SIMGE Silicon Image (MM)

Silicon Image Reports Fourth Quarter 2003 Revenue Grew 25.4 Percent Over Prior Quarter Selected Q4 Highlights: SUNNYVALE, Calif., Feb. 17 /PRNewswire-FirstCall/ -- Silicon Image, Inc. , a leader in multi-gigabit semiconductor solutions for the securetransmission and storage of rich digital media, today reported financial results for its fourth quarter ended December 31, 2003. Revenue of $30.3 million was achieved for the fourth quarter. This was an increase of 25.4 percent from revenue of $24.2 million achieved in the third quarter of 2003, and was an increase of 27.5 percent from revenue of $23.8 million in the fourth quarter of 2002. Year-to-date revenue totaled $103.5 million, an increase of 27.0 percent from revenue of $81.5 million for the year 2002. Net loss under Generally Accepted Accounting Principles (GAAP), which includes stock compensation expense, amortization and impairment of goodwill and intangible assets, patent defense costs, acquisition integration costs, restructuring costs, in-process research and development expense, and a gain on escrow settlement, was $5.3 million, or $0.07 per basic and diluted share, for the quarter ended December 31, 2003. This compares to a net loss of $2.1 million, or $0.03 per basic and diluted share, for the previous quarter, and a net loss of $8.1 million, or $0.12 per basic and diluted share, for the fourth quarter of 2002. On a year-to-date basis, the GAAP net loss was $12.8 million, or $0.18 per basic and diluted share, and comparesto a net loss of $40.1 million, or $0.62 per basic and diluted share, for the year 2002. Fourth quarter pro-forma net income, calculated excluding a non-cash charge for stock compensation ($7.0 million), a non-cash expense for the amortization of intangible assets ($0.4 million) and cash legal expenses associated with the patent litigation lawsuit against Genesis Microchip ($0.2 million), was $2.3 million, or $0.03 per diluted share. This compares to a pro-forma net loss of $0.5 million, or $0.01 per basic and diluted share, for the third quarter of 2003, and a pro-forma net profit of $0.6 million, or $0.01 per diluted share, for the fourth quarter of 2002. Commenting on the results, David Lee, Silicon Image's chairman and chief executive officer, said, "We achieved record financial results -- both on the top line as well as the pro-forma bottom line. We saw revenues expand more than 25% sequentially and interest in our IP, particularly in the HDMI arena, remains strong. In fact, the successand momentum of our HDMI products was readily apparent at the Consumer Electronics Show in January. Our business momentum entering 2004 continues to be robust and we look forward to more record quarters." "Our overall strategy aimed at the distribution, storage and display of rich digital content in a secure environment is clearly paying benefits for us as we enter 2004. Our improved visibility and gross margins are clear evidence that we are focused and executing to plan," added Silicon Image's president Steve Tirado. The company will host a conference call at 2:00 p.m. PST today to discuss its fourth quarter 2003 results and business outlook. The call will be broadcast over the Internet and can be accessed on the investor relations 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 March 1, 2004. * Pro-forma net income or loss represents net income or net loss, exclusive of stock compensation expense, amortization and impairment of goodwill and intangible assets, patent defense costs, acquisition integration costs, restructuring costs, in-process research & development expense, and gains on escrow settlement. 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, product introductions and standards adoption rates. 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, 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. SILICON IMAGE, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (GAAP BASIS) Three Months Ended Twelve Months Ended (unaudited) (unaudited) (In thousands, except per share amounts) Dec. 31, Sept. 30, Dec. 31, Dec. 31, Dec. 31, 2003 2003 2002 2003 2002 Revenue: Product $27,421 $22,447 $20,202 $89,335 $74,884 Development, licensing and royalties 2,906 1,743 3,593 14,190 6,655 Total revenue 30,327 24,190 23,795 103,525 81,539 Cost and operating expenses: Cost of productrevenue 13,267 11,501 10,739 46,609 38,110 Research and development 9,264 9,054 8,646 36,523 32,809 Selling, general and administrative 5,607 4,131 3,962 18,401 17,454 Stock compensation expense 6,991 1,106 3,521 9,988 11,107 