What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-05-05 compared with 2025-11-04 · 66 added, 87 removed, 148 unchanged (51% of the section changed)

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Our fiscal year-end financial reporting periods are a 52- or 53-week fiscal year that ends on the Saturday closest to December 31.

Fiscal 2025 will have 53 weeks with the extra week occurring in the first quarter of the year.

Fiscal 2024 had 52 weeks.

Our third quarter of fiscal 2025 ended October 4, 2025 and our third quarter of fiscal 2024 ended September 28, 2024.

Fiscal 2026 will have 52 weeks.

Fiscal 2025 had 53 weeks with the extra week occurring in the first quarter of the year.

Our first quarter of fiscal 2026 ended April 4, 2026 and our first quarter of fiscal 2025 ended April 5, 2025.

Proposed Merger

As announced on February 4, 2026, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Texas Instruments Incorporated (“Parent”) and Caldwell Merger Corp., a wholly-owned direct subsidiary of Parent (“Merger Subsidiary”), pursuant to which Merger Subsidiary will merge with and into Silicon Laboratories Inc.

(the “Merger”), and we will survive the Merger as a wholly-owned direct subsidiary of Parent.

At the effective time of the Merger, each share of our common stock outstanding as of immediately prior to the effective time (other than dissenting shares or any shares of our common stock held by us as treasury stock or owned by Parent or any of our or Parent’s subsidiaries) will be cancelled and converted into the right to receive $231.00 in cash, without interest.

The transactions contemplated by the Merger Agreement were unanimously approved by our board of directors, and on April 30, 2026 we obtained the approval of our stockholders required to adopt the Merger Agreement.

The Merger is expected to close in the first half of 2027, subject to customary closing conditions, including approval by our stockholders and the receipt of required regulatory approvals.

In connection with the proposed Merger, for the three months ended April 4, 2026 we have incurred $11.2 million of costs, and expect to continue to incur financial advisory, legal, accounting, and other professional fees prior to the completion of the Merger, which could be significant.

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.

The global economic environment has experienced inflationary pressure, high interest rates, and geopolitical tensions.

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

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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.

Continued geopolitical instability, including the ongoing war in Ukraine and the war in Iran and other conflicts in the Middle East, volatility in energy markets and recent increases in oil prices driven by geopolitical conflicts, 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 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.

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

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

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Current Period Highlights

Revenues increased $39.6 million in the recent quarter compared to the third quarter of fiscal 2024 due to increased revenues from our Home & Life products and our Industrial & Commercial products.

Revenues increased $35.8 million in the recent quarter compared to the first quarter of fiscal 2025 due to increased revenues from our Industrial & Commercial products and our Home & Life products.

Gross profit increased $29.2 million during the same period primarily as a result of the increase in revenues.

Gross margin increased to 57.8% in the recent quarter compared to 54.3% in the third quarter of fiscal 2024 as our indirect and overhead expenses decreased as a percentage of revenues.

Operating expenses increased by $11.3 million in the recent quarter compared to the third quarter of fiscal 2024 primarily due to higher personnel-related costs.

Operating loss in the recent quarter was $12.3 million compared to operating loss of $29.7 million in the third quarter of fiscal 2024.

Gross margin increased to 59.5% in the recent quarter compared to 55.0% in the first quarter of fiscal 2025 as our indirect and overhead expenses decreased as a percentage of revenues.

Operating expenses increased by $14.2 million in the recent quarter compared to the first quarter of fiscal 2025 primarily due to costs related to the Merger.

Operating loss in the recent quarter was $17.1 million compared to operating loss of $32.1 million in the first quarter of fiscal 2025.

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

We ended the third quarter of fiscal 2025 with $439.0 million in cash, cash equivalents, and short-term investments.

Net cash provided by operating activities was $87.4 million during the current year nine-month period.

Accounts receivable were $67.3 million at October 4, 2025, representing 29 days sales outstanding (“DSO”).

Inventory was $82.2 million at October 4, 2025, representing 85 days of inventory (“DOI”).

During the nine months ended October 4, 2025, we had no customer that represented more than 10% of our revenues.

We ended the first quarter of fiscal 2026 with $438.9 million in cash, cash equivalents, and short-term investments.

Net cash provided by operating activities was $4.9 million during the current year three-month period.

Accounts receivable were $77.1 million at April 4, 2026, representing 33 days sales outstanding (“DSO”).

Inventory was $103.2 million at April 4, 2026, representing 107 days of inventory (“DOI”).

During the three months ended April 4, 2026, 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 nine months ended October 4, 2025.

The percentage of our revenues derived from outside of the United States was 89% during the nine months ended October 4, 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 three months ended April 4, 2026.

