Q4 2023 Silicon Laboratories Inc Earnings Call

Operator: Thank you for standing by. My name is Jonathan, and I will be your conference operator today. Welcome to Silicon Labs' fourth quarter fiscal 2023 earnings call. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star one one on your telephone. If your question has been answered and you wish to remove yourself from the queue, simply press star one one again.

Thank you for standing by my name is Jonathan and I will be your conference operator today welcome to the Silicon Labs fourth quarter fiscal 2023 earnings call. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your telephone.

If your question has been answered and you wish to remove yourself from the queue simply press star one again.

Operator: As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Giovanni Pacelli, Silicon Labs senior director of finance. Giovanni, please go ahead.

Today's program is being recorded.

Now I'd like to introduce your host for today's program Giovanni Porcelli Silicon Labs' Senior director of Finance Giovanni. Please go ahead.

Giovanni Porcelli: Thank you Jonathan and good morning, everyone. We are recording this meeting and a replay will be available on the Investor Relations section of our website at Investor.

Giovanni Pacelli: Thank you, Jonathan. And good morning, everyone. We are recording this meeting, and a replay will be available for weeks on the investor relations section of our website at investor.scilabs.com. Our earnings press release and the accompanying financial tables are also available on our website. Joining me today are Silicon Labs President and Chief Executive Officer Matt Johnson and Interim Chief Financial Officer Mark Malden.

Giovanni Porcelli: <unk> Dot com are.

Giovanni Porcelli: Our earnings press release, and the company financial tables are also available on our website.

Speaker Change: Joining me today are Silicon labs, President and Chief Executive Officer, Matt Johnson, and interim Chief Financial Officer, Mark model. They will discuss our fourth quarter earnings performance and review recent business activities. We will take questions. After our prepared comments and our remarks. Today will include forward looking statements are subject to risks and uncertainty.

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

Speaker Change: We base. These forward looking statements on information available to US as of the date of this conference call and assume no obligation to update these statements in the future.

Speaker Change: We encourage you to review, our SEC filings, which identify important risk factors that could cause actual results to differ materially from those contained.

Speaker Change: Any forward looking statements.

Giovanni Pacelli: Additionally, during our call today, we will refer to certain non-GAAP financial information. A reconciliation of our non-GAAP results is included in the company's earnings press release and on the investor relations section of the Silicon Alliance website. I'll now turn the call over to Silicon Lab's Chief Executive Officer, Matt Johnson.

Speaker Change: Additionally, during our call today, we will refer to certain non-GAAP financial information.

Speaker Change: A reconciliation of our GAAP to non-GAAP results is included in the company's earnings press release and on the Investor Relations section of Silicon Labs' website.

Speaker Change: I'll now turn the call over to Silicon Labs', Chief Executive Officer, Matt Johnson.

Matt Johnson: Thanks, Giovanni. Good morning, everyone. The Silicon Labs team delivered fourth-quarter results above the midpoint of our guidance. During the quarter, we saw reductions in both channel and end customer inventory. We expect end-customer inventory and destocking to continue in Q1. On a unit basis, this inventory is now at a lower level than during the supply crisis. We believe Q4 2023 represents our low point of revenue.

Matt Johnson: Thanks, Giovanni and good morning, everyone.

Matt Johnson: Silicon labs team delivered fourth quarter results above the midpoint of our guidance during the quarter, we saw reductions in both channel and end customer inventory.

Matt Johnson: We expect end customer inventory destocking to continue in Q1 on.

Matt Johnson: On a unit basis. This inventory is now a lower level than during the <unk>.

Matt Johnson: <unk>.

Matt Johnson: We believe Q4 of 2023 represents a low point in revenue, we expect to return to sequential growth starting in Q1 as our customers inventories start to normalize we'll begin to see the early benefits of design wins ramping into production.

Matt Johnson: We expect to return to sequential growth starting in Q1 as our customers' inventories start to normalize and we begin to see the further benefits of designing new rampings for Dr. We've also seen slight improvements in our weekly booking activity, but land visibility continues to improve. We are encouraged by another year of outstanding design and achievement despite the challenges of the current operating environment. The projected lifetime revenue of our 2023 design wins is up low double digits year over year, in line with the ambitious targets we set. These design wins span a broad range of technologies, applications, and customers, and we are expected to deliver strong growth and earnings power as the market dynamics improve. Before we turn the call over to Mark, I would like to take a moment to express our gratitude to John Hollister, who has stepped down after 20 years of dedicated service to Silicon Labs, 10 of those years as CFO.

Matt Johnson: We've also seen slight improvements in our weekly bookings activity, but demand visibility continues to be low.

Matt Johnson: We are encouraged by another year of outstanding design win achievement. Despite the challenges of the current operating environment.

Matt Johnson: Good luck time revenue of our 2023 design wins was up low double digits year over year in line with the ambitious targets we set these.

Matt Johnson: These design wins spanned a broad range of technology applications and customers.

Matt Johnson: We are expected to deliver strong growth and earnings power of the market dynamics improve.

Speaker Change: Before I turn the call over to Mark I would like to take a moment to express our gratitude to John Hollister, who has stepped down after 40 years of dedicated service facilities and labs 10 of those years as CFO John financial stewardship has been instrumental to our success over the years and his insights and partnership have been invaluable on behalf of the entire team. Thank you John.

Matt Johnson: John's financial stewardship has been instrumental to our success over the years, and his insights and partnership have been invaluable. On behalf of the entire team, thank you, John, for your outstanding work and commitment, and we wish you the best as you join Global Power. In addition, I would like to thank Mark Malden for stepping in so effectively during this transition.

Mark Model: Our outstanding work and commitment and we wish you the best as he joined Globalfoundries.

Mark Model: In addition, I would like to thank mark more than for stepping in and so effectively during this transition.

Mark Malden: I can also share that the search for our new CFO is going well, and we're impressed by the caliber and potential fit of the candidates we're engaged with and are looking forward to concluding the search as quickly as possible. Now, I'll hand it over to Mark for the financial updates. Mark. Thanks, Matt. And good morning, everyone.

Mark Model: I can also share that the search for a new CFO is going well.

Mark Model: The caliber of potential fit of the candidates, we're engaged with and are looking forward to including the search as quickly as possible now I'll hand, it over to Mark for the financial update Mark.

Mark Model: Thanks, Matt and good morning, everyone fourth quarter revenue was $87 million above the midpoint of our guidance and down 66% year on year.

Mark Malden: Fourth quarter revenue was $87 million above the midpoint of our guidance and down 66% year on year. ASPs declined sequentially in the quarter, primarily due to product and customer mix; unit volume was also down on a sequential basis. Revenue was down year over year for both business units in the court. The industrial and commercial business unit ended at $60 million, down 62% from the same period last year and 51% to $0.25 million. All three product groups in IMT declined in the fourth quarter, with the broad industrial category experiencing the largest decline.

Mark Model: Asp's decline sequentially in the quarter, primarily due to product and customer mix.

Mark Model: Volume was also down on a sequential basis.

Mark Model: Revenue was down year over year for both business units in the quarter, the industrial and commercial business unit ended at $60 million down 62% from the same period last year and 51% sequentially.

Mark Model: All three product groups and IMT declined in the fourth quarter with a broad industrial category experiencing the largest decline.

Mark Model: However for the full year is smart city and commercial product group achieved record revenue levels, driven primarily by strength in electronic shelf labels and metering.

Mark Malden: However, for the full year, the Smart City and commercial product groups achieved record revenue levels, driven primarily by strength in electronic shelf labels and meters. However, weak demand and high customer inventories continue to negatively impact the home and life market. H&L revenue was down 73% year over year and 67% sequentially at $27 million.

Mark Model: Weak demand and high customer inventories continue to negatively impact our home and life market.

Mark Model: <unk> revenue was down 73% year over year, and 67% sequentially at $27 million.

Mark Model: Spike near term weakness, we are well positioned as demand recovers and inventories normalize with growth expected in smart home and particular strength in connected health.

Mark Malden: Despite the near-term weakness, we are well-positioned as demand recovers and inventories normalize, with growth expected in smart homes and particular strength in connected health. Furthermore, successful market initiatives are driving H&L design wins above our targets in terms of projected lifetime revenue. Distribution revenue was 63% for the fourth quarter, down sequentially, and well below our typical level; inventory in the channels decreased to 79 days. And on a unit basis, this inventory was down to its lowest level since the. The decrease in Disney mix in the quarter was due to a temporary shift toward direct customers as channel partners work through their inventory. This makeshifting also contributed to lower ASBs in the core.

Mark Model: Successful market initiatives are driving H&R design wins above our targets in terms of projected lifetime revenue.

Mark Model: Distribution revenue was 63% for the fourth quarter down sequentially and well below our typical levels.

Mark Model: Inventory in the channel decreased to 79 days and on a units basis <unk> inventory was down to its lowest level since the divestiture.

The decrease in this the mix in the quarter was due to a temporary shifts towards direct customers as channel partners worked through their inventory.

Mark Model: This mix shift also contributed to lower lower asps in the quarter.

Mark Model: Our top 10 end customers or about 42% of revenue for the quarter, an increase from historical trends driven by the lower revenue level and the mix shifts.

Mark Malden: Our top 10 in-customers accounted for about 42% of revenue for the quarter, an increase from historical trends driven by the lower revenue level and the mix. Non-Gap Gross Margin ended lower than expected at 51% due to product and customer value. We continue to see a generally stable pricing and input cost environment with no significant change expected on a life-for-life basis in the next. Non-GAAP operating expenses of $91 million were better than expected, largely due to earlier pull effects of the restructuring, which commenced in November. Non-GAAP operating loss was $47 million, and our non-GAAP effective tax rate was lower for the quarter at 14%.

Mark Model: non-GAAP gross margin ended lower than expected at 51% due to product and customer mix.

Mark Model: Continue to see a generally stable pricing and input cost environment with no significant changes expected on a like for like basis in the next quarter.

Mark Model: non-GAAP operating expenses of $91 million were better than expected.

Mark Model: Largely due to earlier for the effects of the restructuring which commenced in November.

Mark Model: non-GAAP operating loss was $47 million and our non-GAAP effective tax rate was lower for the quarter at 14%.

Mark Model: non-GAAP loss of $1 19.

