Market Outlook - The market currently lacks strong visibility due to uncertainties surrounding trade and geopolitical issues, leading customers to adopt a conservative ordering approach [1] - Despite the overall uncertainty, bookings have shown a consistent and stable upward trend over the past six quarters, indicating positive data from a bookings perspective [2]

Core Insights - Silicon Labs is hosting the sixth annual Works With conference series in 2025, focusing on the future of IoT with in-person events in Austin, Shenzhen, and Bangalore, along with a virtual event for broader accessibility [1][2] Group 1: Conference Details - The Works With 2025 conference aims to connect developers and innovators globally, emphasizing breakthroughs in IoT, including embedded wireless and AI at the edge [2] - The Austin summit will broaden its invitation process to include senior executives and decision-makers, facilitating discussions on emerging market trends and strategic IoT challenges [3] - The event will feature keynotes and discussions on how AI, next-generation IoT platforms, and secure wireless innovations are transforming smart homes and enterprises [4][5] Group 2: Opportunities and Networking - Works With 2025 will provide opportunities for live demonstrations, visionary insights, and networking, highlighting the convergence of AI, software, and wireless innovation [6] - Sponsorship opportunities are available for companies to showcase their leadership in the IoT space and connect with a qualified audience [6][8] Group 3: Company Background - Silicon Labs is a leading innovator in low-power connectivity, providing solutions for smart home, industrial IoT, and smart cities markets, with operations in over 16 countries [10]

Core Insights - GlobalFoundries (GF) has achieved a significant milestone in its 40nm process technology by shipping over 10 million Wi-Fi units in collaboration with Silicon Labs, marking a step forward in the production of energy-efficient connected devices [1][2][3] Group 1: Partnership and Technology - The partnership between GF and Silicon Labs focuses on delivering cost-effective, feature-rich CMOS solutions that are essential for next-generation edge devices [2] - GF's 40LP process technology is designed for low leakage in standby mode, supporting power-efficient, always-on intelligent devices [2] - The SiWX917 chip from Silicon Labs is engineered to enhance battery life while ensuring a secure connection for IoT devices, thus addressing critical challenges in the market [3] Group 2: Market Impact and User Experience - This collaboration is expected to expand the IoT ecosystem and enhance user experiences by providing high-performance wireless technology [4] - The partnership aims to eliminate the trade-off between robust Wi-Fi connectivity and long battery life, allowing innovators to focus on user experience and faster market delivery [5] Group 3: Company Profiles - GlobalFoundries is a leading semiconductor manufacturer that focuses on delivering high-performance products for various high-growth markets, including automotive and IoT [6] - Silicon Labs specializes in low-power connectivity solutions and provides advanced edge connectivity applications, operating in over 16 countries [7]

Group 1 - Silicon Laboratories (NASDAQ: SLAB) is a solutions provider for the Internet of Things (IoT) and released its Q2 FY2025 quarterly report on August 5 [1] - The June report provided insights into the company's performance and future outlook [1]

