What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-08-05 compared with 2025-05-13 · 93 added, 69 removed, 147 unchanged (52% of the section changed)

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Fiscal 2024 had 52 weeks.

Our first quarter of fiscal 2025 ended April 5, 2025 and our first quarter of fiscal 2024 ended March 30, 2024.

Our second quarter of fiscal 2025 ended July 5, 2025 and our second quarter of fiscal 2024 ended June 29, 2024.

Impact of Macroeconomic Conditions

In recent years, the global economic environment has experienced inflationary pressure, high interest rates, and geopolitical tension, and we have experienced declines in revenues as our customers slowed purchases to reduce existing inventories in response to a softening market.

There currently is increasing uncertainty regarding global macroeconomic conditions as a result of recent changes to U.S.

trade policies, including tariffs on foreign imports to the U.S.

The extent and duration of tariffs and the resulting impact on general economic conditions and our business are uncertain and depend on various factors, such as negotiations between the U.S.

and affected countries, the responses of other countries (such as the retaliatory tariffs imposed by China), exemptions or exclusions that may apply, and any additional cost which may be borne by us, our suppliers, and/or our end customers.

Additionally, increased geopolitical tensions, the risk of inflation and a recession, and the weakening U.S.

There continues to be uncertainty regarding international trade relations and trade policy, including those related to tariffs.

The situation concerning the imposition of additional tariffs and trade restrictions by the U.S.

and other jurisdictions continues to evolve, and we cannot be certain of the outcome, which could adversely impact demand for our products, costs, customers, suppliers, and general economic conditions.

Additionally, continued geopolitical instability, including the ongoing war in Ukraine and conflicts in the Middle East, as well as the risk of inflation, slower GDP growth, or recession, and the weakening U.S.

dollar, have added to the uncertainty.

The extent of the impact, or any new impact, of macroeconomic conditions on our operational and financial performance will depend on future developments, their impact to the businesses of our suppliers and/or customers, and other items identified under “Risk Factors” below, all of which are uncertain and cannot be predicted.

Any extended period of global supply chain and economic disruption could materially affect our business, results of operations, access to sources of liquidity, and financial condition.

The extent of the impact of the macroeconomic and geopolitical environment on our operational and financial performance will depend on future developments, which are uncertain, but could materially affect our business, results of operations, access to sources of liquidity, and financial condition.

See the section entitled "Risk Factors” in Part II, Item 1A of the Form 10-Q for further discussion.

We are a leader in secure, intelligent wireless technology for a more connected world.

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Current Period Highlights

Revenues increased $71.3 million in the recent quarter compared to the first quarter of fiscal 2024 due to increased revenues from our Home & Life products and our Industrial & Commercial products.

Revenues increased $47.5 million in the recent quarter compared to the second quarter of fiscal 2024 due to increased revenues from our Home & Life products and our Industrial & Commercial products.

Gross profit increased $31.5 million during the same period primarily as a result of the increase in revenues.

Gross margin increased to 55.0% in the recent quarter compared to 51.8% in the first quarter of fiscal 2024 as our indirect and overhead expenses remained relatively constant but decreased as a percentage of revenues.

Operating expenses increased by $15.7 million in the recent quarter compared to the first quarter of fiscal 2024 primarily due to higher personnel-related costs.

Operating loss in the recent quarter was $32.1 million compared to operating loss of $59.1 million in the first quarter of fiscal 2024.

Gross margin increased to 56.1% in the recent quarter compared to 52.7% in the second quarter of fiscal 2024 as our indirect and overhead expenses decreased as a percentage of revenues.

Operating expenses increased by $6.4 million in the recent quarter compared to the second quarter of fiscal 2024 primarily due to higher personnel-related costs.

Operating loss in the recent quarter was $22.9 million compared to operating loss of $48.0 million in the second quarter of fiscal 2024.

Refer to “Results of Operations” below for further discussion.

We ended the first quarter of fiscal 2025 with $424.8 million in cash, cash equivalents, and short-term investments.

Net cash provided by operating activities was $48.1 million during the current year three-month period.

