Silicon Motion Technology Corporation Announces Third Quarter 2005 Results

Sales and marketing expenses in 3Q05 increased by 22% from 3Q04 and 21% from 2Q05 and represented 5.0% of net sales. The year-over-year increase was primarily driven by higher salary and benefits as well as higher commissions. The sequential increase was primarily due to higher salary and benefits and the higher expenses associated with samples for use in compatibility testing.

General and administrative expenses in 3Q05 increased by 133% year-over- year and 120% sequentially and represented 6.5% of net sales. The year-over- year and sequential increases were primarily due to higher professional fees associated with the ongoing legal and reporting requirements for publicly listed companies in the US, salary and benefits, and travel expenses.

Research and development expenses in 3Q05 increased 80% year-over-year and 2% sequentially and represented 12.8% of net sales. The year-over-year increase was driven by higher salary and benefits due to the higher R&D headcount, and higher project costs that resulted from greater number of R&D projects under development. The sequential increase in R&D expenses was due to increases in salary and benefits from the increase in R&D headcount, partially offset by decreases in project expenses and IP license fees.

In 2Q05, the Company incurred a loss on its inventory in the possession of a subcontractor due to fire. The Company is currently in the claims process with the subcontractor for an amount exceeding the book value of lost inventory. After consultation with its outside legal counsel, the Company believes it is highly probable for the Company to receive reimbursement for the lost inventory at full book value, and the Company subsequently recorded NT$42 million of inventory loss, offset by NT$42 million of fire loss reimbursement, resulting in zero impact to the earnings for the period. In connection with the inventory loss, the Company also recorded NT$8 million in other expenses in 3Q05 for amounts paid to certain customers for delays in shipment caused by the fire.

The company-wide headcount increased 14% from 196 at the end of 2Q05 to 224 at the end of 3Q05. A large majority of the headcount increase took place in our research and development department.

Earnings

Net income totaled NT$215 million (US$6.7 million) in 3Q05, an increase of 83% from NT$117 million in 3Q04 and an increase of 85% from NT$116 million in 2Q05. The net margin was 28.8%, up from 18.9% in 3Q04 and 21.0% in 2Q05. Diluted earnings per ADS were NT$6.85 (US$0.21), up 52% from NT$4.51 (US$0.13) in 3Q04 and up 59% from NT$4.32 (US$0.14) in 2Q05.

As part of the Company's initial public offering, 4.3 million American Depositary Shares were issued in July 2005. Using the as adjusted share count, the Company's basic earnings per ADS in the first and second quarters of 2005 would have been NT$3.13 (US$0.10) and NT$3.79 (US$0.12), respectively, and the Company's diluted earnings per ADS in the first and second quarters of 2005 would have been NT$3.13 (US$0.10) and NT$3.73 (US$0.12), respectively.

Balance Sheet

At the end of the third quarter of 2005, the Company had NT$1,625 million (US$49.0 million) in cash and cash equivalent funds and NT$993 million (US$29.9 million) in short-term investments. Accounts receivable (A/R) increased from NT$296 million at the end of 2Q05 to NT$479 million (US$14.4 million) at the end of 3Q05. The average A/R turnover days increased from 45 days to 47 days. Inventory increased from NT$202 million at the end of 2Q05 to NT$232 million (US$7.0 million) at the end of 3Q05. The average inventory turnover days decreased from 87 days to 56 days. Total assets grew from NT$1,975 million at the end of 2Q05 to NT$3,832 million (US$115.5 million) at the end of 3Q05, primarily due to the approximately US$41 million net cash proceeds received from the closing of the Company's initial public offering in July 2005.

Current liabilities increased from NT$309 million at the end of 2Q05 to NT$582 million (US$17.5 million) at the end of 3Q05, primarily due to increases in accounts payable and accrued expenses. There was no material change in the Company's long-term liabilities.

In early July, Silicon Motion issued 17.2 million new ordinary shares, representing 4.3 million American Depositary Shares as part of the Company's initial public offering. Since the offering, there are now 122.612 million ordinary shares outstanding, which is equivalent to 30.653 million American Depositary Shares.

4Q05 Business Outlook:

The Company currently expects its revenues in 4Q05 to grow by 10-15% from 3Q05. The Company estimates that its operating margin in 4Q05 may be flat or slightly up from the 3Q05 level.

Webcast of Conference Call:

The Company's management team will conduct a conference call at 11:00 am Eastern Time on October 28. A webcast of this conference call will be accessible on the Company's web site at http://www.siliconmotion.com.


                    Silicon Motion Technology Corporation
                      Consolidated Statements of Income
     (in thousands, except percentages, per share data, and share count)
                                 (unaudited)


                          For the   For the  For the   For the
                              3        3        3         3
                           Months    Months   Months    Months
                            Ended     Ended    Ended     Ended   Change Change
                          Sep. 30,  Jun. 30, Sep. 30, Sept. 30,    from   from
                             2004      2005     2005      2005     3Q04   2Q05
                             (NT$)     (NT$)    (NT$)     (US$)(2)   (%)   (%)
    Net Sales             621,988   551,747  747,012    23,131      20     35
    Cost of sales         347,172   292,886  356,688    11,045       3     22
    Gross profit          274,816   258,861  390,324    12,086      42     51
    Operating expenses
     Research &
      development          53,112    93,480   95,690     2,963       80            2
          Sales  &  marketing          30,651        30,827      37,372          1,157            22          21
          General  &
            administrative              20,851        22,054      48,489          1,501          133        120
          Amort.  of
            intangible  assets          4,439          1,125        1,126                35          (75)          -
          Subtotal                          109,053      147,486    182,677          5,656            68          24
        Operating  income            165,763      111,375    207,647          6,430            25          86

