Lattice Semiconductor Reports Second Quarter 2017 Results

Lattice Semiconductor Corporation - Reconciliation of U.S. GAAP to Non-GAAP Financial Measures - (in thousands, except per share data) (unaudited)

	Three Months Ended									Six Months Ended
	July 1, 2017			April 1, 2017			July 2, 2016			July 1, 2017			July 2, 2016

Gross Margin Reconciliation
GAAP Gross margin	$	51,209		$	60,832		$	58,426		$	112,041		$	115,530
Inventory step-up expense	—			—			—			—			523
Stock-based compensation - gross margin	180			228			166			408			425
Non-GAAP Gross margin	$	51,389		$	61,060		$	58,592		$	112,449		$	116,478

Gross Margin % Reconciliation
GAAP Gross margin %	54.4		%	58.2		%	58.9		%	56.4		%	59.0		%
Cumulative effect of non-GAAP Gross Margin adjustments	0.2		%	0.2		%	0.2		%	0.2		%	0.5		%
Non-GAAP Gross margin %	54.6		%	58.4		%	59.1		%	56.6		%	59.5		%

Operating Expenses Reconciliation
GAAP Operating expenses	$	59,938		$	61,534		$	64,799		$	121,472		$	135,261
Amortization of acquired intangible assets	(8,737		)	(8,514		)	(8,311		)	(17,251		)	(17,032		)
Restructuring charges	(1,576		)	(66		)	(2,568		)	(1,642		)	(7,999		)
Acquisition related charges (1)	(867		)	(1,660		)	—			(2,527		)	(94		)
Stock-based compensation - operations	(2,749		)	(3,615		)	(3,076		)	(6,364		)	(7,373		)
Non-GAAP Operating expenses	$	46,009		$	47,679		$	50,844		$	93,688		$	102,763

Income (Loss) from Operations Reconciliation
GAAP Loss from operations	$	(8,729	)	$	(702	)	$	(6,373	)	$	(9,431	)	$	(19,731	)
Inventory step-up expense	—			—			—			—			523
Stock-based compensation - gross margin	180			228			166			408			425
Amortization of acquired intangible assets	8,737			8,514			8,311			17,251			17,032
Restructuring charges	1,576			66			2,568			1,642			7,999
Acquisition related charges (1)	867			1,660			—			2,527			94
Stock-based compensation - operations	2,749			3,615			3,076			6,364			7,373
Non-GAAP Income from operations	$	5,380		$	13,381		$	7,748		$	18,761		$	13,715

Income (Loss) from Operations % Reconciliation
GAAP Loss from operations %	(9.3		)%	(0.7		)%	(6.4		)%	(4.7		)%	(10.1		)%
Cumulative effect of non-GAAP Gross Margin and Operating adjustments	15.0		%	13.5		%	14.2		%	14.1		%	17.1		%
Non-GAAP Income from operations %	5.7		%	12.8		%	7.8		%	9.4		%	7.0		%

(1) Legal fees and outside services in connection with our pending acquisition by Canyon Bridge Acquisition Company, Inc.

Lattice Semiconductor Corporation - Reconciliation of U.S. GAAP to Non-GAAP Financial Measures - (in thousands, except per share data) (unaudited)

	Three Months Ended									Six Months Ended
	July 1, 2017			April 1, 2017			July 2, 2016			July 1, 2017			July 2, 2016

Income Tax Expense Reconciliation
GAAP Income tax expense	$	47		$	518		$	4,539		$	565		$	6,439
Estimated tax effect of non-GAAP adjustments (2)	663			(303		)	(2,499		)	360			(1,951		)
Non-GAAP Income tax expense	$	710		$	215		$	2,040		$	925		$	4,488

Net Income (Loss) Reconciliation
GAAP Net loss	$	(13,022	)	$	(7,275	)	$	(13,810	)	$	(20,297	)	$	(33,521	)
Inventory step-up expense	—			—			—			—			523
Stock-based compensation - gross margin	180			228			166			408			425
Amortization of acquired intangible assets	8,737			8,514			8,311			17,251			17,032
Restructuring charges	1,576			66			2,568			1,642			7,999
Acquisition related charges (1)	867			1,660			—			2,527			94
Stock-based compensation - operations	2,749			3,615			3,076			6,364			7,373
Gain on sale of business unit	(300		)	—			(2,646		)	(300		)	(2,646		)
Estimated tax effect of non-GAAP adjustments (2)	(663		)	303			2,499			(360		)	1,951
Non-GAAP Net income (loss)	$	124		$	7,111		$	164		$	7,235		$	(770	)

Net Income (Loss) Per Share Reconciliation
GAAP Net loss per share - basic and diluted	$	(0.11	)	$	(0.06	)	$	(0.12	)	$	(0.17	)	$	(0.28	)
Cumulative effect of Non-GAAP adjustments	0.11			0.12			0.12			0.23			0.27
Non-GAAP Net income (loss) per share - basic and diluted	$	—		$	0.06		$	—		$	0.06		$	(0.01	)

Shares used in per share calculations:
Basic	122,390			121,800			119,445			122,095			119,125
Diluted - GAAP (3)	122,390			121,800			119,445			122,095			119,125
Diluted - Non-GAAP (3)	124,527			124,343			120,871			124,276			119,125


(1) Legal fees and outside services in connection with our pending acquisition by Canyon Bridge Acquisition Company, Inc.
(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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