Okay, let's get started. Good morning, and welcome to JP Morgan's 52nd Annual Technology, Media, and Communication Conference. My name is Peter Peng, small and mid-cap semiconductor analyst here at the firm. I'm pleased to have Matt Johnson, President and CEO, Dean Butler, SVP and CFO, with here today. I have asked Matt to start off with an overview of Silicon Laboratories and a summary of the March quarter and June quarter outlook, and then we can kick off the Q&A.
Sure. So, for anyone who's not familiar with the company, Silicon Labs is focused on embedded wireless technology. We're actually the largest dedicated company in the world with that focus, and what we do is provide complete solutions for wireless technologies that would be used in embedded communications. So think of technologies that many have heard of, like Bluetooth and Wi-Fi, and then other technologies like 15.4, like Zigbee, Thread, sub-gigahertz across Wi-SUN, Z-Wave, Amazon Sidewalk, all those technologies. And what we do is provide complete solutions around those, the silicon, the software, the tools, all the enablement around those, and then supporting all the ecosystems that go behind it. So our focus is to be the provider that has every requisite wireless technology our customers need for embedded applications.
That's been our focus, and it's been pretty exciting, market cycle aside, because what we see is embedded wireless really accelerating, IoT adoption really accelerating, and our position to capture that, I think is the strongest it's ever been. To answer your question about kind of, you know, the last quarter's guidance, you know, what we said back in Q4 is we'd, you know, not called the market cycle, but we'd called our trough or bottom, and we saw a path to sequential growth moving forward from there
and that's what we were able to do in Q1, that's what we've guided in Q2, and we feel confident that continues to be the case moving forward. You know, a lot of the key indicators out there, whether it's, it's bookings, backlog, are moving in the right direction. Never as fast as we want, and, you know, the question we get most often is: What's the rate we're gonna see ourselves moving out of this? And that's difficult to call, but the confidence in the direction is as good as it gets.
Okay. Let me just kind of start with some near-term question
Sure.
That's been a lot of the investor focus. So, you know, you continue to under-ship demand, you know, to fully flush out your excess inventory in the channel and at your customers into the June quarter. Like, can you give us a sense of what your customer inventory situation is like, and when do you expect to ship to consumption levels?
Sure. You know, customer inventory is difficult to track and call, but you know, what we do is we sample our top customers, and what that's told us is, you know, back in Q4, we believed our customers were carrying an excess inventory of over a quarter of what they should be carrying. And so what we've said since then is we've seen that continue to work its way down over the last few quarters. And you know, easy way to think about it is, as they work down their excess inventory, our revenue increases and approaches consumption.
So not there yet. You know, we've seen the average excess move down, we've seen the count of customers with excess move down, but still higher than it should be. So I think, you know, as we go throughout this year, you'll continue to see our revenue go up and approaching the consumption level that we've said is, is over $160 million quarter, not at $160 million a quarter.
Got it. Okay. If we kind of look, just look at consensus estimate, the Street is modeling a pretty aggressive second-half revenue ramp, somewhere in that close to 50% growth for the second half of the year. So if we were to get there, what kind of drivers, you know, can, can bring us to that number?
Yeah. I mean, the easy way to think about it is you can break it into maybe three major drivers or legs, if you will. One is this dynamic we just talked about, you know, simply said, destocking, excess inventory at our customers. You know, our channel inventory is already very low, but that end customer inventory, as I said, as that works down, revenue can go up towards consumption. So that can be a meaningful driver for us, and it's the biggest driver we're seeing right now. The second major driver is design wins. You know, we've been winning design wins at an accelerated rate over the last few years. You know, very happy with what we've been able to accomplish there, and we're starting to see those ramp.
