Release Date: November 04, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Silicon Laboratories Inc (SLAB, Financial) delivered solid third-quarter results with revenue and earnings exceeding the midpoint of their guidance.
- The company is seeing growth in design win ramps in secular growth areas such as connected health, smart metering, and commercial retail.
- The Works With developer conference was a success, hosting over 500 unique customers and ecosystem partners like Amazon, Google, Samsung, and NVIDIA.
- Silicon Laboratories Inc (SLAB) is making progress with its Series 2 and Series 3 platforms, which include advanced AI and machine learning capabilities.
- The company is ramping up its Wi-Fi 6 device, the 917, which offers significant battery life improvements and strong customer engagement.
Negative Points
- Revenue for the quarter was down 18% year over year due to excess inventory absorption across distributors and end customers.
- The industrial and commercial business saw a 20% year-over-year decline in revenue.
- The company is experiencing uneven bookings and a gradual demand recovery, with no significant channel restocking expected in the near term.
- Visibility remains limited due to shorter lead times and choppy end-market demand, particularly in industrial sectors.
- Silicon Laboratories Inc (SLAB) reported a GAAP operating loss of $30 million and a non-GAAP operating loss of $8 million for the quarter.
Q & A Highlights
Q: Matt, you mentioned bookings being somewhat uneven. Could you provide more details on which end markets are experiencing this, particularly regarding commercial and home and life sectors?
A: We have seen continued improvement overall, but not an acceleration to indicate we're past the current cycle. Home and life sectors show more strength, while industrial and commercial, particularly industrial, are weaker. This isn't surprising as industrial is later in the cycle, but we would like to see more strength there.
Q: With the rise of edge AI, how does this impact ASPs and what should we expect in the coming years?
A: AI functionality at the edge will lift ASPs as it requires more cores, compute, and silicon space. Our devices provide industry-leading inference at the edge for battery-powered applications, which increases ASPs and expands our served available market (SAM) by opening new applications and use cases.
Q: How are you thinking about the distributor mix overall, and can it return to 80% by early 2025?
A: We're not assuming a broad restocking into the channel. Our target channel days of inventory is 70-75, but we ended the quarter at 53. It will take several quarters to restock. As POS and customer confidence grow, distributors will gradually take more stock. Returning to 80% will take time and patience.
Q: Can you provide more details on the continuous glucose monitors (CGMs) market opportunity and your expectations for 2025?
A: We have multiple design wins at multiple end customers and expect these to ramp as we exit this year. The CGM market represents hundreds of millions of units of opportunity, and we are securing market share, expecting it to contribute significantly in 2025.
Q: Regarding design win ramps, how material could this be to revenue contribution for 2025 compared to 2024?
A: We assume a flat end consumption environment post-destocking, with growth driven by design win ramps. We see a path to solid growth based on these ramps, even in a flat market environment, but cannot provide more specific revenue contribution details at this time.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