Accounts receivable were $52.1 million at April 5, 2025, representing 26 days sales outstanding (“DSO”).

Inventory was $83.4 million at April 5, 2025, representing 94 days of inventory (“DOI”).

During the three months ended April 5, 2025, we had no customer that represented more than 10% of our revenues.

We ended the second quarter of fiscal 2025 with $415.5 million in cash, cash equivalents, and short-term investments.

Net cash provided by operating activities was $53.0 million during the current year six-month period.

Accounts receivable were $56.5 million at July 5, 2025, representing 26 days sales outstanding (“DSO”).

Inventory was $80.9 million at July 5, 2025, representing 86 days of inventory (“DOI”).

During the six months ended July 5, 2025, we had no customer that represented more than 10% of our revenues.

In addition to direct sales to customers, some of our end customers purchase products indirectly from us through distributors and contract manufacturers.

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Although we actually sell the products to, and are paid by, the distributors and contract manufacturers, we refer to such end customer as our customer.

Two of our distributors who sell to our customers, Arrow Electronics and Edom Technology, each represented more than 10% of our revenues during the three months ended April 5, 2025.

The percentage of our revenues derived from outside of the United States was 91% during the three months ended April 5, 2025.

Two of our distributors who sell to our customers, Arrow Electronics and Edom Technology, each represented more than 10% of our revenues during the six months ended July 5, 2025.

The percentage of our revenues derived from outside of the United States was 89% during the six months ended July 5, 2025.

All of our revenues to date have been denominated in U.S.

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Provision for Income Taxes.

Provision for income taxes includes both domestic and foreign income taxes at the applicable tax rates adjusted for non-deductible expenses, research and development tax credits, global intangible low-taxed income, Subpart F income inclusions, and other permanent differences.

Provision for income taxes includes both domestic and foreign income taxes at the applicable tax rates adjusted for non-deductible expenses, research and development tax credits, deemed foreign income inclusions, and other permanent differences.

See Note 10, Income Taxes , to the Condensed Consolidated Financial Statements.

The following table sets forth our Condensed Consolidated Statements of Operations data as a percentage of revenues for the periods indicated:

Three Months Ended

2025 March 30,

Three Months Ended Six Months Ended

2025 June 29,

Revenues 100.0 % 100.0 % 100.0 % 100.0 %

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Loss before income taxes (10.0) (31.3) (12.9) (40.7)

Provision (benefit) for income taxes 1.1 (0.4)

Provision for income taxes 1.3 25.2 1.2 14.4

Net loss (11.3) % (56.5) % (14.1) % (55.1) %

Three Months Ended

(in millions) April 5,

2025 March 30,

Three Months Ended Six Months Ended

(in millions) July 5,

2025 June 29,

2024 Change %

Change July 5,

2025 June 29,

2024 Change %

Industrial & Commercial $ 109.8 $ 88.1 $ 21.7 24.6 % $ 205.8 $ 153.3 $ 52.5 34.2 %

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The increase in revenues in the recent three-month period was due to increased revenues of $21.7 million from our Industrial & Commercial products and increased revenues of $25.8 million from our Home & Life products.

Revenues increased in the recent three-month periods as a result of increases in unit volumes and average selling prices of our products.

The increase in revenues in the recent six-month period was due to increased revenues of $52.5 million from our Industrial & Commercial products and increased revenues of $66.4 million from our Home & Life products.

Revenues increased in the recent three and six-month periods as a result of increases in unit volumes and average selling prices of our products, as the current demand environment has improved relative to the prior year, which was impacted by customers reducing inventory levels relative to amounts they held during the period of widespread supply chain disruptions.

The average selling prices of our products may fluctuate significantly from period to period due to changes in product mix, pricing decisions and other factors.

In general, as our products become more mature, we expect to experience decreases in average selling prices.

Three Months Ended

(in millions) April 5,

2025 March 30,

Three Months Ended Six Months Ended

(in millions) July 5,

2025 June 29,

2024 Change July 5,

2025 June 29,

Gross profit $ 108.1 $ 76.6 $ 31.5 $ 205.9 $ 131.7 $ 74.2

Gross margin 56.1 % 52.7 % 3.4 % 55.6 % 52.3 % 3.3 %

Gross profit increased during the recent three-month period primarily as a result of increases in revenues in the periods.

