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Silicon Labs Weathers Macro Headwinds With IoT Growth

By Steve Symington - Jul 24, 2019 at 2:54PM

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The fabless semiconductor company is rallying after its latest quarterly beat.

Silicon Laboratories ( SLAB 0.08% ) released second-quarter 2019 results early Wednesday. Just as management suggested would be the case three months ago, the company highlighted a moderated year-over-year revenue decline thanks largely to the sustained momentum of its budding Internet of Things (IoT) segment.

Shares of the fabless semiconductor specialist are up around 6% in afternoon trading as of this writing. So let's dig deeper for a better idea of what Silicon Labs has accomplished over the past few months and what investors should be watching next.

Time-lapse image of cityscape overlaid with a digital chart of various connected devices.

IMAGE SOURCE: GETTY IMAGES.

Silicon Labs results: The raw numbers

Metric

Q2 2019

Q2 2018

Year-Over-Year Change

Revenue

$206.7 million

$217.1 million

(4.8%)

GAAP net income (loss)

($16.0 million)

$14.3 million

N/A

GAAP diluted earnings (loss) per share

($0.37)

$0.32

N/A

Data source: Silicon Labs. GAAP = generally accepted accounting principles.

What happened with Silicon Labs this quarter?

  • Adjusted for items like stock-based compensation and acquisition costs, Silicon Labs generated (non-GAAP) net income of $36.4 million, or $0.83 per share.
  • For perspective, revenue was near the midpoint of guidance provided in April for a range of $202 million to $212 million, and adjusted earnings per share were well above the high end of Silicon Labs' $0.70 to $0.80 target range.
  • By segment:
    • IoT revenue grew 7% year over year and 17% sequentially to $125 million.
    • Infrastructure revenue declined 15% year over year and 4% sequentially to $44 million.
    • Broadcast revenue fell 23% year over year and remained flat sequentially, at $26 million.
    • Access revenue fell 23% year over year but increased 24% sequentially to $12 million.

What management had to say

CEO Tyson Tuttle elaborated:

We grew second quarter revenue 10 percent sequentially despite macro headwinds impacting the semiconductor industry. We are gaining traction in our target markets, with total estimated design win lifetime revenue establishing a new record, up 25 percent year-on-year. Wireless products achieved more than one billion units shipped to date and established record revenue in the second quarter.

Looking forward

For the third quarter of 2019, Silicon Labs sees revenue of $213 million to $223 million (down from just over $230 million in the same year-ago period), with adjusted earnings per share between $0.79 and $0.89. The former range assumes the IoT and broadcast segments will achieve sequential growth, with flat access revenue and a sequential decline from the infrastructure segment.

While we don't generally pay close attention to Wall Street's demands, most analysts were already modeling earnings of $0.86 per share on revenue near the high end of Silicon Labs' guidance range.

Given its impressive ability to withstand today's macroeconomic uncertainties, however, and with shares trading roughly even over the past year leading up to this report, it appears the market is more than willing to forgive that seemingly light outlook.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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