Silicon Image Reports Record Third Quarter 2004 Revenues; Revenue Up 98%
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Silicon Image Reports Record Third Quarter 2004 Revenues; Revenue Up 98%

SUNNYVALE, Calif., Oct. 19 /PRNewswire-FirstCall/ -- Silicon Image, Inc. (NASDAQ: SIMG), a leader in multi-gigabit semiconductor solutions for the secure transmission and storage of rich digital media, today announced financial results for its third quarter ended September 30, 2004.

Selected Q3 Highlights:

-- Revenue of $47.9 million for the quarter, a sequential increase of 10 percent and a 98 percent increase over the year ago quarter

-- GAAP net income of $7.9 million, or $0.09 per diluted share, as compared to a net loss of $2.1 million or $0.03 per diluted share for the year ago quarter. The GAAP net income includes a loss on derivative investment securities of $64,000.

-- Pro-forma* net income of $10.0 million, or $0.12 per diluted share, a year-over-year increase of $10.5 million

-- Sequential product revenue growth of 27 percent in Consumer Electronics (CE)

-- Expansion of the PanelLink Cinema(TM) Partners Program through the addition of industry leaders including Samsung, Mitsubishi, LG, Sanyo, Pace Micro, MediaTek and Sunplus Technology

-- Announced SteelVine(TM) storage architecture delivering highly-integrated, easy-to-use, scalable and reliable storage at industry- leading price points

-- Added 15 new High-Definition Multimedia Interface(TM) (HDMI(TM)) licensees, bringing total licensees to approximately 130

The company achieved record revenue of $47.9 million for the third quarter, an increase of 10 percent over the $43.4 million in the second quarter of 2004, and an increase of 98 percent from revenue of $24.2 million in the third quarter of 2003. Year-to-date revenue totaled $127.1 million, an increase of 74 percent over revenue of $73.2 million for the first nine months of 2003.

Net income under Generally Accepted Accounting Principles (GAAP), which includes stock compensation expense, loss (gain) on derivative investment securities, amortization of intangible assets and patent defense costs, was $7.9 million, or $0.09 per diluted share, for the quarter ended September 30, 2004. This compares to a net loss of $262,000, or $0.00 per diluted share, for the previous quarter, and a net loss of $2.1 million, or $0.03 per diluted share, for the third quarter of 2003. On a year-to-date basis, the GAAP net loss was $245,000, or $0.00 per diluted share, and compares to a net loss of $7.5 million, or $0.11 per diluted share, for the first nine months of 2003.

Third quarter pro-forma* net income was $10.0 million, or $0.12 per diluted share. This compares to pro-forma net income of $8.4 million, or $0.10 per diluted share, for the second quarter of 2004, and a pro-forma net loss of $456,000, or $0.01 per diluted share, for the third quarter of 2003. Pro-forma net income for the third quarter of 2004 excludes $2.2 million of charges for: a non-cash charge for stock compensation; a loss on derivative investment securities; a non-cash expense for the amortization of intangible assets; and cash legal expenses associated with a patent litigation lawsuit.

"The third quarter was another successful quarter for Silicon Image as we once again posted sequential revenue growth and achieved solid pro-forma profitability. Rapid adoption of HDMI continues to fuel growth in our CE business, which recorded a 27 percent sequential increase. Our PC business was hampered by the slow ramp of Intel's Grantsdale and Alviso platforms and our storage business actually declined less than we had anticipated," commented David Lee, Silicon Image chairman and chief executive officer. "On a strategic note, we announced the SteelVine architecture-a highly-integrated and revolutionary solution that provides ease-of-use, scalability and reliability, at industry-leading price points. Market interest has been high in SteelVine, especially relative to the small and medium business and consumer electronics markets. We expect significant growth in this area in 2005.

