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Lattice Semiconductor Reports Second Quarter 2022 Results

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Record quarterly revenue with growth of 28% compared to Q2 2021 and 7% compared to Q1 2022

Gross Margin expands to 68.5% / 69.1% for Q2 2022 on a GAAP / Non-GAAP basis, compared to 61.3% / 62.1%, respectively, for Q2 2021

Net Income improves to $0.32 / $0.42 per diluted share for Q2 2022 on a GAAP / Non-GAAP basis, compared to $0.15 / $0.25, respectively, for Q2 2021

* 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., August 01, 2022--(BUSINESS WIRE)--Lattice Semiconductor Corporation (NASDAQ: LSCC), the low power programmable leader, announced financial results today for the fiscal second quarter ended July 2, 2022.

Jim Anderson, president and CEO, said, "We drove 28% year-over-year revenue growth in Q2 2022 with a year-over-year increase in net income of 104% on a GAAP basis and 68% on a non-GAAP basis. Growth was driven by our strategic segments of communications and computing, and industrial and automotive. We are well positioned in the right strategic markets with a rapidly expanding product portfolio and growing customer momentum."

Sherri Luther, CFO, said, "In Q2 2022, we achieved record operating profit of 29.0% on a GAAP basis and 38.1% on a non-GAAP basis with continued gross margin expansion of 720 basis points on a GAAP basis and 700 basis points on a non-GAAP basis compared to Q2 2021. We continued to drive strong cash flow generation, while executing our seventh consecutive quarter of share buybacks."

Selected Second Quarter 2022 Financial Results and Comparisons (in thousands, except per share data)

GAAP Financial Results (unaudited)

Q2 2022

Q1 2022

Q2 2021

Q/Q

Y/Y

Revenue

$

161,372

$

150,515

$

125,905

7.2%

28.2%

Gross Margin %

68.5

%

66.9

%

61.3

%

160 bps

720 bps

R&D Expense %

20.8

%

21.6

%

21.8

%

(80) bps

(100) bps

SG&A Expense %

18.0

%

19.1

%

20.3

%

(110) bps

(230) bps

Operating Expense

$

63,699

$

63,004

$

53,868

1.1%

18.3%

Operating Income

$

46,786

$

37,763

$

23,316

23.9%

100.7%

Net Income

$

44,532

$

36,078

$

21,838

23.4%

103.9%

Net Income per Share - Basic

$

0.32

$

0.26

$

0.16

$0.06

$ 0.16

Net Income per Share - Diluted

$

0.32

$

0.26

$

0.15

$0.06

$ 0.17

Non-GAAP* Financial Results (unaudited)

Q2 2022

Q1 2022

Q2 2021

Q/Q

Y/Y

Revenue

$

161,372

$

150,515

$

125,905

7.2%

28.2%

Gross Margin %

69.1

%

67.7

%

62.1

%

140 bps

700 bps

R&D Expense %

17.8

%

18.2

%

18.4

%

(40) bps

(60) bps

SG&A Expense %

13.1

%

13.2

%

14.6

%

(10) bps

(150) bps

Operating Expense

$

49,943

$

47,243

$

41,528

5.7%

20.3%

Operating Income

$

61,553

$

54,645

$

36,651

12.6%

67.9%

Net Income

$

59,124

$

52,696

$

35,206

12.2%

67.9%

Net Income per Share - Basic

$

0.43

$

0.38

$

0.26

$ 0.05

$ 0.17

Net Income per Share - Diluted

$

0.42

$

0.37

$

0.25

$ 0.05

$ 0.17

Second Quarter 2022 Highlights

Record Revenue: Revenue increased 28% in Q2 2022 compared to Q2 2021 and 7% compared to Q1 2022, with the sixth consecutive quarter of double-digit growth year-over-year.

Profit Expansion: Gross margin expanded 720 basis points on a GAAP basis and 700 basis points on a non-GAAP basis compared to Q2 2021, with net income per diluted share increasing 113% on a GAAP basis and 68% on a non-GAAP basis compared to Q2 2021.

