slab-20240330

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


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

For the quarterly period ended March 30, 2024


o			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.

þ Yes o 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).

þ Yes o 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 þ

Accelerated filer o

Non-accelerated filer o

Smaller reporting company o

Emerging growth company o

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. o

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

o Yes þ No

As of April 17, 2024, 31,924,416 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 March 30, 2024 and December 30, 2023	3

	Condensed Consolidated Statements of Operations for the three months ended March 30, 2024 and April 1, 2023	4

	Condensed Consolidated Statements of Comprehensive Income for the three months ended March 30, 2024 and April 1, 2023	5

	Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three months ended March 30, 2024 and April 1, 2023	6

	Condensed Consolidated Statements of Cash Flows for the three months ended March 30, 2024 and April 1, 2023	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	23

Item 4.	Controls and Procedures	23

Part II. Other Information

Item 1.	Legal Proceedings	24

Item 1A.	Risk Factors	24

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	38

Item 3.	Defaults Upon Senior Securities	38

Item 4.	Mine Safety Disclosures	38

Item 5.	Other Information	38

Item 6.	Exhibits	39

Cautionary Statement

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

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Part I. Financial Information

Item 1. Financial Statements

Silicon Laboratories Inc.

Condensed Consolidated Balance Sheets

(In thousands, except per share data)

(Unaudited)


	March 30, 2024		December 30, 2023
Assets
Current assets:
Cash and cash equivalents	$	191,489	$	227,504
Short-term investments	141,201		211,720
Accounts receivable, net	32,616		29,295
Inventories	198,206		194,295
Prepaid expenses and other current assets	82,608		75,117
Total current assets	646,120		737,931
Property and equipment, net	142,155		145,890
Goodwill	376,389		376,389
Other intangible assets, net	53,453		59,533
Other assets, net	126,036		123,313
Total assets	$	1,344,153	$	1,443,056
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	44,575	$	57,498
Revolving line of credit	—		45,000
Deferred revenue and returns liability	3,921		2,117
Other current liabilities	62,863		58,955
Total current liabilities	111,359		163,570

Other non-current liabilities	67,233		70,804
Total liabilities	178,592		234,374
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; 31,924 and 31,897 shares issued and outstanding at March 30, 2024 and December 30, 2023, respectively	3		3
Additional paid-in capital	29,830		16,973
Retained earnings	1,136,205		1,192,731
Accumulated other comprehensive loss	(477)		(1,025)
Total stockholders’ equity	1,165,561		1,208,682
Total liabilities and stockholders’ equity	$	1,344,153	$	1,443,056

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

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Silicon Laboratories Inc.

Condensed Consolidated Statements of Operations

(In thousands, except per share data)

(Unaudited)


	Three Months Ended
	March 30, 2024		April 1, 2023
Revenues	$	106,375	$	246,787
Cost of revenues	51,306		92,927
Gross profit	55,069		153,860
Operating expenses:
Research and development	80,650		89,396
Selling, general and administrative	33,553		44,891
Operating expenses	114,203		134,287
Operating income (loss)	(59,134)		19,573
Other income (expense):
Interest income and other, net	2,732		4,836
Interest expense	(509)		(1,656)
Income (loss) before income taxes	(56,911)		22,753
Provision (benefit) for income taxes	(385)		7,753
Equity-method loss	—		(1,033)
Net income (loss)	$	(56,526)	$	13,967

Earnings (loss) per share:
Basic	$	(1.77)	$	0.44
Diluted	$	(1.77)	$	0.41

Weighted-average common shares outstanding:
Basic	31,910		31,959
Diluted	31,910		33,753

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

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Silicon Laboratories Inc.

Condensed Consolidated Statements of Comprehensive Income

(In thousands)

(Unaudited)


	Three Months Ended
	March 30, 2024		April 1, 2023
Net income (loss)	$	(56,526)	$	13,967
Other comprehensive income, before tax:
Net changes to available-for-sale securities:
Unrealized gains arising during the period	624		2,997
Reclassification for losses included in net income (loss)	15		2,614

Net changes to cash flow hedges:
Unrealized gains arising during the period	275		38
Reclassification for gains included in net income (loss)	(234)		(30)
Other comprehensive income, before tax	679		5,619

Provision for income taxes	131		1,394

Other comprehensive income	548		4,225

Comprehensive income (loss)	$	(55,978)	$	18,192

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

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Silicon Laboratories Inc.

Condensed Consolidated Statements of Changes in Stockholders’ Equity

(In thousands)

(Unaudited)


Three Months Ended March 30, 2024	Shares	Common Stock		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total Stockholders’ Equity
Balance as of December 30, 2023	31,897	$	3	$	16,973	$	1,192,731	$	(1,025)	$	1,208,682
Net loss	—	—		—		(56,526)		—		(56,526)
Other comprehensive income	—	—		—		—		548		548
Stock issuances, net of shares withheld for taxes	27	—		(707)		—		—		(707)
Repurchases of common stock	—	—		—		—		—		—
Stock-based compensation	—	—		13,564		—		—		13,564
Balance as of March 30, 2024	31,924	$	3	$	29,830	$	1,136,205	$	(477)	$	1,165,561


Three Months Ended April 1, 2023	Shares	Common Stock		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total Stockholders’ Equity
Balance as of December 31, 2022	31,994	$	3	$	—	$	1,415,693	$	(10,688)	$	1,405,008
Net income	—	—		—		13,967		—		13,967
Other comprehensive income	—	—		—		—		4,225		4,225
Stock issuances, net of shares withheld for taxes	98	—		(6,931)		—		—		(6,931)
Repurchases of common stock	(95)	—		(9,732)		(3,746)		—		(13,478)
Stock-based compensation	—	—		16,663		—		—		16,663
Balance as of April 1, 2023	31,997	$	3	$	—	$	1,425,914	$	(6,463)	$	1,419,454

