Techpoint: Financial Results For The Year Ended December 31, 2021 (Unaudited)

The following excerpt is from the company's SEC filing.
February 10, 2022
Company Name:
Techpoint, Inc.
Listed Exchange:
Mothers market of the Tokyo Stock Exchange
Identification Code:
Website URL:
www.techpoint.co.jp
Representative:
Fumihiro Kozato, President and Chief Executive Officer
Contact:
Hiroshi Kondo, Vice President Corporate Marketing and
President of Techpoint Japan KK
03-6205-8405
Expected Date of Annual Shareholders Meeting:
June 2, 2022
Expected Date of Annual Securities Report Filing:
March 11, 2022
Expected Start Date of Dividend Payment:
February 15, 2022
Supplementary Materials for Fin ancial Results:
Included
Earnings Announcement for Financial Results:
Financial Results for the Year Ended December 31, 2021 (January 1, 2021 to December 31, 2021)
Consolidated Operating Results
(Unit: thousands, % change as compared to the previous year)
Revenue
Income from
Operations
Income Before
Income Taxes
Net Income
Non-GAAP
Amount
Change
64,707
19,885
19,914
17,287
18,889
7,442,599
2,287,173
2,290,508
1,988,351
2,172,613
34,339
3,949,672
425,344
450,418
384,397
530,242
The Company’s consolidated financial statements are prepared in U.S. dollars. For amounts disclosed in Japanese yen, an exchange rate of ¥115.02
Japanese yen to $1.00 U.S. dollar was used based on the Telegraphic Transfer Middle Rate quoted by Mitsubishi UFJ Financial Group’s official index as of December 30, 2021. This rate is also used for amounts disclosed in Japanese yen for prior periods in order to exclude the impact from the change in foreign currency exchange rates when comparing financial results in the current period to those in the prior period, which is permitted according to the current disclosure requirements for Tanshin in Japan.
The Company’s comprehensive income for the year ended December 31,
and 2020 was $17.2 million (¥1,980.6 million, 406.8%) and $3.4 million (¥390.8 million, 55.9%), respectively. The Company’s non-GAAP operating income for the year ended December 31,
2021 was $21.7 million (¥2,499.4 million) based on the exclusion of stock-based compensation of $1.8 million  (¥212.2 million). The Company’s non-GAAP net income for the year ended
2021 was $18.9 million (¥2,172.6 million) based on the exclusion of stock-based compensation of $1.8 million  (¥212.2 million) and the relating income tax impact based on a 13.19% effective tax rate.
The Company’s non-GAAP operating income for the year ended December 31, 2020 was $5.2 million (¥596.3 million) based on the exclusion of stock-based compensation of $1.5 million (¥170.9 million). The Company’s non-GAAP net income for the year ended December 31, 2020 was $4.6 million (¥530.2 million) based on the exclusion
of $1.5 million (¥170.9 million) and the relating income tax impact based on an assumed 14.66% effective tax rate.
(Unit: $ or
, except for % data)
Basic EPS
Diluted
Diluted EPS
Ratio of Net
Income to
Equity
Tax to
Total Assets
Margin
Consolidated Financial Position
(Unit: thousands, except per share and % data)
Net Assets
Stockholders'
Equity Ratio
Per Share
61,938
51,817
7,124,109
5,959,991
43,219
37,373
4,971,049
4,298,642
Consolidated Cash Flows
(Unit: thousands)
Net Cash Provided by
Operating Activities
Net Cash Provided by     (Used in)
Investing Activities
Net Cash Provided by              (Used in)
Financing Activities
Cash and Cash
Equivalents
14,247
27,379
1,638,690
136,069
(15,528
3,149,133
(2,093
12,084
313,430
(240,737
1,389,902
Dividends
Annual Dividend
Quarter
Second
Payout
2022 (Forecast)
Forecasted Operating Results for the Year Ending December 31, 2022 (January 1, 2022 to December 31, 2022)
Income Before
71,469
19,882
19,922
17,133
19,313
8,220,364
2,286,828
2,291,428
1,970,638
2,221,381
The forecasted basic and diluted Earnings Per Share, or EPS, for the year ending December 31, 2022 was computed using a forecasted weighted average shares outstanding for the year ending December 31, 2022. The forecasted non-GAAP figures exclude stock-based compensation of $2.2 million (
¥250.8
net of the relating income tax impact based on an assumed 14.00% effective tax rate.
The Company’s forecasts are made in U.S. dollars.
Changes in subsidiaries during the period: Not Applicable
Changes in accounting policies
Due to codification revisions: None
Due to other reasons: None
Stock information:
December 31, 2021
December 31, 2020
Common stock
17,928,748
17,690,062
Treasury stock
Weighted average shares outstanding used in computing net income per share
17,830,808
17,587,804
Audit Procedures:
This Tanshin is not in the scope of audit procedures by the Company’s independent auditors under the Financial Instruments and Exchange Act of Japan. Additionally, as of the date of this Tanshin, audit procedures performed in accordance with the standards of the Public Company Accounting Oversight Board (“PCAOB”) in the United States have yet to be completed. The Company’s independent auditors have not compiled or been involved in the preparation of the forecasted financial results for the year ending December 31, 2022. Accordingly, they assume no responsibility for the accuracy or presentation of this information.
Forward Looking Statements:
The Tanshin includes forward-looking statements that involve a number of risks and uncertainties, many of which are beyond the Company’s control. The Company’s actual results may differ from those anticipated or expressed in these forward-looking statements as a result of various factors. All statements other than statements of historical facts contained in the Tanshin, including statements regarding the Company’s future results of operations and financial position, strategy and plans, and the Company’s expectations for future operations, are forward-looking statements. The Company has based these forward-looking statements largely on its current expectations and projections about future events and trends that we believe may affect the Company’s financial condition, results of operations, strategy, short-term and long-term business operations and objectives, and financial needs. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in the Tanshin may not occur, and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. Any forward-looking statement made by the Company in the Tanshin speaks only as of the date on which it is
made.
disclaim
any duty to update any of these forward-looking statements after the date of the Tanshin, except a
s required by law.
Investors Meeting:
Please refer to the Company’s website for details on its Investors Meetings
for holders of the Company’s
Japanese depositary shares, or JDSs.
Appendix Index
Management’s Discussion and Analysis of:
Financial Condition and Results of Operations
Liquidity and Capital Resources
Forecast for the Year Ending December 31, 2022
Accounting Standards
Consolidated Financial Statements and Supplementary Data (Unaudited)
Consolidated Balance Sheets
Consolidated Statements of Operations and Comprehensive Income
Consolidated Statements of Stockholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Japanese yen to $1.00 U.S. dollar was used based on the Telegraphic Transfer Middle Rate quoted by Mitsubishi UFJ Financial Group’s official index as of December 30, 2021. This rate is also used for amounts disclosed in Japanese yen for prior periods in order to exclude the impact from the change in foreign currency exchange rates when comparing financial results in the current period to those in the prior periods, which is permitted according to the current disclosure requirements for Tanshin in Japan. The Company’s
JDSs are traded on the Mothers market of the Tokyo Stock Exchange. Each JDS represents one share of common stock.
Comparison of the Year Ended December 31, 2021 and December 31, 2020
Year Ended December 31,
(dollars in thousands)
30,368
Revenue increased by $30.4 million, or 88%, for the year ended December 31, 2021 as compared to the year ended December 31, 2020. This was primarily due to a
$16.6 million
increase in security surveillance market revenue as a result of a 106% increase in the volume of shipments and a $13.8 million increase in automotive market revenue resulting from a 44% increase in the volume of shipments, partially offset by a decrease in average selling price attributable to product mix.
We have determined that pricing of our products remains stable in our target markets. Fluctuation in our overall average selling price is directly attributable to changes in product mix given the natural pricing variation of the products in our portfolio. When the product mix shifts towards the higher priced products in our portfolio, the average selling price will be higher than when the product mix shifts towards the lower price point products.  
Revenue by geographic region
The table below sets forth the major components of revenues by the geographic region to which products were delivered as a percentage of total revenues for the year ended December 31, 2021 and 2020:
Taiwan
South Korea
Total revenue
Cost of revenue and gross margin
29,660
16,132
13,528
Gross margin
Cost of revenue increased $13.5 million, or 84%, for the year ended December 31, 2021 as compared to the year ended December 31, 2020. Gross margin increased to 54% for the year ended December 31, 2021 from 53% for the year ended December 31, 2020.
Cost of revenue increased primarily due to a $12.7 million increase in cost of goods sold primarily attribute to a 73% increase in the volume of shipments, a $0.8 million increase as a result of an increase in inventory write-downs, decreased utilization of previously reserved inventory, increased warranty expense and product mix. Gross margin was positively impacted by these changes.
We expect gross margins to fluctuate in future periods due to changes in customer and product mix, average unit selling prices, manufacturing costs, adjustments to inventory, if any, and end market product demand.
Research and development expense
Research and development expense decreased $0.9 million, or 12%, for the year ended December 31, 2021 as
This decrease was
primarily due to a $1.3 million decrease in tape-out expenses associated with the development of new products
offset by a $0.3 million increase in personnel costs and a $0.1 million increase in product costs related to design, prototype and software expense.
Selling, general and administrative expense
Selling, general and administrative expenses increased by $1.5 million, or 21%,
This increase was
mainly due to a $0.5 million increase in personnel costs, a $0.5 million increase in professional service fees due to additional administrative efforts associated with operating as a U.S. company that is publicly traded in Japan, a $0.3 million increase in stock-based compensation, and a $0.2 million increase in other administrative costs.
Other income – net
Other income - net
Other income - net for the year ended December 31, 2021 decreased by $0.2 million, or 87%
as compared to the year ended December 31, 2020 primarily
due to the net interest income from investments.
Provision for income taxes
The provision for income taxes increased by $2.1 million, or 358%, for the year ended December 31, 2021 as compared to the year ended December 31, 2020. The increase in the provision for income taxes was primarily due to an increase in taxable income.
Net income
13,945
As a result of the foregoing, net income increased by $13.9 million, or 417% for the year ended December 31, 2021 as compared to the year ended December 31, 2020.
Our cash, cash equivalents and short-term investments as of December 31, 2021 were $42.3 million. We believe our existing cash, cash equivalents, short-term investments and the cash we expect to generate from operations will be sufficient to meet our anticipated cash needs for at least the next 12 months.
Operating Activities
During the year ended December 31, 2021, net cash provided by operating activities was $14.2 million, primarily due to net income of $17.3 million and non-cash charges of $3.8 million primarily attributable to stock-based compensation, noncash lease expense, depreciation and amortization, deferred income taxes and provision for excess inventories, partially offset by cash outflow from the net change in operating assets and liabilities of $6.8 million.
The net cash outflow used in operating assets and liabilities was primarily attributable to a $5.2 million cash outflow for inventory as units manufactured during the period and on hand were in excess of product sales during the period to support future demand, a $0.8 million cash outflow in accrued expense due to the timing of services performed, and a $0.8 million cash outflow in lease liabilities and other liabilities due to the renewal of an operating lease.
During the year ended December 31, 2021, cash provided by investing activities was $1.2 million, primarily a $17.4 million cash inflow due to proceeds from maturities of debt securities, partially offset by a $16.0 million cash outflow attributable to the purchase of debt securities and a $0.3 million cash outflow due to purchases of property and equipment.
, cash used in financing activities was $0.1 million, primarily due to payments
for shares withheld for tax withholdings on vesting of restricted stock units, partially offset by
net proceeds from the exercise of stock options.
Forecast for the Year Ending December 31, 2022
After careful consideration of current uncertainties in the global economy, instabilities in global politics, the COVID-19 pandemic and semiconductor manufacturing constraints, the Company is providing its financial forecast for the year ending December 31, 2022 as follows.
Revenue is expected to be $71.5 million, which is an increase of 10.5% from 2021, excluding shipments of the newly developed CMOS Image Sensor product and the Door-Phone product. Revenue for the Security Surveillance Market will remain approximately the same or decrease slightly compared to that of 2021 mainly due to a cost increase in our final products and inventory adjustments caused by the global semiconductor shortage. However, additional revenue from the Security Surveillance Market can be expected if the new
bidirectional audio ISP products
, currently under development, go into volume production. In contrast, despite the economic inflation in many of the regions where our final products are shipped and the shortage in semiconductor supplies, revenue in the Automotive Market is expected to increase approximately 22% compared to that of 2021. The Company may continue to update its revenue guidance from time to time, as it secures manufacturing capacities for its CMOS Image Sensor and the Door-Phone product lines during the second half of the fiscal year.
Operating expense is expected to be $18.7 million an increase of 23% as compared to 2021 due to an increase in headcount primarily to support sales initiatives, and an increase in new product tape-out activities, which is expected to result in the Company’s largest single year spending on tape-out activities.
Operating income is expected to be $19.9 million, approximately the same as 2021. GAAP basis net income is expected to be $17.1 million, a decrease of 0.9% from 2021. Non-GAAP basis net income is expected to be $19.3 million, an increase of 2.2% from 2021.
We expect our revenue to be lower in the first quarter of 2022 as compared to the fourth quarter of 2021, largely because most of our semiconductors are sold to customers located in Asia, primarily to customers located in regions who observe the Lunar New Year holiday. Revenue is expected to be $16.0 million, a decrease of 8.5% from the fourth quarter of 2021 but an increase of 10.3% from the first quarter of 2021.  
ince it is difficult to predict the future spread of COVID-19 and the timing of its cessation, the Company has calculated the forecast figures based on the assumption that COVID-19 will continue to have the same level of impact
during  fiscal
year 202
as it does at present.
Policy
The Company’s Board of Directors has adopted a dividend policy to link dividend payments to business performance on an ongoing basis. The amount to be paid in future dividends will be reviewed by the Board, with an aggregate dividend target amount for each fiscal year equal to approximately 50% of our annual non-GAAP net income for the prior fiscal year. The Company anticipates making payment of future dividends in two installments following its December 31 year end. This policy can be modified or terminated at any time at the discretion of the Company’s Board of Directors, including the Board’s determination to cease paying dividends in the future. The payment will be made in accordance with and subject to the terms of the Trust Agreement dated August 31, 2017 between the Company; Mizuho Securities Co., Ltd.; Mitsubishi UFJ Trust and Banking Corporation; and The Master Trust Bank of Japan, Ltd., which agreement governs the rights of JDS holders.
2022 Dividend
On December 22, 2021, the Company announced a special cash dividend of an aggregate of $0.50 per share for fiscal 2022, payable in two equal installments of $0.25 per share. The first installment of the dividend has been accrued as of December 31, 2021 in the amount of $4.5 million and is payable to stockholders of record on January 31, 2022. The payment date for the first installment on its shares of common stock (including common stock underlying its Japanese Depositary Shares (JDS)) will be February 15, 2022. The second installment of the dividend is not accrued as of December 31, 2021 because it is anticipated to be paid in the third fiscal quarter of 2022 and the declaration of the second installment is subject to the Board approval and in accordance with applicable law. The Company intends to provide additional information about the second installment of the dividend in the second fiscal quarter of 2022. The timing for receipt of the dividend payments by individual holders of Techpoint common stock and JDSs will vary due to the payment process for JDS holders. The amount paid to JDS holders will be reduced by any applicable U.S. withholding income tax, and then converted into Japanese Yen. Once the dividend is converted into Japanese Yen, a distribution payment fee and any additional local taxes will be paid from the distribution amount. As a result, the net amount of the first dividend installment that is ultimately received by JDS holders will be less than $0.25 per JDS. The Company anticipates that JDS holders will receive the payment of the first installment of the fiscal 2022 dividend in their accounts in late-March 2022.
Accounting Policy Changes
(Unit: thousands, except share data)
Current assets:
Cash and cash equivalents
Short-term investments
14,942
1,718,628
17,567
2,020,556
Accounts receivable
38,647
13,572
Inventory
13,522
1,555,300
1,023,794
Prepaid expenses and other current assets
102,943
70,622
Total current assets
57,074
6,564,651
39,284
4,518,446
Property and equipment - net
82,009
74,418
Deferred tax assets
67,172
67,632
Right-of-use assets
116,055
110,304
Other assets
294,222
200,249
Total assets
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable
211,406
167,585
Accrued liabilities
217,963
290,195
Liability related to early exercised stock options
Customer deposits
89,141
84,540
Lease liabilities
60,386
82,814
Dividend payable
518,050
Total current liabilities
1,097,061
627,319
Other liabilities
67,057
45,088
Total liabilities
10,121
1,164,118
672,407
Commitments and contingencies
Stockholders’ equity
Preferred stock, par value $0.0001 per share - 5,000,000 shares authorized as of December 31, 2021 and 2020; nil shares issued and outstanding as of December 31, 2021 and 2020.
Common stock, par value $0.0001 per share - 75,000,000 shares authorized as of December 31, 2021 and 2020; 17,928,748 and 17,690,062  shares issued and outstanding as of December 31, 2021 and 2020, respectively
Additional paid-in capital
24,251
2,789,350
22,523
2,590,595
Accumulated other comprehensive income (loss)
(2,991
Retained earnings
27,590
3,173,402
14,807
1,703,101
Total stockholders’ equity
Total liabilities and stockholders’ equity
(Unit: thousands, except share and per share data)
Year Ended December 31, 2021
Year Ended December 31, 2020
3,411,493
1,855,503
Gross profit
35,047
4,031,106
18,207
2,094,169
Operating expenses
732,792
833,205
1,011,141
835,620
Total operating expenses
15,162
1,743,933
14,509
1,668,825
Income from operations
25,074
Income before income taxes
Income taxes
302,157
66,021
Weighted-average shares outstanding used in computing net income per share:
18,565,882
17,929,541
Comprehensive income:
Other comprehensive income (loss), net of tax:
Unrealized gain (loss) on available-for-sale debt securities, net of tax benefit (expense) of $18, and ($11) for year ended December 31, 2021 and 2020, respectively
(7,707
17,220
1,980,644
390,838
Common Stock
Paid-In
Income (Loss)
Balances as of December 31, 2019
17,449,572
20,928
11,465
32,380
2,407,139
(1,725
1,318,704
3,724,348
Other comprehensive income - unrealized gain on available-for-sale debt securities
Issuance of common stock upon exercise of stock options and vesting of early exercised options
123,817
25,763
Issuance of common stock upon vesting of restricted stock units
141,175
Shares repurchased for tax withholdings on vesting of restricted stock units
(24,502
(13,227
Stock-based compensation
170,920
Balances as of December 31, 2020
Other comprehensive loss - unrealized loss on available-for-sale debt securities
110,084
20,934
151,608
(23,006
(34,391
212,212
Cash dividends declared ($0.25 per share)
(4,504
(518,050
Balances as of December 31, 2021
Cash Flows From Operating Activities
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
46,008
41,176
        Amortization of premium on available-for-sale investments
21,394
16,218
Write-off of deferred costs and long lived assets
Inventory valuation adjustment
64,181
18,863
Deferred income taxes
Noncash lease expense
85,000
78,674
Changes in operating assets and liabilities:
(25,074
(1,265
(5,179
(595,689
(3,017
(347,015
(25,880
37,957
(1,495
43,823
(8,742
Accrued expenses
(93,511
62,801
(73,153
(41,982
(11,617
(49,229
(63,606
Net cash provided by operating activities
Cash Flows From Investing Activities
Purchase of property and equipment
(32,666
(58,430
Purchase of debt securities
(15,953
(1,834,914
(12,594
(1,448,562
Proceeds from maturities of debt securities
17,420
2,003,649
11,009
1,266,255
Net cash provided by (used in) investing activities
Cash Flows From Financing Activities
Net proceeds from exercise of stock options
20,244
Payment for shares withheld for tax withholdings on vesting of restricted stock units
(13,228
Net cash provided by (used in) financing activities
Net increase in cash and cash equivalents
15,295
1,759,231
79,709
Cash and cash equivalents at beginning of period
11,391
1,310,193
Cash and cash equivalents at end of period
Supplemental Disclosure of Cash Flow Information
Cash paid for income taxes
357,482
Supplemental Disclosure of Noncash Investing and Financing Information
Property and equipment purchased but not yet paid
26,455
Vesting of early exercised options
Cash dividend declared but not yet paid
Going Concern
Not applicable.
Basis of Consolidation and Accounting Standards
The Company’s consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, and have been prepared in conformity with generally accepted accounting principles in the United States (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”). All intercompany balances and transactions have been eliminated. The functional currency of each of the Company’s subsidiaries is the U.S. dollar. Foreign currency gains or losses are recorded as other income (expense) in the Consolidated Statements of Operations and Comprehensive Income.
Segment Information
The Company’s chief operating decision maker, the chief executive officer, reviews financial information presented on a consolidated basis for purposes of making operating decisions and assessing financial performance on a regular basis. Accordingly, the Company considers itself to be one reportable segment, which is comprised of one operating segment, the designing, marketing and selling of mixed-signal integrated circuits for the security surveillance and automotive markets.
Product revenue from customers is designated based on the geographic region to which the product is delivered. Revenue by geographic region was as follows (in thousands):
44,549
22,105
10,611
Revenue by principal product lines were as follows (in thousands):
Security surveillance
32,636
16,104
32,071
18,235
Net Income Per Share
The following table presents the calculation of basic and diluted net income per share (amounts in thousands, except per share data):
Numerator:
Basic:
Diluted:
Denominator:
Basic shares:
Weighted-average shares used in computing basic net income per share
Diluted shares:
Effect of potentially dilutive securities:
Stock awards (1)
735,074
341,737
Weighted-average shares used in computing diluted net income per share
Net income per share:
Non-GAAP net income (2):
Weighted-average shares used in computing basic non-GAAP net income per share
Non-GAAP net income per share:
Non-GAAP Basic
Includes vesting of early-exercised options.
Please refer to “Consolidated Operating Results” under “Financial Results for the Year Ended December 31, 2021 (January 1, 2021 to December 31, 2021)” for further non-GAAP information.

The above information was disclosed in a filing to the SEC. To see the filing, click here.

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