For the third quarter, revenue was $58.3 million, a decrease of two percent from the $59.2 million reported in the prior quarter, and a decrease of eight percent from the $63.5 million reported in the same quarter a year ago.
FPGA revenue for the third quarter was a record $13.6 million, up slightly from the $13.5 million reported in the prior quarter, and an increase of two percent from the $13.3 million reported in the same quarter a year ago. PLD revenue for the quarter was $44.7 million, a two percent decrease over the $45.7 million reported in the prior quarter, and a decrease of 11 percent from the $50.2 million reported in the same quarter a year ago.
New product revenue for the third quarter was $8.3 million, up 28% from the $6.5 million reported in the prior quarter, and an increase of 73% from the $4.8 million reported in the same quarter a year ago.
Other income for the third quarter of 2007 was $3.6 million and included a $1.7 million gain related to the extinguishment of outstanding zero coupon convertible notes.
Net loss for the third quarter was $4.4 million ($0.04 per share), as compared to a net loss of $1.5 million ($0.01 per share) reported in the prior quarter, and net income of $0.9 million ($0.01 per share) in the same quarter a year ago. These results include non-cash amortization charges, stock based compensation expense and restructuring charges, which total $5.5 million and $3.9 million for the third quarter of 2007 and 2006, respectively, and $4.0 million for the second quarter of 2007. Excluding these charges net income for the third quarter was $1.1 million as compared to a net income of $2.6 million for the prior quarter, and net income of $4.8 million for the comparable quarter a year ago.
"We are pleased by the strong growth we experienced for our New products in the third quarter. Unfortunately, this continued growth was more than offset by a substantial decline in our Mature products. This decline negatively impacted both revenue and gross margin for the quarter," said Steve Skaggs, Lattice's President and Chief Executive Officer. "Looking forward, we anticipate continued growth in New products and believe that as older products become an increasingly smaller percentage of total revenue overall revenue growth will resume and increasingly benefit the Company throughout 2008. Nonetheless, as our current financial results are below expectations, we will continue to seek opportunities to minimize operating expenses in the short-term."
Third Quarter Business Highlights:
-- During the quarter, Lattice released all members of the 90 nanometer
LatticeECP2M™ family of low cost, high performance FPGAs to volume
production. By combining a low cost FPGA architecture with high-end FPGA
features like 3.125 Gbps SERDES (SERializer/DESerializer) I/O and high
memory capacity, the LatticeECP2M family is bringing new levels of
performance to value-conscious electronic system designs.
-- Released a new XAUI to SPI4.2 intellectual property ("IP") core
optimized for the LatticeSC™ Extreme Performance FPGA family. This core
provides critical bus bridging functions needed to interface 10 Gb Ethernet-
based networks and leading-edge network processor and traffic management
devices. The LatticeSC family's pre-engineered, on-chip SPI4.2 controller,
memory controller and Media Access Controller ("MAC") blocks complete these
solutions to provide exceptional integration, performance and power savings
benefits for Lattice's customers developing network equipment.
-- Announced membership in the HyperTransport™ Consortium to help
promote the use of HyperTransport interface technology. The LatticeSC
family's exceptionally fast 2.0 Gbps PURESPEED™ I/O provides unique
performance in support of the HyperTransport 2.0 specification.
-- Announced collaboration with Silicon Laboratories to provide SONET/SDH
standard-compliant solutions through a combination of LatticeSC FPGAs and
Silicon Labs' multi-rate clock and data recovery (CDR) devices and Any-Rate
precision clock devices.
-- Released Version 7.0 Service Pack 1 of Lattice's ispLEVER® FPGA
design tools providing significant customer upgrades to support high
density FPGA design, including general release of the Reveal™ logic
analysis / hardware debug tool that provides best-in-class design analysis
and an enhanced Power Calculator module that accurately models device
thermal environments and resulting power consumption.
