Silicon Motion Announces Results for the Period Ended September 30, 2018

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 they are 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 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.

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.

Gain and loss on equity-method investment consists of gain and/or loss related to our investment in a privately-held company, which varies depending on the operational and financial performance of the company in which we invested. We believe that providing non-GAAP measures excluding these charges, as well as the GAAP measures, assists our investors because such charges are not reflective of our ongoing operations.

 
Silicon Motion Technology Corporation
Consolidated Statements of Income
(in thousands, except percentages and per ADS data, unaudited)
  
  For the Three Months Ended
  Sep. 30,   2017
($)
Jun. 30, 2018
($)
Sep. 30, 2018
($)
Net Sales 127,216  138,055  138,562 
Cost of sales 68,746  72,474  67,988 
Gross profit 58,470  65,581  70,574 
Operating expenses   
Research & development 25,293  20,014  25,506 
Sales & marketing 7,157  7,144  7,735 
General & administrative 3,917  3,718  4,355 
Amortization of  intangibles assets 526  741  741  
Operating income   21,577     33,964     32,237  
       
Non-operating income (expense)      
Interest income, net   993     1,394     1,597  
Foreign exchange gain (loss), net   701     (933 )   (749 )
Gain (loss) on equity-method investment   -     (205 )   (98 )
Others, net   32     42     55  
Subtotal   1,726     298     805  
Income before income tax   23,303     34,262     33,042  
Income tax expense   5,709     3,534     3,858  
Net income   17,594     30,728     29,184  
                   
       
Earnings per basic ADS $0.49   $0.85   $0.81  
Earnings per diluted ADS $0.49   $0.85   $0.81  
       
Margin Analysis:      
Gross margin   46.0 %   47.5 %   50.9 %
Operating margin   17.0 %   24.6 %   23.3 %
Net margin   13.8 %   22.3 %   21.1 %
       
Additional Data:      
Weighted avg. ADS equivalents 2   35,766     36,113     36,136  
Diluted ADS equivalents   35,828     36,151     36,171  
       

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