Good morning. My name is Cole, and I will be your conference operator today. At this time, I'd like to welcome everyone to Silicon Labs' Third Quarter Fiscal 2020 Earnings Conference Call. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I'd now like to turn the conference over to George Lane, Director of Investor Relations & International Finance. George, please go ahead.

Thank you, Cole, and good morning, everyone. Tyson Tuttle, Chief Executive Officer, and John Hollister, Chief Financial Officer, are on today's call. We will discuss our financial performance and review our business activities for the third quarter. After prepared comments, we'll take questions. Our earnings press release and the accompanying financial tables are available in the Investor Relations section of our website at www.silabs.com. This call is also being webcast, and a replay will be available for four weeks. Our comments today will include forward-looking statements, subject to risks and uncertainties. We base these forward-looking statements on information available to us as of the date of this conference call and assume no obligation to update these statements in the future. We encourage you to review our SEC filings, which identify important risk factors that could 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 in the Investor Relations section of Silicon Labs' website. I would now like to turn the call over to Silicon Labs' Chief Financial Officer, John Hollister.

Thanks, George. We are pleased to announce a strong finish to the third quarter with revenue ending at $221 million, exceeding the top end of our guidance range. Third-quarter revenue was up approximately 7% sequentially. Revenue from our IoT products set a new all-time record in Q3 at $133 million, up more than $18 million from Q2, or about 16%. During the quarter, we saw particular strength from ramps and smart home and lighting products, with product sales from our wireless connectivity technologies growing 29% sequentially. As expected, revenue from our infrastructure and automotive products declined in the third quarter, ending at $88 million. Timing revenue was down significantly due to lower demand from our customers coming off a strong first half. We also had late-quarter impacts to our timing products due to the stoppage of shipments to Huawei. Revenue from broadcast products increased in Q3 with seasonal strength from sales of TV tuners, as well as a slight recovery in automotive radio. Turning to end markets, revenue from industrial and consumer was up in the third quarter due to strong growth in IoT. Automotive revenue was roughly flat; revenue in communications was down significantly due to weakness in timing. Geographically, revenue in the Americas was strong in the third quarter on IoT growth. Sales into Europe also increased whereas APAC revenue was about flat to the second quarter. For IoT, wireless customers moved into our top 10 customer list during the quarter, and a U.S.