In addition, our Panel Link Cinema Partners program picked up significant new partners with the addition of Samsung, Mitsubishi, LG, Sanyo, Pace Micro, MediaTek and Sunplus Technology. The PLC Program demonstrates the company's leadership in driving adoption of HDMI-HDCP as an industry standard interface by identifying device interoperability for the consumer and compatibility with high-definition content. The Company expects the program to continue to expand through the announcement of additional industry-leading partners at the Consumer Electronics Show in January, 2005."

"The market acceptance of our products continues to be strong and our partnerships and licensing opportunities are at historic highs. However, consistent with the general market conditions in the semiconductor industry, incoming orders softened in the third quarter ahead of the seasonally weak fourth and first quarters. Our visibility entering the fourth quarter is approximately 70 percent, and we are projecting revenues to be flat versus the third quarter. Pro-forma earnings on the other hand should expand slightly, " commented, Bob Gargus, chief financial officer of Silicon Image.

The company will host a conference call at 2:00 p.m. PDT today to discuss its third quarter 2004 results and business outlook. The call will be broadcast over the Internet and can be accessed on the investor relations section of the company's Web site located at http://www.siliconimage.com/. A replay of the conference call will be available on this site until 12:00 p.m. PST on November 1, 2004.

*Pro-forma net income or loss represents net income or net loss, exclusive of stock compensation expense, amortization of intangible assets, patent defense costs, acquisition integration costs, restructuring costs, gain/(loss) on derivative securities, gains on escrow settlement, and in-process research and development.

About Silicon Image

Headquartered in Sunnyvale, Calif., Silicon Image, Inc. designs, develops and markets multi-gigabit semiconductor and system solutions for a variety of communications applications demanding high-bandwidth capability. With its proprietary Multi-layer Serial Link (MSL(TM)) architecture, Silicon Image is well positioned for leadership in multiple mass markets including PCs, consumer electronics, and storage. Silicon Image is a leader in the global PC/display arena with its innovative digital interconnect technology and is now emerging as a leading player in the fields of storage and consumer electronics by offering robust, high-bandwidth semiconductors. For more information on Silicon Image, visit http://www.siliconimage.com/

Safe Harbor Statement

This news release contains forward-looking information within the meaning of federal securities regulations. These forward-looking statements include statements related to future financial results, business outlook, business programs and initiatives, market growth and product introductions. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those anticipated by these forward-looking statements. In particular, future demand in PC, display, consumer electronics and storage markets may differ from current expectations, adversely affecting expected future results for the company, new product introductions may not be timely or successful, business programs and initiatives and markets may not grow at the rates anticipated, and standards may not be adopted at the rates anticipated. In addition, see "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Factors Affecting Future Results" in the most recent Quarterly Report on Form 10-Q and Annual Report on Form 10-K filed by Silicon Image with the SEC. Silicon Image assumes no obligation to update this forward-looking information.

NOTE: Silicon Image, PanelLink Cinema, SteelVine, MSL and http://www.siliconimage.com/ are trademarks, registered trademarks or service marks of Silicon Image, Inc. in the United States and other countries.

   SILICON IMAGE, INC.
   CONDENSED CONSOLIDATED STATEMENTS
   OF OPERATIONS (GAAP BASIS)



                                   Three Months Ended      Nine Months Ended
                                       (unaudited)            (unaudited)
  (In thousands, except per      Sept.    June     Sept.     Sept.    Sept.
   share amounts)                 30,      30,      30,       30,      30,
                                 2004     2004     2003      2004     2003


  Revenue:
       Product                 $41,474  $36,826  $22,447  $110,350  $61,914
       Development, licensing
        and royalties            6,394    6,535    1,743    16,737   11,284
                Total revenue   47,868   43,361   24,190   127,087   73,198


  Cost and operating expenses:
       Cost of product revenue  18,314   16,846   11,501    48,523   33,342
       Research and
        development             11,585   11,469    9,054    33,639   27,259
       Selling, general and
        administrative           7,764    6,560    4,131    21,271   12,794
       Stock compensation
        expense                  1,527    9,132    1,106    22,727    2,997
       Amortization of
        intangible assets          357      357      373     1,071      746
       Patent defense and
        acquisition
        integration costs          222       98      160       485    1,956
       Restructuring                --       --       --        --      986
       In-process research and
        development                 --       --       --        --    5,482
               Total cost and
                operating
                expenses        39,769   44,462   26,325   127,716   85,562

  Income (loss) from
   operations                    8,099   (1,101)  (2,135)     (629) (12,364)
  Gain on escrow settlement         --       --       --        --    4,618
  Interest income and other,
   net                             211      104       40       399      216
  Gain (loss) on derivative
   investment security             (64)     990       --       926       --
  Income (loss) before
   provision for income taxes    8,246       (7)  (2,095)      696   (7,530)

  Provision for income taxes       369      255       --       941       --
  Net income (loss)             $7,877    $(262) $(2,095)    $(245) $(7,530)

      Net income (loss) per
       share - basic             $0.11   $(0.00)  $(0.03)   $(0.00)  $(0.11)
      Net income (loss) per
       share - diluted           $0.09   $(0.00)  $(0.03)   $(0.00)  $(0.11)

     Weighted average shares
      - basic                   74,976   73,352   69,803    73,797   68,431
     Weighted average shares
      - diluted                 85,890   73,352   69,803    73,797   68,431


   SILICON IMAGE, INC.
   RECONCILIATION OF GAAP TO PRO-FORMA
   FINANCIAL INFORMATION


                                    Three Months Ended     Nine Months Ended
                                       (unaudited)             (unaudited)
                                    Sept.   June    Sept.     Sept.    Sept.
                                    30,      30,     30,       30,      30,
  (In thousands)                   2004     2004    2003      2004     2003

  GAAP net income (loss)          $7,877   $(262) $(2,095)   $(245) $(7,530)

  Pro-forma adjustments:
  Stock compensation expense (1)   1,527   9,132    1,106   22,727    2,997
  Amortization of goodwill and
   intangible assets (2)             357     357      373    1,071      746
  Patent defense and acquisition
   integration costs (3)             222      98      160      485    1,956
  Restructuring (4)                   --      --       --       --      986
  Gain on escrow settlement (5)       --      --       --       --   (4,618)
  In-process research and
   development (6)                    --      --       --       --    5,482
  Loss (gain) on derivative
   investment security (7)            64    (940)      --     (876)      --
  Pro-forma net income (loss)    $10,047  $8,385    $(456) $23,162      $19

  (1) Non-cash expenses associated with stock option modifications
      (including repricings) and certain stock options issued to
      employees in our Initial Public Offering, to employees of acquired
      companies, and to non-employees in exchange for services.
  (2) Non-cash expenses for the amortization of goodwill and intangible
      assets recorded in connection with our acquisitions.
  (3) Costs incurred to defend our intellectual property and to integrate
      the operations of companies we have acquired. These
      expenses have been excluded because they are expected to be incurred
      over a limited period of time and are not directly attributable to our
      ongoing operations.
  (4) Severance and other costs resulting from our involuntary workforce
      reductions and consolidation of facilities. These expenses
      have been excluded since they are not directly attributable to our
      ongoing operations.
  (5) A non-cash gain from recovery of shares held in escrow as
      indemnification for certain damages incurred as a result of a
      prior acquisition.
  (6) A one-time, non-cash expense for the value assigned to an acquired
      company's existing research and development projects
      that have not reached technological feasibility and that have no
      alternative future use as of the acquisition date.
  (7) Loss (gain) on derivative investment security.


