Q1 2024 Silicon Laboratories Inc Earnings Call

Participants

Giovanni Pacelli; Senior Director of Finance; Silicon Laboratories Inc.

Mark D. Mauldin; Interim CFO & CAO; Silicon Laboratories Inc.

Robert Matthew Johnson; CEO, President & Director; Silicon Laboratories Inc.

Cody Grant Acree; Senior Equity Analyst; The Benchmark Company, LLC, Research Division

Gary Wade Mobley; Senior Analyst; Wells Fargo Securities, LLC, Research Division

Joseph Lawrence Moore; Executive Director; Morgan Stanley, Research Division

Matthew D. Ramsay; MD & Senior Research Analyst; TD Cowen, Research Division

Nathaniel Quinn Bolton; Senior Analyst; Needham & Company, LLC, Research Division

Peter Thomas Puk

Srinivas Reddy Pajjuri; MD; Raymond James & Associates, Inc., Research Division

Thomas James O'Malley; Research Analyst; Barclays Bank PLC, Research Division

Tore Egil Svanberg; MD; Stifel, Nicolaus & Company, Incorporated, Research Division

Presentation

Operator

Thank you for standing by. My name is Jonathan. I will be your conference operator today. Welcome to Silicon Labs First Quarter Fiscal 2024 Earnings Call. (Operator Instructions) As a reminder, today's program is being recorded.
And now I'd like to introduce your host for today's program, Giovanni Pacelli, Silicon Labs Senior Director of Finance. Giovanni, please go ahead.

Giovanni Pacelli

Thank you, Jonathan, and good morning, everyone. We are recording this meeting, and a replay will be available for 4 weeks on the Investor Relations section of our website at investor.silabs.com.
Our earnings press release and the accompanying financial tables are also available on our website. Joining me today are Silicon Labs' President and Chief Executive Officer, Matt Johnson; and Interim Chief Financial Officer, Mark Mauldin. They will discuss our first quarter financial performance and review recent business activities.
We'll take questions after our prepared comments, and our remarks today will include forward-looking statements that are 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 on the Investor Relations section of our website.
I'll now turn the call over to Silicon Labs' Chief Executive Officer, Matt Johnson. Matt?

Robert Matthew Johnson

Thanks, Giovanni, and good morning, everyone. Silicon Labs reported solid first quarter results, with revenue and EPS exceeding the midpoint of our guidance. We are confident that Q4 represented the trough for us, and we expect revenue growth to accelerate from Q1 into Q2.
Based on a sampling of our top customers, we believe they have made further progress in reducing excess inventory in the quarter. We also continue to see steady improvements in our weekly bookings levels, although still below the level we'd like to see.
On a unit basis, channel inventory remains very low, decreasing again in the quarter. We are working closely with our distribution partners and key customers to manage lead times and increase order visibility as the demand environment begins to improve. I'm also incredibly excited about the senior leadership announcements that I will cover later in the call.
Now I'll hand it over to Mark for the financial update. Mark?

