Lattice Semiconductor Reports Second Quarter 2020 Results

* 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."

Second Quarter 2020 Highlights

  • Improved Financial Performance and Increased Profitability: Net income per diluted share was up 33% on a GAAP basis and up 13% on a non-GAAP basis in Q2 2020 compared to Q2 2019, with a 150 basis point improvement in gross margin on a GAAP basis and a 230 basis point improvement on a non-GAAP basis.
  • Certus™-NX General Purpose FPGA Launched: The second product family developed on Lattice's Nexus FPGA platform in just six months, Certus™-NX offers 70% faster I/O, up to a 3x smaller footprint and 4x lower power in comparison to similar competing FPGAs.
  • Propel™ Software Solution Launched: Lattice Propel is a new embedded system design environment with a complete set of graphical and command-line tools to create, analyze, compile, and debug an FPGA-based processor.
  • sensAI™ 3.0 Software Stack Launched: Lattice launched the latest version of its solutions stack for on-device AI processing at the Edge, Lattice sensAI™ 3.0. Lattice sensAI brings new levels of power and performance to smart vision applications in the surveillance/security, robotics, automotive, and computing markets.

Business Outlook - Third Quarter of 2020:

  • Revenue for the third quarter of 2020 is expected to be between $96 million and $106 million.
  • Gross margin percentage for the third quarter of 2020 is expected to be 60.5% plus or minus 1% on a non-GAAP basis.
  • Total operating expenses for the third quarter of 2020 are expected to be between $36.5 million and $37.5 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 2020, 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 2020, and business outlook on Tuesday, July 28 at 5:00 p.m. Eastern Time. The dial-in number for the live audio call is 1-888-684-5603 or 1-918-398-4852 with conference identification number 1694084. 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 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 belief that we remain on track to achieve two additional key milestones in the second half of 2020 with our third Lattice Nexus™ product and the next installment in our software solutions portfolio; that we will drive additional progress toward our target model; and the statements under the heading “Business Outlook - Third Quarter of 2020.” 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 has negatively impacted 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 risks more fully described in Lattice’s filings with the SEC including its Annual Report on Form 10-K for the fiscal year ended December 28, 2019, and Lattice’s quarterly reports filed on Form 10-Q. COVID-19 may increase or change the severity of our other risks reported in our Annual Report on Form 10-K for the fiscal year ended December 28, 2019. Lattice believes these and other risks and uncertainties could cause actual results to differ materially from the forward-looking statements. 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, restructuring plans and related charges, amortization of acquired intangible assets, loss on refinancing of long-term debt, and the estimated tax effect of these items. The non-GAAP net income for the second quarter of fiscal 2020 includes a change in the non-GAAP tax rate calculation to exclude profits from jurisdictions where there is a full valuation allowance on deferred tax assets to improve alignment of non-GAAP income tax expense to non-GAAP income before tax. 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 lets 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

 

 

June 27,

 

March 28,

 

June 29,

 

June 27,

 

June 29,

 

 

2020

 

2020

 

2019

 

2020

 

2019

Revenue

 

$

100,589

 

 

$

97,316

 

 

$

102,296

 

 

$

197,905

 

 

$

200,387

 

Cost of sales

 

 

40,012

 

 

 

39,754

 

 

 

42,258

 

 

 

79,766

 

 

 

82,697

 

Gross margin

 

 

60,577

 

 

 

57,562

 

 

 

60,038

 

 

 

118,139

 

 

 

117,690

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

22,458

 

 

 

21,693

 

 

 

19,377

 

 

 

44,151

 

 

 

39,042

 

Selling, general, and administrative

 

 

24,488

 

 

 

22,551

 

 

 

19,759

 

 

 

47,039

 

 

 

40,540

 

Amortization of acquired intangible assets

 

 

603

 

 

 

2,640

 

 

 

3,390

 

 

 

3,243

 

 

 

6,779

 

Restructuring

 

 

546

 

 

 

940

 

 

 

3,126

 

 

 

1,486

 

 

 

4,467

 

Total operating expenses

 

