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Silicon Labs Announces Record Revenue in Q2

July 29, 2015
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Broadcast Products to Drive Sequential Revenue Decline in Q3

AUSTIN, Texas--(BUSINESS WIRE)-- Silicon Labs (NASDAQ: SLAB), a leading provider of microcontroller, wireless connectivity, analog and sensor solutions for the Internet of Things (IoT), today reported financial results for its second quarter ended July 4, 2015. Revenue in the second quarter was within guidance and established a new record at $164.9 million, up from $163.7 million in the first quarter.

Second Quarter Financial Highlights

On a GAAP basis:

  • Gross margin was 59.1 percent
  • R&D expenses were $47.5 million
  • SG&A expenses were $41.0 million
  • Operating income as a percentage of revenue was 5.5 percent
  • Diluted earnings per share were $0.17

On a non-GAAP basis (results exclude the impact of stock compensation, amortization from acquired intangible assets and certain other items as set forth in the reconciliation tables below):

  • Gross margin was 60.3 percent
  • R&D expenses were $37.4 million
  • SG&A expenses were $32.7 million
  • Operating income as a percentage of revenue was 17.8 percent
  • Diluted earnings per share were $0.56

Business Highlights

  • IoT products delivered an all-time high revenue quarter at $68.9 million
  • Infrastructure products established record revenue at $30.3 million
  • Broadcast revenue was down, at $39.4 million, with weakness in consumer partially offset by a record in automotive
  • Access revenue was consistent with expectations at $26.3 million

Product Highlights

  • Announced our highly anticipated Thread networking solution, delivering a wireless software stack built upon our many years of expertise and the industry's most advanced mesh networking software development tools.
  • Introduced the easy-to-use Bluetooth Smart Ready® BT121 module, offering a dual-mode solution for applications requiring Bluetooth Smart and Bluetooth Classic connectivity.
  • Announced EFM32™ Happy Gecko microcontrollers, providing an energy-friendly, plug-and-play solution for adding USB connectivity to battery-powered IoT applications.
  • Released the next generation of the Simplicity Studio™ development environment, enabling concurrent MCU and wireless design for IoT applications.
  • Introduced the Si5380 clock IC, the industry's most highly integrated timing solution for wireless infrastructure applications including small and macro cell base stations.
  • Announced the Si88xx family of high-speed, multi-channel digital isolators designed to provide a highly integrated solution for signal and power isolation.
  • Introduced the industry's first complete Wireless M-Bus platform solution designed to simplify the development of wirelessly connected smart meters in the European market.

Business Outlook

The company expects revenue in the third quarter to be in the range of $151 million to $156 million. Third quarter diluted earnings per share are expected to be between $0.04 and $0.10 on a GAAP basis and between $0.39 and $0.45 on a non-GAAP basis.

"We delivered another record quarter, and are encouraged by the traction we are seeing in our strategic growth businesses including our Internet of Things, Infrastructure and Broadcast automotive products," said Tyson Tuttle, CEO of Silicon Labs. "However, we believe macro trends continue to stifle the global demand for TVs, with the latest market estimates calling for a reduction in unit demand for 2015. Accordingly, we expect third quarter Broadcast revenue to decline again by approximately 15 percent, counter to typical seasonality."

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 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 (404) 537-3406 (international) and entering conference ID 39717393. The replay will be available through August 28, 2015.

About Silicon Labs

Silicon Labs (NASDAQ: SLAB) is a leading provider of silicon, software and system solutions for the Internet of Things, Infrastructure, industrial automation, consumer and automotive markets. We solve the electronics industry's toughest problems, providing customers with significant advantages in performance, energy savings, connectivity and design simplicity. Backed by our world-class engineering teams with strong software and mixed-signal design expertise, Silicon Labs empowers developers with the tools and technologies they need to advance quickly and easily from initial idea to final product. 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; risks related to the successful completion of the development and implementation of Bluegiga's technology; risks associated with the development of modules and the Company's limited operating history with modules; risks that the acquisition may not yield the expected benefits due to the failure to properly integrate the acquired business and employees; risks that our competitors that supply products incorporated in Bluegiga's modules may disrupt such supply; risks that the acquired business' products and processes under development may fail to achieve market acceptance; risks of disputes regarding the acquired business and intellectual property; 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; 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 Laboratories logo, the Silicon Labs logo, EFM32 and Simplicity Studio 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 4,
2015

   

June 28,
2014

July 4,
2015

   

June 28,
2014

Revenues $ 164,856 $ 154,918 $ 328,561 $ 300,609
Cost of revenues   67,428     56,255     134,764     114,841  
Gross margin 97,428 98,663 193,797 185,768
Operating expenses:
Research and development 47,465 41,844 94,322 84,329
Selling, general and administrative   40,960     36,017     83,260     70,628  
Operating expenses   88,425     77,861     177,582     154,957  
Operating income 9,003 20,802 16,215 30,811
Other income (expense):
Interest income 166 200 358 502
Interest expense (728 ) (780 ) (1,473 ) (1,578 )
Other income (expense), net   90     (6 )   498     61  
Income before income taxes 8,531 20,216 15,598 29,796
Provision for income taxes   956     5,937     1,645     7,407  
 

Net income

$ 7,575   $ 14,279   $ 13,953   $ 22,389  
 
Earnings per share:
Basic $ 0.18 $ 0.33 $ 0.33 $ 0.52
Diluted $ 0.17 $ 0.32 $ 0.32 $ 0.51
 
Weighted-average common shares outstanding:
Basic 42,823 43,462 42,617 43,271
Diluted 43,461 44,218 43,305 44,137
 
