UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Item 2.02. Results of Operations and Financial Condition
On April 26, 2023, Silicon Laboratories Inc. (“Silicon Laboratories”) issued a press release describing its results of operations for its fiscal quarter ended April 1, 2023. 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 April 26, 2023 |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
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 tax 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 and disposition 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 of a business combination or disposition-related costs of a business divestiture, such as costs for attorneys, investment bankers, accountants and other third party service providers. Acquisition and disposition related items are excluded from non-GAAP financial measures because excluding such amounts provides meaningful supplemental information regarding core ongoing operations. |
| · | Termination costs, impairments, and fair value and other adjustments – primarily include costs associated with certain employee terminations, asset impairments, fair value adjustments resulting from observable price changes and other non-cash adjustments. Termination costs, impairments, and fair value and other adjustments are excluded from non-GAAP financial measures because excluding such amounts provides meaningful supplemental information regarding core ongoing operations. |
| · | Equity-method investment adjustments – primarily include the Company’s proportionate share of gains and/or losses from investments accounted for by the equity method of accounting. Equity-method investment adjustments are excluded from non-GAAP financial measures because these generally are non-cash, non-operating activity during the period of adjustment, relate to activity in entities outside those of Silicon Labs, and excluding such expense/gain provides meaningful supplemental information regarding core operations. |
| · | Interest expense adjustments – represents losses on the extinguishment of convertible debt and losses on the termination of interest rate swap agreements. Such amounts are excluded from non-GAAP financial measures because they are non-cash expenses and/or excluding such amounts 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.
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. | ||
| April 26, 2023 | /s/ John C. Hollister | |
| Date | John C. Hollister | |
| Senior Vice President and | ||
| Chief Financial Officer | ||
| (Principal Financial Officer) |
Exhibit 99
Silicon Labs Reports First Quarter 2023 Results
IoT leader delivers in-line results and expands industry-leading Series 2 platform
AUSTIN, Texas – April 26, 2023 – Silicon Labs (NASDAQ: SLAB), a leader in secure, intelligent wireless technology for a more connected world, reported financial results for the first quarter, which ended April 1, 2023. Revenue met the mid-point of the guidance range at $247 million, up 6% year-on-year, driven in part by strength across our Bluetooth portfolio.
“The Silicon Labs team executed well in the first quarter, furthering our leadership position within IoT through deep customer and industry relationships,” said Matt Johnson, President and Chief Executive Officer at Silicon Labs. “With a challenging macro backdrop, we are focused on driving operational efficiencies, supporting new customer ramps, and investing in the people and products that will allow us to outperform the market and capture the exciting growth potential ahead.”
First Quarter Financial Highlights
| · | Revenue was $247 million, up 6% year-on-year | |
| · | Industrial & Commercial revenue for the quarter was $151 million | |
| · | Home & Life revenue for the quarter was $96 million | |
| · | Gross margin was 62.3% |
Results on a GAAP basis:
| · | GAAP gross margin was 62.3% | |
| · | GAAP R&D expenses were $89 million | |
| · | GAAP SG&A expenses were $45 million | |
| · | GAAP operating income as a percentage of revenue was 8% | |
| · | GAAP diluted earnings per share were $0.41 |
Results on a non-GAAP basis, excluding the impact of stock compensation, amortization of acquired intangible assets, and certain other items as set forth in the below GAAP to Non-GAAP reconciliation tables were as follows:
| · | Non-GAAP gross margin was 62.5% | |
| · | Non-GAAP R&D expenses were $70 million | |
| · | Non-GAAP SG&A expenses were $37 million | |
| · | Non-GAAP operating income as a percentage of revenue was 19% |
| · | Non-GAAP diluted earnings per share were $1.12 |
Business Highlights
| · | Announced general availability for our flagship FG25 sub-Ghz SoC. The FG25 is ideal for long-range, low-power communications, capable of broadcasting more than 1km with minimal data loss in dense, urban environments. With Wi-SUN certification, the FG25 also supports high data bandwidth of up to 3.6 Megabits per second, which is critical for enabling the large networks needed by smart cities where the nodes can number in the thousands. |
