Silicon Labs Reports Record Revenue

Company Delivers 15 Percent Revenue Growth in 2012

AUSTIN, Texas--(BUSINESS WIRE)--Silicon Labs (Nasdaq: SLAB), a leader in high-performance, analog-intensive, mixed-signal integrated circuits (ICs), today reported record revenue for the fourth quarter and the full year. Revenue of $563.3 million for 2012 was an impressive 15 percent increase compared to 2011.

“We had an excellent year in 2012, achieving record revenue levels and increasing our market share”

Financial Highlights

Fourth quarter revenue of $152.5 million was up 20 percent compared to the same period last year. On a GAAP-basis, gross margin improved meaningfully to 61.4 percent. R&D investment increased to $36.0 million, and SG&A expense increased to $32.3 million. Resulting GAAP operating income decreased to 16.6 percent. Diluted GAAP earnings per share increased to $0.44. For all of 2012, GAAP gross margin was 60 percent and operating expenses increased only slightly by two percent to $252.3 million, resulting in a five hundred basis point improvement in operating margin to 15.2 percent. GAAP earnings increased therefore by 86 percent to $1.47.

The following non-GAAP results exclude the impact of stock compensation and other one-time items. Gross margin improved to 61.6 percent for the quarter. Operating expenses increased to 39.5 percent of revenue. R&D increased to $32.7 million, and SG&A increased to $27.5 million due to increasing product and sales activity as well as higher variable compensation driven by the outperformance for the quarter. Operating income for the quarter was a record for the year at 22.1 percent. Diluted earnings per share for the quarter were 61 cents, a 24 percent year-over-year increase.

For all of 2012, Silicon Labs reduced operating expenses to 40.3 percent of revenue and improved operating income to 20.7 percent of revenue. Diluted earnings per share increased by 20 percent to $2.16. Reconciling charges are set forth in the financial measures table included below.

The company repurchased 245 thousand shares of stock and ended the quarter with $293 million in cash, cash equivalents and investments due to continued healthy cash flow from operations.

Business Highlights

The company’s strong performance in 2012 was driven by high growth in the Broadcast and Broad-based products. Broadcast growth was driven by the rapid adoption of the company’s TV tuner products, which represented one third of the TV market in 2012. The Broad-based products, which grew more than 30 percent in 2012, significantly outgrew their end markets as the company added customers and expanded its sales channel.

In the fourth quarter, the Broad-based business was up as expected driven by a record quarter for the Timing products. Timing strength came from new business in consumer and embedded applications, a direct result of the company’s investments to broaden the portfolio. The MCU products were up more than 45 percent year over year due to growth from strong organic execution and from a recent acquisition. The Broadcast business exceeded expectations due to record revenue for the company’s video products. The Access business also grew sequentially in the fourth quarter.

“We had an excellent year in 2012, achieving record revenue levels and increasing our market share,” said Tyson Tuttle, president and CEO of Silicon Laboratories. “We are addressing very large markets with a growing portfolio of differentiated products, we have a record backlog of design wins, and we believe that as we continue to execute, this will enable growth in 2013 and beyond.”

The company expects revenue for the first quarter to be down sequentially four to eight percent.

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 simultaneously on Silicon Labs’ website under Investor Relations (www.silabs.com). A replay will be available after the call at the same website listed above or by calling 1 [phone] or [phone] (international) and by entering 39714732. The replay will be available through February 13.

About Silicon Labs

Silicon Labs is a leading designer of high-performance, analog-intensive, mixed-signal integrated circuits (ICs) for a broad range of applications. Silicon Labs’ diverse portfolio of highly integrated, patented solutions is developed by a world-class engineering team with expertise in cutting-edge mixed-signal design. The company has design, engineering, marketing, sales and applications offices throughout North America, Europe and Asia. For more information about Silicon Labs, please visit 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 Laboratories 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; volatile stock price; average selling prices of products may decrease significantly and rapidly; difficulties developing new products that achieve market acceptance; dependence on a limited number of products and customers; intellectual property litigation risks; inventory-related risks; risks associated with acquisitions; difficulties managing international activities; difficulties managing our manufacturers and subcontractors; 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; risks associated with divestitures; 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; the competitive and cyclical nature of the semiconductor industry and other factors that are detailed in Silicon Labs’ filings with the SEC. 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.

