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Silicon Labs(SLAB) equity presentation for the Student Managed Investment Fund.

Silicon Labs(SLAB) equity presentation for the Student Managed Investment Fund.

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    Silicon Labs(SLAB) Silicon Labs(SLAB) Presentation Transcript

    • Silicon Labs NASDAQ:SLABEvan and Mitchell Lowery Robert GwydirBrant ‘the real’ MacQuoid Tim Barnes
    • Silicon Laboratories• Incorporated 1996, now based in Austin, Texas• Design and develop analog-intensive, mixed-signal integrated circuits (ICs) for a range of applications• Mixed-signal ICs convert analog signals(sound & radio waves) into digital signals electronic products can process – Portable Devices – Satellite set top boxes – Amplitude/frequency modulation radios – Networking Equipment – Test & Measurement Equipment
    • Product Groups• Broad-based products – Microcontrollers – Timing products (clocks and oscillators) – Wireless receivers – Isolation devices – Human interface sensors• Broadcast products – Broadcast audio and video products• Access products – Embedded modems – Voice over IP (VoIP) products – Power over Ethernet devices• Mature products – Devices that are at the end of their respective life cycles • Receive minimal or no continued research and development investment – DSL analog front end ICs – IRDA devices
    • Basic ProfileMarket Cap 1.79 BillionFiscal Year End January 1Last Earnings October 26Next Earnings January 26Institutional Ownership 110.66%Insider Ownership 14.25%# of Analysts 16S&P Quality Ranking
    • Competitors• Analog Devices, Inc. – designs, manufactures and markets analog, mixed- signal and digital signal processing integrated circuits – $10.57 Billion• Broadcom Corporation – Provider of semiconductors for wired and wireless communications – $17.66 Billion• Texas Instruments Incorporated – Designing and making of semiconductors – $34.34 Billion
    • Risk Factors• Unable to develop or acquire new and enhanced products that achieve market acceptance in a timely manner• R&D efforts are focused on a limited number of new technologies and products• Limited number of customers for a substantial portion of revenues – 10 customers: 36% of revenues• Significant litigation over intellectual property• Inventory risks and costs – Build products based on forecasts provided by customers before receiving purchase orders for the products• Products are complex and may contain errors which could lead to product liability• Customers require our products to undergo a lengthy and expensive qualification process without any assurance of product sales• Increased international activities significantly and plan to continue such efforts• Rely on third parties to manufacture, assemble and test products• Risks relating to product concentration• Most current manufacturers, assemblers, test service providers, distributors and customers are concentrated in the same geographic region• Semiconductor manufacturing process is highly complex and, from time to time, manufacturing yields may fall below expectations
    • Mergers and Acquisitions• Silicon Clocks – April 2010 for $21 million – Designed and developed microelectromechanical system (MEMS) technology to enable the manufacture of silicon resonators and sensors directly on standard CMOS wafers – Effort to leverage CMOS-based timing products into high- volume applications such as consumer electronics – Accelerate entry into the low end timing market while further scaling the Company’s engineering team• ChipSensors Ltd – October 2010 for $11.7 million – Created innovative single-chip CMOS sensors designed to detect temperature, humidity and gases
    • Mergers and Acquisitions• SpectraLinear Inc – January 2011 for $28.6m – Low-power, highly programmable and small- footprint silicon clocking solutions – Optimized for consumer electronics and embedded applications – Adds a broad family of timing ICs, accelerating penetration into high-volume applications
    • Capital Structure
    • Management Discussion• Mixed-signal ICs are critical components in a broad range of applications in a variety of markets – communications, consumer, industrial, automotive, medical and power management• Third-party fabrication, assembly, packaging, testing and shipping – Faster delivery – Shorter production cycle – Lower inventory – Lower costs – Increased flexibility of test capacity
    • Management Discussion• Expertise in analog-intensive, high- performance, mixed-signal ICs – Enable highly differentiated solutions that address multiple markets• Through acquisitions and internal development, diversifying product portfolio – Next generation ICs with added functionality and further integration
    • Management Discussion Q3• Sales cycle for ICs can be 12 months or more – 3-6 months more before customers ship significant volume of devices incorporating our ICs – Experience significant delay between incurring R&D and SG&A expenses and corresponding sales – If sales do not occur in quarter expected, expenses & inventory could be disproportionately high• Many ICs are designed for use in consumer products – Demand for our products subject to seasonality – Rapid change in our markets & across product areas make it difficult to accurately estimate impact of seasonal factors
    • Q3 Conference Call• TV tuner & demodulator shipments declined – TV makers working off inventory – Strong tier-one TV maker penetration – Introduced tuner to Tier-two TV makers in high volume emerging markets• FM tuner better seasonal lift than anticipated – Audio products continue strong design win activity
    • S-LABS• The company develops mixed-signal integrated circuits (ICs), which translate real- world analog signals (such as sound) into digital signals that can be processed by electronic products. Silicon Labs provides ICs used in set-top boxes, game consoles, portable electronics, industrial monitoring and control devices, and wireless handsets.
