Q2 2024 Silicon Laboratories Inc Earnings Call

Hello. My name is Tanya, and I'll be your conference operator today. Welcome to Silicon Labs' second quarter 2024 fiscal earnings call. At this time, all participants are in a listen-only mode.

Operator: Welcome to Silicon Lab's second quarter of the 2024 fiscal year. At this time, all participants are in a listen-only mode.

Operator: Welcome to Silicon Slav's second quarter 2024 fiscal earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session.

Operator: 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 11 on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to turn the conference over to Giovanni Pacelli, Silicon Labs Senior Director of Finance. Giovanni, please go ahead.

Operator: To ask the question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star 1-1 again.

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 1 1 on your telephone. You will then hear an automated message advising that your hand is raised.

Operator: Please be advised that today's conference is being recorded.

Giovanni Pacelli: To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to turn the conference over to Giovanni Pacelli, Silicon Labs Senior Director of Finance. Giovanni, please go ahead.

Giovanni Pacelli: We'd now like to turn the conference over to Giovanni Pacelli, Silicon Slav's Senior Director of Finance. Giovanni, please go ahead.

Giovanni Pacelli: Thank you, Tonya. 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.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 Chief Financial Officer Dean Butler. They will discuss our second quarter financial performance and review recent business activities.

Operator: Thank you, John.

Giovanni Pacelli: 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.com. Our earnings press release and the accompanying financial tables are also available on our website.

Giovanni Pacelli: Thank you, Tonya, 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.scilabs.com.

Our earnings press release and the accompanying financial tables are also available on our website.

Giovanni Pacelli: Joining me today are Silicon Labs, President and Chief Executive Officer, Matt Johnson, and Chief Financial Officer, Dean Butler. They will discuss our second 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 a bidet of this conference call and assume no obligation to update these statements in the future. We encourage you to review our SEC by-lings, which identify important risk factors that could cause actual results you differ materially from those contained in any forward-looking statements.

Speaker Change: Joining me today are Silicon Labs President and Chief Executive Officer Matt Johnson and Chief Financial Officer Dean Butler. They will discuss our second quarter financial performance and review recent business activities.

Giovanni Pacelli: We will take questions after our prepared comments, and our remarks today will include forward-looking statements that are subject to risks and uncertainty. We base these forward-looking statements on information available to us as of the date of this conference, 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 will take questions after our prepared comments, and our remarks today will include forward-looking statements that are subject to risks and uncertainties.

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 in any forward-looking statements.

Giovanni Pacelli: Additionally, during our call today, we will refer to certain non-GAAP financial information. Reconciliation of our gap to non-gap results is included in the company's earnings press release and on the investor relations section of the Silicon Labs website. I'd now like to turn the call over to Silicon Labs Chief Executive Officer, Matt Johnson. Matt. Thank you, Giovanni. Good morning, everyone.

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

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

Giovanni Pacelli: For reconciliation of our gap to non-gap results is included in the company's earnings press release and on the Investor Relations section of the Silicon Labs website.

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

Matt Johnson: I'd now like to turn the call over to Silicon Labs Chief Executive Officer Matt Johnson. Matt.

Speaker Change: I'd now like to turn the call over to Silicon Lab's Chief Executive Officer, Matt Johnson. Matt?

Robert Matthew Johnson: Thank you, Ronnie.

Robert Matthew Johnson: Good morning, everyone. Silicon Labs delivered strong second quarter results, with revenue reaching the top of our end of our forecast and earnings exceeding expectations. Many survey customers report that their excess inventory levels are normalized, although some significant outliers remain. Improve-booking patterns in the first half of the year indicate that continued recovery in the second half, even though weekly bookings are still below our target level. Our design would pipeline as well and track for the year with record design and industrial commercial business unit with particular strength in the smart cities business. The home business also set a design and record in the quarter.

Matt Johnson: Silicon Labs delivered strong second-quarter results with revenue reaching the top of our end of our forecast and earnings exceeding expectations. Many surveyed customers report that their excess inventory levels have normalized, although some significant outliers remain. Improved booking patterns in the first half of the year indicate a continued recovery in the second half, even though weekly bookings are still below our target level. Our design pipeline is well on track for the year with record design wins in the industrial commercial business unit with particular strength in the smart cities. The home business also set a design record in the quarter.

Matt Johnson: Thanks Giovanni and good morning everyone.

Matt Johnson: Silicon Labs delivered strong second quarter results, with revenue reaching the top end of our forecast and earning exceeding expectations.

Speaker Change: Many surveyed customers report that their excess inventory levels have normalized, although some significant outliers remain.

Speaker Change: Improved booking patterns in the first half of the year indicate a continued recovery in the second half, even though weekly bookings are still below our target level.

Speaker Change: Our Design with Pipeline is well on track for the year with record design wins in industrial and commercial business units with particular strength in the smart cities business.

Matt Johnson: We are also pleased to see numerous designs ramping into production and shipping to customers, including insulin management devices, electronic shelf labels, and smart meters. For Inf1 Management, we've started shipping millions of units across multiple customers and regions. We expect this momentum to continue in the second half of the year and accelerate into 2025 as the market and our share for these products grow, and large customers begin ramping the program. In smart retail, global deployments in the electronic shelf label market are expanding, and we have a clear leadership position in the space. We're working with four of the top five global ESL providers to support their rollout to retail customers.

Matt Johnson: We are also pleased to see numerous design and ramping into production and shipping and customers, including insulin management devices, electronic shelf labels, and smart meters. In insulin management, we started shipping millions of units across multiple customers and regions. We expect this momentum to continue in the second half of the year and accelerate into 2025 as the market and our share for these products grow. And large customers begin ramping into the program. It's not retail; global deployment and the electronic shelf label market are expanding. We have a clear leadership position in the space. We're working with four of the top five global ESL providers to support their roll-out to retail customers.

Speaker Change: The home business also set a design record in the quarter.

Speaker Change: We are also pleased to see numerous designs ramping into production and shipping to customers, including insulin management devices, electronic shelf labels, and smart meters.

Speaker Change: In Inf1 Management, we've started shipping millions of units across multiple customers and regions. We expect this momentum to continue in the second half of the year and accelerate into 2025 as the market and our share for these products grow, and large customers begin ramping in programs.

Speaker Change: In Smart Retail, global deployments in the electronic shelf label market are expanding, and we have a clear leadership position in the space. We're working with four of the top five global ESL providers to support their rollout to retail customers.

Matt Johnson: In lifetime, we have cumulatively shipped 300 million units, and ESL has become our fastest growing business. We are meaningfully ramping up our ESL unit volume and see this growth continuing to accelerate into the next year as this application gains further traction and smart metering. We are participating in all of the largest smart metering deployment globally, outside of the Chinese domestic market.

Robert Matthew Johnson: Lifetime, we have two monthly ships, 300 million units, and ESL is become our fastest growing business. We're meaningfully ramping our ESL unit volume and see this growth continuing to accelerate into the next year as this application gains for the track. and Smart Meter, and we are participating in all of the largest smart meter and deployment globally outside of the China domestic market. We have secured designs with a major global meter supplier, positioning us to capture significant share and upcoming meter and deployment in new and emerging markets like India, Central America, Southeast Asia, as well as to support next generation deployments in more established markets like the US and Europe.

Speaker Change: Lifetime, we have cumulatively shipped 300 million units, and ESL has become our fastest growing business. We are meaningfully ramping our ESL unit volume and see this growth continuing to accelerate into the next year as this application gains further traction.

Speaker Change: In smart metering, we are participating in all of the largest smart metering deployments globally outside of the China domestic market.

Matt Johnson: We've secured designs with major global meter suppliers positioning us to capture a significant share in upcoming metering deployments in new and emerging markets like India, Central America, and Southeast Asia, as well as to support next generation deployments in more established markets like the US and Europe. We've also just secured a significant smart metering design win with a top utility provider in Japan. This win will enable us to support a majority of Japan's smart meter market, servicing both new and existing deployments with our multi-protocol solutions, including our award-winning Wi-Fi 6 solution, the 917, and our best-in-class sub-gigahertz solution, the FG25.

Speaker Change: We've secured designs with the major global metering suppliers, positioning us to capture significant share in upcoming metering deployments in new and emerging markets like India, Central America, Southeast Asia, as well as to support next generation deployments in more established markets like the U.S. and Europe .

Robert Matthew Johnson: We have also just secured a significant smart meter in design win with a top utility provider in Japan. This win will enable us to support a majority in Japan smart meter in market, servicing both new and existing deployments with our multi-photo-cell solutions, including our award-winning Wi-Fi six solutions to 9117 and our best-day class of bigger-her solutions, the FG-25. Our first Wi-Fi six product, the 9117, has meaning through all of power consumption that competing products in the market, and we believe it as a potential to drive shared games similar to our series to Bluetooth solutions over the past several years.

Speaker Change: We've also just secured a significant smart metering design win with a top utility provider in Japan.

Speaker Change: This win will enable us to support a majority of Japan's smart meter market, servicing both new and existing deployments with our multi-protocol solutions, including our award-winning Wi-Fi 6 solution, the 917, and our best-in-class sub-gigahertz solution, the FG25.

Matt Johnson: Our first Wi-Fi 6 product, the 917, has meaningfully lower power consumption than competing products in the market, and we believe it has the potential to drive share gains similar to our Series 2 Bluetooth solutions over the past several years.

Speaker Change: Our first Wi-Fi 6 product, the 917, has meaningful power consumption than competing products in the market, and we believe it has the potential to drive share gains similar to our Series 2 Bluetooth solutions over the past several years.

Matt Johnson: The 917 continues to generate significant market opportunities, and we are now seeing those opportunities convert to dozens of design wins, including at one of the world's largest appliance manufacturers. As IoT devices proliferate, our Series 2 portfolio is well-positioned to unlock new use cases through industry-leading power consumption, security, multi-protocol wireless performance, and edge computing power. We were the first in our industry to integrate PSA Level 3 security into our Series 2 products, foreseeing its importance, and are now securing new business as a result.

Matt Johnson: The 9117 continues to generate significant market opportunities, and we are now seeing those opportunities to convert to dozens of design wins, including at one of the world's largest appliance manufacturers. As IIT devices proliferate, our series to portfolio with well-positioned unlocked new use cases through industry-leading power consumption, security, multiple protocol wireless performance, and edge computing power. We were the first in our industry to integrate PSA level 3 security into our series of products for seeing its importance and are now securing new businesses as a result. Similarly, our early integration of AIML and the multiple series to SSE is also driving strong customer engagement as it seeks to understand the potential use cases and applications for MOTH and their product roadmap.

Speaker Change: The 917 continues to generate significant market opportunities, and we are now seeing those opportunities convert to dozens of design wins, including at one of the world's largest appliance manufacturers.