   
Unaudited Reconciliation of GAAP to Non-GAAP Financial Measures
(In thousands, except per share data)
   

Non-GAAP Income
Statement Items

Three Months Ended
July 4, 2015

GAAP
Measure

   

GAAP
Percent of
Revenue

   

Stock
Compensation
Expense

   

Intangible
Asset
Amortization

   

Acquisition
Related
Items

   

Termination
Costs

   

Non-
GAAP
Measure

   

Non-GAAP
Percent of
Revenue

Revenues $ 164,856
 
Gross margin 97,428 59.1 % $ 229 $ 390 $ 1,324 $ -- $ 99,371 60.3 %
 

Research and development

47,465 28.8 % 4,960 5,116 -- --

37,389

22.7 %
 

Selling, general and administrative

40,960

24.8

%

5,868 1,219 767

392

32,714

19.8 %
 
Operating income 9,003 5.5 % 11,057 6,725 2,091 392 29,268 17.8 %
 
                                       

Non-GAAP
Earnings Per Share

Three Months Ended
July 4, 2015

GAAP
Measure

Stock
Compensation
Expense*

Intangible
Asset
Amortization*

Acquisition
Related
Items*

Termination
Costs*

Tax
Impact of
Adjustments

Non-
GAAP
Measure

Net income $ 7,575 $ 11,057 $ 6,725 $ 2,091 $ 392 $ (3,379 ) $ 24,461
 

Diluted shares outstanding

43,461

43,461

 

Diluted earnings per share

$ 0.17 $ 0.56
 

* Represents pre-tax amounts

 
   

Unaudited Forward-Looking Statements Regarding Business Outlook

   
Business Outlook

Three Months Ending
October 3, 2015

High     Low
Estimated GAAP diluted earnings per share $ 0.10 $ 0.04
 
Estimated non-GAAP charges   0.35   0.35
 
Estimated non-GAAP diluted earnings per share $ 0.45 $ 0.39
 
       
Silicon Laboratories Inc.
Condensed Consolidated Balance Sheets
(In thousands, except per share data)
(Unaudited)
 

July 4,
2015

January 3,
2015

Assets
Current assets:
Cash and cash equivalents $ 125,051 $ 141,706
Short-term investments 147,556 193,489

Accounts receivable, net of allowances for doubtful accounts of $624 at July 4, 2015 and $786 at January 3, 2015

 71,403 70,367
Inventories 60,746 52,631
Deferred income taxes 17,815 21,173
Prepaid expenses and other current assets   59,025     49,171  
Total current assets 481,596 528,537
Long-term investments 7,179 7,419
Property and equipment, net 130,994 132,820
Goodwill 263,925 228,781
Other intangible assets, net 128,196 115,021
Other assets, net   24,041     29,983  
Total assets $ 1,035,931   $ 1,042,561  
 
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 34,553 $ 38,922
Current portion of long-term debt 10,000 10,000
Accrued expenses 49,327 73,646
Deferred income on shipments to distributors 38,573 38,662
Income taxes   942     2,084  
Total current liabilities 133,395 163,314
Long-term debt 74,562 77,500
Other non-current liabilities   41,761     43,691  
Total liabilities 249,718 284,505
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; 42,908 and 42,225 shares issued and outstanding at July 4, 2015 and January 3, 2015, respectively

4 4
Additional paid-in capital 44,152 29,501
Retained earnings 742,586 728,633
Accumulated other comprehensive loss   (529 )   (82 )
Total stockholders' equity   786,213     758,056  
Total liabilities and stockholders' equity $ 1,035,931   $ 1,042,561  
 
   
Silicon Laboratories Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
 
Six Months Ended

July 4,
2015

   

June 28,
2014

Operating Activities
Net income $ 13,953 $ 22,389
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation of property and equipment 6,029 6,427
Amortization of other intangible assets and other assets 14,697 8,839
Stock-based compensation expense 21,576 18,559
Income tax benefit from stock-based awards 2,781 377
Excess income tax benefit from stock-based awards (2,056 ) (589 )
Deferred income taxes 3,892 4,665
Changes in operating assets and liabilities:
Accounts receivable 1,724 3,082
Inventories (6,534 ) (123 )
Prepaid expenses and other assets 452 3,394
Accounts payable (3,359 ) 3,846
Accrued expenses (1,027 ) 19,697
Deferred income on shipments to distributors (2,132 ) 2,584
Income taxes (7,171 ) (5,130 )
Other non-current liabilities   (5,622 )   (24,599 )
Net cash provided by operating activities 37,203 63,418
 
Investing Activities
Purchases of available-for-sale investments (46,908 ) (117,744 )
Proceeds from sales and maturities of available-for-sale investments 92,759 61,803
Purchases of property and equipment (4,714 ) (3,339 )
Purchases of other assets (1,871 ) (2,726 )
Acquisition of business, net of cash acquired   (76,899 )   --  
Net cash used in investing activities (37,633 ) (62,006 )
 
Financing Activities
Proceeds from issuance of common stock, net of cash paid for withheld taxes 1,684 8,943
Excess income tax benefit from stock-based awards 2,056 589
Repurchases of common stock (10,418 ) (10,954 )
Payment of acquisition-related contingent consideration (4,464 ) --
Payments on debt   (5,083 )   (2,500 )
Net cash used in financing activities   (16,225 )   (3,922 )
 
Decrease in cash and cash equivalents (16,655 ) (2,510 )
Cash and cash equivalents at beginning of period   141,706     95,800  
Cash and cash equivalents at end of period $ 125,051   $ 93,290  

Silicon Labs
Jalene Hoover, +1 512-428-1610
Jalene.Hoover@silabs.com

Source: Silicon Labs

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