Silicon Laboratories(SLAB) - 2023 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - On a GAAP basis, gross margin ended at 58.4% with GAAP operating expenses at $107 million, which was $13 million below the midpoint of guidance due to changes in stock compensation expense [1] - Third quarter revenue was $204 million, down 24% year-on-year, with non-GAAP gross margin slightly lower than expected at 58.5% [7][8] - Non-GAAP operating expenses were $95 million, in line with expectations, and the company expects non-GAAP operating expenses in Q4 to be approximately $94 million [8][10] Business Line Data and Key Metrics Changes - The Industrial & Commercial business ended at $121 million, down 17% year-over-year, while Home & Life revenue was $83 million, down 33% year-over-year but up 4% sequentially [43] - Revenue was down year-over-year in both business units during the quarter [7] Market Data and Key Metrics Changes - Year-over-year decreases were observed in all regions, with APAC being down less than Europe and the Americas [17] - Distribution revenue was 81% for the third quarter, up slightly from the second quarter, with inventory in the channel around 90 days [17] Company Strategy and Development Direction - The company announced its next-generation platform called Series 3, which is expected to enhance its market position [6] - The company is focusing on long-term growth markets such as smart cities and healthcare, with significant deployments expected in the coming years [21][22] - The Series 3 platform is designed to support more than 100 times the processing capability of the current generation, including integrated AI and machine learning accelerators [49] Management's Comments on Operating Environment and Future Outlook - The current market environment is characterized by weak demand and high inventory levels, with end customers carrying excess inventory [5][19] - Management believes Q4 will be the bottom, with expectations for sequential growth in Q1 2024 [24] - The company is committed to managing operating expenses while maintaining investments in essential R&D projects [42] Other Important Information - The company repurchased approximately $16 million worth of shares in Q3, targeting around 100,000 shares [45] - The balance sheet remains healthy with cash and investments totaling $417 million [18] Q&A Session Summary Question: Concerns about design wins and revenue outlook - Management acknowledged concerns about the potential decrease in volumes and revenue underpinning design wins, attributing current challenges to inventory corrections rather than a permanent reduction in total addressable market (TAM) [27][28] Question: Inventory correction and guidance for Q4 - Management clarified that while they expect to clear a significant portion of inventory in Q4, some inventory issues may extend into Q1 2024 [32][34] Question: Flexibility of buyback program - Management confirmed flexibility in the buyback program, emphasizing a cautious approach to liquidity and market conditions [38][63] Question: Impact of inventory on revenue guidance - Management indicated that the inventory situation is complex, with varying levels of excess inventory across customers, impacting revenue guidance for Q4 [60][66] Question: OpEx budget for next year - Management expects OpEx in Q1 to be roughly flat compared to the second half of 2023, with ongoing monitoring based on market recovery [74]