0001104659-23-084101 | 10-Q | XBRL Viewer

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Fair Value of Financial Instruments - Unrealized Gains and Losses (Details) - USD ($) $ in Thousands	Jul. 01, 2023	Dec. 31, 2022
Continuous unrealized loss position, Fair Value
Fair value of available-for-sale investments, continuous loss position for less than twelve months	$ 62,230	$ 383,736
Fair value of available-for-sale investments, continuous loss position for twelve months or greater	186,349	285,676
Total fair value of available-for-sale investments, continuous loss position	248,579	669,412
Continuous unrealized loss position, Gross Unrealized Losses
Available-for-sale investments, continuous loss position for less than 12 months, gross unrealized losses	(420)	(5,923)
Available-for-sale investments, continuous loss position for 12 months or greater, gross unrealized losses	(4,333)	(7,631)
Available-for-sale investments, total gross unrealized losses	(4,753)	(13,554)
Corporate debt securities
Continuous unrealized loss position, Fair Value
Fair value of available-for-sale investments, continuous loss position for less than twelve months	12,019	307,085
Fair value of available-for-sale investments, continuous loss position for twelve months or greater	144,341	185,467
Total fair value of available-for-sale investments, continuous loss position	156,360	492,552
Continuous unrealized loss position, Gross Unrealized Losses
Available-for-sale investments, continuous loss position for less than 12 months, gross unrealized losses	(29)	(5,297)
Available-for-sale investments, continuous loss position for 12 months or greater, gross unrealized losses	(2,918)	(4,090)
Available-for-sale investments, total gross unrealized losses	(2,947)	(9,387)
Government debt securities
Continuous unrealized loss position, Fair Value
Fair value of available-for-sale investments, continuous loss position for less than twelve months	50,211	76,651
Fair value of available-for-sale investments, continuous loss position for twelve months or greater	42,008	100,209
Total fair value of available-for-sale investments, continuous loss position	92,219	176,860
Continuous unrealized loss position, Gross Unrealized Losses
Available-for-sale investments, continuous loss position for less than 12 months, gross unrealized losses	(391)	(626)
Available-for-sale investments, continuous loss position for 12 months or greater, gross unrealized losses	(1,415)	(3,541)
Available-for-sale investments, total gross unrealized losses	$ (1,806)	$ (4,167)

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Jul. 01, 2023	Dec. 31, 2022
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
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

Document and Entity Information - shares	6 Months Ended
Document and Entity Information - shares	Jul. 01, 2023	Jul. 17, 2023
Document and Entity Information
Entity Registrant Name	SILICON LABORATORIES INC.
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Jul. 01, 2023
Document Transition Report	false
Entity File Number	000-29823
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	74-2793174
Entity Address, Address Line One	400 West Cesar Chavez
Entity Address, City or Town	Austin
Entity Address, State or Province	TX
Entity Address, Postal Zip Code	78701
City Area Code	512
Local Phone Number	416-8500
Title of 12(b) Security	Common Stock, $0.0001 par value
Trading Symbol	SLAB
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		31,864,364
Entity Central Index Key	0001038074
Current Fiscal Year End Date	--12-30
Document Fiscal Year Focus	2023
Document Fiscal Period Focus	Q2
Amendment Flag	false

Earnings Per Share

6 Months Ended

Jul. 01, 2023

Earnings Per Share

Earnings Per Share

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.

Commitments and Contingencies

6 Months Ended

Jul. 01, 2023

Commitments and Contingencies

Commitments and Contingencies

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.

Debt - Convertible Senior Notes (Details) - 0.625% Convertible Senior Notes (2025 Notes) - USD ($) $ in Thousands, shares in Millions	1 Months Ended
	Jun. 30, 2023	Mar. 22, 2023	Jun. 01, 2020
Debt
Principal amount		$ 533,600	$ 535,000
Semi-annual interest rate (as a percent)			0.625%
Repayment of convertible senior notes including conversions and redemptions	$ 533,600
Number of shares of common stock issued in connection with redemption of convertible senior notes	0.9
Payments made in lieu of fractional shares	$ 47
Principal amount were redeemed at par, plus accrued interest	$ 1,400

- Definition

Line items represent financial concepts included in a table. These concepts are used to disclose reportable information associated with domain members defined in one or many axes to the table.