The percentage of our revenues derived from outside of the United States was 92% during the three months ended April 4, 2026.

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

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

Three Months Ended Nine Months Ended

2025 September 28,

2024 October 4,

2025 September 28,

Three Months Ended

2026 April 5,

Revenues 100.0 % 100.0 %

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Net loss (7.4) % (17.1) %

Three Months Ended Nine Months Ended

(in millions) October 4,

2025 September 28,

2024 Change %

Change October 4,

2025 September 28,

Three Months Ended

(in millions) April 4,

2026 April 5,

2025 Change %

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The increase in revenues in the recent three-month period was due to increased revenues of $32.0 million from our Industrial & Commercial products and increased revenues of $3.8 million from our Home & Life products.

The increase in revenues in the recent nine-month period was due to increased revenues of $73.6 million from our Industrial & Commercial products and increased revenues of $84.9 million from our Home & Life products.

Revenues increased in the recent three and nine-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.

Revenues increased in the recent three-month periods as a result of increases in unit volumes of our products relative to the prior year.

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 Nine Months Ended

(in millions) October 4,

2025 September 28,

2024 Change October 4,

2025 September 28,

Three Months Ended

(in millions) April 4,

2026 April 5,

Gross profit $ 127.0 $ 97.8 $ 29.2

Gross margin 59.5 % 55.0 % 4.5 %

Gross profit increased during the recent three and nine-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 nine-month period as a result of the increase in revenues.

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 decreased as a percentage of revenues in the recent three-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 Nine Months Ended

(in millions) October 4,

2025 September 28,

2024 Change %

Change October 4,

2025 September 28,

Three Months Ended

(in millions) April 4,

2026 April 5,

2025 Change %

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Percent of revenue 41.5 % 49.6 %

Research and development expense in the recent three-month period increased, with an increase of $10.7 million for personnel-related costs as a result of lower expenses in the prior year period due to cost containment measures, partially offset by decreases of $3.1 million for amortization of intangible assets and $2.8 million for new product introduction and software expense.

Research and development expense in the recent nine-month period increased $31.3 million for personnel-related costs as a result of lower expenses in the prior year period due to cost containment measures, offset by $6.8 million of government incentives and decreases of $6.5 million for amortization of intangible assets and $5.2 million for new product introduction and software expense.

Research and development expense in the recent three-month period increased, with increases of $1.7 million for new product introduction costs, $1.0 million from lower government incentives, and $0.6 million for IT-related costs, partially offset by a decrease of $3.1 million for amortization of intangible assets.

Selling, General and Administrative

Three Months Ended Nine Months Ended

(in millions) October 4,

2025 September 28,

2024 Change %

Change October 4,

2025 September 28,

Three Months Ended

(in millions) April 4,

2026 April 5,

2025 Change %

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Percent of revenue 26.0 % 23.4 %

The increase in selling, general and administrative expense in the recent three-month period was primarily due to a $6.5 million increase in personnel-related costs as a result of lower expenses in the prior year period due to cost containment measures and a $0.7 million increase in IT-related costs.

The increase in selling, general and administrative expense in the recent nine-month period was primarily due to a $18.2 million increase in personnel-related costs as a result of lower expenses in the prior year period due to cost containment measures and a $1.1 million increase in IT-related costs.

The increase in selling, general and administrative expense in the recent three-month period was primarily due to $11.2 million from costs incurred due to the Merger, and a $2.9 million increase in personnel-related costs.

Interest Income and Other, Net

Interest income and other, net for the three and nine months ended October 4, 2025 was $3.0 million and $10.7 million respectively, compared to $3.5 million and $9.0 million for the three and nine months ended September 28, 2024,

respectively.

The decrease in interest income and other, net in the recent three-month period was primarily due to lower interest rates in the current year period as compared to the prior year period.

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

Interest income and other, net for the three months ended April 4, 2026 was $3.6 million, compared to $3.8 million for the three months ended April 5, 2025.

Interest Expense

Interest expense for the three and nine months ended October 4, 2025 was $0.2 million and $0.8 million, respectively, compared to $0.3 million and $1.1 million for the three and nine months ended September 28, 2024, respectively.

The decrease in the recent nine-month period 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 months ended April 4, 2026 was $0.2 million, compared to $0.3 million for the three months ended April 5, 2025.

Provision for Income Taxes

Three Months Ended Nine Months Ended

(in millions) October 4,

2025 September 28,

2024 Change October 4,

2025 September 28,

Three Months Ended

(in millions) April 4,

2026 April 5,

Provision for income taxes $ 2.2 $ 1.9 $ 0.3

Effective tax rate (16.1) % (6.6) %

The decrease in the provision for income taxes for the three months ended October 4, 2025 is primarily due to the release of a liability for unrecognized tax benefits in the three months ended October 4, 2025 in comparison with the three months ended September 28, 2024.