Gross margin increased as our indirect and overhead expenses remained relatively constant but decreased as a percentage of revenues in the recent three-month period as a result of the increase in revenues.

Gross profit increased during the recent three and six-month period primarily as a result of increases in revenues in the periods.

Gross margin increased as our indirect and overhead expenses decreased as a percentage of revenues in the recent three and six-month period as a result of the increase in revenues.

We may experience variations in the average selling prices of certain of our products.

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Research and Development

Three Months Ended

(in millions) April 5,

2025 March 30,

Three Months Ended Six Months Ended

(in millions) July 5,

2025 June 29,

2024 Change %

Change July 5,

2025 June 29,

2024 Change %

Research and development $ 87.8 $ 85.9 $ 1.9 2.2 % $ 176.0 $ 166.6 $ 9.4 5.6 %

Percent of revenue 45.5 % 59.1 % 47.5 % 66.2 %

Research and development expense in the recent three-month period increased, with an increase of $12.1 million for personnel-related costs as a result of lower expenses in the prior year period due to cost containment measures, partially offset by $2.7 million of government incentives, and decreases for new product introduction and software expense and amortization of intangible assets of $1.0 million and $0.6 million respectively.

Research and development expense in the recent three-month period increased, with an increase of $8.5 million for personnel-related costs as a result of lower expenses in the prior year period due to cost containment measures, partially offset by $2.5 million of government incentives, and decreases for amortization of intangible assets and new product introduction and software expense of $2.7 million and $1.3 million respectively.

Research and development expense in the recent six-month period increased $20.6 million for personnel-related costs as a result of lower expenses in the prior year period due to cost containment measures, offset by $5.2 million of government incentives and decreases of $3.3 million for amortization of intangible assets and $2.3 million for new product introduction and software expense.

Selling, General and Administrative

Three Months Ended

(in millions) April 5,

2025 March 30,

Three Months Ended Six Months Ended

(in millions) July 5,

2025 June 29,

2024 Change %

Change July 5,

2025 June 29,

2024 Change %

Selling, general and administrative $ 43.2 $ 38.7 $ 4.5 11.6 % $ 84.8 $ 72.2 $ 12.6 17.4 %

Percent of revenue 22.4 % 26.6 % 22.9 % 28.7 %

The increase in selling, general and administrative expense in the recent three-month period was primarily due to a $7.8 million increase in personnel-related costs as a result of lower expenses in the prior year period due to cost containment measures.

The increase in selling, general and administrative expense in the recent three-month period was primarily due to a $3.9 million increase in personnel-related costs as a result of lower expenses in the prior year period due to cost containment measures and a $0.5 million increase in IT-related costs.

The increase in selling, general and administrative expense in the recent six-month period was primarily due to a $11.8 million increase in personnel-related costs as a result of lower expenses in the prior year period due to cost containment measures and a $0.8 million increase in outside services.

Interest Income and Other, Net

Interest income and other, net for the three months ended April 5, 2025 was $3.8 million compared to $2.7 million for the three months ended March 30, 2024.

The increase in interest income and other, net in the recent three-month period was primarily due to a higher cash and cash equivalents balance in the current year period as compared to the prior year period as well as higher interest rates earned on the investments.

Interest income and other, net for the three and six months ended July 5, 2025 was $3.8 million and $7.6 million respectively, compared to $2.8 million and $5.5 million for the three and six months ended June 29, 2024, respectively.

The increase in interest income and other, net in the recent three and six-month period was primarily due to a higher cash and cash equivalents balance in the current year period as compared to the prior year period.

Interest Expense

Interest expense for the three months ended April 5, 2025 was $0.3 million, compared to $0.5 million for the three months ended March 30, 2024.

The decrease was primarily due to a balance outstanding on the revolving credit facility for a portion of the prior year period.

Interest expense for the three and six months ended July 5, 2025 was $0.3 million and $0.5 million, respectively, compared to $0.3 million and $0.8 million for the three and six months ended June 29, 2024, respectively.

