Silicon Laboratories Inc (SLAB) 2018 Q1 法說會逐字稿

Good morning. My name is Marcella, and I will be your conference operator today. At this time, I'd like to welcome everyone to the Silicon Labs First Quarter Fiscal 2018 Earnings Conference Call. (Operator Instructions)

I will now turn the call over to Jalene Hoover, Director of Investor Relations and International Finance. Jalene, please go ahead.

Thank you, Marcella, 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 first quarter.

After our prepared comments, we will 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 4 weeks.

Our comments today will include forward-looking statements subject to risks and uncertainties. We base these forward-looking statements and 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 make reference 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 also 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, Jalene. I'm pleased to report strong financial performance in Q1. We entered the year on a strong note with revenue topping the high end of guidance and ending at $205 million, up 15% year-over-year. Combined with favorable gross margin, we also delivered non-GAAP EPS in excess of our guide at $0.87, up 38% year-on-year.

Our Infrastructure products led the way with an outstanding quarter, delivering revenue of $49 million, up over $10 million sequentially and representing 37% year-on-year growth. This is well above our 10% strategic growth target, and while we anticipated a strong quarter for Infrastructure, actual results were meaningfully better than we expected. Our timing products reached an all-time record with the expansion of clock, oscillator and buffer products in target markets. Our isolation products posted another record revenue quarter with continued strong adoption of digital isolation.

IoT declined as expected, down slightly on consumer seasonality and based on delayed product rounds on some higher volume emerging customer programs. IoT revenue for the quarter was $103 million, representing a 17% year-on-year increase.

Broadcast declined about 3% year-on-year, but grew slightly to $36 million in Q1, primarily on strength in automotive radio products, which set a new record.

And finally, Q1 Access revenue was better than expected growing slightly sequentially to $17 million, and down about 6% year-on-year.

During Q1, we consolidated our distribution relationships to a single global distributor, Arrow Electronics, and expanded our direct sales force. We are maintaining our extensive network of regional distributors and e-tailers to complement our single global distribution partner. We anticipate these changes will create greater efficiencies and contribute to both near- and long-term revenue growth.

Distribution revenue for the quarter was $150 million and represented 73% of total sales.

No single customer represented more than 5% of total revenue.

Geographically, we saw growth in APAC, driven by strong performance in all product areas with declines in the Americas and Europe on IoT and Broadcast consumer.

By end market, strength in timing drove increases in Communications and Broadcast drove increases in Automotive. Industrial was stable at just over 50% and Consumer down slightly on seasonality.

During the quarter, we successfully implemented ASC 606 requiring revenue recognition based on sell-in rather than sell-through accounting and we realized an approximate $700,000 increase in revenue as a result. We ended the quarter with a normal amount of inventory in the distribution channel at around 47 days.

Non-GAAP gross margins for the quarter were robust at 60.6%, exceeding expectations, primarily due to strength in our Infrastructure products and other product mix effects. As expected, non-GAAP OpEx increased in Q1 to $82 million based on a seasonal peak in payroll taxes and related expenses, and also hiring. Non-GAAP R&D expenses were up $2 million to $44 million and non-GAAP SG&A expenses were up $4 million to $37 million.

We are pleased to report non-GAAP operating margin of 20.9%, representing a 360-basis-point improvement over Q1 2017, and in line with our target operating model. Non-GAAP earnings ended above our guidance range at $0.87 per share, up 38% year-on-year. Our non-GAAP effective tax rate was slightly lower than expected at around 11%.

Looking at our Q1 results on a GAAP basis, gross margins were 60.5%. Total GAAP OpEx was $101 million with R&D at $55 million and SG&A at $46 million. GAAP operating margin was 11.5%, and GAAP EPS was $0.60 per share. We realized a significant positive tax benefit, resulting from the vesting of stock at higher values than at the time of grant. We also booked an increase in the fair value of an investment in a closely held company, which added another $1 million to other income. These items contributed to our strong GAAP earnings.

