SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 UNDER
THE SECURITIES EXCHANGE ACT OF 1934
For the month of November, 2003
Commission File Number: 000-30540
GIGAMEDIA LIMITED
122 TunHua North Road, 14th Floor
Taipei, Taiwan (R.O.C.)
(Indicate by check mark whether the registrant files or will file annual reports
under cover of Form 20-F or Form 40-F.)
Form 20-F [x] Form 40-F [ ]
(Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934.)
Yes [ ] No [x]
(If "Yes" is marked, indicate below the file number assigned to the registrant
in connection with Rule 12g3-2(b) :82- .)
GIGAMEDIA LIMITED is furnishing under cover of Form 6-K:
GigaMedia Reports Third Quarter 2003 Financial Results
(GIGAMEDIA LOGO)
GIGAMEDIA REPORTS THIRD QUARTER
2003 FINANCIAL RESULTS
TAIPEI, Taiwan, November 14, 2003 - GigaMedia Limited ("GigaMedia" or the
"Company") (Nasdaq: GIGM, www.giga.net.tw), a diversified provider of online and
offline entertainment services in Taiwan, today announced its third quarter
operating and financial results.
Key Results:
o Offline music distribution business gross margin reaches 17% with
improved cost and revenue metrics.
o Online broadband ISP business unit records positive EBITDA of
approximately NT$13.8 million.
o Online cash burn rate declines 29% to NT$730 thousand per month for
the third quarter.
o Company in a strong financial position with approximately NT$2.1
billion in total cash, short-term investments and liquid marketable
securities.
Chief Executive Officer Raymond Chang said, "GigaMedia's financial performance
has improved steadily over the past seven consecutive quarters, largely due to
consistent implementation of strict cost controls. In the third quarter, we were
again successful in controlling costs, which improved our operating results. In
our online ISP operations, we held our operating costs and sustained ARPU.
Offline, we achieved cost savings resulting from consolidation and improved our
gross margin. In sum, we have clearly established an efficient, scalable online
ISP business unit and have made headway in turning around our offline
operations."
Mr. Chang continued, "Going forward, under our new chairman, tight cost controls
will remain in place, but primary focus will shift from cost cutting to revenue
growth. Management and the board are carefully reviewing growth initiatives, and
with our operating efficiencies now much improved, we are confident in our
ability to drive incremental top line growth down to our bottom line and
increase shareholder value."
CONSOLIDATED FINANCIAL RESULTS
(THIRD QUARTER 2003 VERSUS SECOND QUARTER 2003)
For the third quarter of 2003, GigaMedia reported consolidated revenues of
NT$800.9 million, compared with revenues of NT$725.6 million for the second
quarter. The Company's third quarter performance was led by results in its
offline music distribution business, which recorded revenues of NT$634.6 million
during the period compared to NT$558.4 million in the second quarter.
1
Operating loss was NT$87.9 million in the third quarter compared with NT$80.9
million during the second quarter. The increase in operating loss during the
quarter was mainly related to professional fees and a re-valuation of cable
modems in GigaMedia's online business unit, which totaled NT$15.8 million and
NT$9.7 million, respectively.
Non-operating income during the third quarter consisted of interest income of
NT$3.0 million, foreign exchange loss of NT$22.4 million, and investment income
of NT$4.0 million. Total non-operating income decreased to negative NT$13.0
million in the third quarter of 2003 from negative NT$12.5 million in the
previous quarter, primarily due to increased foreign exchange losses during the
third quarter.
The Company reported a net loss of NT$90.8 million for the third quarter versus
a loss of NT$73.7 million in the second quarter.
Cash and other cash equivalents at the end of the third quarter totaled NT$1.2
billion, not including additional short-term investments totaling NT$920.0
million, compared to NT$1.1 billion and NT$900.0 million, respectively, during
the previous period, representing a total increase of approximately NT$125.7
million.
GigaMedia's long-term investments include an investment of US$10 million with a
maturity date of 2005.
