SLAB - Earnings call transcript Q1 2022 | Silicon Laboratories Inc.

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Operator

My name is Tom, and I will be your conference operator today. All participants are in a listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I will now turn the conference over to Giovanni Pacelli, Silicon Labs’ Senior Director of Finance. ahead. go please Giovanni,

Giovanni Pacelli

Tom. you, Thank

are recording available section replay be and our this four weeks meeting, for Relations at a on website will silabs.com/investors. We the of Investor

are website. the Officer, John accompanying information, our They Executive available today Joining performance and quarter our along earnings financial Hollister. is Labs’ business and on and Financial Johnson; with review will Chief recent me press Chief release Officer, Silicon first Matt in financial discuss tables President This activities.

We future. after forward-looking our subject on We questions conference us will today identify to you filings, remarks forward-looking this to in forward-looking assume our SEC of statements. to these call risk review important differ We uncertainties. contained encourage and take as comments, cause to prepared our no materially date of and will statements in and obligation statements actual which to any that update include available base factors the information risks could these those results from the statements

refer Relations Labs’ to now call press call information. our to of Additionally, during included Hollister. reconciliation A the of to the we over GAAP would Labs’ financial non-GAAP John? to results on Investor and the Officer, today, Silicon company’s John certain release in website. is earnings the I Financial section Silicon non-GAAP our like will turn Chief

John Hollister

year, high first end for well last IoT long-term Revenue growth $XXX the versus of pure-play established the above tremendous quarter guidance model. of This our of our same business a and range the a Giovanni. operating as Thanks, represents record ahead million. new ended period XX% at

strong momentum. we commercial home strong in markets & driving for Distribution the revenue $XXX XX% strongest of accounted line delivered sales. business year-on-year across XX% with in the QX, smart in applications applications growing performance. home growth smart top and also Commercial ending Home revenue QX, and of city in the where industrial security year-on-year, diverse particular, The quarter with & of at $XXX saw business delivered strength Industrial million XX% Life total applications end up million, infrastructure, our channel Our

business serving of tens customers diverse, thousands of and applications. Our broad very of is and thousands

X% top are largest XX% and customer of revenue. XX revenue, customers about less of our only represents than Our

to Our is ending Asia inventory It’s cost Asia in Americas, all year-on-year Pacific. Pac. in Americas, business QX across fiscal an Europe evolved with of Non-GAAP geographies favorable expectations, has now strongest gross we grew sold XX%. across gross mix balanced was our XXXX. at in geographical procured Europe, roughly margin important in by was to nearly note the atypical margin time lower the quarter and business and then this The over growth followed out by for the the quarter which driven

price rise seeing in also with charges our expedite While also fewer-than-expected costs suppliers. our increases the from Gross from margin manufacturing benefited quarter.

$XX performance, million cost $XXX to a As due around expenses increase QX. the R&D primarily was from and seasonal the expenses Non-GAAP million million, and experiencing over are $XX million moderate SG&A increased increase for quarter, to margin in the for superior at total personnel-related to gross operating expenses noted, we quarters. just expect manufacturing taxes than operating QX costs. initiated $X coming The margin under OpEx with project at benefits, our increases of top expected, effects QX, line stronger leverage from OpEx. with greater-than-expected Non-GAAP combined XX% and the was payroll basis IoT, resulted margin of investment OpEx. timing gross additional and at other in accelerated in ending We strong favorability on successfully in

non-GAAP now effective increase a faced up to we in anticipated, XX%. significant our around rate, tax As

accounting expect amortization up of strong remain non-GAAP our treatment to due million. a non-cash earnings accordingly, no just expenses R&D we have time. debt. year GAAP that margin note I’ve And a tax the in and year expenses to first charge simplified expenses guidance performance capitalization Please per $XX quarter. delivered GAAP full just builds some was share of under rules rate in ahead interest declined per range basis On $X.XX, few points changes, required for to we XXXX described, XX%. for we convertible as were on longer hundred the of stock it basis, for a GAAP the to significant with SG&A quarter $XXX the million onetime decline the R&D legislative million in notes. that updated expect accrete expenses. operating We quarter accounting Based of of convertible over well the in to the the $XX gross our incurred expenses due QX. Absent

share QX GAAP Our for earnings XX% per $X.XX rate. with a tax GAAP ended at effective

balance $X.X billion. cover sheet cash the the provide update. investments and and of I’ll Next, deployment quarter with We a capital ended

with balance million of around QX Our $XX DSO to days. accounts declined in receivable XX

market million we the guidance fiscal week, authorized Last $XXX Directors to year, for $XX operating the the this business now I operations $XXX XXXX. well shareholders our Board bringing Our of the during divestiture for repurchases, repurchases Channel also recovered second inventory remainder XX inventory was upside of quarter million $X.X year. will growing days. of our million. total later delivering the $XX returned revenue operating announced first through this balance executed quarter by ahead our strong first cover open billion. expected on an additional months cash million cumulative of to to and we share Through of upside continued the performance of flow very team as results, the With in quarter to four in the since in our year. expected capital the

with and the We Life of million Commercial in sequential expect & revenue to million increase & growth to a expected $XXX both to Industrial Home $XXX categories. range

Even in expected gross our place, expect along IoT with continue the at already gross premium to year. space increases to on based on the decline We course course non-GAAP the lower the margin over over we year, cost XX% FYXXXX expected the platform. based of margin gross of deliver margin differentiation for this increases of the to around manufacturing

We increases grow to million for merit expect IoT expands increase continue to effect, team. investment our operating expenses FYXXXX take around $XXX non-GAAP we as to and our

effective non-GAAP for tax our and GAAP we margin to to in expect the around gross the $X.XX be $X.XX. of expect quarter share We XX%. be to rate per basis, to be earnings On a XX% range non-GAAP

operating now to turn and I the to call GAAP increase to will the earnings per to Matt? expect in $XXX GAAP $X.XX. We of Matt. over $X.XX be million share expenses range to

Matt Johnson

morning, everyone. you, good Thank John, and

start Demand full revenue as We even year pure for supply, largest first to play outpace our a and to keep consecutive incremental IoT wireless outstanding in seventh the great off as company. we meaningfully result. continues the our quarter supply. operating We’re delivered record adding

customer the continue doing thing we and We Demand our challenges strengthening relationships focus navigate is as right the for growing. together. our solutions supply on to strong and

accelerating our design growth. even first last faster the same than Our in growing quarter revenue a indicator period the is XX% and of year. over revenue, greatly is future momentum the This

over pure IoT market. the the to new opportunities wireless and we pipeline Our identify visibility play grow, Silicon our now growing also company largest as continues within world. in large well and $XX is billion opportunity Labs gain now

platform range approach applications, of Our purpose-built hardware and platform IoT. software the based incredibly using us a an for enables wide to common address

and to Commercial, and our Industrial strong to applications for and wireless seeing across platform to expand industrial easier & automation and faster medical smart end we’re QX, products deliver strength efficiently new appliances. Our and makes growing scale our protocols and deployments saw been us metering markets we’re and In new beyond of bringing demand In across for enabled demand wireless adoption. market as grid it allows city all markets. growth all growing solutions technology and revenue In for the release the continue monitoring. application matter labels portable strong quickly this asset additional Smart and electronic customers smart Home matter shelf Anticipation received. to is and growth products traditional in to end strong & accelerate later well in and our into year, particularly pleased standard have with for our such is distribution wins automation. Life, areas monitoring we markets

announced in wireless samples initial Initial matter family response has customer AI For fantastic. bring SoCs, ML and QX, and shipped of which acceleration of been edge devices. our xGXX support we example, battery-powered to

built Our been to increase applications. R&D products industrial And on Alpha platform. a sold solutions out program Series The our market xGXX wide efficiency been X, has the our latest and representing and just we’ve fantastic. participants faster. smart deliver new X with response Series impressive able With range of lineup home is in an family of

three to another of times reflective products the only Our on Series few on the X demand. with the of great current first platform is way, more indicator future demand four

our times with incredibly the our opening a benchmark. executive Labs’ With proud with company, on ML to SoCs held the Performance enjoyed York. XX the early six xGXX enhanced learning integrated the faster In celebrate even team as Analyst important in of March, NASDAQ now years XXXX the up event XXXX, Silicon to wireless Inference machine up MLCommons the The Day processing lower IoT a can four This Silicon power we ringing XXX% of AI we belt performance provide low public capabilities. power and New IoT are achievements wireless lead of the industry. machine hardware ultra xGXX determined workforce. for focused honor on Learning workloads. the consumption acceleration to means and our times entered be connectivity talented for also devices learning to We’re wireless and Machine global Labs

that ahead. of and people’s of couldn’t the of We’re we the and opportunity impact and by and excited scale an in future be industry billions on year the units in execution see. per positioned are IoT lead in to team’s technologies the Silicon I prouder the to tens achieve our decade having is expected market lives. Labs solutions

ecosystem talent, this your leader the the this I turn time will We the trusted of major behind technology the partnerships Giovanni. and have and IoT the now you across to exciting to the every a be driving morning. Thank industry. of call segment the market force in semiconductor back success the for

Giovanni Pacelli

the you one you Thank QX questions. And thank To you, as that for people follow-up before limit inquiry, opens, open the I’ll possible one as I Matt. time now for ask call business question update. needed. Silicon Labs financial if to XXXX your with joining many market accommodate and

Operator

Please the question comes now Gary with begin Instructions] question-and-answer the [Operator will first Securities. We Mobley Wells session. And Fargo go ahead. from

Gary Mobley

Good morning, everybody.

to be with year. bracketing year half first the extend such perhaps at end somewhat revenue of the me few above well, we hundred might a Day fiscal to whatnot. or that a growth large XX% still growth another you XX% of fiscal respect March congratulations X, endorsing to my Or or Let the specifically in a to Analyst chain your that year. to XXXX on And to as is start with growth the rate Guys, the at rate? miles chip start the was concerns you different range? supply high strong you strong endorsed that Are east China, cautious over company

to day-to-day? second So supply guidance know, all I’m and extent, to we chain does risks macro quarter that about what the that curious contemplate hear

John Hollister

John. is this Gary, Yes.

me to Let and really that to Day I’ll for we provided relative first the over then Matt the take But part. at the kick part Analyst indication event. second it was

our up I that’s demand really is a the momentum have see we nearly the will in more can the quite strength at for moment. we that now first by to That’s year-on-year We’re to and next to And part. supply at the that pass for can encouraged is supply, we’re quarter activate the phenomenon continue guiding time. extent upside deliver right continue XX% it business in the design supply. enable we of with we to excess as one win quarter Matt the happening I’ll say, more

Matt Johnson

Hi, Gary. Matt. is This John. Thanks,

reallocate terms guess, those war demand see able at the of, that as demand definitely as In mentioned, happen, and you to demand other to is lockdown supply. And I some outpacing we’re soon looking meaningfully because pushouts we supply there. out

flexibility. us gives that So

see side team been operations supply earlier, And alternatives that, mentioned recover. all the we issues the John as or pop to respond of do On up. with able has

able being So seeing of team those. navigate both but the both definitely of those, seeing also to

Gary Mobley

appreciate comments, the I guys.

you of variables to margin mismatch different question appreciate respect price long-term between your given guide sort with do all that increases. exit the still given outperforming margin, supply chain But margin? just and year, perhaps Now gross increases gross how fiscal the you’re sub-XX% you’ll of anticipate my is, be we time mid-XX% by gross the I the

John Hollister

is that view know trends we’ll that out. it the could progress plays extent as margins that’s and we see conservatism of we’ll some have definitely more to see we Gary, But Yes, lead ahead through moderate. and to possible, here. The that, how year full

Gary Mobley

John. Thanks, everybody. Thanks right. All to

Operator

with The ahead. next Please Curtis go Barclays. question comes from Blayne

Blayne Curtis

And morning. I as appreciate to know segment. results. good well, I mean, guide actually, Hey, And congrats the I’ll additional I these And detail strong you’re by curious, echo I segments. going not very by my was

You said relative year even these rate would year growth it Industrial even least be kind about this at a doing been better? between up. thinking it’s or segments, like on both between these the just rate Commercial, rates two & the of growth or growth long-term. Any long-term looks I’m the segments, thoughts bit this

John Hollister

highlighted think the If Blayne. start, I’ll that we Analyst we just at event. the SAM Day growth about

see the industry and But do Home also the You given the do growth growth SAM opportunity very Life. potential growth Commercial estimates Industrial see higher for large on the see stronger & from SAM market, in the growth space, strong in side. slightly INC diverse & time for out

Blayne Curtis

want it was less the it ask quarter, just expedited there’s on I just supply. but still to then of is outstripping said demand maybe kind you one-off

quarter? are what’s the if I chain? the becoming root cause for in was wondering I expedites your things predictable supply So last guess more Or in

John Hollister

Thanks, Yes. Blayne. here. John

that more I fair think predictable, in in I somewhat bit though constrained we are and even multiple still predictable. is we say But open a it the up near is that’s it’s fair to a more. projects the company are to term, think assessment undertaking it more

Blayne Curtis

on. it Pass right. Thanks. All

Operator

Matt The from Cowen. next Ramsay comes Please with go ahead. question

Matt Ramsay

China. you EMEA might Pac. the design And Good everybody. and and of you Thank in talked the John, on a about fairly guys focus the and imagine you. being there’s I in script, morning, equally split the momentum business as the think lot lockdowns win Asia Americas between

lockdowns guys worried chain of about as sort of pinch earlier out quite allows to in putting for So that sort in is of through the answer are you of and and bit there. we it guys that supply well way are, I’m the would have as the ahead the are true the is your there products you that and commentary certain just results expected think, that an you of – supply what navigate split China this? well? is stuff points guys a trying Or described some the fungibility these Matt chain that’s given up watching macro to I

make sure gist anything the to we’re that missing trying just you if I’m So not get behind the question. Thanks.

John Hollister

Yes.

run Let Matt, this at me take it. a is John.

China, supply a concentrated the geographical oriented Taiwan, split roughly the globally we footprint of That’s can really, heavily is supply the the equal is Korea. representation our of as customer in three on regions around in So Asia world. with across imagine, The Pacific, where on you good the amount sourced chain in comment in Mainland South of the more major commentary demand. business some have some a

to navigate so able been this we’ve So far.

eye lockdown. there where so the Of mindful we’ve what pushouts been navigate But and the of or customers. of approach And out that. products course, broad-based able and with it given may issues we’re some on could keeping platform to lockdown with we happen far, have our technologies an

So been supply to customers the case. to far, where that we’ve available is able not other reroute

Matt Ramsay

Got it. Thanks.

had that’s us commentary fourth of us slightly lot revenue couple on but you holding an the a back follow-up rest you demand expense John, you as that of expenses had all might OpEx the Are of the whatnot first on modeled to or Thanks. as wonder, funnel there well where grow if just allowing give with as of a Or on that aren’t maybe acceleration under for – above. the for things year, out guys there? quickly the the are hiring are maybe might year. anticipating some levels I for Just it quarters you like? you

John Hollister

goal times, through this timing able to we Sure, course might project acceleration are quickly from year. we work. this is year. Matt. of want factors of different to quite to at At execute yes, as just But expecting course we And further continue acceleration the our through the as were not yes,

Matt Ramsay

Thanks, guys. Congrats, again.

Operator

Srini question Nikko Please comes go next with from Pajjuri SMBC Securities. The ahead.

Srini Pajjuri

the guys. guess on Thank margins, first I John. you. Good gross morning

So quarters next few guiding obviously, the consistently. you’re for down

understand – much to cost pretty if some trying out in across the is additional expect price terms inventory And of inventory, guess, the I flushed in of rolled you left. the if Do any second the to year? much prices Just opportunities been raise in still lower they the or half system the have have still the pretty board? increases, the through you inventory similarly,

John Hollister

Srini. Yes,

the of fully last response fleshed legacy cost from is So is out. first yes, year the inventory

cash We cost incurring the to are point. points, new and higher are XXXX XXXX inventory at costs have meaningfully the cost than been build which new

immediate are that’s of. and now, to So in rule But trends in manufacturing quarter. the those can plan steps the we the experiencing increases half already that quarter, are second seeing it you’re No price third here out. increases on affect forthcoming what at additional us what we are ourselves second we There recover aware expect in and of some we’ve cost taken to fourth the right moment. continue as never

Srini Pajjuri

in all Got or two by is XX% channel how I as think we up as guess well, bit. go the it your then target we in a your demand went terms the margin. visibility you’re still And through about terms saying rest supply it. is levels And to year? to I inventory noise? inventory of should of your terms that little channel of a XX%. supply chain visibility, And compared outpacing ago, But in a of mean, the significant any then given change quarter

Matt Johnson

over of hand Matt. answer part I’ll John. it that first and to This is the

And have within continues At gives Within reallocate. really are respond moving And one accelerating even of and environment, consistent. as to in to visibility leading in statement that’s us said that, our we time, the and important. terms faster as bookings earlier, that’s things indicators I future our wins quarters of XXXX. outpace to our coming the forward. increase the stronger of because that, our our entire revenue, supply, That’s continue which, same remained for to meaningfully our the supply. design have us think important demand for John is than a demand shift flexibility we which

is sequence it in combination that the I’ll So important. for piece. second to hand you John, over really And

John Hollister

Yes, Srini.

the pleased channel were the range. with to our ability we distribution So into target reload back

Our would which continue goal hold as would units bit to the be that’s best here. that, to business goal of as continues supply, we’re is to in the team. at hold it’s But that level the and an we a challenge at. for be increase our that is a But can tight absolute currently grow to

Srini Pajjuri

on Because inventory in Hey forward I customers? of couple in given a either years. of willing seems that that. supply last a the of a be or hang may to evidence happened direct to distribution channel your in going John, that Are you logical more last constraints. saw kind the what couple basis, on just the follow-up to given sense, or just any hearing we years structural bit to mean make customers what terms of seeing

to So what from I your thoughts customers? hearing on hear want just you’re your

John Hollister

Yes.

haven’t for strategies normalized Really, really gotten – the think I it’s understand to – we enough companies. think well longer-term I yes.

more to your but really time some pass things get and normalized I let presumption to we’ve think more got I think know. is logical,

Matt Johnson

alternatives, and of of for We’re through alternatives cetera. supply given much to every quarter through spending now, said, a of I sure, to I’d industry be – back fabs incrementing our still that, the trying on will demand we’re in be time we those component well do of as as keep multiple reliability supply what and inventory has that, supply. can not navigate working one, bridge as gaps higher. going that interest add long-term think through the their the help being and lot sources just and mechanisms them been just end, And customers, definitely discussions et for a right? for That up types right And for in that supply

quite be gaps and So I need some distance think all between on supply there, experiencing. of of time will and those that we’re table, the the but demand size given here still the a there’s we

Srini Pajjuri

Thanks, congrats, guys, sense. Makes and again.

Operator

with Company. The comes go Needham Please & next question Gill from Raji ahead.

Raji Gill

well Thank strong really market. as on a growth and you, congrats a in tumultuous Yes.

follow-up on growth question I split by price a primarily a Just last balanced. a year, more was the This between price in IoT increases little the bit year, and driven units past, unit is increases. know around strong increases. the

design of think of new relates I wanted as and terms XXXX get in how about just about and sense and when Matt of growth you So as talked talking when into about, of looking customers these new as to new to out negotiate do a you’re you’re contracts? kind longer-term as pricing kind well some we wins, it

Matt Johnson

Sure.

market So philosophy the And of the you provide solutions. about would a not to our is easiest the – measuring price, expect what to And stick temporary that design that I not at for transient be design earlier. but windows how talked at business. can competitive price we would we wins duration to those the for is momentum those and win pricing provide approach or say, a

been way been we’ve wins. way the that’s those so operating, we’ve and the that’s winning And design

seeing so to we’re expect So and continue. far, progress we that, good I it think on

optimistic the We’re momentum and of we rest have for the design about progress the year. win the

Raji Gill

my you. Thank just for And follow-up.

capacity XX-nanometer extent of capacity, more kind for for can X you conditions that will products. of describe X Series Series activate with of partners. products you picture. your you XX-nanometer wondering maybe terms or because you looking the How can overall your demand to foundry if are supply, capacity the your at adding generate mentioned, the I’m they new In upside

strong accelerates about industry kind a capital online. year in of throughout over – of because, an to if just oversupply of And and to know, year a those there’s as comes investor the leading so you conditions dynamics and between kind sense capacity get terms concern disconnect and demand wanted it you’re more about supply next a demand this how I thinking

of there’s perhaps a that mismatch lot that occur So about concerns next year.