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

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Silicon Laboratories Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)


	Three Months Ended
	March 30, 2024		April 1, 2023
Operating Activities
Net income (loss)	$	(56,526)	$	13,967
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation of property and equipment	6,634		6,235
Amortization of other intangible assets	6,079		6,510
Amortization of debt issuance costs	—		523

Stock-based compensation expense	13,612		16,638
Equity-method loss	—		1,033
Deferred income taxes	(5,270)		(2,670)
Changes in operating assets and liabilities:
Accounts receivable	(3,321)		(16,257)
Inventories	(3,958)		(32,794)
Prepaid expenses and other assets	(15,466)		11,530
Accounts payable	(13,829)		(12,966)
Other current liabilities and income taxes	1,554		(8,529)
Deferred revenue and returns liability	1,804		4,478
Other non-current liabilities	(3,113)		(978)
Net cash used in operating activities	(71,800)		(13,280)

Investing Activities
Purchases of marketable securities	(9,794)		(66,113)
Sales of marketable securities	25,763		170,317
Maturities of marketable securities	55,188		157,734
Purchases of property and equipment	(2,047)		(7,657)
Proceeds from sale of equity investment	12,382		—

Net cash provided by investing activities	81,492		254,281

Financing Activities

Payments on debt	(45,000)		—
Repurchases of common stock	—		(17,608)
Payment of taxes withheld for vested stock awards	(1,048)		(6,931)
Proceeds from the issuance of common stock	341		—
Net cash used in financing activities	(45,707)		(24,539)

Increase (decrease) in cash and cash equivalents	(36,015)		216,462
Cash and cash equivalents at beginning of period	227,504		499,915
Cash and cash equivalents at end of period	$	191,489	$	716,377

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

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Silicon Laboratories Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. The information included herein contains all normal recurring accruals and adjustments which, in the opinion of management, are necessary to present fairly Silicon Laboratories Inc.’s (the “Company”) financial position, results of its operations, comprehensive income, stockholders’ equity, and cash flows. The Condensed Consolidated Balance Sheet as of December 30, 2023 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 months ended March 30, 2024 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 30, 2023, included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on February 20, 2024.

The Company prepares financial statements on a 52- or 53-week fiscal year that ends on the Saturday closest to December 30. Fiscal 2024 will have 52 weeks and fiscal 2023 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.

Recent Accounting Pronouncements

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280)—Improvements to Reportable Segment Disclosures. This ASU requires interim and annual disclosure of significant segment expenses that are regularly provided to the chief operating decision-maker (“CODM”) and included within the reported measure of a segment’s profit or loss, requires interim disclosures about a reportable segment’s profit or loss and assets that are currently required annually, requires disclosure of the position and title of the CODM, clarifies circumstances in which an entity can disclose multiple segment measures of profit or loss, and contains other disclosure requirements. This authoritative guidance is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. We are currently evaluating the effect of this new guidance on our consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740)—Improvements to Income Tax Disclosures. This ASU requires that reporting entities disclose specific categories in the effective tax rate reconciliation as well as information about income taxes paid. The authoritative guidance is effective for annual periods beginning after December 15, 2024, with early adoption permitted. We are currently evaluating the effect of this new guidance on our consolidated financial statements.

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Silicon Laboratories Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

2. Earnings Per Share

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


	Three Months Ended
	March 30, 2024		April 1, 2023
Net income (loss)	$	(56,526)	$	13,967

Shares used in computing basic earnings per share	31,910		31,959

Effect of dilutive securities:
Convertible debt and stock-based awards	—		1,794
Shares used in computing diluted earnings per share	31,910		33,753

Earnings (loss) per share:
Basic	$	(1.77)	$	0.44
Diluted	$	(1.77)	$	0.41

Diluted shares for the three months ended March 30, 2024 excluded 0.4 million shares due to the Company's net loss for the period. For the three months ended April 1, 2023, approximately 1.2 million shares were included in the denominator for the calculation of diluted earnings per share (related to the not yet converted or redeemed 2025 Notes.) Securities that were anti-dilutive were insignificant and were excluded from the computation of diluted earnings per share for the three months ended April 1, 2023.

3. Fair Value of Financial Instruments

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

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

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

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

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Silicon Laboratories Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

3. Fair Value of Financial Instruments (Continued)

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


	Fair Value Measurements at March 30, 2024 Using
Description	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Total
Cash equivalents:
Money market funds	$	107,746	$	—	$	107,746
Total cash equivalents	$	107,746	$	—	$	107,746

Short-term investments:
Corporate debt securities	$	—	$	58,743	$	58,743
Government debt securities	—		82,458		82,458
Total short-term investments	$	—	$	141,201	$	141,201

Total	$	107,746	$	141,201	$	248,947


	Fair Value Measurements at December 30, 2023 Using
Description	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Total
Cash equivalents:
Money market funds	$	137,195	$	—	$	137,195

Total cash equivalents	$	137,195	$	—	$	137,195

Short-term investments:
Corporate debt securities	$	—	$	130,047	$	130,047
Government debt securities	—		81,673		81,673
Total short-term investments	$	—	$	211,720	$	211,720

Total	$	137,195	$	211,720	$	348,915

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.