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+ Details

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	6 Months Ended
	Jul. 01, 2023	Jul. 02, 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	0	(38,604)
Net cash used in discontinued operations	0	(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

Subsequent Event (Details) $ in Millions	3 Months Ended
Subsequent Event (Details) $ in Millions	Sep. 30, 2023 USD ($)
Subsequent Event
Subsequent Event
Expected net tax benefit	$ 3.3

Fair Value of Financial Instruments - Contractual maturities of investments (Details) $ in Thousands	Jul. 01, 2023 USD ($)
Cost
Due in one year or less, Cost	$ 187,356
Due after one year through five years, Cost	88,385
Total Cost	275,741
Fair Value
Due in one year or less, Fair Value	184,252
Due after one year through five years, Fair Value	86,811
Total Fair Value	$ 271,063

Fair Value of Financial Instruments - Fair values of other financial instruments (Details) - USD ($) $ in Millions	Jul. 01, 2023	Dec. 31, 2022
Convertible Senior Notes \| Level 2
Fair Value of Financial Instruments
Fair value of debt	$ 0.0	$ 671.9

Condensed Consolidated Statements of Changes in Stockholders' Equity - USD ($) shares in Thousands, $ in Thousands	Common Stock	Additional Paid-In Capital	Retained Earnings Cumulative effect of adoption of accounting standard	Retained Earnings	Accumulated Other Comprehensive Income (Loss)	Cumulative effect of adoption of accounting standard	Total
Balance at Jan. 01, 2022	$ 4	$ 0	$ (59,963)	$ 2,214,839	$ (2,419)	$ (59,963)	$ 2,212,424
Balance (in shares) at Jan. 01, 2022	38,481
Increase (Decrease) in Stockholders' Equity
Net income				45,042			45,042
Other comprehensive income (loss)					(11,636)		(11,636)
Stock issuances, net of shares withheld for taxes		(7,593)					(7,593)
Stock issuances, net of shares withheld for taxes (in shares)	301
Repurchases of common stock	$ (1)	(19,675)		(580,522)			(600,198)
Repurchases of common stock (in shares)	(4,559)
Stock-based compensation		27,268					27,268
Balance at Jul. 02, 2022	$ 3	0		1,619,396	(14,055)		1,605,344
Balance (in shares) at Jul. 02, 2022	34,223
Balance at Apr. 02, 2022	$ 4	0		2,018,117	(10,466)		2,007,655
Balance (in shares) at Apr. 02, 2022	37,204
Increase (Decrease) in Stockholders' Equity
Net income				22,135			22,135
Other comprehensive income (loss)					(3,589)		(3,589)
Stock issuances, net of shares withheld for taxes		1,161					1,161
Stock issuances, net of shares withheld for taxes (in shares)	159
Repurchases of common stock	$ (1)	(15,561)		(420,856)			(436,418)
Repurchases of common stock (in shares)	(3,140)
Stock-based compensation		14,400					14,400
Balance at Jul. 02, 2022	$ 3	0		1,619,396	(14,055)		1,605,344
Balance (in shares) at Jul. 02, 2022	34,223
Balance at Dec. 31, 2022	$ 3	0		1,415,693	(10,688)		$ 1,405,008
Balance (in shares) at Dec. 31, 2022	31,994						31,994
Increase (Decrease) in Stockholders' Equity
Net income				24,923			$ 24,923
Other comprehensive income (loss)					6,598		6,598
Stock issuances, net of shares withheld for taxes		(8,524)					(8,524)
Stock issuances, net of shares withheld for taxes (in shares)	359
Repurchases of common stock		(19,330)		(177,632)			(196,962)
Repurchases of common stock (in shares)	(1,412)
Stock-based compensation		31,418					31,418
Convertible debt activity		(3,564)					(3,564)
Convertible debt activity (in shares)	920
Balance at Jul. 01, 2023	$ 3	0		1,262,984	(4,090)		$ 1,258,897
Balance (in shares) at Jul. 01, 2023	31,861						31,861
Balance at Apr. 01, 2023	$ 3	0		1,425,914	(6,463)		$ 1,419,454
Balance (in shares) at Apr. 01, 2023	31,997
Increase (Decrease) in Stockholders' Equity
Net income				10,956			10,956
Other comprehensive income (loss)					2,373		2,373
Stock issuances, net of shares withheld for taxes		(1,593)					(1,593)
Stock issuances, net of shares withheld for taxes (in shares)	261
Repurchases of common stock		(9,597)		(173,886)			(183,483)
Repurchases of common stock (in shares)	(1,317)
Stock-based compensation		14,754					14,754
Convertible debt activity		(3,564)					(3,564)
Convertible debt activity (in shares)	920
Balance at Jul. 01, 2023	$ 3	$ 0		$ 1,262,984	$ (4,090)		$ 1,258,897
Balance (in shares) at Jul. 01, 2023	31,861						31,861

