SILICON LABORATORIES INC. [SLAB] Filings

10-Q 1 slab-20210930x10q.htm 10-Q

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 October 2, 2021

☐	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 19, 2021, 40,187,246 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 October 2, 2021 and January 2, 2021	3

	Condensed Consolidated Statements of Income for the three and nine months ended October 2, 2021 and October 3, 2020	4

	Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended October 2, 2021 and October 3, 2020	5

	Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three and nine months ended October 2, 2021 and October 3, 2020	6

	Condensed Consolidated Statements of Cash Flows for the nine months ended October 2, 2021 and October 3, 2020	7

	Notes to Condensed Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	30

Item 4.	Controls and Procedures	30

Part II. Other Information

Item 1.	Legal Proceedings	30

Item 1A.	Risk Factors	30

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	45

Item 3.	Defaults Upon Senior Securities	45

Item 4.	Mine Safety Disclosures	45

Item 5.	Other Information	45

Item 6.	Exhibits	46

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)


	October 2,		January 2,
	2021		2021
Assets
Current assets:
Cash and cash equivalents	$	1,362,412	$	202,720
Short-term investments		1,364,095		521,963
Accounts receivable, net		72,596		95,169
Inventories		59,114		47,861
Prepaid expenses and other current assets		61,936		87,103
Current assets of discontinued operations		—		21,005
Total current assets		2,920,153		975,821
Property and equipment, net		143,340		135,803
Goodwill		376,389		376,389
Other intangible assets, net		129,512		163,483
Other assets, net		70,108		76,675
Non-current assets of discontinued operations		—		265,316
Total assets	$	3,639,502	$	1,993,487
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	57,975	$	54,949
Current portion of convertible debt, net		—		134,480
Deferred revenue and returns liability		11,329		12,986
Other current liabilities		389,071		81,650
Current liabilities of discontinued operations		—		433
Total current liabilities		458,375		284,498
Convertible debt, net		445,110		428,945
Other non-current liabilities		88,434		79,752
Non-current liabilities of discontinued operations		—		451
Total liabilities		991,919		793,646
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; 40,547 and 43,925 shares issued and outstanding at October 2, 2021 and January 2, 2021, respectively		4		4
Additional paid-in capital		—		204,359
Retained earnings		2,648,190		993,664
Accumulated other comprehensive income (loss)		(611)		1,814
Total stockholders' equity		2,647,583		1,199,841
Total liabilities and stockholders’ equity	$	3,639,502	$	1,993,487

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

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Silicon Laboratories Inc.

Condensed Consolidated Statements of Income

(In thousands, except per share data)

(Unaudited)


	Three Months Ended				Nine Months Ended
	October 2,		October 3,		October 2,		October 3,
	2021		2020		2021		2020
Revenues	$	184,831	$	132,731	$	512,180	$	365,099
Cost of revenues		75,322		57,247		214,619		154,189
Gross profit		109,509		75,484		297,561		210,910
Operating expenses:
Research and development		72,656		58,929		201,503		174,631
Selling, general and administrative		46,128		40,154		131,535		124,956
Operating expenses		118,784		99,083		333,038		299,587
Operating loss		(9,275)		(23,599)		(35,477)		(88,677)
Other income (expense):
Interest income and other, net		5,516		2,044		9,038		8,562
Interest expense		(6,595)		(8,604)		(24,405)		(25,923)
Loss from continuing operations before income taxes		(10,354)		(30,159)		(50,844)		(106,038)
Provision (benefit) for income taxes		9,386		(3,457)		12,543		(11,900)
Loss from continuing operations		(19,740)		(26,702)		(63,387)		(94,138)
Income from discontinued operations, net of income taxes		2,106,796		29,864		2,183,884		97,721

Net income	$	2,087,056	$	3,162	$	2,120,497	$	3,583

Basic earnings (loss) per share:
Continuing operations	$	(0.45)	$	(0.61)	$	(1.44)	$	(2.15)
Net income	$	48.11	$	0.07	$	48.08	$	0.08

Diluted earnings (loss) per share:
Continuing operations	$	(0.45)	$	(0.61)	$	(1.44)	$	(2.15)
Net income	$	46.76	$	0.07	$	46.71	$	0.08

Weighted-average common shares outstanding:
Basic		43,385		43,815		44,103		43,737
Diluted		44,634		44,328		45,394		44,254

