Silicon Labs Announces Third Quarter 2020 Results

AUSTIN, Texas, Oct. 28, 2020 /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 third quarter ended October 3, 2020. Revenue exceeded the top end of the guidance range at $221.3 million, up from $207.5 million in the second quarter. Third quarter GAAP and non-GAAP diluted earnings per share (EPS) were $0.07 and $0.73, respectively.

"Third quarter revenue exceeded the high end of our guidance range at $221.3 million," said Tyson Tuttle, CEO of Silicon Labs. "Revenue was considerably stronger than expected, with our IoT products leading the way with a record quarter. We see sustained acceleration towards a more connected world, which our products are well-suited to address."

Third Quarter Financial Highlights

    --  IoT revenue grew to $133.2 million, up 16% sequentially and 3%
        year-on-year.
    --  Infrastructure and Automotive revenue declined to $88.2 million, down 5%
        sequentially and 6% year-on-year.

On a GAAP basis:

    --  GAAP gross margin was 58.8%.
    --  GAAP R&D expenses were $72 million.
    --  GAAP SG&A expenses were $48 million.
    --  GAAP operating income as a percentage of revenue was 4.3%.
    --  GAAP diluted earnings per share was $0.07.

On a non-GAAP basis, excluding the impact of stock compensation, amortization of acquired intangible assets, restructuring charges, non-cash interest expense and other costs associated with convertible notes, and certain other items as set forth in the reconciliation tables below:

    --  Non-GAAP gross margin was 59.5%.
    --  Non-GAAP R&D expenses were $56 million.
    --  Non-GAAP SG&A expenses were $39 million.
    --  Non-GAAP operating income as a percentage of revenue was 16.9%.
    --  Non-GAAP diluted earnings per share were $0.73.

Product Results

    --  Expanded our Bluetooth(®) Low Energy portfolio this quarter with the
        launch of the BGM220S and BGM220P modules. At just 6x6 mm, the BGM220S
        is one of the world's smallest Bluetooth modules. It provides
        ultra-small size, low-cost, and long battery life to add turnkey
        Bluetooth connectivity to a variety of end products.
    --  Launched the Si54x/6x Ultra Series, a new family of small form-factor,
        high-performance crystal oscillators. The Si54x/6x Ultra Series delivers
        jitter performance as low as 80 femtoseconds for integer and fractional
        frequencies across the entire operating range, providing outstanding
        jitter margin for demanding applications including data center
        interconnect, optical transport, broadcast video and test/measurement.
    --  Introduced new Si823Hx/825xx isolated gate drivers offering a
        combination of faster and safer switching, low latency and high noise
        immunity capabilities that enable power converter designers to meet or
        exceed increasing energy efficiency standards and size constraints in a
        variety of applications including data center and industrial power
        supplies, micro inverters for solar power, and traction inverters for
        the electric vehicle market.

Business Highlights

    --  Announced collaboration with Amazon to support Sidewalk, a secure
        network created by neighbors who share a small portion of Wi-Fi
        bandwidth to help their devices work better at home and beyond the front
        door. Sidewalk is a free software application layer that works on top of
        our Wireless Gecko Series 2 products to support Sidewalk's sub-GHz and
        Bluetooth Low Energy protocols and permit IoT devices to securely
        connect to each other through the cloud.
    --  Held our first-ever Works With smart home developer conference with
        leaders from the world's largest smart home ecosystem players including
        key executives from Google, Amazon, Ring, and Comcast. Our Works With
        conference provided an onramp enabling smart home developers to directly
        engage with the biggest, most popular smart home ecosystems through
        co-authored curriculum featuring 40 technical sessions, 12 hands-on
        workshops and six keynotes spanning 40 hours of high quality, high
        engagement content.
    --  Debuted our new Secure Vault technology for Silicon Labs' multiprotocol
        Wireless Gecko Series 2 platform. Our products are the first with radios
        to earn ARM's PSA Level 2 security certification. We also received
        SmartCert security certification from the ioXt Alliance and were awarded
        a Gold medal in the 2020 LEAP Awards Connectivity category for
        best-in-class security.
    --  Released Simplicity Studio 5, which is the latest version of our free to
        use, class-leading IoT developer environment. Simplicity Studio now
        offers universal access and an enhanced experience across a wide range
        of wireless protocols, all within a new, intuitive and responsive
        web-style user interface allowing customers to accelerate
        differentiation and time to market.
    --  Announced our collaboration with STRATIS on their 3.0 Gateway which uses
        Silicon Labs' connectivity products to provide multiprotocol wireless
        capabilities connecting smart devices throughout apartment communities.
        This new industrial IoT application enables residents to use their
        smartphones as a credential to enter the apartment building and their
        fully equipped smart apartment unit. The system also allows property
        managers to control energy usage and smart technology in vacant units
        and monitor common areas.
    --  Continued to focus on addressing health and safety during the ongoing
        pandemic by collaborating with our customers to expedite time-to-market
        of impactful products. For example, we worked with Maggy, a
        Belgium-based start-up, to use our BGM13S Bluetooth module to enable a
        new, compact social-distancing wearable that warns users when the
        distance between people becomes too small and could pose a risk of
        COVID-19 infection transfer.
    --  Promoted Serena Townsend to Silicon Labs' Chief People Officer to lead
        the company's global talent strategy, people programs, and
        values-driven, inclusive culture.

