Silicon Laboratories

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 1, 2023

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________ to _________

Commission file number: 000-29823

SILICON LABORATORIES INC.

(Exact name of registrant as specified in its charter)

Delaware		74-2793174
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

400 West Cesar Chavez, Austin, Texas		78701
(Address of principal executive offices)		(Zip Code)

(512) 416-8500

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.0001 par value	SLAB	The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

☑ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

☑ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer ☑	Accelerated filer ☐	Non-accelerated filer ☐	Smaller reporting company ☐	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

☐ Yes ☑ No

As of July 17, 2023, 31,864,364 shares of common stock of Silicon Laboratories Inc. were outstanding.

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Part I. Financial Information		Page Number

Item 1.	Financial Statements (Unaudited):

	Condensed Consolidated Balance Sheets at July 1, 2023 and December 31, 2022	3

	Condensed Consolidated Statements of Income for the three and six months ended July 1, 2023 and July 2, 2022	4

	Condensed Consolidated Statements of Comprehensive Income for the three and six months ended July 1, 2023 and July 2, 2022	5

	Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three and six months ended July 1, 2023 and July 2, 2022	6

	Condensed Consolidated Statements of Cash Flows for the six months ended July 1, 2023 and July 2, 2022	7

	Notes to Condensed Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	25

Item 4.	Controls and Procedures	25

Part II. Other Information

Item 1.	Legal Proceedings	25

Item 1A.	Risk Factors	25

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	40

Item 3.	Defaults Upon Senior Securities	41

Item 4.	Mine Safety Disclosures	41

Item 5.	Other Information	41

Item 6.	Exhibits	42

Cautionary Statement

Except for the historical financial information contained herein, the matters discussed in this report on Form 10-Q (as well as documents incorporated herein by reference) may be considered “forward-looking” statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements include declarations regarding the intent, belief or current expectations of Silicon Laboratories Inc. and its management and may be signified by the words “believe,” “estimate,” “expect,” “intend,” “anticipate,” “plan,” “project,” “will” or similar language. You are cautioned that any such forward-looking statements are not guarantees of future performance and involve a number of risks and uncertainties. Actual results could differ materially from those indicated by such forward-looking statements. Factors that could cause or contribute to such differences include those discussed under “Risk Factors” and elsewhere in this report. Silicon Laboratories disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

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Part I. Financial Information

Item 1. Financial Statements

Silicon Laboratories Inc.

Condensed Consolidated Balance Sheets

(In thousands, except per share data)

(Unaudited)


	July 1,		December 31,
	2023		2022
Assets
Current assets:
Cash and cash equivalents	$	234,813	$	499,915
Short-term investments		271,063		692,024
Accounts receivable, net		98,256		71,437
Inventories		145,523		100,417
Prepaid expenses and other current assets		71,322		97,570
Total current assets		820,977		1,461,363
Property and equipment, net		152,358		152,016
Goodwill		376,389		376,389
Other intangible assets, net		72,003		84,907
Other assets, net		97,072		94,753
Total assets	$	1,518,799	$	2,169,428
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	55,102	$	89,860
Revolving line of credit		80,000		—
Deferred revenue and returns liability		11,105		6,780
Other current liabilities		72,339		89,136
Total current liabilities		218,546		185,776
Convertible debt, net		—		529,573
Other non-current liabilities		41,356		49,071
Total liabilities		259,902		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; 31,861 and 31,994 shares issued and outstanding at July 1, 2023 and December 31, 2022, respectively		3		3
Retained earnings		1,262,984		1,415,693
Accumulated other comprehensive loss		(4,090)		(10,688)
Total stockholders’ equity		1,258,897		1,405,008
Total liabilities and stockholders’ equity	$	1,518,799	$	2,169,428

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

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Silicon Laboratories Inc.

Condensed Consolidated Statements of Income

(In thousands, except per share data)

(Unaudited)


	Three Months Ended				Six Months Ended
	July 1,		July 2,		July 1,		July 2,
	2023		2022		2023		2022
Revenues	$	244,866	$	263,150	$	491,653	$	496,964
Cost of revenues		101,091		99,247		194,018		177,289
Gross profit		143,775		163,903		297,635		319,675
Operating expenses:
Research and development		85,902		83,511		175,298		161,053
Selling, general and administrative		40,706		49,013		85,597		93,660
Operating expenses		126,608		132,524		260,895		254,713
Operating income		17,167		31,379		36,740		64,962
Other income (expense):
Interest income and other, net		7,780		3,445		12,616		4,944
Interest expense		(1,596)		(1,667)		(3,252)		(3,347)
Income before income taxes		23,351		33,157		46,104		66,559
Provision for income taxes		12,338		10,994		20,091		22,683
Equity-method earnings (loss)		(57)		(28)		(1,090)		1,166
Net income	$	10,956	$	22,135	$	24,923	$	45,042

Earnings per share:
Basic	$	0.35	$	0.62	$	0.78	$	1.22
Diluted	$	0.33	$	0.60	$	0.75	$	1.18

Weighted-average common shares outstanding:
Basic		31,614		35,722		31,786		36,862
Diluted		32,926		36,604		33,339		38,063

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

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Silicon Laboratories Inc.