 

48,095

 

 

 

47,824

 

 

 

45,652

 

 

 

95,919

 

 

 

90,828

 

Income from operations

 

 

12,482

 

 

 

9,738

 

 

 

14,386

 

 

 

22,220

 

 

 

26,862

 

Interest expense

 

 

(1,045

)

 

 

(1,077

)

 

 

(3,538

)

 

 

(2,122

)

 

 

(8,525

)

Other (expense) income, net

 

 

37

 

 

 

(50

)

 

 

(2,109

)

 

 

(13

)

 

 

(1,956

)

Income before income taxes

 

 

11,474

 

 

 

8,611

 

 

 

8,739

 

 

 

20,085

 

 

 

16,381

 

Income tax expense

 

 

845

 

 

 

444

 

 

 

180

 

 

 

1,289

 

 

 

414

 

Net income

 

$

10,629

 

 

$

8,167

 

 

$

8,559

 

 

$

18,796

 

 

$

15,967

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.08

 

 

$

0.06

 

 

$

0.06

 

 

$

0.14

 

 

$

0.12

 

Diluted

 

$

0.08

 

 

$

0.06

 

 

$

0.06

 

 

$

0.14

 

 

$

0.12

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares used in per share calculations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

134,857

 

 

 

134,253

 

 

 

132,206

 

 

 

134,555

 

 

 

131,599

 

Diluted

 

 

139,202

 

 

 

138,044

 

 

 

137,221

 

 

 

138,751

 

 

 

136,133

 

Lattice Semiconductor Corporation

Condensed Consolidated Balance Sheets

(in thousands)

(unaudited)

   

 

 

June 27,

 

December 28,

 

 

2020

 

2019

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

165,175

 

$

118,081

Accounts receivable, net

 

 

87,408

 

 

64,917

Inventories

 

 

54,061

 

 

54,980

Other current assets

 

 

24,354

 

 

24,452

Total current assets

 

 

330,998

 

 

262,430

 

 

 

 

 

 

 

Property and equipment, net

 

 

40,268

 

 

39,230

Operating lease right-of-use assets

 

 

22,304

 

 

23,591

Intangible assets, net

 

 

3,707

 

 

6,977

Goodwill

 

 

267,514

 

 

267,514

Deferred income taxes

 

 

480

 

 

478

Other long-term assets

 

 

10,759

 

 

11,796

 

 

$

676,030

 

$

612,016

 

 

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable and other accrued liabilities

 

$

81,539

 

$

73,650

Current portion of long-term debt

 

 

4,004

 

 

21,474

Current portion of operating lease liabilities

 

 

4,979

 

 

4,686

Total current liabilities

 

 

90,522

 

 

99,810

 

 

 

 

 

 

 

Long-term debt, net of current portion

 

 

166,501

 

 

125,072

Long-term operating lease liabilities, net of current portion

 

 

19,823

 

 

21,438

Other long-term liabilities

 

 

35,054

 

 

38,028

Total liabilities

 

 

311,900

 

 

284,348

 

 

 

 

 

 

 

Stockholders' equity

 

 

364,130

 

 

327,668

 

 

$

676,030

 

$

612,016

Lattice Semiconductor Corporation

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

 

 

 

Six Months Ended

 

 

June 27,

 

June 29,

 

 

2020

 

2019

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income

 

$

18,796

 

 

$

15,967

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

13,456

 

 

 

16,450

 

Stock-based compensation expense

 

 

19,740

 

 

 

7,655

 

Other non-cash adjustments

 

 

3,124

 

 

 

7,295

 

Net changes in assets and liabilities

 

 

(18,252

)

 

 

19,129

 

Net cash provided by operating activities

 

 

36,864

 

 

 

66,496

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Capital expenditures

 

 

(6,829

)

 

 

(8,459

)

Other investing activities

 

 

(4,626

)

 

 

6,058

 

Net cash (used in) provided by investing activities

 

 

(11,455

)

 

 

(2,401

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from issuance of long-term debt

 

 

50,000

 

 

 

