What changed in this filing

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Item 1. Financial Statements

2023-04-26 compared with 2022-10-26 · 91 added, 238 removed, 281 unchanged (54% of the section changed)

29 unchanged sentences

250,000 shares authorized;

33,530 and 38,481 shares issued and outstanding at October 1, 2022 and January 1, 2022, respectively

31,997 and 31,994 shares issued and outstanding at April 1, 2023 and December 31, 2022, respectively

Retained earnings

7 unchanged sentences

Three Months Ended

Nine Months Ended

Cost of revenues

3 unchanged sentences

Operating expenses

Operating income (loss)

Operating income

Other income (expense):

1 unchanged sentence

Interest expense

Income (loss) from continuing operations before income taxes

Income before income taxes

Provision for income taxes

Equity-method earnings

Income (loss) from continuing operations

Income from discontinued operations, net of income taxes

Basic earnings (loss) per share:

Continuing operations

Diluted earnings (loss) per share:

Continuing operations

Equity-method earnings (loss)

Earnings per share:

Weighted-average common shares outstanding:

4 unchanged sentences

Three Months Ended

Nine Months Ended

Other comprehensive loss, before tax

Other comprehensive income (loss), before tax:

Net changes to available-for-sale securities:

Unrealized losses arising during the period

Reclassification for (gains) losses included in net income

Unrealized gains (losses) arising during the period

Reclassification for losses included in net income

Net changes to cash flow hedges:

Unrealized losses arising during the period

Reclassification for (gains) losses included in net income

Other comprehensive loss, before tax

Unrealized gains (losses) arising during the period

Reclassification for gains included in net income

Other comprehensive income (loss), before tax

Provision (benefit) for income taxes

Other comprehensive loss

Other comprehensive income (loss)

Comprehensive income

6 unchanged sentences

Stockholders’

Three Months Ended October 1, 2022

Income (Loss)

Balance as of July 2, 2022

Other comprehensive loss

Stock issuances, net of shares withheld for taxes

Repurchases of common stock

Stock-based compensation

Balance as of October 1, 2022

Accumulated Other

Comprehensive

Stockholders’

Three Months Ended October 2, 2021

Income (Loss)

Balance as of July 3, 2021

Other comprehensive loss

Three Months Ended April 1, 2023

Balance as of December 31, 2022

Other comprehensive income

Stock issuances, net of shares withheld for taxes

1 unchanged sentence

Stock-based compensation

Balance as of October 2, 2021

Balance as of April 1, 2023

Accumulated Other

1 unchanged sentence

Stockholders’

Nine Months Ended October 1, 2022

Income (Loss)

Three Months Ended April 2, 2022

Balance as of January 1, 2022

4 unchanged sentences

Stock-based compensation

Balance as of October 1, 2022

Accumulated Other

Comprehensive

Stockholders’

Nine Months Ended October 2, 2021

Income (Loss)

Balance as of January 2, 2021

Other comprehensive loss

Stock issuances, net of shares withheld for taxes

Repurchases of common stock

Stock-based compensation

Convertible debt activity

Balance as of October 2, 2021

Balance as of April 2, 2022

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

2 unchanged sentences

(In thousands)

Nine Months Ended

Three Months Ended

Operating Activities

Adjustments to reconcile net income to net cash provided by operating activities of continuing operations:

Income from discontinued operations, net of income taxes

( 2,183,884 )

Adjustments to reconcile net income to net cash provided by (used in) operating activities of continuing operations:

Depreciation of property and equipment

Amortization of other intangible assets

Amortization of debt discount and debt issuance costs

Loss on extinguishment of convertible debt

Amortization of debt issuance costs

Stock-based compensation expense

Equity-method earnings

Equity-method earnings (loss)

Deferred income taxes

6 unchanged sentences

Other non-current liabilities

Net cash provided by operating activities of continuing operations

Net cash provided by (used in) operating activities of continuing operations

Investing Activities

Purchases of marketable securities

( 1,212,572 )

Sales of marketable securities

1 unchanged sentence

Purchases of property and equipment

Purchases of other assets

Net cash provided by (used in) investing activities of continuing operations

Financing Activities

Payments on debt

Repurchases of common stock

Payment of taxes withheld for vested stock awards

Proceeds from the issuance of common stock

Net cash used in financing activities of continuing operations

1 unchanged sentence

Operating activities

Investing activities

Net cash provided by (used in) discontinued operations

Net cash used in discontinued operations

Increase (decrease) in cash and cash equivalents

10 unchanged sentences

The information included herein contains all normal recurring accruals and adjustments which, in the opinion of management, are necessary to present fairly Silicon Laboratories Inc.’s (the “Company”) financial position, results of its operations, comprehensive income, stockholders’ equity and cash flows.