Speaker Change: As IoT devices proliferate, our Series 2 portfolio is well-positioned to unlock new use cases through industry-leading power consumption, security, multi-protocol wireless performance, and edge computing power.

Speaker Change: We were the first in our industry to integrate PSA Level 3 security into our Series 2 products. We're seeing its importance and are now securing new business as a result.

Matt Johnson: Similarly, our early integration of AI and ML into multiple Series 2 SoCs is also driving strong customer engagement as they seek to understand the potential use cases and applications for ML at the Edge in their product roadmap. We continue to see strong momentum in the adoption of our current generation Series 2 products, while at the same time, we've started sampling the first product in our next generation Series 3 platform. The strength of our current generation and potential of our next generation platforms, which are highly complementary, is exciting and positions us extremely well going into the future.

Speaker Change: Similarly, our early integration of AI ML into multiple Series 2 SoCs is also driving strong customer engagement as they seek to understand the potential use cases and applications for ML at the Edge in their product roadmaps.

Matt Johnson: We continue to see strong momentum and adoption of our current generation series 2 products, while the same time we started sampling the first product in our next generation series 3 platform. The strength of our current generation and potential of our next generation platforms that are highly complementary is exciting and positions us extremely well going into the future. Further, customers will be able to transition from series to the Series 3 as needed through common code base, the ABLE memory architecture and significant advancements and performance, power consumption and compute capability.

Speaker Change: We continue to see strong momentum in the adoption of our current generation Series 2 products, while at the same time we've started sampling the first product in our next generation Series 3 platform.

Speaker Change: The strength of our current generation, and potential of our next generation platforms that are highly complementary, is exciting and positions us extremely well going into the future.

Matt Johnson: Further, customers will be able to transition from Series 2 to Series 3 as needed through a common code base, scalable memory architecture, and significant advancements in performance, power consumption, and compute capability. We will be talking more about Series 3 at our upcoming Works with Developers Conference this September. Overall, I'm proud of the team's execution last quarter.

Speaker Change: Further, customers will be able to transition from Series 2 to Series 3 as needed through common code base, scalable memory architecture, and significant advancements in performance, power consumption, and compute capability.

Matt Johnson: We will be talking more about industry and our upcoming works with developers conference this September. Overall, I'm proud of the team's execution last quarter. As anticipated, the main driver of our recovery so far this year has been many of our ancestors managing down the access inventory. The steadily improving inventory backdrop, combined with design when ramps and key focus areas such as insulin management, ESL, and meter, positions us to continue driving sequential growth in the second half. The third driver of our future growth is an improvement in the end market demand; the time in which remains hard to predict.

Speaker Change: We will be talking more about Series 3 at our upcoming Works with Developers conference this September .

Matt Johnson: As anticipated, the main driver of our recovery so far this year has been many of our end customers managing down their excess inventory. Steadily improving inventory backdrops combined with design when ranch and key focus areas such as insulin management, ESL, and metering positions us to continue driving sequential growth in the second half. The third driver of our future growth is an improvement in end market demand, the timing of which remains hard to predict.

Speaker Change: Overall, I'm proud of the team execution last quarter. As anticipated, the main driver of our recovery so far this year has been many of our end customers managing down their excess inventory.

Speaker Change: The steadily improving inventory backdrop, combined with design-win-rants and key focus areas, such as insulin management, ESL, and metering, positions us to continue driving sequential growth in the second half.

Speaker Change: The third driver of our future growth is an improvement in the end-market demand, the time of which remains hard to predict. That said, as bookings improve and shipments into our channel increase, we will benefit from this catalyst and a combination of all three of these factors will provide momentum for us moving forward.

Robert Matthew Johnson: That said, as bookings improve and shipments into our channel increase, we will benefit from this catalyst, and the combination of all three of the factors will provide momentum for us moving forward.

Matt Johnson: That said, as bookings improve and shipments into our channel increase, we will benefit from this catalyst, and the combination of all three of these factors will provide momentum for us moving forward. Lastly, we remain laser focused on returning to profitability as quickly as possible and executing to our long-term financial model. Now, I'll hand it over to the Dean for the financial update.

Matt Johnson: Lastly, we remain later focused on returning to profitability as quickly as possible and executing for our long term financial model.

Speaker Change: Lastly, we remain laser-focused on returning to profitability as quickly as possible and executing to our long-term financial model.

Dean Butler: Now we'll hand it over to Dean for the financial update.

Dean Butler: Dean? Thanks, Matt, and it's great to be joining everyone this morning, having officially stepped into the CSO role during Q2. Before discussing our results in outlook, I found it to be helpful to begin with some early observations.

Dean Warren Butler: Thanks, Matt. And it's great to be joining everyone this morning, having officially stepped into the CFO role during Q2. Before discussing our results and outlook, I thought it would be helpful to begin with some early observations. Those of you who know me know that I've long been an admirer of the Silicon Labs business, and I'm thrilled to be the newest member of such a great team. Silicon Labs is a unique company in our semiconductor industry with its singular focus as a pure player for one of the fastest growing end markets for semiconductors.

Speaker Change: Now I'll hand it over to the Dean for the financial update. Dean?

Dean: Thanks, Matt, and it's great to be joining everyone this morning, having officially stepped into the CFO role during Q2.

Dean: Before discussing our results and outlook, I thought it would be helpful to begin with some early observations.

Dean Warren Butler: Those of you who know me know that I've long been an admirer of the Silicon Labs business, and I'm thrilled to be the newest member of the Pajjuri team. Silicon Labs is the unique company in our semiconductor industry, with its singular focus as a pure play for one of the fastest growing end markets on Pajjuri, the IAP. The characteristic of this market offer many compelling financial attributes, such as a tremendously diverse customer-based, long product life cycles, emerging new growth applications, and the ability to demand market-leading pricing with highly valued technology central to the end market application need.

Speaker Change: Those of you who know me know that I've long been an admirer of the Silicon Lab's business, and I'm thrilled to be the newest member of such a great team.

Speaker Change: Silicon Labs is a unique company in our semiconductor industry with its singular focus as a pure player for one of the fastest-growing end markets for semiconductors, the IoT.

Dean Warren Butler: The characteristics of this market offer many compelling financial attributes, such as a tremendously diverse customer base, long product life cycles, emerging new growth applications, and the ability to command market-leading prices with highly-valued technology central to the end-market application needs. Having now joined and begun to integrate into the organization, I'm pleased to share that the product depth and breadth are even more impressive than I originally understood. I'm happy to report that the sales funnel is extremely robust, with a pipeline of customer engagement and design wins as diverse as the IoT itself, bolstering my belief in future growth for years to come.

Speaker Change: The characteristics of this market offer many compelling financial attributes.

Speaker Change: Such as a tremendously diverse customer base, long product life cycles, emerging new growth applications, and the ability to command market-leading pricing with highly-valued technology central to the end-market application needs.

Dean Butler: Having now joined and began to integrate into the organization, I'm pleased to share that the product depth and breadth are even more impressive than I originally understood. I'm happy to report that the SAO funnel is extremely robust, with a pipeline of customer engagement and design lens as diverse as the IAP itself, bolstering my belief and future growth for years to come. A key focus area for us will be ensuring that we can birth this pipeline of design lens to measure both top line growth and, importantly, delivering that sales growth to the bottom line in the form of EPS expansion.

Speaker Change: Having now joined and begun to integrate into the organization, I'm pleased to share that the product depth and breadth are even more impressive than I originally understood.

Speaker Change: I'm happy to report that the sales funnel is extremely robust, with a pipeline of customer engagement and design wins as diverse as the IoT itself, bolstering my belief in future growth for years to come.

Dean Warren Butler: A key focus area for us will be ensuring that we convert this pipeline of design lenses into measurable top-line growth and, importantly, delivering that sales growth to the bottom line in the form of EPS expansion. We can do this by putting a renewed focus on our operational expenses and improving product margins, which will become clear as our revenue continues to recover and our newest products are released to market. Now moving forward to the June quarter results.

Speaker Change: A key focus area for us will be ensuring that we convert this pipeline of design lens to measurable top-line growth and importantly delivering that sales growth to the bottom line in the form of EPS expansion.

Dean Butler: We can do this by putting a renewed focus on our operational expenses and improving product margins, which will become clear as a revenue-teaching used to recover and our newest products are released to market.

Speaker Change: We can do this by putting a renewed focus on our operational expenses and improving product margins, which will become clear as our revenue continues to recover and our newest products are released to market.

Dean Warren Butler: Revenue was $145 million, up an impressive 37% sequentially, and above the midpoint of our prior guidance as our recovery path takes hold. Year over year revenue was down 41%, as expected. In our industrial and commercial business, June quarter revenue was $88 million, up 35% sequentially and down 47% year over year. The sequential increase was driven by strength and applications such as smart meters, smart building controls, and retail electronic shelf labels, all delivering double-digit growth. Home and Life June quarter revenue was $57 million, up 39% sequentially, and down 28% year over year.

Dean Warren Butler: Now moving forward to the June quarter results. Revenue was 145 million, up and in process 37% sequentially and above the midpoint of our fire dieting as our recovery path takes hold. Year over year revenue was down 41% as expected. In our industrial and commercial business, June quarter revenue was 88 million, up 35% sequentially and down 47% year over year. The sequential increase was given by strength and applications such as smart meters, smart building controls, and retail electronic shelf labels, all delivering double-digit growth. Home and Life June quarter revenue was 57 million, up 39% sequentially and down 28% year over year.

Speaker Change: Now moving forward to the June quarter results.

Speaker Change: Revenue was $145 million, up an impressive 37% sequentially, and above the midpoint of our prior guidance as our recovery path takes hold. Year over year, revenue was down 41% as expected.

Speaker Change: In our industrial and commercial business, June quarter revenue was $88 million, up 35% sequentially and down 47% year-over-year.

Speaker Change: The sequential increase was driven by strength in applications such as smart meters, smart building controls, and retail electronic shelf labels, all delivering double-digit growth.

Speaker Change: Home and Life June quarter revenue was $57 million, up 39% sequentially and down 28% year-over-year.

Dean Butler: During the quarter, we saw strength in home automation and security. In the life business, we're seeing continued traction in connected health and fitness customers, and it's completed the qualification at several new continuous blood glucose monitoring tests. and our now shipping products to multiple of the CGM customers globally. These medical and health-centric applications are poised to deliver future growth for Silicon Labs as customers begin to grant their production. We continue to focus on the level of inventory in our distribution channel, which has now declined to 55 days in the June quarter. Even more encouraging is a sequential growth in our distributed TOS, which leads us to believe that some of the long-tailed customers are beginning to work paths their access inventory position.

Dean Warren Butler: During the quarter, we saw strength in home automation and security. In the life business, we're seeing continued traction in connected health and fitness customers and have completed the qualification at several new continuous blood glucose monitoring customers and are now shipping products to multiple CGM customers globally. These medical and health-centric applications are poised to deliver future growth for Silicon Labs as customers begin to ramp their production.

