- Published: 10 February 2009
- Written by Editor
SiRF Technology Holdings Inc. Announces Financial Results for Fourth Quarter and Fiscal 2008
SiRF Technology Holdings, Inc. (Nasdaq: SIRF), a leading provider of GPS-enabled silicon and premium software location platforms, today reported unaudited financial results for its fourth quarter and year ended December 27, 2008.
Net revenue in the fourth quarter of 2008 was $47.3 million, a decrease of 52.9 percent from $100.4 million reported in the fourth quarter of 2007. Gross margin in the fourth quarter of 2008 was 40.6 percent, as compared to 48.1 percent in the fourth quarter of 2007.
Net loss for the fourth quarter of 2008 was $17.4 million, or ($0.28) per diluted share, based on 62.6 million diluted weighted average shares outstanding. This compares with net income of $0.7 million, or $0.01 per diluted share, based on 64.3 million diluted weighted average shares outstanding in the fourth quarter of 2007.
Net revenue in fiscal 2008 was $232.5 million, a decrease of 29.4 percent from $329.4 million reported in fiscal 2007. Gross margin in fiscal 2008 was 36.3 percent, as compared to 50.9 percent in fiscal 2007.
Net loss for fiscal 2008 was $399.0 million, or ($6.47) per diluted share, based on 61.7 million diluted weighted averages shares outstanding. This compares with net loss of $10.4 million, or ($0.19) per diluted share, based on 55.5 million diluted weighted average shares outstanding in fiscal 2007.
SiRF reports gross profits, net income (loss) and basic and diluted net income (loss) per share in accordance with GAAP and additionally on a non-GAAP basis. Non-GAAP gross profit, where applicable, excludes the effect of stock- based compensation expense, amortization and impairment of acquisition-related intangible assets and fair value adjustments on acquisition-related inventory. Non-GAAP gross profit for the fourth quarter of 2008 was $21.8 million or 46.1% of net revenue, as compared to non-GAAP gross profit of $52.8 million, or 52.6% of net revenue for the fourth quarter of 2007. Non-GAAP net income (loss), where applicable, excludes the effect of stock-based compensation expense, amortization of acquisition-related intangible assets, expenses associated with acquisition-related contingent payments, restructuring charges, note receivable impairment, goodwill impairment, acquisition-related intangible asset impairment, acquired in-process research and development expense, gain on divestiture, release of funds held in escrow in connection with a previous acquisition, fair value adjustments on acquisition-related inventory and adjustments to normalize the income tax provision. Non-GAAP net loss for the fourth quarter of 2008 was $9.8 million, or ($0.16) per diluted share, as compared to non-GAAP net income of $17.7 million, or $0.28 per diluted share for the fourth quarter of 2007. Non-GAAP net loss for the fourth quarter of 2008 excludes $9.1 million in stock-based compensation expense, $3.3 million in amortization of acquisition-related intangible assets, $2.1 million in restructuring charges, $0.9 million in gain on divestiture and $6.0 million in funds released that were held in escrow in connection with a previous acquisition. Non-GAAP net income for the fourth quarter of 2007 excludes $9.9 million in stock-based compensation expense, $6.2 million in amortization of acquisition-related intangible assets, $0.5 million of expenses related to acquisition-related contingent payments and $0.3 million recorded as cost of sales pertaining to fair value adjustments on acquisition-related inventory sold during the quarter. Weighted average shares outstanding used in computing diluted non-GAAP net income per share for the fourth quarter of 2008 were 62.6 million, compared to 64.3 million for the fourth quarter of 2007. Refer to the itemized reconciliation between gross profit and net income (loss) on a GAAP basis and non-GAAP basis for the fourth quarter of 2008 and 2007 as follows.