-based IoT customer became our top customer. Our Top 10 customers now include five IoT customers, all based in the Americas and Europe. Revenue from the Top 10 customers increased to 22% of revenue, up from 20% in Q2. Distribution sales were 78% of total revenue in the third quarter, and we ended Q3 with DSI at around 48 days, down from 53 days at the end of Q2. Non-GAAP gross margin was 59.5% in Q3. This was lower than we expected due to product mix in the quarter, as we experienced a large rebound from top-tier IoT wireless customers and broadcast consumer products combined with a larger than expected decline in higher margin infrastructure and automotive products driven by the aforementioned decline in timing. I would like to note that our IoT wireless products earned some of the highest gross margins in the industry, owing to our feature-rich and highly differentiated technology offering as well as high levels of seamless integration. Given the strong recovery in the semiconductor industry and strong design win momentum, we are seeing sharp ramps in customer demand for our IoT wireless products, and we are aggressively working with our supply chain to expand production capacity and build inventory. Non-GAAP operating expenses ended the quarter at $94 million, up about $4 million, primarily due to increases in variable compensation with an improving business outlook in the second half of this year. Non-GAAP R&D expenses were $56 million, and non-GAAP SG&A expenses were $39 million. Non-GAAP operating margin ended at 16.9%, and non-GAAP earnings per share was $0.73. Our non-GAAP effective tax rate for the quarter was 12.8%. On a GAAP basis, gross margin for Q3 was 58.8%. Total GAAP operating expenses were $120 million, with GAAP R&D at $72 million and GAAP SG&A expenses at $48 million. Stock compensation expense was $15 million for the quarter, and amortization of intangible assets was $12 million. GAAP operating margin was 4% for the quarter, with GAAP earnings at $0.07 per share. Turning now to the balance sheet, we ended the quarter with cash and investments of $727 million. Accounts receivable ended up approximately $10 million at $80 million, or 33 days sales outstanding. Our inventory balance declined in the quarter to $66 million, representing inventory turns of 5.5x. Cash flow from operations on a year-to-date basis was approximately $127 million, down about 6% from the same period of fiscal 2019. In Q3, we also executed approximately $18 million in open market repurchases of our 2022 convertible notes and ended the quarter with a total debt balance of $681 million. Our revolving credit facility remains in effect with no drawn balance. We have ample liquidity available to us to execute our long-term capital deployment strategies. I will now cover guidance for the fourth quarter. We expect revenue in the fourth quarter to be in the range of $221 million to $231 million, with both IoT and infrastructure and automotive increasing. We expect non-GAAP gross margin to be approximately 59%. Our gross margin outlook continues to be influenced by trends we experienced in the third quarter. We expect our IoT mix to grow, particularly from continued ramps of wireless products and tight supply chain capacity. Due to these factors, we expect to be operating toward the bottom end of our non-GAAP gross margin range. We expect non-GAAP operating expenses to be $95 million and our non-GAAP effective tax rate to 13% for the fourth quarter. We expect non-GAAP earnings per share in the range of $0.68 to $0.78. On a GAAP basis, we expect gross margin to be 59%, operating expenses to be $123 million, and GAAP earnings per share to be in the range of $0.02 to $0.12. I will now turn the call over to Tyson.