Mark Model: Seeded our guidance driven largely by the Opex and tax rate favorability.

Mark Model: For the full year, our non-GAAP operating margin was 8% non.

Mark Malden: Non-GAAP loss of $1.19 exceeded our guidance, driven largely by the op-ex and tax rate favorability. For the full year, our non-gap operating margin was 8%, and non-gap earnings for the full year were $1.65. On a gap basis, gross margin ended at 51%. Gap operating expenses were $117 million, which was better than expected. Gap's operating loss was $73 million for the fourth quarter and $24 million for the full year.

Mark Model: non-GAAP earnings for the full year or $1 65.

Mark Model: On a GAAP basis gross margin ended at 51% GAAP.

Mark Model: GAAP operating expenses were $117 million, which was better than expected.

Mark Model: GAAP operating loss was $73 million for the fourth quarter and $24 million for the full year.

Mark Model: GAAP loss per share was $2 19 for the fourth quarter and $1 nine for the full year.

Mark Malden: Gap's loss per share was $2.19 for the fourth quarter and $1.09 for the full year. The GAAP results included an approximate $9 million charge for the separation cost. Associated with the Reduction in Workforce During the Fourth, Turning to the ballot sheet, we ended the year with cash and investment of $439 million. Our accounts receivable balance declined by $29 million, indicative of the lower revenue level. Our day fare about standing reverted back to 30 days, reflecting strong collections in a quarter and no known bad debts from our customers. We added $27 million in net inventory in the quarter to $194 million. We anticipate that our internal inventory will level off in Q1. Inventory turns ended at about one time.

Mark Model: The GAAP results include an approximate $9 million charge for the separation cost associated with the reduction in workforce during the fourth quarter.

Mark Model: Turning to the balance sheet.

Mark Model: Ended the year with cash and investments of $439 million.

Mark Model: Our accounts receivable balance declined in the quarter to $29 million indicative of the lower revenue levels are.

Mark Model: Our days sales outstanding reverting back to 30 days, reflecting strong collections in the quarter and no known bad debts from our customers.

Mark Model: We added $27 million and net inventory in the quarter, it's at $194 million.

Mark Model: We anticipate that our internal inventory will level off in Q1.

Mark Model: Inventory turns ended at about one time.

Mark Model: As a reminder, we hold a significant portion of our inventory and die bank, which provides flexibility as to its ultimate end use application and customers and helps to mitigate inventory obsolescence risk.

Mark Model: We continue to have $45 million outstanding on our revolving credit facility or.

Mark Malden: As a reminder, we hold a significant portion of our inventory in Dibank, which provides flexibility as to its ultimate end-use application in customers and helps to mitigate inventory obsolescence. Additionally, we continue to have $45 million upstanding on our revolving credit facility. Our board of directors has authorized a new share repurchase program in 2024 for $100 million. We will continue to be very opportunistic on share repurchases as we manage liquidity and optimize the use of working capital. Overall, the balance sheet remains very healthy and well-positioned to execute our strategy and weather the current market environment. However, as we announced last week, we identified a material weakness in our internal controls related to the operation and documentation of certain inventory controls. There is no impact on any amounts reported in our current or historical financial statements.

Mark Model: Our board of directors has authorized a new share repurchase program in 2024 or $100 million.

Mark Model: We will continue to be very opportunistic on share repurchases as we manage liquidity and optimize the use of working capital.

Mark Model: Overall, the balance sheet remains very healthy and well positioned to execute our strategy and whether the current market environment.

Mark Model: As we announced last week.

Mark Model: Unified a material weakness in our internal controls related to the operation and documentation of certain inventory controls.

Mark Model: There was no impact to any amounts reported in our current or historical financial statements.

Mark Model: We are in the process of developing a plan to enhance that.

Mark Model: And operating effectiveness of our internal controls to address the material weakness and still expect to file our Form 10-K in a timely manner.

Mark Model: Before returning the call the math I will cover guidance for the first quarter.

Mark Model: We expect revenue for the first quarter to be in the range of $100 million to $110 million, we anticipate both business units to grow in the quarter.

Mark Model: We expect non-GAAP gross margin in the first quarter to be approximately 52%.

Mark Malden: We are in the process of developing a plan to enhance the design and operating effectiveness of our internal patrols to address the material weakness and still expect to file our Form 10-K in a timely manner. Before returning to the map, I will cover guidance for the first quarter. We expect revenue for the first quarter to be in the range of $100 to $110 million.

Mark Model: The lower gross margin for this quarter continues to reflect the fixed cost absorption with lower revenue levels.

Mark Model: We expect non-GAAP operating expenses in the first quarter to be approximately $96 million.

Mark Model: We expect our non-GAAP effective tax rate to be approximately 20% in the first quarter.

Mark Model: Our non-GAAP loss per share from Q1 is expected to be in the range of 92.

To $1 <unk>.

Mark Model: On a GAAP basis, we expect gross margin to be 52%, we expect GAAP operating expenses to be approximately $118 million.

Mark Malden: We anticipate both business units to grow and form. We expect non-GAAP gross margin in the first quarter to be approximately 52%. The lower gross margin for this quarter continues to reflect the fixed-cost absorption over lower revenue levels. We expect non-GAAP operating expenses in the first quarter to be approximately $96 million. We expect the non-GAAP affected tax rate to be approximately 20% in effect.

Mark Model: We expect GAAP loss per share to be between $1 89 and.

Mark Model: And $2 <unk> per share.

Mark Model: I'll now turn the call back over to Matt.

Matt Johnson: Thanks Mark.

Matt Johnson: Looking ahead in 2024, we are excited about several tens of wireless connectivity, including more matter of certified products coming to market as well as strong growth in our life smart cities and commercial segments.

Matt Johnson: Q4, the CSA released matter wound up to which extent the benefits of matter to a wider array of devices, including household appliances air conditioning and smoke alarms.

Matt Johnson: Our non-GAAP loss per share for Q1 is expected to be in the range of $0.92 to $1.04. On a GAAP basis, we expect gross margin to be 52%, we expect GAAP operating expenses to be approximately $118 million, and we expect the gap loss per share to be between $1.89 and $2.05 per share. I will now turn the call back over to Matt. Thanks, Mark. Looking ahead in 2024, we're excited about several trends in wireless connectivity, including more MATTER-certified products coming to market, as well as strong growth in our light, smart cities, and commercial segments. In Q4, the CSA released MATTER 1.2, which extends the benefits of MATTER to a wide array of devices, including household appliances, air conditioning, and smoke alarms.

Matt Johnson: At CES. This year, we're encouraged by the strong level of engagement with customers ecosystem partners and Isps regarding the mater protocol.

Matt Johnson: It is clear that interest in a matter of the availability of matter enabled devices has accelerated.

Matt Johnson: As part of this we announced our collaboration with our cleaner to make minor protocol and advanced Iot developed more accessible to all.

Matt Johnson: We're partnering to integrate good windows first ever matter software libraries with Silicon labs hardware, so developers get our leading security energy efficiency and processing power for matter in an intuitive easy to use development environment.

Matt Johnson: Additionally, Samsung recently announced matter enabled connectivity and smart Tvs and selected appliances that includes our silicon and are currently hitting the market. We're excited to work with Samsung on their smartphone platform as they expand their matter enabled ecosystem.

Matt Johnson: Wildfire is playing an increasingly important role in Iot devices, including in conjunction with matter in Q4, we expanded our portfolio of industry, leading series two based products with a soft launch of our ultra low power Wi Fi solution. The nine months up which was selected as a non REIT and the embedded category at the CES Innovation Awards.

Matt Johnson: At CES this year, we were encouraged by the strong level of engagement with customers, ecosystem partners, and ISPs regarding the MATA protocol. It's clear that interest in matter and the availability of matter-enabled devices are accelerating. As part of this, we announced our collaboration with Arduino to make MATTER protocol and advanced IoT development more accessible to all. We are partnering to integrate Arduino's first-ever MATTER software libraries with Silicon Labs hardware so developers get our leading security, energy efficiency, and processing power for MATTER in an intuitive, easy-to-use development environment.

Matt Johnson: The 907 has the lowest power consumption of any competing Wifi six products on the market, enabling meaningfully longer battery life, a whole new class of applications.

Matt Johnson: We believe this will continue to drive new opportunities and design wins as customers look to integrate Wi fi into their products.

Matt Johnson: In our life segment, we are securing new wins and connected health in APAC, where we are engaged with more than a dozen customers for continuous glucose monitor the demand for connected health devices is growing rapidly driven by demographics and an increase in chronic illnesses and diseases like diabetes.

Matt Johnson: And we are confident that our solutions will continue to gain traction and serve this market well.

Matt Johnson: In 2023, we achieved record revenue in our commercial product group as retail environment continues to digitize for example, and electronic shelf labeling we ramped new designs with SCS of artifact now fusion group. In addition, we have also secured new design wins in the ESL space for shelf labels.

Matt Johnson: <unk> and sensors with our Bluetooth solutions.

Matt Johnson: The smart cities product group also had a record year driven largely by neither.

Matt Johnson: Additionally, Samsung recently announced matter-enabled connectivity in its smart TVs and selected appliances that include our silicon and are currently hitting the market. We're excited to work with Samsung on their SmartThings platform as they expand their matter-enabled ecosystem. Wi-Fi is playing an increasingly important role in IoT devices, including in conjunction with matter. In Q4, we expanded our portfolio of industry-leading Series 2-based products with the soft launch of our ultra-low-power Wi-Fi solution, the 917, which was selected as an honoree in the embedded category of the CES Innovation Award. The 917 has the lowest power consumption of any competing Wi-Fi 6 product on the market, enabling meaningfully longer battery life for a whole new class of applications.

Matt Johnson: However, we're also gaining share in the solar market with integrated solutions for both wireless connectivity and compute and solar panels, which helped to optimize energy production increased biopsy.

Matt Johnson: 2023 was a difficult year characterized by weak demand and high inventory levels, while we're seeing things moving in the right direction. The market is still working through a correction.

Matt Johnson: As we've stated we believe Q4 represents our Bob and we expect to return to sequential growth starting in Q1.

Matt Johnson: In closing I want to thank the silicon lab team for their execution in securing significant design wins and gaining share.