Non-GAAP gross profit for fiscal 2008 was $110.4 million or 47.5% of net revenue, as compared to non-GAAP gross profit of $178.3 million or 54.1% of net revenue in fiscal 2007. Non-GAAP net loss for fiscal 2008 was $36.2 million, or ($0.59) per diluted share, as compared to non-GAAP net income of $60.0 million, or $0.99 per diluted share for fiscal 2007. Non-GAAP net loss for fiscal 2008 excludes $38.4 million in stock-based compensation expense, $19.1 million in amortization of acquisition-related intangible assets, $0.4 million of expenses related to acquisition-related contingent payments, $3.3 million of restructuring charges, $11.8 million of note receivable impairment, $215.7 million of goodwill impairment, $42.9 million on acquisition-related intangibles impairment, $0.9 million in gain on divestiture, $6.0 million in funds released that were held in escrow in connection with a previous acquisition and $38.1 million of provision for income taxes. Non-GAAP net income for the fiscal 2007 excludes $37.7 million in stock-based compensation expense, $12.8 million in amortization of acquisition-related intangible assets, $2.7 million of expenses related to acquisition-related contingent payments, $13.9 million for acquired in-process research and development expense, $1.9 million recorded as cost of sales pertaining to fair value adjustments on acquisition-related inventory sold during the quarter and $1.4 million of adjustments to normalize the provision for income taxes. Weighted average shares outstanding used in computing diluted non-GAAP net income per share for fiscal 2008 were 61.7 million, compared to 60.7 million for fiscal 2007. Refer to the itemized reconciliation between gross profit and net income (loss) on a GAAP basis and non-GAAP basis for fiscal 2008 and 2007 as follows.
Total cash, cash equivalents and short-term investments were $115.8 million at December 27, 2008, compared with $139.4 million at December 31, 2007.
Quarterly conference call details:
SiRF will host a conference call on February 10, 2009, at approximately 8:00 AM EDT/5:00 AM PDT to discuss its fourth quarter and year ended December 27, 2008 financial results.
This event is available through the SiRF Technology web site at by clicking on the "Investors" link. Listeners should go to the website at least ten minutes before the event to download and install any necessary audio software. For those unable to attend the live broadcast, an archived version of the webcast will be available for twelve months.
The call can also be heard by dialing (800) 894-5910 (domestic) or (785) 424-1052 (international) and entering the conference id: SIRF. A telephonic replay will also be available approximately 2 hours following the earnings call and will be available for two weeks. The telephone playback of the conference call can be accessed by dialing (800) 374-0934.
About SiRF Technology
SiRF Technology Holdings, Inc. (NASDAQ: SIRF) develops and markets multifunction location platforms based on semiconductor and software products that are designed to enable location-awareness utilizing GPS and other location technologies, enhanced by wireless connectivity and multimedia capabilities, for high-volume mobile consumer devices and commercial applications. SiRF's technology has been integrated into a wide range of mobile consumer devices such as automobile navigation and telematics systems, portable navigation devices (PNDs), mobile phones, mobile computers, mobile internet devices, handheld and wearable GPS recreational devices, digital cameras and camcorders, mobile gaming devices, child and pet trackers, and GPS-based peripherals, as well as into commercial applications such as logistics management systems, enterprise and carrier LBS servers, asset tracking devices, and fleet management systems. For more information see www.sirf.com.
FORWARD-LOOKING STATEMENTS:
Except for purely historical information contained herein, the matters set forth in this press release, including but not limited to statements related to our design win traction, design win momentum, anticipated benefits or success of our current and announced products, potential success of our customers' products, our business outlook and the purposes and benefits to our management and investors of using non-GAAP measures and the recurrence of certain expenses in the future are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as "to," "being," "possible," "may," "address," "designed to," "provide," "anticipate," "believe," "expect," "plan," "will," and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and reported results should not be considered as an indication of future performance. SiRF's actual results could differ materially from those discussed in these forward-looking statements as a result of risks and uncertainties, including, among others, the market for GPS-based location awareness capabilities, our ability to keep pace with rapid technological change, the outcome of our litigation (including any final ITC order), trends and uncertainties with respect to consumer demand, the macroeconomic environment and the semiconductor industry, global market and economy volatility, international operations and our ability to compete, and other risks and uncertainties discussed in the Company's Quarterly Report on Form 10-Q for the quarter ended September 27, 2008 and from time to time in SiRF's SEC reports. These forward-looking statements speak only as of the date hereof. We do not undertake any obligation to update forward-looking statements.
