Silicon Laboratories Inc.
Jul 26, 2017

Silicon Labs Announces Record Revenue in Second Quarter 2017

-- IoT Grows to More Than 50 Percent of Total Revenue --

AUSTIN, Texas, July 26, 2017 /PRNewswire/ -- Silicon Labs (NASDAQ: SLAB), a leading provider of silicon, software and solutions for a smarter, more connected world, today reported financial results for its second quarter ended July 1, 2017. Revenue in the second quarter exceeded the high end of guidance at $190 million, up from $179 million in the first quarter. Second quarter GAAP and non-GAAP earnings per share (EPS) were $0.38 and $0.79, respectively.

"Our second quarter 2017 financial results reflect outstanding year-on-year progress, with 12 percent growth in product revenue," said Tyson Tuttle, CEO of Silicon Labs. "Five years ago, we accelerated our focus on the Internet of Things through a combination of organic investment and strategic acquisitions. This quarter, IoT surpassed 50 percent of total revenue, driving target model performance in year-on-year product revenue growth, gross margin and operating income. Our strategy is coming together as we focus on core strategic growth drivers and capture share in target markets."

Second Quarter Financial Highlights

  • IoT revenue established a new record, increasing to $98 million, up 11% sequentially and 27% year-on-year.
  • Infrastructure revenue increased to $38 million, up 6% sequentially and up 7% year-on-year, exclusive of $5 million of patent sale revenue in the second quarter of 2016.
  • Broadcast revenue declined to $37 million, down 2% sequentially and 4% year-on-year.
  • Access revenue declined to $17 million, down 2% sequentially and 10% year-on-year.

On a GAAP basis:

  • GAAP gross margin was 59.5%.
  • GAAP R&D expenses were $52 million.
  • GAAP SG&A expenses were $40 million.
  • GAAP operating income as a percentage of revenue was 11.0%.
  • GAAP diluted earnings per share were $0.38.

On a non-GAAP basis, excluding the impact of stock compensation, amortization of acquired intangible assets, non-cash interest expense on convertible notes, and certain other items as set forth in the reconciliation tables below:

  • Non-GAAP gross margin was 59.7%.
  • Non-GAAP R&D expenses were $42 million.
  • Non-GAAP SG&A expenses were $33 million.
  • Non-GAAP operating income as a percentage of revenue was 20.5%.
  • Non-GAAP diluted earnings per share were $0.79.

Product Highlights

  • Launched the new EFM32GG11 Giant Gecko microcontroller, offering the most advanced capabilities and largest memory footprint in the low-power MCU market.
  • Introduced a comprehensive suite of software and hardware that supports the new Bluetooth® mesh specification, addressing smart home, lighting, beacons and asset tracking applications.
  • Launched the CP2615 USB-to-I2S bridge chip, providing a simple, turnkey solution for transferring digital audio data.
  • Introduced the Si54x Ultra Series™ family of high-performance crystal oscillators, offering the industry's lowest jitter frequency-flexible solution and shortest lead times for a wide range of networking and communications applications.

Business Highlights

  • Delivered the keynote at the Design Automation Conference in Austin, Texas, on the topic of "Accelerating the IoT."
  • Won Somfy's Supplier Innovation Award for providing groundbreaking Wireless Gecko silicon and software, enabling flexible control and integration of Somfy's motorized window coverings into connected living and building experiences.

Business Outlook

The company expects revenue in the third quarter to be in the range of $193 million to $199 million, and also estimates the following:

On a GAAP basis:

  • GAAP gross margin at approximately 58.5%.
  • GAAP operating expenses between $92.5 and $93 million.
  • GAAP effective tax rate at 11.0%.
  • GAAP diluted earnings per share between $0.35 and $0.41.

On a non-GAAP basis, and excluding the impact of stock compensation, amortization of acquired intangible assets, non-cash interest expense on convertible notes, and certain other items as set forth in the reconciliation tables below:

  • Non-GAAP gross margin at 58.5%.
  • Non-GAAP operating expenses between $74.5 and $75.0 million.
  • Non-GAAP effective tax rate at 11.0%.
  • Non-GAAP diluted earnings per share between $0.78 and $0.84.