Mark D. Mauldin

Thanks, Matt, and good morning, everyone. First quarter revenue came in at $106 million, above the midpoint of our guidance and up 23% sequentially. Revenue was up for both business units. The Industrial & Commercial business ended at $65 million, up 9% sequentially with the broad industrial category experiencing the largest increase in the quarter. Home & Life revenue was up 51% sequentially at $41 million, driven by a rebound in smart home, particularly in home security applications.
We are well positioned in the Home & Life markets as market initiatives such as Matter-enabled ecosystems and Connected Health gaining further traction. Overall, ASPs were about flat compared to the prior quarter and unit volume was up. Our regional revenue mix was also consistent in the quarter with EMEA and the Americas slightly outpacing APAC.
Distribution revenue mix was about 66% for the first quarter, up from last quarter, but still below our typical levels. Channel inventory decreased to 61 days. On a unit basis, channel inventory was down almost 25% sequentially and 50% year-over-year.
As Matt mentioned, we are working closely with our distribution partners and customers to bring order patterns within our standard lead times to improve demand visibility as the market recovers.
Non-GAAP gross margin ended in line with guidance at 52%. As expected, customer mix was the largest headwind on our gross margin along with the impact of fixed costs over the lower revenue levels. We expect gross margin to increase toward targeted model as revenue further recovers.
Non-GAAP operating expenses of $94 million were better than expected, largely due to slower-than-expected hiring and discretionary spending. Non-GAAP operating loss was $39 million, and our non-GAAP effective tax rate was 20%. Non-GAAP loss of $0.92 was at the top end of our guidance range, mainly driven by the OpEx favorability.
On a GAAP basis, gross margin ended at 52%. GAAP operating expenses were $114 million, which was also better than expected. GAAP operating loss was $59 million for the first quarter. GAAP loss per share was $1.77 for the first quarter, above the top end of our guide.
Turning to the balance sheet. We ended the year with cash and investments of $333 million. We repaid the $45 million outstanding on our revolving credit facility in the quarter and have no outstanding debt. Our DSO was approximately 30 days, and we continue to see no customer credit concerns.
Our internal inventory was up slightly in Q1 at $198 million. Inventory turns ended at 1x, and we expect this represents our peak inventory level for the year. Importantly, the die bank inventory we strategically built over the past year positions us to address the channel efficiently as end market demand improves.
Before returning the call to Matt, I will cover guidance for the second quarter. We expect revenue for the second quarter to be in the range of $135 million to $145 million. We anticipate both business units to be up sequentially. We expect non-GAAP gross margin in the second quarter to be approximately 53%.
The gross margin for this quarter continues to reflect a temporary customer mix shift away from the channel and towards direct customers as distribution partners work to further reduce their inventory. We expect non-GAAP operating expenses in the second quarter to be approximately $102 million and the non-GAAP effective tax rate to be approximately 20%.
Our non-GAAP loss per share for Q2 is expected to be in the range of $0.58 to $0.70. On a GAAP basis, we expect gross margins to be 53%. We expect GAAP operating expenses to be approximately $125 million and GAAP loss per share to be between $1.45 to $1.61.
I will now turn the call back over to Matt. Matt?