Business Outlook

The company expects fourth quarter revenue to be in the range of $221 to $231 million, with IoT and Infrastructure & Automotive up, and estimates the following:

On a GAAP basis:

    --  GAAP gross margin at approximately 59%.
    --  GAAP operating expenses at approximately $123 million.
    --  GAAP effective tax rate of 0.0%.
    --  GAAP diluted earnings per share between $0.02 and $0.12.

On a non-GAAP basis, excluding the impact of stock compensation, amortization of acquired intangible assets, acquisition related charges, restructuring charges, non-cash interest expense and other costs associated with convertible notes, and certain other items as set forth in the reconciliation tables below:

    --  Non-GAAP gross margin at approximately 59%.
    --  Non-GAAP operating expenses at approximately $95 million.
    --  Non-GAAP effective tax rate at 13.0%.
    --  Non-GAAP diluted earnings per share between $0.68 and $0.78.

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 10145993. The replay will be available through November 28, 2020.

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: the impact of COVID-19 on the U.S. and global economy, including the restrictions on travel and transportation and other actions taken by governmental authorities and disruptions to the business of our customers or our global supply chain that have occurred or may occur in the future, the ongoing impact of COVID-19 on our employees and our ability to provide services to our customers and respond to their needs; 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 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; 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; 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.


                                                      
         
              Silicon Laboratories Inc.

                                                  
       
           Condensed Consolidated Statements of Income

                                                    
       
            (In thousands, except per share data)

                                                          
            
              (Unaudited)




                                                              Three Months Ended                            Nine Months Ended

                                                                                                                          ---

                                                                  October 3,                     
            
       September 28,    October 3,   
     
     September 28,
                                                                            2020                                          2019         2020                   2019

                                                                                                                                                            ---


     Revenues                                                          $221,350                                      $223,294     $643,760               $618,116



     Cost of revenues                                                    91,276                                        89,204      258,209                241,103




     Gross profit                                                       130,074                                       134,090      385,551                377,013



     Operating expenses:



        Research and development                                         71,969                                        62,552      214,030                187,974



        Selling, general and administrative                              48,483                                        47,718      150,883                145,571




     Operating expenses                                                 120,452                                       110,270      364,913                333,545




     Operating income                                                     9,622                                        23,820       20,638                 43,468



     Other income (expense):



        Interest income and other, net                                    2,044                                         3,172        8,562                  9,691



        Interest expense                                                (8,604)                                      (5,126)    (25,923)              (15,128)



     Income before income taxes                                           3,062                                        21,866        3,277                 38,031



     Provision (benefit) for income taxes                                 (100)                                        1,685        (306)                28,481



                                                                          $3,162                                       $20,181       $3,583                 $9,550


     Net income

                                                                                                                                                            ===




     Earnings per share:



        Basic                                                             $0.07                                         $0.47        $0.08                  $0.22



        Diluted                                                           $0.07                                         $0.45        $0.08                  $0.22





     Weighted-average common shares outstanding:



        Basic                                                            43,815                                        43,358       43,737                 43,311



        Diluted                                                          44,328                                        44,634       44,254                 44,120


                                                                                                                             
              
                Unaudited Reconciliation of GAAP to Non-GAAP Financial Measures

                                                                                                                                          
              
                (In thousands, except per share data)





              
                Non-GAAP Income                                  
             
               Three Months Ended
    Statement Items
                                                                               
             
               October 3, 2020



                                                          
     
       GAAP        
             
               GAAP                     
         
                Stock                     
              
                Intangible           
     
              Acquisition       
       
               Restructuring      
        
         Non-GAAP                    Non-GAAP
                                                                                                                                                                                       Asset                              Related                          Charges
                                                               Measure   
             
               Percent of               
        
                Compensation                             Amortization                            Items                                                        
        
         Measure                   Percent of
                                                                                      Revenue                                    Expense                                                                                                                                                                             Revenue




              Revenues                                       $221,350





              Gross profit                                    130,074                                 58.8%                                        $390                               
              $        --                              $1,233                  
              $   --                   $131,697                           59.5%





              Research and                                     71,969                                 32.5%                                       7,384                                                8,954                                                                     37                      55,594                           25.1%


                 development





              Selling, general and                             48,483                                                                             6,785                                                2,894                                                                    153                      38,651


                 administrative                                                                      22.0%                                                                                                                                                                                                                           17.5%





              Operating income                                  9,622                                  4.3%                                      14,559                                               11,848                                1,233                                190                      37,452                           16.9%







              
                Non-GAAP                                       
             
               Three Months Ended
                                       Earnings Per Share              
             
              
               October 3, 2020

                                                                                                                                                        ---

                                                          
     
       GAAP        
             
               Stock                  
        
                Intangible                                           Acquisition                       Restructuring       
       
                Interest         
        
         Income          
     
              Non-
                                                                                                                                  Asset                                               Related                            Charges*                          Expense                                                                    GAAP
                                                               Measure  
             
               Compensation                    Amortization*                                           Items*                                                                                              
        
         Tax                            Measure
                                                                                     Expense*                                                                                                                                                       
       
               Adjustments*
                                                                                                                                                                                                                                                                                                 Adjustments




              Net income                                       $3,162                               $14,559                                      $11,848                                               $1,233                                 $190                             $6,373                    $(4,853)                        $32,512





              Diluted shares                                                                                                                                                                                                                                                                                                        44,328


                 outstanding                                   44,328





              Diluted earnings                                  $0.07


                 per share                                                                                                                                                                                                                                                                                                           $0.73





              * Represents pre-tax amounts


                                  
         
           Unaudited Forward-Looking Statements Regarding Business Outlook

                                          
         
                (In millions, except per share data)




                  Business Outlook  
           
           Three Months Ending

                                      
           
           January 2, 2021



                                                      GAAP                    
              
                Non-GAAP    Non-GAAP

                                                    Measure                 
              
                Adjustments*  Measure



     Gross margin                                       59%                                                   0%       59%




     Operating expenses                                $123                                                   $28        $95




     Effective tax rate                                0.0%                                                13.0%     13.0%




     Diluted earnings per
      share -low                                      $0.02                                                 $0.66      $0.68




     Diluted earnings per
      share -high                                     $0.12                                                 $0.66      $0.78



               * Non-GAAP adjustments include the
                following estimates: stock
                compensation expense of $16.0 million,
                intangible asset amortization of $12.0
                million, and interest expense
                adjustments of $6.0 million, and
                associated tax impact from the
                aforementioned items.


                                                                                 
              
                Silicon Laboratories Inc.