| · | Announced a new integrated circuit family designed for the smallest form factor IoT devices: the xG27 family of Bluetooth SoCs. The xG27 family offers IoT device designers the energy efficiency, high performance, security, and wireless connectivity ideal for tiny, battery-optimized devices like connected medical devices, wearables, asset monitoring tags, and smart sensors. |
| · | Silicon Labs announced the availability of its Pro Kit for Amazon Sidewalk, which has been developed to simplify the development process, reduce costs, and accelerate time to revenue for Amazon Sidewalk devices. As one of Amazon Sidewalk’s only three qualified hardware partners for developing Amazon Sidewalk devices, our Pro Kit provides all the necessary tools for developing high-volume, scalable IoT applications. It is also designed to support the development of wireless IoT-based devices on Bluetooth and sub-GHz wireless protocols for Amazon Sidewalk. The Pro Kit for Amazon Sidewalk was also recently awarded Embedded Computing Design's Best in Show Award at the Embedded World Conference in Nuremberg, Germany, in March. |
| · | Issued a notice of redemption on our outstanding 2025 convertible notes. Prior to the consummation of the redemption, the holders of the notes are entitled to convert such notes into shares of our common stock at a rate of 8.6081 shares per $1,000 principal amount of notes. We intend to settle the par value of the notes, $535M, in cash and any in-the-money value assignable to the notes in shares. The notes redemption process will be completed on June 20, 2023. |
Business Outlook
The company expects second-quarter revenue to be between $238 to $248 million. The company also estimates the following results:
On a GAAP basis:
| · | GAAP gross margin of approximately 60% | |
| · | GAAP operating expenses of approximately $131 million | |
| · | GAAP effective tax rate of approximately 34% | |
| · | GAAP diluted earnings per share between $0.35 to $0.45 |
On a non-GAAP basis, excluding the impact of stock compensation, amortization of acquired intangible assets, and certain other items as set forth in the reconciliation tables:
| · | Non-GAAP gross margin to be between 60% and 61% | |
| · | Non-GAAP operating expenses of approximately $106 million | |
| · | Non-GAAP effective tax rate of approximately 25% | |
| · | Non-GAAP diluted earnings per share between $0.98 to $1.08 |
Earnings Webcast and Conference Call
Silicon Labs will host an earnings conference call to discuss the quarterly results and answer questions at 7:30 am CDT today. An audio webcast will be available on Silicon Labs' website (www.silabs.com) under Investor Relations. In addition, the company will post an audio recording of the event at silabs.com/investors and make a replay available through May 26, 2023, online or by calling (877) 344-7529 (US) or (412) 317-0088 (international) and entering access code 6021433.
About Silicon Labs
Silicon Labs (NASDAQ: SLAB) is a leader in secure, intelligent wireless technology for a more connected world. Our integrated hardware and software platform, intuitive development tools, thriving ecosystem, and robust support make us an ideal long-term partner in building advanced industrial, commercial, home and life applications. We make it easy for developers to solve complex wireless challenges throughout the product lifecycle and get to market quickly with innovative solutions that transform industries, grow economies, and improve lives. 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: the competitive and cyclical nature of the semiconductor industry; the challenging macroeconomic environment, including disruptions in the financial services industry; 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 or pandemics, war and political unrest; risks that demand and the supply chain may be adversely affected by military conflict (including between Russia and Ukraine), terrorism, sanctions or other geopolitical events globally (including conflict between Taiwan and China); 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; risks associated with international activities (including trade barriers, particularly with respect to China); intellectual property litigation risks; risks associated with acquisitions and divestitures; product liability risks; difficulties managing and/or obtaining sufficient supply from Silicon Labs’ distributors, manufacturers and subcontractors; dependence on a limited number of products; absence of long-term commitments from customers; 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 its accounts receivable; dependence on key personnel; stock price volatility the impact of COVID-19 on the U.S. and global economy; debt-related risks; capital-raising risks; the timing and scope of share repurchases and/or dividends; average selling prices of products may decrease significantly and rapidly; information technology risks; cyber-attacks against Silicon Labs’ products and its networks 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, and the Silicon Labs logo are trademarks of Silicon Laboratories Inc. All other product names noted herein may be trademarks of their respective holders.
CONTACT: Thomas Haws, Investor Relations Manager, (512) 416-8500, investor.relations@silabs.com
Silicon Laboratories Inc.