BUSINESS SEGMENT RESULTS
ONLINE ENTERTAINMENT (BROADBAND ISP)
THIRD QUARTER 2003 RESULTS COMPARED TO SECOND QUARTER 2003 RESULTS
- ------------------------------------------------------------------------------------------
CATEGORY 3Q03 2Q03 VARIATION (%)
- ------------------------------------------------------------------------------------------
Total revenues NT$166.4 million NT$167.2 million 0
- ------------------------------------------------------------------------------------------
Access revenues NT$160.9 million NT$161.8 million -1
- ------------------------------------------------------------------------------------------
Subscribers 101,356 100,677 1
- ------------------------------------------------------------------------------------------
ARPU NT$426 NT$426 0
- ------------------------------------------------------------------------------------------
Total costs and expenses NT$228.1 million NT$198.3 million 15
- ------------------------------------------------------------------------------------------
Operating cost NT$135.7 million NT$127.1 million 7
- ------------------------------------------------------------------------------------------
SG&A NT$73.3 million NT$53.0 million 38
- ------------------------------------------------------------------------------------------
Operating income (loss) (NT$61.7 million) (NT$31.2 million) -98
- ------------------------------------------------------------------------------------------
Net income (loss) (NT$76.8 million) (NT$45.9 million) -67
- ------------------------------------------------------------------------------------------
Operating cash burn
including capex (quarterly)* NT$2.2 million NT$3.1 million -29
- ------------------------------------------------------------------------------------------
* We define operating cash burn including capex as EBIT plus non-cash items
minus capex. Operating cash burn per month including capex decreased from NT$1.0
million to NT$730 thousand, quarter over quarter.
2
TOTAL REVENUES AND CORPORATE ACCESS REVENUES
Total revenues for the quarter ended September 30, 2003 were flat at NT$166.4
million, compared with NT$167.2 million during the previous quarter.
Total access revenues were flat at NT$160.9 million, compared with NT$161.8
million for the quarter ended June 30, 2003, reflecting stable ARPU in our
subscriber base. The Company has maintained focus on migrating users to higher
specification products throughout the year, which has helped support ARPUs.
GigaMedia recognizes access revenues net of the revenue split with its cable
partners.
Total corporate revenues through our wholly-owned subsidiary Koos Broadband
Telecom Limited ("KBT") were flat during the third quarter.
The ISP business recorded content subscription revenues of NT$3.0 million during
the period, as compared to NT$3.6 million during the second quarter. Content
revenues consist mainly of subscription revenue from GigaMedia's broadband
videostreaming site GigaTV (www.gigatv.com.tw).
Sales/rental/installation revenues in the ISP business, which include routers
and switches, increased to NT$1.2 million for the third quarter from NT$935
thousand during the second quarter.
Advertising revenues decreased to NT$245 thousand in the third quarter from
NT$273 thousand for the second quarter. The Company has de-emphasized this
aspect of its business and does not expect to record significant advertising
revenues going forward.
TOTAL COSTS AND OPERATING COST
Total costs and expenses were up at NT$228.1 million in the third quarter,
compared to NT$198.3 million in the prior period. Total costs primarily
increased due to costs incurred during the second quarter related to
professional consultant fees of approximately NT$15.8 million. Excluding these
fees, total costs were NT$212.3 million.
Operating costs increased in the third quarter to NT$135.7 million versus
NT$127.1 million in the previous quarter, largely due to an inventory valuation
cost of approximately NT$9.7 million recorded to reflect the lower current
market price of cable modems. Operating costs during the period consisted mainly
of costs associated with business operations and customer service departments of
NT$25.3 million, telecommunications costs of NT$49.8 million, and depreciation
cost of network equipment other than cable modems amounting to NT$28.4 million.
3
Included in this quarter's operating costs was amortization of fees related to
backbone maintenance, peering arrangements and billing software, which totaled
NT$6.3 million.
The Company's SG&A costs rose during the third quarter, increasing by
approximately NT$20.3 million, or 38%, to NT$73.3 million as a result of
professional consultant fees incurred during the second quarter. Excluding such
fees, the Company recorded SG&A of approximately NT$57.5 million.
OPERATING LOSS
Operating loss increased by 49% to NT$61.7 million from NT$31.2 million, quarter
over quarter.
NET LOSS
Net income decreased in the third quarter to a loss of NT$76.8 million from a
loss of NT$45.9 million in the prior period, resulting primarily from payment of
professional consultant fees of approximately NT$15.8 million.
OPERATING CASH BURN
Operating cash burn was NT$2.2 million during the period, or NT$730 thousand per
month, versus NT$3.1 million in the second quarter, or NT$1.0 million per month.