The Condensed Consolidated Balance Sheet as of January 1, 2022 was derived from the Company’s audited Consolidated Financial Statements.

The Condensed Consolidated Balance Sheet as of December 31, 2022 was derived from the Company’s audited Consolidated Financial Statements.

All intercompany balances and transactions have been eliminated in consolidation.

The condensed consolidated results of operations for the three and nine months ended October 1, 2022 are not necessarily indicative of the results to be expected for the full year.

These Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and notes thereto for the year ended January 1, 2022, included in the Company’s Form 10-K filed with the Securities and Exchange Commission (SEC) on February 2, 2022.

The condensed consolidated results of operations for the three months ended April 1, 2023 are not necessarily indicative of the results to be expected for the full year.

These Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and notes thereto for the year ended December 31, 2022, included in the Company’s Form 10-K filed with the Securities and Exchange Commission (SEC) on February 1, 2023.

The Company prepares financial statements on a 52 - or 53 -week fiscal year that ends on the Saturday closest to December 31.

25 unchanged sentences

Notes to Condensed Consolidated Financial Statements (Continued)

Significant Accounting Policies (Continued)

Adoption of New Accounting Standard

Convertible Instruments

The Company adopted Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) No.

2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging— Contracts in Entity’s Own Equity (Subtopic 815-40 , on January 2, 2022, the first day of its fiscal year ending December 31, 2022.

The Company elected the modified retrospective transition method of adoption at the beginning of the period of adoption through a cumulative-effect adjustment.

Prior periods have not been adjusted.

The following reflects the material changes recorded in connection with the cumulative-effect adjustment (in thousands):

Financial Statement Line Item

Current portion of convertible debt, net

Other non-current liabilities

Retained earnings

The primary impact of the Company’s adoption of ASU 2020-06 was to increase the carrying value of its convertible debt, representing the unamortized debt discount, and reduce deferred tax liabilities related to convertible debt.

The adoption reduced reported interest expense recorded in connection with convertible debt, which increased basic earnings per share and diluted earnings per share by $ 0.12 and $ 0.12 , respectively, for the three months ended October 1, 2022, and by $ 0.34 and $ 0.33 , respectively, for the nine months ended October 1, 2022.

Discontinued Operations

On July 26, 2021, the Company sold its infrastructure and automotive business to Skyworks Solutions, Inc.

for $ 2.75 billion in cash.

The financial results of the infrastructure and automotive business, which are readily distinguishable from other components of the Company, have been presented as discontinued operations in the Condensed Consolidated Financial Statements because the sale represented a strategic shift for the Company.

The following table presents the financial results of the infrastructure and automotive business (the “discontinued operations”) in the Company’s Condensed Consolidated Statements of Income (in thousands, except per share data):

Three Months Ended

Nine Months Ended

Costs of revenues

Operating expenses

Operating income from discontinued operations

Gain on sale of discontinued operations

Income from discontinued operations before income taxes

Provision for income taxes

Income from discontinued operations

Income from discontinued operations per share:

Silicon Laboratories Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

Discontinued Operations (Continued)

Continuing Involvement

In connection with the closing of the sale, the Company entered into certain ancillary agreements with Skyworks, including a Transition Services Agreement (“TSA”).

Through the TSA, the Company has subleased certain premises to Skyworks and will provide or provides various temporary support services for three to eighteen months after the close of the transaction, depending on the service provided.

Although the services provided under the TSA will generate continuing cash flows between the Company and Skyworks for the duration of the TSA, the amounts have not been nor are expected to be material to the ongoing operations of either entity.

Fees received by the Company under the TSA were approximately $ 4.8 million for the nine months ended October 1, 2022.

Earnings (Loss) Per Share

The following table sets forth the computation of basic and diluted earnings (loss) per share from continuing operations (in thousands, except per share data):

Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share data):

Three Months Ended

Nine Months Ended

Income (loss) from continuing operations

Shares used in computing basic earnings (loss) per share

Shares used in computing basic earnings per share

Effect of dilutive securities:

Stock-based awards and convertible debt

Shares used in computing diluted earnings (loss) per share

Earnings (loss) per share:

Diluted shares for the three and nine months ended October 2, 2021 excluded 1.2 million and 1.3 million shares, respectively, due to the Company’s loss from continuing operations for the periods.