    • Power• “Top customers include Apple, Cisco, Huawei, Nokia, Pace, Samsung, Technicolor, and Varian Medical Systems. Most of Silicon Labs sales come from customers outside the US.”
    • Industry Structure
    • Industry Structure• “The companys 10 largest OEM customers account for 36% of sales”
    • http://files.shareholder.com/downloads/ABEA-39NRLI/1522740570x0x448278/CD564960-9F11-464B-A6D9-0ABA6DF2C8E5/Silicon_Labs_2010_Annual_Report.pdf
    • Competitive Advantages• What sets them apart from other semiconductor markers?• The Sauce… “innovated mixed signal circuit design, there are very few companies that have the discipline and technical talent to create the mixed signal ICs they do.”• “Has both analog circuits and digital circuits on a single semiconductor die” http://files.shareholder.com/downloads/ABEA-39NRLI/1522740570x0x448278/CD564960- 9F11-464B-A6D9-0ABA6DF2C8E5/Silicon_Labs_2010_Annual_Report.pdf
    • Competitive Advantages• IP – They have “strategic blocks”, patents around patents• SLAB must continue to put money toward good researchers, but also continue to achieve good returns on R&D – Consistent R&D pipeline
    • Competitive Advantages• Forward looking, and good at it.• “The market for energy harvesting devices is poised to grow exponentially this decade. IDTechEx forecasts that more than ten billion energy harvesting devices will ship by 2019 – a 20x increase over the roughly 500 million units that shipped in 2009.”• “Silicon Labs has met this design challenge by creating a wireless energy harvesting system based on its Si10xx wireless microcontroller (MCU) family.” http://m2mworldnews.com/2011/05/25/56866-silicon-labs-powers-wireless-networking/
    • Competitive Advantages• “Diversification is important because it has allowed [them] to ride out cycles in the industry better than many of [Silicon Labs] peers, and it has given them insight into a broader set of markets and applications, fueling the new product ideas that ultimately end up in our R&D pipeline.
    • Bull Say…• “Silicon Labs has a talented R&D staff that has allowed the firm to develop innovative mixed- signal chips over time.• The company took the bold step of shedding its wireless business line, even though it was profitable, because the firm saw increased competition and lower profitability down the road.• Silicon Labs is not overly exposed to a single customer or end market.” http://subscriber.hoovers.com/H/company360/overview.html?companyId=59229 000000000
    • Summary• Strong, high value, high volume, customers – Require a lot from SLAB• Diversification to weather highs and lows better than competition• Industry Growth• Forward looking, and good at it• “Silicon Laboratories keeps cooking up new chips in its labs”
    • SLAB Income Statement FQ3 2011 FQ3 2010 FQ3 2009 FQ3 2008 FQ3 2007 FQ3 2011 FQ3 2010 FQ3 2009 FQ3 2008 FQ3 2007 10/1/2011 10/2/2010 10/3/2009 10/4/2008 9/29/2007 10/1/2011 10/2/2010 10/3/2009 10/4/2008 9/29/2007Revenue 476.82 508.64 413.18 416.39 311.96 - Cost of Revenue 184.47 172.23 150.58 157.16 122.89 38.69% 33.86% 36.44% 37.74% 39.39%Gross Profit 292.36 336.41 262.60 259.23 189.07 61.31% 66.14% 63.56% 62.26% 60.61% - Operating Expenses 246.49 234.68 208.26 197.95 179.43 51.69% 46.14% 50.40% 47.54% 57.52%Operating Income 45.87 101.74 54.34 61.29 9.64 9.62% 20.00% 13.15% 14.72% 3.09% - Interest Expense 0.03 0.09 0.26 0.43 0.76 0.01% 0.02% 0.06% 0.10% 0.24% - Net Non-Operating Losses (Gains) (2.23) (0.81) 3.28 (4.92) (21.41) -0.47% -0.16% 0.79% -1.18% -6.86%Pretax Income 48.07 102.46 50.80 65.79 30.29 10.08% 20.14% 12.29% 15.80% 9.71% - Income Tax Expense 12.52 1.85 11.63 23.26 2.17 2.63% 0.36% 2.81% 5.59% 0.70%Income Before XO Items 35.55 100.61 39.16 42.53 28.12 7.46% 19.78% 9.48% 10.21% 9.01% - Extraordinary Loss Net of Tax 0.00 0.00 0.00 (5.40) (160.62) 0.00% 0.00% 0.00% -1.30% -51.49%Net Income 35.55 100.61 39.16 47.93 188.74 7.46% 19.78% 9.48% 11.51% 60.50%
    • SLAB Balance Sheet FQ3 2011 FQ3 2010 FQ3 2009 FQ3 2008 FQ3 2007 FQ3 2011 FQ3 2010 FQ3 2009 FQ3 2008 FQ3 2007 9/30/2011 9/30/2010 9/30/2009 9/30/2008 9/30/2007 10/1/2011 10/2/2010 10/3/2009 9/30/2008 9/30/2007Assets+ Cash & Near Cash Items 108.18 107.65 149.07 151.31 151.55 16.0% 15.2% 20.8% 22.9% 17.0%+ Short-Term Investments 174.91 238.34 228.94 131.50 486.02 25.8% 33.6% 31.9% 19.9% 54.5%+ Accounts & Notes Receivable 58.37 63.80 61.49 61.60 56.69 8.6% 9.0% 8.6% 9.3% 6.4%+ Inventories 38.40 38.14 33.51 34.36 24.18 5.7% 5.4% 4.7% 5.2% 2.7%+ Other Current Assets 46.90 40.28 25.31 17.45 33.79 6.9% 5.7% 3.5% 2.6% 3.8%Total Current Assets 426.77 488.21 498.31 396.22 752.24 63.0% 68.7% 69.4% 60.0% 84.3%+ LT Investments & LT Receivables 17.84 19.31 25.34 53.37 0.00 2.6% 2.7% 3.5% 8.1% 0.0%+ Net Fixed Assets 27.37 25.91 28.70 29.37 28.70 4.0% 3.6% 4.0% 4.4% 3.2%+ Other Long-Term Assets 205.36 176.71 165.81 181.40 111.03 30.3% 24.9% 23.1% 27.5% 12.4%Total Long-Term Assets 250.58 221.93 219.85 264.13 139.73 37.0% 31.3% 30.6% 40.0% 15.7%Total Assets 677.35 710.14 718.16 660.36 891.97 100.0% 100.0% 100.0% 100.0% 100.0%Liabilities and Equity + Accounts Payable 25.72 26.84 26.84 32.41 35.23 3.8% 3.8% 3.7% 4.9% 3.9% + Short-Term Borrowings 0.00 0.00 0.00 0.00 0.00 0.0% 0.0% 0.0% 0.0% 0.0% + Other Short-Term Liabilities 61.02 61.24 62.14 57.24 43.56 9.0% 8.6% 8.7% 8.7% 4.9%Total Current Liabilities 86.74 88.08 88.98 89.65 78.79 12.8% 12.4% 12.4% 13.6% 8.8% + Long-Term Borrowings 0.00 0.00 0.00 0.00 0.00 0.0% 0.0% 0.0% 0.0% 0.0% + Other Long-Term Liabilities 19.28 21.66 50.51 45.54 44.68 2.8% 3.1% 7.0% 6.9% 5.0%Total Long-Term Liabilities 19.28 21.66 50.51 45.54 44.68 2.8% 3.1% 7.0% 6.9% 5.0%Total Liabilities 106.02 109.74 139.50 135.18 123.46 15.7% 15.5% 19.4% 20.5% 13.8% + Total Prefered Equity 0.00 0.00 0.00 0.00 0.00 0.0% 0.0% 0.0% 0.0% 0.0% + Minority Interest 0.00 0.00 0.00 0.00 0.00 0.0% 0.0% 0.0% 0.0% 0.0% + Share Capital & APIC 0.00 37.18 117.56 102.74 389.97 0.0% 5.2% 16.4% 15.6% 43.7% + Retained Earnings 571.32 563.22 461.10 422.43 378.54 84.3% 79.3% 64.2% 64.0% 42.4%Total Equity 571.32 600.40 578.66 525.17 768.51 84.3% 84.5% 80.6% 79.5% 86.2%Total Liabilities & Equity 677.35 710.14 718.16 660.36 891.97