Turning now to the balance sheet. We ended Q1 with cash and investments of $766 million. Operating cash flow was $22 million for Q1, coming off of a very strong fiscal 2017 and includes an $18 million payment of payroll taxes related to RSU vesting.

Accounts receivable ended at $75 million or 33 days of sales outstanding.

Net inventory ended the quarter at $77 million, up about $4 million from Q4 and representing inventory turns of 4.2x. This turns level is slightly below our corporate target of 4.5x, and we expect inventory turns to return to target levels later this year.

On April 18, we closed on the acquisition of Sigma Designs' Z-Wave business. We have successfully onboarded about 100 new employees who we are very pleased to welcome to Silicon Labs. We funded the $240 million acquisition with cash on hand. Post deal, we have more than $525 million in available cash and an additional $300 million in incremental borrowing capacity available to us through our credit facility.

We continue to have a $100 million share repurchase authorization outstanding for Fiscal 2018.

I will now cover guidance for the second quarter, which reflects the acquired Z-Wave business as well as an approximate $2 million reduction in revenue related to the ban on U.S. exports to ZTE announced last week.

We expect revenue to be in the range of $211 million to $217 million with IoT up, Broadcast flat, and Infrastructure and Access down.

We expect non-GAAP gross margin to be approximately 59.5%, and we expect non-GAAP OpEx to be about $86 million.

We expect our non-GAAP effective tax rate to be around 11% and we expect non-GAAP EPS to be in the range of $0.81 to $0.87.

On a GAAP basis, we expect gross margin to be approximately 58.5%. We expect GAAP OpEx to be around $111 million and GAAP EPS to be in the range of $0.23 to $0.29.

I will now turn the call over to Tyson.

Thank you, John. We are very pleased to report outstanding first quarter 2018 financial performance, including 15% year-on-year revenue growth, driven by strength in Infrastructure and Broadcast automotive. Typically, first quarter revenue is seasonally down yet we delivered 2% sequential growth and a new all-time record. We have achieved target operating model performance on revenue growth, non-GAAP gross margin and non-GAAP operating margin for 6 of the past 7 quarters. We attribute these strong results to continued execution on our strategy focusing on large, sustainable, high-quality growth markets in the Internet of Things, Infrastructure, and Automotive, which now represent 80% of total Q1 revenue.

Infrastructure powered Q1 results, setting a record with first quarter revenue just shy of $50 million with records in both timing and isolation.

Timing came back strong in Q1, reflecting broad share gains in strategic markets including industrial, data center, and wireless, and a stable optical networking market. We are seeing growing diversity in our customer base beyond core optical networking and a migration to faster data rates. The explosion of data is driving data center upgrades from 10 gig to 100 gig, wireless carrier upgrades from 4G to 5G and service provider upgrades from 100 gig to 400 gig. These higher speeds drive demand for higher-performance timing products, which plays to our core strength and leadership position in clocks and oscillators.

After launching a multiyear record number of clock and oscillator products in 2017, we continue to expand our timing portfolio to drive revenue growth.

Leveraging our expertise in high-performance clock design in Q1, we introduced a new family of PCI Express clock buffers. Featuring up to 12 clock outputs, these buffers are ideally suited to provide low power, low jitter clock distribution in data center, industrial, communications and consumer designs.

Isolation products represent one of our fastest-growing and most diversified product lines. In Q1, we saw strength across a broad range of applications, including power supplies, solar, industrial and automotive. We have established ourselves as the leading provider of digital isolation technology to the cloud and telecom markets where high-speed isolators improve response times and increase efficiency. We are also the #1 supplier of digital isolation technology for electric vehicles offering best-in-class safety, reliability and noise immunity. Our digital isolation products continue to replace traditional optocouplers enabling higher performance, reliability and integration for designs requiring protection from high voltages.