A lot of those were supposed to ramp last year, but they are ramping now, so that gives us kind of the second major, you know, growth driver, in addition to, just getting our revenue back to consumption levels where, where we want it to be. And then the third, it's the most difficult to call of all those, is the overall market, end market. You know, that's been more challenging. There's a lot of mixed signals out there in terms of what that looks like, but we don't need that, you know, in the next few quarters to drive, you know, the growth that we're looking at. Those first two can carry us there.
Okay. So you have two business end segments. You have your home and life, and then you have your commercial and industrial, right? And the behavior seems to be a little bit different. Your home and life, they kind of corrected over a five-quarter period, whereas your industrial, it was pretty drastic two quarters.
Yeah.
I mean, can you just share some insights on what you're seeing from those end markets? As we kind of, you know, position for the upcycle, how does that, you know, give you insight into that?
Yeah, it's I mean, admittedly, it's difficult to call, just the way this whole cycle has gone. But, you know, the quick way to think about it, the home and life business certainly went into the cycle first, and we've seen that come out, you know, or working its way out now. Industrial is different. You know, industrial went in later into the cycle and the correction. But it's notable that, you know, the behavior we typically expect from industrial, which is, you know, more, I don't know, for lack of a better term, well-behaved and more moderated down and up. It was, you know, across thousands of customers. It was pretty steep.
As you know, I think they collectively realized the demand levels weren't what they had thought, and they also realized at the same time they were carrying more inventory than they should, and that combination was pretty bad. So my point is, it went down much faster than we've typically seen in industrial. So, you know, not saying it's gonna come out as quickly, but I think it's worth noting that it's a difference than we've typically seen. So we could see more strength in industrial faster on the other side, but, we're not banking on that. But, you know, sitting here today, we're seeing encouraging signs in both segments. Bookings continue to increase, pull-in requests, you know, continue. Excess inventory is working down in both segments, so we're seeing the right signs in both.
Okay. Let me just kind of turn into your design win pipeline. You kind of talked to it, about the strength of it, and it's pretty impressive, right? In 2023, it was pretty severe downturn, yet you grew your design win pipeline by almost double digits, and it's kind of reflective of your differentiated technology and product portfolio. So maybe if you can just kind of talk about some of the... Do you see that continuing into 2024? And, you know, how are you seeing these design wins behave from an end market perspective?
Sure. So yeah, big picture, what we've shared is, you know, back in 2021, 2022, when we had grown our revenue over 40% both those years, our design wins grew at a faster rate during that same timeframe. So then, going into 2023, where revenue is down, typically you see some correlation between design wins and revenue, and you'd expect your design wins to decline coming off of that, you know, kind of incredible cycle. And we were still able to grow our design wins, to your point. And really, that's on the strength of our current generation of products. Our Series 2 products are really hitting the sweet spot in the marketplace. You know, we see that as the de facto standard or platform in the marketplace.
We continue to release new products on that platform, and, it's just, it's serving us incredibly well. So that is what's allowing us to drive design win growth. And yes, we do expect to continue growing our design wins, moving forward. And, you know, at the same time, we're working on our next generation, Series 3, which we'll be sampling this quarter. So it's a really powerful combination to have the success we've seen on the current generation and to be starting to introduce our follow-on generation, so closely. I think that'll serve us well, big picture. In terms of the bookings, you know, we touched on it earlier, a lot of design wins, but also at the same time, a lot of ramps that were delayed.
We expected some of those ramps last year, delayed for various reasons, you know, inventory they needed to work down, dynamics those companies were working through. But as I've said, we are starting to see those ramp now, which is encouraging. And, you know, just for those who are not familiar with our company, a design win that we count as lifetime revenue, like last year or the year before, that can take years, to ramp into production, four or five years in many cases. So it's not, this, this big step function necessarily after you win it. It, it can take a long time, and we're starting to see the, you know, effect of those giving us a tailwind moving forward, which is really exciting.