Convertible debt and stock-based awards

Shares used in computing diluted earnings per share

Earnings per share:

The Company has irrevocably elected to settle the principal amount of its convertible senior notes in cash and intends to settle any excess value in shares in the event of a conversion.

For the three months ended October 1, 2022 and October 2, 2021 and the nine months ended October 1, 2022 and October 2, 2021, approximately 0.4 million, 0.7 million, 0.7 million and 0.8 million shares, respectively, were included in the denominator for the calculation of diluted earnings per share.

For the three months ended April 1, 2023 and April 2, 2022, approximately 1.2 million and 1.0 million shares, respectively, were included in the denominator for the calculation of diluted earnings per share.

See Note 6, Debt , to the Condensed Consolidated Financial Statements for additional information.

11 unchanged sentences

Fair Value Measurements

at October 1, 2022 Using

at April 1, 2023 Using

Quoted Prices in

4 unchanged sentences

Money market funds

Government debt securities

Corporate debt securities

Total cash equivalents

Short-term investments:

Government debt securities

Corporate debt securities

Government debt securities

Total short-term investments

Fair Value Measurements

at January 1, 2022 Using

at December 31, 2022 Using

Quoted Prices in

5 unchanged sentences

Corporate debt securities

Government debt securities

Total cash equivalents

Short-term investments:

Government debt securities

Corporate debt securities

Government debt securities

Total short-term investments

Other assets, net:

Auction rate securities

Silicon Laboratories Inc.

6 unchanged sentences

or pricing models, such as a discounted cash flow model, with all significant inputs derived from or corroborated with observable market data.

Investments classified as Level 3 are valued using a discounted cash flow model.

The assumptions used in preparing the discounted cash flow model include estimates for interest rates, amount of cash flows, expected holding periods of the securities and a discount to reflect the Company’s inability to liquidate the securities.

The Company’s foreign currency derivative instruments are valued using discounted cash flow models.

1 unchanged sentence

Contractual maturities of investments

The Company’s investments are reported at fair value, with unrealized gains and losses, net of tax, recorded as a component of accumulated other comprehensive loss in the Consolidated Balance Sheet.

The following summarizes the contractual underlying maturities of the Company’s available-for-sale investments at October 1, 2022 (in thousands):

The Company’s available-for-sale investments are reported at fair value, with unrealized gains and losses, net of tax, recorded as a component of accumulated other comprehensive loss in the Condensed Consolidated Balance Sheet.

The following summarizes the contractual underlying maturities of the Company’s available-for-sale investments at April 1, 2023 (in thousands):

Due in one year or less

Due after one year through ten years

Due after ten years

Available-for-sale investments

Due after one year through five years

Unrealized Gains and Losses

The available-for-sale investments that were in a continuous unrealized loss position, aggregated by length of time that individual securities have been in a continuous loss position, were as follows (in thousands):

1 unchanged sentence

12 Months or Greater

As of October 1, 2022

Government debt securities

As of April 1, 2023

Corporate debt securities

Government debt securities

Less Than 12 Months

12 Months or Greater

As of January 1, 2022

Government debt securities

As of December 31, 2022

Corporate debt securities

Auction rate securities

The gross unrealized losses as of October 1, 2022 were due primarily to changes in market interest rates.

The gross unrealized losses as of January 1, 2022 were due primarily to changes in market interest rates and the illiquidity of the Company’s auction-rate securities.

Government debt securities

The gross unrealized losses as of April 1, 2023 and December 31, 2022 were due primarily to changes in market interest rates.

At April 1, 2023 and December 31, 2022, there were no material unrealized gains associated with the Company’s available-for-sale investments.

Silicon Laboratories Inc.

3 unchanged sentences

When evaluating an investment for impairment, the Company reviews factors such as the severity of the impairment, changes in underlying credit ratings, forecasted recovery, the Company’s intent to sell or the likelihood that it would be required to sell the investment before its anticipated recovery in market value and the probability that the scheduled cash payments will continue to be made.

As of October 1, 2022, there were no material declines in the market value of available-for-sale investments due to credit-related factors.

At October 1, 2022 and January 1, 2022, there were no material unrealized gains associated with the Company’s available-for-sale investments.