Condensed Consolidated Statements of Income
(In thousands, except per share data)
(Unaudited)
| Three Months Ended | ||||||||
| April 1, 2023 | April 2, 2022 | |||||||
| Revenues | $ | 246,787 | $ | 233,814 | ||||
| Cost of revenues | 92,927 | 78,042 | ||||||
| Gross profit | 153,860 | 155,772 | ||||||
| Operating expenses: | ||||||||
| Research and development | 89,396 | 77,542 | ||||||
| Selling, general and administrative | 44,891 | 44,647 | ||||||
| Operating expenses | 134,287 | 122,189 | ||||||
| Operating income | 19,573 | 33,583 | ||||||
| Other income (expense): | ||||||||
| Interest income and other, net | 4,836 | 1,499 | ||||||
| Interest expense | (1,656 | ) | (1,680 | ) | ||||
| Income before income taxes | 22,753 | 33,402 | ||||||
| Provision for income taxes | 7,753 | 11,689 | ||||||
| Equity-method earnings (loss) | (1,033 | ) | 1,194 | |||||
| Net income | $ | 13,967 | $ | 22,907 | ||||
| Earnings per share: | ||||||||
| Basic | $ | 0.44 | $ | 0.60 | ||||
| Diluted | $ | 0.41 | $ | 0.58 | ||||
| Weighted-average common shares outstanding: | ||||||||
| Basic | 31,959 | 38,003 | ||||||
| Diluted | 33,753 | 39,523 | ||||||
Non-GAAP Financial Measurements
In addition to the GAAP results provided throughout this document, Silicon Labs has provided non-GAAP financial measurements on a basis excluding non-cash and other charges and benefits. Details of these excluded items are presented in the tables below, which reconcile the GAAP results to non-GAAP financial measurements.
The non-GAAP financial measurements do not replace the presentation of Silicon Labs’ GAAP financial results. These measurements provide supplemental information to assist management and investors in analyzing Silicon Labs’ financial position and results of operations. Silicon Labs has chosen to provide this information to investors to enable them to perform meaningful comparisons of past, present and future operating results and as a means to emphasize the results of core on-going operations.
Unaudited Reconciliation of GAAP to Non-GAAP Financial Measures
(In thousands, except per share data)
| Three Months Ended April 1, 2023 | ||||||||||||||||||||||||||||
| Non-GAAP Income Statement Items | GAAP Measure | GAAP Percent of Revenue | Stock Compensation Expense | Intangible Asset Amortization | Termination Costs | Non- GAAP Measure | Non-GAAP Percent of Revenue | |||||||||||||||||||||
| Revenues | $ | 246,787 | ||||||||||||||||||||||||||
| Gross profit | 153,860 | 62.3 | % | $ | 298 | $ | -- | $ | 113 | $ | 154,271 | 62.5 | % | |||||||||||||||
| Research and development | 89,396 | 36.2 | % | 9,491 | 6,491 | 3,216 | 70,198 | 28.4 | % | |||||||||||||||||||
| Selling, general and administrative | 44,891 | 18.2 | % | 6,849 | 19 | 1,383 | 36,640 | 14.8 | % | |||||||||||||||||||
| Operating income | 19,573 | 7.9 | % | 16,638 | 6,510 | 4,712 | 47,433 | 19.2 | % | |||||||||||||||||||
| Three Months Ended April 1, 2023 | ||||||||||||||||||||||||||||
| Non-GAAP Earnings Per Share | GAAP Measure | Stock Compensation Expense* | Intangible Asset Amortization* | Termination Costs* | Equity-Method Investment Adjustments* | Income Tax Adjustments | Non- GAAP Measure | |||||||||||||||||||||
| Net income | $ | 13,967 | $ | 16,638 | $ | 6,510 | $ | 4,712 | $ | 1,033 | $ | (5,223 | ) | $ | 37,637 | |||||||||||||
| Diluted shares outstanding | 33,753 | 33,753 | ||||||||||||||||||||||||||
| Diluted earnings per share | $ | 0.41 | $ | 1.12 | ||||||||||||||||||||||||
* Represents pre-tax amounts
Unaudited Forward-Looking Statements Regarding Business Outlook
(In millions, except per share data)
| Three Months Ending July 1, 2023 | ||||||||||||
| Business Outlook | GAAP Measure | Non-GAAP Adjustments** | Non-GAAP Measure | |||||||||
| Gross margin | 60 | % | 0.5 | % | 60.5 | % | ||||||
| Operating expenses | $ | 131 | $ | (25 | ) | $ | 106 | |||||
| Effective tax rate | 34 | % | (9 | )% | 25 | % | ||||||
| Diluted earnings per share - low | $ | 0.35 | $ | 0.63 | $ | 0.98 | ||||||
| Diluted earnings per share - high | $ | 0.45 | $ | 0.63 | $ | 1.08 | ||||||
** Non-GAAP adjustments include the following estimates: stock compensation expense of $17.7 million, intangible asset amortization of $6.4 million, termination costs of $1.6 million, and the associated tax impact from the aforementioned items.
Silicon Laboratories Inc.