Matt Johnson: Currently managing our expenses and advancing industry, leading technology solutions for the Iot.

Matt Johnson: Despite the near term challenges the long term growth trajectory of our end markets and our strong position within those markets remains unchanged.

Matt Johnson: As inventory normalizes demand improves and design wins ramp into production, we are well positioned to return to growth.

Matt Johnson: I'll now hand, it back over to Giovanni for Q&A.

Giovanni Porcelli: Thank you Matt.

Giovanni Porcelli: Before we open the call for Q&A I'd like to announce our participation and Morgan Stanley's 'twenty 'twenty four TMT conference in San Francisco on March.

We will now open the call for questions to accommodate as many people as possible before market open and I ask that you limit yourself to one question and one follow up.

Matt Johnson: We believe this will continue to drive new opportunities and design wins as customers look to integrate Wi-Fi into their products. In our life segment, we are securing new wins in connected health in APAC, where we are engaged with more than a dozen customers for continuous glucose monitoring. The demand for connected health devices is growing rapidly, driven by demographics and an increase in chronic illnesses or diseases like diabetes.

Giovanni Porcelli: Jonathan.

Speaker Change: Certainly one moment for our first question.

Speaker Change: And our first question comes from the line of Matt Ramsay from Cowen Your question. Please.

Matthew D. Ramsay: Thank you very much good morning, guys.

Matthew D. Ramsay: I guess for my first question and I think during the quarter, we talked a number of times about some of these dynamics, but I wanted to get an update on the inventory situation.

Matthew D. Ramsay: We see all of the statistics you guys publish on your own inventory channel inventory in.

Matt Johnson: And we are confident that our solutions will continue to gain traction and serve this market well. In 2023, we achieved record revenue in our commercial product group as the retail environment continues to digitize. For example, in Electronic Shelf Labeling, we ranked new designs with SDS and Architect, now Fusion Group. In addition, we have also secured new design wins in the ESL space for shelf labels, cameras, and sensors with our Bluetooth solution. The Smart Cities product group also had a record year, driven largely by meters.

Matthew D. Ramsay: Matt we take some of your comments on customer inventory, but I imagine that an average of products where you have.

Matthew D. Ramsay: Tons of inventory of some products in certain end markets, and perhaps or even still having escalations or other products that are then its a pretty diverse set. So if you could maybe spend a little bit of time talking about areas, where you feel like you've cleaned everything up and we're sort of back to normal lead times are normal inventories. If you have that visibility and are there particular areas.

Matthew D. Ramsay: Where are you having.

Matthew D. Ramsay: Just give a little bit more detail, maybe not average metrics, but some specifics by by end market.

Matt Johnson: However, we're also gaining share in the solar market with integrated solutions for both wireless connectivity and compute and solar panels, which helps to optimize energy production and increase fire safety. 2023 was a difficult year, characterized by weak demand and high inventory levels. While we're seeing things moving in the right direction, the market is still working towards correction. As we have stated, we believe Q4 represents our bottom, and we expect to return to sequential growth starting in Q1. In closing, I want to thank the Silicon Lab team for their execution in securing significant design wins and gaming shares, prudently managing our expenses, and advancing industry-leading technology solutions for the IoT.

Speaker Change: Sure. Good morning, Matt understands I think let's see I'm going to start working through internal inventory, obviously well understood.

Speaker Change: By design.

Speaker Change: The building value inventory.

Speaker Change: The ramp on the other side of this market environment. We're in as Mark said, we kind of expect that to be peaking now and we feel good about where that that is a ton of flexibility given that we carry it in die bank and we can configure it as an EBIT.

Speaker Change: Next piece of inventory channel also well understood.

Speaker Change: We saw our days go down as we mentioned, what's remarkable about that as the revenue level, but that occurred at <unk>.

Speaker Change: Going from around 200 in Q3 to $87 million in Q4.

Speaker Change: Actual material in the channel came down significantly as we commented that the lower than it was in the supply chain prices. So you can see the clear trend and pattern there as the industry tries to.

Giovanni Pacelli: Despite the near-term challenges, the long-term growth trajectory of our end markets and our strong position within those markets remains unchanged. As inventory normalizes, demand improves, and design becomes rampant in production, we are well positioned to return to growth. I'll now hand it back over to Giovanni for Q&A. Thank you, Matt.

Speaker Change: And ourselves work down those inventories the real trick is customer edge with Florida and customer inventory, which is the most difficult because.

Speaker Change: As you pointed out you can't yet.

Speaker Change: A report that gives you that with precision.

Speaker Change: And given the <unk>.

<unk> technologies applications and just the sheer number of customers we have it's much more difficult to get.

Operator: Before we open the call for Q&A, I'd like to announce our participation in Morgan Stanley's 2024 TNT Conference in San Francisco on March 5. We'll now open the call for questions. To accommodate as many people as possible before the market opens, I ask that you limit your time to one question and one follow-up. Jonathan.

Speaker Change: An exact number on that like we can with the other inventories already mentioned so easy way to say if you compare to this time last quarter. What we do is we sample our customer last quarter Rose 40 to 50, we've expanded that and what we see and believe is that's coming down.

Speaker Change:

Speaker Change: Happy to see that.

Speaker Change: Im not going to imply precision that doesn't exist, we see it coming down.

Speaker Change: And that's the average across all the customers and even the count of customers with more inventory than they should is coming down as well. So thats occurred we expect that trend to continue through Q1.

Operator: Certainly, one moment for our first question, and our first question comes from the line of Matt Ramsay from TD Cowan. Your question, please. Thank you very much.

Speaker Change: And it also speaks to as we've been saying are for lack of better term is consumption of our products is obviously higher than our revenue levels would imply as we're working down those channel and end customer inventories. So hopefully that's helpful and not going to put specific numbers out there that apply precision that doesn't.

Matthew D. Ramsay: Good morning, guys. I guess for my first question... During the quarter, we talked a number of times about some of these dynamics, but I wanted to get an update on the inventory situation. See you all there, you guys publish on your own inventory channel in. Matt, we take some of your comments on. I imagine that's an average for products where you have tons of inventory of some products in certain end markets, and perhaps you're even still having escalations on other products. Code Red Defense, Word.

Speaker Change: But we definitely see it moving in the right direction, which is encouraging.

Speaker Change: No Bob.

Bob: Thanks, Matt.

Speaker Change: That context, that's helping.

Speaker Change: I realize that we're going through a transitory period, but I.

Speaker Change: I guess as my second question I wanted to ask.

Speaker Change: A little bit about.

Gross margin, there's a lot of pieces moving around.

Speaker Change: And I've got a few investor questions. This morning so.

Speaker Change: First question is just to confirm I didn't see it in any of the releases and you guys had mentioned it. So I think this is true, but just to confirm that there weren't any kind of.

Matt Johnson: Documents. Defense. If you could maybe spend a little bit of time talking about areas where you feel like, We cleaned everything up, and we're sort of back, http://TheBusinessProfessor.com where you have it, and just give a little bit more detail, maybe not just average, by. Sure. Good morning, Matt.

Speaker Change: Listen inventory write downs.

Speaker Change: And I guess the second question is any kind of rule of thumb.

Speaker Change: Of how gross margin might trend as we come out of it like revenue levels, where we can get back within the long term range.

Speaker Change: I imagine that has a mix component between the two segments as well, but if you could give us any kind of.

Matt Johnson: I understand, I think. Let's see. I'm going to start just working through the internal inventory. Obviously, well understood. By design, we're building dye inventory for the ramp on the other side of this market environment we're in. As Mark said, we kind of expect that to be peaking now, and we feel good about where that's at. There's a ton of flexibility, given that we carry it in dye banks, and we can configure it as we need it.

Speaker Change: Guidance. There you mentioned in the prepared comments there was a little bit of movement on pricing. So I was curious about that as well, but anything on margins would be helpful. Thanks, Yes sure.

Speaker Change: I'll work from the.

Speaker Change: Details and then up to the bigger picture answer that so Q4 first thing is the what I call. The low level of gross margin from the beginning either of the guide.

Speaker Change: Really driven by that.

Speaker Change: Black Knight, our term fixed cost absorption at that low revenue level.

Speaker Change: But it still came in lower than expected and the reason for that was really around the mix.

Speaker Change: At $87 million of revenue, which isn't indicative of our consumption or a normal operating level.

Matt Johnson: Next piece of the inventory channel, also well understood. You know, we saw our days go down, as we mentioned. What's remarkable about that is the revenue level that occurred at.

Speaker Change: The customers come in lumpy right and that resulted in unfavorable mix.

Speaker Change: Where we're at we do not expect that to be.

Matt Johnson: You know, going from around 200 in Q3 to 87 million in Q4, the actual material in the channel came down significantly. As we commented, it's actually, you know, lower than it was during the supply chain crisis. So, you know, you can see the clear trend and pattern there. The industry tries to, you know, and us, work down those inventories. The real trick is customer inventory, or end customer inventory, which is the most difficult because, you know, as you pointed out, you can't get, you know, a report that gives you that with precision.

Speaker Change: Our per risk trend.

Speaker Change: But we should be clear in Q1 will still have those challenges of lower the subsidy revenue level.

Speaker Change: Lower revenue that we walk to absorb all those fixed costs. So we still see gross margin challenge in Q1, although improving slightly.

Speaker Change: To answer your Big picture question.

Speaker Change: That's critical.

Speaker Change: I don't know that we shouldnt be looking at our gross margin in the peak or the trough of the cycles as indicative of the longer term trend.

Speaker Change: Factor in the peak of the supply chain prices, we were over 60 by a meaningful amount and there was the expectation that will be our new normal we said no.

Speaker Change: That was a transitory environment, that's proven out right now we believe we're in a trough and that also transitory. We don't believe that that's indicative of our.

Matt Johnson: And given the geography, technologies, applications, and just the sheer number of customers we have, it's much more difficult to get, you know, an exact number on that, like we can with the other inventories I already mentioned. So, you know, easy way to say, if you compare it to this time last quarter, what we do is we sample our top customers. Last quarter, it was, you know, 40 to 50.

Speaker Change: Long term gross margins our commitment to our gross margin model.

Speaker Change: We've said all along has not changed is unwavering and we see a continued path to delivering that and we just have to get through this correction cycle and that's what we expect to see so hopefully that answers your question Matt.