Thank you, John. Third-quarter revenue was considerably stronger than expected, with our IoT products leading the way with a record quarter. We see sustained acceleration toward a more connected world, which our products are well suited to address. Both third-quarter design wins and bookings set records, highlighting the strength of our strategy and product portfolio. In particular, we are delighted that Bluetooth design wins continue to set new records, with design wins up 49% sequentially in Q3 and up 100% year-over-year. We continue to see upside in demand for our IoT products, now making up 68% of our design wins and 65% of our total opportunity funnel. Our IoT opportunity funnel grew 8% sequentially to over $9 billion of lifetime revenue. Moving on to product category updates; in IoT, we are seeing increasing demand for connectivity. Smart home, consumer, and industrial solutions are driving design wins, and we continue to strengthen our wireless portfolio, adding new differentiated capabilities while advancing security and growing ecosystem partnerships. In Q3, we announced our collaboration with Amazon to support Sidewalk, a secure network created by neighbors who share a small portion of their broadband connection, enabling their devices to work better at home and beyond the front door. Sidewalk is a free software application layer that works on top of our wireless Gecko Series 2 products to support sidewalk, sub-gigahertz, and low Bluetooth Low Energy protocols, allowing IoT devices to securely connect to each other for the cloud. Sidewalk is simple to set up, free to use, and is expected to have a tangibly positive quality of life impact. We were glad to have Ring Founder and Chief Inventor Jamie Siminoff join us during our works with smartphone developer conference last month to share more details about how Sidewalk extends the working range of low bandwidth IoT devices and helps them stay online even when those devices are outside their home's Wi-Fi range. Millions of consumers will enjoy the many new IoT experiences Sidewalk will enable, such as tools and home appliances that can self-diagnose problems and order replacement parts, smart locks with improved wireless range and reduced energy consumption, and the ability to quickly locate lost pets or missing valuables throughout the neighborhood. Silicon Labs’ wireless solution for Amazon Sidewalk easily enables developers to create IoT products with encrypted cloud communication across wireless protocols. This is an exciting development, furthering the convergence of IoT wireless protocols that we are well positioned to serve. We've built our business to be the ultimate connector with the broadest portfolio of IoT wireless products. As a result, we are uniquely positioned to bring players across the smartphone industry together, as we did last month in our first virtual works with smartphone developer conference. Over 6,000 people from the Americas, Europe, and Asia have registered, making it one of the most attended smart home industry events held to date. The conference provided an on-ramp for smart home developers to engage directly with the biggest and most popular smartphone ecosystems in the world, including Amazon, Comcast, and Google through co-authored curriculum, featuring 40 technical sessions, 12 hands-on workshops, and six keynotes spanning 40 hours of high-quality engaging content. We're thrilled with the turnout and feedback received from participants and will continue to play a leading role in shaping the future of the smart home industry. In combination with this event, we've launched Simplicity Studio 5, which is the latest of our free-to-use class-leading IoT developer environment. Simplicity Studio 5 now offers universal access and an enhanced developer experience across a wide range of wireless protocols, all within a new, intuitive, and responsive web-style user interface. This simplifies and accelerates the development of wireless silicon. Simplicity Studio 5 also gives IoT developers support for open thread and paves the way for future development of project connected home over IP-based devices. We continue to be excited about the Bluetooth opportunity in front of us. The Bluetooth SIG forecasts annual device shipments will grow from 4.6 billion units in 2020 to 6.2 billion units in 2024. To build on our record Bluetooth design wins this quarter, we expanded our Bluetooth low energy portfolio with the launch of the BGM 220 F and BGM 220 T modules. At just six by six millimeters, the BGM 220 F is one of the world's smallest Bluetooth modules. It provides ultra-low size, low cost, and long battery life to add turnkey Bluetooth connectivity to a variety of end products. The BGM 220 F and its larger PCB variant, the BGM 220 T, are among the first Bluetooth modules to support Bluetooth direction finding while delivering up to 10 years of battery life from a single coin cell. Secure Vault, our suite of state-of-the-art IoT security features, debuted in September in Silicon Labs’ multi-protocol Wireless Gecko 2 Series 2 platform. We identified the need to address growing security threats and regulatory issues for IoT devices early on, and Silicon Labs has taken the lead in delivering the world’s best IoT security solutions to the market. Our Secure Vault products are the world's first radios to earn ARM’s PSA Level Two security certification. Secure Vault also received smart shoppers' security certification from the ioXt Alliance, which is recognized as the global standard for IoT security. Finally, Secure Vault was awarded a 2020 Leap Awards Gold Medal for best-in-class security, honoring Secure Vault as a new, timely solution to an ever-evolving problem. An independent panel of judges recognizes just how far Silicon Labs has advanced connected privacy and security for IoT devices with Secure Vault. In September, we