    • SLAB Cash Flows FQ3 2011 FQ3 2010 FQ3 2009 FQ3 2008 FQ3 2007 FQ3 2011 FQ3 2010 FQ3 2009 FQ3 2008 FQ3 2007 10/1/2011 10/2/2010 10/3/2009 9/30/2008 9/30/2007 10/1/2011 10/2/2010 10/3/2009 9/30/2008 9/30/2007Cash from Operating Activities+ Net Income 35.55 100.61 39.16 47.93 188.74+ Depreciation & Amortization 23.78 18.98 20.52 17.06 16.27 66.9% 18.9% 52.4% 35.6% 8.6%+ Other Non-Cash Adjustments 39.62 43.82 45.23 56.71 (121.25) 111.4% 43.6% 115.5% 118.3% -64.2%+ Changes in Non-Cash Capital 1.07 (37.14) 11.84 8.65 (67.28) 3.0% -36.9% 30.2% 18.0% -35.6%Cash from Operations 100.02 126.27 116.75 130.35 16.49 281.4% 125.5% 298.1% 272.0% 8.7%Cash from Investing Activities+ Disposal of Fixed Assets 0.09 0.00 0.00 14.27 271.21 0.3% 0.0% 0.0% 29.8% 143.7%+ Capital Expenditures (7.47) (15.89) (11.66) (9.84) (8.21) -21.0% -15.8% -29.8% -20.5% -4.3%+ Increase in Investments (178.06) (349.43) (182.04) (428.19) (444.64) -500.9% -347.3% -464.9% -893.4% -235.6%+ Decrease in Investments 241.50 347.90 116.02 716.46 276.72 679.3% 345.8% 296.3% 1494.8% 146.6%+ Other Investing Activities (46.19) (23.50) (12.20) (82.86) (17.61) -129.9% -23.4% -31.2% -172.9% -9.3%Cash from Investing Activities 9.86 (40.91) (89.88) 209.84 77.47 27.7% -40.7% -229.5% 437.8% 41.0%Cash from Financing Activities+ Dividends Paid 0.00 0.00 0.00 0.00 0.00 0.0% 0.0% 0.0% 0.0% 0.0%+ Change in Short-Term Borrowings 0.00 0.00 0.00 0.00 0.00 0.0% 0.0% 0.0% 0.0% 0.0%+ Increase in Long-Term Borrowings 0.00 0.00 0.00 0.00 0.00 0.0% 0.0% 0.0% 0.0% 0.0%+ Decrease in Long-Term Borrowings (7.17) 0.00 0.00 0.00 0.00 -20.2% 0.0% 0.0% 0.0% 0.0%+ Increase in Capital Stocks 0.00 0.00 29.35 16.03 19.27 0.0% 0.0% 33.4% 10.2% 10.2%+ Decrease in Capital Stocks (110.04) (150.85) (52.43) (356.76) (61.25) -309.5% -149.9% -744.3% -32.5% -32.5%+ Other Financing Activities 0.00 5.05 (6.03) 0.30 14.83 0.0% 5.0% 0.6% 7.9% 7.9%Cash from Financing Activities (109.35) (126.78) (29.11) (340.44) (27.15) -307.6% -126.0% -710.3% -14.4% -14.4%Net Changes in Cash 0.53 (41.42) (2.24) (0.24) 66.81 1.5% -41.2% -0.5% 35.4% 35.4%
    • SLAB Enterprise Value 11/21/2011 10/1/2011 10/2/2010 10/3/2009 9/30/2008 9/30/2007Market cap 1745.17 1403.28 1590.10 1965.74 11348.68 2302.19+ Preferred Equity 0.00 0.00 0.00 0.00 0.00 0.00+ Minority Interest 0.00 0.00 0.00 0.00 0.00 0.00+ Total Debt 0.00 0.00 0.00 0.00 0.00 0.00- Cash & Cash Equiv 283.10 283.10 345.99 378.01 282.81 637.58Enterprise Value 1462.08 1120.18 1244.10 1587.73 1065.87 1664.61
    • Liquidity Ratios Current Ratio Quick Ratio
    • Activity Ratios Asset Turnover A/R Turnover
    • Leverage Ratios Financial Leverage Debt/Equity
    • Profitability Ratios Gross Margin Operating Margin Profit Margin
    • ROAROEROC
    • Dupont Analysis
    • Silicon Labs- Piotroski Breakdown Qualification Score1. Positive Net Income 12. Positive Cash Flow from Operations 13. Increase of Return of Assets 04. Cash Flow from Operations > Net Income 15. Decrease in Long-Term Debt to Assets 1(No Debt)6. Increase in Current Ratio 17. Decrease in Shares Outstanding 18. Increase in Gross Margin 19. Increase in Asset Turnover 1Total Score 8/9
    • Price/Book Ratio Price MultiplesPrice/Earnings RatioPrice/Sales RatioPrice/ Operating Cash Flow
    • Analyst Coverage
    • Earning Surprise - Quarterly
    • Earning Surprise - Annually
    • Earning Surprise - Matrix
    • Revenue Surprise- Annually
    • Revenue Surprise - Matrix
    • Growth Rates Revenue Growth EPS Growth Asset Growth
    • Silicon does not pay a dividend
    • 6-Month Comparative vs. Peers
    • 2-Year Comparative vs. Peers
    • 5-Year Comparative vs. Peers
    • 6-month Comparative vs. Index
    • 2-Year Comparative vs. Index
    • 5-Year Comparative vs. Index
    • Questions?