Speaker Change: During the quarter, we saw strength in home automation and security.

Speaker Change: In the life business, we're seeing continued traction in connected health and fitness customers and have completed the qualification at several new continuous blood glucose monitoring customers.

Speaker Change: and are now shipping products to multiple of these CGM customers globally.

Speaker Change: These medical and health-centric applications are poised to deliver future growth for Silicon Labs as customers begin to ramp their production.

Dean Warren Butler: We continue to focus on the level of inventory in our distribution channel, which has now declined to 55 days in the June quarter. Even more encouraging is the sequential growth in our distributor POS, which leads us to believe that some of the long-tail customers are beginning to work past their excess inventory position. Distribution made up approximately 69% of our revenue mix for the June quarter, an increase from the prior quarter but still below our typical distribution versus direct sales channel mix.

Speaker Change: We continue to focus on the level of inventory in our distribution channel, which has now declined to 55 days in the June quarter.

Speaker Change: Even more encouraging is the sequential growth in our distributor POS, which leads us to believe that some of the long-tail customers are beginning to work past their excess inventory positions.

Dean Butler: Distribution made up approximately 69% of our revenue mix for the June quarter, and increased from the prior quarter, but still below our typical distribution versus direct sales channel nets. Overall, ASPs were down slightly compared to the prior quarter, but this is due to product and customer mixed during the quarter, while unit volume was up significantly, driving our strong sequential growth. Geographically, we saw sequential increases in all regions with a packed date up more than EDA and the Americas during the quarter. For the June quarter, our gap growth margin was 53%; non-gaps growth margin was also 53%, which was in line with our guidance range and reflected a mix tilted toward the rest customers versus the channel, as we previously discussed.

Speaker Change: Distribution made up approximately 69% of our revenue mix for the June quarter, an increase from the prior quarter, but still below our typical distribution versus direct sales channel mix.

Dean Warren Butler: Overall, ASPs were down slightly compared to the prior quarter, but this was due to product and customer mix during the quarter, while unit volume was up significantly, driving our strong sequential growth. Geographically, we saw sequential increases in all regions, with APAC being up more than EMEA and the Americas during the quarter. For the June quarter, our GAAP gross margin was 53%, and non-GAAP gross margin was also 53%, which was in line with our guidance range and reflected a mix tilted toward direct customers versus the channel, as we previously discussed. Gap operating expenses were $125 million, which included share-based compensation of $16 million and intangible asset amortization of $6 million.

Speaker Change: Overall, ASPs were down slightly compared to the prior quarter, but this is due to product and customer mix during the quarter, while unit volume was up significantly, driving our strong sequential growth.

Speaker Change: Geographically, we saw sequential increases in all regions, with APAC being up more than EMEA and the Americas during the quarter.

Speaker Change: For the June quarter, our GAAP gross margin was 53%, non-GAAP gross margin was also 53%, which was in line with our guidance range and reflected a mix tilted toward direct customers versus the channel, as we previously discussed.

Dean Butler: The gap operating expenses were 125 million, which includes share-based compensation of 16 million and intangible asset amortization of 6 million. Non-gaps operating expense of 102 million was in line with our guidance range. We continue our focus on diligent expense controls and converting our working capital back into cash while it's experiencing non-gaps operating losses. The gap operating loss for the quarter was 48 million, and non-gaps operating loss was 25 million. During the quarter, we recorded a gap tax expense of approximately $37 million. Our non-gaps tax rate remained at 20%. The gap loss for share was $2.56, and non-gaps loss of 50 cents per share was better than our guidance range.

Speaker Change: GAAP operating expenses were $125 million, which includes share-based compensation of $16 million and intangible asset amortization of $6 million.

Dean Warren Butler: Non-Gap Operating Expense of $102 million was in line with our guidance range. We continue our focus on diligent expense controls and converting our working capital back into cash while experiencing non-GAAP operating losses. The gap operating loss for the quarter was $48 million, and the non-gap operating loss was $25 million.

Speaker Change: non-GAAP operating expense of $102 million was in line with our guidance range.

Speaker Change: We continue our focus on diligent expense controls and converting our working capital back into cash while experiencing non-GAAP operating losses.

Speaker Change: Gap operating loss for the quarter was $48 million and non-gap operating loss was $25 million.

Dean Warren Butler: During the quarter, we recorded a gap tax expense of approximately $37 million. Unknown Speaker Our non-GAAP tax rate remained at 20%, gap loss per share was $2.56, and non-GAAP loss of 56 cents per share was better than our guidance. Turning to the balance sheet, we ended the quarter with $339 million of cash, cash equivalents, and short-term investments. Our days of sales outstanding were approximately 30 days. During the quarter, we depleted $32 million of our internal inventory, which ended the quarter down to $166 million of net inventory.

Speaker Change: During the quarter, we recorded a gap tax expense of approximately $37 million.

Speaker Change: Our non-GAAP tax rate remained at 20%.

Speaker Change: Gap loss per share was $2.56, and non-gap loss of $0.56 per share was better than our guidance range.

Dean Butler: Turning to the balance sheet, we ended the quarter with $339 million of cash, cash equivalents, and short-term investments. Our Days of Sales Outstanding was approximately 30 days. During the quarter, we depleted 32 million of our internal inventory, which ended the quarter down to 166 million of net inventory. Our days of inventory on hand improved to 217 days, and we expect further to reduce our balance sheet inventory position in the subsequent quarters as sales levels improve.

Speaker Change: Turning to the balance sheet, we ended the quarter with $339 million of cash, cash equivalents, and short-term investments.

Speaker Change: Our days of sales outstanding was approximately 30 days.

Speaker Change: During the quarter, we depleted $32 million of our internal inventory, which ended the quarter down to $166 million of net inventory.

Dean Warren Butler: Our days of inventory on hand improved to 217 days, and we expect to further reduce our balance sheet inventory position in the subsequent quarters as sales levels improve. Now, let me turn to our September quarter outlook. While visibility is somewhat limited, excess inventory at our customers is moving in the right direction, and distribution POS and our booking have gradually improved throughout the course of the year. Although the rate and pace of the recovery are still somewhat uncertain, we remain confident in our ability to continue to drive sequential growth in the second half. We anticipate revenue in the September quarter to be in the range of $160 million to $170 million.

Speaker Change: Our days of inventory on hand improved to 217 days, and we expect further to reduce our balance sheet inventory position in the subsequent quarters as sales levels improve.

Dean Butler: Now, let me turn to our September quarter outlook. While visibility of someone limited, access inventory at our customers is moving in the right direction, and distribution POS and our booking have gradually improved throughout the course of the year. Although the rate and pace of the recovery is still somewhat uncertain, we remain confident in our ability to continue to drive sequential growth in the second half of the year. We anticipate revenue in the September quarter to be in the range of 160 million to 170 million. We expect both the industrial and commercial, as well as the home and life business units, to be up sequentially in the September quarter, with growth being led by the home and life, but also returning broadly across products and end applications.

Speaker Change: Now, let me turn to our September quarter outlook.

Speaker Change: While visibility is somewhat limited, excess inventory at our customers is moving in the right direction, and distribution POS and our booking have gradually improved throughout the course of the year.

Speaker Change: Although the rate and pace of the recovery is still somewhat uncertain, we remain confident in our ability to continue to drive sequential growth in the second half of the year.

Speaker Change: We anticipate revenue in the September quarter to be in the range of $160 million to $170 million.

Dean Warren Butler: We expect both the industrial and commercial, as well as the home and life business units to be up sequentially in the September quarter, with growth being led by the home and life business units but also returning broadly across products and end applications. We expect our GAAP gross margin in the September quarter to be in the range of 54% to 56%. We expect our non-GAAP gross margin to also be in the range of 54% to 56%, both of which mark strong sequential improvements from the prior quarter.

Speaker Change: We expect both the industrial and commercial, as well as the home and life business units, to be up sequentially in the September quarter, with growth being led by the home and life, but also returning broadly across products and end applications.

Dean Butler: We expect our gap goes margin in the September quarter to be in the range of 54% to 56%. We expect our non-GAAP growth margin to also be in the range of 54% to 56%. Both of which mark strong sequential improvements from the fire quarter. As revenues further recovers for the more noble runway, our distribution mix improves, and we want to expect growth margins to continue to increase. We expect gap operating expenses in the September quarter to be in the range of 123 million to 125 million. We expect non-GAAP operating expenses to be in the range of 101 million to 103 million.

Speaker Change: We expect our GAAP gross margin in the September quarter to be in the range of 54% to 56%

Speaker Change: We expect our non-GAAP gross margin to also be in the range of 54% to 56%, both of which mark strong sequential improvements from the prior quarter.

Dean Warren Butler: As revenue further recovers toward the more normal run rate, our distribution mix improves, and we wouldn't expect gross margins to continue to increase. We expect GAAP operating expenses in the September quarter to be in the range of $123 million to $125 million.

Speaker Change: As revenue further recovers towards a more normal run rate, our distribution mix improves, and we would expect gross margins to continue to increase.

Speaker Change: We expect GAAP operating expenses in the September quarter to be in the range of $123 million to $125 million. We expect non-GAAP operating expenses to be in the range of $101 million to $103 million.

Dean Butler: And finally, we expect gap loss per year to be in the range of 95% to 1 dollar and 25% loss. And we expect non-GAAP loss per year is expected to be in the range of 10% to 30% loss.

Speaker Change: And finally, we expect GAAP loss per share to be in the range of $0.95 to $1.25 loss.

Speaker Change: And we expect non-GAAP loss per share is expected to be in the range of $0.10 to $0.30 loss.

Giovanni Pacelli: I'm about to have a call back over to Giovanni for the Q&A session.

Dean Warren Butler: We expect non-GAAP operating expenses to be in the range of $101 million to $103 million. And finally, we expect GAAP loss per share to be in the range of $0.95 to $1.25. And we expect non-GAAP loss per share to be in the range of $0.10 to $0.30. I'll now hand the call back over to Giovanni for the Q&A session.

Giovanni Pacelli: Giovanni? Thank you, Dan.

Speaker Change: I'll now hand the call back over to Giovanni for the Q&A session.

Giovanni Pacelli: Thank you, Dean. Before we open up the call for Q&A, I'd like to announce our participation in KeyBank's Capital Markets Technology Leadership Forum and Bail on August 5th, Jeffrey's Semiconductor IP Hardware and Communications Technology Conference in Chicago in late August and Evercore ISI's 2024 Semiconductor IP Hardware Networking, also in Chicago in late August.

Giovanni Pacelli: Before we open up the call for Q&A, I'd like to announce our participation in two banks, capital markets, technology, leadership, form, and bail on August 5th.

Giovanni Pacelli: Giovanni? Thank you, Dean. Before we open up the call for Q&A, I'd like to announce our participation in KeyBank's Capital Markets Technology Leadership Forum in Vail on August 5th.

