SST Reports Record Third Quarter 2000 Results
3Q00 Revenue Up 59%, Net Income Up 61%, over 2Q00
SUNNYVALE, Calif., Oct 2000 (BUSINESS WIRE) -- SST (Silicon Storage Technology, Inc.) (Nasdaq: SSTI chart, msgs) today announced record results for the third quarter ended Sept. 30, 2000.
Net revenues for the third quarter were $163.7 million, up 59% from $103.2 million in the second quarter of 2000, and up 366% from $35.1 million in the third quarter last year.
Net income for the third quarter of 2000 was $36.3 million, or $0.37 per share, based on approximately 97.6 million diluted weighted average shares outstanding. This compares with a net income of $22.5 million in the second quarter of 2000, or $0.24 per share, based on approximately 95.8 million diluted weighted average shares outstanding, and with a net income of $0.45 million in the third quarter last year, or $0.01 per share, based on approximately 81.5 million diluted weighted average shares outstanding.
"We are pleased to report our fifth consecutive quarter of record results since the third quarter of 1999," said Bing Yeh, president and CEO. "Our business continues to be driven by the strong demand for our products and by the expanded available capacity. The better-than-expected yield improvements at certain foundry partners have allowed us to produce more than previously planned. However, the additional output could only partially relieve the shortage situation. We expect the demand will continue to outstrip our capability to supply for at least the next three quarters.
"We continue to execute our diversification strategy by developing products with various densities for broad applications. In particular, we are developing application specific products to diversify away from commodity memory. We believe the flash market is very fragmented, characterized by the coexistence and continued growth of all memory densities and the various configurations to meet the specific requirements in many emerging applications. We believe our strategy to diversify our product offerings not only allows us to maximize our growth potential, but has also allowed us to minimize our business fluctuations due to the seasonal weakness of any particular application segment.
"During the third quarter, we have continued to experience broad-based demand from applications in the digital consumer, networking, wireless communications and Internet computing markets. Unit shipments increased 26 percent over second quarter of 2000, driven by key applications such as set-top boxes, digital TVs, CD-RW drives, DVD-ROM drives, DVD players, digital cameras, MP3 players, network switches and routers, DSL modems, cable modems, pagers, cellular phones, cordless telephones, hard disk drives and personal computers.
"At the end of the third quarter, we also settled our two-year long litigation with Winbond Electronics of Taiwan and re-established Winbond as a SuperFlash licensee. Our previous agreement with Winbond was terminated in 1998. This settlement not only allows us to eliminate a management distraction and to reduce our near term legal expenses, but also will significantly improve our royalty stream for the years to come.
"On the licensing front, we are beginning to see upward growth in royalty revenue from TSMC and Sanyo. During a recent trip to TSMC, we learned that TSMC now has more than 50 foundry customers currently using SuperFlash-based embedded flash process. We expect TSMC to begin to allocate more wafers to embedded flash process in 2001 and that this will contribute to our significant growth in royalty revenue.
"With more than 60 new products introduced since mid-1998, the additional wafer capacity that we expect to bring on line in 2001 and our licensing strategy for embedded applications, we believe SST is well positioned to become a strong leader in flash memory. Looking forward, we expect to see robust growth in our business through the balance of 2000 and well into 2001. For the fourth quarter, we expect our product revenue to grow approximately 20 percent from the third quarter, mainly constrained by wafer supply. Product gross margin is expected to expand to approximately 47 percent, based on expected cost improvement and assuming continued stable pricing environment for the markets we are in. Royalty revenue is expected to be greater than $10 million. Operating expenses are expected to result in an operating margin of greater than 35 percent. Our expected tax rate is approximately 35 percent for the fourth quarter and earnings per share are expected to be approximately $0.48. For the first quarter of 2001, we expect our product revenue to grow approximately 20 percent from the fourth quarter of 2000. Product gross margin is expected to expand to approximately 49 percent, based on expected cost improvement and assuming continued stable pricing environment for the markets we are in. Royalty revenue is expected to be greater than $6.0 million. Operating expenses are expected to result in an operating margin of greater than 37 percent.. Our expected tax rate is expected to be approximately 38 percent for the first quarter of 2001 and earnings per share are expected to be approximately $0.56. For fiscal 2001, we expect our product revenue to grow approximately 125 percent from fiscal 2000. Product gross margin is expected to expand to approximately 50 percent, based on expected cost improvement, additional products and applications and assuming continued stable pricing environment for the markets we are in. Royalty revenue is expected to be greater than $30.0 million. Operating expenses are expected to result in an operating margin of greater than 38 percent. Our expected tax rate is expected to be approximately 38 percent for fiscal 2001 and earnings per share are expected to be approximately $2.90," he said.