Supplemental Information

6 Months Ended

Jul. 01, 2023

Supplemental Information

Supplemental Information

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
	$	145,523	$	100,417

Lease income

The Company leases a portion of its headquarter facilities to other tenants. Lease income from operating leases was $1.4 million and $3.7 million during the six months ended July 1, 2023 and July 2, 2022, respectively.

Fair Value of Financial Instruments - Valuation of financial instruments (Details) - USD ($) $ in Thousands	Jul. 01, 2023	Dec. 31, 2022
Fair Value of Financial Instruments
Cash equivalents	$ 129,878	$ 314,218
Short-term investments	271,063	692,024
Total	400,941	1,006,242
Money market funds
Fair Value of Financial Instruments
Cash equivalents	129,878	310,969
Corporate debt securities
Fair Value of Financial Instruments
Cash equivalents		3,249
Short-term investments	178,843	501,014
Government debt securities
Fair Value of Financial Instruments
Short-term investments	92,220	191,010
Quoted Prices in Active Markets for Identical Assets (Level 1)
Fair Value of Financial Instruments
Cash equivalents	129,878	310,969
Total	129,878	310,969
Quoted Prices in Active Markets for Identical Assets (Level 1) \| Money market funds
Fair Value of Financial Instruments
Cash equivalents	129,878	310,969
Significant Other Observable Inputs (Level 2)
Fair Value of Financial Instruments
Cash equivalents		3,249
Short-term investments	271,063	692,024
Total	271,063	695,273
Significant Other Observable Inputs (Level 2) \| Corporate debt securities
Fair Value of Financial Instruments
Cash equivalents		3,249
Short-term investments	178,843	501,014
Significant Other Observable Inputs (Level 2) \| Government debt securities
Fair Value of Financial Instruments
Short-term investments	$ 92,220	$ 191,010

Revenues

6 Months Ended

Jul. 01, 2023

Revenues

Revenues

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				Six Months Ended
	July 1,		July 2,		July 1,		July 2,
	2023		2022		2023		2022
Industrial & Commercial	$	165,303	$	144,144	$	316,016	$	270,813
Home & Life		79,563		119,006		175,637		226,151
	$	244,866	$	263,150	$	491,653	$	496,964

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 six months ended July 1, 2023, the Company did not recognize any revenue related to performance obligations that were satisfied in previous reporting periods. During the three and six months ended July 2, 2022, the Company recognized revenue of $36.5 million and $32.0 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				Six Months Ended
	July 1,		July 2,		July 1,		July 2,
	2023		2022		2023		2022
Distributors	$	187,646	$	211,943	$	392,518	$	404,208
Direct customers		57,220		51,207		99,135		92,756
	$	244,866	$	263,150	$	491,653	$	496,964

- Definition

The entire disclosure of revenue from contract with customer to transfer good or service and to transfer nonfinancial asset. Includes, but is not limited to, disaggregation of revenue, credit loss recognized from contract with customer, judgment and change in judgment related to contract with customer, and asset recognized from cost incurred to obtain or fulfill contract with customer. Excludes insurance and lease contracts.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 9
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479806/606-10-50-9

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 10
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479806/606-10-50-10

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 15
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479806/606-10-50-15

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 12
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479806/606-10-50-12