Giovanni Pacelli: Jeffrey Semik and Dr. IT Hardware and Communications Technology Conference in Chicago in late August. We'll have open up the call for questions to accommodate as many people as possible before the market opens. I asked that you limit your time to one question and one follow-up. Anya? As a reminder to ask a question, please press star one one in your telephone and wait for your name to be announced. To withdraw your question, please press star one one again.

Speaker Change: Jeffrey's Semiconductor IP Hardware and Communications Technology Conference in Chicago in late August and Evercore ISI's 2024 Semiconductor IP Hardware Networking Conference also in Chicago in late August .

Operator: We'll now open up 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. Tanya?

Speaker Change: Will now open up 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.

Speaker Change: on yeah

Operator: As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 111. One moment for our first question, which will come from Matt Ramsay of T.D. Cohen. Your line is open. Thank you very much. Good morning, guys, and Dean, welcome. I guess for my first question, Matt, I wanted to dig into a couple of the end markets. I think we're all obviously following the cyclical recovery. Unknown Speaker for your company, but there are some new drivers out in the back of this that, on the Electronic Shelf Labeling Mark.

Speaker Change: As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again.

Matt Ramsey: And one moment for our first question, which will come from Matt Ramsey of TD Cohen; your line is over.

Speaker Change: And one moment for our first question.

Speaker Change: Which will come from Matt Ramsay of T.D. Cohen. Your line is open.

Matt Johnson: Thank you very much. Good morning, guys. And Dean, welcome to welcome to the show here. I guess for my first question, Matt, I wanted to dig into a couple of the.

Matt: of the end markets. I think we're all obviously following the cyclical recovery for your company, but there's some new drivers out of the back of this that I wanted to dig into a little bit. And the first one is on the electronic shelf labeling market. Maybe you could spend a couple of minutes on

Matthew D. Ramsay: Spend a couple of minutes on the size of the market, the trajectory of the market, Unit Economics, and a little bit about how that market works for a company like. Go through an intermediary, do you go to the retailer directly?

Speaker Change: the size of the market, the growth trajectory of the market,

Speaker Change: A little bit about how that market works for a company like you guys. Do you go through an intermediary? Do you go to the retailer directly? Do you see retailers, once they make the decision to go electronic, roll things out super fast?

Speaker Change: Do they do it regionally? Just trying to get my head around the growth dynamics and.

Matt Johnson: http://www.larryweaver.com trying to get my head around the growth. Yeah, sure, Matt. Good morning. So maybe just starting at the top with electronic or digital shelf labels. Like a lot of areas that we focus on, these things don't happen overnight. So this has been a multi-year investment and multi-year partnership with a lot of customers out there. So to answer some of those questions, the first is that we do work directly with our customers, as the shelf label suppliers. So they would actually make the shelf label, and then they would work with the retailers on the strategy deployment and kind of rollout of those products and technologies. You know, shelf labels are not new.

Speaker Change: some of the unit.

Speaker Change: Unknown Speaker 05, Unknown Speaker 05, Unknown Speaker 05,

Speaker Change: Thanks.

Speaker Change: Yeah, sure, Matt. Good morning. So maybe just starting at the top with the electronic or digital shelf labels.

Speaker Change: Like a lot of areas that we focus on, these things don't happen overnight. So this has been a multi-year investment and multi-year partnership with a lot of customers out there.

Speaker Change: So to answer some of those questions, the first is we do...

Speaker Change: Worked directly with our customers being the shelf label suppliers, so they would actually make the shelf label and then they would work with the retailers on the strategy deployment and kind of rollout of those products and technologies.

Matt Johnson: As a technology, they've been around for a long time, but we've seen a real increase in the adoption of those technologies, really led by, you know, a few dynamics. One is, I think the technology maturity is now there in terms of robustness, interoperability, and reliability. Another key factor that we've seen is battery life, where the battery life of these labels is long enough that retailers don't have to worry about going around and replacing those. They can last years, depending on how they're being used.

Speaker Change: You know, shelf labels are not new as a technology. They've been around for a long time, but we've seen a real increase in the adoption of those technologies, really led by

Speaker Change: , you know, I'm a big fan of the the the the the the the the the the the the

Speaker Change: A few dynamics. One is I think the technology maturity is now there in terms of the robustness, the interoperability, you know, reliability. Another key factor that we've seen is battery life, where the battery life of these labels is enough that the retailers don't have to worry about going around and replacing those.

Matt Johnson: And then, you know, software reliability is also critical. And then, I think the key key here is the return. Our retailers are seeing returns that are really attractive. And as a result of those things coming together, we're seeing the adoption of retailers globally really accelerate. And this is not a phenomenon that's unique to one retailer or one geography.

Speaker Change: , and then the software reliability is also critical. And then I think the key key here is the return. Our retailers are seeing returns that are really attractive to them.

Speaker Change: And as a result of those things coming together, we're seeing the adoption of retailers globally really accelerate.

Speaker Change: And this is not a phenomenon that's unique to one retailer or one geo. We're seeing this.

Matt Johnson: We're seeing this as a broad trend, and as we've said, we see ourselves as very well positioned in that space and as a leading supplier because of, one, our underlying technology. A lot of our customers deploy a proprietary implementation, which is one of the many areas we thrive in in the IMT. We know how to develop products that last a long time. From a battery life perspective, they're secure, they're reliable, they work well, and they work well together.

Speaker Change: As a broad trend. And as we've said, we see ourselves as very well positioned in that space and as a leading supplier because of one, our underlying technology, a lot of our customers deploy a proprietary implementation, which is one of the many areas we thrive in the IMT.

Speaker Change: We know how to develop products that last a long time, from a battery life perspective, they're secure, they're reliable, they work well, they work well together. All things that are critical in a retail environment where consumers are actually going to be seeing these things and experiencing these products.

Matt Johnson: All things that are critical in a retail environment where consumers are actually going to be seeing these things and experiencing these products. So I think, you know, even though we've started shipping over the last few years with a lot of unit volume, I still think we're in the early days in this market. And I'd also add that, you know, in terms of ways to think about these deployments, most of our customers and retailers will prototype, right? They'll prototype stores, they'll try different configurations, they'll see what's happening, and then they'll expand those within a region or within a geography, and they'll keep going.

Speaker Change: So I think, you know, even though we, you know, started, you know, shipping over the last few years, a lot of unit volume, I still think we're early days.

Speaker Change: in this market. And I'd also add that, you know, in terms of ways, ways to think about these deployments.

Speaker Change: Most of our customers and retailers, they'll prototype, right? They'll prototype stores, they'll try different configurations, they'll see what's happening, and then they'll expand those within a region, within a geo, and they'll keep going.

Matt Johnson: So again, still early days, but we like the progress we see; we think this is a durable trend. And it's really because of, you know, one, the maturity of the technology and the returns, and our position here is strong. So we're excited. Now, thank you, Matt, for all your help.

Speaker Change: So again, still early days, but we like the progress we see, we think this is a durable trend, and it's really because of, you know, one, the maturity of the technology and the returns, and our position here is strong, so we're excited about this.

Matt Johnson: There, I think it's an important point on the return. I guess this is my second question. Unknown Attendee, Matt Johnson, Gary Mobley, Blayne Curtis, Cody Acree, Nathaniel Bolton, [inaudible] Developments in different countries, you mentioned Japan in your prepared script, and maybe just the kind of level set for us on the different programs that customers have in flight now. Sure, uh, you know. Maybe to compare and contrast with ESL, a slightly more mature market in the grand scheme of things.

Speaker Change: Thank you, Matt, for all the details there. I think it's an important point on the returns for the customer.

Speaker Change: I guess this is my second question, sort of similar but on the smart metering market, you guys had a lot of success in the UK.

Speaker Change: in some of their programs a few years ago, and it seems like there's some developments in different countries. You mentioned Japan in your prepared script, Matt.

Speaker Change: And maybe just kind of level set us on the different programs that your customers have in flight now in the different regions and what we should expect from that market in the next, I don't know, 24 months.

Matt Johnson: Market dynamics are very different in terms of the rate and pace at which they move. You know, these things can be out there for 10 or 15 years in terms of life cycles. But the bigger picture, again, you know, a very well-positioned market leader. That market leadership is a function of, you know, having all the requisite technologies our customers need. It's not just one technology; it's multiple technologies that we have to bring together across, you know, sub-gigahertz and, you know, Bluetooth, and Wi-Fi all coming together, as we mentioned in the prepared remarks. And, you know, the way it started, as you mentioned, "roll up" like we saw in the UK, but a couple of phenomena.

Matt: Sure, uh, you know,

Speaker Change: Unknown Speaker You know, maybe to compare and contrast with the ESL a little, you know, more mature market in the grand scheme of things, market dynamics are very different in terms of the rate and pace at which it moves, you know, these things can be out there for 10 or 15 years in terms of life cycles.

Speaker Change: But big picture, again, you know, very well positioned, market leader.

Speaker Change: That market leadership is a function of, you know,

Speaker Change: Having all the requisite technologies our customers need, not just one technology, it's multiple technologies that we have to bring together across, you know, sub-gigahertz and, you know, Bluetooth, Wi-Fi all coming together, as we mentioned in the prepared remarks.

Speaker Change: And, you know, the way it started, as you mentioned, you know, roll up like we saw in the UK, but a couple of phenomena. One is the

Matt Johnson: One is the rollout. You'd expect, you know, it takes years for these deployments to happen, and then you'd expect kind of a peak and then the business to roll off. What we're seeing is it's much more resilient and durable because once the rollout kind of gets to its, you know, saturation, if you will, they start renewing the meters on the back end of that. So we're seeing a lot more life and stability in each deployment than, you know, I think would have originally been expected. And you only know that as this technology becomes more mature and you get to see it. And then we're also seeing new deployments go out globally. And that's important, right?

Speaker Change: Robert Johnson, Unknown Executive, Robert Johnson, Unknown Executive, Robert Johnson,

Speaker Change: Unknown Executive, Robert Johnson, Giovanni Pacelli, Matt Johnson, Giovanni Pacelli, Unknown

Matt Johnson: So across new geos, new applications, and this is brought to gas, water, and electric. And you can really just see, again, that combination of the maturity of the technology, the reliability, the robustness, and the returns for those customers. Putting that intelligence inside of meters gives returns for those deployments, and it can be different depending on the geography and their care abouts and what they're trying to accomplish.

Speaker Change: Go all the way.

Speaker Change: And that's important, right? So across new geos, new applications, and this is brought, this is gas, water, and electric. And you can really just see, again, that combination of the maturity of the technology, the reliability, the robustness, and the returns for those customers.

Speaker Change: Putting that intelligence inside a meter gives returns for

Speaker Change: Thank you. Thank you. Thank you.

Speaker Change: Deployment.

