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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 September 30, 2023

or

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 October 16, 2023, 31,779,335 shares of common stock of Silicon Laboratories Inc. were outstanding.

Table of Contents

Part I. Financial Information

Page
Number

Item 1.

Financial Statements (Unaudited):

Condensed Consolidated Balance Sheets at September 30, 2023 and December 31, 2022

3

Condensed Consolidated Statements of Income for the three and nine months ended September 30, 2023 and October 1, 2022

4

Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2023 and October 1, 2022

5

Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three and nine months ended September 30, 2023 and October 1, 2022

6

Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2023 and October 1, 2022

7

Notes to Condensed Consolidated Financial Statements

8

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

17

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

24

Item 4.

Controls and Procedures

24

Part II. Other Information

Item 1.

Legal Proceedings

24

Item 1A.

Risk Factors

25

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

38

Item 3.

Defaults Upon Senior Securities

39

Item 4.

Mine Safety Disclosures

39

Item 5.

Other Information

39

Item 6.

Exhibits

40

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.

2

Part I. Financial Information

Item 1. Financial Statements

Silicon Laboratories Inc.

Condensed Consolidated Balance Sheets

(In thousands, except per share data)

(Unaudited)

    

September 30,

December 31,

    

2023

    

2022

Assets

Current assets:

Cash and cash equivalents

$

159,928

$

499,915

Short-term investments

 

257,157

 

692,024

Accounts receivable, net

 

102,142

 

71,437

Inventories

 

167,581

 

100,417

Prepaid expenses and other current assets

 

86,727

 

97,570

Total current assets

 

773,535

 

1,461,363

Property and equipment, net

 

150,839

 

152,016

Goodwill

 

376,389

 

376,389

Other intangible assets, net

 

65,744

 

84,907

Other assets, net

 

108,555

 

94,753

Total assets

$

1,475,062

$

2,169,428

Liabilities and Stockholders’ Equity

Current liabilities:

Accounts payable

$

48,086

$

89,860

Revolving line of credit

45,000

Deferred revenue and returns liability

10,066

6,780

Other current liabilities

61,991

 

89,136

Total current liabilities

165,143

 

185,776

Convertible debt, net

529,573

Other non-current liabilities

49,997

 

49,071

Total liabilities

215,140

 

764,420

Commitments and contingencies

Stockholders’ equity:

Preferred stock – $0.0001 par value; 10,000 shares authorized; no shares issued

Common stock – $0.0001 par value; 250,000 shares authorized; 31,779 and 31,994 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively

3

 

3

Retained earnings

1,262,518

 

1,415,693

Accumulated other comprehensive loss

(2,599)

 

(10,688)

Total stockholders’ equity

1,259,922

 

1,405,008

Total liabilities and stockholders’ equity

$

1,475,062

$

2,169,428

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

3

Silicon Laboratories Inc.

Condensed Consolidated Statements of Income

(In thousands, except per share data)

(Unaudited)

    

Three Months Ended

    

Nine Months Ended

    

September 30,

    

October 1,

    

September 30,

    

October 1,

2023

    

2022

2023

    

2022

Revenues

$

203,760

$

269,817

$

695,413

$

766,781

Cost of revenues

84,735

 

104,232

278,753

 

281,521

Gross profit

119,025

 

165,585

416,660

 

485,260

Operating expenses:

Research and development

79,042

 

84,624

254,340

 

245,677

Selling, general and administrative

27,766

 

50,738

113,363

 

144,398

Operating expenses

106,808

 

135,362

367,703

 

390,075

Operating income

12,217

30,223

48,957

 

95,185

Other income (expense):

Interest income and other, net

2,938

4,672

15,554

 

9,616

Interest expense

(1,359)

(1,527)

(4,611)

 

(4,874)

Income before income taxes

13,796

33,368

59,900

 

99,927

Provision for income taxes

3,388

 

14,188

23,479

36,871

Equity-method earnings (loss)

(60)

1,819

(1,150)

2,985

Net income

$

10,348

$

20,999

$

35,271

$

66,041

Earnings per share:

Basic

$

0.33

$

0.62

$

1.11

$

1.84

Diluted

$

0.32

$

0.60

$

1.07

$

1.79

Weighted-average common shares outstanding:

Basic

31,796

34,079

31,789

35,935

Diluted

32,078

34,779

32,919

36,968

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

4

Silicon Laboratories Inc.