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Silicon Laboratories Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

3. Fair Value of Financial Instruments (Continued)

The following summarizes the components of available-for-sale investments:


									Reported As
As of March 30, 2024	Amortized Cost Basis		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Cash Equivalent		Marketable Securities
Corporate debt securities	$	59,107	$	46	$	(410)	$	58,743	$	—	$	58,743
Government debt securities	82,685		19		(246)		82,458		—		82,458
Money market funds	107,746		—		—		107,746		107,746		—
Total	$	249,538	$	65	$	(656)	$	248,947	$	107,746	$	141,201


									Reported As
As of December 30, 2023	Amortized Cost Basis		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Cash Equivalent		Marketable Securities
Corporate debt securities	$	130,858	$	69	$	(880)	$	130,047	$	—	$	130,047
Government debt securities	82,091		137		(555)		81,673		—		81,673
Money market funds	137,195		—		—		137,195		137,195		—
Total	$	350,144	$	206	$	(1,435)	$	348,915	$	137,195	$	211,720

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 March 30, 2024 (in thousands):


	Cost		Fair Value
Due in one year or less	$	112,498	$	112,010
Due after one year through five years	29,294		29,191
	$	141,792	$	141,201

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
As of March 30, 2024	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
Corporate debt securities	$	2,501	$	(1)	$	30,323	$	(410)	$	32,824	$	(411)
Government debt securities	36,642		(166)		30,174		(79)		66,816		(245)
	$	39,143	$	(167)	$	60,497	$	(489)	$	99,640	$	(656)

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Silicon Laboratories Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

3. Fair Value of Financial Instruments (Continued)


	Less Than 12 Months				12 Months or Greater				Total
As of December 30, 2023	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
Corporate debt securities	$	12,449	$	(13)	$	95,760	$	(867)	$	108,209	$	(880)
Government debt securities	28,255		(115)		31,122		(440)		59,377		(555)
	$	40,704	$	(128)	$	126,882	$	(1,307)	$	167,586	$	(1,435)

The gross unrealized losses as of March 30, 2024 and December 30, 2023 were due primarily to changes in market interest rates. At March 30, 2024 and December 30, 2023, 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 March 30, 2024, 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 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 loss in the Condensed Consolidated Balance Sheet and subsequently reclassified into earnings in the period during which the hedged transaction is recognized. The reclassified amount is reported in the same financial statement line item as the hedged item. If the foreign currency forward contracts are terminated or can no longer qualify as hedging instruments prior to maturity, the fair value of the contracts recorded in accumulated other comprehensive loss may be recognized in the Condensed Consolidated Statement of Operations based on an assessment of the contracts at the time of termination. As of March 30, 2024, the company held no such foreign currency forward contracts. The fair value of the contracts, contract gains or losses recognized in other comprehensive income and amounts reclassified from accumulated other comprehensive loss into earnings were not material for any of the periods presented.

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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


	March 30, 2024		December 30, 2023
Work in progress	$	173,379	$	173,802
Finished goods	24,827		20,493
	$	198,206	$	194,295

Lease income

The Company leases a portion of its headquarter facilities to other tenants. Lease income from operating leases was $0.8 million and $0.7 million during the three months ended March 30, 2024 and April 1, 2023, respectively.

6. Debt

Credit Facility

The Company and certain of its domestic subsidiaries (the “Guarantors”) have a $400 million revolving credit facility, as amended on June 30, 2023, with a maturity date of June 30, 2028. The credit facility includes a $25 million letter of credit sublimit and a $10 million swingline loan sublimit. The Company also has an option to increase the size of the borrowing capacity by up to the greater of an aggregate of $250 million and 100% of EBITDA of the last four fiscal quarters, plus an amount that would not cause a secured net leverage ratio (funded debt secured by assets/EBITDA) to exceed 3.50 to 1.00, subject to certain conditions.

The credit facility, other than swingline loans, will bear interest at the Adjusted Term Secured Overnight Financing Rate (“SOFR”) plus an applicable margin or, at the option of the Company, a base rate (defined as the highest of the Wells Fargo prime rate, the Federal Funds rate plus 0.50% and the Adjusted Term SOFR plus 1.00%) plus an applicable margin. Swingline loans accrue interest at the base rate plus the applicable margin for base rate loans. The applicable margins for the Adjusted Term SOFR loans range from 1.00% to 1.75% and for base rate loans range from 0.00% to 0.75%, depending in each case, on the leverage ratio as defined in the credit facility.

The credit facility contains various conditions, covenants and representations with which the Company must be in compliance in order to borrow funds and to avoid an event of default, including financial covenants that the Company must maintain a consolidated net leverage ratio (funded indebtedness less cash and cash equivalents up to $750 million and divided by EBITDA) of no more than 4.25 to 1, and a minimum interest coverage ratio (EBITDA/interest payments) of no less than 2.50 to 1. As of March 30, 2024, 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 March 30, 2024, no amounts were outstanding on the credit facility.

7. Commitments and Contingencies

Litigation

The Company is involved in various legal proceedings that have arisen in the normal course of business. While the ultimate results cannot be predicted with certainty, the Company does not expect them to have a material adverse effect on its Condensed Consolidated Financial Statements.

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Silicon Laboratories Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

8. Revenues

The Company groups its products as Industrial & Commercial or Home & Life based on the target markets they address. The following represents revenue by product category (in thousands):


	Three Months Ended
	March 30, 2024		April 1, 2023
Industrial & Commercial	$	65,262	$	150,713
Home & Life	41,113		96,074
	$	106,375	$	246,787

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 months ended March 30, 2024 and April 1, 2023, the Company recognized revenue of $4.2 million and $4.9 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
	March 30, 2024		April 1, 2023
Distributors	$	70,360	$	204,872
Direct customers	36,015		41,915
	$	106,375	$	246,787

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 Operations (in thousands):


	Three Months Ended
	March 30, 2024		April 1, 2023
Cost of revenues	$	412	$	298
Research and development	9,722		9,491
Selling, general and administrative	3,478		6,849
	13,612		16,638
Income tax provision	1,727		1,786
Total	$	11,885	$	14,852

The Company had approximately $80.3 million of total unrecognized compensation cost related to equity grants as of March 30, 2024 that is expected to be recognized over a weighted-average period of approximately 2.0 years.