Condensed Consolidated Balance Sheets
(In thousands, except per share data)
(Unaudited)
| April 1, 2023 | December 31, 2022 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 716,377 | $ | 499,915 | ||||
| Short-term investments | 435,699 | 692,024 | ||||||
| Accounts receivable, net | 87,694 | 71,437 | ||||||
| Inventories | 133,236 | 100,417 | ||||||
| Prepaid expenses and other current assets | 87,734 | 97,570 | ||||||
| Total current assets | 1,460,740 | 1,461,363 | ||||||
| Property and equipment, net | 152,110 | 152,016 | ||||||
| Goodwill | 376,389 | 376,389 | ||||||
| Other intangible assets, net | 78,397 | 84,907 | ||||||
| Other assets, net | 93,812 | 94,753 | ||||||
| Total assets | $ | 2,161,448 | $ | 2,169,428 | ||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 71,437 | $ | 89,860 | ||||
| Current portion of convertible debt, net | 530,096 | -- | ||||||
| Deferred revenue and returns liability | 11,258 | 6,780 | ||||||
| Other current liabilities | 80,540 | 89,136 | ||||||
| Total current liabilities | 693,331 | 185,776 | ||||||
| Convertible debt, net | -- | 529,573 | ||||||
| Other non-current liabilities | 48,663 | 49,071 | ||||||
| Total liabilities | 741,994 | 764,420 | ||||||
| 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; 31,997 and 31,994 shares issued and outstanding at April 1, 2023 and December 31, 2022, respectively | 3 | 3 | ||||||
| Retained earnings | 1,425,914 | 1,415,693 | ||||||
| Accumulated other comprehensive loss | (6,463 | ) | (10,688 | ) | ||||
| Total stockholders’ equity | 1,419,454 | 1,405,008 | ||||||
| Total liabilities and stockholders’ equity | $ | 2,161,448 | $ | 2,169,428 | ||||
Silicon Laboratories Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
| Three Months Ended | ||||||||
| April 1, 2023 | April 2, 2022 | |||||||
| Operating Activities | ||||||||
| Net income | $ | 13,967 | $ | 22,907 | ||||
| Adjustments to reconcile net income to cash provided by (used in) operating activities of continuing operations: | ||||||||
| Depreciation of property and equipment | 6,235 | 5,156 | ||||||
| Amortization of other intangible assets | 6,510 | 10,351 | ||||||
| Amortization of debt issuance costs | 523 | 496 | ||||||
| Stock-based compensation expense | 16,638 | 12,875 | ||||||
| Equity-method earnings (loss) | 1,033 | (1,194 | ) | |||||
| Deferred income taxes | (2,670 | ) | (4,202 | ) | ||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | (16,257 | ) | 19,080 | |||||
| Inventories | (32,794 | ) | (6,215 | ) | ||||
| Prepaid expenses and other assets | 11,530 | 1,704 | ||||||
| Accounts payable | (12,966 | ) | 8,932 | |||||
| Other current liabilities and income taxes | (8,529 | ) | 8,345 | |||||
| Deferred revenue and returns liability | 4,478 | 7,791 | ||||||
| Other non-current liabilities | (978 | ) | (817 | ) | ||||
| Net cash provided by (used in) operating activities of continuing operations | (13,280 | ) | 85,209 | |||||
| Investing Activities | ||||||||
| Purchases of marketable securities | (66,113 | ) | (435,690 | ) | ||||
| Sales of marketable securities | 170,317 | 9,106 | ||||||
| Maturities of marketable securities | 157,734 | 213,750 | ||||||
| Purchases of property and equipment | (7,657 | ) | (4,554 | ) | ||||
| Net cash provided by (used in) investing activities of continuing operations | 254,281 | (217,388 | ) | |||||
| Financing Activities | ||||||||
| Repurchases of common stock | (17,608 | ) | (157,778 | ) | ||||
| Payment of taxes withheld for vested stock awards | (6,931 | ) | (8,755 | ) | ||||
| Net cash used in financing activities of continuing operations | (24,539 | ) | (166,533 | ) | ||||
| Discontinued Operations | ||||||||
| Operating activities | -- | (10,000 | ) | |||||
| Net cash used in discontinued operations | -- | (10,000 | ) | |||||
| Increase (decrease) in cash and cash equivalents | 216,462 | (308,712 | ) | |||||
| Cash and cash equivalents at beginning of period | 499,915 | 1,074,623 | ||||||
| Cash and cash equivalents at end of period | $ | 716,377 | $ | 765,911 | ||||