SILICON LABORATORIES INC. 10-Q

Item 1. Financial Statements Silicon Laboratories Inc. Condensed Consolidated Balance Sheets (In thousands, except per share data) (Unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, ​ December 31, ​ 2023 2022 Assets ​ ​ ​ ​ ​ ​ Current assets: ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ $ 159,928 ​ $ 499,915 Short-term investments ​ 257,157 ​ 692,024 Accounts receivable, net ​ 102,142 ​ 71,437 Inventories ​ 167,581 ​ 100,417 Prepaid expenses and other current assets ​ 86,727 ​ 97,570 Total current assets ​ 773,535 ​ 1,461,363 Property and equipment, net ​ 150,839 ​ 152,016 Goodwill ​ 376,389 ​ 376,389 Other intangible assets, net ​ 65,744 ​ 84,907 Other assets, net ​ 108,555 ​ 94,753 Total assets ​ $ 1,475,062 ​ $ 2,169,428 Liabilities and Stockholders’ Equity ​ ​ ​ ​ ​ ​ Current liabilities: ​ ​ ​ ​ ​ ​ Accounts payable ​ $ 48,086 ​ $ 89,860 Revolving line of credit ​ ​ 45,000 ​ ​ — Deferred revenue and returns liability ​ ​ 10,066 ​ ​ 6,780 Other current liabilities ​ ​ 61,991 ​ 89,136 Total current liabilities ​ ​ 165,143 ​ 185,776 Convertible debt, net ​ ​ — ​ ​ 529,573 Other non-current liabilities ​ ​ 49,997 ​ 49,071 Total liabilities ​ ​ 215,140 ​ 764,420 Commitments and contingencies ​ ​ ​ ​ ​ ​ Stockholders’ equity: ​ ​ ​ ​ ​ ​ Preferred stock – $ 0.0001 par value; 10,000 shares authorized; no shares issued ​ ​ — ​ ​ — Common stock – $ 0.0001 par value; 250,000 shares authorized; 31,779 and 31,994 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively ​ ​ 3 ​ 3 Retained earnings ​ ​ 1,262,518 ​ 1,415,693 Accumulated other comprehensive loss ​ ​ ( 2,599 ) ​ ( 10,688 ) Total stockholders’ equity ​ ​ 1,259,922 ​ 1,405,008 Total liabilities and stockholders’ equity ​ $ 1,475,062 ​ $ 2,169,428 ​ The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. ​ 3 Table of Contents Silicon Laboratories Inc. Condensed Consolidated Statements of Income (In thousands, except per share data) (Unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended Nine Months Ended ​ September 30, October 1, September 30, October 1, ​ ​ 2023 2022 ​ 2023 2022 Revenues ​ $ 203,760 ​ $ 269,817 ​ $ 695,413 ​ $ 766,781 Cost of revenues ​ ​ 84,735 ​ 104,232 ​ ​ 278,753 ​ 281,521 Gross profit ​ ​ 119,025 ​ 165,585 ​ ​ 416,660 ​ 485,260 Operating expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Research and development ​ ​ 79,042 ​ 84,624 ​ ​ 254,340 ​ 245,677 Selling, general and administrative ​ ​ 27,766 ​ 50,738 ​ ​ 113,363 ​ 144,398 Operating expenses ​ ​ 106,808 ​ 135,362 ​ ​ 367,703 ​ 390,075 Operating income ​ ​ 12,217 ​ ​ 30,223 ​ ​ 48,957 ​ 95,185 Other income (expense): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest income and other, net ​ ​ 2,938 ​ ​ 4,672 ​ ​ 15,554 ​ 9,616 Interest expense ​ ​ ( 1,359 ) ​ ​ ( 1,527 ) ​ ​ ( 4,611 ) ​ ( 4,874 ) Income before income taxes ​ ​ 13,796 ​ ​ 33,368 ​ ​ 59,900 ​ 99,927 Provision for income taxes ​ ​ 3,388 ​ 14,188 ​ ​ 23,479 ​ ​ 36,871 Equity-method earnings (loss) ​ ​ ( 60 ) ​ ​ 1,819 ​ ​ ( 1,150 ) ​ ​ 2,985 Net income ​ $ 10,348 ​ $ 20,999 ​ $ 35,271 ​ $ 66,041 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Earnings per share: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic ​ $ 0.33 ​ $ 0.62 ​ $ 1.11 ​ $ 1.84 Diluted ​ $ 0.32 ​ $ 0.60 ​ $ 1.07 ​ $ 1.79 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted-average common shares outstanding: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic ​ ​ 31,796 ​ ​ 34,079 ​ ​ 31,789 ​ ​ 35,935 Diluted ​ ​ 32,078 ​ ​ 34,779 ​ ​ 32,919 ​ ​ 36,968 ​ The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. ​ 4 Table of Contents Silicon Laboratories Inc. Condensed Consolidated Statements of Comprehensive Income (In thousands) (Unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended Nine Months Ended ​ ​ September 30, October 1, September 30, October 1, ​ 2023 2022 ​ 2023 2022 Net income ​ $ 10,348 ​ $ 20,999 ​ $ 35,271 ​ $ 66,041 Other comprehensive income (loss), before tax ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net changes to available-for-sale securities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized gains (losses) arising during the period ​ ​ 1,553 ​ ​ ( 3,359 ) ​ ​ 5,936 ​ ​ ( 16,064 ) Reclassification for losses included in net income ​ ​ 68 ​ ​ 56 ​ ​ 4,542 ​ ​ 479 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net changes to cash flow hedges ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized gains (losses) arising during the period ​ ​ 409 ​ ​ ( 1,574 ) ​ ​ ( 135 ) ​ ( 5,119 ) Reclassification for (gains) losses included in net income ​ ​ ( 195 ) ​ ​ 1,821 ​ ​ ( 38 ) ​ ​ 2,913 Other comprehensive income (loss), before tax ​ ​ 1,835 ​ ​ ( 3,056 ) ​ ​ 10,305 ​ ( 17,791 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Provision (benefit) for income taxes ​ ​ 344 ​ ( 644 ) ​ ​ 2,216 ​ ( 3,743 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other comprehensive income (loss) ​ ​ 1,491 ​ ( 2,412 ) ​ ​ 8,089 ​ ( 14,048 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Comprehensive income ​ $ 11,839 ​ $ 18,587 ​ $ 43,360 ​ $ 51,993 ​ The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. ​ 5 Table of Contents Silicon Laboratories Inc. Condensed Consolidated Statements of Changes in Stockholders’ Equity (In thousands) (Unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ ​ Accumulated Other Total ​ ​ ​ ​ Common ​ Paid-In ​ Retained ​ Comprehensive ​ Stockholders’ Three Months Ended September 30, 2023 ​ Shares ​ Stock ​ Capital ​ Earnings ​ Income (Loss) ​ Equity Balance as of July 1, 2023 31,861 ​ $ 3 ​ $ — ​ $ 1,262,984 ​ $ ( 4,090 ) ​ $ 1,258,897 Net income ​ — ​ — ​ — ​ 10,348 ​ — ​ 10,348 Other comprehensive income ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 1,491 ​ ​ 1,491 Stock issuances, net of shares withheld for taxes ​ 27 ​ — ​ ( 588 ) ​ — ​ — ​ ( 588 ) Repurchases of common stock ​ ( 109 ) ​ ​ — ​ ​ ( 5,354 ) ​ ​ ( 10,814 ) ​ ​ — ​ ​ ( 16,168 ) Stock-based compensation ​ — ​ ​ — ​ ​ 5,942 ​ ​ — ​ ​ — ​ ​ 5,942 Balance as of September 30, 2023 ​ 31,779 ​ $ 3 ​ $ — ​ $ 1,262,518 ​ $ ( 2,599 ) ​ $ 1,259,922 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ ​ Accumulated Other Total ​ ​ ​ ​ Common ​ Paid-In ​ Retained ​ Comprehensive ​ Stockholders’ Three Months Ended October 1, 2022 ​ Shares ​ Stock ​ Capital ​ Earnings ​ Income (Loss) ​ Equity Balance as of July 2, 2022 ​ 34,223 ​ $ 3 ​ $ — ​ $ 1,619,396 ​ $ ( 14,055 ) ​ $ 1,605,344 Net income ​ — ​ — ​ — ​ 20,999 ​ — ​ 20,999 Other comprehensive loss ​ — ​ — ​ — ​ — ​ ( 2,412 ) ​ ( 2,412 ) Stock issuances, net of shares withheld for taxes ​ 15 ​ — ​ ( 773 ) ​ — ​ — ​ ( 773 ) Repurchases of common stock ​ ( 708 ) ​ ​ — ​ ​ ( 15,211 ) ​ ​ ( 72,287 ) ​ ​ — ​ ​ ( 87,498 ) Stock-based compensation ​ — ​ — ​ 15,984 ​ — ​ — ​ 15,984 Balance as of October 1, 2022 ​ 33,530 ​ $ 3 ​ $ — ​ $ 1,568,108 ​ $ ( 16,467 ) ​ $ 1,551,644 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ ​ Accumulated Other Total ​ ​ ​ ​ Common ​ Paid-In ​ Retained ​ Comprehensive ​ Stockholders’ Nine Months Ended September 30, 2023 ​ Shares ​ Stock ​ Capital ​ Earnings ​ Income (Loss) ​ Equity Balance as of December 31, 2022 31,994 ​ $ 3 ​ $ — ​ $ 1,415,693 ​ $ ( 10,688 ) ​ $ 1,405,008 Net income — ​ — ​ — ​ 35,271 ​ ​ — ​ 35,271 Other comprehensive income — ​ — ​ — ​ — ​ 8,089 ​ 8,089 Stock issuances, net of shares withheld for taxes 387 ​ — ​ ( 9,112 ) ​ — ​ — ​ ( 9,112 ) Repurchases of common stock ​ ( 1,522 ) ​ ​ — ​ ​ ( 24,684 ) ​ ​ ( 188,446 ) ​ ​ — ​ ​ ( 213,130 ) Stock-based compensation — ​ — ​ 37,360 ​ — ​ — ​ 37,360 Convertible debt activity ​ 920 ​ — ​ ( 3,564 ) ​ — ​ — ​ ​ ( 3,564 ) Balance as of September 30, 2023 31,779 ​ $ 3 ​ $ — ​ $ 1,262,518 ​ $ ( 2,599 ) ​ $ 1,259,922 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ ​ Accumulated Other Total ​ ​ ​ ​ Common ​ Paid-In ​ Retained ​ Comprehensive ​ Stockholders’ Nine Months Ended October 1, 2022 ​ Shares ​ Stock ​ Capital ​ Earnings ​ Income (Loss) ​ Equity Balance as of January 1, 2022 38,481 ​ $ 4 ​ $ — ​ $ 2,214,839 ​ $ ( 2,419 ) ​ $ 2,212,424 Cumulative effect of adoption of accounting standard — ​ — ​ — ​ ( 59,963 ) ​ ​ — ​ ( 59,963 ) Net income — ​ — ​ — ​ 66,041 ​ ​ — ​ 66,041 Other comprehensive loss — ​ — ​ — ​ — ​ ( 14,048 ) ​ ( 14,048 ) Stock issuances, net of shares withheld for taxes 316 ​ — ​ ( 8,367 ) ​ — ​ — ​ ( 8,367 ) Repurchases of common stock ​ ( 5,267 ) ​ ​ ( 1 ) ​ ​ ( 34,885 ) ​ ​ ( 652,809 ) ​ ​ — ​ ​ ( 687,695 ) Stock-based compensation ​ — ​ ​ — ​ ​ 43,252 ​ ​ — ​ ​ — ​ ​ 43,252 Balance as of October 1, 2022 33,530 ​ $ 3 ​ $ — ​ $ 1,568,108 ​ $ ( 16,467 ) ​ $ 1,551,644 ​ The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. 