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Silicon Laboratories Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

10. Income Taxes

Provision for income taxes includes both domestic and foreign income taxes at the applicable tax rates adjusted for non-deductible expenses, research and development tax credits, global intangible low-taxed income, Subpart F income inclusions, and other permanent differences.

Income tax benefit was $0.4 million and expense was $7.8 million for the three months ended March 30, 2024 and April 1, 2023, resulting in effective tax rates of 0.7% and 35.7%, respectively. The decrease in the provision for income taxes for the three months ended March 30, 2024 is primarily due to reporting a tax benefit on pre-tax book loss for the current period compared to tax expense on pre-tax book income for the three months ended April 1, 2023.

Uncertain Tax Positions

As of March 30, 2024, the Company had gross unrecognized tax benefits, inclusive of interest, of $5.9 million, of which $5.3 million would affect the effective tax rate if recognized. During the three months ended March 30, 2024, the Company did not release any unrecognized tax benefits.

The Company recognizes interest and penalties related to unrecognized tax benefits in the provision for income taxes. These amounts were not material for any of the periods presented.

Following the completion of the Norwegian Tax Administration (“NTA”) examination of the Company’s Norwegian subsidiary for income tax matters relating to fiscal years 2013 - 2016, the Company received an assessment from the NTA in December 2017 concerning an adjustment to its 2013 taxable income related to the pricing of an intercompany transaction. The Company is currently appealing the assessment. The adjustment to the pricing of the intercompany transaction results in approximately 141.3 million Norwegian kroner, or $13.0 million, additional Norwegian income tax. The Company disagrees with the NTA’s assessment and believes the Company’s position on this matter is more likely than not to be sustained. The Company plans to exhaust all available administrative remedies. If unable to resolve this matter through administrative remedies with the NTA, the Company plans to pursue judicial remedies.

The Company believes that it has accrued adequate reserves related to all matters contained in tax periods open to examination. Should the Company experience an unfavorable outcome in the NTA matter, however, such an outcome could have a material impact on its financial statements.

Tax years 2015 through 2024 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 believes it is reasonably possible that its gross unrecognized tax benefits will decrease by approximately $1.9 million, inclusive of interest, in the next 12 months due to the lapse of the statute of limitations.

11. Restructuring Activities

During the fourth quarter of 2023, the Company implemented a workforce reduction of approximately 10% of its employees to reduce costs and align its business in response to market conditions. The following table summarizes the activity of the restructuring liability during the periods presented (in millions):


	Three Months Ended March 30, 2024
Balance, beginning of period	$	4.4
Charges	0.5
Payments	1.0
Balance, end of period	$	3.9

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Silicon Laboratories Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

11. Restructuring Activities (Continued)

During the three months ended March 30, 2024, restructuring charges of $0.5 million were recognized in operating expenses in the Condensed Consolidated Statements of Operations.

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

The following discussion and analysis of financial condition and results of operations should be read in conjunction with the Condensed Consolidated Financial Statements and related notes thereto included elsewhere in this report. This discussion contains forward-looking statements. Please see the “Cautionary Statement” above and “Risk Factors” below for discussions of the uncertainties, risks and assumptions associated with these statements. Our fiscal year-end financial reporting periods are a 52- or 53-week fiscal year that ends on the Saturday closest to December 31. Fiscal 2024 will have 52 weeks and fiscal 2023 had 52 weeks. Our first quarter of fiscal 2024 ended March 30, 2024. Our first quarter of fiscal 2023 ended April 1, 2023.

Impact of Macroeconomic Conditions

The current global economic environment is experiencing inflationary pressure, high interest rates, and geopolitical tension. We have experienced a decline in revenues, as our customers are slowing purchases to reduce existing inventories in a softening market. The extent of the impact of these macroeconomic conditions on our operational and financial performance will depend on future developments, including the duration and severity of any economic downturn, the impact to the business of our suppliers and/or customers, and other items identified under “Risk Factors” below, all of which are uncertain and cannot be predicted. An extended period of global supply chain and economic disruption could materially affect our business, results of operations, access to sources of liquidity, and financial condition.

Overview

We are a leader in secure, intelligent wireless technology for a more connected world. Our integrated hardware and software platform, intuitive development tools, industry leading ecosystem and robust support enable customers in building advanced industrial, commercial, home and life applications. We make it easy for developers to solve complex wireless challenges throughout the product lifecycle and get to market quickly with innovative solutions that transform industries, grow economies and improve lives. We provide analog-intensive, mixed-signal solutions for use in a variety of electronic products in a broad range of applications for the Internet of Things (“IoT”) including connected home and security, industrial automation and control, smart metering, smart lighting, commercial building automation, consumer electronics, asset tracking and medical instrumentation. We group our products as Industrial & Commercial or Home & Life based on the target markets they address.

As a fabless semiconductor company, we rely on third-party semiconductor fabricators in Asia, and to a lesser extent the United States and Europe, to manufacture the silicon wafers that reflect our IC designs. Each wafer contains numerous die, which are cut from the wafer to create a chip for an IC. We rely on third parties in Asia to assemble, package, and, in most cases, test these devices and ship these units to our customers. Testing performed by such third parties facilitates faster delivery of products to our customers (particularly those located in Asia), shorter production cycle times, lower inventory requirements, lower costs and increased flexibility of test capacity.