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				Nine Months Ended
	October 2,		October 3,		October 2,		October 3,
	2021		2020		2021		2020
Net income	$	2,087,056	$	3,162	$	2,120,497	$	3,583
Other comprehensive income (loss), before tax
Net changes to available-for-sale securities
Unrealized gains (losses) arising during the period		(492)		(760)		(1,892)		1,839
Reclassification for (gains) losses included in net income		25		(253)		(372)		(475)

Net changes to cash flow hedges
Unrealized losses arising during the period		(246)		—		(516)		(652)
Reclassification for (gains) losses included in net income		30		62		(290)		825

Other comprehensive income (loss), before tax		(683)		(951)		(3,070)		1,537

Provision (benefit) for income taxes		(143)		(200)		(645)		323

Other comprehensive income (loss)		(540)		(751)		(2,425)		1,214

Comprehensive income	$	2,086,516	$	2,411	$	2,118,072	$	4,797

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

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Silicon Laboratories Inc.

Condensed Consolidated Statements of Changes in Stockholders’ Equity

(In thousands)

(Unaudited)


				Additional				Accumulated Other		Total
		Common		Paid-In		Retained		Comprehensive		Stockholders’
Three Months Ended October 2, 2021	Shares	Stock		Capital		Earnings		Income (Loss)		Equity
Balance as of July 3, 2021	44,764	$	4	$	200,716	$	1,027,105	$	(71)	$	1,227,754
Net income	—		—		—		2,087,056		—		2,087,056
Other comprehensive loss	—		—		—		—		(540)		(540)
Stock issuances, net of shares withheld for taxes	30		—		(1,430)		—		—		(1,430)
Repurchases of common stock	(4,247)		—		(210,204)		(465,971)		—		(676,175)
Stock-based compensation	—		—		10,918		—		—		10,918
Balance as of October 2, 2021	40,547	$	4	$	—	$	2,648,190	$	(611)	$	2,647,583


				Additional				Accumulated Other		Total
		Common		Paid-In		Retained		Comprehensive		Stockholders’
Three Months Ended October 3, 2020	Shares	Stock		Capital		Earnings		Income (Loss)		Equity
Balance as of July 4, 2020	43,796	$	4	$	173,477	$	981,554	$	2,611	$	1,157,646
Net income	—		—		—		3,162		—		3,162
Other comprehensive loss	—		—		—		—		(751)		(751)
Stock issuances, net of shares withheld for taxes	31		—		(408)		—		—		(408)
Stock-based compensation	—		—		14,538		—		—		14,538
Convertible debt activity	—		—		(4,136)		—		—		(4,136)
Balance as of October 3, 2020	43,827	$	4	$	183,471	$	984,716	$	1,860	$	1,170,051


				Additional				Accumulated Other		Total
		Common		Paid-In		Retained		Comprehensive		Stockholders’
Nine Months Ended October 2, 2021	Shares	Stock		Capital		Earnings		Income (Loss)		Equity
Balance as of January 2, 2021	43,925	$	4	$	204,359	$	993,664	$	1,814	$	1,199,841
Net income	—		—		—		2,120,497		—		2,120,497
Other comprehensive loss	—		—		—		—		(2,425)		(2,425)
Stock issuances, net of shares withheld for taxes	484		—		(12,774)		—		—		(12,774)
Repurchases of common stock	(4,390)		—		(229,187)		(465,971)		—		(695,158)
Stock-based compensation	—		—		38,350		—		—		38,350
Convertible debt activity	528		—		(748)		—		—		(748)
Balance as of October 2, 2021	40,547	$	4	$	—	$	2,648,190	$	(611)	$	2,647,583


				Additional				Accumulated Other		Total
		Common		Paid-In		Retained		Comprehensive		Stockholders’
Nine Months Ended October 3, 2020	Shares	Stock		Capital		Earnings		Income (Loss)		Equity
Balance as of December 28, 2019	43,496	$	4	$	133,793	$	980,608	$	646	$	1,115,051
Cumulative effect of adoption of accounting standard	—		—		—		525		—		525
Net income	—		—		—		3,583		—		3,583
Other comprehensive income	—		—		—		—		1,214		1,214
Stock issuances, net of shares withheld for taxes	541		—		(9,407)		—		—		(9,407)
Repurchases of common stock	(210)		—		(16,287)		—		—		(16,287)
Stock-based compensation	—		—		44,337		—		—		44,337
Convertible debt activity	—		—		31,035		—		—		31,035
Balance as of October 3, 2020	43,827	$	4	$	183,471	$	984,716	$	1,860	$	1,170,051

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)


