Silicon Laboratories Reports Strong Top and Bottom Line Performance
Company Grows Revenue by 29 Percent, Achieves Model Performance and Announces Additional $100 Million Share Repurchase Authorization
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.
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.
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Silicon Laboratories Inc. |
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Condensed Consolidated Statements of Income |
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(In thousands, except per share data) |
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(Unaudited) |
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| Three Months Ended | Nine Months Ended | |||||||||||||||
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October 4, |
September 29, |
October 4, |
September 29, |
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| Revenues | $ | 113,483 | $ | 87,938 | $ | 316,282 | $ | 237,349 | ||||||||
| Cost of revenues | 44,174 | 34,986 | 120,593 | 93,658 | ||||||||||||
| Gross profit | 69,309 | 52,952 | 195,689 | 143,691 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Research and development | 25,785 | 20,844 | 73,836 | 67,796 | ||||||||||||
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Selling, general and administrative |
25,940 | 21,693 | 75,035 | 67,267 | ||||||||||||
| In-process research and development | 10,250 | -- | 10,250 | -- | ||||||||||||
| Operating expenses | 61,975 | 42,537 | 159,121 | 135,063 | ||||||||||||
| Operating income | 7,334 | 10,415 | 36,568 | 8,628 | ||||||||||||
| Other income (expense): | ||||||||||||||||
| Interest income | 2,073 | 7,136 | 9,277 | 18,003 | ||||||||||||
| Interest expense | (71 | ) | (129 | ) | (325 | ) | (527 | ) | ||||||||
| Other income (expense), net | (43 | ) | (214 | ) | (540 | ) | (384 | ) | ||||||||
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Income from continuing operations before income taxes |
9,293 | 17,208 | 44,980 | 25,720 | ||||||||||||
| Provision (benefit) for income taxes | 8,139 | (416 | ) | 18,369 | 1,950 | |||||||||||
| Income from continuing operations | 1,154 | 17,624 | 26,611 | 23,770 | ||||||||||||
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Income from discontinued operations, net of income taxes |
-- | 2,810 | -- | 159,750 | ||||||||||||
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Net income |
$ | 1,154 | $ | 20,434 | $ | 26,611 | $ | 183,520 | ||||||||
| Basic earnings per share: | ||||||||||||||||
| Income from continuing operations | $ | 0.02 | $ | 0.32 | $ | 0.54 | $ | 0.43 | ||||||||
| Net income | $ | 0.02 | $ | 0.37 | $ | 0.54 | $ | 3.34 | ||||||||
| Diluted earnings per share: | ||||||||||||||||
| Income from continuing operations | $ | 0.02 | $ | 0.31 | $ | 0.53 | $ | 0.42 | ||||||||
| Net income | $ | 0.02 | $ | 0.36 | $ | 0.53 | $ | 3.25 | ||||||||
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Weighted-average common shares outstanding: |
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| Basic | 47,331 | 55,215 | 49,036 | 54,996 | ||||||||||||
| Diluted | 48,385 | 56,767 | 50,083 | 56,481 | ||||||||||||
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Unaudited Reconciliation of GAAP to Non-GAAP Financial Measures |
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(In thousands, except per share data) |
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Non-GAAP Income |
Three Months Ended |
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GAAP |
GAAP |
Stock |
In-process |
Cost of Sales |
Non-GAAP |
Non-GAAP |
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| Revenues | $ | 113,483 | ||||||||||||||||||||||
| Gross profit | 69,309 | 61.1 | % | $ | 100 | $ | -- | $ | 1,398 | $ | 70,807 | 62.4 | % | |||||||||||
| Operating income | 7,334 | 6.5 | % | 9,996 | 10,250 | 1,398 | 28,978 | 25.5 | % | |||||||||||||||
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Non-GAAP Diluted |
Three Months Ended |
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GAAP |
Acquisition |
Stock |
In-process |
Cost of Sales |
Non-GAAP |
