Third Quarter 2016 Financial Highlights*:

• Revenue of $113.2 million.
• On a GAAP basis, Net loss of $12.4 million or $0.10 per basic and diluted share.
• On a Non-GAAP basis, Net income of $5.9 million or $0.05 per basic and diluted share.
• Gross margin of 59.5% on a GAAP basis and 59.8% on a non-GAAP basis.

* 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. For a reconciliation of GAAP to non-GAAP results, see accompanying tables "Reconciliation of U.S. GAAP to Non-GAAP Financial Measures."

PORTLAND, Ore. — (BUSINESS WIRE) — November 7, 2016 — Lattice Semiconductor Corporation (NASDAQ: LSCC), the global leader in smart connectivity solutions, announced financial results today for the fiscal third quarter ended October 1, 2016.

The Company reported revenue for the third quarter of 2016 of $113.2 million, which increased 14.1% sequentially, as compared to the second quarter 2016 revenue of $99.2 million, and increased 3.2%, as compared to the third quarter 2015 revenue of $109.7 million on a GAAP basis (Lattice closed its acquisition of Silicon Image on March 10, 2015).

Gross margin on a GAAP basis was 59.5% for the third quarter of 2016, as compared to the second quarter of 2016 gross margin of 58.9% and 54.5% for the third quarter of 2015. Gross margin for the third quarter of 2016 was 59.8% on a non-GAAP basis, as compared to 59.1% for the second quarter of 2016 and 55.7% for the third quarter of 2015.

Total operating expenses for the third quarter of 2016 were $73.4 million on a GAAP basis as compared to $64.8 million for the second quarter of 2016 and $77.8 million for the third quarter of 2015. GAAP operating expenses in the third quarter of 2016 were adversely impacted by two non-recurring events: $7.5 million in bad debt expense due to the bankruptcy filing of one of our distributors; and a $7.9 million acquired intangible assets impairment charge due to changes in our role as the agent of the HDMI consortium. Total operating expenses were $52.9 million for the third quarter of 2016 on a non-GAAP basis, including the adverse impact of the previously mentioned $7.5 million in bad debt expense, as compared to $50.8 million for the second quarter of 2016, and $57.6 million for the third quarter of 2015.

GAAP net loss for the third quarter was $12.4 million ($0.10 per basic and diluted share), with net income of $5.9 million ($0.05 per basic and diluted share) on a non-GAAP basis. GAAP results for the third quarter of 2016 reflect the above mentioned $7.5 million in bad debt expense and $7.9 million impairment charge, along with $0.3 million in restructuring charges, $1.0 million in tax expense, $8.3 million in amortization of acquired intangible assets, and $4.3 million in stock-based compensation expense. This compares to a net loss on a GAAP basis in the prior quarter of $13.8 million ($0.12 per basic and diluted share), with net income on a non-GAAP basis in the prior quarter of $0.2 million ($0.00 per basic and diluted share), and compares to a net loss on a GAAP basis in the year ago period of $24.9 million ($0.21 per basic and diluted share), or a net loss of $5.4 million ($0.05 per basic and diluted share) on a non-GAAP basis. GAAP results for the second quarter of 2016 reflect $2.6 million in restructuring charges, $4.5 million in tax expense, $8.3 million in amortization of acquired intangible assets, and $3.2 million in stock-based compensation expense. GAAP results for the third quarter of 2015 reflect $6.8 million in restructuring charges, $0.6 million in acquisition related charges, a $0.3 million in tax provision, $8.9 million in amortization of acquired intangible assets, and $4.2 million in stock-based compensation expense.

Darin G. Billerbeck, President and Chief Executive Officer, said, "Our growth remains on track as we execute on our second half ramp, our R&D roadmap and the strategic initiatives that will help ensure our longer-term success. We achieved a 23% gain in FPGA revenue and continued growth in the overall consumer market. Better than expected manufacturing efficiencies combined with a favorable product mix in the quarter enabled us to deliver a 59.5% gross margin, which was well above our guidance."

Max Downing, Interim Chief Financial Officer, added, "Our non-GAAP operating expenses were adversely impacted by the aforementioned bad debt expense due to the unexpected bankruptcy filing of one of our distributors. Absent this non-recurring event, our non-GAAP operating expenses were $45.4 million, consistent with our plan. In addition, we agreed to restructure our role as the HDMI Licensing Agent under an amendment whereby a new independent entity will assume the agency responsibilities leading to reduction in our share of adopter fees. As a result, we recorded a non-cash impairment charge of $7.9 million during the quarter. The agency change will not have a material impact on our long term profitability given the corresponding reduction in associated expenses."