announced our collaboration with Stratus on a new smart home solution built specifically for apartment complexes. The Stratus 3.0 gateway uses Silicon Labs SOCs to deliver multi-protocol wireless capabilities connecting smart devices throughout apartment communities. Gateway devices are placed strategically throughout buildings to offer a connected network of smart devices that enable energy efficiency, security, voice controls, and remote capabilities that were previously unavailable outside of single-family homes. Residents can use their smartphones as a credential to enter residential buildings, common areas, gates, elevators, and their own fully equipped smart apartment unit. The system also allows property managers and staff to securely control energy usage in smart technology and vacant units and monitor common areas. The Stratus gateway is also designed to address adjacent markets such as hospitality, retail, and small to mid-sized commercial applications. As the pandemic continues, and we enter the heart of this year's holiday shopping season, I would like to talk about smart retail. Amazon's Prime Day kicked things off with a 60% year-over-year increase in online sales, underscoring just how heavily consumers and retailers alike are depending on connected technology. We see two trends in smart retail: first, people are shopping online due to the pandemic. Second, those who do shop in brick-and-mortar stores want to do so safely, meaning minimal time spent shopping indoors and minimal physical contact. These two trends are having a profound impact, requiring retailers to develop and deploy omni-channel strategies that effectively blend online and offline shopping. Our connected solutions are at the heart of this omni-channel strategy. We facilitate online shopping by bolstering back-end bandwidth infrastructure and helping to manage stock in stores and warehouses. We're also facilitating a safe and convenient in-store experience through electronic shelf labels, which reduce the need for store staff to touch inventory and allow customers to easily locate products and see how much they cost. Our location technology helps guide shoppers and store staff to a product's precise location in the store, and smart tags allow shoppers to see product and pricing information on their smartphones and even purchase products securely without having to go through a checkout lane. As part of our focus on addressing the needs of health and safety during the ongoing pandemic, we continue to collaborate with our customers to expedite time to market for impactful products. For example, this quarter we worked with a Belgium-based social distancing device startup, Maggy, to begin shipping their new compact social distancing wearable that warns users when the distance between people becomes too small and poses a risk of COVID-19 infection. Silicon Labs’ Bluetooth solution was a critical design element that streamlined Maggy’s engineering and wireless development time, allowing the company to focus on design simplicity and accelerate time to market. Turning now to infrastructure and automotive, despite the headwinds related to Huawei and the delay in 5G infrastructure rollout, we continue to see a strong opportunity for our portfolio in the areas of internet infrastructure, data centers, and electric vehicles. This quarter, we launched a new family of small form factor high-performance crystal oscillators. Data center operators and telecom networks are deploying lower-cost, smaller form factor optical modules for line-side and client-side applications, delivering the need for space-optimized high-performance timing solutions. Unlike traditional solutions, which may require multiple oscillators to generate all required frequencies, the new oscillators are a single unified solution that delivers great performance in the industry’s smallest footprint. This month, we introduced a new family of isolated gate drivers offering a combination of faster and safer switching, low latency, and high noise immunity capabilities. New advancements in these gate drivers help power converter designers meet or exceed increasing energy efficiency standards and size constraints in a variety of applications, including data center and industrial power supplies, micro-inverters for solar power, and traction inverters for the electric vehicle market. Turning to our leadership team, I’m happy to congratulate Serena Townsend on her promotion to Senior Vice President and Chief People Officer. As CPO, Serena is responsible for the company’s global talent strategy, people programs, and a values-driven inclusive culture. Since joining Silicon Labs in early 2017, Serena has had a positive impact on many fronts, including global talent acquisition, deepening our diversity, equity, and inclusion efforts, and ensuring continuity during the ongoing global pandemic. Under Serena's leadership, I’m confident that our global culture and employee initiatives are in excellent hands. I want to extend our best wishes and deepest thanks to Lori Knowlton, our previous Chief People Officer, for the outstanding contribution she made to our business and culture. Lori played a key role in fostering our winning culture with a focus on diversity, equity, and inclusion. She also helped build a world-class recruiting team that has attracted the best and brightest talent to Silicon Labs. Looking ahead, we expect robust growth in IoT. Despite a turbulent macro environment, we delivered record IoT design wins and revenue with an acceleration of demand throughout the quarter. We will continue innovating silicon, software, and tools to shape the future of IoT and are well positioned with our broad connectivity portfolio to continue this momentum. Thank you for your time and attention. Before we take your questions, I’d like to turn the call back to George. George?

