ 777 $ 3,585 $ 3,774 compensation expense (3) Includes stock-based $ 1,200 $ 1,124 $ 1,135 $ 5,096 $ 5,076 compensation expense SILICON IMAGE, INC. GAAP NET LOSS TO NON-GAAP NET INCOME RECONCILIATION (In thousands, except per share amounts) Unaudited Three Months Ended Twelve Months Ended December September December December December 31, 30, 31, 31, 31, 2012 2012 2011 2012 2011 GAAP net loss $ (265 ) $ (408 ) $ (10,217 ) $ (11,192 ) $ (11,643 ) Non-GAAP adjustments: Stock-based compensation 2,175 2,033 1,996 9,204 9,520 expense (1) Amortization of intangible (639 ) 671 496 1,024 1,585 assets (2) Amortization of intangible assets of an - 134 232 402 232 unconsolidated affiliate (2) Business strategic initiative and - 201 - 3,257 814 acquisition related expenses (2) Impairment of investment in an - 7,467 - 7,467 - unconsolidated affiliate (3) Impairment of intangible - - 8,500 - 8,500 asset (3) Write-down of certain 6,245 - - 6,245 - unsalable inventory (3) Restructuring (54 ) 73 812 110 2,269 expense (3) Reversal of a subsidiary's foreign - - - - 132 currency translation adjustment (3) Non-GAAP net income before 7,462 10,171 1,819 16,517 11,409 tax adjustments Tax adjustments (1,218 ) (1,327 ) 2,992 2,030 4,984 (4) Non-GAAP net $ 6,244 $ 8,844 $ 4,811 $ 18,547 $ 16,393 income Non-GAAP net income per $ 0.08 $ 0.11 $ 0.06 $ 0.23 $ 0.20 share — basic Non-GAAP net income per $ 0.08 $ 0.11 $ 0.06 $ 0.22 $ 0.20 share — diluted Weighted average shares 79,564 82,504 82,050 81,872 80,603 — basic Weighted average shares 80,389 83,353 83,406 82,871 83,195 — diluted Stock-based compensation expense is composed of the following: Cost of $ 104 $ 97 $ 84 $ 523 $ 670 revenue Research and 871 812 777 3,585 3,774 development Selling, general and 1,200 1,124 1,135 5,096 5,076 administrative Total $ 2,175 $ 2,033 $ 1,996 $ 9,204 $ 9,520 Discussion of Non-GAAP Financial Measures 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 (1) 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. 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 (2) 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. Other Items: We exclude certain other items that are the result of either unique or unplanned events including the following, when applicable:(i) impairment charges, (ii) write-down of certain unsalable inventory due to defects in the material used by one of our assembly vendors in the packaging process, (iii) restructuring and related costs and (iv) reversal of a subsidiary’s foreign currency translation adjustment. 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. The inventory write-down is an unusual and one-time event for which we are seeking recovery from the vendor. 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. Reversal of a (3) subsidiary’s foreign currency translation adjustment relates to the reversal from accumulated Other Comprehensive Income (OCI) to income of the accumulated foreign currency translation adjustment of our wholly owned subsidiary in Germany whose facilities and offices had been substantially liquidated during 2010. Our decision to take the accumulated foreign currency translation adjustment to income was based on the provisions of FASB ASC. No. 830-30-40, which states that currency translation adjustment should not be released from accumulated OCI into income until complete or substantially complete liquidation of an investment in a foreign entity. As this was a one-time income and that this unique transaction limits the comparability of our on-going operations with prior and future periods, we believe that this income does not accurately reflect the underlying performance of our continuing operations in the period in which this income was 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. Tax adjustments: For the three and twelve months ended December 31, 2012 and for the three months ended September 30, 2012, our non-GAAP tax rate (4) was approximately 30% of non-GAAP pre-tax income. For the three and twelve months ended December 31, 2011, our non-GAAP tax rate was approximately 18% 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, 2012 December 31, 2011 ASSETS Current