Condensed Consolidated Statements of Comprehensive Income

(In thousands)

(Unaudited)

    

Three Months Ended

    

Nine Months Ended

September 30,

    

October 1,

    

September 30,

    

October 1,

    

2023

    

2022

2023

    

2022

Net income

$

10,348

$

20,999

$

35,271

$

66,041

Other comprehensive income (loss), before tax

Net changes to available-for-sale securities

Unrealized gains (losses) arising during the period

1,553

(3,359)

5,936

(16,064)

Reclassification for losses included in net income

68

56

4,542

479

Net changes to cash flow hedges

Unrealized gains (losses) arising during the period

409

(1,574)

(135)

 

(5,119)

Reclassification for (gains) losses included in net income

(195)

1,821

(38)

2,913

Other comprehensive income (loss), before tax

1,835

(3,056)

10,305

 

(17,791)

Provision (benefit) for income taxes

344

 

(644)

2,216

 

(3,743)

Other comprehensive income (loss)

1,491

 

(2,412)

8,089

 

(14,048)

Comprehensive income

$

11,839

$

18,587

$

43,360

$

51,993

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

5

Silicon Laboratories Inc.

Condensed Consolidated Statements of Changes in Stockholders’ Equity

(In thousands)

(Unaudited)

    

    

    

Additional

    

    

Accumulated Other

    

Total

Common

Paid-In

Retained

Comprehensive

Stockholders’

Three Months Ended September 30, 2023

Shares

Stock

Capital

Earnings

Income (Loss)

Equity

Balance as of July 1, 2023

 

31,861

$

3

$

$

1,262,984

$

(4,090)

$

1,258,897

Net income

 

 

 

10,348

 

 

10,348

Other comprehensive income

1,491

1,491

Stock issuances, net of shares withheld for taxes

27

 

 

(588)

 

 

 

(588)

Repurchases of common stock

(109)

(5,354)

(10,814)

(16,168)

Stock-based compensation

5,942

5,942

Balance as of September 30, 2023

31,779

$

3

$

$

1,262,518

$

(2,599)

$

1,259,922

    

    

    

Additional

    

    

Accumulated Other

    

Total

Common

Paid-In

Retained

Comprehensive

Stockholders’

Three Months Ended October 1, 2022

Shares

Stock

Capital

Earnings

Income (Loss)

Equity

Balance as of July 2, 2022

34,223

$

3

$

$

1,619,396

$

(14,055)

$

1,605,344

Net income

 

 

 

20,999

 

 

20,999

Other comprehensive loss

 

 

 

 

(2,412)

 

(2,412)

Stock issuances, net of shares withheld for taxes

15

 

 

(773)

 

 

 

(773)

Repurchases of common stock

(708)

(15,211)

(72,287)

(87,498)

Stock-based compensation

 

 

15,984

 

 

 

15,984

Balance as of October 1, 2022

33,530

$

3

$

$

1,568,108

$

(16,467)

$

1,551,644

    

    

    

Additional

    

    

Accumulated Other 

    

Total

Common

Paid-In

Retained

Comprehensive 

Stockholders’

Nine Months Ended September 30, 2023

Shares

Stock

Capital

Earnings

Income (Loss)

Equity

Balance as of December 31, 2022

 

31,994

$

3

$

$

1,415,693

$

(10,688)

$

1,405,008

Net income

 

 

 

 

35,271

 

35,271

Other comprehensive income

 

 

 

 

 

8,089

 

8,089

Stock issuances, net of shares withheld for taxes

 