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 on Silicon Labs' website (www.silabs.com) under Investor Relations. 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 entering conference ID 8461186. The replay will be available through August 26, 2017.

About Silicon Labs

Silicon Labs (NASDAQ: SLAB) is a leading provider of silicon, software and solutions for a smarter, more connected world. Our award-winning technologies are shaping the future of the Internet of Things, Internet infrastructure, industrial automation, consumer and automotive markets. Our world-class engineering team creates products focused on performance, energy savings, connectivity and simplicity. 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; cyber-attacks against our products and our networks; 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 "S" symbol, the Silicon Labs logo, and Ultra Series are trademarks of Silicon Laboratories Inc. All other product names noted herein may be trademarks of their respective holders.

CONTACT: Jalene Hoover, +1 (512) 428-1610, Jalene.Hoover@silabs.com


Silicon Laboratories Inc.
Condensed Consolidated Statements of Income
(In thousands, except per share data)
(Unaudited)



Three Months Ended


Six Months Ended


July 1,
2017


July 2,
2016


July 1,
2017


July 2,
2016

Revenues

$190,098


$174,908


$369,126


$336,933

Cost of revenues

76,906


66,614


150,773


133,108

Gross margin

113,192


108,294


218,353


203,825

Operating expenses:








   Research and development

52,432


51,635


104,756


100,681

   Selling, general and administrative

39,826


39,045


79,981


78,682

Operating expenses

92,258


90,680


184,737


179,363

Operating income

20,934


17,614


33,616


24,462

Other income (expense):








   Interest income and other, net

1,595


296


2,171


176

   Interest expense

(4,699)


(641)


(4,501)


(1,296)

Income before income taxes

17,830


17,269


31,286


23,342

Provision (benefit) for income taxes

1,261


1,710


(709)


1,975

 

Net income

$  16,569


$  15,559


$  31,995


$  21,367









Earnings per share:








   Basic

$      0.39


$      0.37


$      0.76


$      0.51

   Diluted

$      0.38


$      0.37


$      0.74


$      0.51









Weighted-average common shares outstanding:








   Basic

42,478


41,775


42,287


41,702

   Diluted

43,178


42,284


43,104


42,242

 

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


Non-GAAP Income Statement Items


Three Months Ended
July 1, 2017



GAAP
Measure


GAAP
Percent of
Revenue


Stock
Compensation
Expense


Intangible
Asset
Amortization


Acquisition
Related
Items


Non-GAAP
Measure


Non-GAAP
Percent of
Revenue

Revenues


$190,098




























Gross margin


113,192


59.5%


$     264


$      --


$   --


$113,456


59.7%
















Research and

  development


52,432


27.6%


5,503


5,048


 

--


41,881


22.1%
















Selling, general and

  administrative


39,826


 

20.9%


5,399


1,647


234


32,546


 

17.1%
















Operating income


20,934


11.0%


11,166


6,695


234


39,029


20.5%































Non-GAAP Earnings Per Share


Three Months Ended
July 1, 2017



GAAP

Measure


Stock

Compensation
Expense*


Intangible
Asset
Amortization*


Acquisition
Related
Items*


Non-cash
Interest
Expense*


Income Tax
Adjustments


Non-GAAP
Measure

Net income


$16,569


$11,166


$6,695


$234


$2,640


$(3,319)


$33,985
















Diluted shares

   outstanding


43,178












 

43,178
















Diluted earnings

   per share


$    0.38












 

$    0.79


* Represents pre-tax amounts

 

Unaudited Forward-Looking Statements Regarding Business Outlook
(In millions, except per share data)


