Silicon Labs Announces Third Quarter 2020 Results

Rhea-AI Summary

Silicon Labs (NASDAQ: SLAB) reported strong Q3 2020 results, with revenues of $221.3 million, surpassing guidance. IoT revenue hit $133.2 million, reflecting a 16% quarter-over-quarter increase. GAAP EPS was $0.07, while non-GAAP EPS reached $0.73. The company launched new products, including the compact BGM220S Bluetooth module and secured partnerships, notably with Amazon for the Sidewalk initiative. For Q4, revenue guidance is set between $221-$231 million, with expected GAAP EPS between $0.02 and $0.12.

Positive

• Q3 revenue of $221.3 million exceeded guidance and was up from $207.5 million.
• IoT revenue grew to $133.2 million, an increase of 16% sequentially.
• Non-GAAP diluted EPS reached $0.73.
• Expansion of product portfolio with new Bluetooth modules and crystal oscillators.
• Successful collaboration with Amazon on the Sidewalk initiative.
• Guidance for Q4 revenue is between $221-$231 million.

Negative

• Infrastructure and Automotive revenue declined by 5% sequentially and 6% year-on-year.
• GAAP diluted EPS was only $0.07.

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, 2020		September 28, 2019		October 3, 2020		September 28, 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
Net income	$    3,162		$  20,181		$    3,583		$    9,550
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 Statement Items		Three Months Ended October 3, 2020
		GAAP Measure		GAAP Percent of Revenue		Stock Compensation Expense		Intangible Asset Amortization		Acquisition Related Items		Restructuring Charges		Non-GAAP Measure		Non-GAAP Percent of Revenue
Revenues		$221,350
Gross profit		130,074		58.8%		$     390		$        --		$1,233		$   --		$131,697		59.5%
Research and    development		71,969		32.5%		7,384		8,954		--		37		55,594		25.1%
Selling, general and    administrative		48,483		22.0%		6,785		2,894		--		153		38,651		17.5%
Operating income		9,622		4.3%		14,559		11,848		1,233		190		37,452		16.9%
Non-GAAP Earnings Per Share		Three Months Ended October 3, 2020
		GAAP Measure		Stock Compensation Expense*		Intangible Asset Amortization*		Acquisition Related Items*		Restructuring Charges*		Interest Expense Adjustments*		Income Tax Adjustments		Non- GAAP Measure
Net income		$  3,162		$14,559		$11,848		$1,233		$190		$6,373		$(4,853)		$32,512
Diluted shares    outstanding		44,328														44,328
Diluted earnings    per share		$    0.07														$    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 Measure		Non-GAAP Adjustments*		Non-GAAP 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, 2020		December 28, 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;         43,827 and 43,496 shares issued and outstanding at       October 3, 2020 and December 28, 2019, respectively	4		4
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, 2020		September 28, 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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SOURCE Silicon Labs

FAQ

What were Silicon Labs' revenue figures for Q3 2020?

Silicon Labs reported revenues of $221.3 million for Q3 2020.

How much did IoT revenue grow in Q3 2020?

IoT revenue grew to $133.2 million, up 16% sequentially.

What is the non-GAAP EPS for Silicon Labs in Q3 2020?

Silicon Labs reported a non-GAAP diluted EPS of $0.73 for Q3 2020.

What challenges did Silicon Labs face in Q3 2020?

Infrastructure and Automotive revenue declined by 5% sequentially and 6% year-on-year.

What is the revenue guidance for Silicon Labs in Q4 2020?

Silicon Labs expects revenue in Q4 2020 to range between $221-$231 million.