Level 3 fair value measurements

The following summarizes the activity in Level 3 financial instruments for the nine months ended October 1, 2022 (in thousands):

Auction Rate Securities

Beginning balance

Loss recognized in earnings

Gain included in other comprehensive loss

Balance at October 1, 2022

(1) On May 31, 2022, the Company sold its prior remaining holding of auction-rate securities for $ 5.7 million.

As of April 1, 2023, there were no material declines in the market value of available-for-sale investments due to credit-related factors.

Fair values of other financial instruments

2 unchanged sentences

The notes are traded in less active markets and are therefore classified as a Level 2 fair value measurement.

As of October 1, 2022 and January 1, 2022, the fair value of the notes was $ 636.2 million and $ 944.3 million, respectively.

As of April 1, 2023 and December 31, 2022, the fair value of the notes was $ 803.4 million and $ 671.9 million, respectively.

The Company’s other financial instruments, including cash, accounts receivable and accounts payable, are recorded at amounts that approximate their fair values due to their short maturities.

3 unchanged sentences

The Company does not use derivative contracts for speculative or trading purposes.

The Company recognizes derivatives, on a gross basis, in the Consolidated Balance Sheet at fair value.

Cash flows from derivatives are classified according to the nature of the cash receipt or payment in the Consolidated Statement of Cash Flows.

Silicon Laboratories Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

Derivative Financial Instruments (Continued)

The Company recognizes derivatives, on a gross basis, in the Condensed Consolidated Balance Sheet at fair value.

Cash flows from derivatives are classified according to the nature of the cash receipt or payment in the Condensed Consolidated Statement of Cash Flows.

Cash Flow Hedges

1 unchanged sentence

The Company uses foreign currency forward contracts to reduce the earnings impact that exchange rate fluctuations have on operating expenses denominated in currencies other than the U.S.

Changes in the fair value of the contracts are recorded in accumulated other comprehensive loss in the Consolidated Balance Sheet and subsequently reclassified into earnings in the period during which the hedged transaction is recognized.

Changes in the fair value of the contracts are recorded in accumulated other comprehensive income (loss) in the Condensed Consolidated Balance Sheet and subsequently reclassified into earnings in the period during which the hedged transaction is recognized.

The reclassified amount is reported in the same financial statement line item as the hedged item.

If the foreign currency forward contracts are terminated or can no longer qualify as hedging instruments prior to maturity, the fair value of the contracts recorded in accumulated other comprehensive loss may be recognized in the Consolidated Statement of Income based on an assessment of the contracts at the time of termination.

The Company has entered into foreign currency forward contracts for a portion of its forecasted operating expenses denominated in the Euro, Hungarian Forint, Indian Rupee and Norwegian Krone.

As of October 1, 2022, the contracts had maturities of one to three months and an aggregate notional value of $ 16.3 million.

If the foreign currency forward contracts are terminated or can no longer qualify as hedging instruments prior to maturity, the fair value of the contracts recorded in accumulated other comprehensive income (loss) may be recognized in the Condensed Consolidated Statement of Income based on an assessment of the contracts at the time of termination.

The Company has entered into foreign currency forward contracts for a portion of its forecasted operating expenses denominated in the Euro, Norwegian Krone and Hungarian Forint.

As of April 1, 2023, the contracts had maturities of three to nine months and an aggregate notional value of $ 15.5 million.

Gains and losses expected to be reclassified into earnings in the next twelve months were not material.

The fair value of the contracts, contract gains or losses recognized in other comprehensive loss and amounts reclassified from accumulated other comprehensive loss into earnings were not material for any of the periods presented.

The fair value of the contracts, contract gains or losses recognized in other comprehensive income (loss) and amounts reclassified from accumulated other comprehensive income (loss) into earnings were not material for any of the periods presented.

Silicon Laboratories Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

Supplemental Information

The following shows the details of selected Condensed Consolidated Balance Sheet items (in thousands):

The following table shows the details of selected Condensed Consolidated Balance Sheet items (in thousands):

Work in progress

1 unchanged sentence

The Company leases a portion of its headquarter facilities to other tenants.

Lease income from operating leases was $ 5.4 million and $ 3.1 million during the nine months ended October 1, 2022 and October 2, 2021, respectively.

Silicon Laboratories Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

Lease income from operating leases was $ 0.7 million and $ 1.9 million during the three months ended April 1, 2023 and April 2, 2022, respectively.