	Nine Months Ended
	October 2,		October 3,
	2021		2020
Operating Activities
Net income	$	2,120,497	$	3,583
Adjustments to reconcile net income to cash provided by operating activities of continuing operations:
Income from discontinued operations, net of income taxes		(2,183,884)		(97,721)
Depreciation of property and equipment		12,925		11,789
Amortization of intangible assets and other assets		33,971		31,118
Amortization of debt discount and debt issuance costs		17,278		14,946
Loss on extinguishment of convertible debt		3,370		3,977
Stock-based compensation expense		36,916		36,252
Deferred income taxes		(3,132)		(7,382)
Changes in operating assets and liabilities:
Accounts receivable		22,573		(2,902)
Inventories		(11,320)		12,499
Prepaid expenses and other assets		27,598		(5,602)
Accounts payable		(4,522)		6,103
Other current liabilities and income taxes		(10,981)		3,608
Deferred revenue and returns liability		(1,657)		2,643
Other non-current liabilities		(11,388)		7,525
Net cash provided by operating activities of continuing operations		48,244		20,436

Investing Activities
Purchases of marketable securities		(1,212,572)		(418,227)
Sales and maturities of marketable securities		368,416		427,235
Purchases of property and equipment		(19,468)		(13,589)
Purchases of other assets		(578)		(920)
Acquisition of business, net of cash acquired		—		(316,809)
Net cash used in investing activities of continuing operations		(864,202)		(322,310)

Financing Activities
Proceeds from issuance of debt		—		845,000
Payments on debt		(140,572)		(618,729)
Repurchases of common stock		(688,373)		(16,287)
Payment of taxes withheld for vested stock awards		(21,393)		(17,562)
Proceeds from the issuance of common stock		8,619		8,155
Net cash provided by (used in) financing activities of continuing operations		(841,719)		200,577

Discontinued Operations
Operating activities		69,685		106,527
Investing activities		2,747,684		(2,018)
Net cash provided by discontinued operations		2,817,369		104,509

Increase in cash and cash equivalents		1,159,692		3,212
Cash and cash equivalents at beginning of period		202,720		227,146
Cash and cash equivalents at end of period	$	1,362,412	$	230,358

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 Condensed Consolidated Financial Statements included herein are unaudited; however, they contain all normal recurring accruals and adjustments which, in the opinion of management, are necessary to present fairly the condensed consolidated financial position of Silicon Laboratories Inc. and its subsidiaries (collectively, the “Company”) at October 2, 2021 and January 2, 2021, the condensed consolidated results of its operations for the three and nine months ended October 2, 2021 and October 3, 2020, the Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended October 2, 2021 and October 3, 2020, the Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three and nine months ended October 2, 2021 and October 3, 2020, and the Condensed Consolidated Statements of Cash Flows for the nine months ended October 2, 2021 and October 3, 2020. All intercompany balances and transactions have been eliminated in consolidation. The condensed consolidated results of operations for the three and nine months ended October 2, 2021 are not necessarily indicative of the results to be expected for the full year.

The accompanying unaudited Condensed Consolidated Financial Statements do not include certain footnotes and financial presentations normally required under U.S. generally accepted accounting principles (GAAP). Therefore, these Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and notes thereto for the year ended January 2, 2021, included in the Company’s Form 10-K filed with the Securities and Exchange Commission (SEC) on February 3, 2021.

The Company prepares financial statements on a 52- or 53-week fiscal year that ends on the Saturday closest to December 31. Fiscal 2021 will have 52 weeks. Fiscal 2020 had 53 weeks with the extra week occurring in the first quarter of the year. 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.

Revenue Recognition

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

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

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Silicon Laboratories Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

Recent Accounting Pronouncements

In August 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging— Contracts in Entity’s Own Equity (Subtopic 815-40). This ASU simplifies the accounting for certain convertible instruments, amends the guidance on derivative scope exceptions for contracts in an entity’s own equity and requires the use of the if-converted method for calculating diluted earnings per share. The ASU removes separation models for convertible debt with a cash conversion feature. Such convertible instruments will be accounted for as a single liability measured at amortized cost, as long as no other features require bifurcation and recognition as derivatives. This ASU is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years, using one of two retrospective transition methods. Early adoption is permitted for fiscal periods beginning after December 15, 2020. The Company expects the primary impacts of this new standard will be to increase the carrying value of its convertible debt by approximately $78.5 million, with an offsetting reduction in additional paid-in capital, and reduce its reported interest expense. In addition, should the Company be required to use the if-converted method for calculating diluted earnings per share, the number of shares used in such calculation could potentially increase. The Company will continue to evaluate the effect that the adoption of this ASU will have on its financial statements.