6 Table of Contents Silicon Laboratories Inc. Condensed Consolidated Statements of Cash Flows (In thousands) (Unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine Months Ended ​ ​ September 30, ​ October 1, ​ 2023 2022 Operating Activities ​ ​ ​ ​ ​ ​ Net income ​ $ 35,271 ​ $ 66,041 Adjustments to reconcile net income to net cash provided by (used in) operating activities of continuing operations: ​ ​ ​ ​ ​ ​ Depreciation of property and equipment ​ ​ 18,992 ​ 16,514 Amortization of other intangible assets ​ ​ 19,162 ​ 27,328 Amortization of debt issuance costs ​ ​ 960 ​ ​ 1,492 Loss on extinguishment of convertible debt ​ ​ — ​ ​ 3 Stock-based compensation expense ​ ​ 37,167 ​ 43,213 Equity-method (earnings) loss ​ ​ 1,150 ​ ​ ( 2,985 ) Deferred income taxes ​ ​ ( 5,881 ) ​ ( 13,126 ) Changes in operating assets and liabilities: ​ ​ ​ ​ ​ ​ Accounts receivable ​ ​ ( 30,706 ) ​ 21,641 Inventories ​ ​ ( 66,971 ) ​ ( 39,100 ) Prepaid expenses and other assets ​ ​ 8,085 ​ ( 28,404 ) Accounts payable ​ ​ ( 37,039 ) ​ 26,694 Other current liabilities and income taxes ​ ​ ( 39,155 ) ​ 17,962 Deferred revenue and returns liability ​ ​ 3,286 ​ ( 2,144 ) Other non-current liabilities ​ ​ 6,794 ​ ​ ( 7,713 ) Net cash provided by (used in) operating activities of continuing operations ​ ​ ( 48,885 ) ​ 127,416 ​ ​ ​ ​ ​ ​ ​ Investing Activities ​ ​ ​ ​ ​ ​ Purchases of marketable securities ​ ​ ( 91,493 ) ​ ( 579,507 ) Sales of marketable securities ​ ​ 365,073 ​ 42,952 Maturities of marketable securities ​ ​ 171,766 ​ ​ 597,399 Purchases of property and equipment ​ ​ ( 18,533 ) ​ ( 20,057 ) Purchases of other assets ​ ​ ( 395 ) ​ ​ — Net cash provided by investing activities of continuing operations ​ ​ 426,418 ​ 40,787 ​ ​ ​ ​ ​ ​ ​ Financing Activities ​ ​ ​ ​ ​ ​ Proceeds from revolving line of credit ​ ​ 80,000 ​ ​ — Payments on debt ​ ​ ( 571,157 ) ​ ​ ( 21 ) Repurchases of common stock ​ ​ ( 217,137 ) ​ ​ ( 681,695 ) Payment of taxes withheld for vested stock awards ​ ​ ( 17,239 ) ​ ​ ( 14,732 ) Proceeds from the issuance of common stock ​ ​ 8,013 ​ ​ 6,366 Net cash used in financing activities of continuing operations ​ ​ ( 717,520 ) ​ ( 690,082 ) ​ ​ ​ ​ ​ ​ ​ Discontinued Operations ​ ​ ​ ​ ​ ​ Operating activities ​ ​ — ​ ​ ( 69,467 ) Net cash used in discontinued operations ​ ​ — ​ ​ ( 69,467 ) ​ ​ ​ ​ ​ ​ ​ Decrease in cash and cash equivalents ​ ​ ( 339,987 ) ​ ( 591,346 ) Cash and cash equivalents at beginning of period ​ ​ 499,915 ​ 1,074,623 Cash and cash equivalents at end of period ​ $ 159,928 ​ $ 483,277 ​ The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. ​ ​ 7 Table of Contents Silicon Laboratories Inc. Notes to Condensed Consolidated Financial Statements (Unaudited) ​ 1. Significant Accounting Policies ​ Basis of Presentation and Principles of Consolidation ​ The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. 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 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 September 30, 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. Fiscal 2023 will have 52 weeks and fiscal 2022 had 52 weeks. In a 52 -week year, each fiscal quarter consists of 13 weeks. ​ Use of Estimates ​ The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Among the significant estimates affecting the financial statements are those related to inventories, goodwill, acquired intangible assets, other long-lived assets, revenue recognition, stock-based compensation and income taxes. Actual results could differ from those estimates, and such differences could be material to the financial statements. The Company periodically reviews the assumptions used in its financial statement estimates. ​ Revenue Recognition ​ Revenue is recognized when control of the promised goods or services is transferred to the customer, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. Substantially all of the Company’s contracts with customers contain a single performance obligation, the sale of mixed-signal integrated circuit (“IC”) products. This performance obligation is satisfied when control of the product is transferred to the customer, which typically occurs upon delivery. Unsatisfied performance obligations primarily represent contracts for products with future delivery dates. The Company has opted to not disclose the amount of unsatisfied performance obligations as these contracts have original expected durations of less than one year. ​ The transaction price reflects the Company’s expectations about the consideration it will be entitled to receive from the customer and may include fixed or variable amounts. Variable consideration primarily includes sales made to distributors under agreements allowing certain rights of return, referred to as stock rotation, and credits