Silicon Laboratories Inc at KeyBanc Capital Markets Future of Technology Series Conference (Virtual) Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: John Vinh - KeyBanc Capital Markets - Analyst : Maybe just first question to get us started, can you guys talk about just the overall demand environment? Obviously, we are in this unprecedented time where demand sounds like it is pretty robust and we are also operating under pretty heavy supply constraints. Maybe just talk about where you are seeing kind of the greatest amount of demand for your products. And then from a supply issue, certainly, you are still constrained -- where are the areas that you are working through the biggest bottlenecks?

Question: John Vinh - KeyBanc Capital Markets - Analyst : So just to follow-up on that point, John, a lot of the people, your peers in the industry right now just given the environment we are in here. They are out trying to put in kind of LTAs to secure capacity. I understand the growth profile of your IoT business kind of post divestiture. So where are you on that front? Are you also kind of putting in LTAs to kind of put in to locking supply for next year or is that still something that you're working through at this point? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 09, 2021 / 7:20PM, SLAB.OQ - Silicon Laboratories Inc at KeyBanc Capital Markets Future of Technology Series Conference (Virtual)

Question: John Vinh - KeyBanc Capital Markets - Analyst : Got it. Maybe what we can do is maybe we can dive into your IoT portfolio maybe in a little bit more detail. IoT obviously is kind of a broad and generic term that gets applied to a lot of things. I know it's also very diverse and fragmented. And you support quite a number of different protocols that you had previously mentioned, Wi-Fi, Bluetooth, Zigbee, Z-Link, proprietary much more broad and diverse than some of your other peers, who mainly focus more on kind of Wi-Fi and Bluetooth. I'm wondering if you could just spend some time and walk us through the different protocols in your portfolio, maybe just touch on what are the key drivers that's driving growth there and maybe also just help us understand which ones are the ones that are driving the bulk of the growth that you are seeing right now?

Question: John Vinh - KeyBanc Capital Markets - Analyst : Great. Thanks for that overview, Matt. A couple of quick follow-ups. Is Zigbee still your biggest kind of franchise within that wireless protocols. And then secondly, real interesting you touched base on Matter that the cloud providers seem to be kind of circling the wagons around Matter. Is Matter also a mesh base protocol, and what are the advantages of Matter and why they've kind of circled the wagons there. And if that's also mesh, I would imagine that you are also well-positioned there.

Question: John Vinh - KeyBanc Capital Markets - Analyst : Great. Maybe we can talk about Redpine a little bit more. I know you recently had said, hey, that acquisition is doing quite nicely. It's kind of ramping two or maybe better than plan. Maybe are you able to give us a little bit more color in terms of how that ramp is progressing today? Is most of what you're shipping today mostly Wi-Fi 5 or are you also starting to ramp Wi-Fi 6 and 6E. And then maybe just talk to us about how you see the ramp of 6 and 6E going forward because I know those are standards that are supported by Redpine. 6E sounds like it's a pretty significant upgrade, so the fact that it's named 6E. I think it means a lot of people think that it's just a minor upgrade. But maybe if you could give us your view of that ramp and maybe talk about what inning are we in the 6 and 6E ramp as well.

Question: John Vinh - KeyBanc Capital Markets - Analyst : Great. A follow-up on Redpine. I know when you guys made the acquisition. One of the things you were most excited about was to really make Redpine and leverage their kind of offshore development center and really help you scale your investments more effectively. Can you talk a little bit about how that's progressing? How many engineers do you have out there and maybe where they were when you first acquired them?

Question: John Vinh - KeyBanc Capital Markets - Analyst : Great. So we had Skyworks. And a little bit earlier this morning, they were pretty excited about their [missing] the close acquisition of the Infrastructure and automotive business they acquired from you. I did want to spend a little bit of time just talking about kind of your ultimate decision to kind of divest this. I know historically, John, you've played that kind of fine line between trying to invest enough. And I know a lot of times you don't feel like you've been able to invest enough, but also keeping kind of the operating leverage there. And that I&A piece historically has been a really nice kind of cash cow for you that to help you invest more in IoT and in other areas. But with the divestiture, your operating leverage has obviously decreased quite a bit. But obviously longer-term with the ability to accelerate the top line right you've obviously can get back there. But just kind of walk us through just how you thought through things and kind of weigh the trade-offs of operating leverage and having a profitability base to invest more in IoT versus where you are today, where clearly you are going to be able to grow much faster than the top line, but potentially you might be a little bit more limited in terms of your ability to invest and show leverage.

Question: John Vinh - KeyBanc Capital Markets - Analyst : Great. As a follow-up to that when I look at some of the milestones you've outlined at least on the EBIT side, you are kind of sketching out [15%] EBIT margins at $1 billion in revenues. In terms of the OpEx ramp for you to get there, does that likely imply that a lot of your investments are going to be a little bit more front-end loaded at this point?

Question: John Vinh - KeyBanc Capital Markets - Analyst : Great. And on the proceeds, I did see the $1 billion tender that you put out there. If I kind of take a step back when I saw you guys announced this divestiture. My initial thought was that why not take those proceeds and go out and acquire other kind of IoT related assets, maybe gives you an opportunity to accelerate things even further, maybe get to some of those EBIT margins a little bit quicker. So I was a little bit surprised to see that you are planning to basically return all those proceeds in terms of either dividends or buybacks. Maybe just walk us through kind of how you came to that decision and on the remaining $1 billion of proceeds, should we expect more of the same or could there be a dividend for the remaining proceeds?

Question: John Vinh - KeyBanc Capital Markets - Analyst : And then on the remaining kind of $1 billion in proceeds.

Question: John Vinh - KeyBanc Capital Markets - Analyst : Got it. Hey, Matt, any thoughts on just potential M&A? If I look at IoT, you have pretty good coverage from a protocol standards perspective, so potentially you could go more broad. I think there is a few other protocols out there that you don't support or is there an opportunity to kind of maybe go deeper along some of your areas? I know when Wi-Fi, it seems like maybe you are kind of focused a little bit more maybe consumer mobile kind of battery-powered. But there's a lot of areas of Wi-Fi such as may be potentially industrial, commercial or even supporting kind of more communications access points type of opportunities. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 09, 2021 / 7:20PM, SLAB.OQ - Silicon Laboratories Inc at KeyBanc Capital Markets Future of Technology Series Conference (Virtual)

Question: John Vinh - KeyBanc Capital Markets - Analyst : Great. Hey, John, just on the supply constraints, it's obviously something that everyone is kind of wrestling within this sort of environment. And along with these constraints, it seems like there's -- people are seeing higher input costs either on logistics or raw materials or input costs. Can you talk about what are you seeing on the cost front? Where are you seeing your costs go up? And then right now what is your ability to kind of pass those input costs on to your customers in terms of pricing? I know customers are never happy to see price increases, but are you generally able to keep yourself whole or is this kind of a process that you are constantly kind of managing through?

Question: John Vinh - KeyBanc Capital Markets - Analyst : Great. And then John just in terms of kind of visibility, I would imagine with the environment we are in, visibility is pretty good. How far do you have visibility and is most of that backlog kind of [MT&R] at this point?

Question: John Vinh - KeyBanc Capital Markets - Analyst : Okay. And the last question looks like we are almost out of time here for Matt. Obviously, you're very familiar with -- without you I think being GM of the Group for the last three years, but obviously as you transition to your CEO role. I think we were chatting before this webcast started, you were kind of saying that you are starting to do some travel. Where are you going to be spending your time and focus over maybe in the next six months here going forward?