Financial Highlights - GAAP: First quarter 2006 compared with first quarter 2005 (including $9.6 million non-cash revenues).
- Revenues for the quarter were $15.8 million, compared to $22.2 million in the previous year.
- Gross profit for the quarter was $12.1 million, compared to $19.6 million in the previous year.
- Operating income for the quarter was $7.7 million, compared to $14.9 million in the previous year.
- Net income for the quarter was $10.0 million, or $0.34 per basic and $0.31 per diluted share, compared to net income in the previous year of $11.8 million.
- Net income for the quarter included $0.6 million of stock-based compensation (including $0.4 million of income due to a cumulative effect of a change in accounting principle relating to the adoption of SFAS 123R) compared to $1.4 million in the previous year.
Saifun reports its results of operation in accordance with GAAP and additionally on a non-GAAP basis, referred to as Non-GAAP. Non-GAAP information, where applicable, excludes the effect of $9.6 million non-cash revenues resulting from the termination of our former joint venture with Infineon Technologies AG recognized in the first quarter of 2005, excludes the loss from discontinued product operations, and excludes stock based compensation expenses and income.
Financial Highlights - Non-GAAP: First quarter 2006 compared with first quarter 2005.
- Revenues for the quarter were $15.8 million, compared to $12.6 million, an increase of 25% compared to the previous year.
- Licensing revenues for the quarter were $10.5 million compared to $9.3 million, an increase of 13%.
- Service revenues for the quarter were $5.3 million, compared to $3.3 million in the previous year, an increase of 59%.
- Gross profit for the quarter was $12.5 million, compared to $10.2 million.
- Operating income for the quarter was $8.7 million or 55% of revenues, compared to $6.6 million or 52% of revenues in the previous year.
- Net income for the quarter was $10.7 million, or $0.36 per basic and $0.33 per diluted share, compared to net income in the previous year of $6.8 million.
 These non-GAAP measures should be considered in addition to, and not as a substitute for, the results prepared in accordance with GAAP. A reconciliation of GAAP statements of operations to Non-GAAP statements of operations is included in the financial statements portion of this release as well as on our website in the Investors section at www.saifun.com.
Saifun's management believes the Non-GAAP information is useful because it can enhance the understanding of the Company's ongoing economic performance and Saifun therefore uses internally the Non-GAAP information to evaluate and manage the Company's operations. Saifun has chosen to provide this information to investors to enable them to perform comparisons of operating results in a manner similar to how the Company analyzes its operating results.
Commenting on the results, Kobi Rozengarten, President of Saifun Semiconductors said, "We met or exceeded many of our goals for the quarter, which included achieving an operating profit margin of over 50% excluding stock-based compensation expense. We believe this illustrates the success and profitability of our business model which positions Saifun as an emerging leader in the NVM market.
"We continued to focus on helping our licensees accelerate product launches and deliver more products incorporating NROM to the market. This is reflected in the increase in service revenues as a percentage of total sales.
"Finally, our results this quarter were underscored by our ongoing commitment to take NROM technology to a new level. During the quarter, we taped out Quad NROM designs to two licensees who are working with us on data flash applications. This is another milestone in our initiative to foster broad adoption of NROM technology. We have multiple data flash projects underway with our partners and expect to see data flash products incorporating Quad NROM on the market by the end of 2006. The data flash market represents a sizeable opportunity for Saifun and our NROM technology. With a number of NROM-based data flash products currently in development by our licensees, we believe we are well positioned to capture a significant share of this market."
The Company wishes to advise all shareholders that signed a lock-up agreement in connection with the Company's initial public offering that the lock-up agreement will be extended until May 15, 2006 and will not terminate on May 8, 2006 as was previously disclosed. This is because this earnings release has been issued within the 17-day period leading up to the expiration of the 180-day lock-up period as described in that agreement.
Saifun will host a conference call to discuss its financial results and other matters discussed in this press release at 8:30 a.m. EDT today, April 26, 2006. The call will be available live on the Internet at http://ir.saifun.com/phoenix.zhtml?c=183096&p=irol-irhome.
