Silicon Laboratories Inc.
SILICON LABORATORIES INC (Form: 8-K, Received: 07/26/2017 08:04:38)

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 8-K

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Date of report (Date of earliest event reported): July 26, 2017

 

SILICON LABORATORIES INC.

(Exact Name of Registrant as Specified in Charter)

 

Delaware

 

000-29823

 

74-2793174

(State or Other Jurisdiction

 

(Commission File Number)

 

(IRS Employer

of Incorporation)

 

 

 

Identification No.)

 

400 West Cesar Chavez , Austin, TX          78701

(Address of Principal Executive Offices)    (Zip Code)

 

Registrant’s telephone number, including area code: (512) 416-8500

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 or Rule 12b-2 of the Securities Exchange Act of 1934.

 

Emerging growth company o

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Securities Exchange Act of 1934. o

 

 

 



 

Item 2.02. Results of Operations and Financial Condition

 

On July 26, 2017, Silicon Laboratories Inc. (“Silicon Laboratories”) issued a press release describing its results of operations for its fiscal quarter ended July 1, 2017. A copy of the press release is attached as Exhibit 99 to this report.

 

Item 9.01. Financial Statements and Exhibits

 

(d) Exhibits.

 

99                        Press Release of Silicon Laboratories Inc. dated July 26, 2017

 

Use of Non-GAAP Financial Information

 

From time to time, Silicon Laboratories provides certain non-GAAP financial measures as additional information relating to its operating results. The non-GAAP financial measurements provided in the press release furnished herewith do not replace the presentation of Silicon Laboratories’ GAAP financial results. These additional measurements merely provide supplemental information to assist investors in analyzing Silicon Laboratories’ financial position and results of operations; however, these measures are not in accordance with, or an alternative to, GAAP and may be different from non-GAAP measures used by other companies.

 

Non-GAAP financial measures used by Silicon Laboratories include non-GAAP gross margin, non-GAAP research and development expense, non-GAAP selling, general and administrative expense, non-GAAP operating income, non-GAAP interest expense, non-GAAP net income and non-GAAP diluted earnings per share. Silicon Laboratories has chosen to provide this information to investors because it believes that such supplemental information enables them to perform meaningful comparisons of past, present and future operating results, and as a means to highlight the results of core ongoing operations.

 

Non-GAAP financial measures are adjusted by the following items:

 

·                   Stock compensation expense — represents charges for employee stock awards issued under Silicon Laboratories’ stock-based compensation plans. Stock compensation expense is excluded from non-GAAP financial measures because it is a non-cash expense, and excluding such expense provides meaningful supplemental information regarding core ongoing operations.

 

·                   Intangible asset amortization — primarily represents charges for the amortization of intangibles assets, such as core and developed technology, customer relationships and trademarks, acquired in connection with business combinations. Intangible asset amortization is excluded from non-GAAP financial measures because it is a non-cash expense, and excluding such expense provides meaningful supplemental information regarding core ongoing operations.

 

·                   Acquisition related items — primarily including the following: charges for the fair value write-up associated with inventory acquired; adjustments to the fair value of acquisition-related contingent consideration; and acquisition-related costs to effect a business combination, such as costs for attorneys, investment bankers, accountants and other third party service providers. Acquisition related items are excluded from non-GAAP financial measures because excluding such amounts provides meaningful supplemental information regarding core ongoing operations.

 

·                   Termination costs and impairments — primarily include costs associated with certain employee terminations and asset impairments. Termination costs and impairments are excluded from non-GAAP financial measures because excluding such amounts provides meaningful supplemental information regarding core ongoing operations.

 

2



 

·                   Interest expense — represents charges for the amortization of the debt discount on Silicon Laboratories’ convertible senior notes. Such interest expense is excluded from non-GAAP financial measures because it is a non-cash expense, and excluding such expense provides meaningful supplemental information regarding core ongoing operations.

 

·                   Income tax adjustments — primarily include the following: the current and deferred income tax effects of the above non-GAAP adjustments; other indirect impacts of excluding stock-based compensation; and the income tax impact of certain intercompany license arrangements for technology acquired in business combinations. Income tax adjustments are excluded from non-GAAP financial measures because excluding such amounts provides meaningful supplemental information regarding core ongoing operations.

 

Pursuant to the requirements of Regulation G, we have provided in the press release furnished with this report a reconciliation of the non-GAAP financial measures to the most directly comparable GAAP financial measures.

 

The information in this report, including the exhibit hereto, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section.  The information contained therein and in the accompanying exhibit shall not be incorporated by reference into any filing with the U.S. Securities and Exchange Commission made by Silicon Laboratories, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

 

3



 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

 

 

SILICON LABORATORIES INC.

 

 

 

 

 

 

July 26, 2017

 

/s/ John C. Hollister

Date

 

John C. Hollister
Senior Vice President and

Chief Financial Officer
(Principal Financial Officer)

 

4



 

EXHIBIT INDEX

 

Exhibit No.

 

Description

 

 

 

99

 

Press Release of Silicon Laboratories Inc. dated July 26, 2017

 

5


Exhibit 99

 

 

Silicon Labs Announces Record Revenue in Second Quarter 2017

 

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

 

AUSTIN, Texas — July 26, 2017 — 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)

 

 

 

Three Months Ended
July 1, 2017

 

Non-GAAP Income
Statement Items

 

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

%

 

 

 

Three Months Ended
July 1, 2017

 

Non-GAAP
Earnings Per Share

 

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)

 

 

 

Three Months Ending
September 30, 2017

 

Business Outlook

 

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