The sales cycle for our ICs can be as long as 12 months or more. An additional three to six months or more are usually required before a customer ships a significant volume of devices that incorporate our ICs. Due to this lengthy sales cycle, we typically experience a significant delay between incurring research and development and selling, general and administrative expenses, and the corresponding sales. Consequently, if sales in any quarter do not occur when expected, expenses and inventory levels could be disproportionately high, and our operating results for that quarter and, potentially, future quarters would be adversely affected. Moreover, the amount of time between initial research and development and commercialization of a product, if ever, can be substantially longer than the sales cycle for the product. Accordingly, if we incur substantial research and development costs without developing a commercially successful product, our operating results, as well as our growth prospects, could be adversely affected.

Because some of our ICs are designed for use in consumer products, we expect that the demand for our products will be typically subject to some degree of seasonal demand. However, rapid changes in our markets and across our product areas make it difficult for us to accurately estimate the impact of seasonal factors on our business.

Current Period Highlights

Revenues decreased $140.4 million in the recent quarter compared to the first quarter of fiscal 2023 due to decreased revenues from our Home & Life products and our Industrial & Commercial products. Gross profit decreased $98.8 million during the same period due to decreased gross profit from our Home & Life products and our Industrial & Commercial

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products. Gross margin decreased to 51.8% in the recent quarter compared to 62.3% in the first quarter of fiscal 2023, and increased slightly compared to 50.6% in the fourth quarter of fiscal 2023, primarily due to variations in customer and product mix. Operating expenses decreased by $20.1 million in the recent quarter compared to the first quarter of fiscal 2023 due primarily to lower personnel-related costs as a result of the workforce reduction in the fourth quarter of fiscal 2023. Operating loss in the recent quarter was $59.1 million compared to operating income of $19.6 million in the first quarter of fiscal 2023. Refer to “Results of Operations” below for further discussion.

We ended the first quarter of fiscal 2024 with $332.7 million in cash, cash equivalents, and short-term investments. Net cash used in operating activities was $71.8 million during the current year three-month period. Accounts receivable were $32.6 million at March 30, 2024, representing 28 days sales outstanding (“DSO”). Inventory was $198.2 million at March 30, 2024, representing 348 days of inventory (“DOI”). During the first quarter, we repaid $45.0 million in borrowings under our revolving credit facility.

We have continued to diversify our product portfolio and introduce new products and solutions with added functionality and integration. We plan to continue introducing products that expand the capabilities we offer in order to serve both current and emerging applications, enabling us to address new markets and expand our total available market opportunity.

During the three months ended March 30, 2024, we had no customer that represented more than 10% of our revenues. In addition to direct sales to customers, some of our end customers purchase products indirectly from us through distributors and contract manufacturers. An end customer purchasing through a contract manufacturer typically instructs such contract manufacturer to obtain our products and incorporate such products with other components for sale by such contract manufacturer to the end customer. Although we actually sell the products to, and are paid by, the distributors and contract manufacturers, we refer to such end customer as our customer. Two of our distributors who sell to our customers, Arrow Electronics and Edom Technology, each represented more than 10% of our revenues during the three months ended March 30, 2024.

The percentage of our revenues derived from outside of the United States was 95% during the three months ended March 30, 2024. All of our revenues to date have been denominated in U.S. dollars. We believe that a majority of our revenues will continue to be derived from customers outside of the United States.

Results of Operations

The following describes the line items set forth in our Condensed Consolidated Statements of Operations:

Revenues. Revenues are generated predominately by sales of our products. Our revenues are subject to variation from period to period due to the volume of shipments made within a period, the mix of products we sell, and the prices we charge for our products.

Cost of Revenues. Cost of revenues includes the cost of purchasing finished silicon wafers processed by independent foundries; costs associated with assembly, test and shipping of those products; costs of personnel and equipment associated with manufacturing support, logistics, and quality assurance; costs of software royalties, other intellectual property license costs, and certain acquired intangible assets; and an allocated portion of our occupancy costs. Our gross margin fluctuates depending on product mix, manufacturing yields, inventory valuation adjustments, average selling prices, and other factors.

Research and Development. Research and development expense consists primarily of personnel-related expenses, including stock-based compensation, as well as new product masks, external consulting and services costs, equipment tooling, equipment depreciation, amortization of intangible assets, and an allocated portion of our occupancy costs. Research and development activities include the design of new products, refinement of existing products and design of test methodologies to ensure compliance with required specifications.

Selling, General and Administrative. Selling, general and administrative expense consists primarily of personnel-related expenses, including stock-based compensation, as well as an allocated portion of our occupancy costs, sales commissions to independent sales representatives, amortization of intangible assets, professional fees, legal fees, and promotional and marketing expenses.

Interest Income and Other, Net. Interest income and other, net reflects interest earned on our cash, cash equivalents and investment balances, foreign currency remeasurement adjustments, and other non-operating income and expenses.

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Interest Expense. Interest expense consists of interest on our short and long-term obligations, including our convertible senior notes that were previously outstanding and our credit facility. Interest expense on our convertible senior notes included contractual interest and amortization of debt issuance costs.

Provision for Income Taxes. Provision for income taxes includes both domestic and foreign income taxes at the applicable tax rates adjusted for non-deductible expenses, research and development tax credits, global intangible low-taxed income, Subpart F income inclusions, and other permanent differences. See Note 10, Income Taxes, to the Condensed Consolidated Financial Statements.

