Silicon Laboratories Inc.
Jul 25, 2011

Silicon Laboratories Reports Second Quarter Results

Strong Growth from Broad-based Products

AUSTIN, Texas--(BUSINESS WIRE)-- Silicon Laboratories Inc. (Nasdaq: SLAB), a leader in high-performance, analog-intensive, mixed-signal integrated circuits (ICs), today reported a 5.5 percent sequential increase in second quarter revenue to $126.2 million due to a record quarter in its Broad-based product lines.

Financial Highlights

During the quarter, the company demonstrated sequential improvement across key financial metrics. On a GAAP basis, which includes approximately $8.6 million in non-cash stock compensation charges, gross margin was up slightly at 60.4 percent for the second quarter. R&D investment was down in the second quarter to $34.2 million, and SG&A decreased significantly to $26.1 million. This resulted in fully diluted GAAP earnings per share of 29 cents.

The following non-GAAP results exclude the impact of stock compensation expense and certain other one-time items. Non-GAAP gross margin increased to 62.1 percent for the quarter, within the company's target range. Operating expenses declined to 42 percent of revenue. Specifically, R&D expense was $30.5 million and SG&A declined to $22.5 million. Operating income improved to 20.1 percent of revenue. Net income increased to $21.9 million in the second quarter, or 17.3 percent of revenue. Resulting second quarter diluted earnings per share were 48 cents. The reconciling charges are set forth in the financial measures table included below.

Business Highlights

The company's performance was driven by growth in all three of its main product lines, Broad-based, Access and Broadcast. The record quarter in Broad-based products was driven primarily by MCUs, with particular strength due to ramps of new products and customer programs. Video and timing products also delivered record revenue in the quarter. New mid-year model wins in video support the anticipated increase in the adoption rate of silicon tuner technology across TV makers, models and geographies.

CPE modems and FM tuners in handsets combined declined to 12 percent of company revenue. These maturing products have become a less significant share of total revenue, contributing to the long-term improvement in the complexion of the business.

"We've executed well in the first half of the year, achieving record revenue in many of our product lines while successfully navigating through the transition in our access and audio products. But, while the business is ready to sprint ahead on the legs of very strong products and share gains, we're facing weakening end-user demand in several of our markets," said Necip Sayiner, president and CEO of Silicon Laboratories. "While we find this frustrating, we remain focused on operational discipline to preserve profitability and continued R&D pipeline development so when the economy improves, we'll be ready to break out to higher revenue and earnings levels."

The company expects revenue for the third quarter to decline by 5 to 10 percent sequentially.

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 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) 642-1687 or +1 (706) 645-9291 (international) and by entering 79607832. The replay will be available through August 8, 2011.

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; difficulties developing new products that achieve market acceptance; dependence on a limited number of products and customers; intellectual property litigation risks; inventory-related risks; risks associated with acquisitions; difficulties managing international activities; difficulties managing our manufacturers and subcontractors; risks that Silicon Laboratories may not be able to manage strains associated with its growth; credit risks associated with our accounts receivable; dependence on key personnel; risks associated with divestitures; 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; 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 Six Months Ended
July 2,

2011

    July 3,

2010

July 2,

2011

    July 3,

2010

Revenues $ 126,197 $ 134,577 $ 245,833 $ 261,296
Cost of revenues   49,985     43,684     97,463     86,813  
Gross margin 76,212 90,893 148,370 174,483
Operating expenses:
Research and development 34,173 30,509 69,533 60,431
Selling, general and administrative   26,055     29,737     57,914     57,740  
Operating expenses   60,228     60,246     127,447     118,171  
Operating income 15,984 30,647 20,923 56,312
Other income (expense):
Interest income 473 633 1,044 1,299
Interest expense (5 ) (22 ) (10 ) (45 )
Other income (expense), net   164     (586 )   373     (883 )
Income before income taxes 16,616 30,672 22,330 56,683
Provision for income taxes   3,244     9,625     10,918     14,557  
 

Net income

$ 13,372   $ 21,047   $ 11,412   $ 42,126  
 
Earnings per share:
Basic $ 0.30 $ 0.46 $ 0.26 $ 0.92
Diluted $ 0.29 $ 0.44 $ 0.25 $ 0.88
 
Weighted-average common shares outstanding:
Basic 44,602 45,387 44,435 45,602
Diluted 45,951 47,371 45,998 47,649
 

Unaudited Reconciliation of GAAP to Non-GAAP Financial Measures

(In thousands, except per share data)

     
Non-GAAP Income Statement Items Three Months Ended

July 2, 2011

GAAP

Measure

 

GAAP

Percent of

Revenue

 

Stock

Compensation
Expense

 

Acquisition
Related
Items

 