The decrease in operating cash burn was largely related to a significant
decrease in capex during the period. GigaMedia defines operating cash burn per
month including capex as EBIT plus non-cash items minus capex.
ARPU
Blended average revenue per user ("ARPU") for GigaMedia's one-way cable, two-way
cable and ADSL broadband access services remained flat during the third quarter
at NT$426, compared with NT$426 in the second quarter. This was achieved despite
strong market competition and continued price pressure. One-way ARPU in the
third period was NT$254, with ARPU for two-way cable during the period at NT$583
and ARPU for ADSL for the three-month period at NT$408. Management expects
minimal ARPU gains in the foreseeable future.
OFFLINE MUSIC DISTRIBUTION (G-MUSIC)
The following represents the results of the Rose Records and Tachung Records
music store chains for the three-month period.
4
G-MUSIC THIRD QUARTER 2003 RESULTS COMPARED TO SECOND QUARTER 2003 RESULTS
The following reflects the results of G-Music, not GigaMedia's 58.6% interest in
G-Music, during the periods indicated. Minority interests have not been
excluded.
- -----------------------------------------------------------------------------------------
CATEGORY 3Q03 2Q03 VARIATION (%)
- -----------------------------------------------------------------------------------------
Total revenues NT$634.6 million NT$558.4 million 14
- -----------------------------------------------------------------------------------------
COGS NT$527.4 million NT$482.0 million 9
- -----------------------------------------------------------------------------------------
Gross margin 17% 14% 21
- -----------------------------------------------------------------------------------------
SG&A NT$133.7 million NT$126.2 million 6
- -----------------------------------------------------------------------------------------
Total costs and expenses NT$660.8 million NT$608.1 million 9
- -----------------------------------------------------------------------------------------
Operating income (loss) (NT$26.2 million) (NT$49.7 million) 47
- -----------------------------------------------------------------------------------------
Net income (loss) (NT$23.9 million) (NT$47.5 million) 50
- -----------------------------------------------------------------------------------------
TOTAL REVENUES
Total revenues for the quarter ended September 30, 2003 were NT$634.6 million,
up 14% from the NT$558.4 million recorded during the prior period. While third
quarter sales improved over the second period, which was negatively impacted by
SARS, operating conditions remain challenging. GigaMedia records offline music
business revenues under sales revenues.
COSTS AND EXPENSES
Total COGS, net of return and allowance for the quarter ended June 30, 2003, was
NT$527.4 million, an increase of approximately NT$45.4 million, or 9% quarter
over quarter. The increase in COGS was in line with the 14% increase in total
revenues during the period. Gross margin for the offline music business
increased to 17%, or NT$107.2 million, reflecting cost savings from
consolidating Taiwan's two leading music store chains. GigaMedia records COGS
from its offline music business under cost of sales.
G-Music recorded an increase in SG&A costs during the third quarter of
approximately NT$7.4 million, in line with revenue growth recorded during the
period.
OPERATING MARGIN
Operating margin for the quarter ended September 30, 2003 was negative 4%, or an
operating loss of NT$26.2 million. This represented a decreased loss of
approximately NT$23.5 million over the second quarter, due primarily to cost
controls and revenue improvements recorded during the third quarter.
5
NET LOSS
Net income increased from negative NT$47.5 million to negative NT$23.9 million,
primarily due to improved sales and strict cost controls during the third
quarter.
BUSINESS OUTLOOK
The following forward-looking statements reflect GigaMedia's expectations as of
November 14, 2003. Given potential changes in economic conditions and consumer
spending, the evolving nature of broadband, fluctuations in Taiwan's recorded
music market and various other risk factors discussed in our 20-F filing with
the U.S. Securities and Exchange Commission, actual results may differ
materially.
As part of GigaMedia's commitment to strong shareholder communications, the
company will issue a mid-quarter update to the Business Outlook provided below.
The fourth quarter update is tentatively scheduled for late February 2004.
GigaMedia expects continued implementation of cost controls in its offline
G-Music business segment and expansion of products sold to improve the company's
financial performance going forward. Online consumer and corporate broadband ISP
operations may be impacted by strong competition and price-cutting by the market
leader. As a result, management expects revenues and ARPU in this business
segment to remain relatively flat in the fourth quarter compared with this
period. Detailed expectations are provided below.