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| Income from continuing operations | $ | 1,154 | $ | 11,756 | $ | 8,646 | $ | 10,250 |
$ |
909 |
$ |
32,715 |
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| Diluted shares outstanding | 48,385 | -- | -- | -- | -- | 48,385 | ||||||||||||||||||
| Diluted earnings per share from continuing operations | $ | 0.02 |
$ |
0.68 |
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Non-GAAP Diluted |
Three Months Ended |
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GAAP |
Acquisition |
Stock |
In-process |
Cost of Sales |
One Time |
Non-GAAP |
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| Income from continuing operations | $ | 1,154 | $ | 11,756 | $ | 8,646 | $ | 10,250 |
$ |
909 |
$ |
(9,051 |
) |
$ |
23,664 |
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| Diluted shares outstanding | 48,385 | -- | -- | -- | -- | -- | 48,385 | |||||||||||||||||
| Diluted earnings per share from continuing operations | $ | 0.02 |
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$ |
0.49 |
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Non-GAAP Diluted |
Three Months Ended |
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GAAP |
Stock |
Non-GAAP |
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| Income from continuing operations | $ | 17,624 | $ | 7,013 | $ | 24,637 | ||||||||||||||||||
| Diluted shares outstanding | 56,767 | -- | 56,767 | |||||||||||||||||||||
| Diluted earnings per share from continuing operations | $ | 0.31 |
$ |
0.43 |
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Silicon Laboratories Inc. |
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Condensed Consolidated Balance Sheets |
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(In thousands, except per share data) |
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October 4, |
December 29, |
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| (Unaudited) | |||||||
| Assets | |||||||
| Current assets: | |||||||
| Cash and cash equivalents | $ | 151,311 | $ | 264,408 | |||
| Short-term investments | 131,496 | 308,566 | |||||
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Accounts receivable, net of allowance for doubtful accounts of $1,004 at October 4, 2008 and $517 at December 29, 2007 |
61,601 | 51,211 | |||||
| Inventories | 34,360 | 28,587 | |||||
| Deferred income taxes | 6,003 | 6,025 | |||||
| Prepaid expenses and other current assets | 11,451 | 33,895 | |||||
| Total current assets | 396,222 | 692,692 | |||||
| Long-term investments | 53,367 | -- | |||||
| Property, equipment and software, net | 29,372 | 28,157 | |||||
| Goodwill | 107,494 | 73,199 | |||||
| Other intangible assets, net | 51,707 | 18,077 | |||||
| Other assets, net | 22,194 | 28,121 | |||||
| Total assets | $ | 660,356 | $ | 840,246 | |||
| Liabilities and Stockholders’ Equity | |||||||
| Current liabilities: | |||||||
| Accounts payable | $ | 32,407 | $ | 33,321 | |||
| Accrued expenses | 23,137 | 26,397 | |||||
| Deferred income on shipments to distributors | 29,413 | 28,448 | |||||
| Income taxes | 4,688 | 5,226 | |||||
| Total current liabilities | 89,645 | 93,392 | |||||
| Long-term obligations and other liabilities | 45,537 | 43,309 | |||||
| Total liabilities | 135,182 | 136,701 | |||||
| Commitments and contingencies | |||||||
| Stockholders' equity: | |||||||
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Preferred stock--$0.0001 par value; 10,000 shares authorized; no shares issued and outstanding |
-- | -- | |||||
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Common stock--$0.0001 par value; 250,000 shares authorized; 46,251 and 52,810 shares issued and outstanding at October 4, 2008 and December 29, 2007, respectively |
5 | 5 | |||||
| Additional paid-in capital | 102,736 | 303,682 | |||||
| Retained earnings | 426,469 | 399,858 | |||||
| Accumulated other comprehensive loss | (4,036 | ) | -- | ||||
| Total stockholders' equity | 525,174 | 703,545 | |||||
| Total liabilities and stockholders' equity | $ | 660,356 | $ | 840,246 | |||
Contacts
Silicon Laboratories Inc.
Shannon Pleasant, 512-464 9254
shannon.pleasant@silabs.com
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.
Silicon Laboratories Inc.