Amortization of goodwill and intangible assets 357 373 857 1,103 3,482 Patent defense and acquisition integration costs 196 160 2,870 2,152 7,034 Restructuring -- -- 1,500 986 7,193 In-process research and development -- -- -- 5,482 -- Impairment of goodwill and intangible assets -- -- -- -- 5,200 Total cost and operating expenses 35,682 26,325 32,095 121,244 122,389 Net loss from operations (5,355) (2,135) (8,300) (17,719) (40,850) Gainon escrow settlement -- -- -- 4,618 -- Interest income and other, net 75 40 161 291 758 Net loss $(5,280) $(2,095) $(8,139) $(12,810) $(40,092) Net loss per share - basic $(0.07) $(0.03) $(0.12) $(0.18) $(0.62) Net loss per share - diluted $(0.07) $(0.03) $(0.12) $(0.18) $(0.62) Weighted average shares - basic 70,638 69,803 66,198 69,412 64,283 Weighted average shares - diluted 70,638 69,803 66,198 69,412 64,283 SILICON IMAGE, INC. RECONCILIATION OF GAAP TO PRO-FORMA FINANCIAL INFORMATION Three Months Ended Twelve Months Ended (unaudited) (unaudited) Dec. 31, Sept. 30, Dec. 31, Dec. 31, Dec. 31, (in thousands) 2003 2003 2002 2003 2002 GAAP net loss $(5,280) $(2,095) $(8,139) $(12,810) $(40,092) Pro-forma adjustments: Stock compensation expense (A) 6,991 1,106 3,521 9,988 11,107 Amortization of goodwill and intangible assets (B) 357 373 857 1,103 3,482 Patent defense and acquisition integration costs (C) 196 160 2,870 2,152 7,034 Restructuring (D) -- -- 1,500 986 7,193 In-process research and development (E) -- -- -- 5,482 -- Impairment of goodwill and intangible assets (F) -- -- -- -- 5,200 Gain on escrow settlement (G) -- -- -- (4,618) -- Pro-forma net income (loss) $2,264 $(456) $609 $2,283 $(6,076) (A) 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. (B) Non-cash expenses for the amortization of goodwill and intangible assets recorded in connection with our acquisitions. (C) 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. (D) 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. (E) A 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 use as of the acquisition date. (F) A non-cash expense to reduce the carrying values of intangible assets to their estimated fair values. (G) A non-cash gain from recovery of shares held in escrow as indemnification for certain damages incurred as a result of a prior acquisition. SILICON IMAGE, INC. PRO FORMA (NON-GAAP BASIS) CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS Three Months Ended Twelve Months Ended (unaudited) (unaudited) (In thousands, except per share amounts) Dec. 31, Sept. 30, Dec. 31, Dec. 31, Dec. 31, 2003 2003 2002 2003 2002 Revenue: Product $27,421 $22,447 $20,202 $89,335 $74,884 Development, licensing and royalties 2,906 1,743 3,593 14,190 6,655 Total revenue 30,327 24,190 23,795 103,525 81,539 Pro-forma cost and operating expenses: Cost of product revenue 13,267 11,501 10,739 46,609 38,110 Research and development 9,264 9,054 8,646 36,523 32,809 Selling, general and administrative 5,607 4,131 3,962 18,401 17,454 Total pro-forma cost and operating expenses 28,138 24,686 23,347 101,533 88,373 Pro-forma net income (loss) from operations 2,189 (496) 448 1,992 (6,834) Interest income and other, net 75 40 161 291 758 Pro-forma net income (loss) $2,264 $(456) $609 $2,283 $(6,076) Pro-forma net income (loss) per share $0.03 $(0.01) $0.01 $0.03 $(0.09) Weighted average shares * 78,564 69,803 73,195 76,555 64,283 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, in process research and development 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 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) Dec. 31, Dec. 31, 2003 2002 Assets Current assets: Cash and short-term investments $37,254 $35,833 Accounts receivable, net 12,754 11,589 Inventories, net 10,312 7,301 Prepaid expenses and other current assets 2,703 2,510 Total current assets 63,023 57,233 Property and equipment, net 7,411 6,653 Goodwill and intangible assets, net 16,049 13,021 Other assets 1,259 709 Total assets $87,742 $77,616 Liabilities and Stockholders' Equity Current liabilities: Accounts payable, debt and other current liabilities $18,075 $25,313 Deferred margin on sales to distributors 7,274 4,133 Total current liabilities 25,349 29,446 Stockholders' equity 62,393 48,170 Total liabilities and stockholders' equity $87,742 $77,616 DATASOURCE: Silicon Image, Inc. CONTACT: Robert G. Gargus, Chief Financial Officer, +1-408-616-4114, or Liz Casolari, Investor Relations, +1-408-616-1543, both of Silicon Image, Inc., fax, +1-408-830-9531 Web site: http://www.siliconimage.com/

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