Okay. I think that's kind of the great part of your story, is that you have the end market recovery, you have the destocking, and you have all these unique design wins that's gonna layer in. So, you know, this year you talked about some design wins that's gonna, you know, drive some incremental... Maybe if you can just rank order for us what you think are the significant design win ramp this year, and maybe, like, if not, you know, quantitatively, maybe qualitatively talk about-
Sure
how significant they are.
Yeah, there's a few ways to think about that. I think, you know, one thing we've tried to do to help our audience is to start, you know, kind of sticking with a few themes and a few application areas where we're consistently talking about those. One of the challenges we have in our space is there's so many applications, so many customers, you know, tens of thousands of customers and thousands of applications. It can be difficult to kind of understand our market and customers. So we've picked a few areas in each of our subsegments. Examples of those would be, you know, recently we started talking more about the healthcare space, continuous glucose monitoring, where, you know, to answer your question, that's a big driver for us.
That's where historically we didn't have a lot of sockets there and customers. But, you know, after multiple years of focus, we're really starting to make progress on multiple customers, multiple wins, and those are starting to ramp now. And the nature of that market, the volumes are fairly high. So that could be a meaningful area for us and will be, I think, starting this year. After that, another one we talk about a lot that also has a pretty big potential, right under CGM, would be the electronic shelf label space or digital shelf labels. You know, that's where we see a pretty, you know, not new technology necessarily, but I think early days in terms of industry adoption.
You see almost every retailer globally having a plan to adopt this technology in various ways and levels. And, you know, just like CGM, we're very well positioned there across multiple suppliers. We are ramping now in that space, and, again, given the nature of that business, the volumes are pretty meaningful. And, maybe the last one under that we talk about is the smart meter, gas, water, electric. You know, I think everyone's aware that the grid challenges globally and, you know, that space has really kind of hit its sweet spot in terms of returns... and the technology maturity to deploy.
So again, very similarly, while we're very well positioned there, we're ramping, and I'd put that right under the first two in terms of impact to us moving forward. And to be clear, there's many other spaces, many other, areas that we see, us being well positioned in ramps, but those three, we talk about quite a bit, and they're all happening now. And they're gonna start impacting us more meaningfully moving forward. I'd rank them in that order.
Okay. Okay, so, you know, this is a technology conference, and we're not gonna get away from talking about AI. I mean, you have, you know, you guys, you know, there's, you know, as AI kind of proliferate, you know, and moving on to inference at the edge, I mean, you guys have your Series 3 platform, and that's a 22 nanometer process node which can kind of bring 100 times more capability versus your prior generation, and it has some AI/ML accelerators in there. So maybe just help us understand, like, what, you know, your Series 3 platform can do, and help us understand from an AI angle how that plays into that.
Sure. Maybe before we do that, I'll just do a, you know, a very self-serving plug for our current generation, Series 2. That generation has, from an artificial intelligence perspective, machine learning accelerators on a lot of our products. So what that is, you know, generative AI is really not being deployed at the extreme edge where we are in embedded applications, but machine learning is. So we have the industry's most effective, most power-efficient solutions for deploying machine learning at the edge. And what I mean by that is, we allow, with the solutions we've put into Series 2, customers can deploy machine learning at the edge on battery-powered applications.
So you can run inference at the edge in a very practical, real-life way, instead of running on a general purpose core and not getting the battery life you want and need. And, you know, we've had this for a while, and we're really starting to see encouraging signs of adoption and uptake as customers start to figure out applications that make sense for them, which is really exciting to see. To answer your question on Series 3, as you would expect, almost in every generation, and including this one, the need for, you know, scaling compute, whether it's general purpose or AI, continues.
So, you know, just like in Series 2, we introduced things that people didn't really understand at the time, levels of security that were new to industry, custom manufacturing capabilities that were new to industry, machine learning on our devices. We're doing the same thing in Series 3, 'cause we've got to target, you know, 5-10 years from now what we think our customers will want and need. That's what we're doing in terms of compute. So general purpose will scale up substantially in terms of general purpose compute. The same for AI. We'll be bringing, again, new-to-industry capabilities to our customers in this space. Because I think, you know, you can plot it out big picture, it’s definitely where the market is going and wants to go, and we want to make sure that we’re always a couple steps ahead of our customers and our competitors.