                                                                           
              
                Condensed Consolidated Balance Sheets

                                                                           
              
                (In thousands, except per share data)

                                                                                        
              
                (Unaudited)




                                                                                                                                         October 3, 
     
     December 28,
                                                                                                                                               2020              2019

                                                                                                                                                                 ---

                                                                      
            
                Assets



     Current assets:



        Cash and cash equivalents                                                                                                         $230,358          $227,146



        Short-term investments                                                                                                             491,428           498,825



        Accounts receivable, net                                                                                                            80,460            75,639



        Inventories                                                                                                                         66,159            73,057



        Prepaid expenses and other current assets                                                                                           69,244            69,192




     Total current assets                                                                                                                  937,649           943,859



     Property and equipment, net                                                                                                           139,673           135,939



     Goodwill                                                                                                                              631,932           398,402



     Other intangible assets, net                                                                                                          178,076           134,279



     Other assets, net                                                                                                                      55,745            62,374




     Total assets                                                                                                                       $1,943,075        $1,674,853





                                                       
              
              Liabilities and Stockholders' Equity



     Current liabilities:



        Accounts payable                                                                                                                   $46,228           $38,899



        Deferred revenue and returns liability                                                                                              22,323            19,251



        Other current liabilities                                                                                                           82,595            79,551



     Total current liabilities                                                                                                             151,146           137,701



     Convertible debt                                                                                                                      561,678           368,257



     Other non-current liabilities                                                                                                          60,200            53,844




     Total liabilities                                                                                                                     773,024           559,802



     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;                                                                             4                 4


           43,827 and 43,496 shares issued and outstanding at


           October 3, 2020 and December 28, 2019, respectively



        Additional paid-in capital                                                                                                         183,471           133,793



        Retained earnings                                                                                                                  984,716           980,608



        Accumulated other comprehensive income                                                                                               1,860               646




     Total stockholders' equity                                                                                                          1,170,051         1,115,051




     Total liabilities and stockholders' equity                                                                                         $1,943,075        $1,674,853


                                                                                      
        
                Silicon Laboratories Inc.

                                                                                    
     
          Condensed Consolidated Statements of Cash Flows

                                                                                        
            
                (In thousands)

                                                                                         
            
                (Unaudited)




                                                                                                                                             Nine Months Ended



                                                                                                                                                 October 3,    
     
     September 28,
                                                                                                                                                          2020                2019

                                                                                                                                                                              ---


     
                Operating Activities



     Net income                                                                                                                                        $3,583              $9,550



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



        Depreciation of property and equipment                                                                                                         12,896              12,675



        Amortization of other intangible assets and other assets                                                                                       32,741              29,891



        Amortization of debt discount and debt issuance costs                                                                                          14,946              10,031



        Loss on extinguishment of convertible debt                                                                                                      3,977                  --



        Stock-based compensation expense                                                                                                               44,329              40,042



        Deferred income taxes                                                                                                                         (7,382)             24,531



        Changes in operating assets and liabilities:



           Accounts receivable                                                                                                                        (2,902)            (2,975)



           Inventories                                                                                                                                 11,283               3,512



           Prepaid expenses and other assets                                                                                                          (6,162)             23,401



           Accounts payable                                                                                                                             6,103               6,419



           Other current liabilities and income taxes                                                                                                   3,648            (15,602)



           Deferred revenue and returns liability                                                                                                       2,643               (667)



           Other non-current liabilities                                                                                                                7,260             (5,957)




     Net cash provided by operating activities                                                                                                        126,963             134,851





     
                Investing Activities



     Purchases of available-for-sale investments                                                                                                    (418,227)          (306,645)



     Sales and maturities of available-for-sale investments                                                                                           427,235             268,140



     Purchases of property and equipment                                                                                                             (15,247)           (12,773)



     Purchases of other assets                                                                                                                        (1,280)            (7,132)



     Acquisition of business, net of cash acquired                                                                                                  (316,809)                 --



     Net cash used in investing activities                                                                                                          (324,328)           (58,410)





     
                Financing Activities



     Proceeds from issuance of debt                                                                                                                   845,000                  --



     Payments on debt                                                                                                                               (618,729)            (1,127)



     Repurchases of common stock                                                                                                                     (16,287)           (26,716)



     Payment of taxes withheld for vested stock awards                                                                                               (17,562)           (15,693)



     Proceeds from the issuance of common stock                                                                                                         8,155               7,108



     Net cash provided by (used in) financing activities                                                                                              200,577            (36,428)






     Increase in cash and cash equivalents                                                                                                              3,212              40,013



     Cash and cash equivalents at beginning of period                                                                                                 227,146             197,043




     Cash and cash equivalents at end of period                                                                                                      $230,358            $237,056

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