387

 

 

(9,112)

 

 

 

(9,112)

Repurchases of common stock

(1,522)

(24,684)

(188,446)

(213,130)

Stock-based compensation

 

 

 

37,360

 

 

 

37,360

Convertible debt activity

920

 

 

(3,564)

 

 

(3,564)

Balance as of September 30, 2023

 

31,779

$

3

$

$

1,262,518

$

(2,599)

$

1,259,922

    

    

    

Additional

    

    

Accumulated Other

    

Total

Common

Paid-In

Retained

Comprehensive 

Stockholders’

Nine Months Ended October 1, 2022

Shares

Stock

Capital

Earnings

Income (Loss)

Equity

Balance as of January 1, 2022

 

38,481

$

4

$

$

2,214,839

$

(2,419)

$

2,212,424

Cumulative effect of adoption of accounting standard

 

 

 

 

(59,963)

 

(59,963)

Net income

 

 

 

 

66,041

 

66,041

Other comprehensive loss

 

 

 

 

 

(14,048)

 

(14,048)

Stock issuances, net of shares withheld for taxes

 

316

 

 

(8,367)

 

 

 

(8,367)

Repurchases of common stock

(5,267)

(1)

(34,885)

(652,809)

(687,695)

Stock-based compensation

43,252

43,252

Balance as of October 1, 2022

 

33,530

$

3

$

$

1,568,108

$

(16,467)

$

1,551,644

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

6

Silicon Laboratories Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

    

Nine Months Ended

September 30,

October 1,

    

2023

    

2022

Operating Activities

Net income

$

35,271

$

66,041

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

Depreciation of property and equipment

18,992

 

16,514

Amortization of other intangible assets

19,162

 

27,328

Amortization of debt issuance costs

960

1,492

Loss on extinguishment of convertible debt

3

Stock-based compensation expense

37,167

 

43,213

Equity-method (earnings) loss

1,150

(2,985)

Deferred income taxes

(5,881)

 

(13,126)

Changes in operating assets and liabilities:

Accounts receivable

(30,706)

 

21,641

Inventories

(66,971)

 

(39,100)

Prepaid expenses and other assets

8,085

 

(28,404)

Accounts payable

(37,039)

 

26,694

Other current liabilities and income taxes

(39,155)

 

17,962

Deferred revenue and returns liability

3,286

 

(2,144)

Other non-current liabilities

6,794

(7,713)

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

(48,885)

 

127,416

Investing Activities

Purchases of marketable securities

(91,493)

 

(579,507)

Sales of marketable securities

365,073

 

42,952

Maturities of marketable securities

171,766

597,399

Purchases of property and equipment

(18,533)

 

(20,057)

Purchases of other assets

(395)

Net cash provided by investing activities of continuing operations

426,418

 

40,787

Financing Activities

Proceeds from revolving line of credit

80,000

Payments on debt

(571,157)

(21)

Repurchases of common stock

(217,137)

(681,695)

Payment of taxes withheld for vested stock awards

(17,239)

(14,732)

Proceeds from the issuance of common stock

8,013

6,366

Net cash used in financing activities of continuing operations

(717,520)

 

(690,082)

Discontinued Operations

Operating activities

(69,467)

Net cash used in discontinued operations

(69,467)

Decrease in cash and cash equivalents

(339,987)

 

(591,346)

Cash and cash equivalents at beginning of period

499,915

 

1,074,623

Cash and cash equivalents at end of period

$

159,928

$

483,277

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

7

Silicon Laboratories Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1.

Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. The information included herein contains all normal recurring accruals and adjustments which, in the opinion of management, are necessary to present fairly Silicon Laboratories Inc.’s (the “Company”) financial position, results of its operations, comprehensive income, stockholders’ equity and cash flows. The Condensed Consolidated Balance Sheet as of December 31, 2022 was derived from the Company’s audited Consolidated Financial Statements. All intercompany balances and transactions have been eliminated in consolidation. The condensed consolidated results of operations for the three and nine months ended September 30, 2023 are not necessarily indicative of the results to be expected for the full year.