Condensed Consolidated Statements of Income
(In thousands, except per share data)
(Unaudited)
Three Months Ended Nine Months Ended
October 4, September 29, October 4, September 29,
2008 2007 2008 2007
Revenues $ 113,483 $ 87,938 $ 316,282 $ 237,349
Cost of revenues 44,174 34,986 120,593 93,658
Gross profit 69,309 52,952 195,689 143,691
Operating expenses:
Research and development 25,785 20,844 73,836 67,796
Selling, general and administrative 25,940 21,693 75,035 67,267
In-process research and development 10,250 -- 10,250 --
Operating expenses 61,975 42,537 159,121 135,063
Operating income 7,334 10,415 36,568 8,628
Other income (expense):
Interest income 2,073 7,136 9,277 18,003
Interest expense (71 ) (129 ) (325 ) (527 )
Other income (expense), net (43 ) (214 ) (540 ) (384 )
Income from continuing operations before income taxes 9,293 17,208 44,980 25,720
Provision (benefit) for income taxes 8,139 (416 ) 18,369 1,950
Income from continuing operations 1,154 17,624 26,611 23,770
Income from discontinued operations, net of income taxes -- 2,810 -- 159,750
Net income $ 1,154 $ 20,434 $ 26,611 $ 183,520
Basic earnings per share:
Income from continuing operations $ 0.02 $ 0.32 $ 0.54 $ 0.43
Net income $ 0.02 $ 0.37 $ 0.54 $ 3.34
Diluted earnings per share:
Income from continuing operations $ 0.02 $ 0.31 $ 0.53 $ 0.42
Net income $ 0.02 $ 0.36 $ 0.53 $ 3.25
Weighted-average common shares outstanding:
Basic 47,331 55,215 49,036 54,996
Diluted 48,385 56,767 50,083 56,481
Unaudited Reconciliation of GAAP to Non-GAAP Financial Measures
(In thousands, except per share data)
Non-GAAP Income Three Months Ended
Statement Items October 4, 2008
GAAP GAAP Stock In-process Cost of Sales Non-GAAP Non-GAAP
Measure Percent of Compensation Research & Fair Value Measure Percent of
Revenue Expense Development Adjustment Revenue
Revenues $ 113,483
Gross profit 69,309 61.1 % $ 100 $ -- $ 1,398 $ 70,807 62.4 %
Operating income 7,334 6.5 % 9,996 10,250 1,398 28,978 25.5 %
Non-GAAP Diluted Three Months Ended
Earnings Per Share October 4, 2008
GAAP Acquisition Stock In-process Cost of Sales Non-GAAP
Measure Tax Expense Compensation Research & Fair Value Measure
Expense Development Adjustment
Income from continuing operations $ 1,154 $ 11,756 $ 8,646 $ 10,250 $ 909 $ 32,715
Diluted shares outstanding 48,385 -- -- -- -- 48,385
Diluted earnings per share from continuing operations $ 0.02 $ 0.68
Non-GAAP Diluted Three Months Ended
Earnings Per Share October 4, 2008
Excluding
One Time Tax
Benefits
GAAP Acquisition Stock In-process Cost of Sales One Time Non-GAAP
Measure Tax Expense Compensation Research & Fair Value Tax Benefits Measure
Expense Development Adjustment
Income from continuing operations $ 1,154 $ 11,756 $ 8,646 $ 10,250 $ 909 $ (9,051 ) $ 23,664
Diluted shares outstanding 48,385 -- -- -- -- -- 48,385
Diluted earnings per share from continuing operations $ 0.02 $ 0.49
Non-GAAP Diluted Three Months Ended
Earnings Per Share September 29, 2007
GAAP Stock Non-GAAP
Measure Compensation Measure
Expense
Income from continuing operations $ 17,624 $ 7,013 $ 24,637
Diluted shares outstanding 56,767 -->Silicon Laboratories Inc. Condensed Consolidated Balance Sheets (In thousands, except per share data) October 4, December 29, 2008 2007 (Unaudited) Assets Current assets: Cash and cash equivalents $ 151,311 $ 264,408 Short-term investments 131,496 308,566 Accounts receivable, net of allowance for doubtful accounts of 61,601 51,211 $1,004 at October 4, 2008 and $517 at December 29, 2007 Inventories 34,360 28,587 Deferred income taxes 6,003 6,025 Prepaid expenses and other current assets 11,451 33,895 Total current assets 396,222 692,692 Long-term investments 53,367 -- Property, equipment and software, net 29,372 28,157 Goodwill 107,494 73,199 Other intangible assets, net 51,707 18,077 Other assets, net 22,194 28,121 Total assets $ 660,356 $ 840,246 Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 32,407 $ 33,321 Accrued expenses 23,137 26,397 Deferred income on shipments to distributors 29,413 28,448 Income taxes 4,688 5,226 Total current liabilities 89,645 93,392 Long-term obligations and other liabilities 45,537 43,309 Total liabilities 135,182 136,701 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; 46,251 5 5 and 52,810 shares issued and outstanding at October 4, 2008 and December 29, 2007, respectively Additional paid-in capital 102,736 303,682 Retained earnings 426,469 399,858 Accumulated other comprehensive loss (4,036 ) -- Total stockholders' equity 525,174 703,545 Total liabilities and stockholders' equity $ 660,356 $ 840,246
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SOURCE: Silicon Laboratories Inc.
Silicon Laboratories Inc.
Shannon Pleasant, 512-464 9254
shannon.pleasant@silabs.com