Connection Is at the Heart of Everything We Do
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ANNUAL REPORT 2020 Connection is at the heart of everything we do. To Our Shareholders Silicon Labs thrived in 2020 despite a tumultuous In 2020, the market embraced Silicon Labs’ expand- macro environment that impacted both supply and ing portfolio of Bluetooth Low Energy solutions. Our demand across our industry. We increased our ability Bluetooth revenue grew 23 percent and design win to support customers, develop products, and collab- expected lifetime revenue grew 58 percent for the orate across global sites, and did so with incredible year. We expect accelerating growth rates for dedication and focus throughout the year. Our global Bluetooth in 2021. team rallied around the company’s vision and values In April, we expanded the company's wireless portfo- to uplift and support one another, our partners, cus- lio with the acquisition of Redpine Signals, a leader in tomers, and the communities we live in. Ultimately, we low-power Wi-Fi connectivity solutions. The Red- closed out the year with numerous industry-leading pine acquisition brought a culturally aligned team of achievements and innovations that helped our world approximately 200 employees in Hyderabad, which is stay connected. one of the most talent-rich locations in India. We plan Total revenue for 2020 was a record $887 million, an to continue to grow this site to scale our R&D efforts increase of 6 percent from 2019, with growth both in more efficiently across the board, from software and IoT and Infrastructure and Automotive. IoT wireless silicon to the cloud. growth led the way and our Infrastructure and Auto- We are leading the way in IoT security with Secure motive business also flourished, propelled by strong Vault, which was awarded a 2020 LEAP Awards gold economic activity in the data center, solar energy, and medal for secure connectivity. Secure Vault products electric vehicle markets. were also the first wireless SoCs and modules to earn We had record design win expected lifetime reve- PSA Level 2 security certification. nue in 2020 at $2.5 billion, which was a 10 percent Infrastructure and Automotive revenue was $373 increase from 2019. We ended the year with the million, up 7 percent from 2019. Our isolation products largest opportunity funnel in our history at $15 billion, saw strong growth in 2020 and timing revenue was with IoT making up 65 percent of the funnel at approx- slightly up despite 5G delays and a government-im- imately $10 billion. posed shipment ban on our largest Timing customer. We believe our increasing demand trends are durable Our expanded timing portfolio which addresses the and the result of an acceleration of the digital trans- wireless infrastructure, industrial, data center and formation of our economy by several years, mean- automotive markets, now represents approximately ing there will be a greater need for semiconductors 50 percent of our overall timing revenue, up from 40 going forward. We see clear evidence of accelerating percent in 2019, and we expect the trend to continue demand in our 2021 bookings, especially in the smart into 2021. The success of this strategy combined with home, portable medical, retail, industrial automation, accelerating bandwidth demands is reflected in our solar energy, and electric vehicle markets. Timing revenue and record design wins. IoT revenue grew 5 percent from 2019. Wireless We have established ourselves as a leading provider continues to be our fastest growing product category of digital isolation technology for the data center, and represents two thirds of total IoT revenue. As IoT solar, and electric vehicle markets. Our isolation prod- continues to evolve, we see increased traction with ucts continue to replace traditional optocouplers and Bluetooth® and Wi-Fi® in addition to the already ramp- outperform competing digital isolators, which resulted ing proprietary, 15.4, and Z-Wave protocols. in strong isolation revenue growth. In 2020, we delivered GAAP gross margins of 59 In 2020, we received numerous industry awards, under- percent and non-GAAP gross margins of 60 percent. scoring our commitment to technology innovation, our GAAP operating margin was 4 percent of revenue workplace environment, and our communities. Awards in 2020, while non-GAAP operating margin was 17 included recognition for leadership in wireless con- percent. GAAP diluted earnings per share declined nectivity, IoT security, community engagement, and 35 percent to $0.28. Non-GAAP diluted earnings per continuing to be a great place to work. share declined 7 percent from 2019 to $3.01. We had We believe we are uniquely positioned with the full year operating cash flow of $136 million and ended broadest portfolio of IoT wireless products and strong the year with $730 million in cash, cash equivalents isolation and timing solutions. We also believe the and investments. During fiscal 2020, we retired increasing demand trends we experienced in 2020 are approximately $259 million of our 2022 convertible durable as a result of the acceleration of the digital notes and issued a redemption notice in the first transformation of our economy by several years. quarter of 2021 to fully redeem the remaining balance Going forward, this means there will be a greater need of $141 million. We expect to complete the redemption for semiconductors, and we have seen clear evidence process by the end of March 2021. of accelerating demand in our 2021 bookings to-date. 2020 was also a defining year for equity and social 2020 was filled with many challenges and also signifi- justice, ideals embedded in Silicon Labs’ culture. cant achievements. Our business is stronger than ever During the year we launched a variety of new diversity, with sustained secular market growth drivers fueling equity, and inclusion (DEI) initiatives focused on build- our increasing momentum in 2021 and beyond. ing a strong foundation and making Silicon Labs a great place to work for everyone. We have formalized We appreciate your investment in Silicon Labs. a set of corporate DEI goals as part of our executive bonus metrics, and our leadership team is fully com- mitted and accountable for driving long-term change. In 2020, we disclosed additional information around Silicon Labs’ environmental, social and governance (ESG) efforts, including energy and water use, air emissions, water waste, and work-related safety statistics. We will be expanding our disclosure efforts in 2021, continuing our commitment to support our environment and the communities in which we live. Nav Sooch Tyson Tuttle Founder and President and Chairman Chief Executive Officer Revenue in Millions FY16 FY17 FY18 FY19 FY20 IoT $315 $395 $464 $488 $514 Infrastructure & Automotive 383 374 404 349 373 Total $698 $769 $868 $838 $887 Silicon Labs 2020 Annual Report | 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ፤ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended January 2, 2021 or អ 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 (I.R.S. 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