SLAB - Earnings call transcript Q2 2022 | Silicon Laboratories Inc.

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Operator

Hello. My name is Sarah, and I will be your conference operator today. Welcome to Silicon Labs' Second Quarter Fiscal 2022 Earnings Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. this being note Please Instructions] event recorded. is [Operator turn over Director to would Finance. now Pacelli, conference to like Senior I Giovanni the Silicon of Labs' Giovanni, please go ahead.

Giovanni Pacelli

Thank Sarah. you,

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

John Hollister

million, our year-on-year above that performance at set strong new for XX% revenue the Giovanni. and $XXX quarter Thanks, a of pleased guidance to second record, the top-end range. report I'm up

same of The million, from across all exceptionally XXXX. business also QX, well quarter commercial significant XX% ending up $XXX million, city life strong commercial major year-on-year increase in the at home smart applications. an and QX to up $XXX strength connected of in particular of applications. portions business [I&C] in [Ph] the in saw We industrial the fiscal for industrial, home growth and year-on-year, grew and with business XX% period was Our

In lines more the doubled terms Bluetooth year-on-year. second of from our in connectivity revenue our product protocols, than quarter,

saw also protocols, as other proprietary wireless, such Wi-Fi. Thread, Zigbee, across rates and supporting growth our Z-Wave, mid-to-upper We double-digit

Looking QX we growth in in the at strongest followed saw our Americas revenue by in geographically, region, sequential QX the Europe.

was down. our did in customers, situation the and QX, lockdown suppliers. COVID impact Asia-Pacific In distributors, China

increases Distribution in lockdowns, was primarily example, to For of distributors revenue in inventory. our of due are two in total experienced our the inventory [indiscernible] and second for large increase revenue. the for the levels XX% regional quarter China distribution responsible around

continues thousands business of and diverse, worldwide. tens Our of be of in used solutions our thousands are customers by applications very to

customer top-XX customer a our The X% ability supply to customers environment seeing strong, are to combined of end sales. said, reschedules. higher in of bookings our be and recent we represent more total week-to-week continues largest of with single fully Our it. is more our sales. around patterns, remains basis And XX% volatility demand variation demand with on above levels our That

nature not first macro to normalized operating $XX quarter the million price uptick greater XX.X%, income were which the due customer than have the for believe revenue, large was effect product sales, to combined heavily a and revenue. significant We coming million as due weakness footprint Non-GAAP as order was XX% performance, in resumed a more and were SG&A $XX expenses our increased we million, offers expenses margin XX% mix. QX. at was upside favorable or stability gross more XX% Non-GAAP industrial elevated, travel quarter, million product additional broad-based out QX to ending of seen Non-GAAP R&D margin were variable in $XX operations. increase from gross due or costs exceeded of on the expectations expenses operating anticipated, slightly consumer-oriented to decline exceeding We exposure cancellations. significant in with development QX higher of semiconductor travel patterns $XXX of of costs, pandemic. business expectations. or our

line Our rate operating the at XX.X%. $XX million GAAP margin above the was $XX at in GAAP guidance range. of was and GAAP Stock or million. were sales. $X.XX earnings $X R&D SG&A end XX%. expense expenses high compensation our million, million, the assets range. non-GAAP $XX $XX expenses was expenses at quarter XX% of effective guidance our were tax and per ended expectations. $X.XX earnings basis, of intangible share, operating was for slightly share, gross of with at Non-GAAP a million, above favorable, with $XXX was both top-end million, income On GAAP amortization per our

to the to $X.X million in ended Net $XX and from $XX turns. up at ended of cash reflecting days. X.X ending Turning Accounts receivable balance and quarter inventory increased investments sheet, million, at at billion. QX XX the DSO

We capital QX supply future into to capacity. also working invested secure chain our in

Our days. distributor slightly XX inventory to increased

$XXX announced count. over we a ago, we year of million stock divestiture through repurchase have returned the million shares or this XX% our our billion to pre-divestiture program. cumulative $XX just have returned shareholders far, retiring a So year, share $X.XX Since we

shareholders. to earnings a capital will intend share long-term going continue Our return And provide activities we benefit power durable our to to to forward. repurchase

However, repurchase our through Board of approved XXXX. fiscal an program end market Directors the open of this million month, of $XXX additional

third guidance for the Next, I'll cover quarter.

be expect revenue to for the QX range to million $XXX We $XXX of million. our in

and We for expect be margin XX%. between gross our non-GAAP XX% QX to

rising $XXX to expenses continued QX investment We primarily our on for the QX. $X to increase and based around environment, million R&D in rate to to our income item the Due to cash around interest strong products. expect line position expect operating and in level non-GAAP million increase expenses from we increase with other

have interest fixed Our a notes rate. convertible

a tax next year legislative absence to we accumulates. [Ph] couple for [deductions] that the tax And We amortization expect our continue by non-GAAP any basis the rate changes, effective expect on XX%. to R&D XXX decline to as be note QX stock please rate

per We expect the our to to $X.XX share. $X.XX be of non-GAAP earnings in range

GAAP XX%, expect to approximately to now over GAAP and be margin GAAP for call share. about million, earnings gross expenses to turn $X.XX to $X.XX the of $XXX per Matt to be range business be I'll in the operating Matt? We update.

Matt Johnson

you, record Thank in macro during Labs morning, the posting well John, in and June everyone. continue Silicon environment ESP execute good a quarter. challenging revenue

in continues market. meaningfully supply. the to volatility ability experiencing focused we our in gain our strong continued seeing are John design increasing while we in pattern. And notable win meeting We our requirements. driving booking customers' our mentioned, solid share to variability are and strength exceed as said, That momentum, and market, Demand are diverse end execution, on

product our all diversity Our second driven quarter by highlighting double the groups digit growth markets our end and result was business. within across major

XX% Our billion, opportunity pipeline continues at sits expand, up year-over-year. to $XX.X and now

significant the and already continued all continue we expectations levels. see well, We In market. us saw year-to-date design momentum confidence our as a a approaching outperformance in full-year XXXX win protocols. our wireless to strong across for QX, in total This gives growth

growth, And accelerating. share. were momentum grew and demand our of solutions Industrial sequentially saw our pace growing & market an the In Bluetooth Revenue at a a win strong to design record XXX% Bluetooth a is related XX% our we notable environment. exceptional win, Commercial year-over-year. strength and portfolio source solid reflecting design revenue business, Bluetooth Our

label a by electronic well leading top led design We providers. & also saw this level Life, two of see with segment major win including as global wins the growth record revenue shelf design In as three again the Home customer we solid home specifically. smart quarter

market and While we quarter, the consumer know in recognize we market including weakness ongoing win softening design some our volatility momentum. the

standard example, advantage our the development connectivity showing we solutions. developers to recently are with interest launched supported MGXX we in continue position the home standard continue to Customers Matter the Matter. wins smart that support For [borrowings] [Ph] strong world's in help our to take And in Matter create expand product. best protocol Matter-based of connectivity design

We and retaining for employees. competitive landscape talented recruiting on are highly focused the

over built and college year. strong early talent graduates have this pipeline interns and a We joining new have XXX

this comes groups. intern of from global underrepresented our percent historically Forty products five year talent

ability base. Our new continues hiring accelerated enhancing a at graduate scale sustainable college our to further pace, build talent also an and

resource employee through that We that retain and the are and critical we attract experience investing training other groups, ensure talent to a initiatives programs, of variety drives our our business.

brings company. appointed semiconductor we as been continue earlier morning, has nearly will He to a of As mindset Freescale grow retiring, experience Board which to XXXX. deep the strategic we Directors. most invaluable before and scale NXP, industry, XX Bob and the Bob has our with in and Conrad announced this be in in experience industry recently years

we're a have The one large across simplifying increased over remarkable In of and being is as executed to and create With premier September skills Stockholders wireless scale has power company, reelection in announced IoT company, that confident the to pure-play of our XXXX Bill delivered impactful ever the to Silicon also Directors. We're earnings growth despite showing IoT Developer Board Works for are year, our we He together connected conference year has not of looking Works worldwide. Directors on to the With the growing XX the Giovanni? and for for ability our our also of We market Labs and retire building market. market, shareholders. In third Conference, In the bring more we upcoming returning to intention of Meet. wireless broader shared while accelerating grateful capital and Silicon well to to leadership record and will the continue beginning the held landscape XX. in effective revenue since the this its his became lead is forward the devices. industry our years. developer We significant and to his resilience, our than since board. changing Board Labs date Bill served Annual Wood adoption summary, the stand team the

Giovanni Pacelli

Thanks, Matt.

open on early in York, to Technology Leadership we August XX, for would in I like announce the Technology Forum Global call Vail and Annual in upcoming Markets' participation conferences; Citi's September. Before two our Capital in KeyBanc Q&A, Conference, New XXXX

question now questions. if To market the open needed. before many to inquiry, the possible follow-up ask one will I accommodate people opens, for one with as to call your We you time limit as

Operator

Company. Please session. begin will ahead. from now question We go Needham [Operator comes with & Instructions] Raji the Gill Our question-and-answer first

Raji Gill

further thank the just bit around you on trying to on if Yes, congrats you commentary or and order variability when And just say uptick have order I'm my an variability a customer books, taking in could And cancellations seeing say specific did and more is customer elaborate a clarity you little that seen questions, have wanted on the little wondering clarify. seen good haven't also, and more a -- not if all book get to cancellations? language. And volatility what you for and can get that the in order on you in you in your insight momentum. there uptick large that you seeing mean, -- does you're you scheduling,

John Hollister

Hi, thing. Raji, sure John. this is Yes,

Let me start, Raji.

of as just period we of we know that the have, demand in last it's strength all the sustained, really secular our the crunch over supply strong quarters. several the of You bookings a drivers time, given of know, and period and for time been

to patterns, backlog. the have ability We continuing backlog although bookings, and light in the booking remains some in high variability significantly more new to see weeks with that cumulative strong, are of be fully to very there some begun the weeks above more our service regard week-to-week

In out a as are a major are nature, profile. they yes, to Raji, customer in terms trend broad-based their not assess the as but to push-outs own sort more in of further and cancellations, but requests we of or seeing frequently time seen reschedule deliveries we've few what continue cancellations, demand

Raji Gill

-- you that, Thank that it's for helpful.

exceed XX% follow-up, of you if so. guidance you're and my maybe was on to more recall, last year, growth it or I And contrast Wondering growth last This XX% seems pricing it's could the talk the your year, if of to year, your kind attributed to you grew the of to revenue XX%. also revenue at for you look Just of growth, the unit or between attributed growth, growth, was of majority increases. track and even. growth going XX% ASP to annual if much like unit about be

to you year or price do pricing itself, the going go think that power long in deceleration demand? get into unit on sustain your you wanted to your continuing So, double-digit so, to especially where is How input could double-digit say, thoughts that pass as you. versus, on be we there cost of a Thank environment. kind pricing increases price Are the customers? next to increases, increases

John Hollister

Let me start, Matt. John and then again. I'll pass this Raji, is it to

that that, in progress to quarter is stable both from So, assessment double-digit we there way you're quarter. saw a and And pricing this And more first frame the a output. good you'll the as year year, of we with pricing unit unit contributions second contribution right, through see the and your output summary more environment. than

highlight Just to generated flat as another we that, point in QX essentially that QX. to the data ASPs were

the the unit business output. was driven growth in So, by sequentially, fully

far power pricing how let that to comment as and the long sustain, turn longer-term. will to it As Matt me

Matt Johnson

Yes, sure. This is Matt.

been quick One think and is incrementing continue. to to I recognize have we extremely two up expect important for that which important our our comments. it's supply, that is, we customers,

not reflect [with to calling] approach nibbling of and than to the piece, our On some did [some suppliers the others, as that worked increase we're happen based what that and estimates] on one we by trying death [Ph], a being it customers, to the going pricing is course we bit on trying time [Ph] well. communicated this; we're over we well little think that's year a we're what took to our different as pretty

it that we're that's our and for the year. navigate to that seeing plan think them well allows I worked customers,

In don't And, of that think suppliers that terms for changes, now, durability to seems be durable. of going continue increase the in expectation I pricing to we the relatively fact, of any And price. that, right their they're right? see most to supplier is indications

approached to good in those indications that's plans. right our small what from we've it. feel increase now, are continue amounts we've So, will and we prices baked into suppliers, about how And,

So, good we it. feel about

Raji Gill

And in in and just squeeze could back thank the you. I'll And if one more, up queue.

you. your lead Just what could are? times you Thank remind John, us,

John Hollister

XX quite -- of Yes, at it sort looking and aggregate the time lead this they're months between We're six terms, product of just depends on in but point. extended. line,

Raji Gill

Thank you.

Operator

go Mobley Gary Wells Fargo from comes with Securities. question next Our Please ahead.

Gary Mobley

But billion start that. that's XX% your I the margin. the Hey, for off guys and long-term as by far guys, have I question. taking you saying your roughly at financial on Analyst thanks exceeding your of my you long-term been at appreciate as congratulations want that so targets revenue, Day, year, I to financial look fact low-end gross target, present of $X.XX this

looks for percent. below that margin However, simply I out million guide might third call quarter, extrapolate like a non-GAAP your you maybe, if out putting the $XXX be XX% there target; OpEx that high-teens little it you're it, long-term

OpEx question is allow my to that what the some financial margin, can gross fruition of is So of it give low-end more target, is it discipline? maybe

John Hollister

Hey, Gary, is targets I outperforming be long-term our the understand year. we John. point, and yes, to yes, this pleased this are

point, say, variability a indicated, you [Ph] one of ahead, make. here. sort model. As OpEx, -- bit first we we've takes we management that margin that's introduced go to or the is have and more have our in spending to ways change to we a and the profile to and provides that thing to between team no change point no got know,] you the optionality look second flex and more [Would long-term as And gross that's point puts into

Gary Mobley

John. Thanks,

million remind speak. follow-up, in us mean left have As is to a believe optionality, my [indiscernible] there term can is cash return? for roughly return? what $XXX to your capital you you Does dollars so I keep long that billion maybe that for remaining to

John Hollister

Yes.

Board to am billion and this some so for that end program. would like did top mean say, would don't return a to really pleased is with that with suffice capital gone expect M&A around Yes, that to there doesn't is another Gary, like Just but points That that deal, that optionality. authorized [indiscernible]. us. about Happy full the [indiscernible] million. dry quite talked how view road the to continue to to have up and and we $XXX $X to powder we the a of maintain would far, I continue has shareholders the that's we we

Gary Mobley

it. Appreciate John. thanks, Okay,

Operator

Our Please the with of Cowen. Ramsay next go question ahead. Matt from comes line

Matt Ramsay

gone morning, a some in first that's inventory And you in that And guess very shutdowns script for called you to couple out quarter. mentioned due Good question, I distribution had everybody. I Thank much. my COVID having up. of your that during I happened [indiscernible] was that guess understandable. John, the you think China

how you more Thanks. a Okay, on have back that's going can seen And maybe to if give start color sell-through much come bit inventory from on little down? up? those been tracking [indiscernible] you that

John Hollister

bit. a Yes,

better the accumulation to So, our China the goal open two sure. And, where on market above the up in are to it the in XX where saw second this for XX remains and was seeing that the average suffice question, the we're category. quarter we say composite areas to days be second than clearly, for

we actually. little So, are a they some distributors below target are But ahead.

create to in normalize taken the continue also of expect fill relieve we place this So, and more to and China. some accumulation that's

Matt Ramsay

Got it. peer you a strong And there a kind the guess results Thanks, with follow-up, back little what's of is coming the fears I bit investor ASP observation bigger picture the your good. my pipe guess margins now. companies I really are economy. and of of is John. juxtaposition right that really the for down the stepping

end to are maybe that new are guess economy the about that might are a does maybe and translate Matt, you momentum? win end, seeing different that now fact time these that How talk help [hairy] get sustainable the you I perspective? little sort you us as you behave investors [Ph]? that What seeing to defensible the wins the of getting just ASPs contemplated? of Thanks. on some more of transits think being are little and spend markets end design are design bit from could design And win a I

Matt Johnson

a point impact and And that of because going look can coming think Matt. us and terms from going whatever we win things important one makes this most what is -- our it's strongest quarters. lot happens future of we It's in a of one out momentum. that the massive like. there to have of do what uncertainty indicators the is is so design look a gains that share on the there focusing is to the insulate market meaningful Yes, the of in really to like I Sure. the And

level in see year of strong you earlier that year-to-date is secured current a And us. for year what And I approaching win So, mentioned wins our XXXX we entire have design was our design the performance. are XXXX.

the and gaining socket. momentum however, said, competitive be being we well-positioned about So this most ASPs the you up in that that, confidence gives asked and ends out, We playing That win will well. as outperforming. share ASPs

win wins competitive is socket there not long-term application design priced Honestly, time; There be at these a at them. one are So, customer a ASPs. assumption one at when time. have change. we don't time, it's in to any a And competitive one of at

that's it's the when design So reflected how recognize win. we

So, accelerate of forward. momentum maximum our to moving important very proud the to it extent we And the but can is topic, only and we continue not team's there. that are goal

Matt Ramsay

Thanks, Matt, color. really appreciate the

Operator

ahead. Svanberg go comes Tore Stifel. question next with from Your Please

Tore Svanberg

Yes. the results strong Congratulations on quarter. on a record

that holding First, It September potential sound throughout bit for Can more talk seem for or you beyond move the margin the the gross previous about is up the John; like you better. does gave year. some pressures about as in gross John, there guidance dynamics call, the quite you a quarter? margin talked we

John Hollister

Tore. Sure, Yes.

due the some in we're of ahead price earlier some the and that. in coming are -- effect to downward that call, again, in was more costs seeing some dynamics really seeing are come And expected about forthcoming. anomalous forecasting Matt QX somewhat asynchronous down of now bit down where of increases what implemented here. We price of we costs that the the talking shift QX QX and We a saw

So, materializing we increases had half. some in cost second the additional

and over the in so may looking We open as really, and messaging ahead, how time, a points continue up major capacity as those changes our no have talked market chain well. about will monitor to that before we open and this supply progresses around up see

Tore Svanberg

suggested higher what Great, basis hundred or before. points still than very think we good. had, you Yes, I had it's perhaps several

the Second for two on of like where out of elaborate little It Could that now called there. market question you we're few you seems the I just think huge years? market you, a is still players shelf the Matt; of label bit very early becoming working with in next you're the electronic innings potentially largest that? a

Matt Johnson

Yes, that. asking absolutely. Thanks for

all, a said, days First market you early substantial it a of space. as I think that's just a has as that beginning potential growth

I we're planned broad of that of cases signs global is out eight stores actually use and I And the and well. for a lot this in of the the seeing in as just space but to we're really focused this we're about by adoption technology early what to adoption We've impact pandemic. I the that, needs define not is relatively start internally. for accelerated low, and very U.S., think globally being years, but a on seven interesting would think the It's type excited not new been of us point or now see of about phenomenon it. to starting as

early I substantial moving and well-positioned, So, days, potential forward. think

Tore Svanberg

Congratulations Thank again. Great. you.

Operator

next Our question with from go Instructions] Blayne Curtis Barclays. Please ahead. comes [Operator

Blayne Curtis

question. Hey, my thanks for taking

you you it grew mentioned were in some home with quite that that offset nicely. in design and wins able curious in when the just You weakness to you weakness saw and life, actually saw script

color you September, and Just whether kind September Home still within of Life to weakness on & that curious that consumer looked as grow? guide any can

John Hollister

affected that of fair the part seen have that. bit outs of but a we'll we over how the the it could say trends push the evolve yes, quarter, some the business And course is Blayne, grow. that more, of see business that possible Yes, to

Matt Johnson

John's applications. understand saying, to exceed demand dynamic, supply across that continues important meaningfully what that those and all Yes, add this it's I Matt. just is to to markets

the those ability the outs those gap demand want have that of that on continue to for is We which still factors as to schedule of lot in out supply, of seeing definitely see and some creates are close there. priority because challenges growing we gaps. our push to versus space. our volatility some to a way those to So, a things we hurting close happen. And some we customers find But

So, there for opportunity it's definitely growth.

Blayne Curtis

you. on just is increase mean, increase. but overall big sequential it I that follow on basis, And inventory, of Got in it not a up terms then, a the just, much is

that to product ship had that just you moving hoped given was and couldn't, pieces? these So, all

John Hollister

Yes, on essentially, times that's it our what our done in we're And right. and it's there speaks here, also really to at well, to work chain is but progress making four supply the -- more some not as mean, neighborhood. target we've inventory level three but our goal. I turns

So, turns we of turn our above remain couple inventory a target level.

Blayne Curtis

Thanks. you. Got

John Hollister

Sure.

Operator

I to will now Giovanni hand the call Pacelli. back

Giovanni Pacelli

call. for Sarah, you, joining you This and thank today's Thank concludes this morning. all

Operator

concluded. conference The attending has presentation. now for today's you Thank

may disconnect. You now

Silicon Laboratories (SLAB) 27 Jul 222022 Q2 Earnings call transcript