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 12
-Subparagraph (b)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479806/606-10-50-12

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 12
-Subparagraph (c)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479806/606-10-50-12

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 12
-Subparagraph (d)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479806/606-10-50-12

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 12
-Subparagraph (e)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479806/606-10-50-12

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 13
-Subparagraph (b)(2)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479806/606-10-50-13

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Name Accounting Standards Codification
-Topic 606
-Publisher FASB
-URI https://asc.fasb.org//606/tableOfContent

+ Details

Supplemental Information (Tables)

6 Months Ended

Jul. 01, 2023

Supplemental Information

Schedule of Inventories

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
	$	145,523	$	100,417

Condensed Consolidated Statements of Income - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jul. 01, 2023	Jul. 02, 2022	Jul. 01, 2023	Jul. 02, 2022
Condensed Consolidated Statements of Income
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 (in dollars per share)	$ 0.35	$ 0.62	$ 0.78	$ 1.22
Diluted (in dollars per share)	$ 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

Significant Accounting Policies

6 Months Ended

Jul. 01, 2023

Significant Accounting Policies

Significant Accounting Policies

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.

Debt - Interest expense (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
Debt - Interest expense (Details) - USD ($) $ in Thousands	Jul. 01, 2023	Jul. 02, 2022	Jul. 01, 2023	Jul. 02, 2022
Interest expense related to the notes
Interest Expense, Total	$ 1,596	$ 1,667	$ 3,252	$ 3,347
Convertible Senior Notes
Interest expense related to the notes
Contractual interest expense	648	839	1,493	1,684
Amortization of debt issuance costs	436	497	960	994
Interest Expense, Total	$ 1,084	$ 1,336	$ 2,453	$ 2,678

- Definition

Amount of the cost of borrowed funds accounted for as interest expense.

+ References + Details

Fair Value of Financial Instruments

6 Months Ended

Jul. 01, 2023

Fair Value of Financial Instruments

Fair Value of Financial Instruments

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.

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

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.

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.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details

Significant Accounting Policies (Details)	6 Months Ended	12 Months Ended
Significant Accounting Policies (Details)	Jul. 01, 2023	Dec. 31, 2022
Significant Accounting Policies
Length of fiscal year	364 days	364 days
Number of days in each fiscal quarter for 52-week fiscal year	91 days
Minimum
Significant Accounting Policies
Length of fiscal year	364 days
Maximum
Significant Accounting Policies
Length of fiscal year	371 days

Income Taxes

6 Months Ended

Jul. 01, 2023

Income Taxes

Income Taxes

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 and Subpart F income inclusions and other permanent differences. Income tax expense was $12.3 million and $11.0 million for the three months ended July 1, 2023 and July 2, 2022, resulting in effective tax rates of 53.0% and 33.2%, respectively. Income tax expense was $20.1 million and $22.7 million for the six months ended July 1, 2023 and July 2, 2022, resulting in effective tax rates of 44.6% and 33.5%, respectively. The increase in the effective tax rate for the three and six months ended July 1, 2023 was primarily due to a decrease to forecasted pre-tax book income, as the impact of permanent items is greater when pre-tax book income is lower, partially offset by a discrete state return-to-provision benefit recorded in the recent quarter.

Uncertain Tax Positions

As of July 1, 2023, the Company had gross unrecognized tax benefits, inclusive of interest, of $5.1 million, all of which would affect the effective tax rate if recognized. During the six months ended July 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.

10.

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. 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 $13.1 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, and 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.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 946
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 13
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147480990/946-20-50-13

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Topic 235
-SubTopic 10
-Name Accounting Standards Codification
-Section S99
-Paragraph 1
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Reference 3: http://www.xbrl.org/2003/role/disclosureRef
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Reference 4: http://www.xbrl.org/2003/role/disclosureRef
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-Paragraph 2
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-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482603/740-30-50-2

+ Details

Debt

6 Months Ended

Jul. 01, 2023

Debt

Debt

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 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

The 2025 Notes were recorded in convertible debt, net on the Condensed Consolidated Balance Sheet. The effective interest rate for the liability component was 5.336%. The remaining balance of the debt issuance costs was recognized in stockholders’ equity for 2025 Notes that were converted and as debt extinguishment loss for 2025 Notes that were redeemed in the second quarter of fiscal 2023. Interest expense related to the 2025 Notes was comprised of the following (in thousands):


	Three Months Ended				Six Months Ended
	July 1,		July 2,		July 1,		July 2,
	2023		2022		2023		2022
Contractual interest expense	$	648	$	839	$	1,493	$	1,684
Amortization of debt issuance costs		436		497		960		994
	$	1,084	$	1,336	$	2,453	$	2,678

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.