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

The Company prepares financial statements on a 52- or 53-week fiscal year that ends on the Saturday closest to December 31. Fiscal 2023 will have 52 weeks and fiscal 2022 had 52 weeks. In a 52-week year, each fiscal quarter consists of 13 weeks.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Among the significant estimates affecting the financial statements are those related to inventories, goodwill, acquired intangible assets, other long-lived assets, revenue recognition, stock-based compensation and income taxes. Actual results could differ from those estimates, and such differences could be material to the financial statements. The Company periodically reviews the assumptions used in its financial statement estimates.

Revenue Recognition

Revenue is recognized when control of the promised goods or services is transferred to the customer, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. Substantially all of the Company’s contracts with customers contain a single performance obligation, the sale of mixed-signal integrated circuit (“IC”) products. This performance obligation is satisfied when control of the product is transferred to the customer, which typically occurs upon delivery. Unsatisfied performance obligations primarily represent contracts for products with future delivery dates. The Company has opted to not disclose the amount of unsatisfied performance obligations as these contracts have original expected durations of less than one year.

The transaction price reflects the Company’s expectations about the consideration it will be entitled to receive from the customer and may include fixed or variable amounts. Variable consideration primarily includes sales made to distributors under agreements allowing certain rights of return, referred to as stock rotation, and credits issued to the distributor due to price protection. The Company estimates variable consideration at the most likely amount to which it expects to be entitled. The estimate is based on information available to the Company, including recent sales activity and pricing data. The Company applies a constraint to its variable consideration estimate which considers both the likelihood of a return and the amount of a potential price concession. Variable consideration that does not meet revenue recognition criteria is deferred. The Company records a right of return asset in prepaid expenses and other current assets for the costs of distributor inventory not meeting revenue recognition criteria. A corresponding deferred revenue and returns liability amount is recorded for unrecognized revenue associated with such costs. The Company’s products carry a one-year replacement warranty. Payments are typically due within 30 days of invoicing and do not include a significant financing component.

8

Table of Contents

Silicon Laboratories Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

2.

Earnings Per Share

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

Three Months Ended

Nine Months Ended

    

September 30,

    

October 1,

    

September 30,

    

October 1,

2023

2022

2023

2022

Net income

$

10,348

$

20,999

$

35,271

$

66,041

Shares used in computing basic earnings per share

31,796

 

34,079

31,789

 

35,935

Effect of dilutive securities:

Convertible debt and stock-based awards

282

 

700

1,130

 

1,033

Shares used in computing diluted earnings per share

32,078

 

34,779

32,919

 

36,968

Earnings per share:

Basic

$

0.33

$

0.62

$

1.11

$

1.84

Diluted

$

0.32

$

0.60

$

1.07

$

1.79

The Company irrevocably elected to settle the principal amount of its 0.625% convertible senior notes due 2025 (the “2025 Notes”) in cash and intended to settle any excess value in shares in the event of a conversion. In June 2023, the Company paid $535.0 million in cash and issued 0.9 million shares of common stock in connection with the conversions and redemptions of the 2025 Notes. For the three and nine months ended September 30, 2023 and October 1, 2022, approximately 0.0 million, 0.7 million, 0.4 million, and 0.7 million shares, respectively, were included in the denominator for the calculation of diluted earnings per share (related to the not yet converted or redeemed 2025 Notes.) See Note 6, Debt, to the Condensed Consolidated Financial Statements for additional information.Securities that were anti-dilutive were insignificant and were excluded from the computation of diluted earnings per share in all periods presented.

3.

Fair Value of Financial Instruments

The fair values of the Company’s financial instruments are recorded using a hierarchical disclosure framework based upon the level of subjectivity of the inputs used in measuring assets and liabilities. The three levels are described below:

Level 1 - Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.

