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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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. ¨
Item 2.02. Results of Operations and Financial Condition
On October 23, 2019, Silicon Laboratories Inc. (“Silicon Laboratories”) issued a press release describing its results of operations for its fiscal quarter ended September 28, 2019. 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 October 23, 2019 |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL) |
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 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, 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 fair value adjustments – primarily include costs associated with certain employee terminations, asset impairments and fair value adjustments resulting from observable price changes. Termination costs and fair value adjustments are excluded from non-GAAP financial measures because excluding such amounts provides meaningful supplemental information regarding core ongoing operations. |
| · | Non-cash 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 effect of the Tax Cuts & Jobs Act of 2017; 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.
EXHIBIT INDEX
| Exhibit No. | Description | |
| 99 | Press Release of Silicon Laboratories Inc. dated October 23, 2019 | |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL) |
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. | ||
| October 23, 2019 | /s/ John C. Hollister | |
| Date | John C. Hollister | |
| Senior Vice President and Chief Financial Officer | ||
| (Principal Financial Officer) | ||
Exhibit 99
Silicon Labs Announces Third Quarter 2019 Results
– Wireless Strength Drives Record IoT Revenue –
AUSTIN, Texas – Oct. 23, 2019 – Silicon Labs (NASDAQ: SLAB), a leading provider of silicon, software and solutions for a smarter, more connected world, today reported financial results for its third quarter ended September 28, 2019. Revenue was at the high end of guidance at $223.3 million, up from $206.7 million in the second quarter. Third quarter GAAP and non-GAAP diluted earnings per share (EPS) were $0.45 and $0.96, respectively.
“Third quarter revenue was up eight percent sequentially, with growth across all major product categories, and following the ten percent sequential increase we realized in the second quarter,” said Tyson Tuttle, CEO of Silicon Labs. “Despite macro headwinds, ongoing trade policy uncertainties and current semiconductor industry market conditions, we are pleased to deliver two consecutive quarters of strong revenue growth and a return to target operating model profitability.”
Third Quarter Financial Highlights
| · | IoT revenue increased to a record $129 million, up 4% sequentially and 3% year-on-year. |
| · | Infrastructure revenue increased to $45 million, up 3% sequentially and down 14% year-on-year. |
| · | Broadcast revenue increased to $34 million, up 30% sequentially and down 5% year-on-year. |
| · | Access revenue increased to $15 million, up 23% sequentially and down 10% year-on-year. |
On a GAAP basis:
| · | GAAP gross margin was 60.1%. |
| · | GAAP R&D expenses were $63 million. |
| · | GAAP SG&A expenses were $48 million. |
| · | GAAP operating income as a percentage of revenue was 10.7%. |
| · | GAAP diluted earnings per share were $0.45. |
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 60.2%. |
| · | Non-GAAP R&D expenses were $49 million. |
| · | Non-GAAP SG&A expenses were $38 million. |
| · | Non-GAAP operating income as a percentage of revenue was 21.1%. |
| · | Non-GAAP diluted earnings per share were $0.96. |
Product Results
| · | Launched a new portfolio of pre-certified Series 2 wireless modules to simplify the development of smart LED lighting, home automation and industrial IoT applications. |
| · | Announced a collaboration with Allegion, a pioneer in security solutions, to expand IoT wireless capabilities to security products for smart homes and commercial buildings. |
| · | Announced the industry’s broadest portfolio of automotive grade timing solutions including AEC-Q100-qualified clock generators, buffers and PCIe devices. |
| · | Introduced the Si834x isolated smart switch family designed to optimize performance in harsh industrial environments while offering best-in-class protection and diagnostic reporting features. |
| · | Enhanced Silicon Labs’ Si479xx automotive tuner family with software-defined radio technology addressing the market need to support all global digital radio standards with a common platform. |
Business Highlights
| · | Hosted the Z-Wave Alliance’s Fall Summit in Austin, convening members, partners and thought leaders for a series of presentations, panels and workshops on the future of Z-Wave technology and the smart home market. |
| · | Announced the acquisition of Qulsar’s IEEE 1588 precision time protocol (PTP) software and module assets enabling Silicon Labs to address the fast-growing IEEE 1588 market with turnkey, carrier-grade solutions simplifying integration and accelerating time to market for a wide range of applications. |
| · | Awarded the Chamberlain Group’s “Innovation and Technology Solutions” supplier award. |
| · | Added Megan Lueders to Silicon Labs’ executive team as Chief Marketing Officer to lead the company’s global marketing team responsible for brand management, sales pipeline acceleration and customer experience. |
Business Outlook
The company expects fourth quarter revenue to be in the range of $217 to $227 million, with Infrastructure up, IoT flat, and a decline in Broadcast and Access, and estimates the following:
On a GAAP basis:
| · | GAAP gross margin at approximately 60.3%. |
| · | GAAP operating expenses at approximately $113 million. |
| · | GAAP effective tax rate of 8.0%. |
| · | GAAP diluted earnings per share between $0.33 and $0.43. |
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 approximately 60.5%. |
| · | Non-GAAP operating expenses at approximately $90 million. |
| · | Non-GAAP effective tax rate at 11.5%. |
| · | Non-GAAP diluted earnings per share between $0.84 and $0.94. |
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 (877) 344-7529 (US) or (412) 317-0088 (International) and entering access code 10135403. The replay will be available through November 23, 2019.
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. 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 Silicon Labs’ distributors, manufacturers and subcontractors; inventory-related risks; difficulties managing international activities; risks associated with international activities (including trade barriers); 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; 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 Silicon Labs’ products and its 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, 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: 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 | Nine Months Ended | |||||||||||||||
| September 28, 2019 | September 29, 2018 | September 28, 2019 | September 29, 2018 | |||||||||||||
| Revenues | $ | 223,294 | $ | 230,243 | $ | 618,116 | $ | 652,733 | ||||||||
| Cost of revenues | 89,204 | 94,616 | 241,103 | 261,577 | ||||||||||||
| Gross profit | 134,090 | 135,627 | 377,013 | 391,156 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Research and development | 62,552 | 61,091 | 187,974 | 175,414 | ||||||||||||
| Selling, general and administrative | 47,718 | 49,406 | 145,571 | 148,896 | ||||||||||||
| Operating expenses | 110,270 | 110,497 | 333,545 | 324,310 | ||||||||||||
| Operating income | 23,820 | 25,130 | 43,468 | 66,846 | ||||||||||||
| Other income (expense): | ||||||||||||||||
| Interest income and other, net | 3,172 | 2,109 | 9,691 | 6,920 | ||||||||||||
| Interest expense | (5,126 | ) | (4,932 | ) | (15,128 | ) | (14,703 | ) | ||||||||
| Income before income taxes | 21,866 | 22,307 | 38,031 | 59,063 | ||||||||||||
| Provision (benefit) for income taxes | 1,685 | (5,454 | ) | 28,481 | (9,383 | ) | ||||||||||
| Net income | $ | 20,181 | $ | 27,761 | $ | 9,550 | $ | 68,446 | ||||||||
| Earnings per share: | ||||||||||||||||
| Basic | $ | 0.47 | $ | 0.64 | $ | 0.22 | $ | 1.59 | ||||||||
| Diluted | $ | 0.45 | $ | 0.63 | $ | 0.22 | $ | 1.55 | ||||||||
| Weighted-average common shares outstanding: | ||||||||||||||||
| Basic | 43,358 | 43,256 | 43,311 | 43,177 | ||||||||||||
| Diluted | 44,634 | 44,194 | 44,120 | 44,135 | ||||||||||||
Unaudited Reconciliation of GAAP to Non-GAAP Financial Measures
(In thousands, except per share data)
Three Months Ended September 28, 2019 | ||||||||||||||||||||||||
| Non-GAAP Income Statement Items | GAAP Measure | GAAP Percent of | Stock Compensation | Intangible Asset Amortization | Non-GAAP Measure | Non-GAAP Percent of | ||||||||||||||||||
| Revenues | $ | 223,294 | ||||||||||||||||||||||
| Gross profit | 134,090 | 60.1 | % | $ | 344 | $ | -- | $ | 134,434 | 60.2 | % | |||||||||||||
| Research and development | 62,552 | 28.0 | % | 6,474 | 6,946 | 49,132 | 22.0 | % | ||||||||||||||||
| Selling, general and administrative | 47,718 | 21.4 | % | 6,970 | 2,469 | 38,279 | 17.1 | % | ||||||||||||||||
| Operating income | 23,820 | 10.7 | % | 13,788 | 9,415 | 47,023 | 21.1 | % | ||||||||||||||||
Three Months Ended September 28, 2019 | ||||||||||||||||||||||||
| Non-GAAP Earnings Per Share | GAAP Measure | Stock Compensation | Intangible Asset Amortization* | Non-cash Interest Expense* | Income Tax Adjustments | Non-GAAP Measure | ||||||||||||||||||
| Net income | $ | 20,181 | $ | 13,788 | $ | 9,415 | $ | 2,930 | $ | (3,627 | ) | $ | 42,687 | |||||||||||
| Diluted shares outstanding | 44,634 | 44,634 | ||||||||||||||||||||||
| Diluted earnings per share | $ | 0.45 | $ | 0.96 | ||||||||||||||||||||
* Represents pre-tax amounts
Unaudited Forward-Looking Statements Regarding Business Outlook
(In millions, except per share data)
Three Months Ending December 28, 2019 | ||||||||||||
| Business Outlook | GAAP Measure | Non-GAAP Adjustments | Non-GAAP Measure | |||||||||
| Gross margin | 60.3 | % | 0.2 | % | 60.5 | % | ||||||
| Operating expenses | $ | 113 | $ | 23 | $ | 90 | ||||||
| Effective tax rate | 8.0 | % | 3.5 | % | 11.5 | % | ||||||
| Diluted earnings per share - low | $ | 0.33 | $ | 0.51 | $ | 0.84 | ||||||
| Diluted earnings per share - high | $ | 0.43 | $ | 0.51 | $ | 0.94 | ||||||
Silicon Laboratories Inc.