you. thoughts be So Thank there any helpful. would

Matt Johnson

Understood. Yes, seems It where I given question – the meaningfully completely. have we supply that between issue, it’s – a Sure. gap, but ways would long understand be and right I demand now. meaningful that away the think, the

think it we our secure going and definitely more comment our suppliers supply leave say is well. long-term plans capacity only partners with can our But and their short-term for I to overall effective, to to on not mid-term what ability work as suppliers I forward. and specifically supply has been but

So when give the going we online. can half important because a into see them that we support I a those this working design customers is that’s of they path component we very and which new like designs as to our wins on also that into and second visibility with think, we’re ability that XXXX, major year come

company. and as in allocation I think being is to discussions work – helpful found IoT one powerful that pure-play we mentioning other and on thing these we that’s supply an worth

all I think given that a attractive that makes perspective. for diverse all our portfolio we a – suppliers term, incredibly we And and position exposure. a from includes and that presence do that’s better there, want have that that us IoT that lack of

I So as to supplier strong but literally a with well. across helping base and this we’ve us that, navigate seen one not that’s response just with think our

Operator

ahead. go And from Nicolaus. Instructions] next Svanberg [Operator the question Stifel Tore Please with comes

Jeremy Kwan

congrats the calling especially This margin. on add – just the morning. And operating XX% on let Tore. Good is me Jeremy for Yes. my

can a on the three to geographies? those historically? of sense where that you follow-up geographic the growth does order most in you And Can a give Just question. you rank if us – of how maybe compare terms expect of the

John Hollister

consistent. pretty Yes, Jeremy, John. this It’s is

opportunities the at applications North least America applications, do expect develop as I have it’s in Asia are Europe. forward believe, in to of for MCU here. well. some and overall, of There further the that initially going reasonably we balanced, here. more think Things over significant it’s and Asia Internet Pac We Pac seen rollout business But fair good in strength to in have time wireless say you

Jeremy Kwan

more back a at I And Great. maybe technologies. guess drivers long-term or looking stepping bit, the

an maybe heavily or there on terms matter of things of the you the out fill that to complete any see Thanks. in things you’re investing other being even mentioned on You things in on at that that service one. Are the you more important portfolio might horizon platform the moment? side want

Matt Johnson

make opportunity. some on just – general, incredibly matter, for about an get delays first this will comment we don’t right. less our the the benefit see positive in positive I’ll as this We industry we industry. the most we right, a sure. if this a think the important it’s a space. quick we’re that as Yes, drive gets than development And And this concerned because see very short-term net for

by that. encouraged we’re So

very xGXX, it’s calling that I In Series the X across and we’re see big worth to know be terms mentioned of that out approach market. indicative this to longer-term the market differentiated base, why that end catalysts, demand clear, those getting seeing and ability service us for to technologies. are a keep But continues platform market taking parts strongly. driving the of parts allows to keep that’s we from is strong we growth all response growing customer improve. platform just that and our our our that earlier But That more that we’re tremendous applications

I And of out that accelerating to gate on the X our road. the of about mentioned, as we that’s alpha Series fantastic. we’ve more then us a you that’s learning one more what based that sold the march that the terms two in the see a way Xx continued released, xGXX, off down that earlier, supports already And we the battery-powered platform. customers products one coming in and and said And right matter, there’s I I see of is really have solutions really that X best that platform future latest when mentioned, of efficient the and potential applications. supports the machine three the for makes look off only products excited about in seeing, As or coming demand environment demand the we’re from historical you product the very out been program first example response think

that’s to future. the be one So see – forward. if to have about say, It’s back what’s step moving excited the platform of and yet many that you we’re reasons seeing and effect

Jeremy Kwan

again. Great. Thank you congrats and

Operator

There are questions. further no

So hand I Pacelli. back the will session. this over Giovanni question-and-answer concludes now our to call

Giovanni Pacelli

joining you you QX Silicon Labs’ conclude the Tom, now call. Thank Thank call. for the you. earnings may

Operator

has you attending today’s you concluded. and presentation, disconnect. now now conference The Thank for may

Silicon Laboratories (SLAB) 27 Apr 222022 Q1 Earnings call transcript