Silicon Laboratories (SLAB)
Q1 2012 Earnings Call
April 25, 2012 8:30 am ET
Shannon Pleasant -
Paul V. Walsh - Chief Financial Officer and Chief Accounting Officer
G. Tyson Tuttle - Chief Executive Officer, President and Chief Operating Officer
Craig A. Ellis - Caris & Company, Inc., Research Division
Anil K. Doradla - William Blair & Company L.L.C., Research Division
Vernon P. Essi - Needham & Company, LLC, Research Division
Tore Svanberg - Stifel, Nicolaus & Co., Inc., Research Division
Alex Gauna - JMP Securities LLC, Research Division
Blayne Curtis - Barclays Capital, Research Division
Srini Pajjuri - CLSA Asia-Pacific Markets, Research Division
Steven Eliscu - UBS Investment Bank, Research Division
Auguste Gus Richard - Piper Jaffray Companies, Research Division
Previous Statements by SLAB
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Good morning. My name is Sarah, and I will be your conference operator today. At this time, I would like to welcome everyone to the Silicon Labs First Quarter Earnings Conference Call. [Operator Instructions] Thank you. Ms. Pleasant, you may begin your conference.
Good morning. This is Shannon, Vice President of Corporate Communications for Silicon Laboratories. Thank you for joining us today to discuss the company's financial results. This call is being webcast-ed 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 Paul Walsh, 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 Laboratories 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 conditions. 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 statements.
Also the non-GAAP financial measurements, which are discussed today, are not intended to replace the presentation of Silicon Labs' 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 Laboratories' Chief Executive Officer, Tyson Tuttle.
Paul V. Walsh
Thank you, Shannon. Good morning, everybody. We had a great quarter with strong results driving meaningful upside to both revenue and earnings. New product cycle momentum allowed us to overcome what is typically a weak seasonal first quarter. Revenue of $125.7 million was down only slightly from a strong fourth quarter we reported with the share gains in TV tuners and the ramp in touch surprising to the upside. While weakness in the telecom market and a general slowing in the consumer end market persisted, new design wins continue to propel our business.
I'm going to turn the call over to Paul to review the specifics for the quarter and then, I will provide some further commentary on the business and our Q2 outlook. Paul?
Paul V. Walsh
Thank you, Tyson, and good morning. As Tyson mentioned, the revenue of $125.7 million exceeded our expectations, up 5% from the same period a year ago. First, I'd like to cover the GAAP results, which included approximately $6.7 million in non-cash stock compensation charges, or $7.9 million, excluding the reversal of prior stock compensation related to Necip Sayiner's separation agreement. The Q1 impact of the separation agreement included a net $1.2 million credit for stock comp and $300,000 cash component. The balance of the agreement will be recognized through Q3. We also recorded a $950,000 one-time credit related to purchase accounting from a prior acquisition.
First quarter GAAP gross margin was 59.7%. R&D investment of $32.9 million and SG&A expense of $25.4 million offset the gross margin decline and resulted in GAAP operating income of 13.3%, an improvement over the same period a year ago. The GAAP tax rate was 16.3%, resulting in GAAP earnings of $0.33, a 14% sequential increase and a 6-quarter high.
Turning to our non-GAAP results, going into the quarter, we had anticipated that Broadcast would be down seasonally, access will be about flat and Broad-based would be up. Given that mix profile, we expected gross margin to stay about flat. As near-term gross margin is largely a function of mix, better-than-expected Broadcast revenue brought gross margin down to 60%.
Starting with Broadcast, as the quarter progressed, we saw significant strength in video, which was up by more than 15%. As a result, video largely offset the seasonal weakness in audio. And our broadcast products in total ended the quarter above flat versus the guide down. Access was down sequentially about 10% as phone equipment demand slowed somewhat, affecting our SLIC business. And modems into set-top boxes continued their anticipated decline. Set-top box modems represented between 3% and 4% of our total revenue in Q1. This has become a much less significant headwind, particularly given the potential for growth in modems as we gain share in multifunction printers.