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Silicon Labs Turns In a Solid Beat

By Steve Symington – Jul 27, 2016 at 7:28PM

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As connected devices become more ubiquitous, the fabless-semiconductor specialist is gaining momentum.

Silicon Labs' Gecko and Laser Bee microcontrollers. IMAGE SOURCE: SILICON LABORATORIES.

Silicon Laboratories (SLAB -2.29%) announced stronger-than-expected second-quarter 2016 results Wednesday morning, with both revenue and earnings swinging back to growth from the same year-ago period. Shares of the fabless-semiconductor company enjoyed a solid 4% pop today as a result, touching a fresh 52-week high when all was said and done in the day's regular trading.

To understand why, let's take a closer look at Silicon Labs' performance in Q2.

Silicon Labs results: The raw numbers

Metric

Q2 2016 Actuals

Q2 2015 Actuals

Growth (YOY)

Sales

$174.9 million

$164.9 million

6.1%

Net income

$15.6 million

$7.6 million

105.4%

GAAP earnings per share

$0.37

$0.17

117.6%

Data source: Silicon Laboratories.  

What happened with Silicon Labs this quarter?

  • On an adjusted (non-GAAP) basis, which excludes items such as stock-based compensation and acquisition costs, net income was $31.8 million, or $0.75 per diluted share.
  • These results came in above the high ends of Silicon Labs' guidance ranges provided in April, which called for revenue of $168 million to $173 million, and adjusted earnings per share between $0.61 and $0.67.
  • Internet of Things (IoT) revenue rose 8.3% sequentially from last quarter, to $76.7 million, establishing a new quarterly high for the company.
  • Infrastructure revenue also set a new company record, increasing 12.9% sequentially, to $35.7 million, excluding $5 million in previously disclosed patent sale revenue.
  • Broadcast revenue declined 1.2% from last quarter, to $38 million, but also exceeded expectations.
  • Access revenue declined 7.7% sequentially, to $19.5 million.
  • Adjusted gross margin was 62.3%, above guidance for roughly 60% plus or minus 50 basis points.
  • Adjusted operating income was $35.9 million, or 20.5% of total revenue.
  • New product launches included:
    • Expanding the Wireless Gecko portfolio with the industry's first multiband, multiprotocol wireless SoC devices optimized for ultra-low-energy IoT applications.
    • A new EZR32HG Happy Gecko family of wireless MCUs for ultra-low-energy, battery-powered wireless applications in the sub-GHz band.
    • Industrial-grade Busy Bee 8-bit MCUs meant to operate reliably in temperatures up to 125 degrees Celsius.
    • A new Connect networking stack, meant to simplify development of proprietary wireless IoT applications.
    • A comprehensive USB Type-C reference design, helping developers more easily design USB-C cables and adapters at minimal cost.
  • The company repurchased more than $38 million in shares year to date, leaving $62 million remaining in Silicon Labs' 2016 repurchase authorization.
  • It generated $60.4 million in cash flow from operations year to date.

What management had to say 

Silicon Labs CEO Tyson Tuttle stated:

We are pleased to report exceptional second quarter financial performance, including record revenue in all of our strategic growth products. We have a 20-year history of leveraging our mixed-signal and RF design expertise to deliver highly integrated solutions, and we have consistently demonstrated our ability to pioneer innovation and achieve market leadership. Our vision is to connect people, devices, and data across multiple markets and applications. We are beginning a new chapter in the creation of a more connected world, where the intersection of cloud computing and the proliferation of connected devices will transform our lives and economy in dramatic ways, and Silicon Labs is at the heart of it.

Looking forward 

For the current quarter, Silicon Labs expects revenue of $171 million to $176 million, the midpoint of which represents 11.1% year-over-year growth. That should translate to adjusted earnings between $0.61 and $0.67, up from $0.51 per share in last year's third quarter.

All told, this was a strong report from Silicon Labs, which continues to position itself for growth as connected devices permeate our lives. Given its outperformance in Q2 and solid growth expected ahead, I think Silicon Labs investors should be more than happy today.

Steve Symington has no position in any stocks mentioned. The Motley Fool recommends Silicon Laboratories. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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