Speaker Change: And it can be different depending on the G.O. and their care about them and what they're trying to accomplish. But the point is they see the return and they see the technology maturity.

Matt Johnson: But the point is, they see the returns, and they see the technology maturity, and we have a leadership position there. So we think that's a very long-term, you know, robust, and reliable space for us. And, you know, we don't take that for granted. And, you know, we're not doing a victory lap in the sense that this is over. It's still early days, but we're well-positioned to continue bringing new technology to the space and continuing that leadership with what we have in Series 2 and what's coming in Series 3. I really appreciate the thoughts.

Speaker Change: And we have a leadership position there, so we think that's a very long-term, you know, robust and reliable space for us.

Speaker Change: And, you know, we don't take that for granted, and, you know, we're not doing a victory lap in the sense that this is done, it's still early days, but we're well-positioned to continue bringing new technology to the space and continuing that leadership with what we have in Series 2 and what's coming in Series 3.

Thomas O'malley: Best of luck as we get through the cyclicality here and back to the growth vectors. Thanks, guys. And our next question will be coming from Thomas O'Malley of Barclays. Thomas, your line is open.

Speaker Change: Really appreciate the thoughts. Best of luck as we get through the cyclicality here and back to the growth factors. Thanks, guys. Thanks, Matt.

Speaker Change: And our next question will be coming from Thomas O'Malley of Barclays. Thomas, your line is open.

Dean Warren Butler: Hey, guys, thanks for taking my question. And welcome, Dean. My first one was just on pricing; over the last couple of quarters, it's really held in a lot better than some would have imagined kind of on the upswing. Could you guys talk about when you look at September, just kind of taking the assumption of just a little bit of a pricing decrease, you know, your midpoint of your guidance assumes another robust step up in units.

Thomas O'malley: Hey guys, thanks for taking my question and welcome Dean My first one was just on pricing over the last couple of quarters It's really held in a lot better than than some would have imagined kind of on the upswing

Speaker Change: Could you guys talk about, when you look at September , just...

Speaker Change: kind of taking the assumption of just a little bit of a pricing decrease, you know, your the midpoint of your guidance assumes another robust step up in units. Is that how we should be thinking about the next couple of quarters?

Speaker Change: On the revenue upswing, is it largely driven by units or should we be seeing any sort of ASP tailwind as we get some of the upgrades to your newer products?

Dean Warren Butler: Is that how we should be thinking about the next couple of quarters on the revenue upswing? Is it largely driven by units, or should we be seeing any sort of ASP tailwind as we get some of the upgrades to your newer products? Yeah, Tom, good question. This is Dean.

Dean: Yeah, Tom, good question. This is Dean. Thanks for the warm welcome. On the ASP front, largely what we saw in the June quarter and then now what we look into the September quarter guidance is primarily a function of MIPS.

Dean Warren Butler: Thanks for the warm welcome. On the ASP front, largely what we saw in the June quarter and now what we look at for the September quarter guidance is primarily a function of MIPS. You know, in the June quarter, we ended up shipping quite a bit more direct customers than we typically would. What we find is that the mix of products and the ASPs between direct versus channel is just a little bit different in the nature of the long tail versus large consolidated customers. So I wouldn't read into that too much.

Dean: In the June quarter, actually, we ended up shipping quite a bit more direct customers than we typically would.

Dean: What we find is

Dean: That the mix of products and the ASPs between direct versus channel is just a little bit different in the nature of long-tail versus large consolidated customers.

Dean Warren Butler: Pricing continues to be relatively stable. There hasn't been a whole lot of change in the last couple of quarters, from what I can ascertain. And as I look forward into probably the next couple of quarters, at least what we can see on the visibility front, I don't think you'll see much change at all from a sort of like for like. So customer on customer, you know, ASP change, if that helps Tom. Unknown Speaker Go ahead. Unknown Speaker Just add to that, just, you know, exactly.

Dean: So I wouldn't read into that too much. Pricing continues to be relatively stable. There hasn't been a whole lot of change in the last couple of quarters from what I can ascertain.

Dean: And as I look forward into probably the next couple of quarters, at least what we can see on the visibility front, I don't think you'll see much change at all from a sort of like-to-like, so customer-on-customer, you know, ASP change, if that helps Tom.

Dean Warren Butler: An easy way to think about it is, you know, there's been no big change in the pricing environment out there. And what we're seeing right now is, as we've said, really a function of our mix. So as revenue goes up, and that mix continues to change, you'll see the gross margin, you know, improve. And that's what we're guiding from Q2 to Q3, which is really important for people to understand. Yeah, and I think the second part of that is obviously the mix back to Disney. So you said Disney was 55 days.

Tom: Thank you. That was super helpful.

Speaker Change: Go ahead. I'll just add to that, just, you know, exactly, an easy way to think about it is...

Speaker Change: You know no big change in the pricing environment out there and what we're seeing right now is as we said really a function of our mix

Speaker Change: So as revenue goes up and that mix continues to change, you'll see the gross margin, you know, improve, and that's what we're guiding from Q2 to Q3, which is really important for people to understand.

Thomas O'malley: If you look over the last three quarters, similarly, it's gone from like 63 to 66 to 69% of revenue. Can you just talk about the cadence there? Like, do you think 55 days is a place where you're going to start to see some of these guys being more aggressive? Like, what's the right target for Disney? And like, in terms of how quickly you can get back to what was the norm, which is the low 80s, by my math, like, how long do you think that will take?

Speaker Change: Yeah, and I think that the second part of that is obviously the mix back to DISTI. So you said DISTI was 55 days.

Speaker Change: If you look over the last three quarters similarly, it's gone from like 63 to 66 to 69 percent.

Speaker Change: of Revenue. Can you just talk about like the cadence there? Like, do you think 55 days is a place where you're going to start to see some of these guys being more aggressive? Like what's the right target for Disney? And like, in terms of how quickly you can get back to what was the norm, which is low 80s by my math, like how long do you think that takes?

Speaker Change: Thank you, guys.

Speaker Change: Yeah, that's right. I think that, you know, replenishment is probably a

Speaker Change: I'll call it like roughly two quarters to sort of keep moving. Look, we've deliberately been, you know, shipping

Speaker Change: left into the channel to try to continue to burn down inventory as the channels and customers also looked to burn down inventory.

Speaker Change: What has happened is that's gotten lower than we typically expect. Typically, Tom, we would probably look at 70-75 days as kind of a healthy sort of channel inventory mix.

Tom: Like you said, we're at 55 today.

Tom: Look, I think customers and distributors, they're all sort of watching it, and nobody's in a hurry to sort of replenish quickly, and we're not pushing for that, just to be clear about it.

Tom: I do think we ended the quarter at about...

Speaker Change: 69% of our revenue coming from channel. Typically, like you said, we're 80%, you know, kind of channel based and about 20% direct.

Speaker Change: So, I do think ad channel, you know, inventory.

Speaker Change: comes down starts to replenish those long tail end customers and burn through their final excess inventory and start coming back into a normal run rate will keep moving up toward that more normal distribution versus direct a set of business.

Speaker Change: and then hopefully over the course of the next couple of quarters.

Speaker Change: Distributors are comfortable with holding a more normal inventory level, and we'd like to see that back to the 70-75 days, but like I said, I would just reiterate, we're not pushing for that, and that is not something that we're contemplating in the September guide as we talk today.

Thomas O'malley: Thank you, guys. That is not something that we're contemplating in the September guide as we talk today, so in one moment for our next question. Our next question will be coming from Quinn Bolton of Needham. Your line is open, Quinn.

Speaker Change: Thank you, guys.

Speaker Change: In one moment for our next question.

Speaker Change: Our next question will be coming from Quinn Bolton of Needham. Your line is open, Quinn.

Unknown Attendee: Hey, guys, and welcome, Dean. I guess just a quick clarification on your answer to Tom's question there. Dean, it sounds like you're sort of saying or implying that the Disney Mix does normalize, I think you said over a couple quarters, but I'm hoping to try to pin you down a little bit more. Do you think it will normalize kind of by the end of this year? Or do you think that Disney Mix, you know, takes into calendar 25 before you get back to that more typical 80% of sales level? Yeah, I don't have a perfect crystal ball, Quinn.

Unknown Attendee: Hey guys, and welcome. Dean, I guess just a quick clarification on your answer to Tom's question there. Dean, it sounds like you're sort of saying or implying that the DistiMix does normalize. I think you said over a couple quarters, but I'm hoping to try to pin you down a little bit more. Do you think it normalizes kind of by the end of this year, or do you think the DistiMix...

Speaker Change: takes into calendar 25 before you get back to that more typical 80% of sales level.

Dean Warren Butler: But if I were a betting person, I really would sort of put your highest odds on early 2025, rather than you getting all the way there back to normal by the end of this calendar year. So that's, you know, for what I can see from the backlog and the way your customers are behaving, it's probably early 2025 rather than the end of this calendar year. And then I guess my first question is kind of knowing that that mix towards DISTI is helping somewhat, but you're not fully there in the September quarter. The roughly 200 basis point margin improvement in September feels like some of that probably is, you know, it's not entirely all DISTI mix.

Dean: Yeah, I don't have a perfect crystal ball Quinn. But if I were a betting person, I really would sort of put your highest odds on early 2025 rather than you getting all the way there back to normal by the end of this calendar year.

Dean: So that's, you know, for what I can see on backlog and the way your customers are behaving, it's probably an early 2025 rather than a end of 24.

Unknown Attendee: I guess my first question is kind of knowing that mix towards DISTE is helping somewhat, but you're not.

Speaker Change: Excuse me, you're not fully there, in the September quarter, the roughly 200 basis point margin improvement.

Speaker Change: In September , it feels like some of that probably is, you know, it's not entirely all DISTI mix, and so can you just kind of walk us through what are the biggest drivers of the gross margin improvement in the September quarter, you know, beyond the mix back towards DISTI?

Dean Warren Butler: And so can you just kind of walk us through what were the biggest drivers of the gross margin improvement in the September quarter, you know, beyond the mix back towards DISTI? Yeah, I mean, there's the channel, there's the product specific, and then there's, you know, the absorption of overhead. So I think all three can contribute at different levels.

Speaker Change: Yeah, I mean there's the channel, there's product-specific, and then there's the absorption of overhead. So I think all three contribute to differing levels.

Dean Warren Butler: In the move from June quarter 53 to now guiding September quarter 55, that 200 basis points, it's largely around your channel and product mix. So if I look at it, it looks like, you know, better margin products are likely to ship into September quarter, and the channel will probably continue to make some progress as an overall mix of revenue. And then, to a lesser degree, but it is certainly a contributing factor in growing the revenue by 20 million, you know, sequentially. That, you know, has an overhead of absorption, you know, and contribution as well.

Speaker Change: In the move from June quarter 53 to now guiding September quarter 55, that's 200 basis points.

