SILICON LABORATORIES INC.

Previous wording

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 2026 will have 52 weeks. Fiscal 2025 had 53 weeks with the extra week occurring in the first quarter of the year. Our first quarter of fiscal 2026 ended April 4, 2026 and our first quarter of fiscal 2025 ended April 5, 2025.

Current wording

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 2026 will have 52 weeks. Fiscal 2025 had 53 weeks with the extra week occurring in the first quarter of the year. Our second quarter of fiscal 2026 ended July 4, 2026 and our second quarter of fiscal 2025 ended July 5, 2025.

Previous wording

In connection with the proposed Merger, for the three months ended April 4, 2026 we have incurred $11.2 million of costs, and expect to continue to incur financial advisory, legal, accounting, and other professional fees prior to the completion of the Merger, which could be significant.

Current wording

In connection with the proposed Merger, for the three and six months ended July 4, 2026 we have incurred $9.6 million and $20.8 million of costs, respectively, and expect to continue to incur financial advisory, legal, accounting, and other related costs prior to the completion of the Merger, which could be significant.

Previous wording

The global economic environment has experienced inflationary pressure, high interest rates, and geopolitical tensions. There continues to be uncertainty regarding international trade relations and trade policy, including those related to tariffs. The situation concerning the imposition of additional tariffs and trade restrictions by the U.S. and other jurisdictions continues to evolve, and we cannot be certain of the outcome, which could adversely impact demand for our products, costs, customers, suppliers, and general economic conditions. Continued geopolitical instability, including the ongoing war in Ukraine and the war in Iran and other conflicts in the Middle East, volatility in energy markets and recent increases in oil prices driven by geopolitical conflicts, the risk of inflation, slower GDP growth, or recession, and the weakening U.S. dollar, have added to the uncertainty. The extent of the impact of the macroeconomic and geopolitical environment on our operational and financial performance will depend on future developments, which are uncertain, but could materially affect our business, results of operations, access to sources of liquidity, and financial condition. The extent of the impact of macroeconomic conditions on our operational and financial performance will depend on future developments, their 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. See the section entitled “Risk Factors” in Part II, Item 1A of the Form 10-Q for further discussion.

Current wording

The global economic environment has experienced inflationary pressure, high interest rates, and geopolitical tensions. There continues to be uncertainty regarding international trade relations and trade policy, including those related to tariffs. The situation concerning the imposition of additional tariffs and trade restrictions by the U.S. and other jurisdictions continues to evolve, and we cannot be certain of the outcome, which could adversely impact demand for our products, costs, customers, suppliers, and general economic conditions. Continued geopolitical instability, including the ongoing war in Ukraine and the war in Iran and other conflicts in the Middle East, volatility in energy markets and recent increases in oil prices driven by geopolitical conflicts, the risk of inflation, slower GDP growth, or recession, and variations in the relative strength of the U.S. dollar, have added to the uncertainty. The extent of the impact of the macroeconomic and geopolitical environment on our operational and financial performance will depend on future developments, their 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, but could materially affect our business, results of operations, access to sources of liquidity, and financial condition. See the section entitled “Risk Factors” in Part II, Item 1A of the Form 10-Q for further discussion.

Previous wording

Revenues increased $35.8 million in the recent quarter compared to the first quarter of fiscal 2025 due to increased revenues from our Industrial & Commercial products and our Home & Life products. Gross profit increased $29.2 million during the same period primarily as a result of the increase in revenues. Gross margin increased to 59.5% in the recent quarter compared to 55.0% in the first quarter of fiscal 2025 as our indirect and overhead expenses decreased as a percentage of revenues. Operating expenses increased by $14.2 million in the recent quarter compared to the first quarter of fiscal 2025 primarily due to costs related to the Merger. Operating loss in the recent quarter was $17.1 million compared to operating loss of $32.1 million in the first quarter of fiscal 2025. Refer to “Results of Operations” below for further discussion.

Current wording

Revenues increased $35.3 million in the recent quarter compared to the second quarter of fiscal 2025 due to increased revenues from our Industrial & Commercial products and our Home & Life products. Gross profit increased $32.6 million during the same period primarily as a result of the increase in revenues. Gross margin increased to 61.6% in the recent quarter compared to 56.1% in the second quarter of fiscal 2025 as our indirect and overhead expenses decreased as a percentage of revenues. Operating expenses increased by $20.4 million in the recent quarter compared to the second quarter of fiscal 2025 primarily due to higher personnel-related costs and costs related to the Merger. Operating loss in the recent quarter was $10.7 million compared to operating loss of $22.9 million in the second quarter of fiscal 2025. Refer to “Results of Operations” below for further discussion.