About Saifun Semiconductors Ltd.
Saifun is a provider of intellectual property (IP) solutions for the non-volatile memory (NVM) market. The company's innovative Saifun NROM(R) technology allows semiconductor manufacturers to deliver high performance, reliable products at a lower cost per megabit, with greater storage capacity, using a single process for all NVM applications. Saifun licenses its IP to semiconductor manufacturers who use this technology to develop and manufacture a variety of stand-alone and embedded NVM products. These include Flash memory for the telecommunications, consumer electronic, networking and automotive markets. The companies currently licensing Saifun NROM technology are Infineon Technologies, Macronix International, Matsushita, SMIC, Sony Corporation, Spansion and Tower Semiconductors.
Safe Harbor Statement
Information provided in this press release may contain statements relating to current expectations, estimates, forecasts and projections about future events that are "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements generally relate to the company's plans, objectives and expectations for future operations and are based upon management's current estimates and projections of future results or trends. Actual future results may differ materially from those projected as a result of certain risks and uncertainties. For a discussion of such risks and uncertainties, see "Risk Factors" as described in the Company's final prospectus filed on November 10, 2005 with the U.S. Securities and Exchange Commission in connection with the company's initial public offering. These forward-looking statements are made only as of the date hereof, and we undertake no obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise.
The above reconciled Non-GAAP statements are based upon our unaudited and audited consolidated statements of operations for the periods shown, giving effect to the adjustments above. This presentation is not in accordance with, or an alternative for, U.S. generally accepted accounting principles (GAAP). The reconciled Non-GAAP financial information presented herein should be considered supplemental to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. However, Saifun believes that the Non-GAAP information, giving effect to the adjustments shown above, provides meaningful information and therefore uses it to supplement its GAAP reporting and internally in evaluating operations, managing and benchmarking performance. Saifun has chosen to provide this Non -GAAP supplemental information to investors, analysts and other interested parties to enable them to perform additional analyses of operating results.
SAIFUN SEMICONDUCTORS LTD. CONSOLIDATED STATEMENTS OF OPERATIONS All data in thousands of U.S. dollars, except share and per share data Three months ended Year ended March 27, March 31, December 31, 2005 2006 2005 Unaudited Revenues: Licenses $ 18,881 $ 10,502 $ 65,790 Services 3,333 5,290 12,811 22,214 15,792 78,601 Cost of revenues: Services (1) 2,634 3,678 12,048 Gross Profit 19,580 12,114 66,553 Operating expenses: Research and development (1) 1,520 2,317 7,427 Marketing and selling (1) 1,430 883 4,889 General and administrative (1) 1,737 1,225 6,216 Total operating expenses 4,687 4,425 18,532 Operating income 14,893 7,689 48,021 Financial income, net 155 1,977 1,749 Income from continuing operations 15,048 9,666 49,770 Loss from discontinued operations (1) (3,224) - (5,263) Income before cumulative effect of change in accounting principle 11,824 9,666 44,507 Cumulative effect of a change in accounting principle (2) - 378 - Net Income $ 11,824 $ 10,044 $ 44,507 Net earnings per share from continuing operations Basic $ - $ 0.33 $ 0.46 No. of shares - basic 17,640 29,601 19,581 Diluted $ - $ 0.30 $ 0.36 No. of shares - diluted 17,640 32,329 26,447 Net earnings per share Basic $ - $ 0.34 $ 0.17 No. of shares - basic 17,640 29,601 29,453 Diluted $ - $ 0.31 $ 0.16 No. of shares - diluted 17,640 32,329 31,947 (1) Expenses include stock-based compensation related to options granted to employees and others as follows: Three months ended Year ended March 27, March 31, December 31, 2005 2006 2005 Unaudited Cost of revenues $ 154 $ 367 $ 834 Research and development 31 191 330 Marketing and selling 162 165 667 General and administrative 974 292 2,410 Loss from discontinued operations 35 - 54 $ 1,356 $ 1,015 $ 4,295