San Jose, USA, 30 January 2007 – SiRF Technology Holdings, Inc., a provider of GPS-enabled silicon and premium software location platforms, today reported unaudited financial results for its fourth quarter and year ended December 31, 2006.
“Demand for products with SiRF GPS was very strong at the retail level in Q4 resulting in an exceptional quarter for SiRF. We have recorded record revenues, shipments and operating income plus a strong order backlog for Q1,” said Dr. Michael Canning, President and CEO.
Net revenue in the fourth quarter of fiscal 2006 was $74.2 million, an increase of 37 percent from $54.3 million reported in the fourth quarter of 2005. Net revenue in fiscal 2006 was $247.7 million, an increase of 50 percent from $165.1 million in fiscal 2005. Gross margin in the fourth quarter of 2006 was 55.3 percent, as compared to 54.5 percent in the fourth quarter of 2005. Gross margin in fiscal 2006 was 55.6 percent, as compared to 55.4 percent in fiscal 2005.
Beginning in the fourth quarter of fiscal 2006, SiRF determined that due to business circumstances it could no longer reliably estimate royalty revenues for sales by certain licensees. As such, SiRF began recognizing all royalty revenues based solely on royalties reported by licensees during the quarter. This change in timing of recognizing royalty revenue was made prospectively and had an initial one-time effect of reducing royalty revenues recorded in the fourth quarter of fiscal 2006.
Net income for the fourth quarter of fiscal 2006 was $9.1 million or $0.16 per diluted share based on 56.1 million weighted average shares outstanding. This compares with net income of $10.2 million or $0.19 per diluted share based on 55.2 million weighted average shares outstanding in the fourth quarter of fiscal 2005. The decrease in net income for the fourth quarter of fiscal 2006 as compared to the fourth quarter of fiscal 2005 is primarily attributable to increased employee stock compensation expense as a result of the adoption of Statement of Financial Accounting Standard 123R, Share-Based Payment (SFAS No. 123R) on January 1, 2006, as well as increased acquisition-related contingent payments and compensation expense related to share-based payments associated with SiRF’s acquisitions.
These increased expenses were partially offset by a one-time research and development tax credit recognized in the fourth quarter of fiscal 2006. SiRF recognized $3.4 million in research and development tax credits as a result of the reinstatement of the federal research and development tax credit that was signed into law in December 2006 with retroactive effect to the beginning of 2006. Of the $3.4 million tax credit recorded in the fourth quarter of fiscal 2006, approximately $2.6 million related to the first nine months of the fiscal year. In addition, during the fourth quarter of fiscal 2005, SiRF recognized a one-time charge related to acquired in-process research and development associated with the acquisition of Impulsesoft, with no similar charge during the fourth quarter of fiscal 2006.
Net income for fiscal 2006 was $2.4 million or $0.04 per diluted share based on 56.0 million weighted average shares outstanding. This compares with net income of $30.0 million or $0.56 per diluted share based on 53.6 million weighted average shares outstanding in fiscal 2005. The decrease in net income for fiscal 2006 as compared to fiscal 2005 is primarily attributable to the same reasons as the decrease for the fourth quarter of fiscal 2006 as compared to the fourth quarter of fiscal 2005, as well as an increase in one-time charges related to acquired in-process research and development associated with the acquisition of TrueSpan of $13.3 million during the first quarter of fiscal 2006.
In fiscal 2005, SiRF recognized cumulative one-time benefits of approximately $6.8 million associated with previously unrecognized income tax assets related to research and development tax credit benefits available for the 1997 – 2004 years, an acquisition-related tax benefit and the reversal of a litigation settlement obligation with no similar benefits recorded during fiscal 2006.
