Net income jumped 85% sequentially on the back of strong flash memory controller sales growth Third Quarter 2005 Financial Highlights: * Revenue grew 20% year-over-year and 35% sequentially to NT$747 million (US$23.1 million) * Gross margin increased from 46.9% in 2Q05 to 52.3% in 3Q05 * Net income increased 83% year-over-year and 85% sequentially to NT$215 million (US$6.7 million) * Diluted earnings per ADS was NT$6.85 (US$0.21), up from NT$4.51 (US$0.13) in 3Q04 and NT$4.32 (US$0.14) in 2Q05 Third Quarter 2005 Business Highlights: * Unit shipments of mobile storage products grew 143% year-over-year and 72% sequentially to 24 million units * Unit shipments of multimedia System-on-Chip (SoC) products grew 218% year-over-year and 21% sequentially to approximately 407,000 units * The Company shipped over 10 million SD and MMC controllers in the month of September
TAIPEI, Taiwan, Oct. 27 /PRNewswire-FirstCall/ -- Silicon Motion Technology Corporation (NASDAQ: SIMO), a leading fabless semiconductor company that designs, develops, and markets universally compatible, high-performance, low-power semiconductor solutions for the multimedia consumer electronics market, today announced its third quarter 2005 financial results. Under accounting principles generally accepted in the United States of America (US GAAP), diluted earnings per ADS was NT$6.85 (US$0.21) in the third quarter of 2005 or 3Q05, an increase of 52% from NT$4.51 (US$0.13) in the same period of the previous year or 3Q04 and an increase of 59% from NT$4.32 (US$0.14) in the second quarter of 2005 or 2Q05. Net income for 3Q05 was NT$215 million (US$6.7 million), an increase from NT$117 million in 3Q04 and NT$116 million in 2Q05.
Commenting on the results, Silicon Motion's President and CEO, Wallace Kou, said, "We are pleased with our performance in the third quarter. We saw robust demand for our products in the quarter, particularly in flash memory card controllers for use in Secure Digital (SD) and MultiMediaCard (MMC) products. Despite constrained foundry and substrate capacity among our suppliers, we shipped a record 24 million flash memory card controllers and USB 2.0 flash disk controllers. Additionally, in an effort to constantly improve our customer relationships and meet their needs, we continued to build our R&D and technical support teams. In the fourth quarter of 2005, we anticipate launching a number of upgrades to our current products, and we believe that we should see continued strong demand for our products."
Third Quarter Financial Review(1)
Net sales in the third quarter totaled NT$747 million (US$23.1 million), an increase of 20% from the third quarter of 2004 and 35% from the second quarter of 2005. By product, net sales from mobile storage products accounted for 87% of total net sales, which was an increase from 80% in the second quarter of 2005. Net sales from multimedia SoCs represented 13% of total net sales, which was down from 19% in 2Q05. Net sales from other products accounted for less than 1% of net sales.
As % of Net Sales 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 Mobile Storage Products 80% 80% 87% 92% 86% 80% 87% Multimedia SoCs 20% 18% 13% 7% 13% 19% 13% Others 0% 2% 0% 1% 1% 1% 0% Total 100% 100% 100% 100% 100% 100% 100%
Net sales from mobile storage products, which include flash memory card controllers and USB 2.0 flash disk controllers, grew 21% from 3Q04 and grew 47% from 2Q05 to NT$650 million (US$20.1 million). Unit shipments increased 143% from 3Q04 and 72% from 2Q05 to 24 million units. Both the year-over-year and sequential increases were driven by strong demand for the Company's newer generation of SD, MMC, and USB 2.0 flash disk controllers. The average selling price or ASP per unit declined 15% from 2Q05.
Net sales from multimedia SoC products, which include multimedia display processors and portable audio SoCs, grew 18% from 3Q04 and decreased 12% from 2Q05 to NT$94 million (US$2.9 million). On a sequential basis, net sales of portable audio SoCs grew 21% while net sales of multimedia display processors fell by 16%. Unit shipments of multimedia SoC products increased 218% from 3Q04 and 21% from 2Q05 to approximately 407,000 units. The ASP per unit for multimedia SoC products declined 27% from 2Q05 primarily because portable audio SoCs, which have lower selling prices compared to multimedia display processors, constituted a greater proportion of the total multimedia SoC product sales in the third quarter. Increased competition in the portable audio SoC market also contributed to the decline in ASP.
Unit Shipment (thousand units) 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 Mobile Storage Products 4,824 4,913 9,983 14,549 10,912 14,120 24,265 Multimedia SoCs 112 114 128 111 163 337 407 Others 2 34 3 - 17 59 3
The Company's top customers in the quarter included A-Data Technology, All American Semiconductor, ATP Electronics Taiwan, Dynacard, Kingmax Digital, Lexar Media, Macrotron Systems, Power Digital Cards, Siltrontech Electronics, and Sunvision. The Company's top 5 customers accounted for 48% of total net sales in 3Q05, compared to 38% in 2Q05.
The cost of sales in 3Q05 totaled NT$357 million (US$11.0 million), an increase of 3% from 3Q04 and an increase of 22% from 2Q05. The year-over-year increase was driven primarily by higher assembly and test costs as a result of the higher unit shipments, though this was partially offset by lower total wafer costs. The sequential increase was driven primarily by higher total wafer costs and, to a lesser extent, higher assembly and test costs as a result of the higher unit shipments overall. Gross margin for the quarter was 52.3%, up from 44.2% in 3Q04 and from 46.9% in 2Q05.
Total operating expenses in 3Q05, which include sales and marketing expenses, general and administrative (G&A) expenses, research and development (R&D) expenses, and amortization of intangible assets, were NT$183 million (US$5.7 million), an increase of 68% from 3Q04 and an increase of 24% from 2Q05. Total operating expenses represented 24.5% of net sales, compared to 17.5% and 26.7% of net sales in 3Q04 and 2Q05, respectively. The Company's operating margin increased from 26.7% in 3Q04 and 20.2% in 2Q05 to 27.8% in 3Q05.