Silicon Laboratories Inc.
Apr 29, 2009

Silicon Laboratories Reports Better Than Expected First Quarter Results and Strong Outlook

Company Demonstrates Good Expense Control and Generates Solid Cash FlowAUSTIN, Texas, Apr 29, 2009 (BUSINESS WIRE) -- Silicon Laboratories Inc. (Nasdaq: SLAB), a leader in high-performance, analog-intensive, mixed-signal integrated circuits (ICs), today reported first quarter revenue of $83.7 million. The company's expense controls, better than expected revenue and model gross margin resulted in better than anticipated earnings per share performance and solid cash generation in the quarter.

First Quarter Financial Results

First quarter revenue of $83.7 million declined 16 percent sequentially versus the original projection of a 20 to 25 percent decline. Strong operating performance allowed the company to remain profitable on a GAAP basis. First quarter GAAP gross margin was flat sequentially at 60.5 percent. R&D investment for the period declined to $26.1 million and SG&A declined to $23.4 million. GAAP diluted earnings per share was one cent, significantly better than originally anticipated. Cash flow from operations was nearly $12 million.

The following non-GAAP results exclude the impact of stock compensation expense and other one-time charges. Non-GAAP gross margin held at the midpoint of the company's target range at 61 percent. Non-GAAP operating expenses declined five percent sequentially to $38.9 million as a result of tight controls over discretionary spending. Non-GAAP operating income was 14.5 percent at $12.1 million, an excellent result. Non-GAAP diluted earnings per share were $0.22, considerably better than anticipated. The reconciling charges are set forth in the financial measures table below.

During the first quarter, accounts receivable returned to normal levels as demand improved throughout the quarter. Inventory decreased again sequentially to $23.5 million. The company repurchased $5 million in shares and ended the quarter with a higher level of cash, cash equivalents and investments at $326 million.

Business Summary

The company's notable performance during the quarter was due primarily to several key customers gaining share in their respective markets and new product cycles.

The Broad-based business increased almost 15 percent year over year driven by growth in the timing and power businesses. Increasing share and new product momentum experienced during the first quarter is expected to continue into the second quarter. The RF business declined less than anticipated due to a strong ramp of the video demodulator with a major customer, as well as relatively better handset demand. Handsets represented the dominant share of the audio revenue, and new design win activity was strong. The Access business declined sequentially as customers reduced inventory levels. All three businesses, Broad-based, RF and Access are expected to grow sequentially in the second quarter.

"With the first quarter behind us, we are feeling good about our business, even in light of what we recognize is a very weak global economy," said Necip Sayiner, president and CEO of Silicon Laboratories. "We see Q1 as the cyclical bottom in terms of revenue and expect to benefit from strong product cycles and share gains going forward. We believe that our ability to hold margins, sustain our profitability and generate cash despite the depressed revenue puts us in a select group of companies well equipped to outperform this year."

For the second quarter of 2009, the company is guiding revenue in the range of $92 to $97 million.

Webcast and Conference Call

A conference call discussing the 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 1-866-415-2341 or +1 203-369-0686 (international). Replays will be available through May 13, 2009.

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 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
April 4,

2009

April 5,

2008

Revenues $ 83,701 $ 98,179
Cost of revenues 33,023 37,832
Gross margin 50,678 60,347
Operating expenses:
Research and development 26,069 24,673
Selling, general and administrative 23,442 24,609
Operating expenses 49,511 49,282
Operating income 1,167 11,065
Other income (expense):
Interest income 882 4,798
Interest expense (52 ) (145 )
Other income (expense), net (52 ) (142 )
Income before income taxes 1,945 15,576
Provision for income taxes 1,274 4,762

Net income

$ 671 $ 10,814
Earnings per share:
Basic $ 0.02 $ 0.21
Diluted $ 0.01 $ 0.21
Weighted-average common shares outstanding:
Basic 44,633 51,109
Diluted 45,083 52,000

Unaudited Reconciliation of GAAP to Non-GAAP Financial Measures

(In thousands, except per share data)

Non-GAAP Income
Statement Items

Three Months Ended

April 4, 2009

GAAP

Measure

GAAP
Percent of
Revenue

Stock
Compensation
Expense

Termination
Costs and
Impairments

Non-GAAP
Measure

Non-GAAP
Percent of
Revenue

Revenues $ 83,701
Gross margin 50,678 60.5 % $ 395 $ 10 $ 51,083 61.0 %
Operating expenses 49,511 59.1 % 9,754 811 38,946 46.5 %
Operating income 1,167 1.4 % 10,149 821 12,137 14.5 %