Level 2 - Inputs other than Level 1 that are directly or indirectly observable, such as quoted prices for similar assets or liabilities and quoted prices in less active markets.

Level 3 - Inputs are unobservable for the asset or liability and are developed based on the best information available in the circumstances, which might include the Company’s own data.

9

Table of Contents

Silicon Laboratories Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

3.

Fair Value of Financial Instruments (Continued)

The following summarizes the valuation of the Company’s financial instruments (in thousands). The tables do not include either cash on hand or assets and liabilities that are measured at historical cost or any basis other than fair value.

Fair Value Measurements

at September 30, 2023 Using

Quoted Prices in

Significant Other

Active Markets for

Observable

Identical Assets

Inputs

Description

    

(Level 1)

    

(Level 2)

    

Total

Cash equivalents:

Money market funds

$

57,144

$

$

57,144

Total cash equivalents

$

57,144

$

$

57,144

Short-term investments:

Corporate debt securities

$

$

166,868

$

166,868

Government debt securities

90,289

90,289

Total short-term investments

$

$

257,157

$

257,157

Total

$

57,144

$

257,157

$

314,301

Fair Value Measurements

at December 31, 2022 Using

Quoted Prices in

Significant Other

Active Markets for

Observable

Identical Assets

Inputs

Description

    

(Level 1)

    

(Level 2)

    

Total

Cash equivalents:

Money market funds

$

310,969

$

$

310,969

Corporate debt securities

 

3,249

 

3,249

Total cash equivalents

$

310,969

$

3,249

$

314,218

Short-term investments:

Corporate debt securities

$

$

501,014

$

501,014

Government debt securities

191,010

191,010

Total short-term investments

$

$

692,024

$

692,024

Total

$

310,969

$

695,273

$

1,006,242

Valuation methodology

The Company’s cash equivalents and short-term investments that are classified as Level 2 are valued using non-binding market consensus prices that are corroborated with observable market data; quoted market prices for similar instruments in active markets; quoted prices in less active markets; or pricing models, such as a discounted cash flow model, with all significant inputs derived from or corroborated with observable market data. The Company’s foreign currency derivative instruments are valued using discounted cash flow models. The assumptions used in preparing the valuation models include foreign exchange rates, forward and spot prices for currencies and market observable data of similar instruments.

10

Table of Contents

Silicon Laboratories Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

3.

Fair Value of Financial Instruments (Continued)

Contractual maturities of investments

The Company’s available-for-sale investments are reported at fair value, with unrealized gains and losses, net of tax, recorded as a component of accumulated other comprehensive loss in the Condensed Consolidated Balance Sheet. The following summarizes the contractual underlying maturities of the Company’s available-for-sale investments at September 30, 2023 (in thousands):

    

    

Fair

Cost

Value

Due in one year or less

$

195,410

$

193,040

Due after one year through five years

64,803

64,117

$

260,213

$

257,157

Unrealized Gains and Losses

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

Less Than 12 Months

12 Months or Greater

Total

Gross

Gross

Gross

Fair

Unrealized

Fair

Unrealized

Fair

Unrealized

As of September 30, 2023

    

Value

    

Losses

    

Value

    

Losses

    

Value

    

Losses

Corporate debt securities

$

13,876

$

(13)

$

132,920

$

(1,865)

$

146,796

$

(1,878)

Government debt securities

 

49,597

 

(341)

 

37,762

 

(908)

 

87,359

 

(1,249)

$

63,473

$

(354)

$

170,682

$

(2,773)

$

234,155

$

(3,127)

Less Than 12 Months

12 Months or Greater

Total

Gross

Gross

Gross

Fair

Unrealized

Fair

Unrealized

Fair

Unrealized

As of December 31, 2022

    

Value

    

Losses

    

Value

    

Losses

    

Value

    

Losses

Corporate debt securities

$

307,085

$

(5,297)

$

185,467

$

(4,090)

$

492,552

$

(9,387)

Government debt securities

 

76,651

(626)

100,209

(3,541)

176,860

(4,167)

$

383,736

$

(5,923)

$

285,676

$

(7,631)

$

669,412

$

(13,554)

The gross unrealized losses as of September 30, 2023 and December 31, 2022 were due primarily to changes in market interest rates. At September 30, 2023 and December 31, 2022, there were no material unrealized gains associated with the Company’s available-for-sale investments.

