Silicon Labs Posts 55% Q2 Revenue Growth, Warns of More 'Volatility'

Silicon Labs reported strong Q2 revenue performance with supply still catching up to demand, but it’s seeing signs of “more volatility” in recent booking patterns, said Chief Financial Officer John Hollister on the company’s Wednesday Q2 earnings call.

Hollister cited “more variation on a week-to-week basis, combined with higher levels of customer reschedules,” but said there hasn’t been a high uptick in order cancellations. The cancellations it has seen haven’t been broad-based, “but we are seeing customer requests to schedule deliveries further out in time."

Revenue grew 55% year on year, and 13% sequentially in the quarter ended July 2, to $263 million, exceeding the top end of its guidance range, Hollister said. The Home & Life unit had a 49% year-on-year revenue increase to $119 million; Industrial & Commercial grew 61% to $144 million. Shares closed 7.7% higher at $149.25.

Silicon Labs’ business remains diverse, Hollister said, saying its solutions are used in “thousands of applications by tens of thousands of customers worldwide.” The top 20 customers represent 30% of sales; its largest customer is 5% of sales, he said.

The company’s Bluetooth product line revenue more than doubled year on year, Hollister said, with mid-to-upper double-digit growth across Zigbee Thread, proprietary wireless, Z-Wave and Wi-Fi. Growth came from the Americas and Europe; Asia-Pacific was down, he said. COVID-19 lockdowns in China affected customers, distributors and suppliers; two large regional distributors experienced increased inventory levels due to lockdowns, but that situation is improving, he said.

Silicon Labs is expanding its smart home position to take advantage of the Matter connectivity standard supported by its recently launched MG24 Series product, said CEO Matt Johnson. The MG24 has received strong interest from customers, he said, and the company continues to support the Connectivity Standards Alliance in support of Matter.

On the pricing environment ahead of a potential deceleration in market demand in 2023, Hollister said he expects more stable pricing over the rest of the year. Average selling prices in Q2 were nearly flat with Q1, he said. Johnson added that the company took a different approach to pricing compared with other manufacturers, taking a one-time hike so it wouldn’t “nibble [customers] to death.” The price increase reflected what it thought would happen over the course of the year. “That seems to be relatively durable,” Johnson said. Silicon Labs' suppliers have indicated small price increases, “and that’s what we baked into our plan,” he said.

In its industrial business, Silicon Labs is in “early days” with product for the electronic shelf label market, Johnson said, citing "substantial growth potential." Global adoption is low but use cases and needs accelerated during the pandemic, and the company is seeing “early signs of very broad adoption” being planned by a number of global retailers.