Silicon Laboratories Inc. Q3 FY2024 earnings call

• Silicon Labs delivered solid third quarter results with revenue and earnings exceeding guidance.
• Many customers' excess inventory levels have normalized but some still have destocking left. Bookings and distribution POS have modestly improved but demand recovery is gradual.
• Growth in near to midterm underpinned by design win ramps in secular growth areas like connected health, smart metering, etc.
• Works With developer conference was a success; AI is a growth catalyst for IoT devices.
• Shipping Series 2 devices with machine learning inference engines; Series 3 device sampling underway.
• First Wi-Fi 6 device 917 ramping at customers, strong customer engagement.
• Bluetooth is fastest growing technology by revenue and largest opportunity pipeline; focus on building matter infrastructure.

In the third quarter, industrial and commercial revenue was $96 million, up 10% sequentially but down 20% year-over-year, contributing approximately 57.8% to total revenue. Home & Life revenue was $70 million, up 22% sequentially but down 16% year-over-year, contributing approximately 42.2% to total revenue. Distribution inventory ended the quarter at 53 days, down 2 days from the prior quarter, and distribution made up approximately 72% of revenue mix for the quarter.

• Q4 revenue expected to be in range of $161 million to $171 million, flat quarter-on-quarter.
• GAAP gross margin expected to be in range of 54% to 55%, non-GAAP same.
• GAAP operating expenses expected to be in range of $118 million to $122 million, non-GAAP in range of $97 million to $99 million.
• GAAP loss per share expected to be in range of $0.75 to $1.05 loss, non-GAAP in range of $0.01 loss to $0.21 loss.

Q: Srini Pajjuri asked about bookings by end markets, specifically weakness in some.

A: More strength in Home & Life, less in industrial and commercial, especially industrial.

Q: Srini Pajjuri followed up on Edge AI and ASP uplift.

A: AI definitely lifts ASPs, as it requires more cores, compute, etc. for edge AI, leading to ASP increases and SAM expansion.

Q: Nick Doyle asked about distributor mix and CGM units.

A: Distributor mix expected to gradually return to historical 80% as POS grows; CGM end market represents hundreds of millions of units of opportunity.

Q: Cody Acree asked about in-consumption levels.

A: End customer excess inventory is getting closer to consumption but not complete; end market visibility is choppy; design win ramps are a growth driver.

Q: Peter Peng asked about design win ramp impact on revenue and margin.

A: Design win ramps will contribute to revenue but won't meaningfully change gross margin outlook; growth assumed from design win ramps in flat market environment