Silicon Laboratories Delivers Another Quarterly Beat

By Steve Symington Markets Fool.com

Silicon Laboratories(NASDAQ: SLAB)released stronger-than-expected fourth-quarter 2016 results Wednesday morning, driven by sustained momentum from its Internet of Things segment. With shares now trading at fresh all-time highs, let's take a closer look at the moving parts behind the fabless-semiconductor specialist's business as it heads into the new fiscal year.

Continue Reading Below

Silicon Laboratories' Thunderboard Sense is a complete sensor-to-cloud kit for developers of all skill levels. Image source: Silicon Labs.

Silicon Labs results: The raw numbers

Metric

Q4 2016

Q3 2015

Year-Over-Year Growth

Revenue

$182.6 million

$160.1 million

14.1%

GAAP net income

$20.1 million

$5.7 million

255.4%

GAAP earnings per share (diluted)

$0.47

$0.13

261.5%

Data source: Silicon Laboratories.

What happened with Silicon Labs this quarter?

Continue Reading Below

  • On an adjusted (non-GAAP) basis, which adds perspective by excluding things such as stock-based compensation and acquisition costs, net income was $32 million, or $0.75 per diluted share, up from $0.63 per share in the same year-ago period.
  • Both the top and bottom lines were above Silicon Labs' latest guidance, which called for revenue of $176 million to $181 million, and adjusted earnings per diluted share between $0.62 and $0.68.
  • Internet of Things (IoT) revenue grew 5% sequentially from Q3, to $85 million, setting another company record.
  • Infrastructure revenue fell 3% sequentially, to $37 million.
  • Broadcast revenue was flat sequentially, at roughly $41 million.
  • Access revenue grew 11%, to $20 million.
  • Adjusted gross margin was 60.1%, remaining above Silicon Labs' gross-margin target model of 58% to 60%.
  • Adjusted operating income was $36.6 million, or 20% of total revenue.
  • Subsequent to the end of the quarter, the company acquired low-power, cloud-connected Wi-Fi technologies specialist Zentri, expanding its portfolio of power-sensitive IoT end-node applications.
  • Product launches included:
    • A new Bluetooth low-energy system-in-package module with the industry's smallest footprint, to miniaturize IoT designs.
    • A Bluetooth software solution to help developers more efficiently create Apple HomeKit-enabled accessories.
    • The new Thunderboard Sense development kit, enabling developers to easily create cloud-connected wireless sensing products for the IoT.
    • New pre-certified occupancy sensor and smart outlet reference designs for home automation.
    • Ultra-low-power EFM8 Sleepy Bee microcontrollers with on-chip capacitive sensor technology for automotive customers, to replace physical buttons with touch control.
  • Cash flow from operations grew 22.3% year over year in 2016, to $128.9 million.

What management had to say

Silicon Labs CEO Tyson Tuttle called his company's quarterly and full-year performance "outstanding." He elaborated: "We are executing on our strategy focused on the IoT and Infrastructure markets and are seeing our efforts translate into strong financial results, achieving target model for annual growth, gross margin, and operating margin in the second half."

Looking forward

For the first quarter of 2017, Silicon Labs anticipates revenue of $174 million to $179 million, the midpoint of which represents 8.9% year-over-year growth.On the bottom line, Silicon Labs expects that performance to translate to adjusted earnings per diluted share of between $0.57 and $0.63, up from $0.51 per share in last year's first quarter.For perspective -- and though we don't usually pay close attention to Wall Street's quarterly demands -- analysts were less optimistic, with consensus estimates calling fiscal first-quarter revenue and earnings near the low ends of Silicon Labs' guidance ranges.

Once again, Silicon Laboratories' relative outperformance was evident this quarter, as it continues to capitalize on the increasing ubiquity of connected devices. And even with shares trading at all-time highs going into this report, it's no surprise investors were willing to continue bidding up Silicon Labs stock today.

10 stocks we like better than Silicon Laboratories
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Silicon Laboratories wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of January 4, 2017

Steve Symington owns shares of Apple. The Motley Fool owns shares of and recommends Apple. The Motley Fool has the following options: long January 2018 $90 calls on Apple and short January 2018 $95 calls on Apple. The Motley Fool recommends Silicon Laboratories. The Motley Fool has a disclosure policy.