TechDogs-"Lattice Semiconductor Reports Second Quarter 2023 Results"

Manufacturing Technology

Lattice Semiconductor Reports Second Quarter 2023 Results

By Business Wire

Business Wire
Overall Rating
  • Quarterly revenue growth of 18% compared to Q2 2022 and 3% compared to Q1 2023
  • Gross Margin expands to 69.7% / 70.5% for Q2 2023 on a GAAP / Non-GAAP basis, compared to 68.5% / 69.1%, respectively, for Q2 2022
  • Net Income improves to $0.36 / $0.52 per diluted share for Q2 2023 on a GAAP / Non-GAAP basis, compared to $0.32 / $0.42, respectively, for Q2 2022

* GAAP represents U.S. Generally Accepted Accounting Principles. Non-GAAP represents GAAP excluding the impact of certain activities which the Company's management excludes in analyzing the Company's operating results and in understanding trends in the Company's earnings. Additional information relating to these measures is included below in “Non-GAAP Financial Measures.” For a reconciliation of GAAP to non-GAAP results, see accompanying tables "Reconciliation of U.S. GAAP to Non-GAAP Financial Measures."

HILLSBORO, Ore.--(BUSINESS WIRE)--Lattice Semiconductor Corporation (NASDAQ: LSCC), the low power programmable leader, announced financial results today for the fiscal second quarter ended July 1, 2023.

Jim Anderson, president and CEO, said, "We continued to grow both revenue and profitability in Q2 2023 on a year-over-year basis, with revenue increasing 18%, and net income on a GAAP basis growing 14% and 23% on a non-GAAP basis. We’re driving the largest product portfolio expansion in the Company’s history, which continues to create strong customer momentum. While we’re not immune to macro-economic challenges impacting the industry, we are well positioned for long-term growth in our core markets."

Sherri Luther, CFO, said, "Q2 2023 represented our thirteenth consecutive quarter of sequential growth. We achieved operating profit of 28% on a GAAP basis and 40% on a non-GAAP basis, with gross margin expansion of 120 basis points on a GAAP basis and 140 basis points on a non-GAAP basis compared to Q2 2022. We also achieved free cash flow margin of 35% and continued our share repurchase program for the eleventh consecutive quarter."

Selected Second Quarter 2023 Financial Results and Comparisons (in thousands, except per share data)

GAAP Financial Results (unaudited)

Q2 2023

Q1 2023

Q2 2022

Q/Q

Y/Y

Revenue

$

190,079

$

184,310

$

161,372

3.1%

17.8%

Gross Margin %

69.7

%

69.8

%

68.5

%

(10) bps

120 bps

R&D Expense %

22.1

%

19.5

%

20.8

%

260 bps

130 bps

SG&A Expense %

19.4

%

17.7

%

18.0

%

170 bps

140 bps

Operating Expenses

$

79,491

$

69,467

$

63,699

14.4%

24.8%

Income from Operations

$

53,070

$

59,134

$

46,786

(10.3)%

13.4%

Net Income

$

50,644

$

55,923

$

44,532

(9.4)%

13.7%

Net Income per Share - Basic

$

0.37

$

0.41

$

0.32

$(0.04)

$ 0.05

Net Income per Share - Diluted

$

0.36

$

0.40

$

0.32

$(0.04)

$ 0.04

Non-GAAP* Financial Results (unaudited)

Q2 2023

Q1 2023

Q2 2022

Q/Q

Y/Y

Revenue

$

190,079

$

184,310

$

161,372

3.1%

17.8%

Gross Margin %

70.5

%

70.3

%

69.1

%

20 bps

140 bps

R&D Expense %

18.0

%

16.5

%

17.8

%

150 bps

20 bps

SG&A Expense %

12.5

%

12.8

%

13.1

%

(30) bps

(60) bps

Operating Expenses

$

58,018

$

53,983

$

49,943

7.5%

16.2%

Income from Operations

$

75,968

$

75,641

$

61,553

0.4%

23.4%

Net Income

$

72,509

$

71,772

$

59,124

1.0%

22.6%

Net Income per Share - Basic

$

0.53

$

0.52

$

0.43

$ 0.01

$ 0.10

Net Income per Share - Diluted

$

0.52

$

0.51

$

0.42

$ 0.01

$ 0.10

Second Quarter 2023 Highlights

Record Revenue: Revenue increased 18% in Q2 2023 compared to Q2 2022 and 3% compared to Q1 2023, which represented the thirteenth consecutive quarter of sequential growth.

Profit Growth: Gross margin expanded 120 basis points on a GAAP basis and 140 basis points on a non-GAAP basis compared to Q2 2022, with net income per diluted share increasing 13% on a GAAP basis and 24% on a non-GAAP basis compared to Q2 2022.

Lattice Receives Multiple Industry Awards:

• Named a 2023 Top Workplace in the Technology Industry.
• The Lattice ORAN™ solution stack was named a 2023 Edison Awards™ finalist in the commercial technology category.

• Named a 2023 SEAL Sustainability Innovation Award winner and a 2023 Environmental + Energy Leader Awards winner for Top Product of the Year.

• Won a 2023 Fortress Cyber Security Award from the Business Intelligence Group for Lattice SupplyGuard™ in the Threat Detection category.

May 15, 2023 Analyst and Investor Day: Lattice detailed its large and growing addressable market, its rapid product portfolio expansion and new, higher financial model targets.

Business Outlook - Third Quarter of 2023:

Revenue for the third quarter of 2023 is expected to be between $187 million and $197 million.

Gross margin percentage for the third quarter of 2023 is expected to be 70.5% plus or minus 1% on a non-GAAP basis.

Total operating expenses for the third quarter of 2023 are expected to be between $58 million and $60 million on a non-GAAP basis.

Non-GAAP Financial Measures: In addition to financial measures prepared in accordance with generally accepted accounting principles (GAAP), this earnings release makes reference to non-GAAP financial measures. With respect to the outlook for the third quarter of 2023, certain items that affect GAAP measurement of financial measures for gross margin percentage and total operating expenses are not accessible on a forward-looking basis because such items cannot be reasonably predicted without unreasonable efforts due to the unpredictability of the amounts and timing of events affecting the items we exclude from non-GAAP measures, including certain large and/or unpredictable charges such as stock-based compensation expense; litigation expense outside the ordinary course of business; and restructuring. Consequently, the Company is unable to provide a reasonable estimate of GAAP measurement for non-GAAP gross margin percentage or non-GAAP total operating expenses for second quarter guidance or a corresponding reconciliation to GAAP for the quarter. From a qualitative perspective, the differences between our GAAP measurement of financial measures for gross margin percentage and total operating expenses and our non-GAAP measure of those items will consist of items similar to those described in the financial tables later in this release for such items historically, including, for example and without limitation, certain large and/or unpredictable charges such as stock-based compensation expense; litigation expense outside the ordinary course of business; and restructuring. Additional information regarding the reasons the Company uses non-GAAP measures, a reconciliation of these measures to the most directly comparable GAAP measures, and other information relating to these measures are included below, following the GAAP financial information.

Investor Conference Call / Webcast Details:

Lattice Semiconductor will review the Company's financial results for the fiscal second quarter 2023, and business outlook on Monday, July 31 at 5:00 p.m. Eastern Time. The dial-in number for the live audio call is 1-877-407-3982 or 1-201-493-6780 with conference identification number 13739896. A live webcast of the conference call will also be available on the investor relations section of www.latticesemi.com. The Company's financial guidance will be limited to the comments on its public quarterly earnings call and the public business outlook statements contained in this press release.

Forward-Looking Statements Notice:

The foregoing paragraphs contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, that involve estimates, assumptions, risks and uncertainties. Any statements about our expectations, beliefs, plans, objectives, assumptions or future events or performance are not historical facts and may be forward-looking. Such forward-looking statements include, but are not limited to, statements relating to our rapid product portfolio expansion; accelerating customer momentum; long-term growth in core markets; large and growing addressable market; higher financial model targets; and the statements under the heading “Business Outlook - Third Quarter of 2023.” Other forward-looking statements may be indicated by words such as “will,” “could,” “should,” “would,” “may,” “expect,” “plan,” “project,” “anticipate,” “intend,” “forecast,” “future,” “believe,” “estimate,” “predict,” “propose,” “potential,” “continue” or the negative of these terms or other comparable terminology.

Estimates of future revenue are inherently uncertain due to such factors such as global economic conditions which may affect customer demand, pricing and inflationary pressures, competitive actions, international trade disputes and sanctions, and potential impact of the COVID-19 pandemic. Actual gross margin percentage and operating expenses could vary from the estimates on the basis of, among other things, changes in revenue levels, changes in product pricing and mix, changes in wafer, assembly, test and other costs, variations in manufacturing yields, the failure to sustain operational improvements, and the actual amount of compensation charges due to stock price changes. Actual results may differ materially from our expectations and are subject to risks and uncertainties that relate more broadly to our overall business, including those described in Item 1A in Lattice’s most recent Annual Report on Form 10-K and as may be supplemented from time-to-time in Lattice’s other filings with the Securities and Exchange Commission, all of which are expressly incorporated herein by reference.

Lattice believes these and other risks and uncertainties could cause actual results to differ materially from the forward-looking statements. New risk factors emerge from time to time and it is not possible for Lattice’s management to predict all risk factors. You should not unduly rely on forward-looking statements because actual results could differ materially from those expressed in any forward-looking statements. In addition, any forward-looking statement applies only as of the date on which it is made. The Company does not intend to update or revise any forward-looking statements, whether as a result of events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

Non-GAAP Financial Measures:

Included within this press release and the accompanying tables and notes are certain non-GAAP financial measures that supplement the Company's consolidated financial information prepared in accordance with U.S. GAAP, including non-GAAP gross margin, gross margin percentage, R&D expense, SG&A expense, operating expenses, income from operations, other (expense) income, net, income tax expense, net income, net income per share – basic, and net income per share – diluted. The non-GAAP measures presented exclude charges and adjustments primarily related to stock-based compensation and related payroll tax effects, litigation expense outside the ordinary course of business, amortization of acquired intangible assets, restructuring plans and other charges, and the estimated tax effect of these items, change in tax law and other tax adjustments. These charges and adjustments are a result of periodic or non-core operating activities of the Company. The Company describes these non-GAAP financial measures and reconciles them to the most directly comparable GAAP measures in the tables and notes attached to this press release.

The Company's management believes that these non-GAAP financial measures provide an additional and useful way of viewing aspects of our performance that, when viewed in conjunction with our GAAP results, provide a more comprehensive understanding of the various factors and trends affecting our ongoing financial performance and operating results than GAAP measures alone. Management also uses these non-GAAP measures for strategic and business decision-making, internal budgeting, forecasting, and resource allocation processes and believes that investors should have access to similar data. These non-GAAP measures are included solely for informational and comparative purposes and are not meant as a substitute for GAAP and should be considered together with the consolidated financial information located in the tables attached to this press release.

About Lattice Semiconductor Corporation:

Lattice Semiconductor (NASDAQ: LSCC) is the low power programmable leader. We solve customer problems across the network, from the Edge to the Cloud, in the growing communications, computing, industrial, automotive and consumer markets. Our technology, long-standing relationships, and commitment to world-class support let our customers quickly and easily unleash their innovation to create a smart, secure, and connected world.

For more information about Lattice, please visit www.latticesemi.com. You can also follow us via LinkedIn, Twitter, Facebook, YouTube, WeChat, or Weibo.

Lattice Semiconductor Corporation

Consolidated Statements of Operations

(in thousands, except per share data)

(unaudited)

Three Months Ended

Six Months Ended

July 1,

April 1,

July 2,

July 1,

July 2,

2023

2023

2022

2023

2022

Revenue

$

190,079

$

184,310

$

161,372

$

374,389

$

311,887

Cost of sales

57,518

55,709

50,887

113,227

100,635

Gross margin

132,561

128,601

110,485

261,162

211,252

Operating expenses:

Research and development

41,946

35,989

33,613

77,935

66,168

Selling, general, and administrative

36,788

32,578

29,024

69,366

57,795

Amortization of acquired intangible assets

869

870

870

1,739

2,039

Restructuring

(112

)

30

136

(82

)

190

Acquisition related

56

511

Total operating expenses

79,491

69,467

63,699

148,958

126,703

Income from operations

53,070

59,134

46,786

112,204

84,549

Interest income (expense), net

189

(555

)

(891

)

(366

)

(1,599

)

Other (expense) income, net

(176

)

(95

)

(243

)

(271

)

(265

)

Income before income taxes

53,083

58,484

45,652

111,567

82,685

Income tax expense

2,439

2,561

1,120

5,000

2,075

Net income

$

50,644

$

55,923

$

44,532

$

106,567

$

80,610

Net income per share:

Basic

$

0.37

$

0.41

$

0.32

$

0.77

$

0.59

Diluted

$

0.36

$

0.40

$

0.32

$

0.76

$

0.57

Shares used in per share calculations:

Basic

137,735

137,418

137,424

137,573

137,462

Diluted

139,768

140,101

140,170

139,966

140,657

Lattice Semiconductor Corporation

Condensed Consolidated Balance Sheets

(in thousands)

(unaudited)

July 1,

December 31,

2023

2022

Assets

Current assets:

Cash and cash equivalents

$

103,773

$

145,722

Accounts receivable, net

96,587

94,018

Inventories, net

111,490

110,375

Other current assets

32,762

29,052

Total current assets

344,612

379,167

Property and equipment, net

50,446

47,614

Operating lease right-of-use assets

14,543

17,590

Intangible assets, net

22,790

25,070

Goodwill

315,358

315,358

Other long-term assets

11,322

13,914

$

759,071

$

798,713

Liabilities and Stockholders' Equity

Current liabilities:

Accounts payable

$

41,264

$

42,036

Accrued liabilities

32,877

48,467

Accrued payroll obligations

17,825

36,870

Total current liabilities

91,966

127,373

Long-term debt

43,885

128,752

Long-term operating lease liabilities, net of current portion

10,827

13,618

Other long-term liabilities

37,632

41,807

Total liabilities

184,310

311,550

Stockholders' equity

574,761

487,163

$

759,071

$

798,713

Lattice Semiconductor Corporation

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

Six Months Ended

July 1,

July 2,

2023

2022

Cash flows from operating activities:

Net income

$

106,567

$

80,610

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

Stock-based compensation expense

35,744

27,249

Depreciation and amortization

16,578

14,272

Other non-cash adjustments

3,427

3,445

Net changes in assets and liabilities

(46,858

)

(32,658

)

Net cash provided by (used in) operating activities

115,458

92,918

Cash flows from investing activities:

Capital expenditures

(11,943

)

(8,917

)

Other investing activities

(5,799

)

(5,368

)

Net cash provided by (used in) investing activities

(17,742

)

(14,285

)

Cash flows from financing activities:

Repayment of long-term debt

(85,000

)

(8,750

)

Repurchase of common stock

(20,006

)

(50,161

)

Net cash flows related to stock compensation exercises

(34,439

)

(32,182

)

Net cash provided by (used in) financing activities

(139,445

)

(91,093

)

Effect of exchange rate change on cash

(220

)

(1,228

)

Net increase (decrease) in cash and cash equivalents

(41,949

)

(13,688

)

Beginning cash and cash equivalents

145,722

131,570

Ending cash and cash equivalents

$

103,773

$

117,882

Supplemental disclosure of cash flow information and non-cash investing and financing activities:

Interest paid

$

2,962

$

1,337

Income taxes paid, net of refunds

$

6,837

$

2,355

Operating lease payments

$

4,082

$

3,706

Lattice Semiconductor Corporation

Supplemental Historical Financial Information

(unaudited)

Three Months Ended

July 1,

April 1,

July 2,

2023

2023

2022

Balance Sheet Information

A/R Days Revenue Outstanding (DSO)

46

45

53

Inventory Days (DIO)

177

192

139

Revenue % (by Geography)

Asia

63

%

57

%

73

%

Americas

17

%

23

%

14

%

Europe (incl. Africa)

20

%

20

%

13

%

Revenue % (by End Market) *

Communications and Computing

34

%

36

%

45

%

Industrial and Automotive

61

%

59

%

46

%

Consumer

5

%

5

%

9

%

Revenue $M (by End Market) *

Communications and Computing

$

64.2

$

66.3

$

72.6

Industrial and Automotive

$

115.5

$

108.3

$

74.5

Consumer

$

10.4

$

9.7

$

14.3

Revenue % (by Channel)

Distribution

89

%

88

%

89

%

Direct

11

%

12

%

11

%

* During the first quarter of fiscal 2023, we realigned our end market categories. Prior periods have been reclassified to match current period presentation.

Lattice Semiconductor Corporation

Reconciliation of U.S. GAAP to Non-GAAP Financial Measures

(in thousands, except per share data)

(unaudited)

Three Months Ended

July 1,

April 1,

July 2,

2023

2023

2022

Gross Margin Reconciliation

GAAP Gross margin

$

132,561

$

128,601

$

110,485

Stock-based compensation - gross margin (1)

1,425

1,023

1,011

Non-GAAP Gross margin

$

133,986

$

129,624

$

111,496

Gross Margin % Reconciliation

GAAP Gross margin %

69.7

%

69.8

%

68.5

%

Cumulative effect of non-GAAP Gross Margin adjustments

0.8

%

0.5

%

0.6

%

Non-GAAP Gross margin %

70.5

%

70.3

%

69.1

%

Research and Development Expense % (R&D Expense %) Reconciliation

GAAP R&D Expense %

22.1

%

19.5

%

20.8

%

Stock-based compensation - R&D (1)

(4.1

)%

(3.0

)%

(3.0

)%

Non-GAAP R&D Expense %

18.0

%

16.5

%

17.8

%

Selling, General, and Administrative Expense % (SG&A Expense %) Reconciliation

GAAP SG&A Expense %

19.4

%

17.7

%

18.0

%

Stock-based compensation - SG&A (1)

(6.7

)%

(4.7

)%

(4.9

)%

Litigation expense (2)

(0.2

)%

(0.2

)%

%

Non-GAAP SG&A Expense %

12.5

%

12.8

%

13.1

%

Operating Expenses Reconciliation

GAAP Operating expenses

$

79,491

$

69,467

$

63,699

Stock-based compensation - operations (1)

(20,277

)

(14,296

)

(12,694

)

Litigation expense (2)

(439

)

(288

)

Amortization of acquired intangible assets

(869

)

(870

)

(870

)

Restructuring and other

112

(30

)

(192

)

Non-GAAP Operating expenses

$

58,018

$

53,983

$

49,943

Income from Operations Reconciliation

GAAP Income from operations

$

53,070

$

59,134

$

46,786

Stock-based compensation - gross margin (1)

1,425

1,023

1,011

Stock-based compensation - operations (1)

20,277

14,296

12,694

Litigation expense (2)

439

288

Amortization of acquired intangible assets

869

870

870

Restructuring and other

(112

)

30

192

Non-GAAP Income from operations

$

75,968

$

75,641

$

61,553

Income from Operations % Reconciliation

GAAP Income from operations %

27.9

%

32.1

%

29.0

%

Cumulative effect of non-GAAP Gross Margin and Operating adjustments

12.1

%

8.9

%

9.1

%

Non-GAAP Income from operations %

40.0

%

41.0

%

38.1

%

(1)

The non-GAAP adjustments for Stock-based compensation include related payroll tax expenses.

(2)

Legal expenses associated with the defense of claims that are outside the ordinary course of business that were brought against the Company by Steven A.W. De Jaray, Perienne De Jaray and Darrell R. Oswalde.

Lattice Semiconductor Corporation

Reconciliation of U.S. GAAP to Non-GAAP Financial Measures

(in thousands, except per share data)

(unaudited)

Three Months Ended

July 1,

April 1,

July 2,

2023

2023

2022

Income Tax Expense Reconciliation

GAAP Income tax expense

$

2,439

$

2,561

$

1,120

Estimated tax effect of non-GAAP adjustments

1,372

1,670

175

Change in tax law (3)

(339

)

(1,012

)

Non-GAAP Income tax expense

$

3,472

$

3,219

$

1,295

Net Income Reconciliation

GAAP Net income

$

50,644

$

55,923

$

44,532

Stock-based compensation - gross margin (1)

1,425

1,023

1,011

Stock-based compensation - operations (1)

20,277

14,296

12,694

Litigation expense (2)

439

288

Amortization of acquired intangible assets

869

870

870

Restructuring and other

(112

)

30

192

Estimated tax effect of non-GAAP adjustments

(1,372

)

(1,670

)

(175

)

Change in tax law (3)

339

1,012

Non-GAAP Net income

$

72,509

$

71,772

$

59,124

Net Income Per Share Reconciliation

GAAP Net income per share - basic

$

0.37

$

0.41

$

0.32

Cumulative effect of Non-GAAP adjustments

0.16

0.11

0.11

Non-GAAP Net income per share - basic

$

0.53

$

0.52

$

0.43

GAAP Net income per share - diluted

$

0.36

$

0.40

$

0.32

Cumulative effect of Non-GAAP adjustments

0.16

0.11

0.10

Non-GAAP Net income per share - diluted

$

0.52

$

0.51

$

0.42

Shares used in per share calculations:

Basic

137,735

137,418

137,424

Diluted

139,768

140,101

140,170

(1)

The non-GAAP adjustments for Stock-based compensation include related payroll tax expenses.

(2)

Legal expenses associated with the defense of claims that are outside the ordinary course of business that were brought against the Company by Steven A.W. De Jaray, Perienne De Jaray and Darrell R. Oswalde.

(3)

Adjustments for Change in tax law reflect an increase in our provision for U.S. tax on foreign operations resulting from The 2017 Tax Cuts and Jobs Act and is related to the capitalization and subsequent amortization of R&D costs for tax purposes.


Contacts

MEDIA:
Sophia Hong
Lattice Semiconductor Corporation
503-268-8786
Sophia.Hong@latticesemi.com

INVESTORS:
Rick Muscha
Lattice Semiconductor Corporation
408-826-6000
Rick.Muscha@latticesemi.com

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First published on Tue, Aug 1, 2023

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