Silicon Laboratories Inc.
Jan 25, 2012

Silicon Laboratories Results Exceed Expectations

Strong Quarterly Performance and Better Than Seasonal Outlook

AUSTIN, Texas--(BUSINESS WIRE)-- Silicon Laboratories Inc. (Nasdaq: SLAB), a leader in high-performance, analog-intensive, mixed-signal integrated circuits (ICs), today reported fourth quarter revenue of $126.7 million, a 13 percent increase compared to the same period last year. GAAP and non-GAAP earnings per share of $0.29 and $0.49, respectively, exceeded expectations and represented solid double-digit sequential growth.

Financial Highlights

Business trends were robust throughout the quarter, with new product cycles driving revenue upside. Solid operating performance also translated to better than anticipated profitability.

Fourth quarter revenue increased more than 6 percent sequentially to $126.7 million. GAAP gross margin was 60.9 percent. R&D investment increased to $34.7 million, and SG&A was flat at $27.3 million. Operating income improved meaningfully from the same period last year to 12 percent. GAAP net income was 10 percent of revenue for the quarter. Diluted GAAP earnings of 29 cents represented a 12 percent increase compared to the third quarter.

The following non-GAAP results exclude the impact of stock compensation expense and certain other one-time items. Gross margin remained stable at 61.2 percent. R&D investment increased to $29.6 million due primarily to increased tape out activity, and as planned, SG&A remained flat at $22.5 million. Operating income improved to 20 percent of revenue, and net income improved to 17 percent of revenue. The solid operational performance resulted in diluted earnings per share of 49 cents, an 11 percent sequential increase, and well above guidance. The company ended the quarter with $325 million in cash, cash equivalents and investments due to continued healthy cash flow from operations.

Reconciling charges are set forth in the financial measures table included below.

Business Highlights

Fourth quarter revenue upside was driven by new product cycles in video and touch controllers, as well as better than anticipated demand for SLIC devices and many of the company's Broad-based products.

The company's video products exceeded the full year revenue target and exited the year positioned to further expand its strong market share position as customers ramp 2012 TV models into production. iDTVs featuring the company's latest generation products were on display at the Consumer Electronics Show, demonstrating the form factor and performance advantages available when using Silicon Labs silicon tuner technology.

Similarly, the company's touch controllers designed into mobile handsets exceeded initial forecasts, shipping throughout Europe, China and India during the fourth quarter. This rapid ramp in a major mobile handset platform was strong validation for the company's touch technology and a good foundation for expanding market share in 2012.

The company's non-consumer products also delivered solid performance in the quarter, including MCUs, which remained stable, and isolation and wireless products which grew significantly as new customer programs ramped. Timing products delivered excellent year over year growth again at 30 percent, but slowed in the fourth quarter in conjunction with the near-term weakness in the telecom equipment market.

"We enjoyed a sustained improvement in the strength of bookings as we ended 2011. And with our recent results demonstrating significant share gains, we have a lot to look forward to in 2012," said Necip Sayiner, president and CEO of Silicon Laboratories. "We believe we have both the diversity to weather any lingering macro weakness and the product cycles to get us back into a mode of consistently outperforming our peers."

The company expects revenue for the first quarter to be in the range of $120 million to $125 million.

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 (855) 859-2056 or +1 (404) 537-3406 (international) and by entering 42298945. The replay will be available through February 8th.

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 Year Ended
December 31,

2011

January 1,

2011

December 31,

2011

January 1,

2011

Revenues $ 126,692 $ 111,891 $ 491,625 $ 493,341
Cost of revenues   49,513     40,800     193,179     169,097  
Gross margin 77,179 71,091 298,446 324,244
Operating expenses:
Research and development 34,705 32,621 135,953 123,821
Selling, general and administrative   27,251     27,456     112,419     113,752  
Operating expenses   61,956     60,077     248,372     237,573  
Operating income 15,223 11,014 50,074 86,671
Other income (expense):
Interest income 427 479 1,859 2,318
Interest expense (23 ) (11 ) (37 ) (77 )
Other income (expense), net   152     24     444     (1,253 )
Income before income taxes 15,779 11,506 52,340 87,659
Provision (benefit) for income taxes   2,974     (1,377 )   16,868     14,417  

Net income

$ 12,805   $ 12,883   $ 35,472   $ 73,242  
 
Earnings per share:
Basic $ 0.31 $ 0.29 $ 0.82 $ 1.63
Diluted $ 0.29 $ 0.28 $ 0.79 $ 1.57
 
Weighted-average common shares outstanding:
Basic 41,979 43,834 43,421 44,845
Diluted 43,410 45,658 44,832 46,742
 
 
Unaudited Reconciliation of GAAP to Non-GAAP Financial Measures
(In thousands, except per share data)
                             
Non-GAAP Income Statement Items Three Months Ended

December 31, 2011

GAAP
Measure

 

GAAP
Percent of
Revenue

 

Stock
Compensation
Expense

 

Acquisition
Related
Items

 

Termination
Costs and
Impairments

 

Non-
GAAP
Measure

 

Non-
GAAP
Percent of
Revenue

Revenues $ 126,692
 
Gross margin 77,179 60.9 % $ 304 $ -- $ -- $ 77,483 61.2 %
 

Research and development

34,705 27.4 % 3,588 -- 1,553

29,564

23.3 %
 

Selling, general and administrative

27,251

21.5

%

5,000

(560

)

345

22,466

17.7 %
 
Operating income 15,223 12.0 % 8,892 (560 ) 1,898 25,453 20.1 %
 
Net income 12,805 10.1 % 7,629 (560 ) 1,510 21,384 16.9 %
 
                       
Non-GAAP Diluted Earnings Per Share     Three Months Ended

December 31, 2011

GAAP
Measure

Stock
Compensation
Expense

Acquisition
Related
Items

Termination
Costs and
Impairments

Non-
GAAP
Measure

Net income $ 12,805 $ 7,629 $ (560 ) $ 1,510 $ 21,384
 
Diluted shares outstanding 43,410 43,410
 
Diluted earnings per share $ 0.29 $ 0.49
 
 
Silicon Laboratories Inc.
Condensed Consolidated Balance Sheets
(In thousands, except per share data)
(Unaudited)
   
December 31,

2011

January 1,

2011

Assets
Current assets:
Cash and cash equivalents $ 94,964 $ 138,567
Short-term investments 212,526 227,295

Accounts receivable, net of allowance for doubtful accounts of $725 at December 31, 2011 and $772 at January 1, 2011

55,351 45,030
Inventories 34,778 39,450
Deferred income taxes 11,563 9,140
Prepaid expenses and other current assets   43,867     34,447  
Total current assets 453,049 493,929
Long-term investments 17,477 17,500
Property and equipment, net 25,141 29,945
Goodwill 115,489 112,296
Other intangible assets, net 60,005 53,242
Other assets, net   34,830     20,746  
Total assets $ 705,991   $ 727,658  
 
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 26,354 $ 24,433
Accrued expenses 30,857 25,604
Deferred income on shipments to distributors 24,962 26,127
Income taxes   665     3,692  
Total current liabilities 82,838 79,856
Long-term obligations and other liabilities   24,214     22,372  
Total liabilities 107,052 102,228
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; 42,068 and 43,933 shares issued and outstanding at December 31, 2011 and January 1, 2011, respectively

4 4
Additional paid-in capital 14,749 49,947
Retained earnings 586,653 579,127
Accumulated other comprehensive loss   (2,467 )   (3,648 )
Total stockholders' equity   598,939     625,430  
Total liabilities and stockholders' equity $ 705,991   $ 727,658  
 
 
Silicon Laboratories Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
   
Year Ended
December 31,

2011

January 1,

2011

Operating Activities
Net income $ 35,472 $ 73,242
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation of property and equipment 13,570 11,797
Amortization of other intangible assets and other assets 11,030 7,494
Impairment of long-lived assets 1,322 --
Stock-based compensation expense 36,115 40,324
Income tax benefit from employee stock-based awards 2,814 3,295
Excess income tax benefit from employee stock-based awards (2,404 ) (2,412 )
Deferred income taxes (445 ) (552 )
Changes in operating assets and liabilities:
Accounts receivable (8,562 ) 11,342
Inventories 5,334 (7,811 )
Prepaid expenses and other assets (5,948 ) (5,300 )
Accounts payable (2,176 ) (777 )
Accrued expenses (1,320 ) (2,590 )
Deferred income on shipments to distributors (1,915 ) (2,343 )
Income taxes   5,855     (7,774 )
Net cash provided by operating activities 88,742 117,935
Investing Activities
Purchases of available-for-sale investments (178,676 ) (357,777 )
Proceeds from sales and maturities of marketable securities 193,474 352,779
Purchases of property and equipment (8,690 ) (13,850 )
Purchases of other assets (4,018 ) (8,372 )
Acquisitions of businesses, net of cash acquired   (27,262 )   (28,021 )
Net cash used in investing activities (25,172 ) (55,241 )
Financing Activities
Proceeds from issuance of common stock, net of shares withheld for taxes 7,660 18,055
Excess income tax benefit from employee stock-based awards 2,404 2,412
Repurchases of common stock (110,063 ) (140,331 )
Payments on debt   (7,174 )   --  
Net cash used in financing activities (107,173 ) (119,864 )
 
Decrease in cash and cash equivalents (43,603 ) (57,170 )
Cash and cash equivalents at beginning of period   138,567     195,737  
Cash and cash equivalents at end of period $ 94,964   $ 138,567  

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

Source: Silicon Laboratories Inc.

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