Silicon Labs Announces Second Quarter 2014 Results

July 25, 2014

Broad-based Products Fuel Record Revenue

AUSTIN, Texas--(BUSINESS WIRE)-- Silicon Labs (NASDAQ: SLAB), a leader in high-performance, analog-intensive, mixed-signal integrated circuits (ICs), today reported financial results for its second quarter ended June 28, 2014. Revenue in the second quarter exceeded the top end of guidance and established a new record at $154.9 million, which included $5.0 million of patent sale revenue, up from $145.7 million as reported in the first quarter.

Financial Highlights

On a GAAP basis:

Gross margin was 63.7 percent
R&D expenses were $41.8 million
SG&A expenses were $36.0 million
Operating income as a percentage of revenue was 13.4 percent
Diluted earnings per share were $0.32

On a non-GAAP basis (results exclude the impact of stock compensation, amortization from acquired intangible assets and certain other items as set forth in the reconciliation tables below):

Gross margin was 64.1 percent
R&D expenses were $34.4 million
SG&A expenses were $31.3 million
Operating income was 21.6 percent
Diluted earnings per share were $0.58

Business Highlights

Broad-based revenue established a new record at $79.7 million, up 10 percent sequentially.
Broadcast revenue was $50.5 million for the quarter, which included $5.0 million from a patent sale. The patent sale revenue resulted from the acceleration of a royalty arrangement and was not forecasted.
Access revenue also exceeded expectations at $24.7 million.

Product Highlights

Introduced a new family of ultra-low-power capacitive sensing MCUs, the C8051F97x MCU family, offering fast and accurate capacitive touch control technology backed by Silicon Labs' Simplicity Studio® development ecosystem.
Launched a new 32-bit hardware and firmware development kit that simplifies the process of developing "Made for iPod/iPhone/iPad" (MFi) accessories and accelerates time to market for MFi accessory developers.
Announced a comprehensive Wireless M-Bus software solution that simplifies the process of adding wireless connectivity to smart metering systems while enabling extended battery life.
Joined other industry leaders to form the Thread Group, leading the development of the next generation of IP-based wireless mesh networking for the Connected Home.
Won an EDN China Innovation Award in the category of "Innovation Excellence: Leading Technologies" for the EFM32™ Gecko family.

Business Outlook

The company expects revenue in the third quarter to be in the range of $153 million to $157 million and expects to establish another record in its Broad-based products. Third quarter diluted earnings per share are expected to be between $0.18 and $0.24 on a GAAP basis and between $0.45 and $0.51 on a non-GAAP basis.

"We are very pleased with our strong second quarter results, including record revenue in our Broad-based products," said Tyson Tuttle, CEO of Silicon Labs. "We are benefitting from our multi-year investment strategy for the IoT and Internet Infrastructure and realizing meaningful revenue growth."

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 Labs' 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 (404) 537-3406 (international) and by entering 39717389. The replay will be available through August 25.

About Silicon Labs

Silicon Labs is an industry leader in the innovation of high-performance, analog-intensive, mixed-signal ICs. Developed by a world-class engineering team with unsurpassed expertise in mixed-signal design, Silicon Labs' diverse portfolio of patented semiconductor solutions offers customers significant advantages in performance, size and power consumption. For more information about Silicon Labs, please visit www.silabs.com.

Forward-Looking Statements

This press release contains forward-looking statements based on Silicon Labs' current expectations. The words "believe," "estimate," "expect," "intend," "anticipate," "plan," "project," "will" and similar phrases as they relate to Silicon Labs are intended to identify such forward-looking statements. These forward-looking statements reflect the current views and assumptions of Silicon Labs 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 Labs may not be able to maintain its historical growth; quarterly fluctuations in revenues and operating results; difficulties developing new products that achieve market acceptance; dependence on a limited number of products and customers; intellectual property litigation risks; risks associated with acquisitions and divestitures; product liability risks; difficulties managing our distributors, manufacturers and subcontractors; inventory-related risks; difficulties managing international activities; risks that Silicon Labs may not be able to manage strains associated with its growth; credit risks associated with our accounts receivable; dependence on key personnel; stock price volatility; geographic concentration of manufacturers, assemblers, test service providers and customers in Asia that subjects Silicon Labs' business and results of operations to risks of natural disasters, epidemics, war and political unrest; debt-related risks; capital-raising risks; the competitive and cyclical nature of the semiconductor industry; average selling prices of products may decrease significantly and rapidly; information technology risks; conflict mineral risks and other factors that are detailed in the SEC filings of Silicon Laboratories Inc.Silicon Labs disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. References in this press release to Silicon Labs shall mean Silicon Laboratories Inc.

Note to editors: Silicon Laboratories, Silicon Labs, the Silicon Labs logo and Simplicity Studio 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						Six Months Ended
	June 28, 2014			June 29, 2013			June 28, 2014			June 29, 2013
Revenues	$	154,918		$	141,543		$	300,609		$	286,918
Cost of revenues		56,255			52,770			114,841			110,773
Gross margin		98,663			88,773			185,768			176,145
Operating expenses:
Research and development		41,844			37,387			84,329			74,969
Selling, general and administrative		36,017			32,357			70,628			61,510
Operating expenses		77,861			69,744			154,957			136,479
Operating income		20,802			19,029			30,811			39,666
Other income (expense):
Interest income		200			152			502			487
Interest expense		(780	)		(831	)		(1,578	)		(1,673	)
Other income (expense), net		(6	)		114			61			62
Income before income taxes		20,216			18,464			29,796			38,542
Provision for income taxes		5,937			5,852			7,407			5,896