Turning to IoT, Silicon Labs is well positioned to play a leading role in an $8 billion IoT market opportunity, which is expected to grow to about $13 billion over the next 5 years. We offer leading IoT technology for end node applications in target market segments including Smart Home, lighting, metering and industrial. To enable a superior customer experience, we deliver easy-to-use products, platforms and tools to simplify development and we have a well-developed channel to get our solutions to market.

Silicon Labs has pioneered an IoT platform to accelerate technology innovation and product development.

Our Gecko platform architecture encompasses hardware ranging from chips to modules to boards, software including an RTOS and security, connectivity stacks featuring 15.4, Bluetooth, proprietary and Wi-Fi and a broad set of development tools. Together, these layers comprise the industry's most flexible scalable platform for IoT end node development. Connecting and networking devices and maintaining them through the cloud, adds true economic value, enabling new business models and opportunities for our customers.

In Q1, IoT represented half our total revenue and achieved 17% first quarter year-on-year growth. Our connectivity portfolio continues to gain traction as we target low-power wireless end nodes with a broad range of protocols, which now include Z-Wave, a leading mesh technology for the Smart Home market.

Last week, we completed the purchase of Sigma Designs' Z-Wave business, our largest and first public acquisition. Z-Wave has a proven, broadly deployed technology having shipped more than 100 million devices into the market to date. The acquisition expands Silicon Labs' access to a diverse range of ecosystem partners including Amazon, Alarm.com, ADT, Samsung SmartThings, Yale, Vivint, Google Home, Ring and Comcast.

This strategic acquisition complements Silicon Labs' comprehensive wireless hardware and software portfolio and strengthens our position in the Smart Home market. Z-Wave's focus on product interoperability combined with Silicon Labs' Gecko platform and multiprotocol expertise provides us with a great opportunity to accelerate the Z-Wave road map while enhancing features and capabilities.

Z-Wave's interoperability, including forward and backward compatibility, has created a strong following of users and installers who enjoy seamless setup and management of devices in the home. Together, Silicon Labs and the Z-Wave Alliance will continue to advance Z-Wave's technology road map, delivering innovations which will open the door to millions of potential users of Smart Home products and drive a unified Smart Home experience.

In Q1, we introduced the industry's first Wi-Fi product designed specifically for the requirements of IoT applications. Our new Wi-Fi portfolio enables breakthroughs in size, integration, cost and performance as well as ultra-low power consumption creating new design opportunities for IoT end nodes that simply weren't possible until now.

Silicon Labs' new Wi-Fi transceivers and modules enable half the power consumption of traditional Wi-Fi solutions, while delivering the high performance, reliability, advanced security and small footprint, which are hallmarks of Silicon Labs' innovation. Our Wi-Fi products are ideal for a wide range of IoT end node applications including IT security cameras, point-of-sale terminals and consumer healthcare devices.

Our new Wi-Fi products won VDC Research's Embeddy award for Best of Show in the hardware category for 2018 Embedded World conference. This prestigious award recognizes cutting-edge products for embedded developers.

Broadcast automotive radio products continue to grow nicely, establishing record revenue in Q1 driven primarily by OEM share gains. Our scalable, high-performance portfolio addresses demanding automotive radio requirements worldwide while reduced -- while reducing design in costs.

We are leveraging core strengths in RF and mixed-signal CMOS integration and software to enable the building blocks, Infrastructure and opportunities to create a more connected world. Our innovations are propelling growth and will improve lives and transform industries for decades to come.

We are excited about our acquisition of Z-Wave and believe we have the right strategy, products and team in place to achieve our growth objectives. Together, we will continue to deliver differentiated solutions to address large, sustainable, high-quality growth markets.

Thank you for your time and attention. Before we take your questions, I'd like to turn the call back to Jalene. Jalene?

Thank you, Tyson. Before we open the call for the question-and-answer session, I would like to announce our participation in Stifel's Cross Sector Insight Conference in Boston on June 13.