SiRF TECHNOLOGY HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(In thousands)
December 27, December 31,
2008 2007
(Unaudited) (1)
ASSETS
Current assets:
Cash and cash equivalents $ 85,840 $ 100,963
Marketable securities 29,950 38,446
Accounts receivable, net 16,329 37,060
Inventories 16,372 27,962
Current deferred tax assets 22 6,946
Prepaid expenses and other
current assets 4,153 5,380
Total current assets 152,666 216,757
Property and equipment, net 13,637 13,147
Goodwill - 215,752
Identified intangible assets,
net 21,602 82,705
Long-term deferred tax assets 2,837 34,032
Other long-term assets 2,907 1,348
Note receivable 1,700 -
Total assets $ 195,349 $ 563,741
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 15,038 $ 22,069
Accrued payroll and related
benefits 8,535 12,590
Other accrued liabilities 7,743 6,145
Deferred margin on shipments
to distributors 1,714 3,028
Deferred revenue 1,368 373
Advance contract billings 23 191
Rebates payable to customers 1,026 5,452
Capital lease obligations - 129
Total current liabilities 35,447 49,977
Long-term deferred tax liabilities 165 169
Long-term income taxes payable 3,022 2,762
Long-term obligations 1,695 1,421
Total liabilities 40,329 54,329
Commitments and contingencies
Stockholders' equity:
Common stock 6 6
Additional paid-in capital 593,350 548,895
Accumulated other comprehensive
income (loss) 21 (105)
Accumulated deficit (438,357) (39,384)
Total stockholders' equity 155,020 509,412
Total liabilities and
stockholders' equity $ 195,349 $ 563,741
(1) The condensed consolidated balance sheet information was derived from
SiRF Technology Holdings, Inc. audited consolidated financial
statements for the year ended December 31, 2007 as presented in the
Company's December 31, 2007 Form 10-K.
SiRF TECHNOLOGY HOLDINGS, INC.
CONDENSED CONSOLIDATED GAAP STATEMENT OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended Year Ended
December 27, December 31, December 27, December 31,
2008 2007 2008 2007
Revenue:
Product revenue $44,052 $98,930 $222,922 $323,128
License royalty and
service revenue 3,216 1,424 9,530 6,252
Net revenue 47,268 100,354 232,452 329,380
Cost of revenue:
Cost of product
revenue (includes
stock-based
compensation expense
of $308 and $416
for the three months
ended December 27,
2008 and December
31, 2007,
respectively, and
$1,468 and $1,469
for the year ended
December 27, 2008
and December 31,
2007,
respectively) 25,802 48,304 123,558 154,452
Amortization of
acquisition-related
intangible assets 2,255 3,730 11,964 7,314
Acquisition-related
intangible asset
impairment - - 12,472 -
Gross profit 19,211 48,320 84,458 167,614
Gross margin 40.6% 48.1% 36.3% 50.9%
Operating expenses:
Research and
development
(includes stock-
based compensation
expense of $5,233
and $5,274 for
the three months
ended December 27,
2008 and December 31,
2007, respectively,
and $21,643 and
$20,862 for the
year ended December
27, 2008 and
December 31, 2007,
respectively) 25,671 26,283 108,710 96,701
Sales and marketing
(includes stock-based
compensation expense
of $1,415 and $1,950
for the three months
ended December 27,
2008 and December 31,
2007, respectively,
and $6,240 and
$6,639 for the year
ended December 27,
2008 and December
31, 2007,
respectively) 5,220 8,012 25,414 27,920
General and
administrative
(includes stock-
based compensation
expense of $2,114
and $2,278 for the
three months ended
December 27, 2008
and December 31,
2007,
respectively, and
$9,014 and $8,689
for the year ended
December 27, 2008
and December 31,
2007, respectively) 9,478 11,323 51,051 36,708
Amortization of
acquisition-related
intangible assets 1,068 2,489 7,174 5,514
Restructuring and
asset impairment
charges 2,145 - 3,324 -
Goodwill impairment - - 215,717 -
Acquisition-related
intangible asset
