Silicon Labs Keeps the Earnings Beats Coming

By Steve Symington Markets Fool.com

Silicon Laboratories(NASDAQ: SLAB) announced first-quarter 2017 results Wednesday morning, as the fifth straight quarter of company-record revenue from its Internet of Things segment and growth in infrastructure sales more than offset declines elsewhere. After initially falling in Wednesday's trading as the market digested these results, Silicon Labs stock all but recouped its early losses and now sits little changed on the news.

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Let's take a closer look at what drove Silicon Labs' results as it kicked off the new year, and at what investors can expect from the company as it works to sustain its momentum.

Image source: Silicon Laboratories.

Silicon Labs results: The raw numbers

Metric

Q1 2017

Q1 2016

Year-Over-Year Growth

Revenue

$179 million

$162 million

10.5%

GAAP net income

$15.4 million

$5.8 million

165.6%

GAAP earnings per share (diluted)

$0.36

$0.14

157.1%

Data source: Silicon Laboratories.

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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 $27.3 million, or $0.63 per share, up from adjusted net income of $0.36 per share in last year's first quarter.
  • These results were near the high end of Silicon Labs' guidance provided last quarter, which called for revenue of $174 million to $179 million, and adjusted earnings per diluted share of between $0.57 and $0.63
  • By segment:
    • Internet of Things revenue climbed 24% year over year, to $88 million.
    • Infrastructure revenue increased 14% year over year, to $36 million.
    • Broadcast revenue fell 3% year over year, to $37 million.
    • Access revenue declined 15% year over year, to $18 million.
  • The company completed a private offering of $400 million of 1.375% convertible senior notes, to be used for a combination of repaying Silicon Labs' existing credit facility and for "general corporate purposes."
  • New product launches included:
    • a major expansion of the EFR32 Wireless Gecko SoC portfolio, with new features including improved RF performance, larger memory options, on-chip capacitive touch control, and new sensor interfaces.
    • the new EFM32 Jade and Pearl MCUs for embedded developers, similarly featuring new security, larger memory options, and peripheral integration.
    • new Micrium operating system and platform builder software aimed at simplifying Internet of Things system configuration, and accelerating time to market for embedded designers.

What management had to say

"We are very pleased with our first quarter 2017 financial results, reflecting solid year-on-year growth in revenue and profitability," Silicon Labs CEO Tyson Tuttle said. "Our Internet of Things and Infrastructure businesses now represent nearly 70% of revenue targeting large, high-quality, sustainable, and growing markets."

Looking forward

For the second quarter of 2017, Silicon Labs expects revenue of $184 million to $189 million, GAAP earnings per diluted share between $0.27 and $0.33, and adjusted earnings per diluted share between $0.68 and $0.74. For perspective -- and though we don't usually lend much credence to Wall Street's demands -- consensus estimates predicted second-quarter revenue and adjusted earnings near the lower ends of Silicon Labs' guidance ranges.

All things considered, it's hard to ask much more of Silicon Labs as it steadily cements its influence in the budding Internet of Things market. So while investors' muted response to these strong results might indicate otherwise -- and keeping in mind Silicon Labs stock has climbed nearly 60% over the past year to hover near a 52-week high today -- I think investors should be more than happy with where Silicon Labs stands.

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Steve Symington has no position in any stocks mentioned. The Motley Fool recommends Silicon Laboratories. The Motley Fool has a disclosure policy.