   SILICON IMAGE, INC.
   PRO-FORMA (NON-GAAP BASIS) CONDENSED
   CONSOLIDATED STATEMENTS OF OPERATIONS


                                   Three Months Ended      Nine Months Ended
                                      (unaudited)            (unaudited)
  (In thousands, except per       Sept.   June     Sept.    Sept.    Sept.
   share amounts)                  30,     30,      30,      30,      30,
                                  2004    2004     2003     2004     2003

  Revenue:
       Product                 $41,474  $36,826  $22,447  $110,350  $61,914
       Development, licensing
        and royalties            6,394    6,535    1,743    16,737   11,284
                Total revenue   47,868   43,361   24,190   127,087   73,198


  Pro-forma cost and operating
   expenses:
       Cost of product revenue  18,314   16,846   11,501    48,523   33,342
       Research and
        development             11,585   11,469    9,054    33,639   27,259
       Selling, general and
        administrative           7,764    6,560    4,131    21,271   12,794
               Total pro-forma
                cost and
                operating
                expenses        37,663   34,875   24,686   103,433   73,395

  Pro-forma income (loss) from
   operations                   10,205    8,486     (496)   23,654     (197)
  Interest income and other,
   net                             211      104       40       399      216
  Pro-forma income (loss)
   before income taxes          10,416    8,590     (456)   24,053       19

  Provision for income taxes       369      205       --       891       --
  Pro-forma net income (loss)  $10,047   $8,385    $(456)  $23,162      $19

  Pro-forma net income (loss)
   per share                     $0.12    $0.10   $(0.01)     0.27     0.00
  Weighted average shares *     85,890   84,874   69,803    84,699   75,372


   The above pro-forma financial information is presented for informational
   purposes only. Our presentation of pro-forma financial information
   excludes non-cash expenses resulting from acquisitions or the issuance of
   stock options, as well as unusual or infrequent income and expenses that
   are not directly attributable to our ongoing operations and are expected
   to be non-recurring or to be incurred over a limited period of time.
   Because of these exclusions, our presentation is not in accordance with
   Generally Accepted Accounting Principles (GAAP). Additionally, our
   presentation of pro-forma financial information may not be consistent
   with that of other companies.

   We do not evaluate items such as amortization of goodwill and intangible
   assets, stock-based compensation, impairment charges and other non-cash
   or infrequent or unusual items when assessing the performance of our
   ongoing operations or when allocating resources. We believe that the
   exclusion of intangible and stock-based compensation non-cash charges may
   help the investor better understand our liquidity position and the use of
   tangible resources in our operations and the exclusion of unusual or
   infrequent items provides an alternative measure which may help the
   investor evaluate our underlying operating performance. Pro-forma
   information is not, and should not be considered, a substitute for
   financial information prepared in accordance with GAAP.

  * For periods in which there is pro-forma net income, weighted average
    shares includes weighted average shares outstanding during the period,
    as well as the dilutive effect of outstanding stock options as if they
    had been converted to shares during the period.


  SILICON IMAGE, INC.
  CONDENSED CONSOLIDATED BALANCE SHEETS - UNAUDITED


  (In thousands)                                  Sept. 30,         Dec. 31,
                                                    2004              2003
  Assets
  Current assets:
     Cash and short-term investments              $78,710           $37,254
     Accounts receivable, net                      22,302            12,754
     Inventories                                   14,038            10,312
     Prepaid expenses and other current
      assets                                        2,008             2,703
            Total current assets                  117,058            63,023
  Property and equipment, net                       8,562             7,411
  Goodwill and intangible assets, net              14,979            16,049
  Other assets                                        994             1,259
            Total assets                         $141,593           $87,742

  Liabilities and Stockholders' Equity
  Current liabilities:
     Accounts payable, debt and other
      current liabilities                         $25,542           $18,075
     Deferred margin on sales to
      distributors                                 12,428             7,274
            Total current liabilities              37,970            25,349
  Stockholders' equity                            103,623            62,393
             Total liabilities and
              stockholders' equity               $141,593           $87,742

CONTACT: Robert G. Gargus, Chief Financial Officer of Silicon Image,
Inc., +1-408-616-4114, or Email Contact; or investors, Barry
Sievert, Director, Shelton Investor Relations, +1-972-239-5119, ext. 134, or
Email Contact, for Silicon Image

Web site: http://www.siliconimage.com/