Thank you, Tyson. Before we open the call for a question-and-answer session, I'd like to announce our participation in the Barclays Global TMT Conference on December 10 using a virtual platform. We'd now like to open the call up for your questions. To accommodate as many people as possible before the market opens, we ask that you please limit your questions to one with one follow-up.

Our first question today will come from Blayne Curtis with Barclays.

Hey, guys, thanks for taking my questions. I had two; just kind of curiously think about the strength you're seeing in IoT. You mentioned smart home and consumer. I'm assuming there's some benefit from all this home improvement people are doing while they're sitting around. So just kind of curiously think about what you saw an upside and any kind of perspective in the next year. And then second question just on gross margin, obviously bottom of the range. You said mix, and I think you mentioned wireless being 68% of the design wins, I'm assuming wireless will continue to increase as a percent of the mix. So any perspective where wireless as the percent mix in September, and then just thoughts on gross margin as that becomes a bigger part?

Thanks for the question, Blayne. I'll cover the first part, and then I'll let John cover the gross margins. We are seeing really robust growth ahead in IoT, and there are large ramps in wireless with top-tier customers. We've mentioned smartphone, consumer retail; it's really very, very broad. There’s a lot of industrial applications that are coming online; we’ve got things like smart lighting, home security systems, building automation, retail asset tracking—there’s just a lot of design win activity and some very, very strong ramps, and we see really a path to double-digit revenue growth next year. As the SAM expands and we take share in wireless, double-digit revenue growth is really for the whole company. We see the design win funnel, everything very, very strong. The wireless growth—we did 29% here in Q3, and we see an opportunity to continue that growth 30% up next year kind of same as what we've seen. We're seeing a lot of the work that we've been doing for the last couple of years is now starting to ramp into production, and some of the trends that we've seen in a pandemic have accelerated some of those programs, and just the general trend towards IoT and connected devices in general. So, yes, the trends in IoT are very, very, very positive, and it's both at the tier one customers as well as the broader base of customers that we are seeing here.

Yes, Blayne, this is John. So on the gross margin topic, you're right; it's really as a function of mix. With both a combination of factors, strength in IoT. And as a reminder, our IoT gross margins are a bit below the corporate average gross margin. Combined with weakness in timing, we saw the restrictions placed on Huawei and also a general pullback in timing in the third quarter coming off of what was a very strong first half in that part of our business. So it's really a combination of those two factors. And yes, we do see that continuing.

Yes, Blayne, I would like to just mention that our IoT gross margins are in the high 50s, but they are a little bit below the overall corporate gross margin levels, and certainly less than timing. So when you swap timing revenue for IoT gross margin, you'll see that next shift occur, and that's what we're seeing here in the second half.

I guess a quick follow-up; if the IoT margins are in the high 50s, should we think about the wireless within that being lower or is that not the case?

Yes. It's—it really gets into customer-specific and application-specific. The technology itself, without going into too much detail there, but there's a blend in various mix factors within IoT.

Yes, I think you look at the IoT wireless mix and the IoT mix in general for wireless is more than two-thirds of the revenue. And it is in the high 50s. On the wireless side, there's a mix depending on the various technologies, and then that gets blended in with the microcontroller margins, which are in the same range. So I would say that across the wireless and everything, wireless is in the high 50s as well, but it's not quite the 60% that we have in our target.

Our next question will come from Gary Mobley with Wells Fargo.

Hey, guys, thanks for taking my question. What to double-click on the topic of gross margin? Speaking about the mix, within the mix of IoT, would you characterize the gross margins in the wireless radio mix as being lower for standards based wireless like Wi-Fi and Bluetooth versus something that's a little more proprietary like C wave, and do you see a significant difference in the growth rates of each? And you mentioned some tight supply in your supply chain. Are you seeing some maybe outsized weight for inflation?

Yes, I can cover kind of the mix of standards, and there’s also the mix between modules and chips. Then you've also got the difference between large volume customers and smaller customers. If you look, we're seeing a very strong uptick in 15.4, which includes ZigBee and Thread. Those margins, as well as the GeeWay and the smartphone, tend to be in line. Bluetooth is a lot of more consumer higher volume applications; we're seeing very strong growth there and very respectable margins. Wi-Fi is still a smaller portion of the business and those are in line as well. So we don't see too much variation; I would say that on the proprietary side, which I would maybe include the G2Way in there, but we have a lot of stuff in sub-gigahertz proprietary that goes into industrial networks. It’s a very broad range of things. And that's maybe a little bit above, but overall, the variation between these is not that there's not that huge of a range between the top and the bottom end of the wireless customers; then you blend in the 8-bit and 32-bit and CUs and sensors into that mix. I would say that the variation probably is more based on volume than it is based on standard. And, John, I want you to cover the other part of that question.