The decrease in the recent six-month period was primarily due to a balance outstanding on the revolving credit facility for a portion of the prior year period.

Provision for Income Taxes

Three Months Ended

(in millions) April 5,

2025 March 30,

Provision (benefit) for income taxes $ 1.9 $ (0.4) $ 2.3

Three Months Ended Six Months Ended

(in millions) July 5,

2025 June 29,

2024 Change July 5,

2025 June 29,

Provision for income taxes $ 2.5 $ 36.7 $ (34.2) $ 4.4 $ 36.3 $ (31.9)

Effective tax rate (13.1) % (80.6) % (9.3) % (35.4) %

The change in the provision for income taxes for the three months ended April 5, 2025 is primarily due to tax expense associated with the increase in the U.S.

and Singapore valuation allowance in the three months ended April 5, 2025, whereas the valuation allowance had not yet been established in the three months ended March 30, 2024.

The decrease in the provision for income taxes for the three and six months ended July 5, 2025 is primarily due to a decrease in tax expense related to the U.S.

and Singapore valuation allowance in the three and six months ended July 5, 2025 in comparison with the three and six months ended June 29, 2024.

Because of the valuation allowance, we are unable to recognize the full tax benefit of the pre-tax losses incurred in those jurisdictions in the current year.

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We intend to maintain the valuation allowance until our ability to forecast sufficient future sources of taxable income is reestablished.

On July 4, 2025, the U.S.

government enacted tax legislation commonly referred to as the One Big Beautiful Bill Act (the “OBBBA”).

The OBBBA extends and/or modifies many provisions first enacted via the Tax Cuts and Jobs Act in 2017, as well as introduces new modifications to U.S.

federal tax law.

Some provisions are effective for the 2025 tax year while others will become effective in 2026.

In our initial analysis of the OBBBA, we determined that it decreased our forecasted annual effective tax rate for the current year, primarily due to U.S.

research and experimental expenditures no longer being capitalized within net controlled foreign corporation tested income (formerly known as global intangible low-taxed income or “GILTI”), which the Company has elected to treat as a period cost .

Liquidity and Capital Resources

Our principal sources of liquidity as of April 5, 2025 consisted of $424.8 million in cash, cash equivalents and short-term investments, of which $204.1 million was held by our U.S.

Our principal sources of liquidity as of July 5, 2025 consisted of $415.5 million in cash, cash equivalents and short-term investments, of which $195.7 million was held by our U.S.

The remaining balance was held by our foreign subsidiaries.

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government securities;

corporate debt securities, which include asset-backed securities and corporate bonds;

corporate debt securities, which include asset-backed securities;

and money market funds.

Operating Activities

Net cash provided by operating activities was $48.1 million during the three months ended April 5, 2025, compared to net cash used of $71.8 million during the three months ended March 30, 2024.

Operating cash flows during the three months ended April 5, 2025 reflect our net loss of $30.5 million, adjustments of $29.9 million for depreciation, amortization, stock-based compensation, and deferred income taxes, and a net cash inflow of $48.7 million due to changes in our operating assets and liabilities.

Accounts receivable decreased to $52.1 million at April 5, 2025 from $54.5 million at December 28, 2024.

The decrease in accounts receivable resulted primarily from normal variations in the timing of collections and billings.

Our DSO decreased to 26 days at April 5, 2025 from 29 days at December 28, 2024.

Inventory decreased to $83.4 million at April 5, 2025 from $105.6 million at December 28, 2024.

Net cash provided by operating activities was $53.0 million during the six months ended July 5, 2025, compared to net cash used of $55.7 million during the six months ended June 29, 2024.

Operating cash flows during the six months ended July 5, 2025 reflect our net loss of $52.3 million, adjustments of $62.6 million for depreciation, amortization, stock-based compensation, and deferred income taxes, and a net cash inflow of $42.7 million due to changes in our operating assets and liabilities.

Accounts receivable increased to $56.5 million at July 5, 2025 from $54.5 million at December 28, 2024.

The increase in accounts receivable resulted primarily from normal variations in the timing of collections and billings.