0.625 % Convertible Senior Notes

On June 1, 2020, the Company completed a private placement of $ 535 million principal amount convertible senior notes (the “2025 Notes”).

The 2025 Notes bear interest semi-annually at a rate of 0.625 % per year and mature on June 15, 2025.

The 2025 Notes are convertible at a conversion rate of 8.1980 shares of common stock per $1,000 principal amount of the 2025 Notes, or approximately 4.4 million shares of common stock, which is equivalent to a conversion price of approximately $ 121.98 per share.

The conversion rate is subject to adjustment under certain circumstances.

Holders may convert the 2025 Notes under the following circumstances:

during any calendar quarter after the calendar quarter ended on September 30, 2020 if the closing price of the Company’s common stock for at least 20 trading days in the 30 consecutive trading days ending on the last trading day of the preceding calendar quarter is greater than or equal to $ 159.51 per share, representing 130 % of the conversion price of the 2025 Notes (“the Sales Price Trigger”);

during the five business day period after any ten consecutive trading day period (the “measurement period”) in which the trading price per $1,000 principal amount of notes for each trading day of the measurement period was less than 98 % of the product of the closing sale price of our common stock and the conversion rate on each such trading day;

if specified distributions or corporate events occur;

if the Notes are called for redemption;

or at any time after March 15, 2025.

The Company may redeem all or any portion of the 2025 Notes, at its option, on or after June 20, 2023, if the last reported sale price of the Company’s common stock has been at least 130 % of the conversion price then in effect for at least 20 trading days during any 30 consecutive trading day period.

As of January 1, 2022, upon conversion, the 2025 Notes could be settled in cash, shares of the Company’s common stock or a combination of cash and shares, at the Company’s election.

On January 2, 2022, the Company irrevocably elected cash settlement for the principal amount of the 2025 Notes.

The Company intends to settle any excess value in shares in the event of a conversion.

The 2025 Notes were classified as current liabilities at January 1, 2022 due to the Sales Price Trigger condition being met on January 1, 2022.

The Sales Price Trigger condition has not been met during the nine months ended October 1, 2022, therefore the net carrying amount of the 2025 Notes is now classified as a non-current liability.

The principal balance of the 2025 Notes was initially separated into liability and equity components, and recorded at fair value.

The excess of the principal amount of the liability component over its carrying amount represented the debt discount, which was amortized to interest expense over the term of the 2025 Notes using the effective interest method.

With the Company’s adoption of ASU 2020-06 in fiscal 2022, the principal balance of the 2025 Notes is no longer separated between liability and equity components.

This resulted in an increase to the carrying value of its convertible debt, representing the unamortized debt discount as of January 2, 2022, with an offsetting reduction in stockholders’ equity.

The Company incurred debt issuance costs of approximately $ 10.4 million, which were allocated to the liability and equity components in proportion to the allocation of the proceeds.

Upon the adoption of ASU 2020-06, the equity component was reclassified to liabilities and remeasured to reflect cumulative amortization since the issuance of the 2025 Notes.

Silicon Laboratories Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

Debt (Continued)

The 2025 Notes bear interest semi-annually at a rate of 0.625 % per year and were scheduled to mature on June 15, 2025.

On March 22, 2023, the Company issued a notice of redemption for the 2025 Notes.

The redemption will occur on June 20, 2023 for any of the 2025 Notes outstanding that have not been previously converted.

Prior to the consummation of the redemption, the noteholders are entitled to convert their notes into shares of our common stock at a rate of 8.1980 shares per $1,000 principal amount of the 2025 Notes, which is equivalent to a conversion price of $ 121.98 per share.

Such conversion right will expire on June 16, 2023.

Noteholders that convert their 2025 Notes will also receive an additional 0.4101 shares per $1,000 principal amount of 2025 Notes.

The Company irrevocably elected cash settlement for the principal amount of the 2025 Notes and intends to settle any excess value with a combination of shares of the Company’s common stock and cash for fractional shares, if any.

The excess value will be determined pursuant to the settlement upon conversion procedure as described in the 2025 Notes indenture.

The 2025 Notes were classified as current liabilities at April 1, 2023 due to the pending redemption.

The carrying amount of the 2025 Notes consisted of the following (in thousands):

Liability component

Unamortized debt discount

Unamortized debt issuance costs

Net carrying amount

Equity component

Net carrying amount

The liability component of the 2025 Notes is recorded in convertible debt on the Consolidated Balance Sheet.