Condensed Consolidated Balance Sheets
(In thousands, except per share data)
(Unaudited)
| September 28, 2019 | December 29, 2018 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 237,056 | $ | 197,043 | ||||
| Short-term investments | 457,879 | 416,779 | ||||||
| Accounts receivable, net | 76,169 | 73,194 | ||||||
| Inventories | 71,453 | 74,972 | ||||||
| Prepaid expenses and other current assets | 52,609 | 64,650 | ||||||
| Total current assets | 895,166 | 826,638 | ||||||
| Property and equipment, net | 136,601 | 139,049 | ||||||
| Goodwill | 397,344 | 397,344 | ||||||
| Other intangible assets, net | 140,941 | 170,832 | ||||||
| Other assets, net | 67,126 | 90,491 | ||||||
| Total assets | $ | 1,637,178 | $ | 1,624,354 | ||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 38,724 | $ | 41,171 | ||||
| Deferred revenue and returns liability | 21,827 | 22,494 | ||||||
| Other current liabilities | 71,485 | 81,180 | ||||||
| Total current liabilities | 132,036 | 144,845 | ||||||
| Convertible debt | 364,802 | 354,771 | ||||||
| Other non-current liabilities | 56,586 | 57,448 | ||||||
| Total liabilities | 553,424 | 557,064 | ||||||
| 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; 43,373 and 43,088 shares issued and outstanding at September 28, 2019 and December 29, 2018, respectively | 4 | 4 | ||||||
| Additional paid-in capital | 112,251 | 107,517 | ||||||
| Retained earnings | 970,893 | 961,343 | ||||||
| Accumulated other comprehensive income (loss) | 606 | (1,574 | ) | |||||
| Total stockholders' equity | 1,083,754 | 1,067,290 | ||||||
| Total liabilities and stockholders' equity | $ | 1,637,178 | $ | 1,624,354 | ||||
Silicon Laboratories Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
| Nine Months Ended | ||||||||
| September 28, 2019 | September 29, 2018 | |||||||
| Operating Activities | ||||||||
| Net income | $ | 9,550 | $ | 68,446 | ||||
| Adjustments to reconcile net income to cash provided by operating activities: | ||||||||
| Depreciation of property and equipment | 12,675 | 11,781 | ||||||
| Amortization of other intangible assets and other assets | 29,891 | 33,322 | ||||||
| Amortization of debt discount and debt issuance costs | 10,031 | 9,578 | ||||||
| Stock-based compensation expense | 40,042 | 36,893 | ||||||
| Deferred income taxes | 24,531 | (2,994 | ) | |||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | (2,975 | ) | 2,518 | |||||
| Inventories | 3,512 | 5,066 | ||||||
| Prepaid expenses and other assets | 23,401 | 6,349 | ||||||
| Accounts payable | 6,419 | 8,675 | ||||||
| Other current liabilities and income taxes | (15,602 | ) | (23,814 | ) | ||||
| Deferred income, deferred revenue and returns liability | (667 | ) | (2,816 | ) | ||||
| Other non-current liabilities | (5,957 | ) | (7,878 | ) | ||||
| Net cash provided by operating activities | 134,851 | 145,126 | ||||||
| Investing Activities | ||||||||
| Purchases of available-for-sale investments | (306,645 | ) | (253,973 | ) | ||||
| Sales and maturities of available-for-sale investments | 268,140 | 371,885 | ||||||
| Purchases of property and equipment | (12,773 | ) | (18,267 | ) | ||||
| Purchases of other assets | (7,132 | ) | (9,088 | ) | ||||
| Acquisition of business, net of cash acquired | -- | (239,729 | ) | |||||
| Net cash used in investing activities | (58,410 | ) | (149,172 | ) | ||||
| Financing Activities | ||||||||
| Payment of debt issuance costs | (1,127 | ) | -- | |||||
| Repurchases of common stock | (26,716 | ) | (24,272 | ) | ||||
| Payment of taxes withheld for vested stock awards | (15,693 | ) | (18,927 | ) | ||||
| Proceeds from the issuance of common stock | 7,108 | 6,585 | ||||||
| Payment of acquisition-related contingent consideration | -- | (3,380 | ) | |||||
| Net cash used in financing activities | (36,428 | ) | (39,994 | ) | ||||
| Increase (decrease) in cash and cash equivalents | 40,013 | (44,040 | ) | |||||
| Cash and cash equivalents at beginning of period | 197,043 | 269,366 | ||||||
| Cash and cash equivalents at end of period | $ | 237,056 | $ | 225,326 | ||||