Our DSO decreased to 26 days at July 5, 2025 from 29 days at December 28, 2024.

Inventory decreased to $80.9 million at July 5, 2025 from $105.6 million at December 28, 2024.

Our inventory levels will vary based on the availability of supply and the impact of variations between forecasted demand used for purchasing inventory and actual demand.

Our DOI was 94 days at April 5, 2025 and 125 days at December 28, 2024.

Our DOI was 86 days at July 5, 2025 and 125 days at December 28, 2024.

Investing Activities

Net cash used in investing activities was $3.9 million during the three months ended April 5, 2025, compared to net cash provided of $81.5 million during the three months ended March 30, 2024.

Net cash used in investing activities was $14.1 million during the six months ended July 5, 2025, compared to net cash provided of $121.1 million during the six months ended June 29, 2024.

The decrease in cash inflows was principally due to a decrease in cash provided by net purchases, sales, and maturities of marketable securities of $114.8 million in the current period, and proceeds received in the prior year of $12.4 million for the sale of an equity investment.

Purchases of property and equipment increased $8.0 million during the six months ended July 5, 2025 compared to the six months ended June 29, 2024.

Financing Activities

Net cash used in financing activities was $1.0 million during the three months ended April 5, 2025, compared to $45.7 million during the three months ended March 30, 2024.

Net cash used in financing activities was $6.1 million during the six months ended July 5, 2025, compared to $52.1 million during the six months ended June 29, 2024.

The decrease in cash outflows was principally due to a $45.0 million repayment of borrowings under the revolving credit facility in the prior year period.

As of April 5, 2025, we had a $400 million revolving credit facility.

As of July 5, 2025, we had a $400 million revolving credit facility.

We have an option to increase the size of the borrowing capacity of the revolving credit facility by up to the greater of an aggregate of $250 million and 100% of EBITDA, plus an amount that would not cause a secured net leverage ratio to exceed 3.50 to 1.00, subject to certain conditions.

As of April 5, 2025, no amounts were outstanding on the revolving credit facility.

The credit facility contains various conditions, covenants, and representations with which we must be in compliance in order to borrow funds, including financial covenants that we must maintain a consolidated net leverage ratio (funded indebtedness less cash and cash equivalents up to $750 million and divided by EBITDA) of no more than 4.25 to 1, and a minimum interest coverage ratio (EBITDA/interest payments) of no less than 2.50 to 1.

We were granted a waiver of compliance for the minimum interest coverage ratio through October 4, 2025.

In the event we are not able to achieve compliance by the end of the waiver period, we may need to obtain an additional waiver in order to access the revolving credit facility.

As of July 5, 2025, we were in compliance with all of the covenants and no amounts were outstanding on the revolving credit facility.

Capital Requirements

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interest rates.

A 100 basis point decline in yield on our investment portfolio holdings as of April 5, 2025 would decrease our future annual interest income by approximately $3.4 million.

A 100 basis point decline in yield on our investment portfolio holdings as of July 5, 2025 would decrease our future annual interest income by approximately $3.4 million.

We believe that our investment policy, which defines the duration, concentration, and minimum credit quality of the allowable investments, meets our investment objectives.

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The interest rate on the credit facility consists of a variable-rate of interest and an applicable margin.

While we have drawn from the credit facility in the past, we have no borrowings as of April 5, 2025.

While we have drawn

from the credit facility in the past, we have no borrowings as of July 5, 2025.

If we borrow from the credit facility in the future, we will again be exposed to interest rate fluctuations.

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We may use foreign currency forward contracts to manage exposure to foreign exchange risk.

Gains and losses on foreign currency forward contracts are recognized in earnings in the same period during which the hedged transaction is recognized.

Gains and losses on foreign currency forward contracts designated as hedging instruments are recognized in earnings in the same period during which the hedged transaction is recognized.

Available Information

Our website address is www.silabs.com.

practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission (“SEC”).

Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, are available through the investor relations page of our website free of charge as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission (“SEC”).

Our website and the information contained therein or connected thereto are not intended to be incorporated into this Quarterly Report on Form 10-Q.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis