Silicon Laboratories Reports Record Revenue

Company Delivers Strong Quarterly Performance and Outlook

Category:

Wednesday, October 24, 2012 6:30 am CDT

Dateline:

AUSTIN, Texas

Public Company Information:

NASDAQ:
SLAB
"Our Broad-based business has achieved critical mass, and with double-digit annual growth rates, it is on track to be the majority of our business as we exit the year"

AUSTIN, Texas--(BUSINESS WIRE)--Silicon Laboratories Inc. (Nasdaq: SLAB), a leader in high-performance, analog-intensive, mixed-signal integrated circuits (ICs), today reported record third quarter revenue of $149.5 million, an impressive 25 percent increase compared to the third quarter of 2011. The company believes market share gains across the portfolio and record design win activity are enabling the business to outperform the end markets.

Financial Highlights

Third quarter revenue was up ten percent sequentially due to both organic growth and the additional revenue from an acquisition completed during the quarter. On a GAAP-basis, gross margin was 57.9 percent, which included one-time charges associated with the acquisition. R&D investment increased to $34.8 million, and SG&A expense decreased to $24.5 million. SG&A expense declined primarily due to an $8.1 million gain from the purchase of the company’s headquarters. Resulting GAAP operating income increased to 18.2 percent. Diluted GAAP earnings per share declined to $0.24 and included other charges related to the acquisition of Ember and a net gain from the purchase of the headquarters buildings.

The following non-GAAP results exclude the impact of stock compensation and other one-time items. Gross margin was 61.0 percent for the quarter. Operating expenses decreased to 39.1 percent of sales. R&D increased to $31.7 million, and SG&A increased to $26.7 million due to the acquisition and increased variable compensation. Operating income, therefore, was better than expected at 21.9 percent of revenue. Strong revenue growth and operating performance resulted in significant earnings leverage. Diluted earnings per share for the quarter was 61 cents, a 20 percent sequential increase. Reconciling charges are set forth in the financial measures table included below.

The company repurchased $14.9 million of stock and ended the quarter with $285 million in cash, cash equivalents and investments due to continued healthy cash flow from operations.

Business Highlights

All of the company’s major product categories, Access, Broadcast and Broad-based, grew sequentially again in the third quarter. The company believes it is benefiting from growth trends in energy efficiency, the “Internet of Everything”, and the explosion in demand for bandwidth, all of which drive an increasing need for mixed-signal ICs.

The Broad-based business was up 15 percent as the company’s microcontroller (MCU) products posted record revenue. The increase, driven by both organic growth and the acquisition of ZigBee® wireless products, resulted from market share gains in communications infrastructure, consumer devices, smart energy, home automation and security. The company’s power products benefited from customers’ power system re-designs, growing 20 percent sequentially.

The Broadcast business increased in both audio and video as consumer equipment makers continued to build ahead of the holidays. Design win traction remains very strong, with the company’s video products closing on the majority of 2013 TV models, enabling continued share gains into next year. The Access products also posted sequential growth due to new ramps in PBX systems, voice over cable and Power over Ethernet applications.

“Our Broad-based business has achieved critical mass, and with double-digit annual growth rates, it is on track to be the majority of our business as we exit the year,” said Tyson Tuttle, president and CEO of Silicon Laboratories. “We’ve aligned our product focus to capitalize on the most important trends impacting mixed-signal ICs, and I feel good about extending the breadth and quality of the growth we’re seeing in the business into 2013.”

The company expects revenue for the fourth quarter to be in the range of $145 to $150 million.

Webcast and Conference Call

A conference call discussing the quarterly results will follow this press release 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 (855) 859-2056 or +1 (404) 537-3406 (international) and by entering 39712936. The replay will be available through November 7.

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; difficulties developing new products that achieve market acceptance; dependence on a limited number of products and customers; intellectual property litigation risks; inventory-related risks; risks associated with acquisitions; difficulties managing international activities; difficulties managing our manufacturers and subcontractors; risks that Silicon Laboratories may not be able to manage strains associated with its growth; credit risks associated with our accounts receivable; dependence on key personnel; risks associated with divestitures; 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; 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 and the Silicon Labs logo are trademarks of Silicon Laboratories Inc. All other product names noted herein may be trademarks of their respective holders.

       
Silicon Laboratories Inc.
Condensed Consolidated Statements of Income
(In thousands, except per share data)
(Unaudited)
 
Three Months Ended Nine Months Ended
September 29,

2012

    October 1,

2011

September 29,

2012

    October 1,

2011

Revenues $ 149,461 $ 119,100 $ 410,833 $ 364,933
Cost of revenues   62,968     46,203     166,442     143,666  
Gross margin 86,493 72,897 244,391 221,267
Operating expenses:
Research and development 34,768 31,715 101,943 101,248
Selling, general and administrative   24,495     27,254     82,075     85,168  
Operating expenses   59,263     58,969     184,018     186,416  
Operating income 27,230 13,928 60,373 34,851
Other income (expense):
Interest income 243 388 1,103 1,432
Interest expense (234 ) (4 ) (299 ) (14 )
Other income (expense), net   (161 )   (81 )   807     292  
Income before income taxes 27,078 14,231 61,984 36,561
Provision for income taxes   17,054     2,976     17,131     13,894  
 

Net income

$ 10,024   $ 11,255   $ 44,853   $ 22,667  
 
Earnings per share:
Basic $ 0.24 $ 0.26 $ 1.06 $ 0.52
Diluted $ 0.24 $ 0.26 $ 1.04 $ 0.50
 
Weighted-average common shares outstanding:
Basic 41,735 42,834 42,279 43,902
Diluted 42,520 43,919 43,261 45,305
 
 
Unaudited Reconciliation of GAAP to Non-GAAP Financial Measures
(In thousands, except per share data)
   
Non-GAAP Income Statement Items Three Months Ended

September 29, 2012

GAAP

Measure

    GAAP

Percent of Revenue

    Stock

Compensation Expense *

    Termination Costs    

Acquisition Related
Items

    Headquarters Purchase

Items

    Non-GAAP

Measure

   

Non-GAAP

Percent of Revenue

Revenues $ 149,461
 
Gross margin 86,493 57.9 % $ 261 $ -- $ 4,466 $ -- $ 91,220 61.0 %
 
Research and

development

34,768 23.3 % 3,039 -- --

--

31,729

21.2 %
 
Selling, general and

administrative

24,495

16.4

%

4,096

1,428

358

(8,113

)

26,726

17.9 %
 
Operating expenses 59,263 39.7 % 7,135 1,428 358 (8,113 ) 58,455 39.1 %
 
Operating income 27,230 18.2 % 7,396 1,428 4,824 (8,113 ) 32,765 21.9 %
 
                                     
Non-GAAP Diluted Earnings Per Share Three Months Ended

September 29, 2012

GAAP

Measure

Stock

Compensation Expense *

Termination Costs

Acquisition Related
Items

Headquarters Purchase

Items

Non-GAAP

Measure

Net income $ 10,024 $ 6,595 $ 1,136 $ 13,651 $ (5,274 ) $ 26,132
 
Diluted shares outstanding 42,520 42,520
 
Diluted earnings per share $ 0.24 $ 0.61

* Excludes stock compensation recognized in connection with terminations costs for our former CEO.

     
Silicon Laboratories Inc.
Condensed Consolidated Balance Sheets
(In thousands, except per share data)
(Unaudited)
 
September 29,

2012

December 31,

2011

Assets
Current assets:
Cash and cash equivalents $ 125,505 $ 94,964
Short-term investments 148,573 212,526

Accounts receivable, net of allowances for doubtful accounts of $789 at September 29, 2012 and $725 at December 31, 2011

75,749 55,351
Inventories 42,523 34,778
Deferred income taxes 15,870 11,563
Prepaid expenses and other current assets   36,735     43,867  
Total current assets 444,955 453,049
Long-term investments 11,418 17,477
Property and equipment, net 136,321 25,141
Goodwill 130,069 115,489
Other intangible assets, net 94,611 60,005
Other assets, net   37,669     34,830  
Total assets $ 855,043   $ 705,991  
 
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 35,476 $ 26,354
Current portion of long-term debt 5,000 --
Accrued expenses 41,441 30,857
Deferred income on shipments to distributors 30,903 24,962
Income taxes   3,339     665  
Total current liabilities 116,159 82,838
Long-term debt 95,000 --
Other non-current liabilities   22,663     24,214  
Total liabilities 233,822 107,052
Commitments and contingencies
Stockholders' equity:

Preferred stock--$0.0001 par value; 10,000 shares authorized; no shares issued and outstanding

-- --

Common stock--$0.0001 par value; 250,000 shares authorized; 41,706 and 42,068 shares issued and outstanding at September 29, 2012 and December 31, 2011, respectively

4 4
Additional paid-in capital -- 14,749
Retained earnings 622,098 586,653
Accumulated other comprehensive loss   (881 )   (2,467 )
Total stockholders' equity   621,221     598,939  
Total liabilities and stockholders' equity $ 855,043   $ 705,991  
 
 
Silicon Laboratories Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
 
Nine Months Ended
September 29,

2012

    October 1,

2011

Operating Activities
Net income $ 44,853 $ 22,667
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation of property and equipment 10,247 10,119
Net gain on the purchase of property and equipment (8,457 ) --
Amortization of other intangible assets and other assets 11,001 8,570
Stock-based compensation expense 23,796 27,224
Income tax benefit from employee stock-based awards 2,301 2,301
Excess income tax benefit from employee stock-based awards (2,470 ) (2,111 )
Deferred income taxes 5,024 2,011
Changes in operating assets and liabilities:
Accounts receivable (18,470 ) (11,581 )
Inventories (5,994 ) 1,670
Prepaid expenses and other assets 13,283 227
Accounts payable 9,113 871
Accrued expenses (797 ) 819
Deferred income on shipments to distributors 5,267 1,495
Income taxes   (4,378 )   1,287  
Net cash provided by operating activities 84,319 65,569
Investing Activities
Purchases of available-for-sale investments (138,822 ) (113,784 )
Proceeds from sales and maturities of marketable securities 209,972 166,262
Purchases of property and equipment (99,720 ) (7,472 )
Purchases of other assets (6,146 ) (891 )
Acquisition of businesses, net of cash acquired   (71,852 )   (27,262 )
Net cash provided by (used in) investing activities (106,568 ) 16,853
Financing Activities
Proceeds from issuance of common stock, net of shares withheld for taxes 3,035 2,320
Excess income tax benefit from employee stock-based awards 2,470 2,111
Repurchases of common stock (51,040 ) (110,063 )
Proceeds from issuance of long-term debt, net 98,325 --
Payments on debt   --     (7,174 )
Net cash provided by (used in) financing activities   52,790     (112,806 )
 
Increase (decrease) in cash and cash equivalents 30,541 (30,384 )
Cash and cash equivalents at beginning of period   94,964     138,567  
Cash and cash equivalents at end of period $ 125,505   $ 108,183  

Contact:

Silicon Laboratories Inc.
Shannon Pleasant, 512-464 9254
shannon.pleasant@silabs.com

Media Contact

Dale Weisman

Global PR Manager

400 West Cesar Chavez Austin, Texas 78701
Phone: +1 512-532-5871
Mobile: +1 512-743-6240
Dale.Weisman@silabs.com