Okay. The Series 3, you're gonna be expanding way more products, 2-3 times more products than your Series 2. So maybe you can just talk about the strategy there. Is it just, you know, new wireless SoC technologies, just more expanded footprint, market segmentation? Maybe you can just go through your strategy there.
Sure. Yeah, it's, it's basically all the above. Anyone who's not familiar, our maybe our generations or platforms are not maybe the best named. Our Series 3 will be our fifth generation of wireless technology, and every generation, you obviously learn an incredible amount, some of it the hard way, and then you roll that forward into the next generation. So Series 1, we introduced in that generation, 4 wireless SoCs. Series 2, which is our workhorse platform right now, we will have done 10-12 wireless SoCs. We just announced one actually a few weeks ago, and we'll continue to introduce silicon and software. We do over 500 software products on top of that every year. So, you know, that's basically continuing to proliferate.
Our goal in Series 3 is to 2-3x that, as you've, as you've said, and, you know, we're looking to do around 30 products in that space. Because as we gain momentum and we take our platform approach, we're really learning on how to do something that I think is really unique in the industry, which is generate not only so many products, but so many differentiated products with so many different wireless protocols integrated. So industry-leading integration of wireless technology, industry-leading integration of almost every ecosystem you've ever heard of in the wireless space, and then, you know, industry-leading performance around security, machine learning, et cetera.
Each generation, we're getting better, and one, if you put yourself in the customer's shoes, our goal is they look at the landscape and say, "There's no need to work with anyone else, talk to anyone else, adopt anyone else's solution," because we have all the requisite technologies, all the requisite ecosystems, and we have a solution that is really optimal for what they're doing in their application. So that's our goal, and that's why there's so many products coming out each generation, is that machine, that engine, builds, and we service more and more of the market more effectively.
Okay. Before I kind of move on to more questions, I want to see if there's any questions from the audience.
Yeah, guys.
Bye.
So let's talk a little bit about R&D priorities that you're seeing. At CES, you saw a lot of home health, aging at home, you know, private or personal healthcare applications that really proliferated this year. For that part of your business, where are you prioritizing your R&D and spend? And then on the same thing, question on the industrial side. And then, are you looking at any M&A to augment any of your capabilities?
Sure. Yep, so the question was, where are we prioritizing R&D around healthcare and the same around industrial? And then, you know, kind of what we're thinking around M&A. So the healthcare space, right now, that's been an internal strategic focus for us, for 4-5 years. So we've been developing products capability around that space. You're only just now starting to see that externally and really focusing it on predominantly in the Bluetooth space, where we see, you know, really this need, you know, Continuous Glucose Monitoring, great example, where, you know, you have solutions that are essentially disposable and really scaling in terms of global need and adoption, and then other areas that are affiliated with that, that kind of accelerated during the pandemic.
So think telemedicine and the need for things that are wirelessly connected for those visits: blood pressure cuffs, pulse oximeters, thermometers, all these things that you can connect to the smartphone, and then the phone can upload to the doctor's office for that telemedicine visit. So areas like that, we're hyper-focusing on, and, you know, just very transparently, there's reluctance to go too far, too wide. You really wanna clean up that space and then move on, not, not spread ourselves too thin. So that's where we're focused there. Industrial, it's really pretty remarkable that we're seeing, I think a combination of a couple things. One is the technology maturity is there for broader adoption in industrial environments, commercial environments, and the financial returns are strong. In a lot of cases, you know, six, nine months, maybe 12 months. So that's accelerated adoption.