Summary of Conference Call Company and Industry - **Company**: Silicon Labs - **Industry**: Semiconductor and IoT (Internet of Things) Key Points and Arguments 1. **Market Recovery**: The company has observed a recovery in demand across various applications, including industrial, consumer, and medical sectors, despite macroeconomic uncertainties affecting visibility into future orders [6][7][8] 2. **Demand Trends**: Demand is described as reasonably healthy, with customers placing shorter-term orders (3-4 months) rather than long-term commitments, allowing flexibility amid macroeconomic changes [7][8] 3. **Segment Performance**: The industrial and commercial segments have shown better performance compared to the home and life segments, which are more sensitive to interest rates and real estate market conditions [9][10][12] 4. **Growth in Medical Sector**: The medical sector is identified as a growth area, largely driven by design wins, and is less affected by macroeconomic factors [13] 5. **Continuous Design Wins**: The company anticipates that Continuous Glucose Monitoring (CGM) applications will grow to represent 10% of revenue, with ongoing engagement with multiple customers in various stages of qualification [14][15][18] 6. **Electronic Shelf Labels (ESL)**: ESL is highlighted as a fast-growing application, with broader deployments expected in retail, particularly in North America and Europe [19][21][22] 7. **Market Size for ESL**: The total addressable market (TAM) for ESL is substantial, with potential for billions of units based on the number of SKUs and stores [22] 8. **Importance of Standards**: The adoption of standards like Matter and Thread is crucial for the smart home market, facilitating interoperability among devices [25][26] 9. **Series Two vs. Series Three**: Series Three products offer enhanced computing capabilities and security features compared to Series Two, with both series expected to coexist in the market [30][36] 10. **Design Win Pipeline**: The company has a $10 billion design win pipeline, which is expected to convert to approximately $2-2.5 billion in annual revenue over the next few years [38][39] 11. **Profitability and Investment Balance**: The company aims to balance investments in growth with a focus on improving profitability, targeting mid-teens operating margins while managing operating expenses [42][44] 12. **Gross Margin Outlook**: The long-term gross margin target is set at 56-58%, with current margins driven by product mix and scale, particularly in industrial applications [45][46] Other Important Content - **Geographic Deployment of ESL**: ESL is more prevalent in North America and Europe, with slower adoption in Asia Pacific [23][24] - **Customer Engagement**: The company has engaged with 60 potential customers in the CGM space, indicating confidence in securing additional design wins [18] - **Regulatory Environment**: Increasing government regulations regarding security standards are influencing product development, particularly for embedded microcontrollers [31][32]

Group 1 - Barclays has raised the target price for Silicon Labs from $100 to $130 [1]

Financial Data and Key Metrics Changes - Revenue for Q2 was $193 million, up 9% sequentially and 33% year over year [12][13] - GAAP gross margin was 56.1%, while non-GAAP gross margin was 56.3%, up 90 basis points from the prior quarter [15] - GAAP operating loss was $23 million, with non-GAAP operating income of $1 million [16] - GAAP loss per share was $0.67, while non-GAAP earnings per share was $0.11, beating guidance by $0.02 [16] Business Line Data and Key Metrics Changes - Home and Life revenue was $83 million, up 2% sequentially and 45% year over year, driven by new design ramps with medical customers [13] - Industrial and Commercial revenue was $110 million, up 14% sequentially and 25% year over year, supported by electronic shelf labeling and smart meter rollouts [13][18] - Distribution accounted for approximately 69% of revenue mix, with channel inventory increasing slightly to 51 days [14][15] Market Data and Key Metrics Changes - The home automation segment showed strength, particularly in gateways and smart lighting [6] - Shipments to global smart metering customers are steady, including India's electric metering rollout [9] - Customer surveys indicated lower inventory positions compared to 90 days ago, suggesting a positive demand outlook [11][17] Company Strategy and Development Direction - The company is focused on converting design win pipeline into production ramps, with 10 of the 12 largest customer ramps on track for 2025 [5][11] - The Series two platform is driving revenue growth and market share gains, particularly in Bluetooth and Wi-Fi products [5][9] - The introduction of the Series three platform is expected to enhance capabilities and performance, setting new industry benchmarks [10][11] Management's Comments on Operating Environment and Future Outlook - Management remains confident in strong growth potential in the healthcare market, particularly in continuous glucose monitoring applications [8] - The evolving tariff discussions have not significantly impacted customer forecasts or order patterns [11][17] - The outlook for Q3 anticipates revenue between $200 million and $210 million, implying a 23% year-over-year growth rate [18][19] Other Important Information - The company has secured design wins in emerging medical applications, including remote vital sign monitors [10] - The balance sheet ended with $416 million in cash and short-term investments, with days of sales outstanding at approximately 30 days [16][17] Q&A Session Summary Question: Home and Life business performance - Management confirmed that the continuous glucose monitoring target remains on track for 10% of sales by 2025, with design ramps being the primary growth driver [23][25] Question: Gross margin expectations - Management expects to maintain gross margins in the high end of the 56% to 58% range, driven by distribution channel contributions [26][27] Question: Design win pipeline update - The design win pipeline is the largest ever, with significant momentum and expectations for continued growth [30][33] Question: Glucose meter business customer engagement - The company is engaged with over 60 customers in the glucose meter space, ramping more than 12 [34][35] Question: Geographic revenue mix changes - Revenue trends were consistent across geographies, with no significant anomalies noted [38][39] Question: Distribution channel opportunities - The company is working to refill the channel inventory towards the target of 70-75 days, with positive momentum observed [45][47] Question: Tariff impact strategy - The company plans to pass on modest tariff impacts to customers, with a relatively low overall impact expected [50][51] Question: Wi-Fi application wins - Continued progress in Wi-Fi applications, particularly with the Roku design, showcasing long battery life capabilities [54][55] Question: Future growth expectations - Management indicated that design wins and share gains will continue to drive growth, with significant potential in the pipeline [63][65]

Core Viewpoint - Silicon Laboratories (SLAB) reported quarterly earnings of $0.11 per share, exceeding the Zacks Consensus Estimate of $0.09 per share, and showing a significant improvement from a loss of $0.56 per share a year ago [1][2] Financial Performance - The company achieved revenues of $192.85 million for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 0.18%, compared to revenues of $145.37 million in the same quarter last year [2] - Over the last four quarters, Silicon Labs has exceeded consensus EPS estimates three times and topped consensus revenue estimates four times [2] Stock Performance - Silicon Labs shares have increased approximately 7.5% since the beginning of the year, slightly underperforming the S&P 500's gain of 7.6% [3] Future Outlook - The company's earnings outlook is crucial for investors, with current consensus EPS estimates at $0.27 for the coming quarter and $0.69 for the current fiscal year, with revenues expected to be $204.54 million and $787.92 million respectively [7] - The Zacks Rank for Silicon Labs is currently 3 (Hold), indicating expected performance in line with the market in the near future [6] Industry Context - The Semiconductor - Analog and Mixed industry, to which Silicon Labs belongs, is currently ranked in the top 13% of over 250 Zacks industries, suggesting a favorable outlook compared to lower-ranked industries [8]

Financial Performance & Outlook - Q2 2025 revenue reached $193 million, a 9% increase compared to Q1 2025[11] - Home & Life revenue in Q2 2025 was $83 million[11, 14], representing a 45% year-over-year growth[15] - Industrial & Commercial revenue in Q2 2025 was $110 million[11, 18], a 25% year-over-year growth[18] - GAAP gross margin improved to 56.1% in Q2 2025, up from 55.0% in Q1 2025[22, 23] - Non-GAAP gross margin improved to 56.3% in Q2 2025, up from 55.4% in Q1 2025[22, 23] - GAAP loss per share was $(0.67) in Q2 2025, compared to $(0.94) in Q1 2025[26, 28] - Non-GAAP earnings per share improved to $0.11 in Q2 2025 from $(0.08) in Q1 2025, a 238% increase[27, 28] - Q3 2025 revenue is projected to be between $200 million and $210 million[6, 32] - The company forecasts a 15-25% revenue growth, which is 3x the semiconductor market growth rate[44] Market & Strategy - The company aims to be the undisputed leader in embedded wireless[8] - The company estimates the IoT market will reach >10 Billion devices per year by 2035[9]