Continued Portfolio Expansion: Lattice introduced MachXO5-NX, the fifth device family built on the award-winning Lattice Nexus™ platform, which enhances system monitoring and control in the industrial, automotive, server and communications markets, with class-leading power efficiency and reliability.

Software Portfolio Expansion: Lattice launched its fifth software solution stack, the ORAN™ Solution Stack, which enables 5G ORAN deployment by providing solutions for robust security, flexible fronthaul synchronization, and low power hardware acceleration.

Lattice Receives Multiple Industry Awards: Lattice was named a 2022 Fortress Cyber Security Awards winner by the Business Intelligence Group, was awarded a Global Infosec Award by Cyber Defense Magazine, and won a Gold Vendor Award from VDC Research. Additionally, Lattice was named a Best-in-Show Award Winner at Embedded World 2022 exhibition and conference for the Lattice CertusPro™-NX FPGA family.

Lattice Added to Russell 1000® Index: Lattice moved up to the large-cap Russell 1000® Index from the Russell 2000® Index, reflecting the Company's tremendous progress.

Business Outlook - Third Quarter of 2022:

Revenue for the third quarter of 2022 is expected to be between $161 million and $171 million.

Gross margin percentage for the third quarter of 2022 is expected to be 69% plus or minus 1% on a non-GAAP basis.

Total operating expenses for the third quarter of 2022 are expected to be between $50 million and $52 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 2022, certain items that affect GAAP measurement of financial measures are out of the Company’s control and/or cannot be reasonably predicted. Consequently, the Company is unable to provide a reasonable estimate of GAAP measurement for guidance or a corresponding reconciliation to GAAP for the quarter. 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 2022, and business outlook on Monday, August 1 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 13730685. 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 strategic market position; our product portfolio expansion; growing customer momentum; and the statements under the heading "Business Outlook - Third Quarter of 2022." 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 pressures, competitive actions, and international trade disputes and sanctions. In addition, the COVID-19 pandemic continues to impact the overall economy and, as a result of the foregoing, may negatively impact our operating results for future periods. 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.

Further economic and market disruptions from COVID-19, future impacts of the military conflict between Ukraine and Russia, and demand changes in secular growth markets may increase or change the severity of our other risks reported in Item 1A in Lattice’s most recent Annual Report on Form 10-K. 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. The non-GAAP measures presented exclude charges and adjustments primarily related to stock-based compensation and related tax effects, amortization of acquired intangible assets, restructuring plans and other charges, and the estimated tax effect of these items. 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, Weibo or Youku.

Lattice Semiconductor Corporation

Consolidated Statements of Operations

(in thousands, except per share data)

(unaudited)

Three Months Ended

Six Months Ended

July 2,

April 2,

July 3,

July 2,

July 3,

2022

2022

2021

2022

2021

Revenue

$

161,372

$

150,515

$

125,905

$

311,887

$

241,621

Cost of sales

50,887

49,748

48,721

100,635

93,851

Gross margin

110,485

100,767

77,184

211,252

147,770

Operating expenses:

Research and development

33,613

32,555

27,454

66,168

51,520

Selling, general, and administrative

29,024

28,771

25,607

57,795

50,699

Amortization of acquired intangible assets

870

1,169

603

2,039

1,206

Restructuring

136

54

204

190

380

Acquisition related charges

56

455

511

Total operating expenses

63,699

63,004

53,868

126,703

103,805

Income from operations

46,786

37,763

23,316

84,549

43,965

Interest expense

(891

)

(708

)

(702

)

(1,599

)

(1,420

)

Other (expense) income, net

(243

)

(22

)

(135

)

(265

)

(297

)

Income before income taxes

45,652

37,033

22,479

82,685

42,248

Income tax expense (benefit)

1,120

955

641

2,075

1,597

Net income

$

44,532

$

36,078

$

21,838

$

80,610

$

40,651

Net income per share:

Basic

$

0.32

$

0.26

$

0.16

$

0.59

$

0.30

Diluted

$

0.32

$

0.26

$

0.15

$

0.57

$

0.29

Shares used in per share calculations:

Basic

137,424

137,500

136,388

137,462

136,394

Diluted

140,170

141,281

141,491

140,657

141,637

Lattice Semiconductor Corporation

Condensed Consolidated Balance Sheets

(in thousands)

(unaudited)

July 2,

January 1,

2022

2022

Assets

Current assets:

Cash and cash equivalents

$

117,882

$

131,570

Accounts receivable, net

93,380

79,859

Inventories, net

77,478

67,594

Other current assets

25,720

22,328

Total current assets

314,460

301,351

Property and equipment, net

42,741

38,094

Operating lease right-of-use assets

20,407

23,818

Intangible assets, net

27,218

29,782

Goodwill

315,358

315,358

Other long-term assets

16,944

18,091

$

737,128

$

726,494

Liabilities and Stockholders' Equity

Current liabilities:

Accounts payable

$

39,336

$

34,597

Accrued expenses

29,082

26,444

Accrued payroll obligations

20,798

27,967

Current portion of long-term debt

17,192

17,173

Total current liabilities

106,408

106,181

Long-term debt, net of current portion

132,159

140,760

Long-term operating lease liabilities, net of current portion

15,917

19,248

Other long-term liabilities

46,723

48,672

Total liabilities

301,207

314,861

Stockholders' equity

435,921

411,633

$

737,128

$

726,494

Lattice Semiconductor Corporation

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

Six Months Ended

July 2,

July 3,

2022

2021

Cash flows from operating activities:

Net income

$

80,610

$

40,651

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

Stock-based compensation expense

27,249

22,374

Depreciation and amortization

14,272

11,759

Other non-cash adjustments

3,445

3,383

Net changes in assets and liabilities

(32,658

)

(7,463

)

Net cash provided by (used in) operating activities

92,918

70,704

Cash flows from investing activities:

Capital expenditures

(8,917

)

(4,413

)

Other investing activities

(5,368

)

(6,377

)

Net cash provided by (used in) investing activities

(14,285

)

(10,790

)

Cash flows from financing activities:

Repayment of long-term debt

(8,750

)

(4,375

)

Repurchase of common stock

(50,161

)

(40,113

)

Net cash flows related to stock compensation exercises

(32,182

)

(9,975

)

Net cash provided by (used in) financing activities

(91,093

)

(54,463

)

Effect of exchange rate change on cash

(1,228

)

(49

)

Net increase (decrease) in cash and cash equivalents

(13,688

)

5,402

Beginning cash and cash equivalents

131,570

182,332

Ending cash and cash equivalents

$

117,882

$

187,734

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

Interest paid

$

1,337

$

1,180

Income taxes paid, net of refunds

$

2,355

$

1,805

Lattice Semiconductor Corporation

Supplemental Historical Financial Information

(unaudited)

Three Months Ended

July 2,

April 2,

July 3,

2022

2022

2021

Balance Sheet Information

A/R Days Revenue Outstanding (DSO)

53

50

52

Inventory Days (DIO)

139

132

123

Revenue% (by Geography)

Asia

73

%

72

%

77

%

Americas

14

%

15

%

14

%

Europe (incl. Africa)

13

%

13

%

9

%

Revenue% (by End Market)

Communications and Computing

44

%

42

%

42

%

Industrial and Automotive

46

%

46

%

45

%

Consumer

8

%

10

%

10

%

Licensing and Services

2

%

2

%

3

%

Revenue% (by Channel)

Distribution

89

%

90

%

88

%

Direct

11

%

10

%

12

%

Lattice Semiconductor Corporation

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

(in thousands, except per share data)

(unaudited)

Three Months Ended

July 2,

April 2,

July 3,

2022

2022

2021

Gross Margin Reconciliation

GAAP Gross margin

$

110,485

$

100,767

$

77,184

Stock-based compensation - gross margin (1)

1,011

1,121

995

Non-GAAP Gross margin

$

111,496

$

101,888

$

78,179

Gross Margin % Reconciliation

GAAP Gross margin %

68.5

%

66.9

%

61.3

%

Cumulative effect of non-GAAP Gross Margin adjustments

0.6

%

0.8

%

0.8

%

Non-GAAP Gross margin %

69.1

%

67.7

%

62.1

%

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

GAAP R&D Expense %

20.8

%

21.6

%

21.8

%

Stock-based compensation - R&D (1)

(3.0

)%

(3.4

)%

(3.4

)%

Non-GAAP R&D Expense %

17.8

%

18.2

%

18.4

%

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

GAAP SG&A Expense %

18.0

%

19.1

%

20.3

%

Stock-based compensation - SG&A (1)

(4.9

)%

(5.9

)%

(5.7

)%

Non-GAAP SG&A Expense %

13.1

%

13.2

%

14.6

%

Operating Expenses Reconciliation

GAAP Operating expenses

$

63,699

$

63,004

$

53,868

Stock-based compensation - operations (1)

(12,694

)

(14,083

)

(11,533

)

Amortization of acquired intangible assets

(870

)

(1,169

)

(603

)

Restructuring and other charges

(192

)

(509

)

(204

)

Non-GAAP Operating expenses

$

49,943

$

47,243

$

41,528

Income from Operations Reconciliation

GAAP Income from operations

$

46,786

$

37,763

$

23,316

Stock-based compensation - gross margin (1)

1,011

1,121

995

Stock-based compensation - operations (1)

12,694

14,083

11,533

Amortization of acquired intangible assets

870

1,169

603

Restructuring and other charges

192

509

204

Non-GAAP Income from operations

$

61,553

$

54,645

$

36,651

Income from Operations % Reconciliation

GAAP Income from operations %

29.0

%

25.1

%

18.5

%

Cumulative effect of non-GAAP Gross Margin and Operating adjustments

9.1

%

11.2

%

10.6

%

Non-GAAP Income from operations %

38.1

%

36.3

%

29.1

%

(1)

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

Lattice Semiconductor Corporation

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

(in thousands, except per share data)

(unaudited)

Three Months Ended

July 2,

April 2,

July 3,

2022

2022

2021

Income Tax Expense (Benefit) Reconciliation

GAAP Income tax expense (benefit)

$

1,120

$

955

$

641

Estimated tax effect of non-GAAP adjustments (2)

175

264

(33

)

Non-GAAP Income tax expense (benefit)

$

1,295

$

1,219

$

608

Net Income Reconciliation

GAAP Net income

$

44,532

$

36,078

$

21,838

Stock-based compensation - gross margin (1)

1,011

1,121

995

Stock-based compensation - operations (1)

12,694

14,083

11,533

Amortization of acquired intangible assets

870

1,169

603

Restructuring and other charges

192

509

204

Estimated tax effect of non-GAAP adjustments (2)

(175

)

(264

)

33

Non-GAAP Net income

$

59,124

$

52,696

$

35,206

Net Income Per Share Reconciliation

GAAP Net income per share - basic

$

0.32

$

0.26

$

0.16

Cumulative effect of Non-GAAP adjustments

0.11

0.12

0.10

Non-GAAP Net income per share - basic

$

0.43

$

0.38

$

0.26

GAAP Net income per share - diluted

$

0.32

$

0.26

$

0.15

Cumulative effect of Non-GAAP adjustments

0.10

0.11

0.10

Non-GAAP Net income per share - diluted

$

0.42

$

0.37

$

0.25

Shares used in per share calculations:

Basic

137,424

137,500

136,388

Diluted

140,170

141,281

141,491

(1)

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

(2)

We calculate non-GAAP tax expense by applying our tax provision model to year-to-date and projected income after adjusting for non-GAAP items. The difference between calculated values for GAAP and non-GAAP tax expense has been included as the "Estimated tax effect of non-GAAP adjustments."

View source version on businesswire.com: https://www.businesswire.com/news/home/20220801005701/en/

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