impairment - - 30,407 -
Acquired in-process
research and
development - - - 13,900
Total operating
expenses
43,582 48,107 441,797 180,743
Operating income
(loss) (24,371) 213 (357,339) (13,129)
Other income
(loss), net (11) 1,301 2,169 7,392
Gain on divestiture 914 - 914 -
Release of escrow
funds 6,000 - 6,000 -
Note receivable
impairment - - (11,800) -
Net income (loss)
before provision
for income taxes (17,468) 1,514 (360,056) (5,737)
Provision for
(benefit from)
income taxes (69) 797 38,917 4,660
Net income (loss) $(17,399) $717 $(398,973) $(10,397)
Net income (loss)
per share:
Basic $(0.28) $0.01 $(6.47) $(0.19)
Diluted $(0.28) $0.01 $(6.47) $(0.19)
Weighted average number
of shares used in per
share calculations:
Basic 62,574 59,998 61,673 55,477
Diluted 62,574 64,338 61,673 55,477
SiRF TECHNOLOGY HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
GAAP BASIS to NON-GAAP BASIS RECONCILIATION
(In thousands, except per share amounts)
(Presentation is not based on a comprehensive set of accounting rules or
principles)
(Unaudited)
Three Months Ended Year Ended
December 27, December 31, December 27, December 31,
2008 2007 2008 2007
Net revenue: $47,268 $100,354 $232,452 $329,380
Gross profit:
GAAP gross profit $19,211 $48,320 $84,458 $167,614
Stock-based
compensation
expense (A) 308 416 1,468 1,469
Amortization of
acquisition-
related
intangible
assets (B) 2,255 3,730 11,964 7,314
Acquisition-
related
intangible asset
impairment (G) - - 12,472 -
Fair value
adjustments on
acquisition-
related
inventory (I) - 313 - 1,916
Non-GAAP gross
profit $21,774 $52,779 $110,362 $178,313
Non-GAAP gross
margin 46.1% 52.6% 47.5% 54.1%
Operating expenses:
GAAP operating
expenses
$43,582 $48,107 $441,797 $180,743
Stock-based
compensation
expense (A) (8,762) (9,502) (36,897) (36,190)
Amortization of
acquisition-
related
intangible
assets (B) (1,068) (2,489) (7,174) (5,514)
Acquisition-
related
contingent
payments (C) (3) (548) (369) (2,677)
Restructuring
and asset
impairment
charges (D) (2,145) - (3,324) -
Goodwill
impairment (F) - - (215,717) -
Acquisition-
related
intangible
asset
impairment (G) - - (30,407) -
Acquired in-
process research
and development (H) - - - (13,900)
Non-GAAP operating
expenses $31,604 $35,568 $147,909 $122,462
Operating loss:
GAAP operating
income (loss) $(24,371) $213 $(357,339) $(13,129)
Stock-based
compensation
expense (A) 9,070 9,918 38,365 37,659
Amortization of
acquisition-
related
intangible
assets (B) 3,323 6,219 19,138 12,828
Acquisition-
related
contingent
payments (C) 3 548 369 2,677
Restructuring and
asset impairment
charges (D) 2,145 - 3,324 -
Goodwill
impairment (F) - - 215,717 -
Acquisition-
related
intangible
asset
impairment (G) - - 42,879 -
Acquired in-
process
research and
development (H) - - - 13,900
Fair value
adjustments on
acquisition-
related
inventory (I) - 313 - 1,916
Non-GAAP operating
income (loss) $(9,830) $17,211 $(37,547) $55,851
Net income (loss):
GAAP net income
(loss) $(17,399) $717 $(398,973) $(10,397)
Stock-based
compensation
expense (A) 9,070 9,918 38,365 37,659
Amortization of
acquisition-
related
intangible
assets (B) 3,323 6,219 19,138 12,828
Acquisition-
related
contingent
payments (C) 3 548 369 2,677
Restructuring
and asset
impairment
charges (D) 2,145 - 3,324 -
Note receivable
impairment (E) - - 11,800 -
Goodwill
impairment (F) - - 215,717 -
Acquisition-
related
intangible
asset
impairment (G) - - 42,879 -
Acquired in-
process
research and
development (H) - - - 13,900
Gain on
divestiture (I) (914) - (914) -
Release of
escrow funds (J) (6,000) - (6,000) -
Fair value
adjustments on
acquisition-
related
inventory (K) - 313 - 1,916
Provision for
income taxes (L) - - 38,125 1,370
Non-GAAP net
income
(loss) $(9,772) $17,715 $(36,170) $59,953
Diluted net income
(loss) per share:
GAAP diluted net
income (loss) per
share $(0.28) $0.01 $(6.47) $(0.19)
Non-GAAP diluted
net income (loss)
per share $(0.16) $0.28 $(0.59) $0.99
Shares used to compute
diluted net income
(loss) per share:
GAAP 62,574 64,338 61,673 55,477
Non-GAAP 62,574 64,338 61,673 60,708
USE OF NON-GAAP FINANCIAL INFORMATION:
To supplement the company's condensed consolidated financial statements presented on a GAAP basis, SiRF uses non-GAAP additional measures of gross profit, operating income, net income and net income per share adjusted to exclude certain expenses it believes appropriate to enhance an overall understanding of SiRF's past financial performance and also its prospects for the future. We present such non-GAAP financial measures in reporting our financial results to provide investors with an additional tool to evaluate our operating results. Because these non-GAAP measures are not calculated in accordance with GAAP, it may not necessarily be comparable to similarly titled measures employed by other companies. These non-GAAP financial measures should not be considered in isolation or as a substitute for comparable GAAP measures, and should be read only in conjunction with our condensed consolidated financial statements prepared in accordance with GAAP.
SiRF management uses each of the non-GAAP financial measures internally to understand, manage and evaluate our business. SiRF believes it is useful for itself and investors to review, as applicable, both GAAP information, which includes stock-based compensation expense, amortization of acquisition-related intangibles assets, expenses related to acquisition-related contingent payments, restructuring charges, note receivable impairment, goodwill impairment, acquisition-related intangibles impairment, acquired in-process research and development expense, fair value adjustments on acquisition- related inventory and adjustments to normalize the income tax provision, and the non-GAAP measures, which exclude these amounts, in order to assess the performance of our continuing operations and for planning and forecasting in future periods. Each of these non-GAAP measures is intended to provide investors with an understanding of our operational results and trends that enables them to analyze our base financial and operating performance and facilitate period-to-period comparisons and analysis of operational trends. SiRF believes each of these non-GAAP financial measures is useful to investors in allowing for greater transparency with respect to supplemental information used by management in its financial and operational decision making.
Our non-GAAP financial measures reflect adjustments based on the following items:
(A) Stock-based compensation expense: Our operating expenses include
stock-based compensation expense recorded pursuant to SFAS No. 123R,
which requires us to recognize a non-cash expense related to the fair
value of all our employee stock-based compensation awards. We believe
it is useful to highlight the effect of this stock compensation
expense in our condensed statement of operations. However, stock-based
compensation is a key incentive offered to our employees, and we
believe it contributed to the revenue earned during the period and
will contribute to our future revenue generation. Stock compensation
expenses will recur in future periods.
(B) Amortization of acquisition-related intangible assets: SiRF has
excluded the effects of amortization of acquisition-related intangible
assets from our non-GAAP net income (loss) because these costs are
associated with the acquisition of companies that would not have
otherwise been incurred. This non-GAAP adjustment is intended to
reflect acquisition-related expense incurred that is not directly
associated with our continuing operations.