Net income	$	14,279		$	12,612		$	22,389		$	32,646

Earnings per share:
Basic	$	0.33		$	0.30		$	0.52		$	0.77
Diluted	$	0.32		$	0.29		$	0.51		$	0.76

Weighted-average common shares outstanding:
Basic		43,462			42,552			43,271			42,370
Diluted		44,218			43,269			44,137			43,191



Unaudited Reconciliation of GAAP to Non-GAAP Financial Measures (In thousands, except per share data)

Non-GAAP Income Statement Items	Three Months Ended June 28, 2014
	GAAP Measure		GAAP Percent of Revenue			Stock Compensation Expense		Intangible Asset Amortization		Acquisition Related Items			Non- GAAP Measure		Non-GAAP Percent of Revenue
Revenues	$	154,918

Gross margin		98,663		63.7	%	$	178	$	390	$	--		$	99,231	64.1	%

Research and development		41,844		27.0	%		4,327		3,104		--			34,413	22.2	%

Selling, general and administrative		36,017		23.3	%		4,777		729		(822	)		31,333	20.3	%

Operating income		20,802		13.4	%		9,282		4,223		(822	)		33,485	21.6	%


Non-GAAP Diluted Earnings Per Share			Three Months Ended June 28, 2014
Non-GAAP Diluted Earnings Per Share			Three Months Ended June 28, 2014
			GAAP Measure			Stock Compensation Expense		Intangible Asset Amortization		Acquisition Related Items			Non- GAAP Measure
Net income			$	14,279		$	8,695	$	3,388	$	(822	)	$	25,540

Diluted shares outstanding				44,218			--		--		--			44,218

Diluted earnings per share			$	0.32									$	0.58


Unaudited Forward-Looking Statements Regarding Business Outlook (In thousands, except per share information)


Business Outlook	Three Months Ending September 27, 2014
	High		Low
Estimated GAAP diluted earnings per share	$	0.24	$	0.18

Estimated non-GAAP charges		0.27		0.27

Estimated non-GAAP diluted earnings per share	$	0.51	$	0.45



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

	June 28, 2014			December 28, 2013
Assets
Current assets:
Cash and cash equivalents	$	93,290		$	95,800
Short-term investments		235,645			179,593
Accounts receivable, net of allowances for doubtful accounts of $788 at June 28, 2014 and $797 at December 28, 2013		69,042			72,124
Inventories		45,557			45,271
Deferred income taxes		17,658			18,878
Prepaid expenses and other current assets		47,785			47,651
Total current assets		508,977			459,317
Long-term investments		10,993			10,632
Property and equipment, net		129,357			132,445
Goodwill		228,781			228,781
Other intangible assets, net		124,106			131,593
Other assets, net		22,251			28,382
Total assets	$	1,024,465		$	991,150

Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	24,745		$	22,126
Current portion of long-term debt		10,000			7,500
Accrued expenses		65,672			45,975
Deferred income on shipments to distributors		33,437			30,853
Income taxes		896			2,693
Total current liabilities		134,750			109,147
Long-term debt		82,500			87,500
Other non-current liabilities		29,610			55,941
Total liabilities		246,860			252,588
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; 43,406 and 42,779 shares issued and outstanding at June 28, 2014 and December 28, 2013, respectively		4			4
Additional paid-in capital		65,199			48,630
Retained earnings		713,001			690,612
Accumulated other comprehensive loss		(599	)		(684	)
Total stockholders' equity		777,605			738,562
Total liabilities and stockholders' equity	$	1,024,465		$	991,150



Silicon Laboratories Inc. Condensed Consolidated Statements of Cash Flows (In thousands) (Unaudited)

	Six Months Ended
	June 28, 2014			June 29, 2013
Operating Activities
Net income	$	22,389		$	32,646
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation of property and equipment		6,427			6,634
Amortization of other intangible assets and other assets		8,839			5,635
Stock-based compensation expense		18,559			13,684
Income tax benefit (shortfall) from stock-based awards		377			(489	)
Excess income tax benefit from stock-based awards		(589	)		(243	)
Deferred income taxes		4,665			9,277
Changes in operating assets and liabilities:
Accounts receivable		3,082			9,388
Inventories		(123	)		(1,028	)
Prepaid expenses and other assets		3,394			5,023
Accounts payable		3,846			(2,271	)
Accrued expenses		(4,902	)		(6,013	)
Deferred income on shipments to distributors		2,584			293
Income taxes		(5,130	)		(6,439	)
Net cash provided by operating activities		63,418			66,097

Investing Activities
Purchases of available-for-sale investments		(117,744	)		(121,994	)
Proceeds from sales and maturities of available-for-sale investments		61,803			146,870
Purchases of property and equipment		(3,339	)		(6,498	)
Purchases of other assets		(2,726	)		(2,438	)
Net cash provided by (used in) investing activities		(62,006	)		15,940

Financing Activities
Proceeds from issuance of common stock, net of shares withheld for taxes		8,943			9,512
Excess income tax benefit from stock-based awards		589			243
Repurchases of common stock		(10,954	)		--
Payments on debt		(2,500	)		(3,750	)
Net cash provided by (used in) financing activities		(3,922	)		6,005

Increase (decrease) in cash and cash equivalents		(2,510	)		88,042
Cash and cash equivalents at beginning of period		95,800			105,426
Cash and cash equivalents at end of period	$	93,290		$	193,468

Silicon Labs
Jalene Hoover, +1-512-428-1610
Jalene.Hoover@silabs.com

Source: Silicon Laboratories Inc.

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Release Details

Silicon Labs Announces Second Quarter 2014 Results