Robert Matthew Johnson

Thanks, Mark. We continue to gain share in both Home & Life and Industrial & Commercial end markets with our industry-leading power efficiency, security and our performance as well as our leadership position in Matter.
Last quarter in our Home business, we highlighted the release of Matter 1.2 by the CSA, which expands Matter's reach to include smart TVs, white goods and gateways. Matter 1.2 also extends Wi-Fi connectivity to a wide array of home devices such as appliances, home security systems and automation products, including battery-powered cameras, switches, sensors and window shades.
As consumer interest and interoperability intensifies, more customers are embracing Matter-enabled ecosystems. Silicon Labs remains a trusted partner in this rapidly expanding market. Our commitment to building Matter infrastructure has well positioned both Silicon Labs and Thread technology moving forward. As an example of this, we are actively working with 24 of the 26 major ISPs in North America and Europe that are integrating Matter into their solutions.
Earlier this month at Embedded World, we continued to build out our Series 2 platform with the unveiling of the xG26, our most advanced multi-protocol wireless device family yet, engineered to future-proof IoT technology. This new family ensures that manufacturers' current designs can keep pace with the escalating demand of sophisticated IoT applications.
The xG26 enhances performance with advanced compute capabilities, embedded AI/ML acceleration for energy-efficient battery car devices, top-tier security, 2.4 gigahertz wireless connectivity, twice the flash and RAM and support for wireless protocols such as Matter, Bluetooth Low Energy and multiprotocol and Thread.
Additionally, with Amazon Sidewalk moving through its initial rollout phases, we are guiding partnerships with manufacturers to facilitate their wireless development within this growing ecosystem. Though Amazon Sidewalk is still in the very early stages, we secured a design win in the quarter with one of North America's leading hot water heater manufacturers, providing a Wi-Fi dual band solution with Matter and Amazon Sidewalk capability.
This win was directly related to our being a key Amazon partner on the development and rollout of Sidewalk, enabling us to leverage our technology leadership as the Sidewalk ecosystem continues expanding.
In our Life business, we are excited to see further global expansion of our continuous glucose monitoring solutions. As an example, we have secured additional APAC design wins in the quarter for more than a dozen total design wins in the region, a few of which are starting to ramp in the quarter.
In the industrial end markets, the integration of machine learning at the Edge is proving essential. As a reminder, we have multiple wireless SoCs in production with industry-leading integrated AI/ML capability. Our customers are enhancing the efficiency of connected equipment with wireless connectivity for applications such as Predictive Maintenance.
We recently secured a design win with a leading connected equipment provider in the construction industry to facilitate real-time data analysis and location tracking. Similarly, AI/ML at the Edge is boosting efficiency in HVAC systems in Smart Buildings using Motion Sensing, while also enhancing vehicle safety with rear seat monitoring technologies.
In the Smart Access sector, Chamberlain Group, a global leader in Intelligent Access has chosen our xG28 device for their 11 million plus myQ users because of its superior compute power and greater performance that delivers a more reliable user experience.
Our position in smart cities remains strong, particularly in the Metering sector where wireless communication is making electric grid more efficient and sustainable. We are actively involved in developing solutions for low disaggregation or nonintrusive load monitoring that are maintaining our leadership in smart metering across various regions.
In the Commercial domain, we are tapping into retail automation trends such as electronic shelf labeling, where emerging technologies like shelf cameras and stand-alone sensors. While the overall market penetration for electronic shelf labeling is still nascent, our multi-protocol solutions and design wins in this area reinforce our belief that this market will be an additional growth engine for us, driven by expanding deployments globally.
Looking ahead, we are strategically allocating resources to initiatives that bolster our long-term growth and scalability. The rollout of Series 2 continues to progress well, like the xG26 that we just announced, and is contributing significantly to our current and future growth.
At the same time, the development of Series 3 continues in parallel, helping position us for an even stronger future. We will begin sampling Series 3 to alpha customers this quarter. Series 3 introduces industry-leading wireless performance, compute and scalability on a multi-radio platform and a unified code base that will support over 30 new wireless SoCs.
I want to thank Mark for stepping in as Interim CFO during the CFO transition, and I look forward to Dean Butler joining us on May 15. We also announced 2 additional leadership appointments. Rob Conrad, a long-time industry veteran, is stepping down from our Board of Directors to become our SVP of Worldwide Operations. Rob's expertise in rapidly scaling semiconductor businesses will be critical as we position to scale even faster.
Additionally, Radhika Chennakeshavula joins Silicon Labs as our new Chief Information Officer. Radhika will oversee IT operations, enterprise applications, data analytics and critical digital transformation initiatives.
I would also like to thank Sandeep Kumar for his role in leading our worldwide operations team for the last 18 years. Sandeep has been pivotal in leading Silicon Labs' operational strategies, including during the recent supply chain crisis.
I would also like to express my gratitude to Karuna Annavajjala for her leadership in our IT organization over the last 4 years.
Looking ahead, we remain laser-focused on executing on our new Series 2 and Series 3 products driving design wins and continuing to accelerate our position. As excess inventory at our customers corrects, our design wins ramp and end market demand improves, we're well positioned to drive revenue and profit growth throughout 2024 and beyond.
I'll now hand it back over to Giovanni for Q&A.

Giovanni Pacelli

Thanks, Matt. Before we open the call for Q&A, I'd like to announce our participation in JPMorgan's Global TMT Conference in Boston on May 21 and Stifel's 2024 Cross Sector Insight Conference in Boston in early June. (Operator Instructions)

Question and Answer Session

Operator

(Operator Instructions) And our first question comes from the line of Matt Ramsay from TD Cowen.

Matthew D. Ramsay

Matt, I wanted to -- I mean we're obviously going through the bottoming and now the beginning of the recovery. And you made some -- I think you guys made some comments in the script about maybe a little bit more mix toward direct sales versus the channel for this interim period. And I guess that makes sense as the customers that are supported by the channel drain their own inventory. So I guess my question is, in the prior few months, how much more visibility have you gotten to customer-level inventories that are supported by the channel?
And I don't know if you can give any anecdotes as to what you're hearing by -- either by end market or by geo as to how the direct sort of the customer inventory behind the channel is trending, that would be really helpful.

Robert Matthew Johnson

Yes. Sure. Thanks, Matt. So quick answer is end customer inventory and channel distribution inventory are both moving in the right direction and now, it's the fastest way to say it.
In terms of end customer inventory, our approach has been to sample our top customers and pretty extensively now given what we've been through. And we see a consistent trend, Matt, is the fastest way I can say it that from December to January, January to now, we've seen both the average of excess inventory working down as well as the count of customers who have excess inventory. So it is not fully corrected. And easy way to say that is this revenue level that we're guiding is not indicative of our consumption, but we continue to see it moving in a good direction and we like the progress we're seeing and the same for Disty inventory.
I'd say Disty inventory is -- I don't think we want that to go lower now. I'd say that's fully corrected. But the end customers moving in the right direction, but not there yet.