FOURTH QUARTER EXPECTATIONS
ONLINE - BROADBAND ISP
o Total revenue and costs and expenses are expected to increase
slightly. The company anticipates flat to slightly improved
subscribers, and blended ARPU comparable with third quarter 2003
results.
OFFLINE - MUSIC STORE CHAINS
o Total revenues are expected to be flat.
o Gross margins are expected to be flat.
ABOUT GIGAMEDIA
GigaMedia Limited (Nasdaq: GIGM) is a diversified provider of entertainment
services in Taiwan. The Company's online/offline business model provides the
Company multiple distribution channels, deep customer relationships and the
ability to meet future market demands as technology drives new media and
entertainment industry change.
6
Offline, GigaMedia operates Taiwan's two largest music store chains, Rose
Records and Tachung Records through its subsidiary G-Music. These businesses
were acquired in February and September of 2002, respectively, and together hold
approximately a 50% share of Taiwan's music retail market.
Online, the Company operates a leading broadband ISP, providing Internet access
service and broadband content with multiple delivery technologies. The Company's
access products consist of premium cable modem and ADSL offerings, giving the
company the ability to deliver superior broadband connections island-wide.
GigaMedia's cable modem is a world-class platform capable of offering broadband
Internet access at speeds of up to 100 times faster than traditional dial-up
services. With 21 cable system partners, the Company's cable modem business
passes more than 3.1 million Taiwan households, as well as 417,000 small and
medium businesses. In addition, the Company offers interactive Chinese-language
multimedia Web sites through its Web destination http://www.gigigaga.com.
Other subsidiary companies of GigaMedia include Koos Broadband Telecom Limited,
a broadband service provider focused exclusively on corporate subscribers in
Taiwan.
Strategic investors of GigaMedia include the Koos Group, a major player in
Taiwan's manufacturing, finance, telecommunications, media, and cable
industries.
More information on GigaMedia can be obtained from < http://ir.giga.net.tw >.
The directors of GigaMedia (including any director who may have delegated
detailed supervision of this announcement) have taken all reasonable care to
ensure that the facts stated and opinions expressed in this announcement are
fair and accurate and that no material facts have been omitted from this
announcement (the omission of which would render any statement in this
announcement misleading in any material respect), and they jointly and severally
accept responsibility accordingly. Where any information has been extracted from
published or publicly available sources, the sole responsibility of the
directors of GigaMedia has been to ensure through reasonable enquiries that such
information is accurately extracted from such sources or, as the case may be,
reflected or reproduced in this announcement.
The statements included above and elsewhere in this press release that are not
historical in nature are "forward-looking statements" within the meaning of the
"safe harbor" provisions of the Private Securities Litigation Reform Act of
1995. GigaMedia cautions readers that forward-looking statements are based on
the company's current expectations and involve a number of risks and
uncertainties. Actual results may differ materially from those contained in such
forward-looking statements. Information as to those factors that could cause
actual results to vary can be found in GigaMedia's Registration Statement on
Form 20-F filed with the United States Securities and Exchange Commission in
July 2003.