Matt Johnson: We've expanded that, and what we see and believe is that it's coming down, and we're happy to see that. And, you know, I'm not going to imply precision that doesn't exist. We see it coming down, you know, and that's the average across all the customers, and even the count of customers with more inventory than they should is coming down as well. So, that's encouraging. We expect that trend to continue through Q1, and it also speaks to, as we've been saying, our, for lack of a better term, end consumption of our product is obviously higher than our revenue levels would imply as we're working down those, you know, channel and end customer inventories. So, hopefully that's helpful, and I'm not going to put specific numbers out there that imply precision that doesn't exist, but we definitely see it Thanks Matt, that context does help. Thank you for watching. We'll see you next time. Transcription by CastingWords. But I guess as my second question, I wanted to ask a little bit about margin.

Matt: Thank you very much.

Speaker Change: All the best as you guys managed through then take care.

Speaker Change: Sure.

Speaker Change: Thank you one moment for our next question.

Speaker Change: And our next question comes from the line of Thomas O'malley from Barclays. Your question. Please.

Jeff Thomas: Good morning, guys and thanks for taking my question I just wanted to first check out.

Jeff Thomas: In the March quarter could you give us some color as to which of your segments, you're expecting to grow more into the March quarter, just to get to your guidance of 105 and then also.

Jeff Thomas: You mentioned in the fourth quarter that units Asps user bolt down as expected with the reset but can you talk about what youre seeing kind of through the quarter as such.

Thus far from a pricing perspective, and just how that's playing into the March guidance.

Speaker Change: Sure. Thomas this is not so quick answer on the segments Q1, I would expect.

Speaker Change: Both of our segments to grow in Q1.

Speaker Change: Big picture.

Speaker Change: It's really tough to call this market environment, but we ultimately believe that home and life is probably further through a cycle that in industrial and commercial.

Speaker Change: So if I were to buy it I would expect more of there, but we're not calling specific numbers in our guidance.

Matthew D. Ramsay: A lot of pieces moving around, and I've got a few investor questions. First question is just to confirm that I didn't see it in any of the releases, and you guys didn't mention it, so I'm sure that there weren't. That's an inventory write-down. And I guess the second question is: Any kind of rule of thumb of how gross margin might trend as we come out of this, like revenue level. Bye.

Speaker Change: In terms of the pricing environment overall.

Speaker Change: No big changes, so what we've been saying and experiencing CA is price debate.

Speaker Change: Very much in line is indicative of this type of environment.

Speaker Change: No surprises there it is worth commenting there is one competitor out there who has done things that I would say are not indicative of our typical of this environment.

Matt Johnson: I imagine it has a mixed component, segments as well. Guidance there you mentioned in the prepared comments. Price. The Bulletproof Executive 2013, Yeah, sure. I'll work from the detail and then up to the bigger picture to answer that. So Q4, the first thing is, you know, what I call the low-level gross margin from the beginning, even as a guide, is really driven by, you know, that, for lack of a better term, fixed cost absorption at that low revenue level. But it still came in lower than expected, and the reason for that was really in the mix.

Speaker Change: And what I mean by that is upsetting lower price points and trying to fill fab the justify capacity, but for us that competitor doesn't overlap a lot with our portfolio so not significant but.

Speaker Change: It would be incorrect to say that everything is normal I don't call that one out but aside from that same very expected behavior.

Speaker Change: People trying to drum up business trying to drive.

Speaker Change: Fill their capacity to get demand back up and running but.

Speaker Change: We're just telling us about the problem is it pricing problems inventory in the market cycle that we're going through and.

Speaker Change: No big changes in our outlook or expectations based on what we've seen so far.

Speaker Change: Super Helpful. And then I just wanted to follow up obviously.

Matt Johnson: At $87 million in revenue, which is indicative of, you know, our consumption or a normal operating level, the customers come in wealthy, right? And that resulted in an unfavorable mix that got us to where we are. We do not expect that to be, you know, a permanent trend. So, but we should be clear, in Q1, we'll still have those challenges of, you know, lower than consumption revenue levels and lower revenue than we want to absorb all those fixed costs. So we still see gross margin challenges in Q1, although improving slightly. You know, to answer your big picture question, I think that's critical. And, you know, we all know this; we shouldn't be looking at our gross margin at the peak or the drop of these cycles as indicative of the longer-term trend. You know, back during the peak of the supply chain crisis, we were, you know, over 60 by a meaningful amount. And there was an expectation that this could be our new normal. And we said, no, we expect that was a transitory environment. And that's proven to be true.

Speaker Change: You moved to report here due to inventory controls issue it looks like youre, not really seeing any impact of that in the quarter.

Speaker Change: A couple of things one could you could you maybe give us a little bit more color as to what's going on there. If you can and two you mentioned that most of the inventory that you are carrying right now is die bank could.

Speaker Change: Could you maybe give us the split of how much of that inventory is debate because I would assume that if you were looking at inventory control there'll be more products. So I would assume a smaller portion of your overall inventory any color there would be helpful. Thank you.

Speaker Change: Sure. This is mark for the controls issue.

Mark Model: Late in January which has identified some areas within our inventory accounting process.

Mark Model: That needed some improvement there we are working to develop that plan to address address it going forward.

Mark Model: The way.

Mark Model: These things work generally speaking, we're going to have to have the.

Mark Model: The new controls and process and shown as effective.

Mark Model: It makes for more than one quarter. So we will have that open out out there.

Mark Model: Through the first quarter.

Mark Model: But in general it just had to do with having more documentation.

Mark Model: Reviews over some of the assumptions that go into it the judgmental aspect of the inventory valuation.

Speaker Change: Thank you very much guys I appreciate it.

Speaker Change: Yes.

Matt Johnson: Right now, we believe we're in our trough, and that's also transitory. We don't believe that that's indicative of our long-term gross margin. Our commitment to our gross margin model, which we've said all along has not changed, is unwavering. And we see a continued path to delivering that, and we just have to get through this correction cycle. And that's what we expect to see. So hopefully, that answers your question. Thank you very much. All the best to you guys. Take care.

Yes.

Speaker Change: Comment.

Speaker Change: Meaningful majority of our inventory is in die bank because.

Speaker Change: Sure.

Speaker Change: People out there just importantly understand while we have a remarkable diversity in our end customers and applications.

Speaker Change: We tried to do is not have that same diversity in silicon and silicon will have ssds that address as much market as possible and they can be tailored customized configured in silicon to address for lack of better term different part numbers of skus and applications of customer needs and on top of that.

Operator: One moment for our next question. And our next question comes from the line of Thomas O'Malley from Barclays. Your question, please? Good morning, guys, and thanks for taking my question. I just wanted to first check in on the March quarter.

Silicon I'm, sorry software flexibility that is substantial as well so it's really an advantage for us to carry a diabetic it gives us the maximum flexibility to respond and to manage inventory responsibly by taking that approach. So quick answer is that's where most of us.

Thank you. Our next question comes from the line of Torrey Swanberg from Stifel. Your question. Please.

Thomas O'malley: Could you give us some color as to which of your segments you're expecting to grow more in the March quarter just to get to your guidance of 105? And then also, you mentioned in the fourth quarter that units and ASPs are both down, as expected, with the reset, but can you talk about what you're seeing kind of through the quarter thus far from a pricing perspective and just how that's playing into March? Sure, Thomas. This is Matt.

Tore Egil Svanberg: Yes. Thank you.

Tore Egil Svanberg: First question is on the home and life business.

So Matt I know this is a difficult.

Tore Egil Svanberg: Question to answer, but I'll ask it anyway. So I think it peaked at a run rate of half a billion now their run rate is $100 million.

Tore Egil Svanberg: So quite stunning and I'm just wondering if you could unpack a little bit.

Tore Egil Svanberg: As you had that has $1 billion peak.

Matt Johnson: So, quick answer on segments. Q1: I would expect both of our end segments to grow in Q1. The big picture, you know, it's really tough to call in this market environment, but we ultimately believe that, you know, home and life is probably further through its cycle than industrial and commercial. So, if I were to buy it, I would expect more there, but we're not calling specific numbers in our guidelines.

Tore Egil Svanberg: What was cyclicality and what was more secular businesses and if you look at the mix today.

Tore Egil Svanberg: That $27 million, how much of that is quote unquote more secular business, where it's a cyclical business I know again, it's difficult, but if you could unpack some of that that'd be great and I assume youre not going to give us a true consumption number of that business, but any more color you could add would be really helpful.

Matt Johnson: In terms of the pricing environment overall, no big changes, you know, so what we've been saying and experiencing is, you know, price and behavior that is very much, you know, in line and indicative of this type of environment. No surprises there. It is worth commenting that there is one competitor out there who has done, you know, things that I would say are not indicative or typical of this environment. You know, and what I mean by that is, you know, setting lower price points and, you know, trying to fill fabs and justify capacity. But for us, that competitor doesn't overlap a lot with our portfolio, so it's not significant, but it would be incorrect to say that, you know, everything is normal if I didn't call that one out. But aside from that, we're seeing very expected behavior, you know, people trying to drum up business, trying to drive, you know, fill their capacity and get demand back up and running. But, you know, if we're just honest about it, the problem isn't price.

Speaker Change: Sure, Yes that is.

Speaker Change: It's not easy to answer, but I'll do my best to provide some perspective and context.

Speaker Change: Hopefully be helpful. So.

Speaker Change: Just go all the way up to the top Big picture, we haven't provided that.

Speaker Change: And exact consumption.

Speaker Change: Number for the company or for the segments, but it can be helpful to remember that we do.

Speaker Change: Did do some meaningful opex actions in Q4 of last year, and obviously those were with that consumption level of mine and whatever you do there for cuts you want your breakeven point to be below that consumption levels. So thats important conceptually.

Speaker Change: As a way to help think about it.

Speaker Change: Going into <unk>.

Speaker Change: It's been what four or five quarters now of declines that we've seen in that business, we do see.

Speaker Change: What I call cautiously optimistic signs that.

Speaker Change: We're seeing some improvement in bookings seeing some not push outs anymore, it's more pull ins.