The Company records an allowance for credit loss when a decline in investment market value is due to credit-related factors. When evaluating an investment for impairment, the Company reviews factors such as the severity of the impairment, changes in underlying credit ratings, forecasted recovery, the Company’s intent to sell or the likelihood that it would be required to sell the investment before its anticipated recovery in market value and the probability that the scheduled cash payments will continue to be made. As of September 30, 2023, there were no material declines in the market value of available-for-sale investments due to credit-related factors.

11

Table of Contents

Silicon Laboratories Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

3.

Fair Value of Financial Instruments (Continued)

Fair values of other financial instruments

Prior to its conversion or redemption in June 2023, the Company’s debt was recorded at cost, but measured at fair value for disclosure purposes. The fair value of the Company’s 2025 Notes was determined using observable market prices. The notes were traded in less active markets and were therefore classified as a Level 2 fair value measurement. As of December 31, 2022, the fair value of the 2025 Notes was $671.9 million. No notes were outstanding as of September 30, 2023.

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

4.

Derivative Financial Instruments

The Company uses derivative financial instruments to manage certain exposures to the variability of foreign currency exchange rates. The Company’s objective is to offset increases and decreases in expenses resulting from these exposures with gains and losses on the derivative contracts, thereby reducing volatility of earnings. The Company does not use derivative contracts for speculative or trading purposes. The Company recognizes derivatives, on a gross basis, in the Condensed Consolidated Balance Sheet at fair value. Cash flows from derivatives are classified according to the nature of the cash receipt or payment in the Condensed Consolidated Statement of Cash Flows.

Cash Flow Hedges

Foreign Currency Forward Contracts

The Company uses foreign currency forward contracts to reduce the earnings impact that exchange rate fluctuations have on operating expenses denominated in currencies other than the U.S. dollar. Changes in the fair value of the contracts are recorded in accumulated other comprehensive income (loss) in the Condensed Consolidated Balance Sheet and subsequently reclassified into earnings in the period during which the hedged transaction is recognized. The reclassified amount is reported in the same financial statement line item as the hedged item. If the foreign currency forward contracts are terminated or can no longer qualify as hedging instruments prior to maturity, the fair value of the contracts recorded in accumulated other comprehensive income (loss) may be recognized in the Condensed Consolidated Statement of Income based on an assessment of the contracts at the time of termination.

The Company has entered into foreign currency forward contracts for a portion of its forecasted operating expenses denominated in Norwegian Krone. As of September 30, 2023, the contracts had maturities of one to three months and an aggregate notional value of $2.0 million. Gains and losses expected to be reclassified into earnings in the next twelve months were not material. The fair value of the contracts, contract gains or losses recognized in other comprehensive income (loss) and amounts reclassified from accumulated other comprehensive income (loss) into earnings were not material for any of the periods presented.

Non-designated Hedges

Foreign Currency Forward Contracts

The Company uses foreign currency forward contracts to reduce the earnings impact that exchange rate fluctuations have on non-U.S. dollar balance sheet exposures. The Company recognizes gains and losses on the foreign currency forward contracts in interest income and other, net in the Consolidated Statement of Income in the same period as the remeasurement loss and gain of the related foreign currency denominated asset or liability. The Company does not apply hedge accounting to these foreign currency forward contracts.

As of September 30, 2023, the Company held foreign currency forward contracts denominated in the Euro with an aggregate notional value of $7.4 million. The fair value of the foreign contracts and contract gains and losses recognized in income were not material for any of the periods presented.

12

Table of Contents

Silicon Laboratories Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

5.

Supplemental Information

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

Inventories