** Operating margin (non-GAAP) excludes $0.5 million of amortization of intangible assets, and $3.2 million to $3.7 million of stock-based compensation.
For the full year 2017, management expects:
| GAAP | Non-GAAP Adjustment | Non-GAAP | |
| Revenue | $556m to $612m | -- | $556m to $612m |
| 0% to +10% Y/Y | 0% to +10% Y/Y | ||
| Gross margin | 49% to 51% | Approximately $0.5m* | 49% to 51% |
| Operating margin | 24.4% to 26.4% | Approximately $17.2m to 19.2m** | 27.5% to 29.5% |
* Gross margin (non-GAAP) excludes $0.5 million of stock-based compensation.
** Operating margin (non-GAAP) excludes $2.1 million of amortization of intangible assets, $0.6 million of litigation expense, and $14.5 million to $16.5 million of stock-based compensation.
Conference Call & Webcast:
The Company’s management team will conduct a conference call at 8:00 am Eastern Time on January 24, 2017.
Speakers
Wallace Kou, President & CEO
Riyadh Lai, CFO
Jason Tsai, Senior Director of Investor Relations and Strategy
CONFERENCE CALL ACCESS NUMBERS:
USA (Toll Free): 1 866 519 4004
USA (Toll): 1 845 675 0437
Taiwan (Toll Free): 0080 112 6920
Participant Passcode: 4750 3600
REPLAY NUMBERS (for 7 days):
USA (Toll Free): 1 855 452 5696
USA (Toll): 1 646 254 3697
Participant Passcode: 4750 3600
A webcast of the call will be available on the Company's website at
www.siliconmotion.com.
Discussion of Non-GAAP Financial Measures
To supplement the Company’s unaudited selected financial results calculated in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”), the Company discloses certain non-GAAP financial measures that exclude stock-based compensation and other items, including gross profit (non-GAAP), operating expenses (non-GAAP), operating profit (non-GAAP), net income (non-GAAP), and earnings per diluted ADS (non-GAAP). These non-GAAP measures are not in accordance with or an alternative to GAAP, and may be different from non-GAAP measures used by other companies. We believe that these non-GAAP measures have limitations in that they do not reflect all the amounts associated with the Company’s results of operations as determined in accordance with GAAP and that these measures should only be used to evaluate the Company’s results of operations in conjunction with the corresponding GAAP measures. The presentation of this additional information is not meant to be considered in isolation or as a substitute for the most directly comparable GAAP measure. We compensate for the limitations of our non-GAAP financial measures by relying upon GAAP results to gain a complete picture of our performance.
Our non-GAAP financial measures are provided to enhance the user’s overall understanding of our current financial performance and our prospects for the future. Specifically, we believe the non-GAAP results provide useful information to both management and investors as these non-GAAP results exclude certain expenses, gains and losses that we believe are not indicative of our core operating results and because it is consistent with the financial models and estimates published by many analysts who follow the Company. We use non-GAAP measures to evaluate the operating performance of our business, for comparison with our forecasts, and for benchmarking our performance externally against our competitors. Also, when evaluating potential acquisitions, we exclude the items described below from our consideration of the target’s performance and valuation. Since we find these measures to be useful, we believe that our investors benefit from seeing the results from management’s perspective in addition to seeing our GAAP results. We believe that these non-GAAP measures, when read in conjunction with the Company’s GAAP financials, provide useful information to investors by offering:
- the ability to make more meaningful period-to-period comparisons of the Company’s on-going operating results;
- the ability to better identify trends in the Company’s underlying business and perform related trend analysis;
- a better understanding of how management plans and measures the Company’s underlying business; and
- an easier way to compare the Company’s operating results against analyst financial models and operating results of our competitors that supplement their GAAP results with non-GAAP financial measures.
The following are explanations of each of the adjustments that we incorporate into our non-GAAP measures, as well as the reasons for excluding each of these individual items in our reconciliation of these non-GAAP financial measures:
Stock-based compensation expense consists of non-cash charges related to the fair value of and restricted stock units awarded to employees. The Company believes that the exclusion of these non-cash charges provides for more accurate comparisons of our operating results to our peer companies due to the varying available valuation methodologies, subjective assumptions and the variety of award types. In addition, the Company believes it is useful to investors to understand the specific impact of share-based compensation on its operating results.