Assets: Cash and cash equivalents $ 29,069 $ 37,125 Short-term investments 78,398 124,301 Accounts receivable, net 37,936 27,368 Inventories 11,268 10,062 Prepaid expenses and other current 8,105 9,101 assets Deferred income taxes 841 708 Total current assets 165,617 208,665 Property and equipment, net 14,840 12,772 Deferred income taxes, non-current 4,144 4,706 Intangible assets, net 11,452 11,915 Goodwill 21,646 18,646 Other assets 9,043 9,369 Total assets $ 226,742 $ 266,073 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable $ 10,690 $ 10,133 Accrued and other current liabilities 19,600 26,116 Deferred margin on sales to 10,340 7,809 distributors Deferred license revenue 2,185 2,684 Total current liabilities 42,815 46,742 Other long-term liabilities 16,827 14,815 Total liabilities 59,642 61,557 Stockholders’ equity 167,100 204,516 Total liabilities and stockholders’ $ 226,742 $ 266,073 equity SILICON IMAGE, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Unaudited Year Ended December 31, 2012 2011 Cash flows from operating activities: Net loss $ (11,192) $ (11,643) Adjustments to reconcile net loss to cash provided by operating activities: Depreciation 6,107 6,416 Stock-based compensation expense 9,204 9,520 Amortization of investment premium 1,995 2,610 Tax benefits from employee stock-based transactions 498 2,125 Impairment of investment in an unconsolidated 7,467 - affiliate Impairment of intangible asset - 8,500 Amortization of intangible assets 1,331 1,585 Deferred income taxes 429 389 Reversal of a subsidiary's accumulated foreign - 132 currency translation adjustment Excess tax benefits from employee stock-based (498) (2,125) transactions Realized loss on sale of short-term investments (139) (177) Equity in net loss of unconsolidated affiliate 1,803 994 Others 340 240 Changes in assets and liabilities: Accounts receivable (10,503) (4,353) Inventories (1,206) 1,701 Prepaid expenses and other assets 1,124 (2,844) Accounts payable (529) (2,521) Accrued and other liabilities (4,635) 4,829 Deferred margin on sales to distributors 2,531 (5,675) Deferred license revenue (505) (2,245) Cash provided by operating activities 3,622 7,458 Cash flows from investing activities: Proceeds from maturities and sales of short-term 104,765 147,032 investments Purchases of short-term investments (60,612) (113,319) Cash used in business acquisitions - (15,910) Purchases of property and equipment (8,885) (7,821) Cash paid for investment in an unconsolidated (2,750) (7,514) affiliate Investment in privately held companies (6,000) - Cash paid for assets purchased from privately-held (1,200) - company Advances for intellectual properties (1,242) (7,805) Repayment of secured notes - 575 Cash provided by (used in) investing activities 24,076 (4,762) Cash flows from financing activities: Proceeds from employee stock programs 5,631 6,203 Excess tax benefits from employee stock-based 498 2,125 transactions Payment to acquire treasury shares (39,684) - Repurchases of restricted stock units for income (2,179) (3,304) tax withholding Payment of a line of credit assumed in business - (523) acquisition Cash provided by (used in) financing activities (35,734) 4,501 Effect of exchange rate changes on cash and cash (20) (14) equivalents Net increase (decrease) in cash and cash (8,056) 7,183 equivalents Cash and cash equivalents — beginning of year 37,125 29,942 Cash and cash equivalents — end of year $ 29,069 $ 37,125 Supplemental cash flow information: Common stock issued in connection with business $ - $ 10,429 acquisition (1.3 million shares) Cash payment for income taxes $ (6,389) $ (6,722) Restricted stock units vested $ 6,276 $ 9,626 Property and equipment and other assets purchased $ 2,380 $ 1,132 but not paid for Unrealized gain (loss) on short term investments $ 40 $ (90) Contact: MEDIA CONTACT: Silicon Image, Inc. Gabriele Collier, 408-616-4088 email@example.com or INVESTOR CONTACT: Investor Relations – The Blueshirt Group Mike Bishop, 415-217-4968 firstname.lastname@example.org
Silicon Image Announces Fourth Quarter and Fiscal Year 2012 Earnings
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