Business Outlook


Three Months Ending

September 30, 2017



GAAP

Measure


Non-GAAP

Adjustments


Non-GAAP

Measure

Gross margin


58.5%


0.0%


58.5%








Operating expenses


$92.5 - $93


$18


$74.5 - $75








Effective tax rate


11.0%


0.0%


11.0%








Diluted earnings per share - low


$0.35


$0.43


$0.78








Diluted earnings per share - high


$0.41


$0.43


$0.84

 

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



July 1,
 2017


December 31,
2016

Assets




Current assets:




   Cash and cash equivalents

$   210,615


$   141,106

   Short-term investments

451,114


153,961

   Accounts receivable, net

75,488


74,401

   Inventories

67,427


59,578

   Prepaid expenses and other current assets

46,862


61,805

Total current assets

851,506


490,851

Long-term investments

5,379


5,196

Property and equipment, net

130,909


129,559

Goodwill

288,629


276,130

Other intangible assets, net

96,819


103,565

Other assets, net

61,085


76,543

Total assets

$1,434,327


$1,081,844





Liabilities and Stockholders' Equity




Current liabilities:




   Accounts payable

$     39,989


$     39,577

   Accrued expenses

50,797


50,100

   Deferred income on shipments to distributors

48,914


45,568

   Income taxes

3,543


4,450

Total current liabilities

143,243


139,695

Long-term debt

--


72,500

Convertible debt

335,639


--

Other non-current liabilities

43,240


42,691

Total liabilities

522,122


254,886

Commitments and contingencies




Stockholders' equity:




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

      shares issued

--


--

   Common stock - $0.0001 par value; 250,000 shares authorized;  

      42,539 and 41,889  shares issued and outstanding at

      July 1, 2017 and December 31, 2016, respectively

4


4

   Additional paid-in capital

76,409


24,463

   Retained earnings

836,210


801,999

   Accumulated other comprehensive income (loss)

(418)


492

Total stockholders' equity

912,205


826,958

Total liabilities and stockholders' equity

$1,434,327


$1,081,844

 

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



Six Months Ended


July 1,
2017


July 2,
2016


Operating Activities





Net income

$  31,995


$  21,367


Adjustments to reconcile net income to cash provided by operating activities:





   Depreciation of property and equipment

7,308


6,675


   Amortization of other intangible assets and other assets

13,571


15,534


   Amortization of debt discount and debt issuance costs 

3,907


--


   Stock-based compensation expense

21,652


20,861


   Income tax benefit (shortfall) from stock-based awards

--


(1,218)


   Deferred income taxes

(6,242)


817


   Changes in operating assets and liabilities:





      Accounts receivable

(887)


1,611


      Inventories

(7,737)


(2,888)


      Prepaid expenses and other assets

12,539


3,282


      Accounts payable

2,363


(1,680)


      Accrued expenses

141


4,372


      Deferred income on shipments to distributors

3,251


3,773


      Income taxes

(127)


(1,338)


      Other non-current liabilities

(1,169)


(10,737)


Net cash provided by operating activities

80,565


60,431







Investing Activities





Purchases of available-for-sale investments

(389,234)


(92,222)


Sales and maturities of available-for-sale investments

92,307


78,950


Purchases of property and equipment

(8,390)


(5,146)


Purchases of other assets

(1,784)


(2,215)


Acquisition of business, net of cash acquired

(13,658)


--


Net cash used in investing activities

(320,759)


(20,633)







Financing Activities





Proceeds from issuance of long-term debt, net

389,468


--


Payments on debt

(72,500)


(5,000)


Repurchases of common stock

--


(36,103)


Payment of taxes withheld for vested stock awards

(14,101)


(9,308)


Proceeds from the issuance of common stock

6,836


7,362


Payment of acquisition-related contingent consideration

--


(9,500)


Net cash provided by (used in) financing activities

309,703


(52,549)







Increase (decrease) in cash and cash equivalents

69,509


(12,751)


Cash and cash equivalents at beginning of period

141,106


114,085


Cash and cash equivalents at end of period

$210,615


$101,334


 

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SOURCE Silicon Laboratories, Inc.

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