Silicon Laboratories (SLAB)
Q1 2013 Earnings Call
April 24, 2013 8:30 am ET
G. Tyson Tuttle - Chief Executive Officer, President, Director and Member of Equity Award Committee
William G. Bock - Interim Chief Financial Officer, Senior Vice President and Director
Craig A. Ellis - Caris & Company, Inc., Research Division
Craig A. Ellis - B. Riley Caris, Research Division
Srini Pajjuri - CLSA Asia-Pacific Markets, Research Division
Blayne Curtis - Barclays Capital, Research Division
Terence R. Whalen - Citigroup Inc, Research Division
Ian Ing - Lazard Capital Markets LLC, Research Division
Anil K. Doradla - William Blair & Company L.L.C., Research Division
Vernon P. Essi - Needham & Company, LLC, Research Division
John Vinh - Pacific Crest Securities, Inc., Research Division
Tore Svanberg - Stifel, Nicolaus & Co., Inc., Research Division
Steven Eliscu - UBS Investment Bank, Research Division
Previous Statements by SLAB
» Silicon Laboratories Management Discusses Q4 2012 Results - Earnings Call Transcript
» Silicon Laboratories Management Discusses Q3 2012 Results - Earnings Call Transcript
» Silicon Laboratories' CEO Presents at the Citi Technology Conference (Transcript)
Thank you. Good morning. This is Shannon Pleasant, the Vice President of Corporate Communications for Silicon Labs. Thank you for joining us today to discuss the company's financial results. This call is being webcasted and will be archived for 2 weeks. The financial press release, reconciliation of GAAP to non-GAAP financial measures and other financial measurement tables are now available on the Investor page of our website at www.silabs.com. I'm joined today by Tyson Tuttle, President and Chief Executive Officer; and Bill Bock, Chief Financial Officer. We will discuss our financial results and review our business activities for the quarter. We will have a question-and-answer session following our prepared remarks.
Our comments today will include forward-looking statements or projections that involve substantial risks and uncertainties. We base these forward-looking statements on information available to us as of the date of this conference call. This information will likely change over time. By discussing our current perception of our market and the future performance of Silicon Labs and our products with you today, we are not undertaking an obligation to provide updates in the future. There are a variety of factors that we may not be able to accurately predict or control that could have a material adverse effect on our business, operating results and financial condition. We encourage you to review our SEC filings that identify important factors that could cause actual results to differ materially from those contained in any forward-looking statement.
Also, the non-GAAP financial measurements, which are discussed today, are not intended to replace the presentation of Silicon Lab's GAAP financial results. We are providing this information because it may enable investors to perform meaningful comparisons of operating results and more clearly highlight the results of core ongoing operations.
I would now like to turn the call over to Silicon Labs' Chief Executive Officer, Tyson Tuttle.
G. Tyson Tuttle
Good morning. I'm pleased to report another great quarter with revenue up 16% year-over-year. Excluding our touch controllers, every one of our product lines was up compared to this time last year. I'll talk more about the trends for the quarter after Bill reviews the financial results. Bill?
William G. Bock
Thank you, Tyson. First quarter revenue of $145.4 million was at the high end of our guidance range. This reflects a decline of 4.6% sequentially, which is less than we would normally expect seasonally. Broadcast led the way with record performance in the quarter. On a GAAP basis, first quarter gross margin was 60.1%, R&D investment increased, as expected, to $37.6 million and SG&A expense declined to $29.2 million, resulting in GAAP operating income of 14.2% or $20.6 million. GAAP earnings increased to $0.46, well ahead of our guidance and included charges related to executive separation agreements and $6.3 million in stock compensation expense.
Turning to our non-GAAP results. Gross margin declined as forecasted. This was mix related as Broadcast revenue represented a greater share of the revenues than last quarter. At 60.3% for the full quarter, this fiscal's margin represented our expected low for the year, and we anticipate a full 100-basis-point improvement for the second quarter.
We were able to incrementally drive operating leverage through expense controls. Despite first quarter seasonal upticks in overhead on FICA taxes and our annual payroll raise cycles, operating expenses increased only fractionally to $60.6 million. Both R&D and SG&A remained relatively flat, a significant accomplishment. We plan to manage operating expenses carefully while making the required investments to support our growth. We expect operating expenses will increase by about $1 million in Q2 with growth in R&D partially offset by declines in SG&A.
The combination of higher revenue and favorable operating expenses resulted in better-than-anticipated operating income of 18.6% in Q1. Other expense was about $600,000. Net income, therefore, increased to 17.5% of revenue or $25.4 million. The tax rate was materially lower than typical at 4%, reflecting the 2012 catch-up from the renewal of the U.S. R&D tax credit. The tax rate will return to a steady state of about 17% for the rest of the year. These combined effects enabled better-than-anticipated earnings performance. The company delivered earnings per share of $0.59 in Q1, well above the high end of guidance. Additionally, this represents an impressive increase of nearly 40% compared to the same time last year.