Securities and Exchange Commission's Regulation Fair Disclosure
SST also announced its intention to adhere to the Securities and Exchange Commission's newly adopted Regulation Fair Disclosure. SST will provide its investors and analysts with guidance in the areas of total revenues, gross margins, operating margins and earnings per share each quarter in its earnings news releases and in its conference calls. SST will not provide any further guidance or updates on its performance during the quarter unless it does so in a news release.
Conference Call
SST's quarterly conference call will be held today, Oct. 12th at 1:30 p.m. PST. To participate in the call please dial (712) 257-3880 using pass code "SST." A two-week replay will be available by calling (402) 998-1428. A webcast of the conference call will be available on www.streetevents.com and on www.vcall.com.
About SuperFlash Technology
SST's SuperFlash technology is a NOR type, split-gate cell architecture which uses a reliable thick-oxide process with fewer manufacturing steps resulting in a low-cost, nonvolatile memory solution with excellent data retention and higher reliability. The split-gate NOR SuperFlash architecture facilitates a simple and flexible design suitable for high performance, high reliability, small or medium sector size, in- or off-system programming and a variety of densities, all in a single CMOS-compatible technology.
About Silicon Storage Technology, Inc.
Headquartered in Sunnyvale, California, SST designs, manufactures and markets a diversified range of nonvolatile memory solutions, based on proprietary, patented SuperFlash technology, for high volume applications in the digital consumer, networking, wireless communications and Internet computing markets. SST's product families include high-functionality flash memory components, CompactFlash card mass storage products and 8-bit microcontrollers with on-chip flash memory. SST also offers its SuperFlash technology for embedded applications through its world-class manufacturing partners and technology licensees IBM, National Semiconductor, Motorola, Samsung Electronics Co. Ltd., SANYO Electric Co., Ltd., Seiko Epson Corp., TSMC-Acer Semiconductor Manufacturing Co. (TASMC) and Taiwan Semiconductor Manufacturing Co. Ltd. (TSMC).
TSMC offers SuperFlash under its trademark Emb-FLASH. Further information on SST can be found on the company's Web site at ssti.com.
Note to Editors: The SST logo and SuperFlash are registered trademarks of Silicon Storage Technology, Inc. MPF, ComboMemory and FlashFlex are trademarks of Silicon Storage Technology, Inc. Emb-FLASH is a trademark of TSMC
Forward-Looking Statements
Except for the historical information contained herein, this news release contains forward-looking statements regarding flash memory market conditions, the company's future financial performance, the performance of new products and the company's ability to bring new products to market that involve risks and uncertainties. These risks may include timely development, acceptance and pricing of new products, the terms and conditions associated with licensees' royalty payments, the impact of competitive products and pricing, and general economic conditions as they affect the company's customers, as well as other risks detailed from time to time in the company's SEC reports, including the report on Form 10-K for the year ended December 31, 1999 and reports on Form 10-Q for the quarters ended March 31, 2000 and June 30, 2000.
Silicon Storage Technology, Inc. and Subsidiary
Condensed Consolidated Statements of Operations
(in thousands except per share data)
Three months ended Nine months ended
September 30, September 30,
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1999 2000 1999 2000
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(unaudited) (unaudited)
Net revenues:
Product revenues $32,508 $162,365 $70,734 $326,254
Technology licensing 2,639 1,356 5,732 2,967
--------- ---------- --------- ---------
Total net revenues 35,147 163,721 76,466 329,221
Cost of revenues 25,941 90,086 60,945 183,645
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Gross profit 9,206 73,635 15,521 145,576
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Operating expenses:
Research and development 4,581 11,989 13,794 29,246
Sales and marketing 2,574 8,558 7,039 19,061
General and administrative 1,278 3,866 2,523 10,185
In process research
and development - - 2,011 -
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Total operating expenses 8,433 24,413 25,367 58,492
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Income (loss) from
operations 773 49,222 (9,846) 87,084
Interest and other income 170 3,197 698 6,297
Interest expense (24) (66) (75) (611)
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Income (loss) before
provision for income taxes 919 52,353 (9,223) 92,770
Provision for income taxes 471 16,087 536 24,324
--------- ---------- --------- ---------
Net income (loss) $448 $36,266 ($9,759 |
