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Silicon Laboratories Inc. Processes Another Great Quarter

Silicon Labs' Gecko and Laser Bee microcontrollers. Image source: Silicon Laboratories.

Silicon Laboratories (NASDAQ: SLAB) released another stronger-than-expected quarterly report, and shares of the fabless-semiconductor specialist were little changed as a result. To be fair, Silicon Labs stock is also trading within pennies of its all-time high as of this writing. So let's take a closer look at what the company achieved in its latest quarter.

Silicon Labs results: The raw numbers

Metric

Q3 2016 Actuals

Q3 2015 Actuals

Growth (YOY)

Revenue

$178.1 million

$156.2 million

14%

GAAP net income

$20.0 million

$10.0 million

100%

GAAP earnings per share

$0.47

$0.23

104.3%

Data source: Silicon Laboratories. YOY = year over year.

What happened with Silicon Labs this quarter?

  • On an adjusted (non-GAAP) basis, which excludes items like stock-based compensation and acquisition costs, net income was $32.4 million, or $0.77 per diluted share, up from $0.51 per share in last year's third quarter
  • These results came in above Silicon Labs' guidance ranges provided in July, which called for revenue of $171 million to $178 million and adjusted earnings per share between $0.61 and $0.67.
  • Internet of Things (IoT) revenue grew 6.2% sequentially from last quarter, to a company-record $81.5 million.
  • Infrastructure revenue grew 7.5% sequentially, to $38.3 million -- another company high mark -- excluding $5 million in previously disclosed patent sale revenue.
  • Broadcast revenue increased 7.1% from last quarter, to $40.7 million.
  • Access revenue declined 10% sequentially, to $17.5 million.
  • Adjusted gross margin was 61%, above Silicon Labs' gross margin target model of 58% to 60%.
  • Adjusted operating income was $37.6 million, or 21.1% of total revenue.
  • Acquired Micrium, a leading real-time operating system software supplier for embedded computing.
  • New product launches included:
    • The MGM111 mesh networking module, whose combination of onboard stacks, antennas, and RF regulatory certifications helps reduce cost, complexity, and time to market for mesh networking applications.
    • A major update of Simplicity Studio software development tools, providing easier access to Silicon Labs' range of IoT products.
    • The CP2102N bridge device, a compact, low-power version of Silicon Labs' USBXpress family for adding USB connectivity to embedded designs.
    • The Si828x isolated gate driver family of products, aimed at helping industrial and green energy designs with state-of-the-art signal isolation technology.
  • Completed $40.5 million in share repurchases through the first nine months of the year, leaving $59 million remaining in Silicon Labs' 2016 repurchase authorization. 
  • Cash flow from operations increased 23% year over year for the quarter, to $107 million.

What management had to say

Silicon Labs CEO Tyson Tuttle stated, "We are delighted to report record revenue, including five percent sequential and 14 percent year-on-year growth in product revenue. We are executing on our growth strategy targeting the IoT and Infrastructure markets, and are seeing our efforts translate into strong financial results."

Looking forward

For the fourth quarter, Silicon Labs expects revenue of $176 million to $181 million, the midpoint of which represents 11.5% year-over-year growth. That should translate to adjusted earnings per diluted share between $0.62 and $0.68, compared to $0.63 per share in last year's fourth quarter. Meanwhile, gross margin in the fourth quarter should be near the middle of the aforementioned target model, at 59%. By comparison -- and though we don't typically pay close attention to Wall Street's quarterly demands -- analysts' consensus estimates called for Silicon Labs to achieve fourth-quarter results near the lower end of both its respective guidance ranges.

In the end, this was another solid showing from Silicon Laboratories, even if it wasn't quite enough to drive the kind of extraordinary post-earnings pop as we've grown accustomed to seeing in the volatile tech space. But with shares already hovering near all-time highs as of this writing, I think you'll be hard-pressed to find an investor willing to complain about Silicon Labs' relative position of strength right now.

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Steve Symington has no position in any stocks mentioned. The Motley Fool recommends Silicon Laboratories. Try any of our Foolish newsletter services free for 30 days. 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.