We would now like to open the call up for your questions. (Operator Instructions) Marcella?

(Operator Instructions) Your first question comes from the line of Blayne Curtis from Barclays.

Tyson, maybe -- you saw such outperformance in the Infrastructure segment, I was just kind of curious you said both saw segments of record, I was wondering if one was particularly stronger than other? And if you could just maybe talk about what contributed to that?

Thanks for the question, Blayne. We had very strong performance in both isolation and timing, coming off of a strong year in isolation and we've had a little bit of a pause in the growth on the timing side with some of the challenges we've had in the optical networking market that have been seen across the industry. The growth in isolation has been quite strong and so I would say that the growth in isolation was a little faster than timing, but overall with the annual growth of 37% year-on-year in Infrastructure -- is very, very strong performance in both areas. In fact, the quarter-on-quarter growth in both areas was about the same.

And then maybe just on the Z-Wave acquisition, if you could just talk about what that acquisition is adding to the June guidance? And then maybe more strategically, if you could just talk about how Z-Wave and Zigbee fit together in the long run?

Yes. So if you look at the second quarter, the Z-Wave acquisition, it's a partial quarter of revenue. So it's about an $8 million adder to the Q2 revenue and if we look out into the whole year, we think that Z-Wave will add about $40 million total revenue to the company. If you -- we're able to now integrate Z-Wave into our sales channel and into our portfolio, into our multiprotocol platform and we certainly see that Zigbee has a substantial position in the market and we have a leadership position on the Zigbee side. We also have a very good position on Bluetooth and have been working on these protocols working interoperably with each other. For instance, you can commission a device with Bluetooth via your smartphone and then have that onto a Zigbee network or a Thread network, and over time we anticipate that multiprotocol capability to be part of an extension and acceleration of the Z-Wave road map. So we're very excited about Z-Wave being another one of the key technologies for the Smart Home. It really increases our presence there. We're going to be driving the road map for Z-Wave, leveraging the alliance and leveraging the relationships with a lot of the operators and customers there to continue to make the Smart Home easier to use and to drive penetration out into the market.

Your next question comes from the line of Cody Acree from Drexel Hamilton.

Tyson, if you could maybe just talk about the expectations for your ramp of the new Wi-Fi product?

Yes. So we announced the Wi-Fi product at the Embedded World conference back in February. We have been sampling that to a number of alpha and beta customers here over the last 6 months or so. We have customers that are in the process of designing those products in, but if you look at the design in time and then how long it takes to get those products into the market, we'll see a modest amount of revenue possibly in the fourth quarter of this year, but it's really a 2019, 2020 story.

Okay. Great. And John, just from your OpEx increase, is this the new baseline? And then what do you expect for the rest of the year?

Yes, Cody, this is a new baseline. We talked earlier about having a seasonal increase on some of the fringe costs, kicking in, in Q1 with then the incremental hiring in the company, filtering in as we move through the course of the year as those fringe costs rule off. So this is a rational baseline to look at in terms of the organic spend and then we have a partial quarter with the Z-Wave team, which is on the order of around $4 million to $5 million on a steady state, that's more like $6 million a quarter of incremental OpEx with the acquisition activity.

$6 million per quarter, so as we look into the rest of the year, September and December, what are you expecting for the OpEx?

We're just guiding for Q2 right now. But you can see the $86 million would be essentially a new baseline with a bit of an increase from a full quarter of Z-Wave on top of that.

Your next question comes from the line of Gary Mobley from Benchmark.

I wanted to delve a little bit deeper into the Sigma Designs acquisition. As you mentioned, it was part of a publicly traded company. There was some visibility on the run rate of that business and if I'm not mistaken, the Z-Wave business was as high as $15 million a quarter and you mentioned a $40 million annual run rate. Is that just a simple extrapolation of maybe some near-term softness in that business?