The decrease in the provision for income taxes for the nine months ended October 4, 2025 is primarily due to a decrease in tax expense related to the U.S.

and Singapore valuation allowance in the nine months ended October 4, 2025 in comparison with the nine months ended September 28, 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.

A valuation allowance is required to be established when it is more likely than not that some portion or all of a deferred tax asset will not be realized.

We identified a need for the valuation allowance due to the presence of significant negative evidence, including recent operating losses and uncertainty around the timing of recovery in economic conditions within both the semiconductor industry and the broader economy.

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

The decrease in the effective tax rate for the three months ended April 4, 2026 is primarily due to a decrease in pre-tax book loss, as the impact of permanent items is relatively greater when the pre-tax loss is smaller.

Liquidity and Capital Resources

Our principal sources of liquidity as of October 4, 2025 consisted of $439.0 million in cash, cash equivalents and short-term investments, of which $220.8 million was held by our U.S.

Our principal sources of liquidity as of April 4, 2026 consisted of $438.9 million in cash, cash equivalents and short-term investments, of which $250.3 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;

time deposits;

and money market funds.

Operating Activities

Net cash provided by operating activities was $87.4 million during the nine months ended October 4, 2025, compared to net cash used of $24.0 million during the nine months ended September 28, 2024.

Operating cash flows during the nine months ended October 4, 2025 reflect our net loss of $62.2 million, adjustments of $91.5 million for depreciation, amortization, stock-based compensation, and deferred income taxes, and a net cash inflow of $58.1 million due to changes in our operating assets and liabilities.

Accounts receivable increased to $67.3 million at October 4, 2025 from $54.5 million at December 28, 2024.

Net cash provided by operating activities was $4.9 million during the three months ended April 4, 2026, compared to net cash provided of $48.1 million during the three months ended April 5, 2025.

Operating cash flows during the three months ended April 4, 2026 reflect our net loss of $15.9 million, adjustments of $30.6 million for depreciation, amortization, stock-based compensation, and deferred income taxes, and a net cash outflow of $9.7 million due to changes in our operating assets and liabilities.

Accounts receivable increased to $77.1 million at April 4, 2026 from $64.5 million at January 3, 2026.

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

Our DSO was 29 days at October 4, 2025 and December 28, 2024.

Inventory decreased to $82.2 million at October 4, 2025 from $105.6 million at December 28, 2024.

Our DSO was 33 days at April 4, 2026 and 28 days at January 3, 2026.

Inventory increased to $103.2 million at April 4, 2026 from $95.6 million at January 3, 2026.

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 85 days at October 4, 2025 and 125 days at December 28, 2024.

Our DOI was 107 days at April 4, 2026 and 113 days at January 3, 2026.

Investing Activities

Net cash used in investing activities was $20.8 million during the nine months ended October 4, 2025, compared to net cash provided of $151.3 million during the nine months ended September 28, 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 $143.6 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 $12.2 million during the nine months ended October 4, 2025 compared to the nine months ended September 28, 2024.

Net cash provided by investing activities was $14.9 million during the three months ended April 4, 2026, compared to net cash used of $3.9 million during the three months ended April 5, 2025.

The increase in cash inflows was principally due to an increase in cash provided by net purchases, sales, and maturities of marketable securities of $22.5 million and the receipt of $1.3 million of proceeds from capital-related government incentives in the current period.

Purchases of property and equipment increased $5.0 million during the three months ended April 4, 2026 compared to the three months ended April 5, 2025.

Financing Activities

Net cash used in financing activities was $6.8 million during the nine months ended October 4, 2025, compared to $51.7 million during the nine months ended September 28, 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 October 4, 2025, we had a $400 million revolving credit facility.

Net cash used in financing activities was $1.0 million during the three months ended April 4, 2026, compared to $1.0 million during the three months ended April 5, 2025.

As of April 4, 2026, 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.

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.

As of October 4, 2025, we were in compliance with all of the covenants and no amounts were outstanding on the revolving credit facility.

As of April 4, 2026, 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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Critical Accounting Estimates

Our critical accounting estimates are described in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section of our Form 10-K for the fiscal year ended December 28, 2024.

There have been no material subsequent changes to our critical accounting estimates.

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interest rates.

A 100 basis point decline in yield on our investment portfolio holdings as of October 4, 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 April 4, 2026 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 October 4, 2025.

While we have drawn from the credit facility in the past, we had no borrowings as of April 4, 2026.

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

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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