Silicon Laboratories Results Exceed Expectations

Company Reports Strong Quarterly Performance and Outlook

AUSTIN, Texas--(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 $125.7 million, a five percent increase compared to the same period last year. GAAP and non-GAAP diluted earnings per share of $0.33 and $0.43, respectively, also exceeded expectations and represented solid growth versus the first quarter of 2011.

Financial Highlights

Strong new product cycles largely offset anticipated seasonal weakness, driving revenue upside. First quarter revenue declined by less than one percent sequentially, setting the stage for a strong start to 2012. On a GAAP-basis, gross margin declined to 59.7 percent. R&D investment was $32.9 million and SG&A expense was $25.4 million. Resulting GAAP operating income was 13 percent, an improvement over the same period a year ago. Net income was 11 percent of revenue. Diluted GAAP earnings per share of 33 cents increased 14 percent sequentially, a six quarter high.

The following non-GAAP results exclude the impact of stock compensation and other one-time items. Significant strength in the company's video products resulted in a mix shift during the quarter. Gross margin therefore declined to 60.0 percent. R&D remained about flat at $29.3 million, while SG&A increased slightly to $23.3 million. Operating income, therefore, was better than expected at 18 percent of revenue, and net income was 15 percent of revenue. Solid operational results provided significant earnings leverage resulting in diluted earnings per share of 43 cents, a 7.5 percent year on year increase. Reconciling charges are set forth in the financial measures table included below.

The company ended the quarter with $351 million in cash, cash equivalents and investments due to continued healthy cash flow from operations.

Business Highlights

First quarter revenue upside was driven by continued strength in video and touch controllers, as well as solid demand for MCU and power-related products.

The company's video products ramped into new design wins as TV makers began to build their new models for 2012. Market share gains were behind the more than 30 percent revenue growth compared to the same period a year ago. Continued momentum at the company's large touch controller customer also contributed to the first quarter performance as demand outpaced original forecasts.

The MCU product line benefitted from some demand recovery in the communications and industrial end markets, growing slightly sequentially despite seasonal weakness in consumer end markets. Isolation and related power product revenue also increased due to market share gains.

"As I take the helm, I see tremendous potential for the business. We have the right team, the product line up and the market runway to become one of the leaders in the semiconductor industry," said Tyson Tuttle, president and CEO of Silicon Laboratories. "We're building a set of capabilities that I feel strongly are going to be the backbone of a very substantial and valuable piece of our business in the future."

The company expects revenue for the second quarter to be up three to seven 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 (855) 859-2056 or +1 (404) 537-3406 (international) and by entering 71533415. The replay will be available through May 9th.

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 Operations (In thousands, except per share data) (Unaudited)
		Three Months Ended
		March 31, 2012					April 2, 2011
Revenues		$	125,702				$	119,636
Cost of revenues			50,606					47,478
Gross margin			75,096					72,158
Operating expenses:
Research and development			32,930					35,359
Selling, general and administrative			25,402					31,860
Operating expenses			58,332					67,219
Operating income			16,764					4,939
Other income (expense):
Interest income			497					571
Interest expense			(33	)				(5	)
Other income (expense), net			(111	)				209
Income before income taxes			17,117					5,714
Provision for income taxes			2,797					7,674
Net income (loss)		$	14,320				$	(1,960	)
Earnings (loss) per share:
Basic		$	0.34				$	(0.04	)
Diluted		$	0.33				$	(0.04	)
Weighted-average common shares outstanding:
Basic			42,458					44,269
Diluted			43,850					44,269

Unaudited Reconciliation of GAAP to Non-GAAP Financial Measures (In thousands, except per share data)
Non-GAAP Income Statement Items		Three Months Ended March 31, 2012
		GAAP Measure				GAAP Percent of Revenue					Stock Compensation Expense *				Termination Costs **					Acquisition Related Items					Non-GAAP Measure				Non-GAAP Percent of Revenue
Revenues		$	125,702
Gross margin			75,096				59.7	%			$	360			$	--				$	--				$	75,456			60.0	%
Research and development			32,930				26.2	%				3,602				--					--					29,328			23.3	%
Selling, general and administrative			25,402				20.2	%				3,895				(868	)				(949	)				23,324			18.6	%
Operating income			16,764				13.3	%				7,857				(868	)				(949	)				22,804			18.1	%
Net income			14,320				11.4	%				6,470				(1,133	)				(949	)				18,708			14.9	%
Non-GAAP Diluted Earnings Per Share						Three Months Ended March 31, 2012
						GAAP Measure					Stock Compensation Expense *				Termination Costs **					Acquisition Related Items					Non-GAAP Measure
Net income						$	14,320				$	6,470			$	(1,133	)			$	(949	)			$	18,708
Diluted shares outstanding							43,850																			43,850
Diluted earnings per share						$	0.33																		$	0.43

* Excludes stock compensation recognized in connection with terminations costs.

** Termination costs include the reversal of previously recognized stock compensation for modified stock awards.

Silicon Laboratories Inc. Condensed Consolidated Balance Sheets (In thousands, except per share data) (Unaudited)
		March 31, 2012					December 31, 2011
Assets
Current assets:
Cash and cash equivalents		$	98,038				$	94,964
Short-term investments			235,299					212,526
Accounts receivable, net of allowances for doubtful accounts of $925 at March 31, 2012 and $725 at December 31, 2011			61,425					55,351
Inventories			34,295					34,778
Deferred income taxes			4,941					11,563
Prepaid expenses and other current assets			47,527					43,867
Total current assets			481,525					453,049
Long-term investments			17,729					17,477
Property and equipment, net			24,008					25,141
Goodwill			115,489					115,489
Other intangible assets, net			57,725					60,005
Other assets, net			36,334					34,830
Total assets		$	732,810				$	705,991
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable		$	29,965				$	26,354
Accrued expenses			30,810					30,857
Deferred income on shipments to distributors			28,269					24,962
Income taxes			1,302					665
Total current liabilities			90,346					82,838
Long-term obligations and other liabilities			19,053					24,214
Total liabilities			109,399					107,052
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; 42,835 and 42,068 shares issued and outstanding at March 31, 2012 and December 31, 2011, respectively			4					4
Additional paid-in capital			24,251					14,749
Retained earnings			600,973					586,653
Accumulated other comprehensive loss			(1,817	)				(2,467	)
Total stockholders' equity			623,411					598,939
Total liabilities and stockholders' equity		$	732,810				$	705,991

Silicon Laboratories Inc. Condensed Consolidated Statements of Cash Flows (In thousands) (Unaudited)
		Three Months Ended
		March 31, 2012					April 2, 2011
Operating Activities
Net income (loss)		$	14,320				$	(1,960	)
Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities:
Depreciation of property and equipment			3,543					3,253
Amortization of other intangible assets and other assets			2,280					3,057
Stock-based compensation expense			6,693					9,473
Income tax benefit from employee stock-based awards			2,656					1,184
Excess income tax benefit from employee stock-based awards			(2,426	)				(1,142	)
Deferred income taxes			3,101					1,366
Changes in operating assets and liabilities:
Accounts receivable			(6,074	)				(11,704	)
Inventories			447					(759	)
Prepaid expenses and other assets			4,581					(4,499	)
Accounts payable			4,209					(4,787	)
Accrued expenses			(5,087	)				(1,634	)
Deferred income on shipments to distributors			3,307					2,293
Income taxes			(5,403	)				3,233
Net cash provided by (used in) operating activities			26,147					(2,626	)
Investing Activities
Purchases of available-for-sale investments			(82,845	)				(31,492	)
Proceeds from sales and maturities of marketable securities			60,518					55,092
Purchases of property and equipment			(2,428	)				(2,697	)
Purchases of other assets			(850	)				(584	)
Acquisition of business, net of cash acquired			--					(27,546	)
Net cash used in investing activities			(25,605	)				(7,227	)
Financing Activities
Proceeds from issuance of common stock, net of shares withheld for taxes			106					(3,580	)
Excess income tax benefit from employee stock-based awards			2,426					1,142
Repurchases of common stock			--					(606	)
Payments on debt			--					(7,174	)
Net cash provided by (used in) financing activities			2,532					(10,218	)
Increase (decrease) in cash and cash equivalents			3,074					(20,071	)
Cash and cash equivalents at beginning of period			94,964					138,567
Cash and cash equivalents at end of period		$	98,038				$	118,496

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

Source: Silicon Laboratories Inc.

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