Note to editors: Silicon Laboratories, Silicon Labs 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						Year Ended
	December 29,			December 31,			December 29,			December 31,
		2012			2011			2012			2011
Revenues	$	152,461		$	126,692		$	563,294		$	491,625
Cost of revenues		58,835			49,513			225,277			193,179
Gross margin		93,626			77,179			338,017			298,446
Operating expenses:
Research and development		36,009			34,705			137,952			135,953
Selling, general and administrative		32,315			27,251			114,390			112,419
Operating expenses		68,324			61,956			252,342			248,372
Operating income		25,302			15,223			85,675			50,074
Other income (expense):
Interest income		235			427			1,338			1,859
Interest expense		(850	)		(23	)		(1,149	)		(37	)
Other income (expense), net		(323	)		152			484			444
Income before income taxes		24,364			15,779			86,348			52,340
Provision for income taxes		5,669			2,974			22,800			16,868
Net income	$	18,695		$	12,805		$	63,548		$	35,472
Earnings per share:
Basic	$	0.45		$	0.31		$	1.51		$	0.82
Diluted	$	0.44		$	0.29		$	1.47		$	0.79
Weighted-average common shares outstanding:
Basic		41,705			41,979			42,136			43,421
Diluted		42,641			43,410			43,106			44,832

Unaudited Reconciliation of GAAP to Non-GAAP Financial Measures
(In thousands, except per share data)
Non-GAAP Income	Three Months Ended
Statement Items	December 29, 2012
	GAAP Measure		GAAP Percent of Revenue			Stock Compensation Expense		Termination Costs and Impairments		Acquisition Related Items			Non-GAAP Measure		Non-GAAP Percent of Revenue
Revenues	$	152,461
Gross margin		93,626		61.4	%	$	268	$	--	$	--		$	93,894	61.6	%
Research and development		36,009		23.6	%		3,006		262		--			32,741	21.5	%
Selling, general and administrative		32,315		21.2	%		4,106		1,967		(1,253	)		27,495	18.0	%
Operating expenses		68,324		44.8	%		7,112		2,229		(1,253	)		60,236	39.5	%
Operating income		25,302		16.6	%		7,380		2,229		(1,253	)		33,658	22.1	%
Non-GAAP Diluted			Three Months Ended
Earnings Per Share			December 29, 2012
			GAAP Measure			Stock Compensation Expense		Termination Costs and Impairments		Acquisition Related Items			Non-GAAP Measure
Net income			$	18,695		$	6,667	$	1,829	$	(1,253	)	$	25,938
Diluted shares outstanding				42,641			--		--		--			42,641
Diluted earnings per share			$	0.44									$	0.61

Unaudited Reconciliation of GAAP to Non-GAAP Financial Measures
(In thousands, except per share data)
(Continued)
Non-GAAP Income	Year Ended
Statement Items	December 29, 2012
	GAAP Measure		GAAP Percent of Revenue			Stock Compensation Expense*		Termination Costs and Impairments		Acquisition Related Items			Headquarters Purchase			Non-GAAP Measure			Non-GAAP Percent of Revenue
Revenues	$	563,294
Operating expenses		252,342		44.8	%	$	28,038	$	6,735	$	(1,361	)	$	(8,113	)	$	227,043			40.3	%
Operating income		85,675		15.2	%		29,244		6,735		3,105			(8,113	)		116,646			20.7	%
Non-GAAP Diluted			Year Ended
Earnings Per Share			December 29, 2012
			GAAP Measure			Stock Compensation Expense*		Termination Costs and Impairments		Acquisition Related Items			Headquarters Purchase			Release of Unrecognized Tax Benefits			Non-GAAP Measure
Net income			$	63,548		$	25,578	$	4,561	$	11,932		$	(5,274	)	$	(7,265	)	$	93,080
Diluted shares outstanding				43,106			--		--		--			--			--			43,106
Diluted earnings per share			$	1.47															$	2.16

* Excludes stock compensation recognized in connection with terminations costs for our former CEO.