Matthew D. Ramsay

Got it. No -- a couple of things in follow-up there, Matt. I think the first one being, do you feel like coming out of this? You'll have built maybe deeper relationships, more visibility of relationships that you might have -- the company might have over the next 2, 3, 4 years, whatever, more visibility into customer level, inventory level behind the channel. I don't know. I'm just trying to figure out if this whole thing you guys going through with your partners has led to any permanent difference in visibility.
And I guess my last question, completely unrelated, you mentioned you might sample Series 3 to a few lead customers in the quarter, any thoughts or anecdotes about which industries or what type of applications or anything like that, that we could get some insights to? Because that's a pretty big milestone.

Robert Matthew Johnson

Yes. So the first piece, Matt, quick answer is absolutely yes, on stronger relationships and more visibility. Easy way to say it is going through these things, it's been a tough cycle and that builds the relationship. I guess it can also work the other way. But what we've seen, whether it was the supply chain crisis or this inventory crisis, relationships got stronger, and those partnerships got stronger. So that -- I can say that was the high confidence. And I also consider high confidence to our approach and visibility to understanding end customer inventory has improved.
As you all know, there's not an easy approach there to report like we can do with, obviously, internal or distribution inventory, but we've learned a lot through the cycle, and we've gotten, I think, much better at being able to see it, understand it and navigate it. So quick answer there is yes.
Series 3, we're not sharing those customers. We are sampling, which is exciting. It's a big milestone. I would encourage people to remember that Series 2 is still relatively early days in its cycle and ramp, and at the same time, we're already introducing our next generation. So it's going to be -- just to be blunt, Matt, it's going to be a difficult message for our investors that both are doing really well and both are progressing and that the game is long for both. But at the end of the day, the combination positions us extremely well, and we're happy with the progress on both.

Operator

And our next question comes from the line of Gary Mobley from Wells Fargo Securities.

Gary Wade Mobley

Matt, you're on record in a public venue back in March as saying that you think your end customer consumption level, I think in the -- related to the first quarter was about $160 million, so perhaps you under-shipped the channel by $50 million. And hopefully, that $160 million end consumption level is a target that's moving up into the right. And so my question is based on the June quarter revenue guidance of $140 million, by how much are you under-shipping end customer demand in the current period?

Robert Matthew Johnson

Yes. Thanks, Gary, for reminding me of the record. So the quick answer is what we said was, we see consumption at least $160 million as a data point there. And we didn't say it was at $160 million, we said it was at least at that number, so that was the data point we provided.
So the easy way to think about it on, as I said earlier to the previous question, we are seeing revenue at $140 million, is not indicative of consumption. And as we said in that conference, we think it's higher or at least $160 million as an easy way to think of it.
So I don't think you can get to the math based on that of exactly what consumption is and exactly how much end customer inventory remains. But easy way to say it, they're going in the right direction. End inventory is going down, revenue is going up, getting closer to consumption, but still a ways to go.

Gary Wade Mobley

Got it. And as a way to get a supporting metric for future revenue growth, hopefully, you had this number at your fingertips, but I'm curious what the measure of lifetime value of design wins captured in the first quarter may have been.
And then embedded within that, what the pricing trends were like in those design wins on a like-for-like product basis or maybe even considering any sort of ASP shift associated with Gen 2?

Robert Matthew Johnson

Sure. Yes. I don't have all that off the top of my head. Quick answers, I think on -- actually in the -- correct me if I'm wrong, guys, in the quarter, I think pricing on a like-for-like basis was basically flat.
On design wins, no changes there, good progress and on track. And in terms of pricing on design wins, as we've communicated, no changes there, but that's where we see more pricing pressure is on new business, not on existing business, and we expect that to continue. But what we're seeing there is what I define as more typical than expected, and it almost looks, Gary -- I mean, I'm jumping ahead a little bit, but we're kind of getting back to kind of pre-pandemic type of behaviors on pricing, which means low to mid-single-digit pricing pressure on an annual basis, which is what we've always had, and we've always offset that with new products, new features differentiation. So I wouldn't say we're there yet, but that appears to be where things are going.