CONTACT:
GIGAMEDIA LIMITED
Brad Miller, Investor Relations Director
886-2-8770-7966 ext. 1107
bradley_miller@corp.giga.net.tw
(Tables to follow)
================================================================================
7
\
GIGAMEDIA LIMITED
CONSOLIDATED STATEMENT OF OPERATIONS
Sept. 30 and June 30, 2003
3Q03 2Q03
NT$ NT$
----------- -----------
OPERATING REVENUE
ACCESS REVENUE 160,877,041 161,783,213
SALES/RENTAL/INSTALLATION 623,376,542 548,515,430
WEB DEVELOPMENT REVENUES
ADVERTISING AND PROMOTIONAL REVENUE 12,634,563 11,109,431
SUBSCRIPTION REVENUE 3,037,084 3,573,448
OTHER REVENUE 1,058,057 583,340
----------- -----------
TOTAL 800,983,287 725,564,862
----------- -----------
COST AND EXPENSES
OPERATING COST 135,737,145 127,117,305
COST OF SALES/RENTAL/INSTALLATION 536,554,294 490,013,739
WEB DEVELOPMENT EXPENSES 0 0
PRODUCT DEVELOPMENT AND ENGINEERING EXPENSES 9,906,685 9,725,991
SELLING AND MARKETING EXPENSES 126,497,685 121,277,291
GENERAL AND ADMINISTRATIVE EXPENSES 80,465,650 57,929,088
BAD DEBT EXPENSES (285,678) 380,133
GOODWILL VALUATION EXPENSES
OTHER COSTS 0 0
----------- -----------
TOTAL 888,875,781 806,443,547
----------- -----------
OPERATING LOSS (87,892,494) (80,878,685)
----------- -----------
NON-OPERATING INCOME (EXPENSE)
INTEREST INCOME 3,039,033 4,242,682
FOREIGN EXCHANGE GAIN (LOSS)-NET (22,387,330) (4,374,364)
INVESTMENT INCOME 4,063,962 4,797,288
GAIN FROM DISPOSAL OF PROPERTY, PLANT AND EQUITY (30,200) (2,771,837)
INTEREST INCOME (EXPENSE) (3,972) (35,780)
OTHER NON-OPERATING INCOME (EXPENSE) 2,351,673 (14,320,973)
----------- -----------
TOTAL NON-OPERATING INCOME-NET (12,966,834) (12,462,984)
----------- -----------
INCOME TAX EXPENSE 0 (53,027)
----------- -----------
MINORITY INTEREST INCOME 10,060,170 19,720,058
----------- -----------
PRE ACQUISITION EARNINGS 0 0
----------- -----------
NET INCOME (LOSS) (90,799,158) (73,674,638)
=========== ===========
NET LOSS PER COMMON SHARE (1.81) (1.47)
=========== ===========
AVERAGE SHARES OUTSTANDING 50,154,000 50,154,000
8
GIGAMEDIA LIMITED
CONSOLIDATED BALANCE SHEET
SEPT. 30 AND JUNE 30, 2003
3Q03 2Q03
ASSETS NT$ NT$
- ---------------------------------------------------------- -------------
CONSOLIDATED CONSOLIDATED
CASH AND CASH EQUIVALENTS 1,240,172,606 1,134,183,302
SHORT-TERM INVESTMENTS 919,765,494 900,053,561
ACCOUNTS RECEIVABLE 152,585,755 154,744,679
RECEIVABLE FROM RELATED PARTIES 0 0
INVENTORIES-NET 245,386,852 245,162,115
PREPAID EXPENSES 33,296,521 27,466,547
RESTRICTED CASH 62,583,602 63,378,217
OTHER CURRENT ASSETS 49,841,952 65,095,637
TOTAL CURRENT ASSETS 2,703,632,782 2,590,084,058
------------- -------------
EQUITY INVESTMENT 558,494,759 580,085,354
PROPERTY, PLANT AND EQUIPMENT - NET 645,900,509 678,152,450
INTANGIBLE ASSETS - NET 243,829,781 251,686,904
TOTAL OTHER ASSETS 168,673,700 185,601,689
TOTAL ASSETS 4,320,531,531 4,285,610,455
============= =============
LIABILITIES & SHAREHOLDERS' EQUITY NT$ NT$
- ---------------------------------------------------------- -------------
CONSOLIDATED CONSOLIDATED
LOAN 0 0
ACCOUNTS PAYABLE 585,953,716 464,588,362
PAYABLE TO RELATED PARTIES 0 0
PAYABLE TO EQUIPMENT SUPPLIERS 155,670 101,070
ACCRUED SALARIES AND BONUS 38,093,764 28,719,694
ACCRUED EXPENSES 59,394,580 46,358,915
LEASE OBLIGATIONS 0 0
OTHER CURRENT LIABILITIES 71,440,400 61,614,372
TOTAL CURRENT LIABILITIES 755,038,130 601,382,413
OTHER LIABILITIES 32,115,727 29,749,438
TOTAL OTHER LIABILITIES 58,379,227 54,555,938
TOTAL LIABILITIES 813,417,357 655,938,351
MINORITY INTEREST 185,082,122 195,142,292
TOTAL SHAREHOLDERS' EQUITY 3,322,032,052 3,434,529,812
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 4,320,531,531 4,285,610,455
------------- -------------
9
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
GigaMedia Limited
(Registrant)
Date: November 17, 2003 By: /s/ Hsia, Winston
- ----------------------- ------------------------------------
(Signature)
Name: Hsia, Winston
Title: Chief Financial Officer