Speaker Change: But visibility remains low because people aren't even ordering within lead time for ordering a much much shorter basis as they need I think they are still working through their inventory they've been rattled.

Speaker Change: They are uncertain. So I do believe we're much further through that cycle correction, and we're seeing encouraging signs, but not at the level to say we're on the other side of this yet or we're out of the woods.

Thomas O'malley: The problem is inventory and, you know, the market cycle that we're going through. And, you know, no big changes in our outlook or expectations based on what we're seeing. And then I just wanted to follow up, obviously, you know, you moved the report here due to an inventory controls issue. It looks like you're not really seeing any impact of that in the quarter. A couple of things. One, could you maybe give us a little bit more color as to what's going on there, if you can?

Speaker Change: To be clear that being said, yes, we went through a remarkable journey Greg from <unk>.

Speaker Change: Demand.

Speaker Change: I think there was a shift from.

Speaker Change: Third the goods in the back of the services demand Spike people want it.

Speaker Change: Expected demand levels would be continuing in perpetuity people built inventory and then theres a whole bunch of trends over there.

Speaker Change: Or difficult to pull out or tease out ourselves how much is contributing to each but do you have the end market strength you have the secular positions that are very important.

Thomas O'malley: And two, you mentioned that, you know, most of the inventory that you're carrying right now is Dibank. Could you maybe give us the split of how much of that inventory is Dibank? Because I would assume that if you were looking at inventory controls, it would be more for products. So I would assume a smaller portion of your overall inventory. Any color there would be helpful.

Speaker Change: Matter of starting to show a lot of strength in there.

Speaker Change: Our prepared remarks, and then we talked about life a few times that life has been durable throughout this because of that secular strength, but at the same time.

Speaker Change: The design win momentum, we started sharing with the world on that.

Mark Malden: Sure. This is Mark from the controls issue. Late in January, we just identified some areas within our inventory accounting process that needed some improvement. We are working to develop a plan to address it going forward. The way these things work, generally speaking, we're going to have to have the new controls in the process and show them that it's effective. It leaks for more than one quarter, so we'll have that item open out there, at least through the first quarter.

Speaker Change: Is really just in its early stages and that will be impactful as well. So I'd say, it's shown resilience because throughout this because of those ramps that are starting but the real growth there in real impact is yet to come so and the last piece is the whole piece.

Speaker Change: As an end market, we continue to see solid progress in opportunity there, whether it's trends such as matter such as Amazon sidewalk, such as just the market finding its footing on the other side of this downturn.

Mark Malden: But in general, it just had to do with having more documentation and reviews of some of the assumptions that go into the judgmental aspects of the inventory guidelines. Thank you very much, guys; I appreciate it. People out there just need to understand that while we have a remarkable diversity in our end customers and end applications, what we try to do is not have that same diversity in silicon. So in silicon, we'll have SOCs that address as many markets as possible, and they can be, you know, tailored, customized, configured in silicon to address, for lack of a better term, different part numbers and SKUs and applications that the customer needs.

Speaker Change: I am trying to convey our confidence in that segment from a growth perspective.

Speaker Change: <unk> remains very strong.

Speaker Change: And our confidence in our position there also remains very strong as we bring in.

Speaker Change: Really great momentum around Bluetooth, where we're clearly gaining share and we're going to do the same thing with Wi Fi and that will help not only further stabilize the hole for us, but actually grow the whole moving forward. So.

Speaker Change: I know thats, a lot to worry, but overall some of the moving pieces in there and.

Speaker Change: <unk> is our confidence in this space is continues to be strong we know, we're gaining share and we see opportunity.

Speaker Change: To grow through some of those trends like I mentioned for matter Bluetooth grow quantified growth.

Speaker Change: Paul.

Speaker Change: No that's really helpful. I appreciate that Matt.

Speaker Change: As my follow up.

Mark Malden: And on top of that, there's a delicate, I'm sorry, software flexibility that is substantial as well. So it's really, you know, an advantage for us to carry in Dibank. It gives us the maximum flexibility to respond and to manage inventory responsibly by taking that approach. So the quick answer is, that's where most of it is headed. Thank you.

Speaker Change: So I know obviously.

Matt: Theres, a cyclical balance coming here, that's pretty obvious, but I know on on top of that you also have a lot of new design wins, you have some new secular business that are ramping and talk about some of the glucose metering smart metering.

Matt: Self labeling and then you've got Wi Fi so.

Speaker Change: I guess the real question that I have here.

Operator: Our next question comes from the line of Tore Svanberg from Stifel. Your question, please. Yes, thank you. The first question is about home and life.

Speaker Change: If you look at some of those newer businesses.

Speaker Change: Any any update there.

Speaker Change: Can you just be really material to revenues for calendar 'twenty four.

Tore Egil Svanberg: So Matt, I know this is a difficult question to answer, but I'll ask it anyway. So I think that it peaked at a run rate of half a billion. You know, now the run rate is a hundred million. So it's quite stunning.

Speaker Change: Especially in light of perhaps some of the most cyclical business at such a low level.

Speaker Change: Yes understood.

Speaker Change: Quick answer is yes.

Speaker Change: It is our.

Speaker Change: Expectation that.

Matt Johnson: And I'm just wondering if you could unpack a little bit, you know, as you had that half a billion dollar peak, what was cyclicality and what was more secular businesses? And if you look at the mix today, that $27 million, how much of that is, quote unquote, more secular business versus cyclical business? I know, again, it's difficult, but if you can unpack some of that, that'd be great.

Speaker Change: We have been unwavering in our view that we're going through.

Speaker Change: Particularly vicious market cycle.

Speaker Change: That has impacted demand.

Speaker Change: Inventory destocking that substantial.

Speaker Change: And we're trying to be clear, we're not calling the market bottom here, we're not out of the woods yet clearly these cycles have worked fully through but we are calling our bonds and the reason we're comfortable doing that is we're not calling the rate necessarily but we do see the confluence of all those things that the inventory destocking.

Matt Johnson: And I assume you're not going to give us a true consumption number for that business, but any more color you could add would be really helpful. Yeah, sure. Sorry.

Speaker Change: Only in the right direction.

Speaker Change: We do see our position in the market is strong and.

Speaker Change: Those designs are starting to ramp.

Matt Johnson: Yeah, that is not easy to answer. But I'll do my best to provide some perspective and context that, hopefully, will be helpful. So maybe just going way up to the top, you know, the big picture, we haven't provided, you know, that exact consumption number for the company or for the segments. But it can be helpful to remember that we did do some meaningful op-ex actions in Q4 of last year. And obviously, those were designed with that consumption level in mind.

Speaker Change: Last earnings call, we called out a few that people were aware of we just called out a couple more on this call that people are unaware of and Theres more. So these are intended to give some perspective that they are happening. Yes. There is a massive counterbalanced with this market cycle, but at some point.

Speaker Change: Those two things will the reps are going to continue and know we get stronger and the market will work through its cycle and when those things come together.

Speaker Change: <unk>.

Matt Johnson: And, you know, whatever you do there for cuts, you want your break-even point to be below that consumption level. So that's important conceptually, just as a way to think about it. Going into home and life, you know, it's been, what, four or five plus quarters now of declines that we've seen in that business. We do see, you know, what I call, you know, cautiously optimistic signs that, you know, we're seeing some improvement in booking, seeing some, you know, not push-outs anymore, it's more pull-ins, but visibility remains low because, you know, people are I think they're still working through their inventory. They've been rattled, they're, you know, they're uncertain.

Speaker Change: Looks like we will be positioned for strong growth when those to happen.

Speaker Change: Great. Thank you very much.

Speaker Change: Yes.

Thank you one moment for our next question.

Speaker Change: And our next question comes from the line of Cody Acree from the benchmark Company. Your question. Please.

Cody Acree: Yes. Thank you for taking my question excuse me.

Cody Acree: Maybe you can talk about just your order linearity throughout the last 90 days.

Cody Acree: Mentioned that.

Cody Acree: That orders are coming in with less than your typical turns requests can you just talk about that pattern of orders in and how that gives you visibility to the bonds.

Cody Acree: Sure.

Cody Acree: So.

Speaker Change: I'm trying to I don't want to electronic or wives remark.

Matt Johnson: So I do believe we're much further through that cycle of correction, and we're seeing encouraging signs, but not at the level to say we're on the other side of this yet or we're out of the woods. So I want that to be clear. That being said, yeah, we went through a remarkable journey, right?

Speaker Change: It's hard for US right now because what is normal.

Speaker Change: Really been disrupted over over this entire cycle, so I'll start with that but to answer your question directly.

Speaker Change: Last 90 days, what we've seen is a.

Speaker Change: Trends in an encouraging direction, where they're increasing.

Matt Johnson: You know, from demand, you know, well, one, I think there was a shift from, you know, services to goods and then back to services; demand spiked, people wanted, you know, expected that demand levels would be, you know, continuing in perpetuity, people built inventory. And then there's a whole bunch of trends under there that, you know, are difficult to pull out or tease out or parse out how much is contributing But you have the end market strength, you have the secular positions that are very important, right? Matter is starting to show a lot of strength in there that are ready to mark. And then we talked about life a few times, that life has been, you know, durable throughout this because of that secular strength.

Speaker Change: Not increasing at the level that we'd like to see that this is done over on the other side of it but optimistic that they're going into right direction, which is always important.

Speaker Change: The visibility continues to be low because our lead times right now, let's just say about a quarter roughly little over a quarter and most of the behavior is customers. The majority of <unk> customers already well within that.

Speaker Change: So that gives you an indication of what we're seeing it's also worth pointing out that.

Speaker Change: Given where we think we're at the cycle between for lack of better term the consumer and industrial segments.

Speaker Change: Seeing order patterns, a little more indicative of consumer and home and life in general being further through the cycle.

Speaker Change: And then industrial commercial but like I said earlier, we do expect both to grow.

Speaker Change: From Q4 to Q1.

Speaker Change: Hopefully that helps give some context and perspective simple.

Speaker Change: Simple headline go into the right direction, but still have further to go.

Speaker Change: Excellent. Thank you.

