Silicon Laboratories, Inc.

My name is Sarah, and I will be your conference operator today. Welcome to Silicon Labs' second quarter fiscal 2022 earnings call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your touchtone phone. To withdraw from the question queue, please press start and two. Please note this event 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.

Thank you, Sarah. We are recording this meeting, and a replay will be available for four weeks on the investor relations section of our website at thilabs.com forward slash investors. Joining me today are Silicon Labs President and Chief Executive Officer Matt Johnson and Chief Financial Officer John Hollister. They will discuss our second quarter financial performance and review recent business activities. This information, along with accompanying financial tables and earnings press release, is available on our website. We will take questions after our prepared comments, and our remarks today will include forward-looking statements subject to risk and uncertainties. We base these forward-looking statements on information available to us as of the day of this conference call and assume no obligation to update these statements in the future. We encourage you to review RSEC filings, which identify important risk factors that cause actual results to differ materially from those contained in any forward-looking statements. Additionally, during our call today, we will refer to certain non-GAAP financial information. A reconciliation of our GAAP to non-GAAP results is included in the company's earnings press release and on the investor relations section of the Silicon Labs website. I would now like to turn the call over to Silicon Labs Chief Financial Officer, John Hollister. John?

Thanks, dear buddy. I'm pleased to report that strong revenue performance for the second quarter set a new record at $263 million, up 55% year-on-year and above the top end of our guidance range. Our industrial and commercial business grew exceptionally well in Q2, ending at $144 million, up 61% from the same period of fiscal 2021. We saw significant year-on-year growth in Q2 across all major portions of the INC business in industrial, commercial, and smart city applications. The home and life business was also up strong for the quarter, to $119 million, an increase of 49% year-on-year, with particular strength in connected home applications. In terms of our connectivity protocols, revenue from our Bluetooth product lines more than doubled in the second quarter year-on-year, We also saw mid to upper double-digit growth rates across our other supported protocols, such as ZigBee Thread, proprietary wireless, Z-Wave, and Wi-Fi. Looking at our revenue in Q2 geographically, we saw the strongest sequential growth in Q2 in the Americas region, followed by Europe. Asia Pacific was down. In Q2, the COVID lockdown situation in China did impact our customers, distributors, and suppliers. For example, two of our large regional distributors in China experienced increases in distribution inventory levels due to the lockdowns and are primarily responsible for the increase in our inventory. Distribution revenue for the second quarter was around 80% of total revenue. Our business continues to be very diverse and our solutions are used in thousands of applications by tens of thousands of customers worldwide. Our top 20 end customers represent around 30% of total sales, and our single largest customer is 5% of sales. The demand environment continues to be strong, and our demand remains above our ability to fully supply it. That said, we are seeing more volatility in our recent bookings patterns with more variation on a week-to-week basis, combined with higher levels of customer reschedules. We have not seen a large uptick in order cancellations. We believe the broad-based nature of our customer footprint combined with our significant industrial exposure offers greater stability to macro weakness than more heavily consumer-oriented semiconductor operations. Non-GAAP gross margin for the quarter exceeded expectations due to favorable product mix. Q2 gross margin was 62.4%. Non-GAAP operating expenses were slightly elevated, ending at $110 billion due to additional product development costs, higher variable costs on upside business performance, and increased travel as we resumed more normalized travel patterns in Q2 coming out of the pandemic. R&D expenses were $68 million, or operating income was $55 million, or 21% of sales, exceeding expectations. Our non-GAAP effective tax rate was slightly favorable at 24%. Non-GAAP earnings ended at $1.17 per share, above the top end of our guidance range. On a GAAP basis, gross margin was 62.3%. GAAP operating expenses were $133 million, with R&D expenses at $84 million and SG&A expenses at $49 million. GAAP operating income was $31 million, or 12% of sales. Stock compensation expense for the quarter was $14 million, and amortization of tangible assets was $9 million, both in line with our expectations. GAAP earnings were $0.60 per share, above the high end of our guidance range. Turning to the balance sheet, cash and investments ended at $1.5 billion. Accounts receivable ended at $72 million, Net inventory increased in the quarter to 74 million up from Q1 and ending at 5.4 turns. We also invested working capital into our supply chain in Q2 to secure future capacity. Our distributor inventory increased slightly to 60 days. So far this year, we have returned $600 million to shareholders through our stock repurchase program. Since we announced the divestiture just over a year ago, we have returned a cumulative $1.75 billion, retiring 11 million shares, or 25% of our pre-divestiture share count. Our share repurchase activities will provide a durable long-term benefit to our earnings power going forward, and we intend to continue to return capital to shareholders. Over this month, our Board of Directors approved an additional open market repurchase program of $250 million through the end of fiscal 2023. Next, I'll cover guidance for the third quarter. We expect our revenue for Q3 to be in the range of $265 to $275 million. We expect our non-GAAP gross margin for Q3 around $113 million, with the increase from the Q2 level primarily in R&D based on continued investment in new products. Due to our strong cash position and rising interest rate environment, we expect our other income and expenses line items to increase to around $4 million for Q3. Our convertible notes have a fixed interest rate. We expect our non-GAAP effective tax rate for Q3 to be 26 percent, and please note that by a couple hundred basis points next year as the amortization stack on R&D deductions accumulates. We expect our non-GAAP earnings to be in the range of $1.08 to $1.18 per share. We expect GAAP gross margin to be about 60%, GAAP operating expenses to be approximately $137 million, and GAAP earnings to be in the range I will now turn the call over to Matt for the business update. Matt?