Material
Cancellation
Charge

  Non-GAAP

Measure

 

Non-GAAP

Percent of
Revenue

Revenues $ 126,197
 
Gross margin 76,212 60.4 % $ 342 $ 464 $ 1,316 $ 78,334 62.1 %
 

Research and development

34,173 27.1 % 3,709 -- --

30,464

24.1 %
 

Selling, general and administrative

26,055

20.6

%

4,550

(1,035

)

--

22,540

17.9 %
 
Operating expenses 60,228 47.7 % 8,259 (1,035 ) -- 53,004 42.0 %
 
Operating income 15,984 12.7 % 8,601 (571 ) 1,316 25,330 20.1 %
 
Net income 13,372 10.6 % 7,813 (571 ) 1,251 21,865 17.3 %
 
                       
Non-GAAP Diluted Earnings Per Share     Three Months Ended

July 2, 2011

GAAP

Measure

Stock

Compensation
Expense

Acquisition
Related
Items

Material
Cancellation
Charge

Non-GAAP

Measure

Net income $ 13,372 $ 7,813 $ (571 ) $ 1,251 $ 21,865
 
Diluted shares outstanding 45,951 -- -- -- 45,951
 
Diluted earnings per share $ 0.29 $ 0.48
 

Silicon Laboratories Inc.

Condensed Consolidated Balance Sheets

(In thousands, except per share data)

(Unaudited)

     
July 2,

2011

January 1,

2011

Assets
Current assets:
Cash and cash equivalents $ 134,824 $ 138,567
Short-term investments 198,766 227,295

Accounts receivable, net of allowance for doubtful accounts of $727 at July 2, 2011 and $772 at January 1, 2011

70,351 45,030
Inventories 38,097 39,450
Deferred income taxes 10,271 9,140
Prepaid expenses and other current assets   34,499     34,447  
Total current assets 486,808 493,929
Long-term investments 17,196 17,500
Property and equipment, net 28,399 29,945
Goodwill 117,215 112,296
Other intangible assets, net 66,280 53,242
Other assets, net   28,359     20,746  
Total assets $ 744,257   $ 727,658  
 
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 26,064 $ 24,433
Accrued expenses 26,944 25,604
Deferred income on shipments to distributors 32,034 26,127
Income taxes   1,102     3,692  
Total current liabilities 86,144 79,856
Long-term obligations and other liabilities   21,521     22,372  
Total liabilities 107,665 102,228
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; 44,292 and 43,933 shares issued and outstanding at July 2, 2011 and January 1, 2011, respectively

4 4
Additional paid-in capital 49,041 49,947
Retained earnings 590,539 579,127
Accumulated other comprehensive loss   (2,992 )   (3,648 )
Total stockholders' equity   636,592     625,430  
Total liabilities and stockholders' equity $ 744,257   $ 727,658  
 

Silicon Laboratories Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)

 
Six Months Ended
July 2,

2011

    July 3,

2010

Operating Activities
Net income $ 11,412 $ 42,126
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation of property and equipment 6,680 5,821
Amortization of other intangible assets and other assets 6,077 3,651
Stock-based compensation expense 18,074 20,931
Income tax benefit from employee stock-based awards 2,083 2,523
Excess income tax benefit from employee stock-based awards (1,963 ) (1,784 )
Deferred income taxes 181 (319 )
Changes in operating assets and liabilities:
Accounts receivable (23,562 ) (19,946 )
Inventories 2,022 2,537
Prepaid expenses and other assets (1,021 ) 3,208
Accounts payable 259 3,015
Accrued expenses (2,841 ) (4,445 )
Deferred income on shipments to distributors 5,157 483
Income taxes   3,672     (5,268 )
Net cash provided by operating activities 26,230 52,533
Investing Activities
Purchases of available-for-sale investments (75,856 ) (216,385 )
Proceeds from sales and maturities of marketable securities 104,831 158,944
Purchases of property and equipment (5,058 ) (3,311 )
Purchases of other assets (665 ) (6,917 )
Acquisitions of businesses, net of cash acquired   (27,262 )   (18,351 )
Net cash used in investing activities (4,010 ) (86,020 )
Financing Activities
Proceeds from issuance of common stock, net of shares withheld for taxes 2,489 17,244
Excess income tax benefit from employee stock-based awards 1,963 1,784
Repurchases of common stock (23,241 ) (100,309 )
Payments on debt   (7,174 )   --  
Net cash used in financing activities   (25,963 )   (81,281 )
 
Decrease in cash and cash equivalents (3,743 ) (114,768 )
Cash and cash equivalents at beginning of period   138,567     195,737  
Cash and cash equivalents at end of period $ 134,824   $ 80,969  

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

Source: Silicon Laboratories Inc.

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