Matt Johnson: But at the same time, you know, the design and momentum we've started sharing with the world on that is really just in its early stages. And it will be impactful as well. So I'd say, you know, it's shown resilience throughout this because of those ramps that are starting, but the real growth there and real impact is yet to come. So, you know, in the last pieces, the whole pie, you know, as an end market, we continue to see solid progress and opportunity there, whether it's trends such as Matter, such as Amazon Sidewalk, such as, you know, just the market finding its footing on the You know, what I'm trying to convey is our confidence in that end segment from a growth perspective remains very strong. And, you know, our confidence in our position there also remains very strong as we bring in, you know, really great momentum around Bluetooth where we're clearly gaining share, and we're going to do the same thing in Wi-Fi. And that will help not only further stabilize the home for us but actually grow the home moving forward.

Lastly, last quarter, you talked pretty optimistically about series three.

Speaker Change: That has been a little absent this quarter can you just give us an update on how that platform has progressed this quarter.

Speaker Change: Yeah sure not asset by design just in the middle of a lot of work.

Speaker Change: So a quick quick way to think about a series to continue.

Speaker Change: Continue to release product for the series two couldnt be happier with the impact thats, having on the market.

Speaker Change: Design win momentum has been excellent.

Speaker Change: It's been everything you'd want to see and it's still in a very powerful spot in its lifecycle, but it's going to drive growth for a long time series three making progress they're on track to what we've said, but we're committed and the impact that we expect that that's going to have not only on us as a company, but our industry and easy way.

Speaker Change: To think about it series III take that platform that is so pervasive which is series two it gives people the ability to lever that and.

Speaker Change: Pushed even further on all the dimensions that we are industry, leading off whether it's the wireless performance whether its the scalability flexibility whether it's the compute that our customers want including AI ml or as I said.

Tore Egil Svanberg: So I know that's a lot to worry about, but those are all some of the moving pieces in there. And the punchline is our confidence in the space continues to be strong. We know we're gaining share, and we see opportunity to grow through some of those trends, like I mentioned for Matter, Bluetooth growth, and Wi-Fi growth going forward. You know, that's really helpful.

Speaker Change: Industry, leading security.

Speaker Change: B.

Speaker Change: Quantum Brett so the combination of those things has our customers excited but what I don't want to do and why you've probably noticed there's not the call. We are that will be worked for us for years to come and we're well into it we're very comfortable where we're at in that cycle, but.

Matt Johnson: I appreciate that, Matt. As for my follow-up, obviously, you know, there's a cyclical balance coming here. That's pretty obvious.

Speaker Change: We'll be talking about series two per year still and what we talked about series three for years to come and both will kind of Cowen.

Tore Egil Svanberg: But I know on top of that, you also have a lot of new design wins. You have some new secular businesses that are ramping. You talked about some of the glucose metering, smart metering, shelf labeling, then you've got Wi-Fi.

Speaker Change: Coincide or be parallel to each other.

Speaker Change: But at least the next five to 10 years. So it's important to have that perspective.

Matt Johnson: So I guess the real question that I have here, you know, is if you look at some of those newer businesses, any update there, and could these be really material to revenues for calendar 24, especially in light of perhaps some of the most cyclical business at such a low level? Yeah, understood. The quick answer is yes, that is our expectation that, you know, we've been unwavering in our view that, you know, we're going through a particularly vicious market cycle that has impacted demand, inventory, and destocking that's substantial. And, you know, we're trying to be clear; we're not calling the market bottom here. You know, we're not out of the woods yet, it's clearly these cycles haven't worked fully through, but we are calling our bottom.

Speaker Change: As we talked about both of those one is not going away and the other is not replacing it.

Speaker Change: But very encouraged by series III, where it's at in the market customer response.

Speaker Change: Great. Thank you guys.

Speaker Change: Thank you one moment for our next question.

Speaker Change: And our next question comes from the line of Quinn Bolton from Needham <unk> Company. Your question. Please.

Quinn Bolton: Hey, guys. Thanks for taking my question I guess I just wanted to.

Quinn Bolton: You've talked about starting to see some more encouraging orders in home and life.

Quinn Bolton: And you've also said it's sort of further through the inventory correction. Just wondering if you could specifically talk more about what youre seeing on the industrial commercial side.

Matt Johnson: And the reason we're comfortable doing that is, you know, we're not necessarily calling the rate necessarily, but we do see the confluence of all those things that the inventory, the stock, is going in the right direction. We do see that our position in the market is strong. And, you know, those designs are starting to ramp up, you know, we just, on the last earnings call, we called out a few that people were unaware of. We just called out a couple more on this call that people are unaware of, and there's more.

Quinn Bolton: At home and life that sort of four to five quarters in which would you expect.

Quinn Bolton: Industrial and commercial type on have that same four to five quarter under pressure before you kind of get back to more normalized run rates.

Speaker Change: Yes, I understand the question.

Speaker Change: Quick an honest answer is we don't know for sure.

Speaker Change: Some really interesting behavior out there in the marketplace for US we saw industrial.

Matt Johnson: So these are intended to, you know, give some perspective on what they're happening. Yes, there's a massive counterbalance with this market cycle. But at some point, those two things will, you know, the ramps are going to continue and normally get stronger, and the market will work through a cycle. And when those things come together, it looks like we'll be positioned for strong growth when those two things happen. Great, thank you very much.

Speaker Change: At the start of a decline a much later than consumer for US I think it was around Q2, where we really started seeing.

Speaker Change: The size of the softened what was remarkable for us is usually I.

Speaker Change: I think historically typically usually it's much more measured and not as a broad but across thousands of customers. We really did see that segment, just really slow down big time.

Operator: Thank you. One moment for our next question. And our next question comes from the line of Cody Acree from the Benchmark Company. Your question, please. Yeah, thank you.

Speaker Change: Really going from Q3 to Q4 that was reflected in our guidance. So.

Speaker Change: The reason I explain that is yeah. So we're a few quarters into the cycle correction as we see it.

Cody Acree: I can take my question. Maybe you can talk about just your order linearity throughout the last 90 days. You mentioned that orders are coming in with less than your typical turn request. Can you talk about that pattern of orders and how that gives you visibility to the bottom? Sure, uh, so... I'm trying, I don't want to, I'm not trying to make a wise remark.

Speaker Change: But it also hasn't been a typical.

Speaker Change: One in the sense of how severe so.

Speaker Change: We're assuming it's going to continue for the next few quarters.

Speaker Change: Yes.

Speaker Change: Even with that being said, we still see this as our trough or bottom.

Speaker Change: Will that drive sequential growth from here.

Speaker Change: But I wouldn't call the market has done and we believe.

Speaker Change: It still has some time to go but with the caveat. We also haven't seen it go.

Matt Johnson: It's hard for us right now because what is normal has really been disrupted by this entire cycle. So, I'll start with that, but to answer your question directly, in the last 90 days, what we've seen is a, you know, a trend in an encouraging direction where, you know, they're increasing. Not increasing at the level that we'd like to see, that they, you know, this is done, we're on the other side of it, but, you know, optimistic that they're going in the right direction, which is always important. You know, the visibility continues to be low because, you know, our lead times right now are about a quarter, roughly, a little over a quarter, and most of the behavior is customers, the majority of the customers ordering well within that.

Speaker Change: Go down to that roughly as we did in this current cycle.

Speaker Change: Got it that's all.

Speaker Change: And then just a question on the on the just the inventory you guys said it came down to 79 days, obviously down.

Speaker Change: In terms of dollars given given the lower revenue level do you guys have.

Speaker Change: What you're shooting for four.

Speaker Change: For that GST, I mean, I imagine as revenue starts to recover if you just kind of hold DSD inventory flat days in Disney is going to come down.

Speaker Change: Still pretty nicely. So just any any thoughts you can give us how we should be thinking about where that where you want to try to get inventory. Thank you yes.

Matt Johnson: So, you know, that gives you an indication of what we're seeing. It's also worth pointing out that, you know, given where we think we are in the cycle between, for lack of a better term, the consumer and industrial segments, we probably see order patterns a little more indicative of the consumer and home and life in general being further through the cycle than industrial and commercial. But like I said earlier, we do expect both to grow from Q4 to Q1. So hopefully that helps give some context and perspective. You know, a simple headline, going in the right direction, but we still have further to go. Excellent. Thank you.

Speaker Change: Yes, I think we've said.

Speaker Change: Over the last few quarters.

Speaker Change: In normal times.

Speaker Change: You know what.

Speaker Change: Whatever those happen.

We'd be somewhere in the 60% to 70 day range as a target it's not an absolute a hard target.

Speaker Change: But something in that range.

Speaker Change: But right now, it's obviously higher than that but on a much lower revenue level and as you pointed out that could spike very quickly as things start to ramp back up.

Cody Acree: And lastly, last quarter, you talked pretty optimistically about Series 3. That has been a little absent this quarter. Can you just give us an update on how that platform has progressed this quarter? Yeah, sure. Not absent by design; just in the middle of a lot of work.

Speaker Change: But you have to counterbalance that with the whole industry spooked by inventory right now right.

Speaker Change: Everyone's trying to work down inventory and.

Speaker Change: And Thats, what you see out there. So distributors are trying to work at our customers. They are trying to work it out so.

Speaker Change: No.

Speaker Change: If we're honest about it as an industry will probably swung the pendulum a little too far maybe this will be one of the times that it doesn't happen, but it's possible that youll see those inventory levels go down and then there'll be.

Matt Johnson: So a quick way to think about it, Series 2, we've continued to release products on Series 2, and couldn't be happier with the impact it's having on the market. DesignWin's momentum has been excellent. It's been everything you'd want to see, and it's still in a very powerful spot in its life cycle that will drive growth for us for a long time. Series 3, making progress there, on track with what we've said, what we've committed, and the impact that we expect that that's going to have not only on us as a company but on our industry. An easy way to think about it is that Series 3 takes that platform that is so pervasive, which is Series 2, and gives people the ability to leverage that and push even further on all the dimensions that we are industry-leading on, whether it's the wireless performance, whether it's the scalability, or flexibility, whether it's the compute that our customers want, including AI, ML, or, as I said, industry-leading security, even being

Speaker Change: About the other side, that's faster than anticipated because we take it too far as an industry. We're trying to whatsapp, we're trying to be responsible.

And do our best to manage it but.

Speaker Change: The real focus for us in problem child, and customer inventory, which is going the right direction, which is encouraging but not done.

Speaker Change: Got it thank you.

Speaker Change: Thank you one moment for our next question.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: And our next question comes from the line of Gary Mobley from Wells Fargo Securities. Your question. Please.

Gary Mobley: Good morning, guys. Thanks for taking my question.

Gary Mobley: Matt you briefly covered this in your prepared remarks, but I missed it to be honest.

Gary Mobley: Was hoping that you could share with us more metrics on design wins in retrospect, specifically the 2023, what the growth in lifetime value was for the design wins captured in the period and as well whether or not there was a particular emphasis on any one wireless standard or.

Matt Johnson: So the combination of those things has our customers excited, but what I don't want to do, and why you probably noticed it's not the call that will work for us for years to come. And we're well into it. We're very comfortable with where we are in that cycle, but we'll be talking about Series 2 for years to come, and we'll be talking about Series 3 for years to come, and both will coincide or be parallel to each other for at least the next 5 to 10 years. So it's important to have that perspective as we talk about both of those. One's not going away, and the other's not replacing it, but I'm very encouraged by Series 3, where it is in the market and the customer response. Great, thank you guys. Thank you.

Gary Mobley: <unk> module generation I would presume the majority of it is on series two any color would be helpful. Yes sure.

Speaker Change: Yes, I think in the prepared remarks and.

I think we said.

Speaker Change: We did deliver to our target and I'll mention a second why that's remarkable and so.

Speaker Change: We saw.

Speaker Change: That as a big deal because normally we entered this year sorry, as we entered last year 'twenty three we knew it would be a great market environment, but we didnt anticipate it would be as bad as well.

Speaker Change: But we said are designed with target and.

Speaker Change: A different environment and usually when you see the market drops like it did in <unk>.

Speaker Change: Volatile as it has been usually you see that convey an impact your design win performance and the reasons are multiple but think about it in real terms right. Now we have customers that are working through inventory that we're trying to work a lot of customers doing R&D reductions. So they are impacting the schedule of the project that way all of those things come into play.

Operator: One moment for our next question, and our next question comes from the line of Quinn Bolton from Needham & Company. Your question, please.

Quinn Bolton: Hey, guys, thanks for taking my question. I guess I just wanted to, you know, you've talked about starting to see some more encouraging orders in Home and Life. And you've also said it sort of further through the inventory correction. Just wondering if you could specifically talk more about what you're seeing on the industrial commercial side. You know, if Home and Life is sort of, you know, four to five quarters in, would you expect industrial and commercial to kind of have that same four to five quarters under pressure before you kind of get back to more normalized run rates? Yeah, I understand the question. My quick and honest answer is we don't know for sure.

Speaker Change: But.

Speaker Change: Certainly not happy with our revenue performance in 2023, but the team was able to.

Speaker Change: Secure and deliver design win performance that was on that original plan, which is outstanding and the reason to be very directed series.

We are still not.

Speaker Change: In the series three design win phase yet.

Speaker Change: Still a ways away but.

Speaker Change: And series to as I said earlier, it's knocking it out of the park and that's the engine that's.

Speaker Change: Driving design wins. These are a way to think about it is right now that drives the growth of our funnel of opportunities that drive the desire to grow and that will be the major driver of revenue growth and that's why we're so excited about serious degree because now that we have that position in the market, we can leverage that with software compatibility.

Matt Johnson: There's, you know, some really interesting behavior out there in the marketplace. For us, we saw industrial enter at the start of a decline much later than consumer. For us, I think it was around Q2 where we really started seeing the signs of softening.

Speaker Change: Affordability, because what our customers are starting to realize the investment series. Two is also an investment in series three which is off so we're starting to get that critical mass and positioned with our platform in the industry that will serve us well in terms of the other questions. It was pretty broad honestly in terms of.

Matt Johnson: What was remarkable for us was that, usually, and I think historically, typically, usually, it's much more measured and not as abrupt. But, you know, across thousands of customers, we really did see that segment just really slow down big time, really going from Q3 to Q4, and that was reflected in our guidance. And the reason I explain that is, yeah, so we're a few quarters into the cycle correction as we see it, but it also hasn't been a typical one in the sense of how severe. So, you know, we're assuming it's going to continue for the next few quarters. And even with that being said, we still see this as our trough or bottom because it's able to drive sequential growth from here. But I wouldn't call the markets done. And, you know, we believe industrial production still has some time to go. But, with the caveat, we also haven't seen it go down as abruptly as we did in this current cycle. Got it. No, that's helpful.

Speaker Change: Multiple all our Geos saw good progress all of our wireless technology saw good progress in all of our focus and market segments saw good progress as well.

Speaker Change: Wanted to call out.

Speaker Change: Big one it would be what you expected areas, where we're really seeing great progress in cleaning up.

Speaker Change: Those secular growth there that we were talking about with Tori earlier definitely having a big impact and then take an area like we've been consistent in Bluetooth, where we see strength in all of our wireless areas, but Bluetooth.

Speaker Change: Really just seeing that often grow from a design win perspective, and we see ourselves continuing to take share. There. So that's one that you could probably call out is a standout and as we've been saying I expect we just released the soft launched nine months, even for Wi Fi you're going to start seeing the same in Wi Fi as we bring.

Speaker Change: Industry, leading capability there as well so.

Quinn Bolton: And then just a question on the DSTI inventory, you know, you guys said it came down to 79 days, obviously down a ton in terms of dollars given given a lower revenue level. Do you guys have a target that you're shooting for for that DSTI? I mean, I imagine as revenue starts to recover, if you just kind of hold DSTI inventory flat, that the days in DSTI are going to come down still pretty nicely. So any thoughts you can give us about where we should be thinking about, you know, where you want to try to get DSTI inventory? Thank you. Yeah, I understand. Yeah, you know, we've said over the last few quarters that in normal times, you know, whenever those things happen, you know, we'd be somewhere in the 60 to 70 day range as a target. It's not an absolute or hard target.

Speaker Change: Those are the drivers Gary hopefully that gives you some perspective, but no no one thing aside from definitely some stripe and Bluetooth, but all of the focus areas performed very well and we hit our mark.

Gary Mobley: Thanks, Matt.

Gary Mobley: Your main foundry partner.

Gary Mobley: <unk>, calling for a pretty good rebound year.

Gary Mobley: With some pretty good growth.

Gary Mobley: And I realize a lot of that rebound is.

Gary Mobley: Leading edge lithography is maybe not where youre at but.

Gary Mobley: To put this in the form of a question are you potentially going to see maybe higher 100 quotes and.

Gary Mobley: As well related some expanding lead times could we possibly see lead times more than 13 weeks at some point in the year.

Gary Mobley: Sure.

Speaker Change: I understand the question don't know for sure I think that we've been very deliberate about our.

Matt Johnson: But, you know, something in that range. But right now, it's obviously higher than that, but at a much lower revenue level. And as you pointed out, that can spike very quickly as things start to ramp back up. But you have to counterbalance it with the whole industry spooked by inventory right now, right? Everyone's trying to work down inventory. And that's what you see out there.

Speaker Change: One strategic inventory build internally are diabetic.

Speaker Change: To smooth this out going into the supply crisis, we were carrying a much lower level. So our intent by having that is to try to smooth the response.

He is abrupt and lumpy.

Speaker Change: And we have.

Speaker Change: Great relationship with our all our foundry partners, including our largest so we feel just to be very blunt, we were able to navigate the supply crisis with our relationships and partnerships I definitely believe we'll be able to navigate the other side of this downturn that we're in and.

Matt Johnson: So distributors are trying to work it down, and customers are trying to work it down. So, you know, if we're honest about it, as an industry, we'll probably swing the pendulum a little too far. Maybe this will be one of the times that it doesn't happen.

Speaker Change: I think we're much better prepared we've learned a lot we're carrying different die bank, we've learned a lot about forecasting watching customer inventories et cetera.

Matt Johnson: But it's possible that, you know, you'll see those inventory levels go down, and then there'll be, you know, a bounce on the other side that's faster than anticipated because we take it too far as an industry. We're trying to watch that, we're trying to be responsible, and do our best to manage it. But, you know, the real focus for us and Problem Child is end customer inventory, which is going in the right direction, which is encouraging, but not done. Thank you.

Speaker Change: I think the confluence of all of those will position us well and I do believe we're from a supply perspective.

Speaker Change: <unk> well positioned to navigate it.

Speaker Change: All things considered.

Speaker Change: Thank you.

Thank you. This does conclude the question and answer session of today's program I'd like to hand, the program back to Giovanni <unk> for any further remarks.

Giovanni Porcelli: Yes, Thank you Jonathan and thank you all for joining US. This morning. This concludes today's call.

Operator: Thank you one moment for our next question. And our next question comes from the line of Gary Mobley from Wells Fargo Securities. Your question, please. Morning, guys.

Speaker Change: Thank you, ladies and gentlemen for your participation in today's conference. This does conclude the program you may now disconnect good day.

Gary Mobley: Thanks for taking my question. Matt, you briefly covered this in your prepared remarks, but I missed it, to be honest. I was hoping that you could share with us more metrics on design wins in retrospect, specifically for 2023, what the growth and lifetime value was for the design wins captured in the period, and as well whether or not there was a particular emphasis on any one-wire standard or module generation. I would presume the majority of it is on Series 2, because it would be helpful.

Speaker Change: Yes.

Speaker Change: [music].

Matt Johnson: Yeah, sure. In the prepared remarks, and I think we said, you know, we did deliver on our target, and I'll mention why that's remarkable in a second. And we saw that as a big deal, because normal, you know, as we entered this year, sorry, as we entered last year, 2023, we knew it wouldn't be a great market environment, but we didn't anticipate it would be as bad as it was. But we set our design with targets in a different environment. And usually, when you see the market drop like it did and as volatile as it has been, usually you see that impact your design and performance. And the reasons are multifold. Like, think about it in real terms right now.

Speaker Change: Yes.

[music].

Matt Johnson: We have customers that are working through inventory, that are trying to work, you know. A lot of customers are doing R&D reductions, so they're impacting schedules and projects that way. All those things come into play. But, you know, with, you know, certainly not happy with our revenue performance in 2023, but the team was able to secure and deliver a design and performance that was on that original plan, which is outstanding. And the reason, to be very direct, is Series 2, right? We're still not in the Series 3 design phase yet. You know, we're still a ways away. But in Series 2, as I said earlier, it's knocking it out of the park, and that's the engine that's driving design.

