Silicon Laboratories Reports Record Quarter

July 28, 2010

AUSTIN, Texas, Jul 28, 2010 (BUSINESS WIRE) -- Silicon Laboratories Inc. (Nasdaq: SLAB), a leader in high-performance, analog-intensive, mixed-signal integrated circuits (ICs), today reported record revenue of $134.6 million for the second quarter and delivered record operating performance enabling better than expected earnings per share. On a trailing twelve month basis, the company crossed $500 million in revenue while achieving record profitability and earnings growth.

Financial Highlights

Second quarter revenue of $134.6 million was a nearly 30 percent increase over the same period in 2009 and a six percent sequential increase. Second quarter GAAP gross margin increased again considerably to 67.5 percent. R&D investment for the second quarter was $30.5 million. SG&A expense was $29.7 million. GAAP operating income exceeded 20 percent for the fourth consecutive quarter, totaling 22.8 percent. The GAAP tax rate was 31 percent and included a one-time charge related to the acquisition of Silicon Clocks announced in April. Fully diluted earnings per share were $0.44, more than double compared to the same period last year.

The following non-GAAP results exclude the impact of stock compensation expense and the one-time Silicon Clocks acquisition tax expense. Non-GAAP gross margin for the quarter was up again to 67.8 percent. Non-GAAP operating expenses decreased as a percent of revenue to 37.1 percent. R&D investment increased to $26.1 million and SG&A expense increased to $23.8 million. Non-GAAP operating income exceeded 30 percent of revenue, a record for the company. Non-GAAP diluted earnings per share for the second quarter were $0.72, well above expectations. The reconciling charges are set forth in the financial measures table included below.

Share repurchases during the quarter totaled approximately $75 million. The Board of Directors replaced the remaining share repurchase authorization with an increased $150 million authorization through the end of 2011. The company ended the quarter with $380 million in cash, cash equivalents and investments due to continued healthy cash flow from operations.

Business Summary

Strong performance for the quarter was led again by the company's broad-based products. Revenue was up 85 percent compared to the same period last year and represented the largest percentage of the company's revenue for the first time. Within the broad-based business, the embedded mixed-signal products had a record quarter due primarily to record MCU revenue. MCU strength resulted from strong demand for USB products and new customer ramps in applications like touchscreens and portable medical devices. The timing business also had another record quarter driven by continued demand from networking equipment makers.

The broadcast business grew by more than 20 percent compared to the second quarter of 2009. Consumer audio revenue exceeded handset revenue in the quarter due to strong ramps into new customer programs. The company also achieved key revenue and customer milestones in its video business. The company introduced a number of new products in the second quarter, including a new video demodulator as well as new clock ICs, new low power MCUs, new touch sense controllers, and new isolators and isolated gate drivers. The high level of new product activity is the outcome of the company's focus on developing a rich R&D pipeline.

"Over the last twelve months we have become a half billion dollar revenue company, delivered above model profitability resulting in some of the best metrics in the business and generated high quality earnings growth," said Necip Sayiner, President and CEO of Silicon Laboratories. "Putting this in the context of our steady diversification, market share gains and portfolio expansion, we believe the company will continue on its path to sustained top and bottom line growth."

The company guided revenues for the third quarter in the range of $136 to $141 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 1 888-484-8258 or +1 203-369-3163 (international). Replays will be available through August 11, 2010.

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 3, 2010			July 4, 2009			July 3, 2010			July 4, 2009
Revenues	$	134,577		$	104,216		$	261,296		$	187,917
Cost of revenues		43,684			39,435			86,813			72,458
Gross margin		90,893			64,781			174,483			115,459
Operating expenses:
Research and development		30,509			25,868			60,431			51,937
Selling, general and administrative		29,737			26,187			57,740			49,629
Operating expenses		60,246			52,055			118,171			101,566
Operating income		30,647			12,726			56,312			13,893
Other income (expense):
Interest income		633			655			1,299			1,537
Interest expense		(22	)		(51	)		(45	)		(103	)
Other income (expense), net		(586	)		342			(883	)		290
Income before income taxes		30,672			13,672			56,683			15,617
Provision for income taxes		9,625			3,942			14,557			5,216
Net income	$	21,047		$	9,730		$	42,126		$	10,401

Earnings per share:
Basic	$	0.46		$	0.22		$	0.92		$	0.23
Diluted	$	0.44		$	0.21		$	0.88		$	0.23

Weighted-average common shares outstanding:
Basic		45,387			44,640			45,602			44,336
Diluted		47,371			45,975			47,649			45,229

Unaudited Reconciliation of GAAP to Non-GAAP Financial Measures (In thousands, except per share data)

Non-GAAP Income Statement Items	Three Months Ended July 3, 2010
	GAAP Measure		GAAP Percent of Revenue			Stock Compensation Expense		Non-GAAP Measure		Non-GAAP Percent of Revenue
Revenues	$	134,577

Gross margin		90,893		67.5	%	$	351	$	91,244	67.8	%

Research and development		30,509		22.7	%		4,386		26,123	19.4	%

Selling, general and administrative		29,737		22.0	%		5,938		23,799	17.7	%

Operating expenses		60,246		44.7	%		10,324		49,922	37.1	%

Operating income		30,647		22.8	%		10,675		41,322	30.7	%


Non-GAAP Diluted Earnings Per Share	Three Months Ended July 3, 2010
	GAAP Measure		Stock Compensation Expense			Acquisition Tax Expense		Non-GAAP Measure
Net income	$	21,047	$	9,156		$	3,850	$	34,053

Diluted shares outstanding		47,371		--			--		47,371

Diluted earnings per share	$	0.44						$	0.72

Silicon Laboratories Inc. Condensed Consolidated Balance Sheets (In thousands, except per share data) (Unaudited)

	July 3, 2010			January 2, 2010
Assets
Current assets:
Cash and cash equivalents	$	80,969		$	195,737
Short-term investments		272,408			214,486
Accounts receivable, net of allowance for doubtful accounts of $771 at July 3, 2010 and $567 at January 2, 2010		76,318			56,128
Inventories		29,100			31,512
Deferred income taxes		9,068			7,620
Prepaid expenses and other current assets		20,448			18,515
Total current assets		488,311			523,998
Long-term investments		26,170			24,676
Property and equipment, net		25,365			27,785
Goodwill		109,222			105,109
Other intangible assets, net		47,965			41,886
Other assets, net		23,465			19,384
Total assets	$	720,498		$	742,838

Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	29,475		$	28,759
Accrued expenses		23,531			25,399
Deferred income on shipments to distributors		28,953			28,470
Income taxes		1,230			6,011
Total current liabilities		83,189			88,639
Long-term obligations and other liabilities		23,832			24,403
Total liabilities		107,021			113,042
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; 44,621 and 45,772 shares issued and outstanding at July 3, 2010 and January 2, 2010, respectively		4			5
Additional paid-in capital		68,660			128,262
Retained earnings		548,011			505,885
Accumulated other comprehensive loss		(3,198	)		(4,356	)
Total stockholders' equity		613,477			629,796
Total liabilities and stockholders' equity	$	720,498		$	742,838

SOURCE: Silicon Laboratories Inc.

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

Release Details

Silicon Laboratories Reports Record Quarter