[Second Quarter Financial & Business Highlights](index=1&type=section&id=Second%20Quarter%20Financial%20%26%20Business%20Highlights) Silicon Labs reported strong Q2 2025 revenue growth and improved non-GAAP operating income, with key product and conference announcements Q2 2025 Key Financial Metrics (GAAP vs. Non-GAAP, in millions except EPS) | Metric | GAAP | Non-GAAP | | :--- | :--- | :--- | | Revenue | $193 | - | | Gross Margin | 56.1% | 56.3% | | Operating Expenses | $131 | $107 | | Operating Income (Loss) | $(23) | $1 | | Diluted EPS (Loss) | $(0.67) | $0.11 | Q2 2025 Revenue by End Market (in millions) | End Market | Revenue | Year-over-Year Growth | | :--- | :--- | :--- | | Industrial & Commercial | $110 | 25% | | Home & Life | $83 | 45% | - Overall revenue grew **33% year-over-year** and **9% sequentially**[1](index=1&type=chunk)[2](index=2&type=chunk) - Announced the upcoming general availability of the SiXG301, the company's first Series 3 device and the world's first to achieve PSA Level 4 iSE/SE security certification[4](index=4&type=chunk) - Introduced the upcoming SiXG302 Series 3 device, targeting Bluetooth and Matter applications with new energy efficiency and wireless performance[4](index=4&type=chunk) - Announced the sixth annual Works With developer conference series, returning with in-person and virtual events to explore trends in wireless connectivity, security, Matter, and AI/ML in IoT[4](index=4&type=chunk) [Third Quarter 2025 Business Outlook](index=2&type=section&id=Business%20Outlook) The company projects Q3 2025 revenues between $200 million and $210 million, with stable gross margins and specific EPS guidance - Third-quarter revenue is expected to be between **$200 million and $210 million**[5](index=5&type=chunk) Q3 2025 GAAP Guidance (in millions except EPS) | Metric | Guidance Range | | :--- | :--- | | Gross Margin | 57% to 58% | | Operating Expenses | $130 to $133 | | Diluted Loss Per Share | $(0.60) to $(0.20) | Q3 2025 Non-GAAP Guidance (in millions except EPS) | Metric | Guidance Range | | :--- | :--- | | Gross Margin | 57% to 58% | | Operating Expenses | $107 to $110 | | Diluted Earnings Per Share | $0.20 to $0.40 | [Consolidated Financial Statements](index=4&type=section&id=Consolidated%20Financial%20Statements) The consolidated financial statements show strong revenue growth, a reduced GAAP net loss, stable balance sheet, and improved cash flow from operations [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Q2 2025 revenues increased to $192.8 million, resulting in a net loss of $21.8 million, a significant improvement from the prior year Q2 Statement of Operations Highlights (YoY Comparison, in thousands) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Revenues | $192,845 | $145,367 | | Gross Profit | $108,109 | $76,583 | | Operating Loss | $(22,867) | $(48,021) | | Net Loss | $(21,817) | $(82,157) | | Diluted Loss Per Share | $(0.67) | $(2.56) | [Unaudited Reconciliation of GAAP to Non-GAAP Financial Measures](index=5&type=section&id=Unaudited%20Reconciliation%20of%20GAAP%20to%20Non-GAAP%20Financial%20Measures) Q2 2025 GAAP operating loss of $22.9 million converted to a non-GAAP operating income of $1.1 million after adjustments, yielding $0.11 non-GAAP diluted EPS Q2 2025 GAAP to Non-GAAP Reconciliation (in thousands) | Item | GAAP Measure | Adjustments | Non-GAAP Measure | | :--- | :--- | :--- | :--- | | Operating Income (Loss) | $(22,867) | $23,988 | $1,121 | | Net Income (Loss) | $(21,817) | $25,580 | $3,763 | | Diluted EPS | $(0.67) | - | $0.11 | [Condensed Consolidated Balance Sheets](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of July 5, 2025, total assets remained stable at $1.221 billion, with increased cash and decreased inventories, while total liabilities rose Balance Sheet Highlights (in thousands) | Account | July 5, 2025 | Dec 28, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $314,459 | $281,607 | | Inventories | $80,871 | $105,639 | | Total Assets | $1,221,065 | $1,222,674 | | Total Liabilities | $159,985 | $142,653 | | Total Stockholders' Equity | $1,061,080 | $1,080,021 | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended July 5, 2025, Silicon Labs generated $53.0 million in cash from operations, a significant improvement, leading to a $32.9 million net increase in cash Six-Month Cash Flow Summary (in thousands) | Activity | Six Months Ended July 5, 2025 | Six Months Ended June 29, 2024 | | :--- | :--- | :--- | | Net cash from Operating | $53,036 | $(55,666) | | Net cash from (used in) Investing | $(14,051) | $121,101 | | Net cash used in Financing | $(6,133) | $(52,105) | | **Increase in Cash** | **$32,852** | **$13,330** |