Non-GAAP Diluted
Earnings Per Share

Three Months Ended

April 4, 2009

GAAP
Measure

Stock
Compensation
Expense

Termination
Costs and
Impairments

Non-GAAP
Measure

Net Income $ 671 $ 8,641 $ 732

$

10,044

Diluted shares outstanding 45,083 -- -- 45,083
Diluted earnings per share $ 0.01 $ 0.22

Non-GAAP Income
Statement Items

Three Months Ended

January 3, 2009

GAAP
Measure

GAAP
Percent of
Revenue

Stock
Compensation
Expense

Termination
Costs and
Impairments

Non-GAAP
Measure

Non-GAAP
Percent of
Revenue

Revenues $ 99,348
Operating expenses 53,008 53.4 % $ 9,690 $ 1,859 $ 41,459 41.7 %

Silicon Laboratories Inc.

Condensed Consolidated Balance Sheets

(In thousands, except per share data)

(Unaudited)

April 4,

2009

January 3,

2009

Assets
Current assets:
Cash and cash equivalents $ 181,828 $ 172,272
Short-term investments 93,838 101,267
Accounts receivable, net of allowance for doubtful accounts of

$680 at April 4, 2009 and $1,011 at January 3, 2009

44,639 36,144
Inventories 23,525 28,293
Deferred income taxes 6,066 6,439
Prepaid expenses and other current assets 21,102 18,297
Total current assets 370,998 362,712
Long-term investments 50,799 51,821
Property, equipment and software, net 29,065 30,496
Goodwill 105,188 105,515
Other intangible assets, net 47,752 49,728
Other assets, net 18,975 23,973
Total assets $ 622,777 $ 624,245
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 20,025 $ 22,274
Accrued expenses 25,558 29,119
Deferred income on shipments to distributors 21,154 21,599
Income taxes 78 4
Total current liabilities 66,815 72,996
Long-term obligations and other liabilities 49,068 48,789
Total liabilities 115,883 121,785
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;

44,589 and 44,613 shares issued and outstanding at

April 4, 2009 and January 3, 2009, respectively

4 4
Additional paid-in capital 79,461 75,711
Retained earnings 433,464 432,793
Accumulated other comprehensive loss (6,035 ) (6,048 )
Total stockholders' equity 506,894 502,460
Total liabilities and stockholders' equity $ 622,777 $ 624,245

Silicon Laboratories Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

Three Months Ended
April 4,

2009

April 5,

2008

Operating Activities
Net income $ 671 $ 10,814
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization of property, equipment and software 2,953 2,621
Loss (gain) on disposal of property, equipment and software 8 (15 )
Amortization of other intangible assets and other assets 1,976 1,032
Stock compensation expense 10,149 10,221
Income tax benefit (detriment) from employee stock-based awards (118 ) 602
Excess income tax benefit from employee stock-based awards (50 ) (411 )
Deferred income taxes 3,589 (262 )
Changes in operating assets and liabilities:
Trading securities 2,600 --
Accounts receivable (8,168 ) 4,856
Inventories 4,781 1,666
Prepaid expenses and other assets 2,237 2,440
Accounts payable (2,105 ) (4,435 )
Accrued expenses (3,753 ) (4,989 )
Deferred income on shipments to distributors (445 ) (842 )
Income taxes (2,568 ) 351
Net cash provided by operating activities 11,757 23,649
Investing Activities
Purchases of available-for-sale investments (16,458 ) (79,237 )
Proceeds from sales and maturities of available-for-sale investments 22,095 248,818
Purchases of property, equipment and software (1,531 ) (1,278 )
Proceeds from the sale of assets -- 14,265
Purchases of other assets (499 ) (183 )
Net cash provided by investing activities 3,607 182,385
Financing Activities
Proceeds from issuance of common stock 661 4,534
Excess income tax benefit from employee stock-based awards 50 411
Repurchases of common stock (5,023 ) (143,022 )
Repurchases of stock to satisfy employee tax withholding (1,496 ) (1,494 )
Net cash used in financing activities (5,808 ) (139,571 )
Increase in cash and cash equivalents 9,556 66,463
Cash and cash equivalents at beginning of period 172,272 264,408
Cash and cash equivalents at end of period $ 181,828 $ 330,871

SOURCE: Silicon Laboratories Inc.

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