Speaker Change: It's largely around, you know, channel and product mix, so if I look at it, it looks like, you know, better margin products are likely to ship into September quarter.

Speaker Change: Channel will continue to probably make some progress as an overall mix of the revenue.

Dean Warren Butler: And when I think about September quarter 200 basis points, and then going forward from there, I think about September is 55%, which is you sort of back into kind of the normal range. And then as we sort of sequentially grow from there, okay, channel sort of, you know, contributing, and then overhead absorption contributing, and probably less so than a specific set of products or a specific set of customers as being, you know, probably third on the list as I look forward over the next few. Thanks, Dean.

Speaker Change: And then to a lesser degree, but he is certainly a contributing factor in growing the revenue by 20 million, you know, sequentially.

Speaker Change: That, you know, has an overhead absorption, you know, contribution as well.

Speaker Change: And when I think about September quarter 200 basis points, and then going forward for there. I think about September is 55% is you sort of back into kind of the normal range.

Speaker Change: And then as we sort of sequentially grow from there, okay, channel sort of, you know, contributing and then overhead absorption contributing, and probably less so than a specific set of products or a specific set of customers as being, you know.

Speaker Change: Probably third on the list as I look forward over the next few quarters.

Dean Warren Butler: And I guess just to, you know, obviously continuing to digest inventory, albeit at a lower rate into the second half of the year. Any updated thoughts on when you think you'll largely be back to shipping in line with consumption? Is that something you think happens by year end?

Thanks, Ethan: Got it. Thanks, and then I guess just a...

Speaker Change: You know obviously continuing to digest inventory albeit at a lower rate into the second half of the year

Speaker Change: Any any updated thoughts on on when you think you'll largely be back to shipping in line with consumption. Is that something you think?

Speaker Change: happens by year end? Could you see some customers, you know, continuing to early 25? Just any updated thoughts on on when you think you're largely back to shipping in line with consumption. Thank you.

Unknown Attendee: Could you see some customers, you know, continuing to the early 25? Just any updated thoughts on when you think you're largely back to shipping in line with consumption? Thank you. It's actually, it's a tough question. I know a lot of people have that on their, you know, top of their list on, you know, when do we get back to sort of regular consumption? Look, for us, it's difficult to tell. I don't think anybody has any great precision on this one.

Speaker Change: It's actually, it's a tough question. I know a lot of people have that on their top of their list on, you know, when do we get back to sort of regular consumption.

Speaker Change: Look, for us, it's difficult to tell. I don't think anybody has any great precision on this one. Look, we're looking at, you know, trends. Are things trending in the right direction? Are bookings coming up? Is POS coming back?

Dean Warren Butler: Look, we're looking at, you know, trends. Are things trending in the right direction? Are bookings coming in? Is POS coming back?

Dean Warren Butler: Are inventory on the customers that we survey coming down, and therefore, sort of the excess is bleeding off? Those indicators are all going in the right direction when you're back to full, or whatever you call it regular normalized consumption rate. I don't know; I don't have a great prediction.

Speaker Change: Our inventory on the customers that we survey coming down and therefore sort of the excess is bleeding off Those indicators are all going the right direction

Speaker Change: When we're back to full, sort of call it regular, normalized consumption rate,

Dean Warren Butler: I think it's also clouded by a number of new designs that are now starting to hit production as well, which are contributing but also masking it to some degree. And you have to imagine, you know, a company like Silicon Labs with, you know, thousands of customers; there's no one generic answer that's gonna be a great fit for everything. So, long story short.

Speaker Change: I don't know. I don't have a great prediction. I think it's also clouded by a number of new designs that are now starting to hit production as well, that are contributing, that also mask it to some degree.

Speaker Change: And you have to imagine, you know, a company like Silicon Labs with, you know, thousands of customers, there's no one generic answer that's going to be a great fit for everything.

Dean Warren Butler: I don't think we're quite there yet, but really tough to call when and what level that kind of normal consumption rate is. I don't know, Matt, if you wanted to add anything. No, I think 100% is.

Speaker Change: So, long story short, don't think we're quite there yet, but really tough to call when and what level that kind of normal consumption rate is. I don't know, Matt, if you wanted to add anything.

Matt Johnson: Maybe the only thing to add is, you know, clearly Q2 is not at our consumption levels, and neither is our Q3 guide. And, as Dean said, I think, you know, the three pillars we've talked about are, you know, to drive growth, the inventory to stocking, going the right direction, but not done yet. Design when ramps, you know, that's encouraging that, you know, we've been on an incredible design when pace over the last few years; we've been driving design when growth annually throughout this cycle, which is remarkable, and we're finally starting to see those designs ramp. It's early days, but they're ramping up.

Matt: No, I think you're 100% it. Maybe the only thing to add is, you know, clearly Q2 is not at our consumption levels, and neither is our Q3 guide.

Matt: And as Dean said, I think, you know, the three kind of pillars we've talked about are, you know, to drive growth, the inventory to stocking going the right direction, but not done yet.

Speaker Change: DesignWin ramps, you know, that's encouraging that, you know, we've been on an incredible DesignWin pace over the last few years. We've been driving DesignWin growth annually throughout this cycle, which is remarkable. And we're finally starting to see those designs ramp.

Matt Johnson: So that's gonna give us some lift moving forward in addition to the de-stocking as that starts to wind down at some point. And then the third pillar is the end market, which is obviously the most difficult to call. But like the progress on de-stocking, like the progress on design wins, still watching the end market because there is still a fair amount of uncertainty.

Speaker Change: you know, it's early days, but they're ramping. So, you know, that's going to give us some lift moving forward, in addition to the destocking as that, you know, starts to wind down at some point. And then the third pillar is the end market, which is obviously the most difficult call.

Speaker Change: But, like the progress on destocking, like the progress on design wins, still watching the end market because there's still a fair amount of uncertainty out there.

Srinivas Reddy Pajjuri: Thanks, Matt. Thanks, Dean. And our next question will be coming from Srini Pajjuri of Raymond. Your line is open. Yeah, good morning, guys. Maybe first one for Matt. Matt, you talked about design when the momentum was pretty strong; maybe you could give us an update, in particular on the Wi-Fi market. I know you talked about some progress on the smart metering, just curious as to what the end mark is. I mean, obviously, this is a very large market when we talk about Wi-Fi.

Speaker Change: Got it. Thanks, Matt. Thanks, Dean.

Speaker Change: And our next question will be coming from Srinivas Pajjuri of Raymond. Your line is open.

Srinivas Reddy Pajjuri: Yeah, good morning, guys. Maybe first one for Matt. Matt, you talked about design when momentum being pretty strong. Maybe you can give us an update, in particular on the Wi-Fi market.

Srinivas Reddy Pajjuri: I know you talked about some progress on the smart metering. Just curious as to...

Srinivas Reddy Pajjuri: What end market – obviously this is a very large market when we talk about Wi-Fi. I'm just curious, outside of smart metering, what are your target markets with this product?

Srinivas Reddy Pajjuri: Curious as to, outside of smart metering, what are your target markets with this product? And how much of the overall SAM do you think you're addressing, and how should we kind of think about revenue contribution from Wi-Fi as we think about the next, you know, 12 years?

Speaker Change: And how much of the overall SAM do you think you're addressing and how should we kind of think about, you know, revenue contribution from Wi-Fi as we think about the next, you know, 12 to 18 months?

Matt Johnson: I'm just taking a lot of notes there. See if I can answer as much of that as possible. First, you know, we are in the early days of Wi-Fi.

Speaker Change: Got it. I'm just taking a lot of notes there, see if I can answer as much of that as possible.

Matt Johnson: You know, as we've said, we're introducing our first product of many in the space. What is exciting is that first product is getting a great market reception. We've shared that the opportunity funnel was a record for us as a company as we introduced that product.

Speaker Change: First, you know, we are early days in Wi-Fi, you know, as we've said, we're introducing our first product of many in the space.

Speaker Change: What is exciting is that first product is getting a great market reception. We've shared that the opportunity funnel was record for us as a company as we introduced that product. Shared in the prepared remarks, we're starting to convert those opportunities to design ones.

Matt Johnson: Shared in the prepared remarks, we're starting to convert those opportunities to design ones, which is really awesome to see. You know, once you have design opportunities, it's going to take, you know, depending on the product application, customer, geography, etc., you're going to see, you know, a year or two to start to see those ramp up. So the quick answer is, you know, I would expect to see Wi-Fi growth continuing and, if not, accelerating, going into 2025 and 2026.

Speaker Change: which is really awesome to see, you know, once you have design wins, it's going to take, you know, depending on the product application, customer geo, etc, you're going to see, you know, a year or two to start to see those ramps.

Speaker Change: So the quick answer is, you know, I would expect to see Wi-Fi growth continuing and if not accelerating, going into 2025 and 2026.

Matt Johnson: You know, in terms of the SAM, the products, those types of questions, we are focused right now on, for lack of a better term, our backyard. And our backyard is, you know, one-by-one Wi-Fi 6 for IoT applications at the edge.

Speaker Change: In terms of the SAM, the product, those types of questions, we are focused right now on, for lack of a better term, our backyard. And our backyard is one-by-one Wi-Fi 6 for IoT applications at the edge.

Matt Johnson: And what we're bringing there is, as I've said a few times, the world's leading power consumption, which brings new meaning to Wi-Fi battery life in those applications. So, you know, where we're seeing designs, we're seeing designs where someone needs longer battery life that's meaningful. And we're also seeing a lot of design wins in markets where there is pull-through with our existing customers. Because of our, you know, large base of customers, and we serve a lot of other wireless technologies in those spaces, we see, you know, almost instant opportunity and interest in having one supplier put all these things together for those customers. So that's kind of the quick answer to where and that.

Speaker Change: And what we're bringing there is, as I've said a few times, is the world's leading power consumption, which brings new-to-Wi-Fi battery life to those applications.

Speaker Change: So, you know, where we're seeing designs, we're seeing designs where someone needs longer battery life that's meaningful, and we're also seeing a lot of design wins in markets where there's pull-through with our existing customers.

Speaker Change: Because of our, you know, large base of customers, and we serve a lot of other wireless technologies in those spaces, we see, you know,

Speaker Change: Almost instant opportunity and interest in having one supplier put all these things together for those customers.

Matt Johnson: And, you know, an important way to think of it is, as you said, this is a big market, and these things take time. So, you know, the first product, like what we're seeing out of the gate, it's a lot of work, but it's going in the right direction. And you should expect to see multiple products coming as we move forward that continue to build out that position, expand the SAM, and increase the capability and offering that we offer the customers. I have a question on competition, in particular in China.

Speaker Change: So that's that's kind of the quick answer of the where and that and you know important way to think of it That as you said, this is a big market and these things take time

Speaker Change: So, you know, the first product, like what we're seeing out of the gate, it's a lot of work, but it's going in the right direction. And you should expect to see multiple products coming as we move forward that continue to build out that position, expand the SAM, and increase the capability and offering that we offer the customers in those markets.