So great examples of that would be those shelf labels or the smart metering that we talked about. So our focus there is any place that, you know, sub-gigahertz, great example, where we have, you know, a leading position in a technology that continues to deploy in those environments, and we're making sure that we're staying on top and leading that space. M&A-wise, what we've said is, our goal, and we're, you know, we have a pretty strong track record of acquiring a company, you know, almost every year for the last decade, and that was really about acquiring technologies, the requisite capabilities and technologies to do what we do today.
Sitting here today, we don't find ourselves lacking or wanting a new technology, you know, not to say never, but right now, we feel like we have all the key capabilities our customers want and need. So what we're looking to do from an M&A perspective is, what could accelerate what we're doing today? What would allow us to step function in the areas we're in, versus, you know, not necessarily opening up a new battlefront? And, you know, before the next question, Peter, if you'd allow me to just take the opportunity to welcome and introduce Dean. This is second week on the job?
That's right.
On the road already. Maybe if you don't mind, just a chance to say a couple of words and introduce yourself. I think you know a lot of the team out here already.
Yeah. Yeah, I do know a lot of the investor base and of sorts, and certainly JP Morgan over the years. Joined the company, you know, second week on the job, really out of the vision that actually Silicon Labs has, which is sort of connecting the future of the world that we all live in. I'm a real believer in that vision. In my prior shop, Peter, you and I worked together a little bit. You know, that was always a company that we admired. We always admired Silicon Labs. I personally had some admiration on, you know, what Matt and the Silicon Labs team were able to build over a number of years.
And when Matt and I sort of first connected and started talking about the opportunity of joining, you know, actually, you know, the ability to sort of come in and help at a pivotal moment where the company's got a huge, massive design win funnel that it's trying to convert, you know, into the bottom line, and at the same time, trying to double down on its investments into series three and sort of beyond, and that was a pretty exciting opportunity for me. And so when Matt and I and the rest of the team sort of talked about it, it was actually, it was pretty exciting for me, and so, I'm here. I'm available for all, all investors. Be out on the road pretty extensively and make myself, you know, available, available. So, you know, so I'm happy to be along. So thanks for having us too, Peter.
Yeah, maybe just kind of I know you've only been in for two weeks, maybe share some of the initial observations you have of the team, the culture, and the company?
Yeah, I mean, look, the team is outstanding. I mean, the engineering team so far, I've sat through actually a bunch of reviews already, the first, you know, week or so. On the engineering side, it's pretty astounding. I mean, the team can almost build anything they set their mind to. I mean, they're world-renowned experts in radio technology. I certainly have a background of, you know, coming through some of that technology, so I know it well, and I know when people have the right stuff and when they don't, and actually, the team is super impressive on the engineering side. Culturally, everybody's very collaborative, actually. It's a one team, one mission, and quite honestly, I think that's what makes Silicon Labs special, is they have a clear mission and a clear goal that's sort of singularly focused.
Sure, there's thousands of customers, and there's lots of end applications, but what they strive to be good at is one thing, and everybody in the company sort of knows that and is driving it forward. So early observations have been, hey, you know, great capabilities, great focus, which I think is important for companies these days. And then finally, that's all turned into a funnel that's impressive. I mean, look, the track record of the last few years that the team has had is tremendous on, you know, revenue growth, execution on design wins. You know, I'm here to just basically turn those design wins into bottom line. So, you know, as long as we can execute and deliver to that pipeline, look, I think this company has a great future ahead of it.
Super excited to have your mindset and experience here. It's gonna be a great thing for the company.
Yeah. Thanks for having me, Matt.
Okay, maybe just kind of going back to your technology. So you guys, you know, have pretty strong position in 15.4 and sub-gigahertz, but you're also getting a lot of traction in Bluetooth, right? It's already your third, you know, largest technology segment. We estimate it's probably 10%-15% of your total revenue mix. Maybe just help us understand, what's been driving this strong momentum? We talked about earlier about the healthcare and the glucose and Bluetooth.
Yeah.
How big of this business, you know, can this become?
