Silicon Laboratories Results Exceed Expectations

July 25, 2012

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 second quarter revenue of $135.7 million, an impressive eight percent sequential increase. GAAP and non-GAAP diluted earnings per share of $0.47 and $0.51, respectively, also exceeded expectations and represented significant growth.

Financial Highlights

Second quarter revenue was a company record and resulted from growth across the company's major product categories. On a GAAP-basis, gross margin improved to 61.0 percent. R&D investment increased to $34.2 million and SG&A expense was $32.2 million. Resulting GAAP operating income was 12.1 percent. Diluted GAAP earnings per share increased by 42 percent sequentially to 47 cents, due in part to a tax reserve release.

The following non-GAAP results exclude the impact of stock compensation and other one-time items. Significant strength in the company's Broad-based products improved the gross margin mix, resulting in gross margin of 61.3 percent for the quarter. R&D increased to $31.3 million due to a record quarter of new product activity, and SG&A increased slightly to $24.4 million. Operating income, therefore, was better than expected at 20.2 percent of revenue. Strong revenue growth and margin expansion provided significant earnings leverage resulting in diluted earnings per share of 51 cents, a 19 percent sequential increase. Reconciling charges are set forth in the financial measures table included below.

The company ended the quarter with $323 million in cash, cash equivalents and investments due to continued healthy cash flow from operations.

Business Highlights

All three of the company's major product categories, Access, Broadcast and Broad-based, grew sequentially in the second quarter.

Within the Broad-based business, the company's timing and MCU products posted record quarters as the company began shipping into new applications in storage, security, and test and measurement. Both product lines also posted record design wins, indicating strength in the revenue pipeline and supporting the continued market share gains driving the outperformance versus the end markets.

The company's wireless products increased over 50 percent in the quarter and are expected to contribute meaningfully to future growth with the addition of the Ember products acquired early in the third quarter. When combined with the company's emerging 32-bit MCU portfolio, the company anticipates having the industry's strongest offering for embedded wireless devices.

The Broadcast business increased in the second quarter driven by audio products, which were up meaningfully due to seasonal builds of consumer radios. The video business was also solid, coming in about flat to the record high in the first quarter. The Access products saw growth across voice over IP, modems and Power over Ethernet applications.

"Our business is hitting on all cylinders, underscoring the strength of our portfolio and ability to gain market share," said Tyson Tuttle, president and CEO of Silicon Laboratories. "We're focusing on developing products that address some of the most significant trends impacting the industry. The global build-out of infrastructure to support growing bandwidth needs, the emergence of the Internet of Things, and the increasing importance of energy efficient and green technology all require analog-intensive, mixed-signal ICs."

The company expects revenue for the third quarter to increase to $140 to $145 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 ( 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 99916472. The replay will be available through August 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

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)
    Three Months Ended   Six Months Ended
    June 30,


  July 2,


  June 30,


  July 2,


Revenues   $ 135,670     $ 126,197     $ 261,372     $ 245,833  
Cost of revenues     52,868       49,985       103,474       97,463  
Gross margin     82,802       76,212       157,898       148,370  
Operating expenses:                
Research and development     34,245       34,173       67,175       69,533  
Selling, general and administrative     32,178       26,055       57,580       57,914  
Operating expenses     66,423       60,228       124,755       127,447  
Operating income     16,379       15,984       33,143       20,923  
Other income (expense):                
Interest income     363       473       860       1,044  
Interest expense     (32 )     (5 )     (65 )     (10 )
Other income (expense), net     1,079       164       968       373  
Income before income taxes     17,789       16,616       34,906       22,330  
Provision (benefit) for income taxes     (2,720 )     3,244       77       10,918  

Net income

  $ 20,509     $ 13,372     $ 34,829     $ 11,412  
Earnings per share:                
Basic   $ 0.48     $ 0.30     $ 0.82     $ 0.26  
Diluted   $ 0.47     $ 0.29     $ 0.80     $ 0.25  
Weighted-average common shares outstanding:                
Basic     42,655       44,602       42,556       44,435  
Diluted     43,423       45,951       43,637       45,998  
Unaudited Reconciliation of GAAP to Non-GAAP Financial Measures
(In thousands, except per share data)

Non-GAAP Income
Statement Items

  Three Months Ended

June 30, 2012

        GAAP   Stock       Acquisition       Non-GAAP
    GAAP   Percent of   Compensation   Termination   Related   Non-GAAP   Percent of
    Measure   Revenue   Expense *   Costs   Items   Measure   Revenue
Revenues   $ 135,670                        
Gross margin     82,802     61.0 %   $ 317   $ --   $ --   $ 83,119       61.3 %
Research and