Speaker Change: Got it. Thanks, Matt. Very helpful.

Speaker Change: And then I have a question on competition, in particular in China, you talked about smart metering, it sounded like you're not participating in the China smart metering market.

Matt Johnson: You talked about smart meters. It sounded like you're not participating in the Chinese smart metering market. Just wondering if there's any reason for that, and, in general, you know, we've been hearing about increased competition from domestic suppliers. So if you could talk about, you know, what you're seeing in that market, that would be very, Yeah, sure. So, you know, the quick answer is, "Why not?"

Speaker Change: I'm just wondering if there's any reason for that, and in general, you know, we've been hearing about increased competition from domestic suppliers, so if you could talk about, you know, what you're seeing in that market, that would be very helpful.

Matt Johnson: You know, China, in terms of the local market there? The quick answer is, it's not for lack of competitive solutions; we have full stop the world's leading solutions for intelligent metering. That's, that's the one that you can imagine that they do not want a foreign supplier providing the technology behind their, That's the fastest way to answer that question. We do see opportunities in China for the export of meters that would go outside of China, but not for ones to be consumed inside of China.

Speaker Change: Yeah, sure. So, you know, the quick answer is why not, you know,

Speaker Change: China, in terms of the local market there.

Speaker Change: The quick answer is it's not for lack of competitive solutions. We have full-stop the world's leading solutions for intelligent metering That's that's the one that you can imagine that they do not want a foreign supplier providing the technology behind their infrastructure

Speaker Change: That's the fastest way to answer that question.

Speaker Change: We do see opportunities in China for export of meters that would go outside of China, but not for ones to be consumed inside of China.

Matt Johnson: So I don't think that that should surprise anyone. It's a pretty common dynamic and similar to what we see in other geographies, including the US and Europe, where I don't think a Chinese supplier would be considered for smart metering.

Speaker Change: So, I don't think that should be surprising to anyone. It's a pretty common dynamic and similar to what we see in other geos, including US and Europe , where I don't think a Chinese supplier would be considered for smart metering infrastructure.

Matt Johnson: Uh, in terms of, you know, Kind of the next clicks on that. Nothing new. You know, in China, you only win if you have a solution that there's no alternative to, and local suppliers are favored.

Speaker Change: In terms of, you know,

Speaker Change: Kind of the next clicks on that nothing new is you know in China You only win if you have a solution that there's no alternative to

Speaker Change: And local suppliers are favored. That's not new. It's probably amplified over the last few years.

Matt Johnson: That's not new; it's probably amplified over the last few years. What we're seeing right now is still strong design momentum in China. But in terms of the strength of the end market, it's still relatively weak, although we have seen some improvement. It's gone up for us, but nothing that we're banking on or building into our forecast. So hopefully, that helps. Thanks, Matt. And welcome, Dean. Thank you. And our next question will be coming from Kyle Smith of Stiefel. Kyle, your line is open. Good morning, everyone. Kyle Smith on for Tore Svanberg. It's the default.

Speaker Change: What we're seeing right now is still strong design wind momentum in China, but in terms of strength of the end market, it's still relatively weak, although we have seen some improvement. It's gone up for us, but nothing that we're banking on or building into our forecast or numbers. So hopefully that's helpful.

Dean: Yeah. Thanks, Matt, and welcome, Dean.

Dean: Thank you.

Speaker Change: And our next question will be coming from Kyle Smith of Stiefel.

Kyle Smith: Kyle, your line is open. Good morning, everyone.

Kyle Smith: First off, congrats on the continued sequential growth and the record design wins in multiple end markets this past quarter. Maybe I could start there. So maybe, I know we've talked about this a bit, but any additional color on the lifetime value of design wins in the prior quarter, and if you have any commentary on pricing trends you're seeing within these new revenue streams, that would be great. Okay, so I'm just trying to, let me try to answer the design one question.

Kyle Smith: Kyle Smith on for Tore Svanberg, it's default. First off, congrats on the continued sequential growth and

Kyle Smith: The Record Design Wins in Multiple End Markets this past quarter. Maybe I could start there. So maybe, I know we've talked about this a bit, but any additional color on the lifetime value of design wins in the prior quarter?

Speaker Change: And if you have any commentary on pricing trends you're seeing within these new revenue streams, that would be great.

Speaker Change: Okay, so, I'm just trying to...

Speaker Change: Let me try to get to the design one, design one piece. So...

Kyle Smith: So the quick answer is, you know, we've talked quite a bit about the trend of our design lens. We haven't shared the magnitude, but the way to think about it is we always look at our design lens targets in the sense of what levels of design lens do we need, all things considered, to make sure we're driving the financial model that we talked about, which is, you know, you're well aware is that, you know, the 20% component of revenue goes over time.

Speaker Change: The quick answer is, you know, we've talked quite a bit about the trend of our design when we haven't shared the magnitude. But the way to think about the magnitude is we always look at our design when targets in the sense of what level of design rooms do we need?

Speaker Change: All things considered, to make sure we're driving the financial model that we talked about, which is, you know, you're well aware, is that, you know, 20% compenated revenues over time.

Kyle Smith: So we have been successfully securing that amount of design lenses on an annual basis, if not more, and we've seen that continue to grow annually throughout this entire market cycle and over the last few years, which is really incredible when you consider that, normally, if you go through a trough or any part of a cycle, you usually see design lenses somewhat correlate to revenue and go down. We're not seeing that yet.

Speaker Change: So, we have...

Speaker Change: have been successfully securing those amount of design wins on an annual basis, if not more.

Speaker Change: and we've seen that continue to grow.

Speaker Change: Annually throughout this entire market cycle and over the last few years, which is

Speaker Change: Really incredible when you consider that normally you do see, you know, if you go through a trough or any part of a cycle, you usually see design with somewhat correlate to revenue and go down. We're not seeing that. We've seen design with growth and strength.

Matt Johnson: We've seen design lens growth and strength, so that's been exciting. That's encouraging. That's what we want.

Matt Johnson: I think the piece that's been, you know, maybe disappointing and discouraging is a lot of these design lenses haven't ramped when we wanted them to or when they were expected to. You know, we expected a lot of design lenses to ramp last year. And that didn't happen for various reasons, supply constraints, product strategies, etc. Not lost, not going away, but for the most part, delayed.

Speaker Change: So, that's been exciting, that's encouraging, that's what we want. I think the piece that's been, you know, maybe disappointing and discouraging is a lot of those design wins haven't ramped when we wanted them to or when they were expected to. You know, we expected a lot of design wins to ramp last year.

Speaker Change: and that didn't happen for various reasons, you know, supply constraints, product strategies, etc. Not lost, not going away, but for the most part, delayed.

Matt Johnson: But you know, as we're sharing today, we are starting to see those, And that's really exciting. We're not talking about one customer, one geo, you know; we're starting to see as the market works through these last few years. We're starting to see a lot of those start. And, you know, the durations can vary, right? Some last for a decade, some last for two or three years, but those are starting to rise.

Speaker Change: But, you know, as we're sharing today, we are starting to see those rings.

Matt Johnson: And as we've shared, it's been implemented across multiple applications. So, early days, but we like the trend that we're seeing. And I think that gives us the confidence to say, you know, we can continue to drive sequential growth. Great, thank you.

Speaker Change: and that's really exciting. We're not talking one customer, one geo, you know, we're starting to see as the market works through this last few years, we're starting to see a lot of those start.

Speaker Change: And, you know, the durations can vary, right? Some last for a decade, some last for two or three years, but those are starting to ramp, and as we've shared, it's broad across multiple applications. So, early days.

Speaker Change: But, you know, we like the trend that we're seeing, and I think that's what gives us the confidence to say, you know, we can continue to drive sequential growth from here.

Kyle Smith: And for my follow-up question, I would ask, I know you mentioned that both business segments are expected to grow in the September quarter, with growth being led a little bit more by home and life. Maybe if you could add any additional color there on how you see that revenue split, both in September and for the year ending, that'd be great. Yeah, we don't Kyle give specific quantified split between the two different areas when we guide going forward.

Speaker Change: Great, thank you. And for my follow-up, I would ask...

Speaker Change: I know you mentioned that both business segments are expected to grow in the September quarter, with growth being led a little bit more by Home and Life. Maybe if you could add any additional color there on how you see that revenue split, both in September and exiting the year, that'd be great.

Kyle Smith: But a couple of observations that we've seen, you know, as we look into the September quarter and sort of guide up, we do see that home and life is likely to grow a little bit faster in the upcoming quarter than industrial commercial. A couple of factors, you know; one, look, home and life actually went into the down cycle earlier than industrial commercial.

Speaker Change: Yeah, we don't kind of give specific, quantified, you know, split between the two different areas when we guide going forward, but a couple of observations that we've seen, you know, as we look into the September quarter and sort of guiding up.

Speaker Change: We do see that the home and life is likely to grow a little bit faster in the upcoming quarter than the industrial commercial.

Speaker Change: A couple of factors, you know, one, look, Home and Life actually, you know, went into the down cycle earlier than the industrial commercial. So we're starting to see that emerge just a tad quicker from at least what we can see.

Dean Warren Butler: So we're starting to see that emerge just a tad quicker from at least what we can see. Even though in the June quarter, both of those businesses grew pretty much in line, 39% growth, 35% growth, so pretty consistent across the two. Home and life, though, specifically, has some new product ramps that are starting to take foot in the September quarter that we can see. And I think that has, you know, sort of pulled just the sequential growth between the two, just to be a little bit more in favor of home and life, rather than, you know, industrial commercial.

Speaker Change: Even though June quarter, both of those businesses grew pretty much in line, 39% growth, 35% growth, so pretty consistent across the two.

Speaker Change: Home and Life, though, specifically has some new product ramps that are starting to take foot in the September quarter that we can see. And I think that has sort of pulled just the sequential growth between the two, just to be a little bit more in favor of Home and Life.

Dean Warren Butler: Although in our prepared remarks, like we said, both are growing, and both are growing across multiple ends. Great, thank you. Yeah, thanks, Kyle. And our next question will be coming from Cody Acree of the Benchmark Company. Your line is open.

Speaker Change: rather than, you know, industrial commercial, although in our prepared remarks, like we said, both are growing and both are growing across, you know, multiple of their end applications.

Speaker Change: Great, thank you. Yeah, thanks, Kyle.

Speaker Change: And our next question will be coming from Cody Acree of the Benchmark Company. Your line is open, Cody.

Cody Grant Acree: Yeah, thanks, guys, for taking my questions, and welcome, Dean. I guess you've taken a stab at when you start shipping back to consumption, but any color on what that consumption level is currently or expected to be in September? Yeah, I think the quick answer is, you know, that I mentioned earlier is that Q2 levels are not at consumption.