Operator

And our next question comes from the line of Tore Svanberg from Stifel.

Tore Egil Svanberg

Congratulations on the continuous recovery here. So Matt, obviously, consumption is a number that we analysts have to decide at some point. But I just want to sort of understand now that you've gone through the upcycle and downcycle, and as we think about the consumption number, is the thought here that the business would grow about 20% going forward longer term? Just wanted to make sure that nothing has really changed with the upcycle and the downcycle fundamentally.

Robert Matthew Johnson

Yes, sure. So sort of a quick answer is no change to our commitment to the 20%, compound annual growth on our revenue has not changed, as that is our target, our model. We see the path to doing that, and we feel really good about that. So that's the fast answer.
There is a couple of things worth mentioning. We're not doing a victory lap at a $140 million guide, right, that we are doing the things that we believe we said we do that we can grow revenue. We're improving gross margin, improving profitability. That happened in Q1. That's going to happen in Q2, and we can continue doing that. But we're far from out of this at $140 million, right? There's still a big gap to our consumption levels, and we also need to see a lot of design wins ramping, which is starting, which is encouraging, and we need to see the end market show more strength.
So we're trying to reflect we're very encouraged by the process -- progress, things are going in the right direction, all signs are encouraging, but we're still in a pretty big hole and we got a ways to go. So we're not celebrating $140 million. We'll be celebrating at much bigger numbers.

Tore Egil Svanberg

Great. And as my follow-up. Beyond the cyclicality stuff, you've sort of highlighted at least 3 big growth engines this year. You mentioned some of the script, right? But the glucose meter, the smart meter and also the shelf labeling, any more details you could add on those 3 as far as ramps, types of customers, regions and so on and so forth?

Robert Matthew Johnson

Yes, sure. So nothing meaningful beyond what the scriptory except I'd say, to be clear, all 3 of those segments are ramping for us in 2024. That's important. And that's encouraging because that gives us growth beyond inventory destocking and whatever the end market demand dynamic ends up being.

Operator

Our next question comes from the line of Thomas O'Malley from Barclays.

Thomas James O'Malley

Just a model squarely first and then a question off that. Just what was the percentage split between the 2 businesses in March? What are you guys assuming for June? And then can you talk to the linearity?
Obviously, it looks like the Disty channel is getting a little bit -- Disty is getting better channels, getting better even in customers improving. Can you just talk about the linearity of what you see right now in terms of revenue as you progress on throughout the year?

Giovanni Pacelli

Tom, it's Giovanni. I'll take the first part. Revenue is between the BUs for Q1. So it was $65 million for the Industrial & Commercial business unit, about $40 million, $41 million for Home & Life.
And I'll let Mark pick up on the linearity as we get through the year.

Mark D. Mauldin

Well, I think what we said in the script that we would expect both business units to continue to grow during the year. We're not providing specific guidance for each business unit for the second quarter.

Robert Matthew Johnson

Yes. I mean maybe a way to think about it, Thomas, is, in general terms, I'd characterize Home & Life as further through the cycle. Industrial & Commercial is still absolutely going in the right direction, but not as far through the cycle. I think that's important.
And then in terms of inventory, I would definitely say that Q1 represents the peak for us in internal inventory that we have intentionally built to be ready for what's coming and as we move forward from here. So that's one.
And as we've said, external inventory at our distributors and other end customers is working down and continues to work down.
So I think the next piece is Disty inventory. We've assumed that, that's going to be flat. But at some point, distributors are trying to work it down. At some point, that's going to start coming up as we see increases in demand in the channel, as their end inventory works down and as they just start to ramp new designs and market strength continues. But we're not assuming that in our guidance right now.

Thomas James O'Malley

Helpful. And then just on the gross margin side, as you see a normalization of your percent sales to kind of just being direct with direct coming back a bit down, how much do you have baked in for that normalization in the June quarter? And how quickly do you see that happening? Obviously, it's a tougher thing to kind of understand. It's a lot of different customers. But just in your base case assumption, we're kind of at the midpoint of your margin guidance, which is up, I think, 80 bps. What do you think that split looks like?

Robert Matthew Johnson

Yes. It's tough to call because part of that includes call in the market, which is not good business. So I think the way to think about it is we have been absolute in our commitment to our gross margin model as well as our total model for the company going through the peak and the trough of this cycle.
We didn't increase our gross margin targets in the peak, and we are not decreasing our gross margin targets in the trough. And what we've said is as we go through each quarter as revenue increases, gross margins will increase. That's what we've seen in Q1. That's what we're sharing that we expect to continue in Q2. And we expect -- simply said, as revenue increases, gross margins will continue to increase back to those levels, that we all know and love. So that's an easy way to think about it.
It's also worth mentioning that as the revenue goes up, the component of the fixed cost absorption goes down. So we're seeing that. And right now, the predominant factor is the mix, and that's what we shared in the script and that's what we're looking at right now. So the easy way to think about it, each quarter's net revenue increases, you'll see that gross margin increase with it.

Operator

Our next question comes from the line of Quinn Bolton from Needham & Company.

Nathaniel Quinn Bolton

I just want to follow up first on the mix issue for gross margin. You kind of said that the mix shifts more to direct here in the near term. And it sort of feels like you're implying that that's a gross margin headwind.
Just wanted to confirm that the Disty sales did carry higher margin than direct sales. And not sure if you will, but I'll ask if you could quantify how much of an impact is that channel mix having on near-term gross margins.
And then I've got a second follow-up question.

Robert Matthew Johnson

So yes, Quinn, this is Matt. A quick answer is, generally, you do see channel or distribution gross margin is higher than direct. That's fairly typical. And for us, what we've also said is mix is now the major driver, a predominant driver of the gross margin being at the levels it is versus where it should and will be. So those are the 2, I think, answers to your question, are hopefully helpful.

Nathaniel Quinn Bolton

Got it. Yes. No, that helps. And then, I guess, I know you guys obviously aren't guiding beyond the current quarter. But given that you've stated that consumption level of $160 million or higher, I guess, kind of looked out to the second half of the year. The Street has got revenue close to $190 million in September, $220 million plus in December, that's significantly higher than that consumption level. And so I guess these aren't your numbers, but what has to happen for the business to get back to kind of where the Street is looking in the second half of the year?
Do you think consumption can increase at that rapid of a pace? Is it really the 3 growth drivers you talked about, the smart metering, glucose monitoring, the electronic shelf labeling that gets you there? Or just any sort of thoughts on sort of that second half.

Robert Matthew Johnson

Sorry, Quinn, can you just say the key question is what are the drivers for the...

Nathaniel Quinn Bolton

Yes. I mean I just -- obviously, you've kind of stated this consumption number of $160 million, and I know that that's kind of a floor, not necessarily where you think consumption is. But the Street numbers for the second half have revenue in September up at like $190 million and $220 million. And I know these aren't your numbers, but I guess to the extent the company were to hit that kind of revenue in the second half, what has to -- what drives that? Is it -- do you think consumption can get up to that kind of level in the second half? Is it driven by some of these new product opportunities that are ramping this year? I mean just what's -- how would you get there in the second half given that $160 million consumption number you've discussed?

Robert Matthew Johnson

Got it. Got it. Okay. So yes, a couple of things. I mean, obviously, the first starting point is you all know this, we don't guide beyond the current quarter, but I can definitely talk about some dynamics that might be helpful towards that end.
And just a reminder on that $160 million number that, that was to give people context around kind of what we -- as we were going through our OpEx reductions last year, that was kind of a rough estimate of a breakeven point.
And obviously, our point was you do your reductions around something that you believed was indicative or better of our consumption. You wouldn't make OpEx reductions on what you thought your go-forward steady state was if you're losing money there. So that's important.
But to your question, so the easy way to think about it is if you oversimplify the 3 major buckets, we have the destocking phenomenon where there's excess inventory at customers, you have design wins ramping and end markets. Right now, the bulk of what we're seeing in Q1 to Q2 is really destocking. There are some ramps in there, but it's not the primary driver. So as we've said, even at $140 million, that's not indicative of consumption, so there's still a ways to go, which is encouraging, and we see that destocking continuing.
There's 2 other factors there, which are the design wins, which I just shared earlier that we do see good design win progress and ramps this year on some pretty major trends in areas, including CGMs, electronic shelf labels, metering were strong positions, and those are ramping. So that gives us an additional lift in addition to revenue approach and consumption.
The end market piece, end demand is more difficult to call. There's just a lot of uncertainty out there in the marketplace. There's conflicting signals and -- not for sure, not trying to call that. But if and when that does improve, that's an additional tailwind. But obviously, you can't bank on that or assume that, at least right now.

Operator

And our next question comes from the line of Srini Pajjuri from Raymond James.

Srinivas Reddy Pajjuri

Matt, on the bookings front, I think you said the weekly bookings are getting better. So I was just hoping you could give us some additional color as to whether the bookings improvement you're seeing is fairly broad-based or if it's -- if one particular end market is doing better than the others?
And also from a geography standpoint, if you're seeing any noticeable differences in terms of the bookings improvement?

Robert Matthew Johnson

Yes. Understood. Quick answer is bookings are improving in a pretty broad and consistent pace. And so what I mean by that is, this isn't 1 or 2 or 3 good weeks. This is many weeks and months of consistent improvement, which is what you want to see. As I mentioned, it's not at the levels we want to see to say we're fully on the other side of this, but the trend is undeniable and encouraging.
To your other point, definitely broad by technology, geo, application space, which is what you'd want to see. As I said, I think Home & Life is a little bit further through than Industrial & Commercial, but we're seeing improvement and strength in both.
And the last thing is just a caveat to all of that, maybe the exception is China, where to be clear, APAC, we're seeing improvement. But in China, we're seeing encouraging signs in terms of design win activity, signaling that there's improving strength, PMI is improving, all that, but we're not seeing that manifest in terms of revenue yet. So that would be the one place. And we're not -- we haven't baked it in. We're not assuming it improves. So there's some encouraging signs, but no, it's not coming out in results yet. So hopefully, that's helpful.

Srinivas Reddy Pajjuri

Yes, yes. Great. And then you also kind of talked about ASPs kind of returning to the pre-pandemic levels or at least the trends in terms of annual ASP declines. I just want to kind of -- given your new product pipeline, of course, the market does what it does.
But can you talk about in terms of as we go from Series 2 to Series 3, and there's a lot of talk about Edge, AI, et cetera, have your own ASPs on a mix adjusted basis? I guess what I'm trying to get at is that as we look out to the next 12 to 24 months, should we kind of bank on unit growth to model your revenue growth? Or do you see kind of content increasing for you as well? And if content is increasing, what are the end markets? And what are some of the applications that will drive that content?

Robert Matthew Johnson

Sure. So big, big picture, if you step back. Series 2 is obviously helpful for us from a gross margin perspective and a pricing perspective in that these are new products with new features, new capabilities that are in demand. And easy way to say it, we mentioned AI/ML, so artificial intelligence, machine learning. So having products that are in production that have the ability to very efficiently provide machine learning inference at the Edge on a battery-powered device is a pretty powerful capability and feature and obviously helps us in terms of being differentiated and driving value with our customers.
So Series 2, as it continues to come out with its features, capabilities that are best-in-class, that is obviously helpful against that dynamic. And to be clear that it's not a new trend or dynamic, that's always how we've operated and traded, but it's -- Series 2 is still introducing new products even in the last few days and in the last few months. So that helps.
And then the second piece is Series 3, obviously, will, as we've shared, bring new to industry capabilities, features and performance, which will again allow us to work on that dynamic. But I do want to set expectations appropriately, that won't be an ASP lift in the next couple of years. I mean that's -- Series 3 will ramp over years, and I wouldn't look there for an ASP lift. I look more to the Series 2 and how is that doing. And then Series 3 is more of a mid- and long-term play. But both help on differentiation, performance features, which help on ASPs and gross margins.

Operator

Our next question comes from the line of Cody Acree from The Benchmark Company.

Cody Grant Acree

Just quick thoughts on operating expenses as you're heading off the bottom here.

Robert Matthew Johnson

Yes, sure. So I mean, a reminder for everyone, as we were going through this cycle, as revenue is decreasing, we decreased our OpEx every quarter along with that. And then as we've shared, as revenue starts going up, we will increase our OpEx, although not at the same level moving forward.
And some of those changes last year were structural, right, with reductions that we've shared in prior calls. That being said, the increase from Q1 to Q2 would be faster than that. And part of that is just one-time dynamics, for example, is we've added an annual merit cycle back for our employees that drives increases from Q1 to Q2.
And then some of the temporary things from last year that have to come back, such as bonus accruals or travel that's driving an unusually high increase as well. But to be clear, as revenue was going down, we reduced OpEx every quarter. As it goes up, we will increase it at a lower rate; Q1 to Q2, a little bit higher than normal because of those one-time effects.

Cody Grant Acree

And maybe just continuing on there. What were the processes that you went through as you were going through the OpEx reductions during the cuts to make sure that you weren't impairing revenue growth?

Robert Matthew Johnson

Yes, sure. That's -- so big picture, that's hard and not easy to do if we're being honest about it. So what we've done is some of the changes were things, obviously, prioritization, where you take classic things, things that are at the bottom, and you do less of those and make sure you're feeding the things at the top that have the biggest impact, biggest returns.
There's also -- going after shifts, we're using the environment as difficult as it is for doing strategic initiatives and shifts where you need to reshore or move resources from one geo to another or do leadership changes. So as an example, we shared the CIO announcement with Radhika, that was one of the changes that came out of last year where we said strategically, how do we approach IT differently so there's employees moving across geos as part of that, but also leveraging -- rebalancing internal-external capabilities, and make versus buy as a classic way to say it.
So it's the combination of all those things, saying, look, it hurts, and it's difficult to make these decisions. But look at it through a lens of managing the portfolio and how do we use this difficult environment not just to cut and have less revenue, but to cut and use it to transform and restructure, rechange how we approach things.
Because -- easiest way to say it, Cody, is if we do these cuts and we don't -- we come out the other side and say, let's just add them back the same way, horrible inefficiency. The motto and approach is make these difficult changes and use them to make us better, use them to transform to reconstitute our capability, and that's the approach we've taken.
So I really do see this will be transformative even though it's difficult. But obviously, too early to see the signs of that. But you're starting to see early things like the CIO announcement.

Operator

Our next question comes from the line of Peter Puk from JPMorgan.

Peter Thomas Puk

Just want to follow up on the China point, where it seems like you guys are not seeing any improvement. How important is China recovery to that $160 million number that you guys talked about?

Robert Matthew Johnson

It's -- quick answer is it's not in there. China, I think right now for us, is roughly around 13% of our revenue, and we are supporting the region. As I said, good design win activity, but the revenue hasn't meaningfully moved, and we're not assuming that it will. So if it does, that's fantastic, but not baked into an assumption of recovery for us.

Peter Thomas Puk

And maybe just on some of these new design wins you eventually talked about, potentially coming in the second half, maybe you can help us understand maybe the size or the scope of these brands? And how meaningful is it to revenue in the second half of this year?

Robert Matthew Johnson

So we haven't provided that context, and we're not guiding beyond the current quarter. But easy way to think about it is we've shared over previous quarters, all of these ramps are, one, not single customer, they're end market across multiple customers and they are meaningful end segments for us and ramps. And I would characterize each of them also as relatively early phases for us in terms of their ramp and potential. But they will all ramp this year, which I think is important and will give us a tailwind, as I said earlier, to whatever that consumption number is.
As we approach that, it gives us lift beyond that. And then, as I said, the end market as well when we see strength there. But no more color on the actual magnitude or size of those that we haven't provided that.

Operator

And our next question comes from the line of Joe Moore from Morgan Stanley.

Joseph Lawrence Moore

Last quarter, you had talked about 1 competitor. I think it was isolating signals better than it had been pricing a little bit more aggressively. Can you give us an update there, any changes? Is that just the new normal? Or is there anything to report there?

Robert Matthew Johnson

Joe, I don't think it's -- I think that's been consistent that most of the industry market has been behaving as you'd expect in this type of market environment. As we said, we did see 1 competitor who is -- we thought being more aggressive, and that hasn't changed. But not signaling anything there. I'm not trying to convey anything. I just wanted to answer with integrity, which is why I called it up.

Operator

This does conclude the question-and-answer session of today's program. I'd like to hand the program back to Giovanni Pacelli for any further remarks.

Giovanni Pacelli

Thank you, Jonathan, and thank you all for joining our call this morning. This concludes today's call. Thanks.

Operator

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.