Silicon Laboratories Inc.
Condensed Consolidated Balance Sheets
(In thousands, except per share data)
(Unaudited)
	December 29,			December 31,
		2012			2011
Assets
Current assets:
Cash and cash equivalents	$	105,426		$	94,964
Short-term investments		176,565			212,526
Accounts receivable, net of allowances for doubtful accounts of $670 at December 29, 2012 and $725 at December 31, 2011		78,023			55,351
Inventories		49,579			34,778
Deferred income taxes		16,652			11,563
Prepaid expenses and other current assets		41,437			43,867
Total current assets		467,682			453,049
Long-term investments		11,369			17,477
Property and equipment, net		135,271			25,141
Goodwill		130,265			115,489
Other intangible assets, net		90,750			60,005
Other assets, net		36,629			34,830
Total assets	$	871,966		$	705,991
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	29,622		$	26,354
Current portion of long-term debt		5,000			--
Accrued expenses		40,410			30,857
Deferred income on shipments to distributors		30,259			24,962
Income taxes		1,087			665
Total current liabilities		106,378			82,838
Long-term debt		95,000			--
Other non-current liabilities		20,615			24,214
Total liabilities		221,993			107,052
Commitments and contingencies
Stockholders' equity:
Preferred stock--$0.0001 par value; 10,000 shares authorized; no shares issued and outstanding		--			--
Common stock--$0.0001 par value; 250,000 shares authorized; 41,879 and 42,068 shares issued and outstanding at December 29, 2012 and December 31, 2011, respectively		4			4
Additional paid-in capital		10,122			14,749
Retained earnings		640,793			586,653
Accumulated other comprehensive loss		(946	)		(2,467	)
Total stockholders' equity		649,973			598,939
Total liabilities and stockholders' equity	$	871,966		$	705,991

Silicon Laboratories Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
	Year Ended
	December 29,			December 31,
	2012			2011
Operating Activities
Net income	$	63,548		$	35,472
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation of property and equipment		13,621			13,570
Net gain on the purchase of property and equipment		(8,457	)		--
Amortization of other intangible assets and other assets		14,154			11,030
Impairment of long-lived assets		708			1,322
Stock-based compensation expense		31,176			36,115
Income tax benefit from employee stock-based awards		1,827			2,814
Excess income tax benefit from employee stock-based awards		(1,294	)		(2,404	)
Deferred income taxes		4,725			(445	)
Changes in operating assets and liabilities:
Accounts receivable		(20,743	)		(8,562	)
Inventories		(13,056	)		5,334
Prepaid expenses and other assets		10,629			(5,948	)
Accounts payable		7,217			(2,176	)
Accrued expenses		(3,812	)		(1,320	)
Deferred income on shipments to distributors		4,623			(1,915	)
Income taxes		(7,816	)		5,855
Net cash provided by operating activities		97,050			88,742
Investing Activities
Purchases of available-for-sale investments		(192,450	)		(178,676	)
Proceeds from sales and maturities of marketable securities		235,517			193,474
Purchases of property and equipment		(102,043	)		(8,690	)
Purchases of other assets		(8,508	)		(4,018	)
Acquisitions of businesses, net of cash acquired		(71,852	)		(27,262	)
Net cash used in investing activities		(139,336	)		(25,172	)
Financing Activities
Proceeds from issuance of common stock, net of shares withheld for taxes		15,148			7,660
Excess income tax benefit from employee stock-based awards		1,294			2,404
Repurchases of common stock		(62,019	)		(110,063	)
Proceeds from issuance of long-term debt, net		98,325			--
Payments on debt		--			(7,174	)
Net cash provided by (used in) financing activities		52,748			(107,173	)
Increase (decrease) in cash and cash equivalents		10,462			(43,603	)
Cash and cash equivalents at beginning of period		94,964			138,567
Cash and cash equivalents at end of period	$	105,426		$	94,964