issued to the distributor due to price protection. The Company estimates variable consideration at the most likely amount to which it expects to be entitled. The estimate is based on information available to the Company, including recent sales activity and pricing data. The Company applies a constraint to its variable consideration estimate which considers both the likelihood of a return and the amount of a potential price concession. Variable consideration that does not meet revenue recognition criteria is deferred. The Company records a right of return asset in prepaid expenses and other current assets for the costs of distributor inventory not meeting revenue recognition criteria. A corresponding deferred revenue and returns liability amount is recorded for unrecognized revenue associated with such costs. The Company’s products carry a one-year replacement warranty. Payments are typically due within 30 days of invoicing and do not include a significant financing component. ​ 8 Table of Contents Silicon Laboratories Inc. Notes to Condensed Consolidated Financial Statements (Continued) (Unaudited) 2. 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 ​ September 30, October 1, September 30, October 1, ​ ​ 2023 ​ 2022 ​ 2023 ​ 2022 Net income ​ $ 10,348 ​ $ 20,999 ​ $ 35,271 ​ $ 66,041 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Shares used in computing basic earnings per share ​ ​ 31,796 ​ 34,079 ​ ​ 31,789 ​ 35,935 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Effect of dilutive securities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Convertible debt and stock-based awards ​ ​ 282 ​ 700 ​ ​ 1,130 ​ 1,033 Shares used in computing diluted earnings per share ​ ​ 32,078 ​ 34,779 ​ ​ 32,919 ​ 36,968 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Earnings per share: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic ​ $ 0.33 ​ $ 0.62 ​ $ 1.11 ​ $ 1.84 Diluted ​ $ 0.32 ​ $ 0.60 ​ $ 1.07 ​ $ 1.79 ​ The Company irrevocably elected to settle the principal amount of its 0.625 % convertible senior notes due 2025 (the “2025 Notes”) in cash and intended to settle any excess value in shares in the event of a conversion. In June 2023, the Company paid $ 535.0 million in cash and issued 0.9 million shares of common stock in connection with the conversions and redemptions of the 2025 Notes. For the three and nine months ended September 30, 2023 and October 1, 2022, approximately 0.0 million, 0.7 million, 0.4 million, and 0.7 million shares, respectively, were included in the denominator for the calculation of diluted earnings per share (related to the not yet converted or redeemed 2025 Notes.) See Note 6, Debt , to the Condensed Consolidated Financial Statements for additional information.Securities that were anti-dilutive were insignificant and were excluded from the computation of diluted earnings per share in all periods presented. ​ 3. Fair Value of Financial Instruments ​ The fair values of the Company’s financial instruments are recorded using a hierarchical disclosure framework based upon the level of subjectivity of the inputs used in measuring assets and liabilities. The three levels are described below: Level 1 - Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date. Level 2 - Inputs other than Level 1 that are directly or indirectly observable, such as quoted prices for similar assets or liabilities and quoted prices in less active markets. Level 3 - Inputs are unobservable for the asset or liability and are developed based on the best information available in the circumstances, which might include the Company’s own data. 9 Table of Contents Silicon Laboratories Inc. Notes to Condensed Consolidated Financial Statements (Continued) (Unaudited) 3. Fair Value of Financial Instruments (Continued) The following summarizes the valuation of the Company’s financial instruments (in thousands). The tables do not include either cash on hand or assets and liabilities that are measured at historical cost or any basis other than fair value. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value Measurements ​ ​ ​ ​ ​ at September 30, 2023 Using ​ ​ ​ ​ ​ Quoted Prices in ​ Significant Other ​ ​ ​ ​ ​ Active Markets for ​ Observable ​ ​ ​ ​ ​ Identical Assets ​ Inputs ​ ​ ​ Description (Level 1) (Level 2) Total Cash equivalents: ​ ​ ​ ​ ​ ​ ​ ​ ​ Money market funds ​ $ 57,144 ​ $ — ​ $ 57,144 Total cash equivalents ​ $ 57,144 ​ $ — ​ $ 57,144 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Short-term investments: ​ ​ ​ ​ ​ ​ ​ ​ ​ Corporate debt securities ​ $ — ​ $ 166,868 ​ $ 166,868 Government debt securities ​ ​ — ​ ​ 90,289 ​ ​ 90,289 Total short-term investments ​ $ — ​ $ 257,157 ​ $ 257,157 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total ​ $ 57,144 ​ $ 257,157 ​ $ 314,301 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value Measurements ​ ​ ​ ​ ​ at December 31, 2022 Using ​ ​ ​ ​ ​ Quoted Prices in ​ Significant Other ​ ​ ​ ​ ​ Active Markets for ​ Observable ​ ​ ​ ​ ​ Identical Assets ​ Inputs ​ ​ ​ Description (Level 1) (Level 2) Total Cash equivalents: ​ ​ ​ ​ ​ ​ ​ ​ ​ Money market funds ​ $ 310,969 ​ $ — ​ $ 310,969 Corporate debt securities ​ ​ — ​ 3,249 ​ 3,249 Total cash equivalents ​ $ 310,969 ​ $ 3,249 ​ $ 314,218 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Short-term investments: ​ ​ ​ ​ ​ ​ ​ ​ ​ Corporate debt securities ​ $ — ​ $ 501,014 ​ $ 501,014 Government debt securities ​ ​ — ​ ​ 191,010 ​ ​ 191,010 Total short-term investments ​ $ — ​ $ 692,024 ​ $ 692,024 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total ​ $ 310,969 ​ $ 695,273 ​ $ 1,006,242 ​ Valuation methodology The Company’s cash equivalents and short-term investments that are classified as Level 2 are valued using non-binding market consensus prices that are corroborated with observable market data; quoted market prices for similar instruments in active markets; quoted prices in less active markets; or pricing models, such as a discounted cash flow model, with all significant inputs derived from or corroborated with observable market data. The Company’s foreign currency derivative instruments are valued using discounted cash flow models. The assumptions used in preparing the valuation models include foreign exchange rates, forward and spot prices for currencies and market observable data of similar instruments. ​ 10 Table of Contents Silicon Laboratories Inc. Notes to Condensed Consolidated Financial Statements (Continued) (Unaudited) 3. Fair Value of Financial Instruments (Continued) Contractual maturities of investments 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 September 30, 2023 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair ​ ​ Cost ​ Value Due in one year or less ​ $ 195,410 ​ $ 193,040 Due after one year through five years ​ ​ 64,803 ​ ​ 64,117 ​ ​ $ 260,213 ​ $ 257,157 ​ 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): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Less Than 12 Months ​ 12 Months or Greater ​ Total ​ ​ ​ ​ Gross ​ ​ ​ Gross ​ ​ ​ Gross ​ ​ Fair ​ Unrealized ​ Fair ​ Unrealized ​ Fair ​ Unrealized As of September 30, 2023 Value Losses Value Losses Value Losses Corporate debt securities ​ $ 13,876 ​ $ ( 13 ) ​ $ 132,920 ​ $ ( 1,865 ) ​ $ 146,796 ​ $ ( 1,878 ) Government debt securities ​ 49,597 ​ ( 341 ) ​ 37,762 ​ ( 908 ) ​ 87,359 ​ ( 1,249 ) ​ ​ $ 63,473 ​ $ ( 354 ) ​ $ 170,682 ​ $ ( 2,773 ) ​ $ 234,155 ​ $ ( 3,127 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Less Than 12 Months ​ 12 Months or Greater ​ Total ​ ​ ​ ​ Gross ​ ​ ​ Gross ​ ​ ​ Gross ​ ​ Fair ​ Unrealized ​ Fair ​ Unrealized ​ Fair ​ Unrealized As of December 31, 2022 Value Losses Value Losses Value Losses Corporate debt securities ​ $ 307,085 ​ $ ( 5,297 ) ​ $ 185,467 ​ $ ( 4,090 ) ​ $ 492,552 ​ $ ( 9,387 ) Government debt securities ​ 76,651 ​ ​ ( 626 ) ​ ​ 100,209 ​ ​ ( 3,541 ) ​ ​ 176,860 ​ ​ ( 4,167 ) ​ ​ $ 383,736 ​ $ ( 5,923 ) ​ $ 285,676 ​ $ ( 7,631 ) ​ $ 669,412 ​ $ ( 13,554 ) ​ The gross unrealized losses as of September 30, 2023 and December 31, 2022 were due primarily to changes in market interest rates. At September 30, 2023 and December 31, 2022, there were no material unrealized gains associated with the Company’s available-for-sale investments. The Company records an allowance for credit loss when a decline in investment market value is due to credit-related factors. 