206,500

 

Cash paid for debt issuance costs

 

 

0

 

 

 

(2,086

)

Repayment of long-term debt

 

 

(26,250

)

 

 

(278,033

)

Net cash flows related to stock compensation exercises

 

 

(2,105

)

 

 

13,023

 

Net cash provided by (used in) financing activities

 

 

21,645

 

 

 

(60,596

)

Effect of exchange rate change on cash

 

 

40

 

 

 

86

 

Net increase in cash and cash equivalents

 

 

47,094

 

 

 

3,585

 

Beginning cash and cash equivalents

 

 

118,081

 

 

 

119,051

 

Ending cash and cash equivalents

 

$

165,175

 

 

$

122,636

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

Interest paid

 

$

2,193

 

 

$

8,103

 

Income taxes paid, net of refunds

 

$

1,579

 

 

$

1,500

 

Lattice Semiconductor Corporation

Supplemental Historical Financial Information

(unaudited)

 

 

Three Months Ended

 

 

June 27,

 

March 28,

 

June 29,

 

 

2020

 

2020

 

2019

Balance Sheet Information

 

 

 

 

 

 

 

 

 

 

 

 

A/R Days Revenue Outstanding (DSO)

 

 

79

 

 

 

64

 

 

 

34

 

Inventory Days (DIO)

 

 

123

 

 

 

112

 

 

 

140

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue% (by Geography)

 

 

 

 

 

 

 

 

 

 

 

 

Asia

 

 

74

%

 

 

71

%

 

 

75

%

Americas

 

 

14

%

 

 

17

%

 

 

13

%

Europe (incl. Africa)

 

 

12

%

 

 

12

%

 

 

12

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue% (by End Market)

 

 

 

 

 

 

 

 

 

 

 

 

Communications and Computing

 

 

46

%

 

 

39

%

 

 

39

%

Industrial and Automotive

 

 

39

%

 

 

43

%

 

 

38

%

Consumer

 

 

11

%

 

 

14

%

 

 

19

%

Licensing and Services

 

 

4

%

 

 

4

%

 

 

4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue% (by Channel)

 

 

 

 

 

 

 

 

 

 

 

 

Distribution

 

 

85

%

 

 

78

%

 

 

85

%

Direct

 

 

15

%

 

 

22

%

 

 

15

%

Lattice Semiconductor Corporation

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

(in thousands, except per share data)

(unaudited)

 
 

Three Months Ended

 

June 27,

 

March 28,

 

June 29,

 

2020

 

2020

 

2019

       
Gross Margin Reconciliation      
GAAP Gross margin   $

60,577

  $

57,562

  $

60,038

Stock-based compensation - gross margin (1)    

1,101

     

591

     

327

 
Non-GAAP Gross margin   $

61,678

  $

58,153

  $

60,365

       
Gross Margin % Reconciliation      
GAAP Gross margin %  

60.2

%

 

59.1

%

 

58.7

%

Cumulative effect of non-GAAP Gross Margin adjustments    

1.1

%

   

0.7

%

   

0.3

%

Non-GAAP Gross margin %  

61.3

%

 

59.8

%

 

59

%

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

22.3

%

 

22.3

%

 

18.9

%

Stock-based compensation - R&D (1)    

(2.3

)%

   

(2.7

)%

   

(1.2

)%

Non-GAAP R&D Expense %  

20

%

 

19.6

%

 

17.7

%

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

24.3

%

 

23.2

%

 

19.3

%

Stock-based compensation - SG&A (1)    

(7.8

)%

   

(5.7

)%

   

(2.3

)%

Non-GAAP SG&A Expense %  

16.5

%

 

17.5

%

 

17

%

       
Operating Expenses Reconciliation      
GAAP Operating expenses   $

48,095

  $

47,824

  $

45,652

Stock-based compensation - operations (1)  

(10,306

)

 

(8,137

)

 

(3,642

)

Amortization of acquired intangible assets  

(603

)

 

(2,640

)

 

(3,390

)

Restructuring charges  

(546

)

 

(940

)

