Silicon Laboratories Inc at Stifel Cross Sector Insight Conference Transcript

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

Question: Tore Svanberg - Stifel Financial Corp. - Analyst : Yeah. No, thank you for that, Matt. That's great. So let's get the near-term stuff out of the way. Because I think that's the one on everyone's mind these days, especially given the dynamic micro bit. But what are you specifically seeing in your two segments near term, both industrial, commercial, and the home and life businesses. Because the dynamics there can be quite different. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 06, 2023 / 7:35PM, SLAB.OQ - Silicon Laboratories Inc at Stifel Cross Sector Insight Conference

Question: Tore Svanberg - Stifel Financial Corp. - Analyst : Sure. And on your recent earnings call late April, you talked about several new design wins. Obviously, the year-over-year growth, but there's also some that are scheduled to ramp in the second half of this year, and that these could be material to potentially navigate through a challenging macro. So can you please elaborate on these wins and give us some specific examples of applications where the designs are expected to ramp up?

Question: Tore Svanberg - Stifel Financial Corp. - Analyst : That's great. Great perspective. Lastly on the near-term dynamics there. At least from my perspective, there seems to be some confusion on pricing. I know this topic has come up a lot, right? But I think we all know that the semiconductor industry has benefited from pricing the last few years. And in your case, obviously, there was also an increase from your suppliers and then you raised prices and so on and so forth. But I also think there's a concept here of selling value, right? And you mentioned that at the onset, you're really selling a system solution. There's two ways of growing ASPs, right? One is just pricing; the other one is more value. So help us understand those dynamics as supply and demand now is starting to balance out. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 06, 2023 / 7:35PM, SLAB.OQ - Silicon Laboratories Inc at Stifel Cross Sector Insight Conference

Question: Tore Svanberg - Stifel Financial Corp. - Analyst : Opens up the door.

Question: Tore Svanberg - Stifel Financial Corp. - Analyst : And what about some of the gross margin dynamics, John? Because I know there's -- even there there's been some confusion, especially given the timing of some of your supplier costs like beginning of the year. So you get high gross margins at the beginning of the year and then it gradually comes down throughout the year, so -- REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 06, 2023 / 7:35PM, SLAB.OQ - Silicon Laboratories Inc at Stifel Cross Sector Insight Conference

Question: Tore Svanberg - Stifel Financial Corp. - Analyst : Very good. Moving on to more medium and longer-term topics. So we're approaching the two-year anniversary of the I&A divestiture to become a pure-play IoT company. And Matt, you talked about doubling the business. Can you give us a snapshot of what this has meant for the company, especially as it relates to reactions from your customers and the ability to now dedicate 100% of your resources to, specifically, IoT?

Question: Tore Svanberg - Stifel Financial Corp. - Analyst : Right. And John, I know when you did the divestiture, you took a -- I call it, take a stab at the long-term model. Because, you're jumping into something new. But at that time, you talked about 20% topline growth, you talked about gross margins in the mid-50s with some operating leverage. And I clearly understand the earnings leverage from the buyback, but what about the operating margin leverage though? Because you may start to find some new opportunities now that you're more focused and things like that, right? So I mean, is this a business that we should think about getting into the 30s from an operating margin perspective?

Question: Tore Svanberg - Stifel Financial Corp. - Analyst : Yeah?

Question: Tore Svanberg - Stifel Financial Corp. - Analyst : Right. Because that would only be slightly higher than what you had before, so I would assume there's definitely some opportunities there.

Question: Tore Svanberg - Stifel Financial Corp. - Analyst : Right. So one of my biggest struggles with covering Silicon Labs is -- I talk a lot about your software business. And investors are like -- well, but no, they sell Wi-Fi chips or Bluetooth chips, right? And I'm trying to say no, I mean, this full system solutions thing is not just selling connectivity chips. And my understanding is that two-thirds of your engineers are software engineers. So help us understand how that really impacts the business

Question: Tore Svanberg - Stifel Financial Corp. - Analyst : And it's kind of interesting, because I think when investors look at Qualcomm, they get it. But I think when it comes to IoT connectivity, maybe because your competitors sell discrete components and maybe that's why they can't quite make that connection. But maybe you could talk a bit about that, because you have some strong competition. There's some big players out there. They do tend to sell more discrete connectivity chips versus what you offer.

Question: Tore Svanberg - Stifel Financial Corp. - Analyst : Right. And when there's a next generation in any of those, just tell us it'll be backwards compatible, right?

Question: Tore Svanberg - Stifel Financial Corp. - Analyst : Right. And you mentioned hundreds of network technologies. But I do know the last couple of years, you've done pretty well in Bluetooth, especially as far as getting share. It sounds like Wi-Fi is kind of approaching that same inflection point. Maybe you could talk a little bit about both the success in Bluetooth and why we're sort of at that inflection now with Wi-Fi.

Question: Tore Svanberg - Stifel Financial Corp. - Analyst : And there's always a lot of focus on connectivity, but you also have a role, of course, in embedded processors. So can you maybe give us an update there? I'm sure there's a lot of consideration for new architectures. You start thinking about AI at the edge, and things like that, right? So, any update?

Question: Tore Svanberg - Stifel Financial Corp. - Analyst : Right. So as far as the next few years, I'm very intrigued by the smart retail market. And you mentioned it earlier, labeling, right? This is a market that's very, very prime for getting rid of these barcodes, right? There's so many advantages for the retailers using wireless technologies for inventory management, they can change the price on the go. There's so many advantages. So help us understand how the smart retail market will help Silicon Labs for the next few years.

Question: Tore Svanberg - Stifel Financial Corp. - Analyst : Anything you want to add, John?

Question: Tore Svanberg - Stifel Financial Corp. - Analyst : So I wanted to ask about AI, because I have to, right? (multiple speakers) times.

Question: Tore Svanberg - Stifel Financial Corp. - Analyst : We are running out of time. Obviously, for you guys, it's going to be AI at the edge, right? There's already a lot of AI at the edge, but it's just going to expand and grow. And so maybe in 30, 40 seconds, how will Silicon Labs contribute to the various bottlenecks for AI at the edge to evolve?

Question: Tore Svanberg - Stifel Financial Corp. - Analyst : Right. Thank you. All right. We've run out of time. Thank you so much, everyone, for coming.

Question: Tore Svanberg - Stifel Financial Corp. - Analyst : Thank you, Matt. Thank you, John. Thank you for coming.