6.	Debt (Continued)

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 July 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 July 1, 2023, $80.0 million was outstanding on the credit facility.

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 1B
-Subparagraph (h)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481139/470-20-50-1B

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Topic 235
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-Section S99
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-Subparagraph (SX 210.4-08(c))
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+ Details

Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares shares in Thousands	Jul. 01, 2023	Dec. 31, 2022
Condensed Consolidated Balance Sheets
Preferred stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Preferred stock, shares authorized	10,000	10,000
Preferred stock, shares issued	0	0
Common stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Common stock, shares authorized	250,000	250,000
Common stock, shares issued	31,861	31,994
Common stock, shares outstanding	31,861	31,994

Debt (Tables)

6 Months Ended

Jul. 01, 2023

Debt

Schedule of information about the equity and liability components of convertible debt

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

Schedule of components of interest expense


	Three Months Ended				Six Months Ended
	July 1,		July 2,		July 1,		July 2,
	2023		2022		2023		2022
Contractual interest expense	$	648	$	839	$	1,493	$	1,684
Amortization of debt issuance costs		436		497		960		994
	$	1,084	$	1,336	$	2,453	$	2,678

Income Taxes (Details) $ in Thousands, kr in Millions	3 Months Ended		6 Months Ended
Income Taxes (Details) $ in Thousands, kr in Millions	Jul. 01, 2023 USD ($)	Jul. 02, 2022 USD ($)	Jul. 01, 2023 USD ($)	Jul. 01, 2023 NOK (kr)	Jul. 02, 2022 USD ($)
Income Taxes
Income tax expense (benefit)	$ 12,338	$ 10,994	$ 20,091		$ 22,683
Effective income tax rate (as a percent)	53.00%	33.20%	44.60%	44.60%	33.50%
Gross unrecognized tax benefits which would affect the effective tax rate if recognized	$ 5,100		$ 5,100
Norwegian Tax Administration \| 2013 \| Under appeal
Income Taxes
Estimate of additional income tax expense			$ 13,100	kr 141.3

- Definition

Amount of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations.

+ References + Details

Derivative Financial Instruments

6 Months Ended

Jul. 01, 2023

Derivative Financial Instruments

Derivative Financial Instruments

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.

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.

Significant Accounting Policies (Policies)	6 Months Ended
Significant Accounting Policies (Policies)	Jul. 01, 2023
Significant Accounting Policies
Basis of Presentation and Principles of Consolidation	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	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 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.

- Definition

Disclosure of accounting policy for revenue from contract with customer.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 17
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479806/606-10-50-17

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
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-Name Accounting Standards Codification
-Section 50
-Paragraph 19
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479806/606-10-50-19

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
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-Name Accounting Standards Codification
-Section 50
-Paragraph 18
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479806/606-10-50-18

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
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-Section 50
-Paragraph 18
-Subparagraph (b)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479806/606-10-50-18

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
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-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479806/606-10-50-20

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
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Reference 7: http://www.xbrl.org/2003/role/disclosureRef
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-Section 50
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-URI https://asc.fasb.org//1943274/2147479806/606-10-50-20

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
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-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479806/606-10-50-20

Reference 9: http://www.xbrl.org/2003/role/exampleRef
-Name Accounting Standards Codification
-Section 50
-Paragraph 4
-Subparagraph (e)
-SubTopic 10
-Topic 235
-Publisher FASB
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Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Name Accounting Standards Codification
-Topic 606
-Publisher FASB
-URI https://asc.fasb.org//606/tableOfContent

+ Details

Stock-Based Compensation (Tables)

6 Months Ended

Jul. 01, 2023

Stock-Based Compensation

Schedule of stock-based compensation costs recognized in the Condensed Consolidated Statements of Income

The following table presents details of stock-based compensation costs recognized in the Condensed Consolidated Statements of Income (in thousands):


	Three Months Ended				Six Months Ended
	July 1,		July 2,		July 1,		July 2,
	2023		2022		2023		2022
Cost of revenues	$	283	$	274	$	582	$	546
Research and development		8,813		7,703		18,305		14,694
Selling, general and administrative		5,643		6,412		12,490		12,024
		14,739		14,389		31,377		27,264
Income tax benefit		2,155		1,371		3,941		3,215
Total	$	12,584	$	13,018	$	27,436	$	24,049

Fair Value of Financial Instruments (Tables)

6 Months Ended

Jul. 01, 2023

Fair Value of Financial Instruments

Summary of valuation of the financial instruments


	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

Schedule of maturities of the Company's available-for-sale investments and money market funds


			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

Schedule of available-for-sale investments in continuous unrealized loss position


	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)

Revenues (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
Revenues (Details) - USD ($) $ in Thousands	Jul. 01, 2023	Jul. 02, 2022	Jul. 01, 2023	Jul. 02, 2022
Revenues
Revenues	$ 244,866	$ 263,150	$ 491,653	$ 496,964
Revenue from performance obligations that were satisfied in previous reporting periods	0	36,500	0	32,000
Distributors
Revenues
Revenues	187,646	211,943	392,518	404,208
Direct customers
Revenues
Revenues	57,220	51,207	99,135	92,756
Industrial & Commercial
Revenues
Revenues	165,303	144,144	316,016	270,813
Home & Life
Revenues
Revenues	$ 79,563	$ 119,006	$ 175,637	$ 226,151

- Definition

Line items represent financial concepts included in a table. These concepts are used to disclose reportable information associated with domain members defined in one or many axes to the table.

+ References + Details

- Definition

Amount, excluding tax collected from customer, of revenue from satisfaction of performance obligation by transferring promised good or service to customer. Tax collected from customer is tax assessed by governmental authority that is both imposed on and concurrent with specific revenue-producing transaction, including, but not limited to, sales, use, value added and excise.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 924
-SubTopic 10
-Name Accounting Standards Codification
-Section S99
-Paragraph 1
-Subparagraph (SAB Topic 11.L)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479941/924-10-S99-1

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
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-Name Accounting Standards Codification
-Section 50
-Paragraph 5
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479806/606-10-50-5

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Topic 280
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-Name Accounting Standards Codification
-Section 50
-Paragraph 30
-Subparagraph (a)
-Publisher FASB
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Reference 4: http://www.xbrl.org/2003/role/disclosureRef
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-Section 50
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-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482810/280-10-50-42

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-Name Accounting Standards Codification
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-Paragraph 22
-Subparagraph (b)
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Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Topic 280
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-Name Accounting Standards Codification
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-Paragraph 32
-Subparagraph (b)
-Publisher FASB
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Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Topic 280
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Reference 8: http://www.xbrl.org/2003/role/disclosureRef
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Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Topic 280
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-Name Accounting Standards Codification
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-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482810/280-10-50-32

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Topic 280
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-Name Accounting Standards Codification
-Section 50
-Paragraph 41
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482810/280-10-50-41

Reference 11: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
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-Name Accounting Standards Codification
-Section 50
-Paragraph 4
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479806/606-10-50-4

+ Details

Derivative Financial Instruments (Details) - Foreign currency forward contracts $ in Millions	6 Months Ended
	Jul. 01, 2023 USD ($)
Non-designated Hedges
Derivative Financial Instruments
Derivative, notional amount	$ 8.1
Cash flow hedges
Derivative Financial Instruments
Derivative, notional amount	$ 10.3
Cash flow hedges \| Minimum
Derivative Financial Instruments
Maturity of contracts	2 months
Cash flow hedges \| Maximum
Derivative Financial Instruments
Maturity of contracts	6 months

Debt - Credit Facility (Details) - USD ($) $ in Millions	6 Months Ended
Debt - Credit Facility (Details) - USD ($) $ in Millions	Jul. 01, 2023	Jun. 30, 2023
Debt
Cash and cash eqquivalents used in net leverage ratio	$ 750.0
Credit Facility
Debt
Amount outstanding	80.0
Credit Facility \| Scenario: Company's option to increase borrowing capacity
Debt
Additional increase in borrowing capacity of the line of credit available at the entity's option	$ 250.0
Additional increase in borrowing capacity based on EBITDA (as a percent)	100.00%
Maximum secured net leverage ratio	3.50
Credit Facility \| Scenario: Credit facility debt covenants
Debt
Maximum net leverage ratio	4.25
Maximum secured leverage ratio	2.50
Revolving Credit Facility
Debt
Maximum borrowing capacity		$ 400.0
Revolving credit facility, other than swingline loans \| Federal Funds Rate
Debt
Interest rate margin (as a percent)	0.50%
Revolving credit facility, other than swingline loans \| SOFR
Debt
Interest rate margin (as a percent)	1.00%
Revolving credit facility, other than swingline loans \| SOFR \| Minimum
Debt
Interest rate margin (as a percent)	1.00%
Revolving credit facility, other than swingline loans \| SOFR \| Maximum
Debt
Interest rate margin (as a percent)	1.75%
Revolving credit facility, other than swingline loans \| Base Rate \| Minimum
Debt
Interest rate margin (as a percent)	0.00%
Revolving credit facility, other than swingline loans \| Base Rate \| Maximum
Debt
Interest rate margin (as a percent)	0.75%
Letter of Credit
Debt
Maximum borrowing capacity	$ 25.0
Swingline Loans
Debt
Maximum borrowing capacity	$ 10.0

Insider Trading Arrangements

3 Months Ended

Jul. 01, 2023

Trading Arrangements, by Individual

Material Terms of Trading Arrangement

Rule 10b5-1 Trading Arrangements

The following table describes contracts, instructions or written plans for the purchase or sale of our securities intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) entered into during the quarter ended July 1, 2023. There were no non-Rule 10b5-1 trading arrangements entered into during the quarter ended July 1, 2023.


			Aggregate Number
			of Securities to be
	Date of		Purchased or Sold
	Adoption of	Duration of the	Pursuant to the
Name and Title of Director or Officer	Arrangement	Arrangement	Arrangement
R. Matthew Johnson President and Chief Executive Officer	May 1, 2023	Expires December 29, 2023	10,711

John C. Hollister Senior Vice President and Chief Financial Officer	May 15, 2023	Expires April 26, 2024	26,000

Non-Rule 10b5-1 Arrangement Adopted

false

R Matthew Johnson [Member]

Trading Arrangements, by Individual

Name

R. Matthew Johnson

Title

President and Chief Executive Officer

Rule 10b5-1 Arrangement Adopted

true

Adoption Date

May 01, 2023

Aggregate Available

10,711

Expiration Date

Dec. 29, 2023

John C Hollister [Member]

Trading Arrangements, by Individual

Name

John C. Hollister

Title

Senior Vice President and Chief Financial Officer

Rule 10b5-1 Arrangement Adopted

true

Adoption Date

May 15, 2023

Aggregate Available

26,000

Expiration Date

Apr. 26, 2024

Subsequent Event

6 Months Ended

Jul. 01, 2023

Subsequent Event

Subsequent Event

11.Subsequent Event

In July 2023, the U.S. Treasury Department released IRS Notice 2023-55, which temporarily relieves taxpayers from the application of certain foreign tax credit Treasury regulations until January 1, 2024. The Company estimates that it will recognize a net tax benefit of approximately $3.3 million as a result, most of which will be recognized in the third quarter of 2023.

Supplemental Information (Details) - USD ($) $ in Thousands	6 Months Ended
Supplemental Information (Details) - USD ($) $ in Thousands	Jul. 01, 2023	Jul. 02, 2022	Dec. 31, 2022
Inventories
Work in progress	$ 120,880		$ 75,112
Finished goods	24,643		25,305
Inventories	145,523		$ 100,417
Lease income
Lease income	$ 1,400	$ 3,700
Lease income, Statements of Income location	Selling, general and administrative	Selling, general and administrative

Revenues (Tables)

6 Months Ended

Jul. 01, 2023

Revenues

Schedule of disaggregation of revenue

The following represents revenue by product category (in thousands):


	Three Months Ended				Six Months Ended
	July 1,		July 2,		July 1,		July 2,
	2023		2022		2023		2022
Industrial & Commercial	$	165,303	$	144,144	$	316,016	$	270,813
Home & Life		79,563		119,006		175,637		226,151
	$	244,866	$	263,150	$	491,653	$	496,964

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


	Three Months Ended				Six Months Ended
	July 1,		July 2,		July 1,		July 2,
	2023		2022		2023		2022
Distributors	$	187,646	$	211,943	$	392,518	$	404,208
Direct customers		57,220		51,207		99,135		92,756
	$	244,866	$	263,150	$	491,653	$	496,964

Condensed Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jul. 01, 2023	Jul. 02, 2022	Jul. 01, 2023	Jul. 02, 2022
Condensed Consolidated Statements of Comprehensive Income
Net income	$ 10,956	$ 22,135	$ 24,923	$ 45,042
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

Stock-Based Compensation

6 Months Ended

Jul. 01, 2023

Stock-Based Compensation

Stock-Based Compensation

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				Six Months Ended
	July 1,		July 2,		July 1,		July 2,
	2023		2022		2023		2022
Cost of revenues	$	283	$	274	$	582	$	546
Research and development		8,813		7,703		18,305		14,694
Selling, general and administrative		5,643		6,412		12,490		12,024
		14,739		14,389		31,377		27,264
Income tax benefit		2,155		1,371		3,941		3,215
Total	$	12,584	$	13,018	$	27,436	$	24,049

The Company had approximately $140.1 million of total unrecognized compensation cost related to equity grants as of July 1, 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.

Earnings Per Share (Tables)

6 Months Ended

Jul. 01, 2023

Earnings Per Share

Schedule of computation of basic and diluted 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

Stock-Based Compensation (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
Stock-Based Compensation (Details) - USD ($) $ in Thousands	Jul. 01, 2023	Jul. 02, 2022	Jul. 01, 2023	Jul. 02, 2022
Stock-based compensation costs
Stock based compensation costs	$ 14,739	$ 14,389	$ 31,377	$ 27,264
Income tax benefit	2,155	1,371	3,941	3,215
Share based compensation costs after tax	12,584	13,018	27,436	24,049
Total unrecognized compensation costs related to awards	140,100		$ 140,100
Weighted-average period of recognition of unrecognized compensation costs			2 years 2 months 12 days
Cost of revenues
Stock-based compensation costs
Stock based compensation costs	283	274	$ 582	546
Research and development
Stock-based compensation costs
Stock based compensation costs	8,813	7,703	18,305	14,694
Selling, general and administrative
Stock-based compensation costs
Stock based compensation costs	$ 5,643	$ 6,412	$ 12,490	$ 12,024

Debt - Convertible Debt, Net (Details) - 0.625% Convertible Senior Notes (2025 Notes) - USD ($) $ in Thousands	Jul. 01, 2023	Dec. 31, 2022
Liability component
Principal		$ 534,980
Unamortized debt issuance costs		(5,407)
Net carrying amount		$ 529,573
Effective interest rate	5.336%

- Definition

Amount, after deduction of unamortized premium (discount) and debt issuance cost, of long-term debt. Excludes lease obligation.

+ References + Details

Earnings Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	1 Months Ended	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jul. 01, 2023	Jul. 02, 2022	Jul. 01, 2023	Jul. 02, 2022
Earnings Per Share:
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 (in dollars per share)		$ 0.35	$ 0.62	$ 0.78	$ 1.22
Diluted (in dollars per share)		$ 0.33	$ 0.60	$ 0.75	$ 1.18
Shares attributable to dilutive effect of conversion of debt securities		900	600	1,100	800
0.625% Convertible Senior Notes (2025 Notes)
Earnings per share:
Repayment of convertible senior notes	$ 535,000
Number of shares of common stock issued in connection with redemption of convertible senior notes	900