 

(3,126

)

Non-GAAP Operating expenses   $

36,640

    $

36,107

    $

35,494

 
       
Income from Operations Reconciliation      
GAAP Income from operations   $

12,482

  $

9,738

  $

14,386

Stock-based compensation - gross margin (1)  

1,101

 

591

 

327

Stock-based compensation - operations (1)  

10,306

 

8,137

 

3,642

Amortization of acquired intangible assets  

603

 

2,640

 

3,390

Restructuring charges  

546

 

940

 

3,126

Non-GAAP Income from operations   $

25,038

    $

22,046

    $

24,871

 
       
Income from Operations % Reconciliation      
GAAP Income from operations %  

12.4

%

 

10

%

 

14.1

%

Cumulative effect of non-GAAP Gross Margin and Operating adjustments    

12.5

%

   

12.7

%

   

10.2

%

Non-GAAP Income from operations %  

24.9

%

 

22.7

%

 

24.3

%

(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

 

 

June 27,

 

March 28,

 

June 29,

 

 

2020

 

2020

 

2019

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Income (Expense), Net Reconciliation

 

 

 

 

 

 

 

 

 

 

 

 

GAAP Other income (expense), net

 

$

37

 

 

$

(50

)

 

$

(2,109

)

Loss on refinancing of long-term debt

 

 

 

 

 

 

 

 

2,235

 

Non-GAAP Other income (expense), net

 

$

37

 

 

$

(50

)

 

$

126

 

Income Tax Expense Reconciliation

 

 

 

 

 

 

 

 

 

 

 

 

GAAP Income tax expense

 

$

845

 

 

$

444

 

 

$

180

 

Estimated tax effect of non-GAAP adjustments (2)

 

 

(365

)

 

 

280

 

 

 

192

 

Non-GAAP Income tax expense

 

$

480

 

 

$

724

 

 

$

372

 

Net Income Reconciliation

 

 

 

 

 

 

 

 

 

 

 

 

GAAP Net income

 

$

10,629

 

 

$

8,167

 

 

$

8,559

 

Stock-based compensation - gross margin (1)

 

 

1,101

 

 

 

591

 

 

 

327

 

Stock-based compensation - operations (1)

 

 

10,306

 

 

 

8,137

 

 

 

3,642

 

Amortization of acquired intangible assets

 

 

603

 

 

 

2,640

 

 

 

3,390

 

Restructuring charges

 

 

546

 

 

 

940

 

 

 

3,126

 

Loss on refinancing of long-term debt

 

 

 

 

 

 

 

 

2,235

 

Estimated tax effect of non-GAAP adjustments (2)

 

 

365

 

 

 

(280

)

 

 

(192

)

Non-GAAP Net income

 

$

23,550

 

 

$

20,195

 

 

$

21,087

 

Net Income Per Share Reconciliation

 

 

 

 

 

 

 

 

 

 

 

 

GAAP Net income per share - basic

 

$

0.08

 

 

$

0.06

 

 

$

0.06

 

Cumulative effect of Non-GAAP adjustments

 

 

0.09

 

 

 

0.09

 

 

 

0.10

 

Non-GAAP Net income per share - basic

 

$

0.17

 

 

$

0.15

 

 

$

0.16

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP Net income per share - diluted

 

$

0.08

 

 

$

0.06

 

 

$

0.06

 

Cumulative effect of Non-GAAP adjustments

 

 

0.09

 

 

 

0.09

 

 

 

0.09

 

Non-GAAP Net income per share - diluted

 

$

0.17

 

 

$

0.15

 

 

$

0.15

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares used in per share calculations:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

134,857

 

 

 

134,253

 

 

 

132,206

 

Diluted - GAAP (3)

 

 

139,202

 

 

 

138,044

 

 

 

137,221

 

Diluted - Non-GAAP (3)

 

 

139,202

 

 

 

138,044

 

 

 

137,221

 

(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.”

(3)

 

Diluted Shares are calculated using the GAAP treasury stock method. In a loss position, diluted shares equal basic shares.





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