Cody Grant Acree: Thanks guys for taking my questions and welcome Dean. I guess you've taken a stab at when you start shipping back to consumption, but any color on what that consumption level is currently or expected to be in September ?

Speaker Change: Yeah, I think the quick answer is, you know, that I mentioned earlier is Q2 levels are not at consumption and the Q3 guide is not at consumption.

Matt Johnson: And the Q3 guide is not about consumption. So that's as, you know, as far as we've gone in trying to articulate that. I think the other piece is the end customer inventory, which is, you know, improving. But, you know, as we said in the prepared remarks, we still, you know, while we see improvement in the number of customers getting to the right levels of excess inventory or right levels of inventory, they'll have some big customers out there who are carrying more than they should.

Speaker Change: So that's as, you know, as far as we've gone in trying to articulate that.

Speaker Change: I think the other piece is the end customer inventory, which is, you know, improving. But you know, as we said in the prepared remarks, we still, you know, while we see improvement in the number of customers getting to right levels of excess inventory or right levels of inventory.

Speaker Change: We still have some big customers out there who are carrying more than they should. So we've got to see how those factors play out, but not there yet in Q2 or Q3.

Matt Johnson: So we have to see all those factors play out, but they aren't there yet in Q2 or so. And I guess with your guidance, your $20 million sequential increase, that's obviously a very good number, but it is somewhat of a deceleration from your Q2 growth. Anything to make of that deceleration?

Speaker Change: And I guess, um, with your guidance, your $20 million sequential increase,

Speaker Change: That's obviously a very good number, but it is somewhat of a deceleration from your Q2 growth. Anything to make of that deceleration, and what does that say about your December outlook?

Cody Grant Acree: And what does that say about your December outlook? I, Cody, I would just take it as, you know, on an a quantitative basis, it's still probably one of the strongest sort of growth numbers. You'll probably see it across most of the semiconductor peers. We're early in the earnings cycle, so we'll see where everybody sort of shakes out for the September quarter, but I do think it's probably strong relative to probably many of the peers that you'll see probably in the coming quarter.

Speaker Change: Cody, I would just take it as, you know, on a

Cody Grant Acree: sequential basis, it's still probably one of the strongest sort of growth numbers, probably you'll see across most of the semiconductor peers were early in the earning cycle. So we'll see where everybody sort of shakes out for the September quarter.

Cody Grant Acree: But I do think it's probably strong relative to probably many of the peers that you'll see probably in the coming quarter.

Cody Grant Acree: The other thing I would say is, given that the downturn was very rapid in Q4 of last year, I think the teams made really good, fast progress and had sort of pretty big upticks in the March quarter and the June quarter. And I think you would logically see that at some point, you just don't see such big jumps.

Cody Grant Acree: The other thing I would say is, look, given that the downturn was very rapid in Q4 of last year, I think the teams made really good fast progress and had sort of pretty big upticks

Cody Grant Acree: And I think you would logically see at some point you just don't see such big jumps. And what we are starting to see is

Dean Warren Butler: And what we're starting to see is, you know, we're working out sort of the finer details of the jumps will actually be probably smaller from here, rather than continuing every quarter sort of a $40 million increase would be my expectation, you would just normally see. Yeah, and you know, it's important to remember that, while we're trying to be very clear and consistent that we're seeing encouraging signs and the trends are in the right direction, between those three pillars of the inventory, stocking, design, wind ramp, and then the end market itself, it's difficult to call the rate.

Cody Grant Acree: You know, we're working out sort of the finer details, so the jumps will actually be probably smaller from here rather than continuing every quarter sort of a 40 million dollar increase would be sort of my expectation. You would just normally see this.

Speaker Change: And, you know, it's important to remember that, you know, while we're trying to be very clear and consistent that we're seeing encouraging signs and the trends are in the right direction, you know, between those three pillars of the inventory, stocking, design and ramp, and then the end market itself, it's difficult to call the rate.

Dean Warren Butler: So and of course, that would be helpful if we had a perfect crystal ball there. But the trend is right and encouraging, which I think is the most important thing. Great. Thanks, guys. And our next question will be coming from Peter Pink of J.P. Morgan. Peter, your line is open. Hey, guys. Good morning.

Speaker Change: So, and of course, that would be helpful if we had a perfect crystal ball there, but the trend is right and encouraging, which I think is the most important.

Speaker Change: Great. Thanks, guys.

Speaker Change: And our next question will be coming from Peter Pink.

Peter Thomas Puk: Welcome, Dean. I just want to follow up on the China point. We heard from, you know, a few of your peers that the Chinese market is rebounding, but it seems like you guys are not seeing it. Last quarter, it was like 13% of sales. Maybe if you could just talk about what your expectations are for this market longer term. Sure.

Speaker Change: of J.P. Morgan. Peter, your line is open.

Peter Thomas Puk: Hey guys, good morning. Welcome Dean. I just want to follow up on the China point. We heard from, you know, a few of your peers that China market is rebounding, but it seems like you guys are not seeing yet. Last quarter, it was like 13% of sales. Maybe if you just talk about what your expectations are for this market longer term.

Matt Johnson: Yeah, I think, you know, the quick answer is we are seeing some improvement there. But we're not banking on it for our future. I think at our lowest, China was probably 10% of revenue going up to 13, going up to 15.

Dean: Sure, yeah, I think, you know, the quick answer is we are seeing some improvement there.

Dean: But we're not banking on it for our future is the quick answer. I think at our lowest, it was China's probably 10% of revenue going up to 13 going up to 15. So and our total revenue is growing as well. So you know, we're seeing

Dean: some improvement there. But I think it's really important that we set expectations accordingly. You know, there's still a lot of uncertainty in that end market. There's still a lot of, you know,

Matt Johnson: And our total revenue is growing as well. So, you know, we're seeing some improvement there. But I think it's really important that we set expectations accordingly. You know, there's still a lot of uncertainty in that end market. There's still a lot of, you know, geopolitical challenges and headwinds.

Dean: Geopolitical challenges and headwinds. We talked about that earlier around, you know, favoring local supplier.

Dean: So, you know, we will opportunistically do anything and everything we can to get design wins there, and we're seeing progress, but we're not banking on it for our future, and we don't need it to deliver the numbers that we talk about. So hopefully that helps frame it.

Matt Johnson: We talked about that earlier in the day about favoring local suppliers. So, you know, we will opportunistically do anything and everything we can to get design wins there, and we're seeing progress, but we're not banking on it for our future. And we don't need it to deliver the numbers that we talked about. So hopefully, that helps frame it. Good, thank you.

Peter Thomas Puk: And then in your program, you talk about some integration of AI and ML into your SIRS-T2 platform, and maybe you can spend some, a few minutes talking about what the use cases and so forth for everything from the customer. Yeah, sure. So, you know, as I said in the prepared remarks, and hopefully that was helpful for people to understand what we're seeing there parallels what we've seen in a lot of other technology areas that we've brought to market.

Speaker Change: Great, thank you.

Speaker Change: And then in your preparatory remarks, you talk about some integration of AI and ML into your SIRS-T2 platform. Maybe you could spend a few minutes talking about what the use case is and so forth for it. Anything from your customers?

Peter Thomas Puk: So, you know, think of this recurring dynamic where we bring something to market that is ahead of the customer need, and over time, the customer need moves into what that portfolio offers. Security is a great example; when we introduce security levels that we have, like the first to have PSA level three on series two, people are like, that's overkill.

Speaker Change #100: Yeah, sure. So the, you know, as I said in the prepared remarks, and hopefully that was helpful for people to understand what we're seeing there parallels what we've seen in a lot of other technology areas that we've brought to market. So, you know, think of this recurring dynamic where we bring something to market that is ahead of the customer need.

Speaker Change #100: And over time, the customer need moves into what that portfolio offers.

Matt Johnson: Now we're winning design after design because of it. And, you know, we've seen this multi-protocol, the levels of multi-protocol and coexistence performance we brought to the market. Well, you know, a lot of people said, "How many applications will need all those different wireless technologies?" They do.

Speaker Change #100: Security is a great example. When we introduced security levels that we had, like the first to have PSA Level 3 on Series 2,

Speaker Change #100: People are like, that's overkill. Now we're winning design after design because of it. And you know, we've seen this multi-protocol.

Speaker Change #100: You know, the levels of multi-protocol and coexistence performance we brought to the market, well, you know, a lot of people said, how many applications will need all those different wireless technologies?

Matt Johnson: That's happening now. We're winning designs because of it. We see AI and ML as the exact same thing. We've brought multiple solutions to market that are in production that are AI, well, specifically the machine learning cores or accelerators that we have built to allow machine learning inference at the edge on battery-powered applications. And, you know, we've really taken our expertise in ultra-low power to bear and brought that to this space. So, you know, I'd still call it early days to be direct in terms of customer adoption, but it will be what we see in these other areas.

Speaker Change #100: They do. It's happening now. We're winning designs because of it. We see AI, ML as the exact same thing. We've brought multiple solutions to market that are in production that are AI, well, specifically, they're machine learning cores or accelerators that we have built.

Speaker Change #100: to allow machine learning inference at the edge on battery-powered applications.

Speaker Change #100: And, you know, we've really taken our expertise in ultra-low power.

Speaker Change #100: to bear and brought that to this space. So, you know, I still call it early days to be, you know, direct in terms of the customer adoption.

Matt Johnson: Customer interest is high because of the strength of our offering. We get right in the front in terms of the engagement, and we're seeing customers work through how they can deploy machine learning in their application, and we see that accelerating. And the rate is increasing over the last year or two.

Speaker Change #100: But it will be what we see in these other areas.

Speaker Change #100: Customer interest is high. Because of the strength of our offering, we get right in the front in terms of the engagement, and we're seeing customers work through.

Speaker Change #101: How can they deploy?

Speaker Change #101: [inaudible]

Matt Johnson: So, I think you're going to see that continue, and we like the trend that we're seeing there. And, as we've already announced in our Series 3, that'll bring a whole new level of machine learning capability to the IoT, which is also very exciting. But we already have industry-leading solutions from an ML perspective, and they're in production.

Speaker Change #101: That will bring a whole new level of machine learning capability to the IoT, which is also very exciting. But we already have the industry-leading solutions on an ML perspective, and they're in production today.

Giovanni Pacelli: I'll now hand the call back to Giovanni Pacelli. Thank you, Tonya, and thank you all for joining this morning. This concludes today's call. This concludes today's conference call. Thank you for participating. You may now disconnect. ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ??

Speaker Change #101: I'll now hand the call back to Giovanni Pacelli.

Giovanni Pacelli: Thank you, Tonya, and thank you all for joining this morning. This concludes today's call.

Speaker Change #102: This concludes today's conference call. Thank you for participating. You may now disconnect.

Speaker Change #102: [inaudible]