Silicon Laboratories, Inc. Q1 FY2024 earnings call

Key Points

• Solid first quarter results with revenue and EPS exceeding guidance; Q4 was seen as the trough, expecting revenue growth to accelerate from Q1 to Q2.
• Top customers reducing excess inventory, weekly bookings improving though still below desired levels; channel inventory low.
• Home & Life revenue up 51% sequentially driven by smart home rebound, particularly home security; Industrial & Commercial up 9% with broad industrial category increase.
• Well positioned in Home & Life markets with Matter-enabled ecosystems and Connected Health gaining traction; Series 2 platform xG26 unveiled, enhancing IoT performance.
• Amazon Sidewalk partnerships, Life business continuous glucose monitoring solutions expanding in APAC; industrial end markets using AI/ML for Edge integration.
• Leadership announcements: Dean Butler joining as CFO, Rob Conrad as SVP of Worldwide Operations, Radhika Chennakeshavula as CIO.

Silicon Labs reported first quarter revenue of $106 million. The Industrial & Commercial business unit ended at $65 million, which is 61.3% of the total revenue, up 9% sequentially. The Home & Life business unit was $41 million, 38.7% of total revenue, up 51% sequentially. On a unit basis, channel inventory decreased again, with distribution revenue mix at 66% for the first quarter, and channel inventory at 61 days, down almost 25% sequentially and 50% year-over-year.

Second Quarter Guidance

• Revenue expected in the range of $135 million to $145 million.
• Non-GAAP gross margin anticipated to be approximately 53%.
• Non-GAAP operating expenses expected to be approximately $102 million.
• Non-GAAP loss per share expected in the range of $0.58 to $0.70.
• GAAP gross margin expected to be 53%, GAAP operating expenses approximately $125 million, and GAAP loss per share between $1.45 to $1.61.

Q: Matthew Ramsay asked about customer-level inventories and visibility, and Series 3 sampling.

A: Robert Johnson said end customer inventory and channel distribution inventory are moving in the right direction, relationships with partners have strengthened, and Series 3 is being sampled to alpha customers but specific customers weren't shared.

Q: Gary Mobley asked about under-shipping end customer demand and design win lifetime value.

A: Robert Johnson said consumption was at least $160 million, revenue at $140 million isn't indicative of consumption, and pricing on a like-for-like basis was flat with good design win progress.

Q: Tore Svanberg asked about long-term growth and cyclicality.

A: Robert Johnson said commitment to 20% compound annual revenue growth remains, but there's still work to do with destocking, design wins ramping, and end market strength.

Q: Thomas O'Malley asked about business unit split, linearity, and gross margin normalization.

A: Giovanni Pacelli and Robert Johnson discussed the split between Industrial & Commercial and Home & Life, inventory peaks, and gross margin increasing as revenue rises with mix being a driver.

Q: Quinn Bolton asked about gross margin mix impact and second half drivers.

A: Robert Johnson said distribution margin is higher than direct, mix is a gross margin headwind, and second half growth depends on destocking, design wins ramping, and end market improvement.

Q: Srini Pajjuri asked about bookings breadth and ASPs.

A: Robert Johnson said bookings are broadly improving, Home & Life is further through the cycle than Industrial & Commercial, and Series 2 helps with differentiation and features.

Q: Cody Acree asked about operating expenses.

A: Robert Johnson said OpEx was reduced during revenue decline, will increase with revenue but at a lower rate, with one-time effects like merit cycles and bonus accruals driving Q1 to Q2 increase.

Q: Peter Puk asked about China recovery and design win impact.

A: Robert Johnson said China recovery isn't baked into the $160 million number, and design wins will ramp this year but no specific size or scope was provided.

Q: Joe Moore asked about competitor updates.

A: Robert Johnson said industry behavior is consistent, with one competitor being more aggressive, but no new updates were shared.