Fourth Quarter and 2007 Highlights
-- Product Revenue - $8.4 Million For Q42007, $33.0 Million For 2007, Up 16% Y/Y
-- Gross Product Margin - 48% For 2007 Vs. 37% For 2006
-- Ex-Item Profit - $1.1 Million For 2007 Vs. $640,000 For 2006
-- Invested More Than $1 Million In New High Density nvRAM Initiative
-- Significant Increase In R&D For New Products To Serve Larger Markets
-- Design Wins From Diverse Applications And All Geographic Areas
-- More Than 160 New Customer Designs In 2007 vs. Just Over 100 In 2006
-- 4Megabit Beta Samples Resulting In Committed Customer Programs
-- Record 15 Patent Applications Submitted In 2007
Financial Results
Revenue for the fourth quarter of 2007 was $8.4 million, consisting entirely of product revenue, compared to $9.1 million in the same quarter of 2006. The decreased revenues are related to lower shipments into the military and smart metering segments. Gross margins were 46% for the quarter compared to 45% a year ago, reflecting lower volume of shipments of military parts that typically carry a gross margin in excess of 80% and the write-off of certain unsalable materials. The Company reported ex-item net loss for the fourth quarter of $284,000, or $0.02 per share, compared to an ex-item profit of $1.2 million, or $0.07 per share in Q406. For the quarter, ex-item income excludes the effects of stock options and amortization of acquisition related costs. On a GAAP basis, the Company reported a net loss for the quarter of $(1.3) million or $(0.08) per share down from a profit of $598,000 or $0.04 per share for the comparable 2006 period. The 2006 period included $552,000 of royalty revenue from Cypress Semiconductor.
For the year ended December 31, 2007, revenue increased to $33.0 million, consisting entirely of product revenue, which represented a 16% increase over product revenue of $28.6 million, reported in the prior year. Gross margins were 48% for 2007 compared to 37%, for 2006. The Company reported ex-item net income for the year ended December 31, 2007 of $1.1 million or $0.07 per share, up from the ex-item net income of $640,000, or $0.04 per share a year ago. For the twelve months, ex-item income excludes the effects of stock options, amortization of acquisition related costs, and contractual milestone payments to Cypress Semiconductor to be paid from the restricted cash account. On a GAAP basis, the Company reported a net loss for 2007 of $(2.8) million or $(0.17) per share compared the loss of $(2.0) million or $(0.13) per share for 2006. The 2006 results include the royalty revenue from Cypress Semiconductor of $2.1 million, which had no associated costs.
"The financial landscape at Simtek has changed dramatically over the 11 quarters that I have reported on," stated Brian Alleman, Simtek's chief financial officer. "The Company's profitability and liquidity are stronger than at any time in Simtek's recent history."
"Fourth quarter revenues were on the high end of our expectations and were driven by strong orders in the third quarter," stated Harold A. Blomquist, Simtek president and chief executive officer. "We experienced solid demand from RAID server and storage customers for both 256K and 1Megabit products. Increased costs were incurred as a result of higher than expected demand for beta samples of our 4 megabit product which needed to be purchased with no offsetting revenue. Overall, we are pleased with the conclusion of 2007. We made progress on many fronts increasing revenues and design wins in our core 1 megabit and smaller products, increasing our R&D efforts to expand addressable markets, committed customer programs for our new 4 megabit product, and filing patents to protect our intellectual property position."
Blomquist concluded, "Demand appears to be picking up from SAS-based RAID customers. We already have customer programs committed to high volume production starting near the end of this year on our 4 megabit nvSRAM with Tier 1 customers in our traditional RAID/server and Industrial/Factory Automation markets. We also see very strong interest in the 4 megabit density from customers in the multifunction printer and copier market. Even though we have committed customer programs for the 4 meg, I'd like to point out that the total number of design wins reported for 2007 is for 1 megabit and smaller products. We will begin adding 4 megs to the count this year."
Ex-Item Earnings
Simtek reports net income or loss in accordance with GAAP and additionally uses ex-item financial measures which are adjusted from the most directly comparable GAAP financial measures to exclude charges related to non-cash, unusual or non-recurring expenses the Company may incur from time to time, in order to provide additional comparative information between periods. Management believes that these ex-item measures are important to investor understanding of the Company's disclosures regarding past, current and future operating results. Following is reconciliation* of the Ex-item financial measures to the most comparable GAAP financial measures, in thousands of dollars, except per share amounts:
Three Months Ended Year Ended
December 31, December 31,
2007 2006 2007 2006
------------ ----------- ------------ ------------
GAAP Net Income
(Loss) $ (1,273) $ 598 $ (2,768) $ (2,007)
Ex-item Adjustments
Amortization of
non-compete
agreement 445 445 1,781 1,784
Costs associated
with stock options 544 125 1,386 542
Cypress milestone
payments - - 735 321
------------ ----------- ------------ ------------
Ex-item income
(loss) $ (284) $ 1,168 $ 1,134 $ 640
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Per Share Data:
Net loss as
reported $ (0.08) $ 0.04 $ (0.17) $ (0.13)
Ex-item Adjustments
Amortization of
non-compete
agreement $ 0.03 $ 0.02 $ 0.11 $ 0.12
Costs associated
with stock options$ 0.03 $ 0.01 $ 0.08 $ 0.03
Cypress milestone
payments $ - $ - $ 0.05 $ 0.02
------------ ----------- ------------ ------------
Ex-item income
(loss) $ (0.02) $ 0.07 $ 0.07 $ 0.04
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weighted average
common shares
outstanding:
Basic and diluted 16,515,245 16,123,904 16,405,580 15,125,847
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