Equity-method Loss. Equity-method loss represents income or loss on our equity-method investment.

The following table sets forth our Condensed Consolidated Statements of Operations data as a percentage of revenues for the periods indicated:


	Three Months Ended
	March 30, 2024		April 1, 2023
Revenues	100.0	%	100.0	%
Cost of revenues	48.2		37.7
Gross profit	51.8		62.3
Operating expenses:
Research and development	75.8		36.2
Selling, general and administrative	31.5		18.2
Operating expenses	107.4		54.4
Operating income (loss)	(55.6)		7.9
Other income (expense):
Interest income and other, net	2.6		2.0
Interest expense	(0.5)		(0.7)
Income (loss) before income taxes	(53.5)		9.2
Provision (benefit) for income taxes	(0.4)		3.1
Equity-method loss	0.0		(0.4)
Net income (loss)	(53.1)	%	5.7	%

Revenues


	Three Months Ended
(in millions)	March 30, 2024		April 1, 2023		Change		% Change
Industrial & Commercial	$	65.3	$	150.7	$	(85.4)	(56.7)	%
Home & Life	41.1		96.1		(55.0)		(57.2)	%
	$	106.4	$	246.8	$	(140.4)	(56.9)	%

The decrease in revenues in the recent three-month period was due to decreased revenues of $85.5 million from our Industrial & Commercial products and decreased revenues of $55.0 million from our Home & Life products. Average selling prices of our products and unit volumes decreased in the recent three-month period. The average selling prices of our products may fluctuate significantly from period to period due to changes in product mix, pricing decisions and other factors. In general, as our products become more mature, we expect to experience decreases in average selling prices.

The overall demand environment for our customers’ products is generally weaker than previously anticipated. Customers are also seeking to reduce inventory levels relative to amounts they held during the recent period of widespread supply chain disruptions. As a result, the current demand environment for our products is experiencing high volatility and general weakness, with customers more frequently requesting cancellations, changes to delivery dates, and price and payment term concessions.

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Gross Profit


	Three Months Ended
(in millions)	March 30, 2024			April 1, 2023			Change
Gross profit	$	55.1		$	153.9		$	(98.8)
Gross margin	51.8		%	62.3		%	(10.5)		%

Gross profit decreased during the recent three-month period due to a decrease in gross profit for our Home & Life product group and a decrease in gross profit for our Industrial & Commercial product group, primarily as a result of the decrease in unit volumes in the periods. Gross margin decreased primarily due to variations in customer and product mix.

We may experience variations in the average selling prices of certain of our products. Increases in average selling prices may occur during periods of increased demand, but such demand may be short-lived and could be accompanied by higher product costs. Declines in average selling prices create downward pressure on gross margin and may be offset to the extent we are able to introduce higher margin new products and gain market share with our products; reduce costs of existing products through improved design; achieve lower production costs from our wafer suppliers and third-party assembly and test subcontractors; achieve lower production costs per unit as a result of improved yields throughout the manufacturing process; or reduce logistics costs.

Research and Development


	Three Months Ended
(in millions)	March 30, 2024			April 1, 2023			Change		% Change
Research and development	$	80.7		$	89.4		$	(8.7)	(9.7)	%
Percent of revenue	75.8		%	36.2		%

The decrease in research and development expense in the recent three-month period was primarily due to decreases of $9.2 million for personnel-related expenses as a result of our restructuring activities and $1.1 million for technical services, partially offset by an increase of $1.8 million in new product introduction costs. We expect that research and development expense will increase in absolute dollars in the second quarter of fiscal 2024.

Selling, General and Administrative


	Three Months Ended
(in millions)	March 30, 2024			April 1, 2023			Change		% Change
Selling, general and administrative	$	33.6		$	44.9		$	(11.3)	(25.2)	%
Percent of revenue	31.5		%	18.2		%

The decrease in selling, general and administrative expense in the three-month period was primarily due to a $9.4 million decrease in personnel-related costs as a result of our restructuring activities and a $1.7 million decrease in outside services. We expect that selling, general and administrative expense will increase in absolute dollars in the second quarter of fiscal 2024.

Interest Income and Other, Net

Interest income and other, net for the three months ended March 30, 2024 was $2.7 million, compared to $4.8 million for the three months ended April 1, 2023. The decrease in interest income and other, net in the recent three-month period was primarily due to lower interest-bearing investment balances as a result of the sale of investments to fund the settlement of our 2025 convertible senior notes in the second quarter of fiscal 2023, stock repurchases in the second and third quarters of fiscal 2023, and repayment of borrowing from our credit facility in the third quarter of fiscal 2023.

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Interest Expense

Interest expense for the three months ended March 30, 2024 was $0.5 million, compared to $1.7 million for the three months ended April 1, 2023, respectively. The decrease was primarily due to the settlement of our 2025 convertible senior notes in the second quarter of fiscal 2023.

Provision for Income Taxes


	Three Months Ended
(in millions)	March 30, 2024			April 1, 2023			Change
Provision (benefit) for income taxes	$	(0.4)		$	7.8		$	(8.2)
Effective tax rate	0.7		%	35.7		%

The decrease in the provision for income taxes for the three months ended March 30, 2024 is primarily due to reporting a tax benefit on pre-tax book loss for the current period compared to tax expense on pre-tax book income for the three months ended April 1, 2023. The Company estimates that its annual effective tax rate will be close to zero for the current year. Thus, discrete items may have a disproportionate impact on the calculation of the overall effective tax rate.

Equity-method Loss

Equity-method loss for the three months ended April 1, 2023 was $1.0 million. Our equity-method investment was sold in the fourth quarter of fiscal 2023.