    34,245     25.2 %     2,954     --     --    


      23.1 %
Selling, general and











      18.0 %
Operating income     16,379     12.1 %     6,611     3,946     483     27,419       20.2 %

Non-GAAP Diluted
Earnings Per Share

      Three Months Ended

June 30, 2012

            Stock       Acquisition   Release of    
        GAAP   Compensation   Termination   Related   Unrecognized   Non-GAAP
        Measure   Expense *   Costs   Items   Tax Benefits   Measure
Net income       $ 20,509     $ 5,846   $ 2,729   $ 483   $ (7,265 )   $ 22,302  
Diluted shares outstanding     43,423                       43,423  
Diluted earnings per share   $ 0.47                     $ 0.51  

* Excludes stock compensation recognized in connection with terminations costs for our former CEO.

Silicon Laboratories Inc.
Condensed Consolidated Balance Sheets
(In thousands, except per share data)
    June 30,


  December 31,


Current assets:        
Cash and cash equivalents   $ 173,753     $ 94,964  
Short-term investments     138,147       212,526  
Accounts receivable, net of allowances for doubtful accounts of

$669 at June 30, 2012 and $725 at December 31, 2011

    72,666       55,351  
Inventories     35,977       34,778  
Deferred income taxes     6,170       11,563  
Prepaid expenses and other current assets     48,152       43,867  
Total current assets     474,865       453,049  
Long-term investments     11,028       17,477  
Property and equipment, net     23,468       25,141  
Goodwill     115,489       115,489  
Other intangible assets, net     55,447       60,005  
Other assets, net     40,977       34,830  
Total assets   $ 721,274     $ 705,991  
Liabilities and Stockholders' Equity        
Current liabilities:        
Accounts payable   $ 36,383     $ 26,354  
Accrued expenses     30,955       30,857  
Deferred income on shipments to distributors     26,334       24,962  
Income taxes     707       665  
Total current liabilities     94,379       82,838  
Long-term obligations and other liabilities     9,700       24,214  
Total liabilities     104,079       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;

41,941 and 42,068 shares issued and outstanding at

June 30, 2012 and December 31, 2011, respectively

    4       4  
Additional paid-in capital     --       14,749  
Retained earnings     618,839       586,653  
Accumulated other comprehensive loss     (1,648 )     (2,467 )
Total stockholders' equity     617,195       598,939  
Total liabilities and stockholders' equity   $ 721,274     $ 705,991  
Silicon Laboratories Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
    Six Months Ended
    June 30,


  July 2,


Operating Activities        
Net income   $ 34,829     $ 11,412  
Adjustments to reconcile net income to cash provided by operating activities:        
Depreciation of property and equipment     6,749       6,680  
Amortization of other intangible assets and other assets     4,559       6,077  
Stock-based compensation expense     15,865       18,074  
Income tax benefit from employee stock-based awards     2,627       2,083  
Excess income tax benefit from employee stock-based awards     (2,450 )     (1,963 )
Deferred income taxes     1,625       181  
Changes in operating assets and liabilities:        
Accounts receivable     (17,315 )     (23,562 )
Inventories     (1,299 )     2,022  
Prepaid expenses and other assets     4,806       (1,021 )
Accounts payable     8,766       259  
Accrued expenses     (5,203 )     (2,841 )
Deferred income on shipments to distributors     1,372       5,157  
Income taxes     (13,672 )     3,672  
Net cash provided by operating activities     41,259       26,230  
Investing Activities        
Purchases of available-for-sale investments     (105,169 )     (75,856 )
Proceeds from sales and maturities of marketable securities     186,514       104,831  
Purchases of property and equipment     (5,095 )     (5,058 )
Purchases of other assets     (7,919 )     (665 )
Acquisition of businesses, net of cash acquired     --       (27,262 )
Net cash provided by (used in) investing activities     68,331       (4,010 )
Financing Activities        
Proceeds from issuance of common stock, net of shares withheld for taxes     2,922       2,489  
Excess income tax benefit from employee stock-based awards     2,450       1,963  
Repurchases of common stock     (36,173 )     (23,241 )
Payments on debt     --       (7,174 )
Net cash used in financing activities     (30,801 )     (25,963 )
Increase (decrease) in cash and cash equivalents     78,789       (3,743 )
Cash and cash equivalents at beginning of period     94,964       138,567  
Cash and cash equivalents at end of period   $ 173,753     $ 134,824  


Silicon Laboratories Inc.
Shannon Pleasant, 512-464 9254

Source: Silicon Laboratories Inc.

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