        Non-operating
          income  (expense)
          Gain  on  sale  of
            investments                      1,544          2,783        3,394              105          120          22
          Interest  income
            (net)                                        40              518      11,725              363    29,213    2,164
          Foreign  exchange
            gain                                        673          1,362        4,710              146          600        246
          Others                                        80              264      (6,356)          (197)  (8,045)(2,508)
          Subtotal                              2,337          4,927      13,473              417          477        173
        Income  before  tax          168,100      116,302    221,120          6,847            32          90
        Income  tax  (expense)
          benefit                              50,802              179        6,021              186          (88)  3,264
        Net  income                                NT                NT              NT
                                                  $117,298    $116,123  $215,099        $6,661            83          85

        Basic  earnings  per
          ADS                                    NT$4.51      NT$4.41    NT$7.02          $0.22
        Diluted  earnings
          per  ADS                            NT$4.51      NT$4.32    NT$6.85          $0.21

        Margin  Analysis:
        Gross  margin                        44.2%          46.9%        52.3%
        Operating  margin                26.7%          20.2%        27.8%
        Net  margin                            18.9%          21.0%        28.8%
        Additional  Data:
          ADS  equivalents
          (thousand)(3)                25,994        26,353      30,653
        Diluted  ADS
          equivalents
          (thousand)                      25,994        26,872      31,389



                                        Silicon  Motion  Technology  Corporation
                                            Consolidated  Statements  of  Income
          (NT$  thousands,  except  percentages,  per  share  data,  and  share  count)
                                                                  (unaudited)


                                                                                  For  the              For  the
                                                                                        Nine                    Nine
                                                                                    Months                Months
                                                                                      Ended                  Ended
                                                                                  Sep.  30,            Sep.  30,
                                                                                        2004                    2005            Change  (%)

        Net  Sales                                                    1,403,697          1,814,020                          29
        Cost  of  sales                                                782,249              940,303                          20
        Gross  profit                                                  621,448              873,717                          41
        Operating  expenses
          Research  &  development                            167,290              258,206                          54
          Sales  &  marketing                                      101,907              100,207                          (2)
          General  &  administrative                          83,718                95,841                          14
          Amortization  of  intangible  assets        13,318                  3,376                        (75)
          Subtotal                                                        366,233              457,630                          25
        Operating  income                                          255,215              416,087                          63

        Non-operating  income  (expense)
          Gain  on  sale  of  investments                      5,597                  9,122                          63
          Interest  income  (net)                                      241                12,773                    5,200
          Foreign  exchange  gain  (loss)                  (3,367)                4,522                        234
          Others                                                                    521                (6,109)                (1,273)
          Subtotal                                                            2,992                20,308                        579
        Income  before  tax                                        258,207              436,395                          69
        Income  tax  expense                                        84,254                  9,128                        (89)
        Net  income                                                NT$173,953        NT$427,267                        146

        Basic  earnings  per  ADS                              NT$6.73            NT$15.37

        Diluted  earnings  per  ADS                          NT$6.73            NT$14.98

        Margin  Analysis:
        Gross  margin                                                      44.3%                  48.2%
        Operating  margin                                              18.2%                  22.9%
        Net  margin                                                          12.4%                  23.6%

        Additional  Data:
        ADS  equivalents  outstanding
          (thousand)                                                    25,840                27,792
        Diluted  ADS  equivalents
          (thousand)                                                    25,840                28,527


                                        Silicon  Motion  Technology  Corporation
                                                    Consolidated  Balance  Sheet
                                                                (NT$  thousands)
                                                                  (unaudited)


                                                                                  Dec.  31,            Jun.  30,              Sep.  30,
                                                                                        2004                    2005                      2005
        Cash  and  cash  equivalents                        727,165              149,658            1,624,817
        Short-term  investments                              154,428              885,551                993,382
        Accounts  receivable,  net                          449,572              295,590                478,878
        Inventories                                                    509,149              202,143                232,341
        Refundable  deposits  -  current                107,527                95,000                  95,000
        Deferred  income  tax  assets,  net              35,330                  9,944                    7,798
        Prepaid  expenses  and  other
          current  assets                                              68,337              177,931                214,583
        Total  current  assets                              2,051,508          1,815,817            3,646,799

        Long-term  investments                                    3,142                  3,142                    3,142
        Property  and  equipment  (net)                    65,657                78,717                  82,064
        Intangible  assets,  net                                  6,843                  4,593                    3,468
        Other  assets                                                    39,887                72,975                  96,289
        Total  assets                                        NT$2,167,037    NT$1,975,244      NT$3,831,762

        Accounts  payable                                          545,818              131,872                353,485
        Income  tax  payable                                        78,133                45,224                  64,518
        Accrued  expenses  and  other
          current  liabilities                                    88,139              132,146                164,114
        Total  current  liabilities                        712,090              309,242                582,117

        Accrued  pension  cost                                      4,813                  6,144                    7,855
        Other  long-term  liabilities                        1,901                  1,592                    1,467
        Total  liabilities                                        718,804              316,978                591,439
        Shareholders'  equity                              1,448,233          1,658,266            3,240,323
        Total  liabilities  &
          shareholders'  equity                      NT$2,167,037    NT$1,975,244      NT$3,831,762


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