Business Outlook - December 2007 Quarter:
-- Sequential quarterly revenue is expected to be approximately $57
million to $59 million;
-- Gross margin percentage is expected to be approximately 55%;
-- Total operating expenses are expected to be approximately $33.0
million to $33.5 million;
-- Restructuring charge is expected to be approximately $1.5 million to
$2.5 million;
-- Intangible asset amortization is expected to be approximately $2.0
million: and
-- Other income is expected to be approximately $2.5 million.
Discussion of Non-GAAP Financial Measures:
Management evaluates and makes operating decisions using various performance measures. In addition to our GAAP results, we also consider adjusted net income, which we refer to as non-GAAP net income. This measure is generally based on the revenue of our products and the costs of those operations, such as cost of products sold, research and development, sales and marketing and general and administrative expenses, that management considers in evaluating our ongoing core operating performance. Non-GAAP net income excludes amortization of intangible assets, stock-based compensation and restructuring charges. Intangible assets relate to assets acquired through acquisitions and consist of technology purchased in connection with the acquisitions. Stock-based compensation charges are related to the adoption of SFAS No. 123(R) effective January 1, 2006, and include expense for items such as stock options and restricted stock units granted to employees, purchases under the employee stock purchase plan and deferred stock compensation issued in connection with acquisitions. Restructuring charges consist of expenses and subsequent adjustments incurred under our corporate restructuring plans that were initiated in the fourth quarter of fiscal 2005 and in the third quarter of fiscal 2007, and include items such as separation packages, costs to vacate space under long-term lease arrangements, and other related expenses.
Non-GAAP net income is a supplemental measure of our performance that is not required by and not presented in accordance with GAAP. Moreover, it should not be considered as an alternative to net (loss) income, operating loss or any other performance measure derived in accordance with GAAP, or as an alternative to cash flow from operating activities or as a measure of our liquidity. Investors and potential investors are encouraged to review the reconciliation of non-GAAP financial measures contained within this press release with our net (loss) income, which is our most directly comparable GAAP financial result. For more information, see the consolidated statement of operations contained in this earnings release.
Conference Call and Business Update:
On October 25, 2007, Lattice will hold a telephone conference call at 2:00 p.m. (Pacific Time) with financial analysts. Investors may listen to our conference call live via the web at www.lscc.com. Replays of the call will also be available at www.lscc.com. On December 13, 2007, we plan to publish a "Business Update Statement" on our website. Our financial guidance will be limited to the comments on our public quarterly earnings call and these public business outlook statements.
Forward-Looking Statements Notice:
The foregoing paragraphs contain forward-looking statements that involve estimates, assumptions, risks and uncertainties. With respect to particular forward-looking statements in the "Business Outlook - December 2007 Quarter" section of this release, Lattice believes the factors identified below in connection with each such statement could cause actual results to differ materially from the forward-looking statements.
Estimates of future revenue are inherently uncertain due to the high percentage of quarterly "turns" business. In addition, revenue is affected by such factors as pricing pressures, competitive actions, the demand for our Mature, Mainstream, and New products, and the ability to supply products to customers in a timely manner. Actual gross margin percentage and operating expenses could vary from the estimates contained herein on the basis of, among other things, changes in revenue levels, changes in product pricing and mix, changes in wafer, assembly and test costs, variations in manufacturing yields, and changes in stock-based compensation charges due to stock price changes.
In addition to the foregoing, other factors that may cause actual results to differ materially from the forward-looking statements herein include the Company's dependencies on its silicon wafer suppliers, technological and product development risks, and the other risks that are described from time to time in our filings with the Securities and Exchange Commission. 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.
About Lattice Semiconductor:
Lattice Semiconductor Corporation provides the industry's broadest range of
Programmable Logic Devices (PLD), including Field Programmable Gate
Arrays (FPGA), Complex Programmable Logic Devices (CPLD), Mixed-Signal
Power Management and Clock Generation Devices, and industry-leading SERDES
products.