Gary, this is Tyson. The $40 million is the revenue that we would achieve for the entire year, given that we just completed the acquisition here on the 18th of April. So we've got a partial year, which is at $40 million. That's a little bit under a right act at a $60 million type of run rate for the year.

Okay. That's helpful. And you mentioned you took on 100 people, that's obviously implying a pretty lean operation, [$600,000] revenue per employee. Is it your plan to accelerate investment in Z-Wave to maybe sort of capture a greater mark opportunity or revenue potential?

Yes, Gary. This is John. We think the team is pretty well formed and they have done an excellent job building their business. We actually don't see a whole lot of OpEx synergy opportunity on this acquisition. Going back to the structure of the transaction, a lot of the heavy lifting in that area was really completed in the transaction structuring on the front end of this. So the team is well formed. Of course, we have a few open racks in the team, but we see that as a fairly stable team in terms of its overall sizing.

Yes, Gary. I would also say that we've -- because we acquired this out of another company, we have on day 1, we are integrating them into our systems in terms of our supply chain, in terms of sales, in terms of our BU structure and HR. And so we're able to leverage the infrastructure of the company and actually, the integration has gone quite well. So if you look at the corporate structure, that is fairly well optimized out the shoot, out the gate, but it's also -- we have a lot of assets within the company in terms of our portfolio and our software and we're really excited about integrating this technology and this team into our overall broader team. And I think that the -- given our larger sales channel and given the alliance, there's a lot of synergies back and forth, both in terms of cost within our operations chain, in terms of sales, but also as we are able to offer a broader portfolio of technologies to companies, we think that longer term, that's going to be a big boost in terms of the growth both for our products that we have before as well as the Z-Wave products. So we're really, really excited about this acquisition and what it brings in terms of capabilities and market position to the company.

Your next question comes from the line of Suji Desilva from Roth Capital.

On the Infrastructure side, you had a very strong quarter. I know, you guided it to decline sequentially. Can you talk about whether there's some inventory adjustment here from the products? And specifically in timing, what percent of that is now nonoptical to understand your diversification there?

Suji, this is John. One of the notable items for second quarter is the ZTE shipments ban. So we have to cease that here in near term. We'll see how long that takes to work itself out. But -- so that is a factor at work here. And relative to the other portion of the question, I don't have a specific breakout, but we did see greater diversity in our timing business in the first quarter in industrial applications as well as data center and some wireless, and those factors definitely contributed to the strong results in timing.

Okay. That's helpful, John. And on the Automotive side, I know it's a smaller part the revenues, but what percent have you grown to here? And is there opportunity beyond the Broadcast products, additional auto opportunity for you guys?

Yes. So really, the automotive opportunity for us is around infotainment in the Broadcast area where we had record revenue in our automotive radio products and that continues to be a key area of strategic high-quality growth for us. The other big opportunity that we have in Automotive is really in electric vehicles and things like battery management systems, motor controls, the onboard chargers, a lot of the systems that require isolation technology, so the isolation products and some of our microcontroller products actually fit well into electric vehicles. And so we've had quite good success in that area as well. We ship into a number of the leading electric vehicle platforms, both in development as well as what shipping into the market today.

Your next question comes from the line of Rajvindra Gill from Needham & Company.

On the IoT business, kind of declining in line with consumer seasonality and some delayed product ramps and some of the higher ramps, I was wondering if you could maybe talk a little bit about that, elaborate on the product delays? And how we should look at the IoT growing into the second quarter?

Yes. So there's some amount of the IoT revenues in a consumer category and you see some natural seasonality there. That's offset by ramps in growth. There were a couple of higher volume designs in IoT that pushed out a bit. We still anticipate those to continue to ramp through the year. We also -- in the U.K. smart energy area, the metering designs, there's about over 100 million meters being deployed over about 5 years and in Q1, we're seeing a transition from an older platform into a newer platform, it's called SMETS 1 going into SMETS 2. We believe that our market share there is intact. We've got the vast majority of this market and we're -- our customers are still engaged. But we did see a bit of a slowdown or a pause in shipments in Q1 due to that transition from SMETS 1 to SMETS 2 in U.K. smart energy.