Amortization of intangibles assets consists of non-cash charges that can be impacted by the timing and magnitude of our acquisitions. The Company considers its operating results without these charges when evaluating its ongoing performance and forecasting its earnings trends, and therefore excludes such charges when presenting non-GAAP financial measures. The Company believes that the assessment of its operations excluding these costs is relevant to its assessment of internal operations and comparisons to the performance of its competitors.
Litigation expenses consist of legal expenses relating to intellectual property disputes, commercial claims and other types of litigation. While litigation may arise in the ordinary course of our business, we nevertheless consider litigation to be an unusual and unplanned activity and therefore exclude this charge when presenting non-GAAP financial measures.
Acquisition-related expenses consist of direct costs of acquisitions, such as transaction fees, which vary significantly and are unique to each acquisition. The Company does not acquire businesses on a predictable cycle, so we have excluded the effect of these costs when presenting our non-GAAP financial measures.
Foreign exchange gains and losses consist of translation gains and/or losses of non-US$ denominated current assets and current liabilities, as well as certain other balance sheet items which result from the appreciation or depreciation of non-US$ currencies against the US$. We do not use financial instruments to manage the impact on our operations from changes in foreign exchange rates, and because our operations are subject to fluctuations in foreign exchange rates, we therefore exclude foreign exchange gains and losses when presenting non-GAAP financial measures.
Impairment of long-term investments relates to the other-than-temporary, non-operating write down of the Company's minority stake investments. We do not consider these investments, which were made before 2007, to be strategic and exclude the performance of these investments when evaluating our ongoing performance and forecasting our earnings trends, and therefore excluding losses (and gains) from the investments when presenting non-GAAP financial measures.
| Silicon Motion Technology Corporation | ||||||||||||
| Consolidated Statements of Income | ||||||||||||
| (in thousands, except percentages and per ADS data, unaudited) | ||||||||||||
| For the Three Months Ended | ||||||||||||
|
Dec. 31, 2015
($) |
Sep. 30, 2016
($) |
Dec. 31, 2016
($) | ||||||||||
| Net Sales | 98,041 | 158,580 | 144,198 | |||||||||
| Cost of sales | 49,028 | 81,175 | 72,080 | |||||||||
| Gross profit | 49,013 | 77,405 | 72,118 | |||||||||
| Operating expenses | ||||||||||||
| Research & development | 19,281 | 25,934 | 26,038 | |||||||||
| Sales & marketing | 6,136 | 7,548 | 5,651 | |||||||||
| General & administrative | 5,008 | 4,878 | 5,048 | |||||||||
| Amortization of intangibles assets | 526 | 526 | 526 | |||||||||
| Operating income | 18,062 | 38,519 | 34,855 | |||||||||
| Non-operating income (expense) | ||||||||||||
| Gain on sale of investments | 1 | - | - | |||||||||
| Interest income, net | 455 | 541 | 623 | |||||||||
| Foreign exchange gain (loss), net | (523 | ) | (375 | ) | 112 | |||||||
| Impairment of long-term investments | - | - | (13 | ) | ||||||||
| Others, net | - | 28 | (4 | ) | ||||||||
| Subtotal | (67 | ) | 194 | 718 | ||||||||
| Income before income tax | 17,995 | 38,713 | 35,573 | |||||||||
| Income tax expense | 4,614 | 5,991 | 9,416 | |||||||||
| Net income | 13,381 | 32,722 | 26,157 | |||||||||
| Earnings per basic ADS | $ | 0.38 | $ | 0.93 | $ | 0.74 | ||||||
| Earnings per diluted ADS | $ | 0.38 | $ | 0.92 | $ | 0.73 | ||||||
| Margin Analysis: | ||||||||||||
| Gross margin | 50.0 | % | 48.8 | % | 50.0 | % | ||||||
| Operating margin | 18.4 | % | 24.3 | % | 24.2 | % | ||||||
| Net margin | 13.6 | % | 20.6 | % | 18.1 | % | ||||||
| Additional Data: | ||||||||||||
| Weighted avg. ADS equivalents 2 | 34,875 | 35,308 | 35,324 | |||||||||
| Diluted ADS equivalents | 35,288 | 35,539 | 35,623 | |||||||||