Previous wording

We ended the first quarter of fiscal 2026 with $438.9 million in cash, cash equivalents, and short-term investments. Net cash provided by operating activities was $4.9 million during the current year three-month period. Accounts receivable were $77.1 million at April 4, 2026, representing 33 days sales outstanding (“DSO”). Inventory was $103.2 million at April 4, 2026, representing 107 days of inventory (“DOI”).

Current wording

We ended the second quarter of fiscal 2026 with $397.2 million in cash, cash equivalents, and short-term investments. Net cash used in operating activities was $9.6 million during the current year six-month period. Accounts receivable were $79.8 million at July 4, 2026, representing 31 days sales outstanding (“DSO”). Inventory was $123.3 million at July 4, 2026, representing 127 days of inventory (“DOI”).

Previous wording

During the three months ended April 4, 2026, 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 April 4, 2026.

Current wording

During the six months ended July 4, 2026, 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 six months ended July 4, 2026.

Previous wording

The percentage of our revenues derived from outside of the United States was 92% during the three months ended April 4, 2026. 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.

Current wording

The percentage of our revenues derived from outside of the United States was 90% during the six months ended July 4, 2026. 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.

Previous wording

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.

Current wording

Selling, General and Administrative. Selling, general and administrative expense consists primarily of personnel-related expenses, including stock-based compensation, as well as costs incurred due to the Merger, 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.

Previous wording

The increase in revenues in the recent three-month period was due to increased revenues of $32.0 million from our Industrial & Commercial products and increased revenues of $3.8 million from our Home & Life products. Revenues increased in the recent three-month periods as a result of increases in unit volumes of our products relative to the prior year. 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.

Current wording

The increase in revenues in the recent three-month period was due to increased revenues of $25.2 million from our Industrial & Commercial products and increased revenues of $10.1 million from our Home & Life products. The increase in revenues in the recent six-month period was due to increased revenues of $57.1 million from our Industrial & Commercial products and increased revenues of $14.0 million from our Home & Life products. Revenues increased in the recent three and six-month periods as a result of increases in unit volumes of our products relative to the prior year. 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.

Previous wording

Gross profit increased during the recent three-month period primarily as a result of increases in revenues in the periods. Gross margin increased as our indirect and overhead expenses decreased as a percentage of revenues in the recent three-month period as a result of the increase in revenues.

Current wording

Gross profit increased during the recent three and six-month period primarily as a result of increases in revenues in the periods. Gross margin increased as our indirect and overhead expenses decreased as a percentage of revenues in the recent three and six-month period as a result of the increase in revenues. Increased product demand and production capacity constraints may affect the costs of our products, and the prices we pay for inventory may increase in future periods which could reduce our gross margins.

Previous wording

Research and development expense in the recent three-month period increased, with increases of $1.7 million for new product introduction costs, $1.0 million from lower government incentives, and $0.6 million for IT-related costs, partially offset by a decrease of $3.1 million for amortization of intangible assets.

Current wording

Research and development expense in the recent three-month period increased, with increases of $3.3 million from costs incurred due to the Merger, $2.7 million from personnel-related costs, and $1.0 million from lower government incentives. Research and development expense in the recent six-month period increased, with increases of $3.3 million from costs incurred due to the Merger, $2.8 million from personnel-related costs, $2.1 million for new product introduction costs, $2.0 million from lower government incentives, and $0.8 million for IT-related costs, partially offset by a decrease of $4.2 million for amortization of intangible assets.

Previous wording

The increase in selling, general and administrative expense in the recent three-month period was primarily due to $11.2 million from costs incurred due to the Merger, and a $2.9 million increase in personnel-related costs.

Current wording

The increase in selling, general and administrative expense in the recent three-month period was primarily due to a $6.4 million increase in personnel-related costs and $6.3 million from costs incurred due to the Merger. The increase in selling, general and administrative expense in the recent six-month period was primarily due to $17.5 million from costs incurred due to the Merger, and a $9.2 million increase in personnel-related costs.

Previous wording

Interest income and other, net for the three months ended April 4, 2026 was $3.6 million, compared to $3.8 million for the three months ended April 5, 2025.

Current wording

Interest income and other, net for the three and six months ended July 4, 2026 was $2.5 million and $6.1 million, respectively, compared to $3.8 million and $7.6 million, respectively, for the three and six months ended July 5, 2025.

Previous wording

Interest expense for the three months ended April 4, 2026 was $0.2 million, compared to $0.3 million for the three months ended April 5, 2025.

