Silicon Motion Announces Results for the Period Ended September 30, 2016

  • 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 stock options 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.

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.

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.

Restructuring expenses consists of costs relating to the restructuring of our corporate organization according to a formal plan to streamline operations and improve financial performance.  The Company does not engage in restructuring activities in the ordinary course of business, so have excluded the effect of these costs 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
 
   Sep. 30,  2015
($)
   Jun. 30,  2016
($)
   Sep. 30,  2016
($)
 
          
Net Sales 95,397  140,686  158,580 
Cost of sales 46,285  72,565  81,175 
Gross profit 49,112  68,121  77,405 
Operating expenses   
Research & development 19,628  21,234  25,934 
Sales & marketing 5,545  6,351  7,548 
General & administrative 3,994  3,797  4,878 
Amortization of  intangibles assets 526   526     526  
Operating income   19,419     36,213     38,519  
Non-operating income (expense)      
Gain on sale of investments   -     1     -  
Interest income, net   506     441     541  
Foreign exchange gain (loss), net   220     (488 )   (375 )
Others, net   4     19     28  
Subtotal   730     (27 )   194  
Income before income tax   20,149     36,186     38,713  
Income tax expense   6,969     7,139     5,991  
Net income   13,180     29,047     32,722  
       
Earnings per basic ADS $ 0.38   $ 0.82   $ 0.93  
Earnings per diluted ADS $ 0.38   $ 0.82   $ 0.92  
       
Margin Analysis:      
Gross margin   51.5 %   48.4 %   48.8 %
Operating margin   20.4 %   25.7 %   24.3 %
Net margin   13.8 %   20.6 %   20.6 %
       
Additional Data:      
Weighted avg. ADS equivalents 2   34,726     35,273     35,308  
Diluted ADS equivalents   34,941     35,476     35,539  
       

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