Matt Johnson: And the easy way to think about it is, right now, that drives the growth of our opportunity funnel, that drives design to grow, and that'll be the major driver of revenue growth. And that's why we're so excited about Series 3, because now that we have that position in the market, we can leverage that with software compatibility and portability, because what our customers are starting to realize is that an investment in Series 2 is also an investment in Series 3, which is awesome. So we're starting to get that critical mass and position with our platform in the industry that will serve us well. In terms of the other questions, it was pretty broad, honestly, in terms of, you know, all our geos saw good progress.

Matt Johnson: All our wireless technology saw good progress, and all our focus and market segments saw good progress as well, you know, big ones, it would be what you expected. Areas where we're just, you know, really seeing great progress in cleaning up, you know, those secular growth areas that we were talking about with Tori earlier, definitely had a big impact. And then, you know, take an area like Bluetooth, where we see strength in all of our wireless areas, but Bluetooth, we've, we've really just seen that grow from a design perspective. And we see ourselves continuing to take share there, so that's one that, you know, you could probably call out as a standout. And, you know, as we've been saying, I expect as we just released the soft launch 9.1.7 for Wi-Fi, you're going to start seeing the same in Wi-Fi as we bring industry-leading capabilities there as well. So, those are the drivers, Gary.

Speaker Change: [music].

Matt Johnson: Hopefully, that gives you some perspective, but there is definitely some strength in Bluetooth, but all the focus areas perform very well, and we hit our mark. Matt. Your main foundry partner is basically calling for a pretty good rebound year, pretty good growth, and I realize a lot of that rebounded, leading-edge lithographies, maybe not where you're at, but, To put this in the form of a question, are you potentially going to see maybe higher founder quotes and, as well, related some expanding lead times? Could we possibly see lead times more than 13 weeks at some point in the year?

Gary Mobley: Sure, don't understand the question, don't know for sure. I think that we've been very deliberate about our one strategic inventory bill internally, our die bank, to smooth this out. You know, going into the supply crisis, we were carrying a much lower level.

Matt Johnson: So our intent by having that is to try to smooth the response and not have it be as abrupt and lumpy. You know, and we have a great relationship with all our foundry partners, including our largest. So, you know, we feel, you know, just to be very blunt, we were able to navigate the supply crisis with our relationships and partnerships. I definitely believe we'll be able to navigate the other side of this downturn that we're in. And I think we're much better prepared. We've learned a lot. We're carrying different die banks.

Matt Johnson: We've learned a lot about forecasting, watching customer inventories, et cetera. So I think the confluence of all those things is position as well. And I do believe we're, from a supply perspective, very well positioned to deal with it, all things considered. Thank you. This concludes the question and answer session of today's program. I'd like to hand the program back to Giovanni Pliselli for any further remarks. Thank you, Jonathan.

Speaker Change: Okay.

Speaker Change: [music].

Giovanni Pacelli: And thank you all for joining us this morning. This concludes today's call. Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect.

Operator: Good day, www.globalonenessproject.org www.globalonenessproject.org www.globalonenessproject.org www.globalonenessproject.org www.globalonenessproject.org www.globalonenessproject.org ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? Copyright © 2020, New Thinking Allowed Foundation ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? Thanks for watching! Thank you for standing by. My name is Jonathan and I will be your conference operator today. Welcome to Silicon Labs fourth quarter fiscal 2023 earnings call. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star one one on your telephone. If your question has been answered and you wish to remove yourself from the queue, simply press star one one again.

Speaker Change: Yes.

[music].

Jonathan: Thank you for standing by my name is Jonathan and I will be your conference operator today welcome to Silicon Labs fourth quarter fiscal 2023 earnings call. After the speaker's presentation. There will be a question and answer session to ask a question. During this session you will need to press star one on your telephone if your question has been answered.

And you wish to remove yourself from the queue simply press Star One again as a reminder, today's program is being recorded and now I'd like to introduce your host for today's program Giovanni Porcelli Silicone lab senior director of Finance Giovanni. Please go ahead.

Giovanni Pacelli: As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Giovanni Pacelli, Silicon Labs senior director of finance. Giovanni, please go ahead.

Giovanni Pacelli: Thank you, Jonathan. And good morning, everyone. We are recording this meeting, and a replay will be available for weeks on the investor relations section of our website at investor.scilabs.com. Our earnings press release and the accompanying financial tables are also available on our website. Joining me today are Silicon Labs President and Chief Executive Officer Matt Johnson and Interim Chief Financial Officer Mark Malden. They will discuss our four-quarter financial performance and review recent business activities. We will take questions after our prepared comments, and our remarks today will include forward-looking statements that are subject to risks and uncertainties. We base these forward-looking statements on information available to us as of the date of this conference call and assume no obligation to update these statements in the future. We encourage you to review our SEC filings, which identify important risk factors that could cause actual results to differ materially from those contained in any forward-working statement.

Giovanni Porcelli: Thank you Jonathan and good morning, everyone. We are recording this meeting and a replay will be available for four weeks on the Investor Relations section of our website at Investor <unk> Com, Our earnings press release and the accompanying financial tables are also available on our website.

Giovanni Porcelli: Joining me today are Silicon labs, President and Chief Executive Officer, Matt Johnson.

Speaker Change: <unk> interim Chief Financial Officer, Mark more of them. They will discuss our fourth quarter financial performance and review recent business activities. We will take questions. After our prepared comments and our remarks. Today will include forward looking statements are subject to risks and uncertainties. We based these forward looking statements on information available to us as of the date of this conference.

Speaker Change: Call and assume no obligation to update these statements in the future.

Speaker Change: We encourage you to review, our SEC filings, which identify important risk factors that could cause actual results to differ materially from those contained in any forward looking statements.

Giovanni Pacelli: Additionally, during our call today, we will refer to certain non-GAAP financial information. A reconciliation of our non-GAAP results is included in the company's earnings press release and on the investor relations section of the Silicon Alliance website. I'll now turn the call over to Silicon Lab's Chief Executive Officer, Matt Johnson.

Speaker Change: Additionally, during our call today, we will refer to certain non-GAAP financial information.

Speaker Change: A reconciliation of our GAAP to non-GAAP results is included in the company's earnings press release and on the Investor Relations section of Silicon Labs' website.

Speaker Change: I'll now turn the call over to Silicon Labs', Chief Executive Officer, Matt Johnson, Matt.

Matt Johnson: Thanks Giovanni and good morning everyone. The Silicon Labs team delivered fourth quarter results above the midpoint of our guidance. During the quarter, we saw reductions in both channel and end customer inventory. We expect End Customer Inventory Stocking to continue in Q1. On a unit basis, this inventory is now at a lower level than during the supply crisis.

Matt Johnson: Thanks, Giovanni and good morning, everyone.

Matt Johnson: Silicon labs team delivered fourth quarter results above the midpoint of our guidance during the quarter, we saw reductions in both channel and end customer inventory.

Matt Johnson: We expect end customer inventory destocking to continue in Q1 on.

On a unit basis. This inventory is now a lower level than during the supply crisis.

Matt Johnson: We believe Q4 2023 represents our low point of revenue. We expect to return to sequential growth starting in Q1 as our customers' inventory starts to normalize, and we begin to see the further benefits of design and framing. We've also seen slight improvements in our weekly bookings activity, but the man visibility continues. We are encouraged by another year of outstanding design and achievement despite the challenges of the current operating environment. The projected lifetime revenue of our 2023 design wins was up low double digits year over year, in line with the ambitious targets we set.

Matt Johnson: We believe Q4 of 2023 represents our low point of revenue, we expect to return to sequential growth starting in Q1 as our customers inventories start to normalize and we begin to see the early benefits of design wins ramping into production.

Matt Johnson: We've also seen slight improvements in our weekly bookings activity, but demand visibility continues to be low.

Matt Johnson: We are encouraged by another year of outstanding design win achievement. Despite the challenges of the current operating environment.

Matt Johnson: The projected lifetime revenue of our 2023 design wins was up low double digits year over year in line with ambitious targets we set.

Matt Johnson: These design wins span a broad range of technologies, applications, and customers, and we are expected to deliver strong growth and earnings power as the market dynamics improve. Before we turn the call over to Mark, I would like to take a moment to express our gratitude to John Hollister, who has stepped down after 20 years of dedicated service to Silicon Labs, 10 of those years as CFO. John's financial stewardship has been instrumental to our success over the years, and his insights and partnership have been invaluable. On behalf of the entire team, thank you, John, for your outstanding work and commitment, and we wish you the best as you join Global Finance. In addition, I would like to thank Mark Malden for stepping in so effectively during this transition.

Matt Johnson: These design wins spanned a broad range of technologies applications and customers.

Matt Johnson: We are expected to deliver strong growth and earnings power of the market dynamics improve.

Speaker Change: Before I turn the call over to Mark I would like to take a moment to express our gratitude to John Hollister, who has stepped down after 20 years of dedicated service to Silicon Labs 10 of those years as CFO John financial stewardship has been instrumental to our success over the years and his insights and partnership have been invaluable on behalf of the entire team. Thank you John.

Mark Model: Our outstanding work and commitment and we wish you the best as he joined Globalfoundries.

Mark Model: In addition, I would like to thank Mark <unk> for stepping in and so effectively during this transition.

Matt Johnson: I can also share that the search for our new CFO is going well, and we are impressed by the caliber and potential fit of the candidates we are engaged with and are looking forward to concluding the search as quickly as possible. Now, I'll hand it over to Mark for the financial updates. Mark. Thanks, Matt. And good morning, everyone. Fourth quarter revenue was $87 million, above the midpoint of our guidance and down 66% year on year. ASPs decline sequentially in the

Mark Model: I can also share that the search for a new CFO is going well and were impressed by the caliber of potential fit of the candidates. We're engaged with and are looking forward, including the search as quickly as possible now I'll hand, it over to Mark for the financial update Mark.

Mark Model: Thanks, Matt and good morning, everyone fourth quarter revenue was $87 million above the midpoint of our guidance and down 66% year on year.

Mark Model: Asp's decline sequentially.