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/