Current wording

Interest expense for the three and six months ended July 4, 2026 was $0.3 million and $0.5 million, respectively, compared to $0.3 million and $0.5 million, respectively, for the three and six months ended July 5, 2025.

Previous wording

The decrease in the effective tax rate for the three months ended April 4, 2026 is primarily due to a decrease in pre-tax book loss, as the impact of permanent items is relatively greater when the pre-tax loss is smaller.

Current wording

The decrease in the effective tax rate for the three and six months ended July 4, 2026 is primarily due to a decrease in pre-tax book loss, as the impact of permanent items is relatively greater when the pre-tax loss is smaller.

Previous wording

Our principal sources of liquidity as of April 4, 2026 consisted of $438.9 million in cash, cash equivalents and short-term investments, of which $250.3 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 U.S. government securities; time deposits; and money market funds.

Current wording

Our principal sources of liquidity as of July 4, 2026 consisted of $397.2 million in cash, cash equivalents and short-term investments, of which $243.8 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 U.S. government securities and money market funds.

Previous wording

Net cash provided by operating activities was $4.9 million during the three months ended April 4, 2026, compared to net cash provided of $48.1 million during the three months ended April 5, 2025. Operating cash flows during the three months ended April 4, 2026 reflect our net loss of $15.9 million, adjustments of $30.6 million for depreciation, amortization, stock-based compensation, and deferred income taxes, and a net cash outflow of $9.7 million due to changes in our operating assets and liabilities.

Current wording

Net cash used in operating activities was $9.6 million during the six months ended July 4, 2026, compared to net cash provided of $53.0 million during the six months ended July 5, 2025. Operating cash flows during the six months ended July 4, 2026 reflect our net loss of $26.5 million, adjustments of $65.1 million for depreciation, amortization, stock-based compensation, and deferred income taxes, and a net cash outflow of $48.2 million due to changes in our operating assets and liabilities.

Previous wording

Accounts receivable increased to $77.1 million at April 4, 2026 from $64.5 million at January 3, 2026. The increase in accounts receivable resulted primarily from normal variations in the timing of collections and billings. Our DSO was 33 days at April 4, 2026 and 28 days at January 3, 2026.

Current wording

Accounts receivable increased to $79.8 million at July 4, 2026 from $64.5 million at January 3, 2026. The increase in accounts receivable resulted primarily from normal variations in the timing of collections and billings. Our DSO was 31 days at July 4, 2026 and 28 days at January 3, 2026.

Previous wording

Inventory increased to $103.2 million at April 4, 2026 from $95.6 million at January 3, 2026. 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. Our DOI was 107 days at April 4, 2026 and 113 days at January 3, 2026.

Current wording

Inventory increased to $123.3 million at July 4, 2026 from $95.6 million at January 3, 2026. Inventory has increased in order to minimize potential supply disruptions and meet forecasted future demand. 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. Our DOI was 127 days at July 4, 2026 and 113 days at January 3, 2026.

Previous wording

Net cash provided by investing activities was $14.9 million during the three months ended April 4, 2026, compared to net cash used of $3.9 million during the three months ended April 5, 2025. The increase in cash inflows was principally due to an increase in cash provided by net purchases, sales, and maturities of marketable securities of $22.5 million and the receipt of $1.3 million of proceeds from capital-related government incentives in the current period. Purchases of property and equipment increased $5.0 million during the three months ended April 4, 2026 compared to the three months ended April 5, 2025.

Current wording

Net cash provided by investing activities was $27.2 million during the six months ended July 4, 2026, compared to net cash used of $14.1 million during the six months ended July 5, 2025. The increase in cash inflows was principally due to cash proceeds from maturities of marketable securities of $44.1 million compared to a net cash outflow of $0.5 million from purchases, sales, and maturities of marketable securities in the prior year, and the receipt of $5.3 million of proceeds from capital-related government incentives in the current period. Purchases of property and equipment increased $8.6 million during the six months ended July 4, 2026 compared to the six months ended July 5, 2025.

Previous wording

Our investment portfolio includes cash, cash equivalents and short-term investments. Our main investment objective is the preservation of investment capital. 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 April 4, 2026 would decrease our future annual interest income by approximately $3.4 million. We believe that our investment policy, which defines the duration, concentration, and minimum credit quality of the allowable investments, meets our investment objectives.

Current wording

Our investment portfolio includes cash, cash equivalents and short-term investments. Our main investment objective is the preservation of investment capital. 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 July 4, 2026 would decrease our future annual interest income by approximately $2.7 million. We believe that our investment policy, which defines the duration, concentration, and minimum credit quality of the allowable investments, meets our investment objectives.