Yeah, there's a significant upside potential beyond what we've already done there. You know, for anyone who's not familiar, you can just, you know, kind of break in terms of wireless technologies into 4 major buckets for us. You have sub-gigahertz, 15.4, Bluetooth, and Wi-Fi. Very, very different in terms of requirements. Fifteen four and sub-gig, we're the market leader in those technologies, but if we're honest about it, they've been relatively niche technologies that were really used in IoT applications, but not broadly adopted in globally and in the industry. What we're seeing now is both of those are getting pulled into the light and into the mainstream, right?
You see that happening with, you know, 15.4 being a key element of Thread, in particular, being a key element of Matter, which, you know, we just shared on our last earnings call. If you look at the internet service providers in the U.S. and Europe, I think 24 out of 26 are using us for the solution as they adopt to Matter, which speaks to how strong our position is. So that's really important. And then the same thing in sub-gig. Sub-gig's getting pulled into whether it's Wi-SUN, which is being adopted in a lot of industrial applications, or Amazon Sidewalk. So that's great to see. Those were not trivial technologies. They were, you know, complicated and took a lot of time, effort, and investment to get to those positions that we had.
You know, four or five years ago, we said, "Let's increase our focus on BLE," because we saw the need for that, you know, to be integrated in a lot of these other applications. And what we found was, and I wanna be clear, it wasn't easy, but it was easier than a lot of the other technologies that we've done historically. And, you know, that isn't surprising, if you think about it. It was designed to be easy. That was the nature of the technology, and with focus, as Dean said, we've been able to really drive a lot of design wins and business in that space. And, you know, we're bringing our value proposition to that space, where most of the competition is really focused singularly on that, we bring the integration of other technologies and, and ecosystems to the table.
We bring the depth of what we do to this space. Like, take Matter as an example, right? Other companies can say, "Oh, we support Matter," right? It's easy to put on your website. It's easy to, you know, slap a sticker on something. We literally helped invent and develop the underlying technology that goes into it. We provided more source code to Matter than any other semi company in the world. You know, look at, you know, in terms of certs, I think we're 70%-80% of the certifications, the last time it was being tracked. And it comes through in those ISP numbers that I just shared.
So I think, you know, that combination of breadth across technologies, the depth of what we're able to do, using the Matter example, and the focus that Dean talked about, it makes us really compelling when we show up and we say, "Hey, we're focusing on Bluetooth," and that's what's helping us grow so quickly in that space. And by the way, it will be as big, if not bigger, over time than those other areas, and we're gonna do the exact same thing in Wi-Fi.
Okay, maybe just kind of touching, following up on the Wi-Fi. You guys are kind of ramping your, you know, lower power products, the 917 product. Maybe talk about the design win pipeline there. Any metrics you can share with us?
Sure. I don't think we've shared any specific numbers, but, the easy way to look at it is, you know, just like we put our focus on BLE, and, you know, you can see the impacts and share gains there, we're doing the exact same thing in Wi-Fi. And, you know, we're starting out with a Wi-Fi solution, which is a, Wi-Fi 6 combo device that has the world's lowest power consumption, so longest battery life that is available in the industry. And I'm not talking, you know, 10, 15, 20%. I'm talking 40%-50%, better than competing alternatives. So that's, you know, taking all of our that breadth and depth that we have in this space and bringing it to our focus in Wi-Fi. So, you know, early days, we've just, you know, released the solution to production.
We love the opportunity, funnel or pipeline that we see there, one, because of the, you know, power consumption, two, because of the integration of our other technologies, and three, because of all the customers we have, we're seeing pull-through for those solutions. So early days, but we like what we see so far, and, you know, we, we have years ahead of continuing to develop more products in the space and, increasing our position there.
Okay, one more. I feel like one of the underappreciated areas is just your software. Half of your employees are software engineers.
More than half.
More than half of it. You guys, you have a you know, strong focus on platform software, connectivity software, security protocols. Maybe if you can just talk about some of the capabilities that you have in your software platform, and how does that help your customers accelerate their time to market?
Yeah, it's a pretty elemental thing for us that, you know, humbly, I think we're very good at what we do in silicon. As Dean said, what we can do in the RF domain, in low power embedded RF is, I think pretty unique in the world. But we're just as focused on being just as differentiated in the software domain, and that kind of manifests itself in two ways. One is we can't develop. You know, even though we're going from 10 to 30 products in each platform, we can't develop silicon fast enough, and you die of the weight, the cost, time, and expense of doing that.
So we heavily lean on software on top of our products to further differentiate, customize them for our customers, their applications, their unique needs. So as I said, we might do, you know, 2 or 3 SoCs every year. We do over 500 software products every year on top of those. So from where a customer sits, it feels very customized, very unique, very differentiated for their particular need, and wants in their application space. So that's one place where, you know, we heavily lean on that and differentiate. The other is in ease of use and enablement. You know, if you think about it, historically, wireless technology is relatively high touch.
We will never scale and grow the way we want in terms of being the company in the space, unless it's low to no touch for a large percentage of our customers. So we heavily invest there to make that a reality, where we have a lot of low to no touch business today in the wireless domain, which is a pretty substantial accomplishment, and we're investing to make that easier and easier all the time. Because, you know, if you have to hold everyone's hand to get there, we'll never scale the way we want and reach our true potential as a company. So those are two areas where we're definitely focused, and software is, you know, basically critical towards making that happen.
Okay. Kind of wanna turn to financial. I don't know if this is gonna be Dean or you that's gonna take these financial questions.
I hope Dean.
So, you know, as we kind of on your gross margin, how are you thinking about just the puts and takes near term, and then, you know, the longer target of mid-fifties? How are you thinking about them?
Oh, sure. I'll take a first pass at that. So, you know, can't say it better than this: We have been unwavering in our commitment to our long-term model around revenue growth, gross margin, and profitability as a company throughout this entire cycle. So when we were in the peak of the cycle, we weren't setting new targets, and in the trough of the cycle, we're not setting new targets. And that's the same for our gross margin. What we're experiencing right now is a function of mix and, you know, absorption at these low revenue levels, and as revenue grows, that gross margin will grow. And, you know, we're holding to our target, and that has not changed, and we haven't seen anything that would cause that to change. So, I don't know how to answer it better than that.
Okay. And then
Dean, anything you wanna add?
No, I couldn't say it better.
On capital return, the board, I think, approved $100 million for share purchase earlier this year, and you talked a lot about organic growth and converting pipeline. So, can you talk about how you're thinking about cash returns or M&As or organic growth?
Yeah, I'll just sort of chime in on my philosophy about capital returns. One, look, we're still sort of coming out of the downturn. You sort of certainly bottomed. We moved up appreciably, you know, this quarter, and then, as you said, second half of the year, based on consensus, looks like, you know, growth is gonna be considerable as well. You know, the focus for me is always first returning to profitability, so you gotta clean up your own house to make sure that you're generating sufficient profits to continue to reinvest into the business. I always look at sort of the capital of the company as, you know, your first priority is to invest in your future. So organically, hey, what can you do? What can we continue to build on, you know, going forward? So reinvesting sort of back into yourself.
You know, share repurchases are excess capital returns in my book. The board does have an authorization out there, but we're not at the point, at least right now, where I would say, "Hey, we have excess cash flow that we're gonna return." I think, one, we still have investments to make in ourselves, and two, honestly, we do wanna be, you know, mindful about opportunistic M&A opportunities that may come up and use some of that capital actually in that vein. So that's sort of how I would think about it in the near term, Peter.
Great. With that, we're out of time.
Saw the red light. That's,
Thank you for participating in the conference.
Thank you.
Thanks, Peter. Appreciate it. Thanks, everybody. Really appreciate it.