Condensed Consolidated Statements of Comprehensive Income

(In thousands)

(Unaudited)


	Three Months Ended				Six Months Ended
	July 1,		July 2,		July 1,		July 2,
	2023		2022		2023		2022
Net income	$	10,956	$	22,135	$	24,923	$	45,042
Other comprehensive income (loss), before tax
Net changes to available-for-sale securities
Unrealized gains (losses) arising during the period		1,385		(3,013)		4,383		(12,705)
Reclassification for losses included in net income		1,859		374		4,474		423

Net changes to cash flow hedges
Unrealized losses arising during the period		(580)		(3,001)		(544)		(3,545)
Reclassification for losses included in net income		186		1,092		157		1,092
Other comprehensive income (loss), before tax		2,850		(4,548)		8,470		(14,735)

Provision (benefit) for income taxes		477		(959)		1,872		(3,099)

Other comprehensive income (loss)		2,373		(3,589)		6,598		(11,636)

Comprehensive income	$	13,329	$	18,546	$	31,521	$	33,406

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

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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 July 1, 2023	Shares	Stock		Capital		Earnings		Income (Loss)		Equity
Balance as of April 1, 2023	31,997	$	3	$	—	$	1,425,914	$	(6,463)	$	1,419,454
Net income	—		—		—		10,956		—		10,956
Other comprehensive income	—		—		—		—		2,373		2,373
Stock issuances, net of shares withheld for taxes	261		—		(1,593)		—		—		(1,593)
Repurchases of common stock	(1,317)		—		(9,597)		(173,886)		—		(183,483)
Stock-based compensation	—		—		14,754		—		—		14,754
Convertible debt activity	920		—		(3,564)		—		—		(3,564)
Balance as of July 1, 2023	31,861	$	3	$	—	$	1,262,984	$	(4,090)	$	1,258,897


				Additional				Accumulated Other		Total
		Common		Paid-In		Retained		Comprehensive		Stockholders’
Three Months Ended July 2, 2022	Shares	Stock		Capital		Earnings		Income (Loss)		Equity
Balance as of April 2, 2022	37,204	$	4	$	—	$	2,018,117	$	(10,466)	$	2,007,655
Net income	—		—		—		22,135		—		22,135
Other comprehensive loss	—		—		—		—		(3,589)		(3,589)
Stock issuances, net of shares withheld for taxes	159		—		1,161		—		—		1,161
Repurchases of common stock	(3,140)		(1)		(15,561)		(420,856)		—		(436,418)
Stock-based compensation	—		—		14,400		—		—		14,400
Balance as of July 2, 2022	34,223	$	3	$	—	$	1,619,396	$	(14,055)	$	1,605,344


				Additional				Accumulated Other		Total
		Common		Paid-In		Retained		Comprehensive		Stockholders’
Six Months Ended July 1, 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	—		—		—		24,923		—		24,923
Other comprehensive income	—		—		—		—		6,598		6,598
Stock issuances, net of shares withheld for taxes	359		—		(8,524)		—		—		(8,524)
Repurchases of common stock	(1,412)		—		(19,330)		(177,632)		—		(196,962)
Stock-based compensation	—		—		31,418		—		—		31,418
Convertible debt activity	920		—		(3,564)		—		—		(3,564)
Balance as of July 1, 2023	31,861	$	3	$	—	$	1,262,984	$	(4,090)	$	1,258,897


				Additional				Accumulated Other		Total
		Common		Paid-In		Retained		Comprehensive		Stockholders’
Six Months Ended July 2, 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	—		—		—		45,042		—		45,042
Other comprehensive loss	—		—		—		—		(11,636)		(11,636)
Stock issuances, net of shares withheld for taxes	301		—		(7,593)		—		—		(7,593)
Repurchases of common stock	(4,559)		(1)		(19,675)		(580,522)		—		(600,198)
Stock-based compensation	—		—		27,268		—		—		27,268
Balance as of July 2, 2022	34,223	$	3	$	—		1,619,396	$	(14,055)	$	1,605,344

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

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Silicon Laboratories Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)


	Six Months Ended
	July 1,		July 2,
	2023		2022
Operating Activities
Net income	$	24,923	$	45,042
Adjustments to reconcile net income to net cash provided by (used in) operating activities of continuing operations:
Depreciation of property and equipment		12,441		10,561
Amortization of other intangible assets		12,904		19,194
Amortization of debt issuance costs		960		994
Loss on extinguishment of convertible debt		—		3
Stock-based compensation expense		31,377		27,264
Equity-method (earnings) loss		1,090		(1,166)
Deferred income taxes		(6,403)		(9,344)
Changes in operating assets and liabilities:
Accounts receivable		(26,819)		26,207
Inventories		(45,064)		(24,714)
Prepaid expenses and other assets		32,963		(25,286)
Accounts payable		(30,003)		25,606
Other current liabilities and income taxes		(26,220)		(3,418)
Deferred revenue and returns liability		4,326		(3,153)
Other non-current liabilities		(1,975)		(4,416)
Net cash provided by (used in) operating activities of continuing operations		(15,500)		83,374

Investing Activities
Purchases of marketable securities		(81,427)		(554,267)
Sales of marketable securities		339,555		27,404
Maturities of marketable securities		171,691		511,296
Purchases of property and equipment		(13,462)		(12,322)
Purchases of other assets		(215)		—
Net cash provided by (used in) investing activities of continuing operations		416,142		(27,889)

Financing Activities
Proceeds from revolving line of credit		80,000		—
Payments on debt		(536,124)		(21)
Repurchases of common stock		(201,095)		(579,040)
Payment of taxes withheld for vested stock awards		(16,310)		(13,958)
Proceeds from the issuance of common stock		7,785		6,365
Net cash used in financing activities of continuing operations		(665,744)		(586,654)

Discontinued Operations
Operating activities		—		(38,604)
Net cash used in discontinued operations		—		(38,604)

Decrease in cash and cash equivalents		(265,102)		(569,773)
Cash and cash equivalents at beginning of period		499,915		1,074,623
Cash and cash equivalents at end of period	$	234,813	$	504,850

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

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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 six months ended July 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. 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.

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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				Six Months Ended
	July 1,		July 2,		July 1,		July 2,
	2023		2022		2023		2022
Net income	$	10,956	$	22,135	$	24,923	$	45,042

Shares used in computing basic earnings per share		31,614		35,722		31,786		36,862

Effect of dilutive securities:
Convertible debt and stock-based awards		1,312		882		1,553		1,201
Shares used in computing diluted earnings per share		32,926		36,604		33,339		38,063

Earnings per share:
Basic	$	0.35	$	0.62	$	0.78	$	1.22
Diluted	$	0.33	$	0.60	$	0.75	$	1.18

The Company irrevocably elected to settle the principal amount of its convertible senior 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 convertible senior notes. For the three and six months ended July 1, 2023 and July 2, 2022, approximately 0.9 million, 0.6 million, 1.1 million, and 0.8 million shares, respectively, were included in the denominator for the calculation of diluted earnings per share (related to the not yet converted or redeemed convertible senior notes.) See Note 6, Debt, to the Condensed Consolidated Financial Statements for additional information.

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.

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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 July 1, 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	$	129,878	$	—	$	129,878
Total cash equivalents	$	129,878	$	—	$	129,878

Short-term investments:
Corporate debt securities	$	—	$	178,843	$	178,843
Government debt securities		—		92,220		92,220
Total short-term investments	$	—	$	271,063	$	271,063

Total	$	129,878	$	271,063	$	400,941


	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

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Silicon Laboratories Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

3.	Fair Value of Financial Instruments (Continued)

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.

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 July 1, 2023 (in thousands):


			Fair
	Cost		Value
Due in one year or less	$	187,356	$	184,252
Due after one year through five years		88,385		86,811
	$	275,741	$	271,063

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 July 1, 2023	Value		Losses		Value		Losses		Value		Losses
Corporate debt securities	$	12,019	$	(29)	$	144,341	$	(2,918)	$	156,360	$	(2,947)
Government debt securities		50,211		(391)		42,008		(1,415)		92,219		(1,806)
	$	62,230	$	(420)	$	186,349	$	(4,333)	$	248,579	$	(4,753)


	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 July 1, 2023 and December 31, 2022 were due primarily to changes in market interest rates. At July 1, 2023 and December 31, 2022, there were no material unrealized gains associated with the Company’s available-for-sale investments.

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Silicon Laboratories Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

3.	Fair Value of Financial Instruments (Continued)

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 July 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

The Company’s debt was recorded at cost, but measured at fair value for disclosure purposes. The fair value of the Company’s convertible senior 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 notes was $671.9 million. No notes were outstanding as of July 1, 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 the Euro, Norwegian Krone and Hungarian Forint. As of July 1, 2023, the contracts had maturities of two to six months and an aggregate notional value of $10.3 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.

Table of Contents

Silicon Laboratories Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

4. Derivative Financial Instruments (Continued)

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 July 1, 2023, the Company held foreign currency forward contracts denominated in Hungarian Forint and Singapore Dollars with an aggregate notional value of $8.1 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.

5.	Supplemental Information

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

Inventories


	July 1,		December 31,
	2023		2022
Work in progress	$	120,880	$	75,112
Finished goods		24,643		25,305
	$