AUSTIN, Texas, - Silicon Laboratories Inc. (Nasdaq: SLAB), a leader in high-performance, analog-intensive, mixed-signal integrated circuits (ICs), today reported third quarter revenue of $113.5 million, a 29 percent increase over the same period last year. The company controlled operating expense growth and delivered strong gross margins, resulting in better than anticipated operating income and earnings per share results.
The company’s Board of Directors also approved a $100 million share repurchase program with a twelve month expiration. This additional authorization reflects the Board’s confidence in the business and the company’s view that the stock is significantly undervalued. The program may be executed on the open market or in private transactions, including structured or accelerated transactions, depending on market conditions.
Financial Results
The company executed well during the quarter. Revenue of $113.5 million represented an 8.5 percent sequential increase. GAAP results, which are inclusive of the impact of the acquisition of Integration Associates, were generally better than forecasted. GAAP gross margin was 61.1 percent, GAAP operating income was $7.3 million, and GAAP diluted earnings per share were two cents. GAAP earnings include charges related to the write-off of in-process research and development, the fair value mark up of cost of sales for the quarter, and a tax expense associated with incorporating the acquisition into the company’s international operating structure. As is typical, the GAAP results also include the impact of stock compensation expense of $10 million, which was flat relative to the prior period despite the acquisition during the quarter.
The following non-GAAP results exclude the previously detailed charges. A non-GAAP gross margin of 62.4 percent was again above the company’s target range of 60 to 62 percent. Operating expenses were slightly lower than expected, resulting in an increase of non-GAAP operating income to $29.0 million or 25.5 percent of revenue, exceeding the company’s target model. Non-GAAP diluted earnings per share from continuing operations were $0.68, representing a greater than 50 percent year over year increase. Excluding one time tax benefits, non-GAAP diluted earnings per share were $0.49, well above the guidance due to the strong gross margin performance and controlled spending. The reconciling charges are set forth in the financial measures table included below.
During the third quarter, the company continued execution of its share repurchase program completing repurchases totaling $69 million, closed the acquisition of Integration Associates and generated another $36 million in cash flow, bringing the quarter-ending cash, cash equivalents and investments balance to $336 million.
Business Summary
Strong revenue growth in the third quarter was due to strength in the RF business, driven primarily by the company’s broadcast audio products. Both handset and non-handset revenue were up double-digits sequentially as the company continued to gain market share. Total design wins also accelerated during the quarter and penetration rates of FM radio in handsets increased. The company began marketing newly acquired EZRadio® short-range wireless products to customers and expects this to be an important growth area in 2009.
The company’s broad-based business was up nearly 50 percent year-over-year led by the timing products. A growing customer base, strong acceptance of new clock and oscillator products and the addition of new, revolutionary products have created significant momentum for the timing portfolio. The MCU products were somewhat impacted by slowing end-market demand, but the company continued to introduce new products to market and secure design wins in new applications. Power, an emerging growth area for the company, became meaningful during the quarter as customers adopted the company’s isolator products. The company is also benefiting from the addition of new ac/dc products to the power portfolio.
“Q3 was another excellent quarter. Our business operated at model performance, with expanded earnings and strong cash generation,” said Necip Sayiner, president and CEO of Silicon Laboratories. “Looking ahead, we believe that with operating expenses well controlled and a strong competitive position with our customers, we have the ability to manage through this difficult market environment. We are executing to our long-term vision, which is to deliver disruptive products to market, gain market share and profitably grow our business in excess of our peers.”
The company guided revenue for the fourth quarter to be flat to down five percent sequentially.
To view the complete release including detailed earnings statements, click here.
Webcast and Conference Call
A conference call discussing the third quarter results will follow this press release today at 7:30 a.m. Central Time. An audio webcast will be available simultaneously on Silicon Laboratories’ website under Investor Relations (www.silabs.com). A replay will be available after the call at the same website listed above or by calling 1-800-294-9508 or +1 203-369-3795 (international). Replays will be available through November 12, 2008.
About Silicon Laboratories Inc.
Silicon Laboratories Inc. is a leading designer of high-performance, analog-intensive, mixed-signal integrated circuits (ICs) for a broad range of applications. Silicon Laboratories’ diverse portfolio of highly integrated, patented solutions is developed by a world-class engineering team with expertise in cutting-edge mixed-signal design. The company has design, engineering, marketing, sales and applications offices throughout North America, Europe and Asia. For more information about Silicon Laboratories, please visit www.silabs.com.
Forward-Looking Statements
This press release contains forward-looking statements based on Silicon Laboratories’ current expectations. The words “believe,” “estimate,” “expect,” “intend,” “anticipate,” “plan,” “project,” “will” and similar phrases as they relate to Silicon Laboratories are intended to identify such forward-looking statements. These forward-looking statements reflect the current views and assumptions of Silicon Laboratories and are subject to various risks and uncertainties that could cause actual results to differ materially from expectations. Among the factors that could cause actual results to differ materially from those in the forward-looking statements are the following: risks that Silicon Laboratories may not be able to maintain its historical growth; quarterly fluctuations in revenues and operating results; volatile stock price; average selling prices of products may decrease significantly and rapidly, dependence on a limited number of products and customers; difficulties developing new products that achieve market acceptance; risks that Silicon Laboratories may not be able to manage strains associated with its growth; dependence on key personnel; difficulties managing our manufacturers and subcontractors; difficulties managing international activities; credit risks associated with our accounts receivable; geographic concentration of manufacturers, assemblers, test service providers and customers in Asia that subjects Silicon Laboratories’ business and results of operations to risks of natural disasters, epidemics, war and political unrest; product development risks; inventory-related risks; intellectual property litigation risks; risks associated with acquisitions (including risks that acquisitions may not yield the expected benefits due to the failure to properly integrate the acquired businesses and employees; risks that the customer base and revenue of the acquired businesses may cease to expand or may decline; risks that the acquired business’ products under development may fail to achieve market acceptance; risks of disputes regarding the acquired business; risks that the performance of Silicon Laboratories’ existing business may not offset the dilutive effect of an acquisition); risks associated with divestitures; the competitive and cyclical nature of the semiconductor industry and other factors that are detailed in Silicon Laboratories’ filings with the SEC. Silicon Laboratories disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Note to editors: Silicon Laboratories, Silicon Labs, EZRadio and the Silicon Labs logo are trademarks of Silicon Laboratories Inc. All other product names noted herein may be trademarks of their respective holders.