Prior to the Company’s adoption of ASU 2020-06, the equity component of the 2025 Notes was recorded in stockholders’ equity.

Silicon Laboratories Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

Debt (Continued)

The 2025 Notes are recorded in convertible debt, net on the Condensed Consolidated Balance Sheet.

The effective interest rate for the liability component was 5.336 %.

As of October 1, 2022, the remaining period over which the debt issuance costs will be amortized was 2.7 years.

The remaining balance of the debt issuance costs will be recognized in stockholders’ equity for 2025 Notes that are converted or as debt extinguishment loss for 2025 Notes that are redeemed prior to conversion in the second quarter of fiscal 2023.

Interest expense related to the 2025 Notes was comprised of the following (in thousands):

Three Months Ended

Nine Months Ended

Contractual interest expense

Amortization of debt discount

Amortization of debt issuance costs

7 unchanged sentences

The credit facility contains various conditions, covenants and representations with which the Company must be in compliance in order to borrow funds and to avoid an event of default, including financial covenants that the Company must maintain a net leverage ratio (funded indebtedness/EBITDA) of no more than 4.25 to 1, a secured leverage ratio of no more than 3.50 to 1, and a minimum interest coverage ratio (EBITDA/interest payments) of no less than 2.50 to 1.

As of October 1, 2022, the Company was in compliance with all covenants of the credit facility.

As of April 1, 2023, the Company was in compliance with all covenants of the credit facility.

The Company’s obligations under the credit facility are guaranteed by the Guarantors and are secured by a security interest in substantially all assets of the Company and the Guarantors.

As of October 1, 2022, no amounts were outstanding on the credit facility.

As of April 1, 2023, no amounts were outstanding on the credit facility.

Silicon Laboratories Inc.

1 unchanged sentence

Commitments and Contingencies

On August 11, 2022, August 26, 2022 and October 11, 2022, Bell Semiconductor, LLC (“Bell”) filed three separate patent infringement actions against the Company in the U.S.

District Court for the District of Massachusetts.

Bell alleges in these actions that four U.S.

patents are infringed by the use of certain computer-aided-design (CAD) tools to design integrated circuits.

The patents in these suits are U.S.

7,007,259, 7,149,989, 7,260,803 and 7,396,760.

In each of these actions, Bell seeks unspecified damages, attorney fees and a permanent injunction.

On October 14, 2022, Bell filed a complaint with the U.S.

International Trade Commission (“ITC”) alleging violations of Section 337 of the Tariff Act of 1930 based on alleged importation of articles and components that infringe U.S.

The ITC complaint seeks institution of an investigation and an exclusion order to prevent the importation and sale of allegedly infringing products in the U.S.

The Company intends to vigorously defend against these allegations.

Bell has brought similar claims against Skyworks Solutions, Inc.

(“Skyworks”), and Skyworks has requested indemnification from the Company under the Asset Purchase Agreement dated April 22, 2021.

The Company is unable to predict the outcome of these matters due to the many uncertainties associated with such actions, nor is it able to reasonably estimate the amount or range of possible losses, if any.

As of October 1, 2022, no loss contingencies have been accrued for these matters in the Company’s Condensed Consolidated Financial Statements.

The Company is involved in various other legal proceedings that have arisen in the normal course of business.

While the ultimate results cannot be predicted with certainty, the Company does not expect them to have a material adverse effect on its Consolidated Financial Statements.

The Company is involved in various legal proceedings that have arisen in the normal course of business.

While the ultimate results cannot be predicted with certainty, the Company does not expect them to have a material adverse effect on its Condensed Consolidated Financial Statements.

The Company groups its products as Industrial & Commercial or Home & Life based on the target markets they address.

1 unchanged sentence

Three Months Ended

Nine Months Ended

Industrial & Commercial

1 unchanged sentence

These factors impact the timing and uncertainty of revenues and cash flows.

During the three months ended October 1, 2022 and October 2, 2021 and the nine months ended October 1, 2022 and October 2, 2021, the Company recognized revenue of $ 4.5 million, $ 10.0 million, $ 30.7 million and $ 10.9 million, respectively, from performance obligations that were satisfied in previous reporting periods.

During the three months ended April 1, 2023 and April 2, 2022, the Company recognized revenue of $ 4.9 million and $ 21.5 million, respectively, from performance obligations that were satisfied in previous reporting periods.

