Press Release

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Oct 29, 2008
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
AUSTIN, Texas, Oct 29, 2008 (BUSINESS WIRE) -- 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.

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.


Silicon Laboratories Inc.

Condensed Consolidated Statements of Income

(In thousands, except per share data)

(Unaudited)

 

    Three Months Ended   Nine Months Ended
   

October 4,
2008

 

September 29,
2007

 

October 4,
2008

 

September 29,
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
Statement Items

 

Three Months Ended
October 4, 2008

   

GAAP


Measure

 

GAAP
Percent of
Revenue

 

Stock


Compensation
Expense

 

In-process
Research &
Development

 

Cost of Sales
Fair Value
Adjustment

 

Non-GAAP
Measure

 

Non-GAAP
Percent of
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
Earnings Per Share

 

Three Months Ended
October 4, 2008

   
   

GAAP
Measure

 

Acquisition
Tax Expense

 

Stock
Compensation
Expense

 

In-process
Research &
Development

 

Cost of Sales
Fair Value


Adjustment

 

Non-GAAP
Measure

       
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
Earnings Per Share
Excluding One Time Tax
Benefits

 

Three Months Ended
October 4, 2008

   

GAAP
Measure

 

Acquisition
Tax Expense

 

Stock


Compensation
Expense

 

In-process
Research &
Development

 

Cost of Sales
Fair Value
Adjustment

 

One Time
Tax Benefits

 

Non-GAAP
Measure

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
Earnings Per Share

 

Three Months Ended
September 29, 2007

                           
   

GAAP
Measure

 

Stock
Compensation
Expense

 

Non-GAAP
Measure

                           
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

                           



Silicon Laboratories Inc.

Condensed Consolidated Balance Sheets

(In thousands, except per share data)

               
   

October 4,


2008

 

December 29,
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 $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:              

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 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


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.



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 
-->

SOURCE: Silicon Laboratories Inc.

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