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Silicon Labs Announces Second Quarter 2018 Results

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Silicon Labs Announces Second Quarter 2018 Results

-- Delivers Record Revenue in IoT and Infrastructure --

PR Newswire

AUSTIN, Texas, July 25, 2018 /PRNewswire/ -- Silicon Labs (NASDAQ:SLAB), a leading provider of silicon, software and solutions for a smarter, more connected world, today reported financial results for its second quarter ended June 30, 2018. Revenue in the second quarter established a new, all-time record, achieving the high end of guidance at $217 million, up from $205 million in the first quarter. Second quarter GAAP and non-GAAP diluted earnings per share (EPS) were $0.32 and $0.92, respectively.

"We continue to focus on long-term, high-quality, strategic growth vectors, including IoT, green energy and data communications," said Tyson Tuttle, CEO of Silicon Labs. "The insatiable demand for data will persist, the electrification of the world will accelerate, and the value in connecting 'things' will increase exponentially. The diversity of our business supports strong fundamentals and is driving greater consistency in our results. We are very pleased with what we have accomplished, and even more excited about what lies ahead."

Second Quarter Financial Highlights

  • IoT revenue increased to $116 million, up 13% sequentially and 19% year-on-year.
  • Infrastructure revenue increased to $52 million, up 4% sequentially and 35% year-on-year.
  • Broadcast revenue declined to $34 million, down 5% sequentially and 7% year-on-year.
  • Access revenue declined to $15 million, down 8% sequentially and 12% year-on-year.

On a GAAP basis:

  • GAAP gross margin was 60.5%.
  • GAAP R&D expenses were $59 million.
  • GAAP SG&A expenses were $54 million.
  • GAAP operating income as a percentage of revenue was 8.3%.
  • GAAP diluted earnings per share were $0.32.

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 61.6%.
  • Non-GAAP R&D expenses were $47 million.
  • Non-GAAP SG&A expenses were $41 million.
  • Non-GAAP operating income as a percentage of revenue was 21.2%.
  • Non-GAAP diluted earnings per share were $0.92.

Product Highlights

  • Released new software for the Wireless Gecko portfolio enabling dynamic switching between sub-GHz networks and Bluetooth Low Energy on a single chip.
  • Expanded Silicon Labs' portfolio of clock generators, jitter attenuators and crystal oscillators to meet the high-performance timing requirements of 56G SerDes and emerging 112G serial applications.

Business Highlights

  • Completed the asset purchase of Sigma Designs' Z-Wave business for $243 million on April 18, 2018, expanding Silicon Labs' leading position in mesh networking for the smart home.
  • Appointed Daniel Cooley as Senior Vice President and Chief Strategy Officer, focusing on Silicon Labs' overall growth and M&A strategy, business development, new technologies and emerging markets.
  • Added Matt Johnson as Senior Vice President and General Manager of IoT Products, leading the development and market success of the company's broad portfolio of wireless products, microcontrollers, sensors, development tools and software.

Business Outlook

The company expects revenue in the third quarter to be in the range of $224 to $230 million, and estimates the following:

On a GAAP basis:

  • GAAP gross margin at approximately 58.5%.
  • GAAP operating expenses at approximately $111.0 million.
  • GAAP effective tax rate at 0.0%.
  • GAAP diluted earnings per share between $0.40 and $0.46.

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 60.0%.
  • Non-GAAP operating expenses between $87.0 and $88.0 million.
  • Non-GAAP effective tax rate at 11.0%.
  • Non-GAAP diluted earnings per share between $0.95 and $1.01.

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 (855) 859-2056 or (404) 537-3406 (international) and entering conference 88340292. The replay will be available through August 22, 2018.

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. 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; 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; cyber-attacks against our products and our 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


Six Months Ended


June 30,
2018


July 1,
2017


June 30,
2018


July 1,
2017

Revenues

$217,106


$190,098


$422,490


$369,126

Cost of revenues

85,814


76,906


166,961


150,773

Gross margin

131,292


113,192


255,529


218,353

Operating expenses:








   Research and development

59,495


52,432


114,323


104,756

   Selling, general and administrative

53,796


39,826


99,490


79,981

Operating expenses

113,291


92,258


213,813


184,737

Operating income

18,001


20,934


41,716


33,616

Other income (expense):








   Interest income and other, net

1,609


1,595


4,811


2,171

   Interest expense

(4,888)


(4,699)


(9,771)


(4,501)

Income before income taxes

14,722


17,830


36,756


31,286

Provision (benefit) for income taxes

442


1,261


(3,929)


(709)

Net income

$  14,280


$  16,569


$  40,685


$  31,995









Earnings per share:








   Basic

$      0.33


$      0.39


$      0.94


$      0.76

   Diluted

$      0.32


$      0.38


$      0.92


$      0.74









Weighted-average common shares outstanding:








   Basic

43,312


42,478


43,138


42,287

   Diluted

44,294


43,178


44,106


43,104

 

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, 2018



GAAP
Measure


GAAP
Percent of
Revenue


Stock
Compensation
Expense


Intangible
Asset
Amortization


Acquisition
Related
Items


Non-GAAP

Measure


Non-GAAP
Percent of
Revenue

Revenues


$217,106




























Gross margin


131,292


60.5%


$     294


$      --


$2,148


$133,734


61.6%
















Research and
  
development


59,495


27.4%


5,669


6,940


--


46,886


21.6%
















Selling, general and
  
administrative


53,796


24.8%


6,156


2,726


4,163


40,751


18.8%
















Operating income


18,001


8.3%


12,119


9,666


6,311


46,097


21.2%































Non-GAAP
Earnings Per Share


Three Months Ended

June 30, 2018



GAAP

Measure


Stock
Compensation
Expense*


Intangible
Asset Amortization*


Acquisition Related
Items*


Non-cash Interest Expense*


Income Tax Adjustments


Non-GAAP

Measure

Net income


$14,280


$12,119


$9,666


$6,311


$2,767


$(4,559)


$40,584
















Diluted shares
  
outstanding


44,294












44,294
















Diluted earnings
  
per share


$    0.32












$    0.92


* Represents pre-tax amounts

 

Unaudited Forward-Looking Statements Regarding Business Outlook

(In millions, except per share data)


Business Outlook


Three Months Ending

September 29, 2018



GAAP

Measure


Non-GAAP

Adjustments


Non-GAAP

Measure

Gross margin


58.5%


1.5%


60.0%








Operating expenses


$111


$23-$24


$87-$88








Effective tax rate


0.0%*


11.0%*


11.0%








Diluted earnings per share - low


$0.40*


$0.55*


$0.95








Diluted earnings per share - high


$0.46*


$0.55*


$1.01


* Does not reflect any potential impact resulting from the U.S. Court of Appeals for the Ninth Circuit's decision on July 24, 2018 on the Altera Tax Court case involving the treatment of stock-based compensation in an intercompany cost-sharing arrangement. The Company is currently evaluating the impact of this decision and such impact could be material to its financial statements.

 

Silicon Laboratories Inc.

Condensed Consolidated Balance Sheets

(In thousands, except per share data)

(Unaudited)



June 30,

 2018


December 30,

 2017

Assets




Current assets:




   Cash and cash equivalents

$   194,864


$   269,366

   Short-term investments

347,416


494,657

   Accounts receivable, net

93,830


71,367

   Inventories

87,163


73,132

   Prepaid expenses and other current assets

52,642


39,120

Total current assets

775,915


947,642

Property and equipment, net

132,021


127,682

Goodwill

396,689


288,227

Other intangible assets, net

192,601


83,144

Other assets, net

95,385


88,387

Total assets

$1,592,611


$1,535,082





Liabilities and Stockholders' Equity




Current liabilities:




   Accounts payable

$     40,323


$     38,851

   Deferred revenue and returns liability

24,503


--

   Deferred income on shipments to distributors

--


50,115

   Other current liabilities

74,254


73,359

Total current liabilities

139,080


162,325

Convertible debt

348,233


341,879

Other non-current liabilities

76,830


77,862

Total liabilities

564,143


582,066

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;  

      43,350 and 42,707 shares issued and outstanding at

      June 30, 2018 and December 30, 2017, respectively

4


4

   Additional paid-in capital

111,984


102,862

   Retained earnings

918,440


851,307

   Accumulated other comprehensive loss

(1,960)


(1,157)

Total stockholders' equity

1,028,468


953,016

Total liabilities and stockholders' equity

$1,592,611


$1,535,082

 

Silicon Laboratories Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)



Six Months Ended


June 30,
2018


July 1,
2017

Operating Activities




Net income

$  40,685


$  31,995

Adjustments to reconcile net income to cash provided by operating activities:




   Depreciation of property and equipment

7,643


7,308

   Amortization of other intangible assets and other assets

18,366


13,571

   Amortization of debt discount and debt issuance costs 

6,354


3,907

   Stock-based compensation expense

24,311


21,652

   Deferred income taxes

(5,830)


(6,242)

   Changes in operating assets and liabilities:




      Accounts receivable

(16,705)


(887)

      Inventories

(565)


(7,737)

      Prepaid expenses and other assets

(1,759)


12,539

      Accounts payable

2,980


2,363

      Other current liabilities and income taxes

(17,249)


14

      Deferred income, deferred revenue and returns liability

(4,193)


3,251

      Other non-current liabilities

(3,260)


(1,169)

Net cash provided by operating activities

50,778


80,565





Investing Activities




Purchases of available-for-sale investments

(148,437)


(389,234)

Sales and maturities of available-for-sale investments

295,405


92,307

Purchases of property and equipment

(11,406)


(8,390)

Purchases of other assets

(5,893)


(1,784)

Acquisition of business, net of cash acquired

(239,729)


(13,658)

Net cash used in investing activities

(110,060)


(320,759)





Financing Activities




Proceeds from issuance of long-term debt, net

--


389,468

Payments on debt

--


(72,500)

Repurchases of common stock

(3,397)


--

Payment of taxes withheld for vested stock awards

(18,408)


(14,101)

Proceeds from the issuance of common stock

6,585


6,836

Net cash provided by (used in) financing activities

(15,220)


309,703





Increase (decrease) in cash and cash equivalents

(74,502)


69,509

Cash and cash equivalents at beginning of period

269,366


141,106

Cash and cash equivalents at end of period

$194,864


$210,615

 

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SOURCE Silicon Labs

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