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 September 30, 2023, there were no material declines in the market value of available-for-sale investments due to credit-related factors. ​ 11 Table of Contents Silicon Laboratories Inc. Notes to Condensed Consolidated Financial Statements (Continued) (Unaudited) 3. Fair Value of Financial Instruments (Continued) ​ Fair values of other financial instruments ​ Prior to its conversion or redemption in June 2023, the Company’s debt was recorded at cost, but measured at fair value for disclosure purposes. The fair value of the Company’s 2025 Notes was determined using observable market prices. The notes were traded in less active markets and were therefore classified as a Level 2 fair value measurement. As of December 31, 2022, the fair value of the 2025 Notes was $ 671.9 million. No notes were outstanding as of September 30, 2023. ​ 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. ​ 4. Derivative Financial Instruments ​ The Company uses derivative financial instruments to manage certain exposures to the variability of foreign currency exchange rates. The Company’s objective is to offset increases and decreases in expenses resulting from these exposures with gains and losses on the derivative contracts, thereby reducing volatility of earnings. The Company does not use derivative contracts for speculative or trading purposes. 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 Foreign Currency Forward Contracts 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. dollar. 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 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 Norwegian Krone. As of September 30, 2023, the contracts had maturities of one to three months and an aggregate notional value of $ 2.0 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 income (loss) and amounts reclassified from accumulated other comprehensive income (loss) into earnings were not material for any of the periods presented. Non-designated Hedges Foreign Currency Forward Contracts The Company uses foreign currency forward contracts to reduce the earnings impact that exchange rate fluctuations have on non-U.S. dollar balance sheet exposures. The Company recognizes gains and losses on the foreign currency forward contracts in interest income and other, net in the Consolidated Statement of Income in the same period as the remeasurement loss and gain of the related foreign currency denominated asset or liability. The Company does not apply hedge accounting to these foreign currency forward contracts. As of September 30, 2023, the Company held foreign currency forward contracts denominated in the Euro with an aggregate notional value of $ 7.4 million. The fair value of the foreign contracts and contract gains and losses recognized in income were not material for any of the periods presented. ​ ​ 12 Table of Contents Silicon Laboratories Inc. Notes to Condensed Consolidated Financial Statements (Continued) (Unaudited) 5. Supplemental Information The following table shows the details of selected Condensed Consolidated Balance Sheet items (in thousands): Inventories ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, December 31, ​ ​ 2023 ​ 2022 Work in progress ​ $ 150,248 ​ $ 75,112 Finished goods ​ 17,333 ​ 25,305 ​ ​ $ 167,581 ​ $ 100,417 ​ Lease income ​ The Company leases a portion of its headquarter facilities to other tenants. Lease income from operating leases was $ 2.3 million and $ 5.4 million during the nine months ended September 30, 2023 and October 1, 2022, respectively. ​ 6. Debt 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 bore 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. Prior to the redemption, the Company received conversion notices representing $ 533.6 million principal amount of the notes. The Company paid $ 533.6 million in cash and issued 0.9 million shares of common stock, as well as $ 47 thousand in cash in lieu of fractional shares, for the conversions. Notes representing $ 1.4 million principal amount were redeemed at par, plus accrued interest. All note conversions and redemptions were completed in June 2023. The carrying amount of the 2025 Notes consisted of the following (in thousands): ​ ​ ​ ​ ​ ​ December 31, ​ ​ 2022 Principal ​ $ 534,980 Unamortized debt issuance costs ​ ( 5,407 ) Net carrying amount ​ $ 529,573 ​ Interest expense related to the 2025 Notes was comprised of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Nine Months Ended ​ ​ September 30, ​ October 1, ​ September 30, October 1, ​ 2023 2022 2023 2022 Contractual interest expense ​ $ — ​ $ 826 ​ $ 1,493 ​ $ 2,511 Amortization of debt issuance costs ​ ​ — ​ ​ 498 ​ ​ 960 ​ 1,492 ​ ​ $ — ​ $ 1,324 ​ $ 2,453 ​ $ 4,003 ​ The 2025 Notes were recorded in convertible debt, net on the Condensed Consolidated Balance Sheet. The remaining balance of the debt issuance costs was recognized in stockholders’ equity for the 2025 Notes that were converted and as debt extinguishment loss for the 2025 Notes that were redeemed in the second quarter of fiscal 2023. 13 Table of Contents Silicon Laboratories Inc. Notes to Condensed Consolidated Financial Statements (Continued) (Unaudited) 6. Debt (Continued) Credit Facility ​ The Company and certain of its domestic subsidiaries (the “Guarantors”) have a $ 400 million revolving credit facility, as amended on June 30, 2023, with a maturity date of June 30, 2028. The credit facility includes a $ 25 million letter of credit sublimit and a $ 10 million swingline loan sublimit. The Company also has an option to increase the size of the borrowing capacity by up to the greater of an aggregate of $ 250 million and 100 % of EBITDA of the last four fiscal quarters, plus an amount that would not cause a secured net leverage ratio (funded debt secured by assets/EBITDA) to exceed 3.50 to 1.00, subject to certain conditions. ​ The credit facility, other than swingline loans, will bear interest at the Adjusted Term Secured Overnight Financing Rate (“SOFR”) plus an applicable margin or, at the option of the Company, a base rate (defined as the highest of the Wells Fargo prime rate, the Federal Funds rate plus 0.50 % and the Adjusted Term SOFR plus 1.00 %) plus an applicable margin. Swingline loans accrue interest at the base rate plus the applicable margin for base rate loans. The applicable margins for the Adjusted Term SOFR loans range from 1.00 % to 1.75 % and for base rate loans range from 0.00 % to 0.75 %, depending in each case, on the leverage ratio as defined in the credit facility. ​ 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 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 September 30, 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 September 30, 2023, $ 45.0 million was outstanding on the credit facility. ​ 7. Commitments and Contingencies Litigation 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. ​ ​ 14 Table of Contents Silicon Laboratories Inc. Notes to Condensed Consolidated Financial Statements (Continued) (Unaudited) 8. Revenues The Company groups its products as Industrial & Commercial or Home & Life based on the target markets they address. The following represents revenue by product category (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended Nine Months Ended ​ ​ September 30, ​ October 1, ​ September 30, ​ October 1, ​ 2023 2022 2023 2022 Industrial & Commercial ​ $ 120,957 ​ $ 145,661 ​ $ 436,973 ​ $ 416,475 Home & Life ​ 82,803 ​ 124,156 ​ 258,440 ​ 350,306 ​ ​ $ 203,760 ​ $ 269,817 ​ $ 695,413 ​ $ 766,781 ​ A portion of the Company’s sales are made to distributors under agreements allowing certain rights of return and/or price protection related to the final selling price to the end customers. These factors impact the timing and uncertainty of revenues and cash flows. During the three and nine months ended September 30, 2023, the Company did no t recognize any revenue related to performance obligations that were satisfied in previous reporting periods. During the three and nine months ended October 1, 2022, the Company recognized revenue of $ 4.5 million and $ 30.7 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 ​ September 30, October 1, September 30, October 1, ​ 2023 2022 2023 2022 Distributors ​ $ 164,444 ​ $ 217,355 ​ $ 556,963 ​ $ 621,563 Direct customers ​ ​ 39,316 ​ 52,462 ​ ​ 138,450 ​ 145,218 ​ ​ $ 203,760 ​ $ 269,817 ​ $ 695,413 ​ $ 766,781 ​ ​ 9. Stock-Based Compensation Stock-based compensation costs are based on the fair values on the date of grant for stock awards and stock options and on the date of enrollment for the employee stock purchase plans. The fair values of stock awards (such as restricted stock units (“RSUs”), performance stock units (“PSUs”) and restricted stock awards (“RSAs”)) are estimated based on their intrinsic values. The fair values of market stock awards (“MSUs”) are estimated using a Monte Carlo simulation. The fair values of stock options and employee stock purchase plans are estimated using the Black-Scholes option-pricing model. The following table presents details of stock-based compensation costs recognized in the Condensed Consolidated Statements of Income (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Nine Months Ended ​ ​ September 30, ​ October 1, ​ September 30, ​ October 1, ​ 2023 2022 2023 2022 Cost of revenues ​ $ 192 ​ $ 288 ​ $ 774 ​ $ 834 Research and development ​ ​ 8,598 ​ ​ 8,788 ​ ​ 26,903 ​ 23,482 Selling, general and administrative ​ ​ ( 3,000 ) ​ ​ 6,874 ​ ​ 9,490 ​ 18,897 ​ ​ ​ 5,790 ​ ​ 15,950 ​ ​ 37,167 ​ 43,213 Income tax benefit ​ ​ 505 ​ ​ 1,230 ​ ​ 4,446 ​ ​ 4,444 Total ​ $ 5,285 ​ $ 14,720 ​ $ 32,721 ​ $ 38,769 ​ For the three months ended September 30, 2023, the Company recognized an expense reversal of $ 9.5 million to reflect a reduction in the estimated levels of achievement related to unvested performance stock units. The Company had approximately $ 103.8 million of total unrecognized compensation cost related to equity grants as of September 30, 2023 that is expected to be recognized over a weighted-average period of approximately 2.2 years. There were no significant stock-based compensation costs capitalized into assets in any of the periods presented. 15 Table of Contents Silicon Laboratories Inc. Notes to Condensed Consolidated Financial Statements (Continued) (Unaudited) 10. 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. Typically, the Company’s interim provision for income taxes is determined using an estimated annual effective tax rate, adjusted for discrete tax items. Under certain circumstances where the Company is unable to make a reliable estimate of the annual effective tax rate, it uses the actual effective tax rate for the year-to-date period. For the three and nine months ended September 30, 2023, the Company used this approach due to the variability of the rate as a result of fluctuations in forecasted pre-tax income. Income tax expense was $ 3.4 million and $ 14.2 million for the three months ended September 30, 2023 and October 1, 2022, resulting in effective tax rates of 24.7 % and 40.3 %, respectively. Income tax expense was $ 23.5 million and $ 36.9 million for the nine months ended September 30, 2023, and October 1, 2022, resulting in effective tax rates of 40.0 % and 35.8 %, respectively. The decrease in the effective tax rate for the three months ended September 30, 2023 as compared to the prior period was primarily due to a decrease in nondeductible stock compensation and a delay in the application of unfavorable foreign tax credit Treasury regulations that was announced during the recent quarter, partially offset by the increased impact of global intangible low-taxed income relative to lower pre-tax book income. The increase in the effective tax rate for the nine months ended September 30, 2023 as compared to the prior period was primarily due the increased impact of global intangible low-taxed income relative to lower pre-tax book income, partially offset by discrete U.S. federal and state return-to-provision benefits recorded in the recent nine-month period. Uncertain Tax Positions As of September 30, 2023, the Company had gross unrecognized tax benefits, inclusive of interest, of $ 5.2 million, all of which would affect the effective tax rate if recognized. During the nine months ended September 30, 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. 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. The Company is currently appealing the assessment. The adjustment to the pricing of the intercompany transaction results in approximately 141.3 million Norwegian kroner, or $ 13.2 million, additional Norwegian income tax. The Company disagrees with the NTA’s assessment and believes the Company’s position on this matter is more likely than not to be sustained. The Company plans to exhaust all available administrative remedies. If unable to resolve this matter through administrative remedies with the NTA, the Company plans to pursue judicial remedies. The Company believes that it has accrued adequate reserves related to all matters contained in tax periods open to examination. Should the Company experience an unfavorable outcome in the NTA matter, however, such an outcome could have a material impact on its financial statements. Tax years 2015 through 2023 remain open to examination by the major taxing jurisdictions in which the Company operates. The Company’s 2021 tax year is currently under examination in India. Although the outcome of tax audits is always uncertain, the Company believes that the results of the examination will not materially impact its financial position or results of operations. The Company is not currently under audit in any other major taxing jurisdiction. The Company does not expect material changes to its gross unrecognized tax benefits in the next 12 months. ​ ​ 11. Subsequent Event The Company expects to incur approximately $ 6.5 million of restructuring related expense in the fourth quarter of fiscal year 2023, consisting primarily of reduction-in-force severance charges. ​ ​ ​ ​ 16 Table of Contents