Business Outlook

The following represents our business outlook for the second quarter of fiscal 2024.


Income Statement Item						Estimate

Revenues						$135 million to $145 million

Gross margin						53%

Operating expenses						$125 million

Diluted loss per share						$(1.61) to $(1.45)

Liquidity and Capital Resources

Our principal sources of liquidity as of March 30, 2024 consisted of $332.7 million in cash, cash equivalents and short-term investments, of which $191.7 million was held by our U.S. entities. The remaining balance was held by our foreign subsidiaries. Our cash equivalents and short-term investments consisted of government debt securities, which include agency bonds, municipal bonds and U.S. government securities; corporate debt securities, which include asset-backed securities, corporate bonds and Yankee bonds; and money market funds.

Operating Activities

Net cash used in operating activities was $71.8 million during the three months ended March 30, 2024, compared to $13.3 million during the three months ended April 1, 2023. Operating cash flows during the three months ended March 30, 2024 reflect our net loss of $56.5 million, adjustments of $21.1 million for depreciation, amortization, stock-based compensation, equity-method loss, and deferred income taxes, and a net cash outflow of $36.3 million due to changes in our operating assets and liabilities.

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Accounts receivable increased to $32.6 million at March 30, 2024 from $29.3 million at December 30, 2023. The increase in accounts receivable resulted primarily from normal variations in the timing of collections and billings. Our DSO decreased to 28 days at March 30, 2024 from 30 days at December 30, 2023.

Inventory increased to $198.2 million at March 30, 2024 from $194.3 million at December 30, 2023. Our inventory levels will vary based on the availability of supply and the impact of variations between forecasted demand used for purchasing inventory and actual demand. We have invested in building inventory to minimize potential supply disruptions and meet forecasted future demand. Our DOI was 348 days at March 30, 2024 and 407 days at December 30, 2023.

Investing Activities

Net cash provided by investing activities was $81.5 million during the three months ended March 30, 2024, compared to $254.3 million during the three months ended April 1, 2023. The decrease in cash inflows was principally due to a decrease in cash provided by net purchases, sales, and maturities of marketable securities of $190.8 million in the current period.

Financing Activities

Net cash used in financing activities was $45.7 million during the three months ended March 30, 2024, compared to net cash used of $24.5 million during the three months ended April 1, 2023. The increase in cash outflows was principally due to $45.0 million in payments on debt in the current period.

Debt

As of March 30, 2024, we had a $400 million revolving credit facility. We have an option to increase the size of the borrowing capacity of the revolving credit facility by up to the greater of an aggregate of $250 million and 100% of EBITDA, plus an amount that would not cause a secured net leverage ratio to exceed 3.50 to 1.00, subject to certain conditions. As of March 30, 2024, no amounts were outstanding on the revolving credit facility.

Capital Requirements

Our future capital requirements will depend on many factors, including the rate of sales growth, market acceptance of our products, the timing and extent of research and development projects, potential acquisitions of companies or technologies and the expansion of our sales and marketing activities. We believe our existing cash, cash equivalents, investments, and cash generated from operations are sufficient to meet our short-term (i.e., over at least the next twelve months) and long-term capital requirements, although we could be required, or could elect, to seek additional funding prior to that time. We may enter into acquisitions or strategic arrangements in the future which also could require us to seek additional equity or debt financing.

Critical Accounting Estimates

Our critical accounting estimates are described in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section of our Form 10-K for the fiscal year ended December 30, 2023. There have been no material subsequent changes to our critical accounting estimates.

Quantitative and Qualitative Disclosures about Market Risk

Interest Income

Our investment portfolio includes cash, cash equivalents and short-term investments. Our main investment objectives are the preservation of investment capital and the maximization of after-tax returns on our investment portfolio. Our interest income is sensitive to changes in the general level of U.S. interest rates. A 100 basis point decline in yield on our investment portfolio holdings as of March 30, 2024 would decrease our future annual interest income by approximately $2.5 million. We believe that our investment policy, which defines the duration, concentration, and minimum credit quality of the allowable investments, meets our investment objectives.

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Interest Expense

We are exposed to interest rate fluctuations in the normal course of our business, including through our credit facility. The interest rate on the credit facility consists of a variable-rate of interest and an applicable margin. While we have drawn from the credit facility in the past, we have no borrowings as of March 30, 2024. If we borrow from the credit facility in the future, we will again be exposed to interest rate fluctuations.

Foreign currency exchange rate risk

We are exposed to foreign currency exchange rate risk primarily through assets, liabilities and operating expenses of our subsidiaries denominated in currencies other than the U.S. dollar. Our foreign subsidiaries are considered to be extensions of the U.S. parent. The functional currency of the foreign subsidiaries is the U.S. dollar. Accordingly, gains and losses resulting from remeasuring transactions denominated in currencies other than U.S. dollars are recorded in the Condensed Consolidated Statements of Operations. We use foreign currency forward contracts to manage exposure to foreign exchange risk. Gains and losses on foreign currency forward contracts are recognized in earnings in the same period during which the hedged transaction is recognized.

Available Information

Our website address is www.silabs.com. Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are available through the investor relations page of our website free of charge as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission (“SEC”). Our website and the information contained therein or connected thereto are not intended to be incorporated into this Quarterly Report on Form 10-Q.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Information related to quantitative and qualitative disclosures regarding market risk is set forth in Management’s Discussion and Analysis of Financial Condition and Results of Operations under Item 2 above. Such information is incorporated by reference herein.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We have performed an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of our disclosure controls and procedures, as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”). As a result of the material weakness in our internal control over financial reporting described in Item 9A. Controls and Procedures in our Annual Report on Form 10-K for the year ended December 30, 2023 filed with the SEC, our management, including our CEO and CFO, concluded that our disclosure controls and procedures were not effective as of March 30, 2024 to provide reasonable assurance that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms.

