Silicon Laboratories Inc. (SLAB)
Q1 2010 Earnings Call
April 28, 2010; 08:30am ET
Necip Sayiner - President & Chief Executive Officer
Bill Bock - Chief Financial Officer
Paul Walsh - Chief Accounting Officer
Shannon Pleasant - Director of Corporate Communications
Adam Benjamin - Jefferies
Craig Ellis - Caris & Company
Terence Whalen - Citi
Anil Doradla - William Blair
Tore Svanberg - Thomas Weisel Partners
Arnab Chanda - Roth Capital
Craig Berger - FBR Capital Markets
Auguste Richard - Piper Jaffray
Sandy Harrison - Signal Hill
Brendan Furlong - Miller Tabak & Co.
Ian Ing - Broadpoint
Srini Pajjuri - CLSA
Suji De Silva - Kaufman Bros
Previous Statements by SLAB
» Silicon Laboratories Inc. Q4 2009 Earnings Call Transcript
» Silicon Laboratories Inc. Q3 2009 Earnings Conference Call
» Silicon Laboratories Inc. Q2 2009 Earnings Call Transcript
I would now like to turn today’s call over to Shannon Pleasant; you may begin.
Thank you Anne. Good morning. This is Shannon Pleasant, Director of Corporate Communications for Silicon Laboratories. Thank you for joining us today to discuss the company’s financial results.
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. This call is being simulcast and will be archived on our website. There will also be a telephone replay available approximately one hour after the completion of the call at 888-562-2923.
I’m joined today by Necip Sayiner, President and Chief Executive Officer; Bill Bock, Chief Financial Officer; and Paul Walsh, Chief Accounting Officer. We will discuss our financial results and review our business activities for the quarter. We will have a question-and-answer session following the presentation.
Before we begin, let me comment regarding the Safe Harbor statement under the Private Securities Litigation Reform Act of 1995. Our comments and presentation 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 overtime.
By discussing our current perception of our market and the future performance of Silicon Laboratories and our products review 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, including the Form 10-Q that we anticipate will be filed this week, and identify important factor that could cause actual results to differ materially from those contained in any forward-looking statements. Also, the non-GAAP financial measurements, which are discussed today, are not intended to replace the presentation of Silicon Laboratories 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 operations.
I would now like to turn the call over to Silicon Laboratories Chief Financial Officer, Bill Bock.
Silicon Labs delivered yet another excellent quarter. Revenue was better than expected at $126.7 million, a $0.51 increase over the same period last year.
The significantly better than seasonal result in the first quarter was due to strong growth in our broad based product lines. This performance is particularly impressive considering revenue is essentially equal to a corporate record in Q4 that was driven by consumer-oriented products. We are clearly demonstrating the benefits of diversification and multiple growth drivers across various end markets and customer categories.
Let me start with the current quarter GAAP results, which include approximately $10.3 million in non-cash stock compensation charges. First quarter GAAP gross margin increased 50 basis points sequentially to 66%. R&D investment for the first quarter was $29.9 million. SG&A decreased to $28 million.
Other income, principally interest income on invested cash was under $1 million. GAAP operating income was over 20% again in the quarter, representing the third consecutive period at this performance level. Fully diluted earnings per share was $0.44 for the first quarter, up from $0.001 the same period last year.
Turning to our non-GAAP results, revenue of $126.7 million reflects strong performance from MCU and timing products, offsetting the seasonal decline in broadcast products. This mix shift contributed to outstanding gross margin results, reaching a post divestiture record of 66.2%. We also benefited from better than anticipated average selling prices, inventory reserve reductions, and continued improved manufacturing yields. We expect to be able to maintain the 65% to 66% margin performance in the second quarter.
Operating expenses were up sequentially as anticipated, to about 38% of revenue. Specifically, R&D increased to $25.8 million or 20% of revenue, while SG&A was about flat at $22.3 million or 18% of revenue. The drivers behind the increase included our annual raise cycle, a record quarter of new product takeouts, and an excellent recruiting effort, starting a strong pace for bringing in new talent.
We expect operating expenses to increase in Q2, primarily in R&D, which will be up about $2 million sequentially. Part of the increase is attributable to the strong hiring trend. We anticipate by quarter end that head count will be up by nearly 100 people from a year ago, most of these in technical positions.
There are just more opportunities to gain share and develop new products than we have been able to adequately address. The ability to secure high caliber talent at this juncture is very strategic for us, as it enables us to lever the incremental investment in marketing, sales and design, to capture more of this potential revenue.