(C) Acquisition-related contingent payments: SiRF has excluded the
effects of compensation expense recorded in relation to acquisition-
related contingent payments from our non-GAAP net income (loss)
because these costs are associated with the acquisition of companies
that would not have otherwise been incurred. This non-GAAP adjustment
is intended to reflect additional acquisition-related payments that
are not directly associated with our continuing operations.
(D) Restructuring charges: SiRF has incurred charges associated with the
various restructuring plans that were adopted 2008 that otherwise
would not have been incurred and therefore we have excluded the
effects of these charges from our non-GAAP net loss. This non-GAAP
adjustment is intended to reflect restructuring costs that are not
directly associated with our continuing operations.
(E) Note receivable impairment: SiRF has incurred charges for impairment
on a note receivable that otherwise would not have been incurred as a
result of the carrying value exceeding the fair value. SiRF has
excluded the effects of these charges from our non-GAAP net loss.
These non-GAAP adjustments are intended to reflect one-time impairment
charges and are not directly associated with our continuing
operations.
(F) Goodwill impairment: SiRF has incurred charges for goodwill impairment
as a result of the carrying value exceeding the implied fair value and
that otherwise would not have been incurred. SiRF has excluded the
effects of these charges from our non-GAAP net loss. This non-GAAP
adjustment is intended to reflect one-time impairment charges that are
not directly associated with our continuing operations.
(G) Acquisition-related intangibles impairment: SiRF has incurred charges
for acquisition-related intangibles impairment as a result of the
carrying value exceeding the fair value and that otherwise would not
have been incurred. SiRF has excluded the effects of these charges
from our non-GAAP net loss. This non-GAAP adjustment is intended to
reflect one-time impairment charges that are not directly associated
with our continuing operations.
(H) Acquired in-process research and development expense: SiRF incurred a
one-time charge in connection with the acquisition of Centrality
during the third quarter of 2007 that otherwise would not have been
incurred and therefore we have excluded the effects of this charge
from our non-GAAP net income. In-process research and development
consists of the estimated fair value of technology projects which, as
of the acquisition date, had not yet reached technological feasibility
and there are no future alternative uses that exist. We believe it is
useful for investors to understand the effect of this expense on our
statement of operations. This non-GAAP adjustment is intended to
reflect acquisition-related expense incurred that is not directly
associated with our continuing operations.
(I) Gain on divestiture: SiRF has excluded the effects of the gain on
divestiture during the fourth quarter of 2008 from our non-GAAP net
loss because this income is not directly associated with our
continuing operations.
(J) Release of funds held in escrow in connection with a previous
acquisition: SiRF has excluded the effects of the release of funds
held in escrow in connection with a previous acquisition during the
fourth quarter of 2008 from our non-GAAP net loss because this income
is not directly associated with our continuing operations.
(K) Fair value adjustments on acquisition-related inventory: SiRF has
excluded the effects of fair value adjustments on acquisition-related
inventory that was subsequently sold to end customers during the third
quarter of 2007 from our non-GAAP net income because these costs are
associated with the acquisition of companies that would not have
otherwise been incurred. This non-GAAP adjustment is intended to
reflect acquisition-related expense incurred that is not directly
associated with our continuing operations.
(L) Provision for income taxes: In 2008, SiRF has recorded valuation
allowances against deferred tax assets because it is more likely than
not that the deferred tax assets will not be realized and otherwise
would not have been incurred. SiRF has excluded the effects of these
charges from our non-GAAP net income (loss). These Non-GAAP
adjustments are intended to normalize the tax effects for the
reporting periods. In 2007, SiRF has excluded the effects of a
reduction to our tax benefit resulting from revisions to prior period
estimated R&D tax credits from our non-GAAP operating results. This
reduction in estimated R&D tax credits resulted from a R&D tax credit
study for the years 2005 - 2006. This non-GAAP adjustment is intended
to reflect revisions to our tax provision that are not directly
associated with our current period operations.