Changes in Internal Control over Financial Reporting

There was no change in our internal controls during the fiscal quarter ended March 30, 2024 that materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting, with the exception of ongoing remediation efforts of the aforementioned material weakness.

Remediation

We are currently in the process of designing and implementing appropriate controls for the remediation plan specific to the inventory valuation process. Our remediation efforts are ongoing and include the following:

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•Evaluating and reassessing the design of our inventory valuation methods, including key assumptions used in the determination of the net realizable value of our inventory;

•Refining the critical assumptions to be used in the inventory valuation assessment, including demand forecast information, historical results, market conditions, and aging of inventory;

•Formalizing management's review and assessment of information used in the inventory valuation assessment; and

•Designing and implementing enhanced controls and documentation requirements over the completeness and accuracy of data used in the inventory valuation assessment.

Management believes that the outlined plans will effectively address the deficiency constituting the material weakness, with the remediation efforts, including necessary testing, anticipated to conclude by the end of 2024. However, the exact timing of completion cannot be guaranteed. As the remediation progresses, management may enact additional measures or refine elements of the remediation plan described above as deemed necessary.

Part II. Other Information

Item 1. Legal Proceedings

Information regarding legal proceedings is provided in Note 7, Commitments and Contingencies, to the Condensed Consolidated Financial Statements. Such information is incorporated by reference herein.

Item 1A. Risk Factors

Global Business Risks

We are subject to the cyclical nature of the semiconductor industry, which has been subject to significant fluctuations

The semiconductor industry is highly cyclical and is characterized by constant and rapid technological change, rapid product obsolescence and price erosion, evolving standards, short product life cycles and wide fluctuations in product supply and demand. The industry has experienced significant fluctuations, often connected with, or in anticipation of, maturing product cycles and new product introductions of both semiconductor companies’ and their customers’ products and fluctuations in general economic conditions. Deteriorating general worldwide economic conditions, including reduced economic activity, concerns about credit, interest rates and inflation, increased energy costs, decreased consumer confidence, reduced corporate profits, decreased spending and similar adverse business conditions, would make it very difficult for our customers, our vendors, and us to accurately forecast and plan future business activities and could cause U.S. and foreign businesses to slow spending on our products. Increases in inflation and interest rates can impact demand for our customers’ end products and increase our costs. If our costs become subject to significant inflationary pressures, we may not be able to fully offset such higher costs with increased revenues. We cannot predict the timing, strength, or duration of any economic slowdown or economic recovery. If the economy or markets in which we operate deteriorate, our business, financial condition, and results of operations would likely be materially and adversely affected.

Downturns have been characterized by diminished product demand, production overcapacity, high inventory levels and accelerated erosion of average selling prices. Upturns have been characterized by increased product demand and production capacity constraints created by increased competition for access to third-party foundry, assembly and test capacity. We are dependent on the availability of such capacity to manufacture, assemble and test our products. None of our third-party foundry, assembly or test subcontractors have provided assurances that adequate capacity will be available to us. We believe the semiconductor industry is currently suffering a downturn due in large part to adverse macroeconomic conditions, characterized by a slowdown in overall GDP performance and factory activity in certain regions, higher levels of customer inventory, the impact of tariffs on trade relations, and greater overall uncertainty regarding the economy. This downturn has negatively affected, and may continue to have an adverse effect, on our business and operating results.

Competition within the numerous markets we target may reduce sales of our products and reduce our market share

The markets for semiconductors in general, and for mixed-signal products in particular, are intensely competitive. We expect that the market for our products will continually evolve and will be subject to rapid technological change. For example, new products and disruptive technologies are being developed, and companies with which we compete have implemented artificial intelligence strategies for products and service offerings. This rapid pace of technological change can create opportunities for our competitors and harm our competitiveness in the market if our products do not evolve or

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we are unable to effectively keep up with such changes. In addition, as we target and supply products to numerous markets and applications, we face competition from a relatively large number of competitors. We compete with Broadcom, Espressif, Infineon, MediaTek, Microchip, Nordic Semiconductor, NXP, Qualcomm, Renesas, STMicroelectronics, Synaptics, Telink, Texas Instruments and others. We expect to face competition in the future from our current competitors, other manufacturers and designers of semiconductors, and start-up semiconductor design companies. As the markets for communications products grow, we also may face competition from traditional communications device companies. These companies may enter the mixed-signal semiconductor market by introducing their own products or by entering into strategic relationships with or acquiring other existing providers of semiconductor products. In addition, large companies may restructure their operations to create separate companies or may acquire new businesses that are focused on providing the types of products we produce or acquire our customers.

We may be the victim of business disruptions and security breaches, including cyber-attacks, which could lead to liability or could damage our reputation and financial results

Information technology system and/or network disruptions, regardless of the cause, but including acts of sabotage, error, or other actions, could harm the company’s operations. Failure to effectively prevent, detect, and recover from security breaches, including cyber-attacks, could result in the misuse of company assets, disruption to the company, diversion of management resources, regulatory inquiries, legal claims or proceedings, reputational damage, loss of sales and other costs to the company. We routinely face attacks that attempt to breach our security protocols, gain access to or disrupt our computerized systems or steal proprietary company, customer, partner or employee information. These attacks are sometimes successful. These attacks may be due to security breaches, employee error, theft, malfeasance, phish

SEC Form 10-Q filed by Silicon Laboratories Inc.