Revenue for the fourth quarter ended Dec. 31, 2007 was $85.3 million, compared to $86.3 million for the third quarter ended Sept. 30, 2007 and $87.0 million for the fourth quarter of 2006. Revenue for the fourth quarter of 2007 included $6.7 million of product revenue from distributor sales during the month of December. Historically, the company has deferred the recognition of sell-through revenue from distributor sales during the third month of a quarter until the following quarter because of the lack of information sufficient to recognize such revenue. As a result of improved business processes, the company has been able to eliminate this delay in revenue recognition beginning with the fourth quarter of 2007. Therefore, 2007 fourth quarter revenue includes an additional month of product revenue from distributor sales in December. Fourth quarter 2006 revenue includes $10.6 million related to royalties earned prior to the fourth quarter of 2006 associated with the Settlement and License Agreement with Genesis Microchip, Inc.
Revenue for 2007 totaled $320.5 million, compared with $295.0 million for 2006.
GAAP net income for the fourth quarter of 2007 was $7.6 million, or $0.09 per diluted share, compared to $4.1 million, or $0.05 per diluted share, for the third quarter and $26.3 million, or $0.29 per diluted share, for the fourth quarter of 2006.
Non-GAAP net income for the fourth quarter of 2007 was $9.5 million, or $0.11 per diluted share, compared to $8.3 million, or $0.10 per diluted share, for the third quarter and $18.3 million, or $0.21 per diluted share, for the fourth quarter of 2006. Non-GAAP net income excludes stock-based compensation expense, amortization of intangible assets, impact of the one-time change in distributor sell-through revenue in 2007 and certain items related to the Settlement and License Agreement with Genesis Microchip, Inc. in 2006.
GAAP net income for 2007 was $19.0 million, or $0.22 per diluted share, compared to $42.5 million, or $0.49 per diluted share for 2006. For 2007, the company incurred income tax expenses of $20.5 million compared to $14.0 million in 2006. This increase in income tax expenses reduced earnings per diluted share by $0.07 in 2007. The remaining difference between 2007 and 2006 diluted earning per share essentially relates to higher research and development expense from the acquisition of sci-worx completed in Jan. 2007.
2007 non-GAAP net income was $32.7 million, or $0.37 per diluted share, compared to $68.9 million, or $0.79 per diluted share, for 2006. Non-GAAP net income excludes stock-based compensation expense, amortization of intangible assets, and the impact of the one-time change in distributor sell-through revenue in 2007 and certain items related to the Settlement and License Agreement with Genesis Microchip, Inc., in 2006.
A reconciliation of GAAP and non-GAAP items is provided in a table immediately following the Condensed Consolidated Statement of Income.
Silicon Image also announced that its Board of Directors has authorized the company to move forward with an accelerated stock repurchase program for the repurchase of $62 million of the company's common stock. Upon completion of the accelerated stock repurchase program, the company expects to conclude its previously announced $100 million stock repurchase program which was authorized in February 2007. The company expects to enter into an agreement effectuating this accelerated stock repurchase program by Feb. 15, 2008.
The company also announced that its Board of Directors has authorized a new stock repurchase program for the repurchase, in the open market from time to time as business conditions warrant, of up to $100 million of the company's common stock over a three-year period commencing upon the completion of the aforementioned accelerated stock repurchase program. Purchases under this program may be increased, decreased or discontinued at any time without prior notice.
"We completed 2007 with 24 percent revenue growth in our consumer electronics business, our largest business line, and achieved a 57 percent gross margin overall which is consistent with our long term model of 55 to 57 percent," said Steve Tirado, Silicon Image's president and chief executive officer. "As we move forward into 2008, which is a product transition year for Silicon Image, we expect gross margin to stay within our long term model. We are focused on new product design wins with major customers interested in the recently announced MHL or Mobile High Definition Link and our first generation Personal Entertainment Network products. These efforts are expected to produce revenue growth in 2009."
Financial Outlook
Based upon Silicon Image's current visibility into the seasonally soft first quarter, the following is the financial outlook for Q1, 2008:
-- Revenue $61 million - $63 million
-- Gross margin 55% - 57%
-- GAAP operating expenses $41 million - $42 million
-- Non-GAAP operating expenses $34 million - $35 million
-- Tax rate 42% - 44%
Given that 2008 is a product transition year for Silicon Image, the following is the full year financial outlook for 2008:
-- Revenue $270 million - $290 million
-- Gross margin 55% - 57%
-- GAAP operating expenses $166 million - $168 million
-- Non-GAAP operating expenses $138 million - $140 million
-- Tax rate 42% - 44%
Use of Non-GAAP Financial Information
Silicon Image presents and discusses gross margins, operating expenses, net income and basic and diluted net income 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 and stock based compensation 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 release its fourth quarter and full-year financial results for 2007 after the market closes on Feb. 7, 2008. The company will host an investor conference call and web cast that event at 2:00 p.m. Pacific Time on the same day. To access the conference call, dial 719-325-4796 and enter pass code 7119394. The webcast will be accessible on Silicon Image's investor relations website at http://www.siliconimage.com. A replay of the conference call will be available until midnight Pacific Time, Feb. 21, 2008. To access the replay, dial 719- 457-0820 or 888-203-1112, and enter pass code 7119394.
About Silicon Image, Inc.
Silicon Image, Inc. is a global leader in driving the architecture and semiconductor implementation for the secure storage, distribution and presentation of high-definition content in the consumer electronics, personal computing, and mobile device markets. With a rich history of technology innovation that includes creating industry standards such as SATA, DVI and HDMI, Silicon Image partners with the world's leading entertainment creators and electronics manufacturers to deliver digital HD content to consumers anytime, anywhere, on any device. Silicon Image is also a leading provider of semiconductor intellectual property solutions for high-definition multimedia and data storage applications. Additionally, Simplay Labs, LLC, a wholly-owned subsidiary of Silicon Image, offers robust testing tools, technologies, support services, consulting and product certification to electronics manufacturers to maximize performance, interoperability and ensure the highest-quality HD experience to consumers. With engineering, sales and customer support facilities located throughout North America, Asia and Europe, Silicon Image (NASDAQ:
SIMG ) is globally headquartered in Sunnyvale, California. For more information, please visit
http://www.SiliconImage.com .