The following disaggregates the Company’s revenue by sales channel (in thousands):

Three Months Ended

Nine Months Ended

Direct customers

8 unchanged sentences

Three Months Ended

Nine Months Ended

Cost of revenues

1 unchanged sentence

Selling, general and administrative

Income tax (provision) benefit

Share-based compensation – continuing operations

Share-based compensation – discontinued operations, net

The Company had approximately $ 123.4 million of total unrecognized compensation cost related to equity grants as of October 1, 2022 that is expected to be recognized over a weighted-average period of approximately 2.3 years.

Income tax benefit

The Company had approximately $ 110.9 million of total unrecognized compensation cost related to equity grants as of April 1, 2023 that is expected to be recognized over a weighted-average period of approximately 2.1 years.

There were no significant stock-based compensation costs capitalized into assets in any of the periods presented.

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 and other permanent differences.

Income tax expense was $ 14.2 million and $ 9.4 million for the three months ended October 1, 2022 and October 2, 2021, resulting in effective tax rates of 40.3 % and ( 90.7 )%, respectively.

Income tax expense was $ 36.9 million and $ 12.5 million for the nine months ended October 1, 2022 and October 2, 2021, resulting in effective tax rates of 35.8 % and ( 24.7 )%, respectively.

The increase in the effective tax rate for the three and nine months ended October 1, 2022 was primarily due to the recognition of certain tax benefits for the three and nine months ended October 2, 2021 in discontinued operations under FASB ASU 2019-12, Simplifying the Accounting for Income Taxes, and the required adoption of new U.S.

tax rules regarding the capitalization of research and experimental costs in the current fiscal year.

Under ASU 2019-12, the income tax benefit of a loss from continuing operations should be recognized in discontinued operations if the Company would be unable to benefit from the loss without considering the income from discontinued operations.

As such, tax benefits associated with losses incurred for the three and nine months ended October 2, 2021 were recognized in discontinued operations.

The Tax Cuts and Jobs Act (the “Act”) was enacted on December 22, 2017.

Under the Act, research and experimental expenditures incurred for tax years beginning after December 31, 2021 must be capitalized and amortized ratably over five or fifteen years for tax purposes, depending on where the research activities are conducted.

The Company has elected to treat global intangible low-taxed income (GILTI) as a period cost so the capitalization of research and experimental costs in GILTI increases the Company’s provision for income taxes.

Silicon Laboratories Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

Income Taxes (Continued)

Income tax expense was $ 7.8 million and $ 11.7 million for the three months ended April 1, 2023 and April 2, 2022, resulting in effective tax rates of 35.7 % and 33.8 %, respectively.

The increase in the effective tax rate for the three months ended April 1, 2023 is primarily due to a decrease in the Company’s foreign tax rate benefit and an increase to nondeductible stock-based compensation, partially offset by an increase in the Company’s Federal research and development credit benefit year over year, further impacted by these items’ relation to pre-tax book income.

Uncertain Tax Positions

As of October 1, 2022, the Company had gross unrecognized tax benefits, inclusive of interest, of $ 4.6 million, all of which would affect the effective tax rate if recognized.

During the nine months ended October 1, 2022, the Company did not release any unrecognized tax benefits.

As of April 1, 2023, the Company had gross unrecognized tax benefits, inclusive of interest, of $ 4.6 million, all of which would affect the effective tax rate if recognized.

During the three months ended April 1, 2023, the Company did not release any unrecognized tax benefits.

The Company recognizes interest and penalties related to unrecognized tax benefits in the provision for income taxes.

These amounts were not material for any of the periods presented.

Silicon Laboratories Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

Income Taxes (Continued)

Following the completion of the Norwegian Tax Administration (“NTA”) examination of the Company’s Norwegian subsidiary for income tax matters relating to fiscal years 2013 - 2016, the Company received an assessment from the NTA in December 2017 concerning an adjustment to its 2013 taxable income related to the pricing of an intercompany transaction.

7 unchanged sentences

The Company is not currently under audit in any major taxing jurisdiction.

The Company believes it is reasonably possible that its gross unrecognized tax benefits will decrease by approximately $ 0.5 million, inclusive of interest, in the next 12 months due to the lapse of the statute of limitations.

The Company does not expect material changes to its gross unrecognized tax benefits in the next 12 months.

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 1. Financial Statements