That's helpful. And the IoT kind of target of 20% growth annually, how does that now -- how is that now factored in with Z-Wave and the slight hiccup in U.K. metering?

We still feel confident in our 20% organic growth target. So on a pro forma basis, we believe that we are intact for -- to hit that long-term 20% growth rate. We had very good results last year where we grew the IoT business 26%. So we're coming off of the strong year and adding that, the Z-Wave business has been growing at about that 20% rate, we think that the addition of the Z-Wave business, we feel comfortable that the combined -- that the Z-Wave portion will grow also at that 20% rate. So factoring in the Z-Wave acquisition, certainly that would boost the growth rate this year. But, so from an organic basis as well as Z-Wave coming in, we feel confident that, that 20% growth rate is going to continue.

And last question on IoT. Now that you've folded Z-Wave. And now you're also introducing new low-power Wi-Fi modules and transceivers, wondering if you could give us a kind of an update on the competitive landscape. How your product portfolio, which is really comprehensive across all different layers, stack up against the competition?

Yes. So if you look competitively, we have been building our multiprotocol capability. We have a leading position on Zigbee. We have a solid position with Bluetooth Smart and a good -- very good position on the proprietary sub-gigahertz wireless. Z-Wave was another one of the leading protocols in the Smart Home. So in terms of the Smart Home, we're very, very well positioned, and then adding Wi-Fi, that brings in a whole new set of applications for higher data rate applications. And again, all of these wireless protocols are focused on IoT end node devices where we provide essentially the SoC into the end application and have optimized the power consumption for that as well as all the software, the development tools and getting this design then to the thousands of applications that are out there around IoT. This is a platform that we have been developing. We've added additional capabilities through acquisitions over the last 6 years. And we saw the continuation of that this quarter. I think that there is a lot of microcontroller companies out there. They do have pinpoints, wireless protocols. I mean, companies like Microchip have done a number of acquisitions and have some level of wireless capability. We do not see them a whole lot in the market out there. We have companies like NXP, which have some position in Zigbee, but given the situation with Qualcomm and some uncertainty there, I think that that's been to our advantage, competitively. You have ST out there a bit with some of the Bluetooth and certainly have Nordic as a leader on the Bluetooth side. But I think that overall, we have, I think, the broadest portfolio of wireless capability and wireless protocols in the industry that are highly optimized for the IoT end node applications and we continue to invest strongly in our next-generation platform to drive cost, to drive security improvements to, to drive power consumption down and to further optimize that for the end node applications. So we think, competitively, we are in very, very good shape and it's really a matter of driving the prioritization and focusing on execution to drive the growth.

Your next question comes from the line of Tore Svanberg from Stifel.

Back to Wi-Fi. Tyson, could you elaborate a little bit more on that? Are these integrated 8.11 halo products. And perhaps, you can comment on how far you're willing to push the envelop on the various different 802.11 standards?

So if you look at the Wi-Fi standard, the predominantly deployed technology today is 802.11, and in some of the high data rate, 5 gigahertz stuff is at 802.11 AC. For the end nodes, it's really about driving cost and low power and the 802.11 and it's a 1 x 1 solution. So single antenna. So that is basically the minimum cost and longest range, and it's really the protocol that is most suitable for IoT end node applications that don't have super high data rates. So we're not talking about high-definition video or something that you would integrate into a phone or a PC, but it would be into devices that are sensors or possibly a camera, something that's a few megabits per second. And so we have focused on integrating the most widely deployed technology and then driving the integration cost and power and performance to the point that it's really optimized for these end node applications so that Wi-Fi could be more broadly deployed into the market. And again, this is -- it's not something that would go into an access point PC or handset, it's really for this broad range of applications and we think that we've got a great solution there that's highly competitive. It's going against the stuff that's coming out from Cypress that came out Broadcom and you've got some other competition from Qualcomm and some from MediaTek. But those devices are not as highly optimized as what we've been able to introduce.

That's really helpful. And as my follow-up, either for Tyson or for John. Could you elaborate a little bit more on the sales strategy? And also the consolidation of your distributor channel? So I think you even mentioned you are hiring a few more direct sales people. So if you could elaborate a bit more on that, that would also be helpful.

Sure, Tore. This is John. So we have a large and growing opportunity pipeline of $8 billion growing up to approaching now $9 billion and see that's as expanding the size of our internal direct sales force, we can optimize our execution and sales and we're targeting to have this initiative drive faster growth for the company over time. And we also decided along with that to consolidate our global distribution to Arrow Electronics and look forward to a deeper relationship with Arrow here, going forward.

Your next question comes from the line of Craig Ellis from B. Riley.

I'll just start off with a question on IoT segment. With Z-Wave in the segment, how does that impact the end market mix that we would expect? I think, previously, Industrial was around 50% of mix. Will it shift more towards other end markets? And Tyson, relative to some of the blue chip customers that were mentioned, does the addition of Z-Wave create more of a high runner element to that segment versus what we had seen previously?

Yes, Craig, I'll take the first part then send it to Tyson. So on the industrial mix, please keep in mind the Smart Home is classified as an industrial application. This is an area where Z-Wave has had a lot of history and strength in the market. So yes, over time, we do think the Industrial segment is going to continue to grow as a function of our overall mix. And with the Smart Home being included in that segment as well, will further add to that.

Yes. Let me add, Z-Wave had a very strong position in the home security market. So companies like ADT that are rolling out wireless sensors for their security systems, that was very strong. If you look at the Z-Wave ecosystem, there are 600 members of the Z-Wave Alliance and there are over 2,400 devices out into the markets supporting the Z-Wave protocol. So this fits into our diversity strategy that we've got within IoT of thousands of applications and tens of thousands of customers and this is bringing on a substantial number of customers. I would say that it's not adding to the concentration, it's actually adding to the diversity. And if you just look at the overall company now, we didn't have a company -- any customers over 5% and their top 10 customers are -- it's right at 20% right now. So it's like we've made a lot of progress in the company towards diversification and driving into the broader market. The sales transformation that we've just gone through is evidence of that -- of our desire to continue to push this into the broader market. And I think, Z-Wave contributes to that diversity going forward.

That's helpful color, guys. And then the follow up, there were comments on the cash balance, $500 million and then the $300 million line of credit that's available. Can you just comment on the milestones you'd be looking at with Z-Wave integration that would help us understand when the company would be comfortable, potentially redeploying some of that cash for further inorganic growth to add technology capabilities? And Tyson, as we think about competencies that company might want to augment or even add, can you help us understand what that priority list would look like?

Yes, Craig, the cash position that we have is strong and additionally, we feel that the Z-Wave acquisition has gone well. The structure that we were able to achieve and the integration that we were able to implement here on day 1, certainly, there's a lot of work to go there. But we don't have any deals active right now. But certainly, we are looking out in the market for what would makes sense. Some of our selection criteria involve compatible culture. Something that's accretive to the bottom line. Something that is strategically aligned with our businesses in IoT and Infrastructure. And there's a number of interesting assets out there, depending on the action ability and all of that, we'll see. But certainly, it's -- we're in a strong position to continue to go, both with situation that we have with Z-Wave and the integration and the cash balance that we have. So we're going to continue to be actively looking at the best ways to deploy our capital. We still have a $100 million authorization on the share repurchases as well and we'll continue to be active on that front.

(Operator Instructions) If there are no further questions, I'll hand the call back over to Jalene Hoover.

Thank you, Marcella. And thank you all for joining us this morning. This concludes today's call.