2. Discontinued Operations

On April 22, 2021, the Company entered into an Asset Purchase Agreement pursuant to which Skyworks Solutions, Inc. agreed to acquire certain assets, rights, and properties, and assume certain liabilities, comprising the Company’s infrastructure and automotive business for $2.75 billion in cash. The transaction closed on July 26, 2021. The financial results of the infrastructure and automotive business, which are readily distinguishable from other components of the Company, have been presented as discontinued operations in the Condensed Consolidated Financial Statements.

The following table presents the financial results of the infrastructure and automotive business (the “discontinued operations”) in the Company’s condensed consolidated statements of income (in thousands):


	Three Months Ended				Nine Months Ended
	October 2,		October 3,		October 2,		October 3,
	2021		2020		2021		2020
Revenues	$	28,203	$	88,619	$	233,915	$	278,661
Costs of revenues and operating expenses		11,395		55,397		142,312		169,345
		16,808		33,222		91,603		109,316
Gain on sale of discontinued operations		2,423,161		—		2,423,161		—
Income from discontinued operations before income taxes		2,439,969		33,222		2,514,764		109,316
Provision for income taxes		333,173		3,358		330,880		11,595
Income from discontinued operations	$	2,106,796	$	29,864	$	2,183,884	$	97,721

Income from discontinued operations per share:
Basic	$	48.56	$	0.68	$	49.52	$	2.23
Diluted	$	47.20	$	0.67	$	48.11	$	2.21

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Silicon Laboratories Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

The following table summarizes the assets and liabilities of the infrastructure and automotive business (in thousands):


	January 2,
	2021
Assets
Inventories	$	18,801
Prepaid expenses and other current assets		2,204
Goodwill		255,543
Other assets		9,773
Total assets	$	286,321

Liabilities
Other current liabilities	$	433
Other non-current liabilities		451
Total liabilities	$	884

Continuing Involvement

In connection with the closing of the sale, the Company entered into certain ancillary agreements with Skyworks, including a Transition Services Agreement ("TSA"). Through the TSA, the Company will sublease certain premises to Skyworks and provide various temporary support services for three to eighteen months, depending on the service provided. Although the services provided under the TSA will generate continuing cash flows between the Company and Skyworks for the duration of the TSA, the amounts are not expected to be material to the ongoing operations of either entity. In addition, the Company has no contractual ability through the TSA or any other agreement to significantly influence the operating or financial policies of Skyworks. The TSA fees were approximately $2.1 million for the nine months ended October 2, 2021.

3. Earnings (Loss) Per Share

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


	Three Months Ended				Nine Months Ended
	October 2,		October 3,		October 2,		October 3,
	2021		2020		2021		2020
Loss from continuing operations	$	(19,740)	$	(26,702)	$	(63,387)	$	(94,138)

Shares used in computing basic loss per share		43,385		43,815		44,103		43,737

Effect of dilutive securities:
Stock-based awards and convertible debt		—		—		—		—
Shares used in computing diluted loss per share		43,385		43,815		44,103		43,737

Loss per share:
Basic	$	(0.45)	$	(0.61)	$	(1.44)	$	(2.15)
Diluted	$	(0.45)	$	(0.61)	$	(1.44)	$	(2.15)

Diluted shares for the three months ended October 2, 2021 and October 3, 2020 and the nine months ended October 2, 2021 and October 3, 2020 excluded 1.2 million, 0.5 million, 1.3 million and 0.5 million shares, respectively, due to the Company’s loss from continuing operations for the periods.

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Silicon Laboratories Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

The Company intends to settle the principal amount of its convertible senior notes in cash and any excess value in shares in the event of a conversion. Accordingly, shares issuable upon conversion of the principal amount using the treasury stock method have been excluded from the calculation of diluted earnings per share. If the market value of the notes under certain prescribed conditions exceeds the conversion amount, the excess is included in the denominator for the computation of diluted earnings per share using the treasury stock method. For the three months ended October 2, 2021 and October 3, 2020 and the nine months ended October 2, 2021 and October 3, 2020, approximately 0.7 million, 0.1 million, 0.8 million and 0.2 million shares, respectively, were included in the denominator for the calculation of diluted earnings per share from net income and discontinued operations. See Note 8, Debt, to the Condensed Consolidated Financial Statements for additional information.

4. 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 are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

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.

Table of Contents

Silicon Laboratories Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

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 October 2, 2021 Using

Quoted Prices in

Significant Other

Significant

Active Markets for

Observable

Unobservable

Identical Assets

Inputs

Description

(Level 1)

(Level 2)

(Level 3)

Total

Assets:

Cash equivalents: