Lattice Semiconductor Reports Third Quarter 2021 Results

Third Quarter 2021 Highlights

  • Revenue Growth: Third consecutive quarter of double-digit growth, with revenue increasing 28% in Q3 2021 compared to Q3 2020 and 5% compared to Q2 2021.
  • Profit Expansion: Gross margin expanded 230 basis points on a GAAP basis and 210 basis points on a non-GAAP basis compared to Q3 2020, with net income increasing 112% on a GAAP basis and 49% on a non-GAAP basis compared to Q3 2020.
  • Lattice Wins 2021 Sustainability Leadership Award: The Business Intelligence Group recognized Lattice for its company-wide commitment to sustainability and organization-wide support to achieve a cleaner, more sustainable world. This is a key focus for Lattice, driven by the Company's leadership in power-efficient products.
  • Award-Winning Lattice mVision™ Solution Stack™: Lattice's mVision stack now supports 4K video data processing and LPDDR4 memory to deliver higher quality image signal processing (ISP) performance. This allows developers to quickly implement popular high-speed communication and display interfaces to accelerate embedded vision performance with class-leading low power consumption for Edge applications.
  • Lattice Certus™-NX for Automotive Applications: Lattice expanded its growing portfolio of automotive products with optimized versions of the Lattice Certus™-NX FPGA family. Built on the Lattice Nexus™ platform, these new Certus-NX devices combine automotive-grade features with class-leading performance and power efficiency.

Business Outlook - Fourth Quarter of 2021:

  • Revenue for the fourth quarter of 2021 is expected to be between $129 million and $139 million.
  • Gross margin percentage for the fourth quarter of 2021 is expected to be 64% plus or minus 1% on a non-GAAP basis.
  • Total operating expenses for the fourth quarter of 2021 are expected to be between $44 million and $46 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 fourth quarter of 2021, 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 third quarter 2021, and business outlook on Tuesday, November 2 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 4666084. 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 are continuing to expand our leadership product portfolio; and the statements under the heading “Business Outlook - Fourth Quarter of 2021.” 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 January 2, 2021, 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 January 2, 2021. 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, 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

 

 

Nine Months Ended

 

 

 

October 2,

 

 

July 3,

 

 

September 26,

 

 

October 2,

 

 

September 26,

 

 

 

2021

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Revenue

 

$

131,911

 

 

$

125,905

 

 

$

103,042

 

 

$

373,532

 

 

$

300,947

 

Cost of sales

 

 

49,086

 

 

 

48,721

 

 

 

40,736

 

 

 

142,937

 

 

 

120,502

 

Gross margin

 

 

82,825

 

 

 

77,184

 

 

 

62,306

 

 

 

230,595

 

 

 

180,445

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

28,769

 

 

 

27,454

 

 

 

22,439

 

 

 

80,289

 

 

 

66,590

 

Selling, general, and administrative

 

 

26,272

 

 

 

25,607

 

 

 

23,758

 

 

 

76,971

 

 

 

70,797

 

Amortization of acquired intangible assets

 

 

603

 

 

 

603

 

 

 

603

 

 

 

1,809

 

 

 

3,846

 

Restructuring

 

 

166

 

 

 

204

 

 

 

2,692

 

 

 

546

 

 

 

4,178

 

Total operating expenses

 

 

55,810

 

 

 

53,868

 

 

 

49,492

 

 

 

159,615

 

 

 

145,411

 

Income from operations

 

 

27,015

 

 

 

23,316

 

 

 

12,814

 

 

 

70,980

 

 

 

35,034

 

Interest expense

 

 

(661

)

 

 

(702

)

 

 

(792

)

 

 

(2,081

)

 

 

(2,914

)

Other (expense) income, net

 

 

(87

)

 

 

(135

)

 

 

(70

)

 

 

(384

)

 

 

(83

)

Income before income taxes

 

 

26,267

 

 

 

22,479

 

 

 

11,952

 

 

 

68,515

 

 

 

32,037

 

Income tax expense (benefit)

 

 

(472

)

 

 

641

 

 

 

(655

)

 

 

1,125

 

 

 

634

 

Net income

 

$

26,739

 

 

$

21,838

 

 

$

12,607

 

 

$

67,390

 

 

$

31,403

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.20

 

 

$

0.16

 

 

$

0.09

 

 

$

0.49

 

 

$

0.23

 

Diluted

 

$

0.19

 

 

$

0.15

 

 

$

0.09

 

 

$

0.47

 

 

$

0.22

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares used in per share calculations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

136,638

 

 

 

136,388

 

 

 

135,598

 

 

 

136,476

 

 

 

134,903

 

Diluted

 

 

141,632

 

 

 

141,491

 

 

 

141,524

 

 

 

142,163

 

 

 

140,763

 

Lattice Semiconductor Corporation

Condensed Consolidated Balance Sheets

(in thousands)

(unaudited)

 

 

 

 

 

 

 

 

 

October 2,

 

 

January 2,

 

 

 

2021

 

 

2021

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

181,452

 

 

$

182,332

 

Accounts receivable, net

 

 

79,606

 

 

 

64,581

 

Inventories, net

 

 

66,105

 

 

 

64,599

 

Other current assets

 

 

24,596

 

 

 

22,331

 

Total current assets

 

 

351,759

 

 

 

333,843

 

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

37,261

 

 

 

39,666

 

Operating lease right-of-use assets

 

 

24,822

 

 

 

22,178

 

Intangible assets, net

 

 

5,643

 

 

 

6,321

 

Goodwill

 

 

267,514

 

 

 

267,514

 

Deferred income taxes

 

 

563

 

 

 

577

 

Other long-term assets

 

 

17,277

 

 

 

9,968

 

 

 

$

704,839

 

 

$

680,067

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

36,323

 

 

$

27,530

 

Accrued expenses

 

 

24,518

 

 

 

21,411

 

Accrued payroll obligations

 

 

25,365

 

 

 

18,028

 

Current portion of long-term debt

 

 

17,163

 

 

 

12,762

 

Total current liabilities

 

 

103,369

 

 

 

79,731

 

 

 

 

 

 

 

 

 

 

Long-term debt, net of current portion

 

 

145,057

 

 

 

157,934

 

Long-term operating lease liabilities, net of current portion

 

 

20,407

 

 

 

18,906

 

Other long-term liabilities

 

 

43,106

 

 

 

39,069

 

Total liabilities

 

 

311,939

 

 

 

295,640

 

 

 

 

 

 

 

 

 

 

Stockholders' equity

 

 

392,900

 

 

 

384,427

 

 

 

$

704,839

 

 

$

680,067

 

Lattice Semiconductor Corporation

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

 

 

 

Nine Months Ended

 

 

 

October 2,

 

 

September 26,

 

 

 

2021

 

 

2020

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income

 

$

67,390

 

 

$

31,403

 

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

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

32,624

 

 

 

30,228

 

Depreciation and amortization

 

 

17,839

 

 

 

19,263

 

Other non-cash adjustments

 

 

5,083

 

 

 

4,663

 

Net changes in assets and liabilities

 

 

(6,873

)

 

 

(16,599

)

Net cash provided by (used in) operating activities

 

 

116,063

 

 

 

68,958

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Capital expenditures

 

 

(7,118

)

 

 

(9,781

)

Other investing activities

 

 

(9,534

)

 

 

(6,850

)

Net cash provided by (used in) investing activities

 

 

(16,652

)

 

 

(16,631

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from long-term debt

 

 

 

 

 

50,000

 

Repayment of long-term debt

 

 

(8,750

)

 

 

(26,250

)

Repurchase of common stock

 

 

(55,126

)

 

 

 

Net cash flows related to stock compensation exercises

 

 

(36,347

)

 

 

(12,789

)

Net cash provided by (used in) financing activities

 

 

(100,223

)

 

 

10,961

 

Effect of exchange rate change on cash

 

 

(68

)

 

 

899

 

Net increase in cash and cash equivalents

 

 

(880

)

 

 

64,187

 

Beginning cash and cash equivalents

 

 

182,332

 

 

 

118,081

 

Ending cash and cash equivalents

 

$

181,452

 

 

$

182,268

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

Interest paid

 

$

1,755

 

 

$

2,849

 

Income taxes paid, net of refunds

 

$

2,842

 

 

$

2,317

 

Lattice Semiconductor Corporation

Supplemental Historical Financial Information

(unaudited)

 

 

 

Three Months Ended

 

 

 

October 2,

 

 

July 3,

 

 

September 26,

 

 

 

2021

 

 

2021

 

 

2020

 

Balance Sheet Information

 

 

 

 

 

 

 

 

 

 

 

 

A/R Days Revenue Outstanding (DSO)

 

 

55

 

 

 

52

 

 

 

65

 

Inventory Days (DIO)

 

 

123

 

 

 

123

 

 

 

133

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue% (by Geography)

 

 

 

 

 

 

 

 

 

 

 

 

Asia

 

 

75

%

 

 

77

%

 

 

77

%

Americas

 

 

15

%

 

 

14

%

 

 

15

%

Europe (incl. Africa)

 

 

10

%

 

 

9

%

 

 

8

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue% (by End Market)

 

 

 

 

 

 

 

 

 

 

 

 

Communications and Computing

 

 

42

%

 

 

42

%

 

 

43

%

Industrial and Automotive

 

 

45

%

 

 

45

%

 

 

41

%

Consumer

 

 

10

%

 

 

10

%

 

 

10

%

Licensing and Services

 

 

3

%

 

 

3

%

 

 

6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue% (by Channel)

 

 

 

 

 

 

 

 

 

 

 

 

Distribution

 

 

90

%

 

 

88

%

 

 

82

%

Direct

 

 

10

%

 

 

12

%

 

 

18

%

Lattice Semiconductor Corporation

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

(in thousands, except per share data)

(unaudited)

 

 

 

Three Months Ended

 

 

 

October 2,

 

 

July 3,

 

 

September 26,

 

 

 

2021

 

 

2021

 

 

2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Margin Reconciliation

 

 

 

 

 

 

 

 

 

 

 

 

GAAP Gross margin

 

$

82,825

 

 

$

77,184

 

 

$

62,306

 

Stock-based compensation - gross margin (1)

 

 

1,056

 

 

 

995

 

 

 

1,022

 

Non-GAAP Gross margin

 

$

83,881

 

 

$

78,179

 

 

$

63,328

 

Gross Margin % Reconciliation

 

 

 

 

 

 

 

 

 

 

 

 

GAAP Gross margin %

 

 

62.8

%

 

 

61.3

%

 

 

60.5

%

Cumulative effect of non-GAAP Gross Margin adjustments

 

 

0.8

%

 

 

0.8

%

 

 

1.0

%

Non-GAAP Gross margin %

 

 

63.6

%

 

 

62.1

%

 

 

61.5

%

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

 

 

 

 

 

 

 

 

 

 

 

 

GAAP R&D Expense %

 

 

21.8

%

 

 

21.8

%

 

 

21.8

%

Stock-based compensation - R&D (1)

 

 

(3.0

)%

 

 

(3.4

)%

 

 

(2.8

)%

Non-GAAP R&D Expense %

 

 

18.8

%

 

 

18.4

%

 

 

19.0

%

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

 

 

 

 

 

 

 

 

 

 

 

 

GAAP SG&A Expense %

 

 

19.9

%

 

 

20.3

%

 

 

23.1

%

Stock-based compensation - SG&A (1)

 

 

(5.1

)%

 

 

(5.7

)%

 

 

(7.1

)%

Non-GAAP SG&A Expense %

 

 

14.8

%

 

 

14.6

%

 

 

16.0

%

Operating Expenses Reconciliation

 

 

 

 

 

 

 

 

 

 

 

 

GAAP Operating expenses

 

$

55,810

 

 

$

53,868

 

 

$

49,492

 

Stock-based compensation - operations (1)

 

 

(10,704

)

 

 

(11,533

)

 

 

(10,189

)

Amortization of acquired intangible assets

 

 

(603

)

 

 

(603

)

 

 

(603

)

Restructuring and other charges

 

 

(701

)

 

 

(204

)

 

 

(2,692

)

Non-GAAP Operating expenses

 

$

43,802

 

 

$

41,528

 

 

$

36,008

 

Income from Operations Reconciliation

 

 

 

 

 

 

 

 

 

 

 

 

GAAP Income from operations

 

$

27,015

 

 

$

23,316

 

 

$

12,814

 

Stock-based compensation - gross margin (1)

 

 

1,056

 

 

 

995

 

 

 

1,022

 

Stock-based compensation - operations (1)

 

 

10,704

 

 

 

11,533

 

 

 

10,189

 

Amortization of acquired intangible assets

 

 

603

 

 

 

603

 

 

 

603

 

Restructuring and other charges

 

 

701

 

 

 

204

 

 

 

2,692

 

Non-GAAP Income from operations

 

$

40,079

 

 

$

36,651

 

 

$

27,320

 

Income from Operations % Reconciliation

 

 

 

 

 

 

 

 

 

 

 

 

GAAP Income from operations %

 

 

20.5

%

 

 

18.5

%

 

 

12.4

%

Cumulative effect of non-GAAP Gross Margin and Operating adjustments

 

 

9.9

%

 

 

10.6

%

 

 

14.1

%

Non-GAAP Income from operations %

 

 

30.4

%

 

 

29.1

%

 

 

26.5

%

(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

 

 

 

October 2,

 

 

July 3,

 

 

September 26,

 

 

 

2021

 

 

2021

 

 

2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income Tax Expense (Benefit) Reconciliation

 

 

 

 

 

 

 

 

 

 

 

 

GAAP Income tax expense (benefit)

 

$

(472

)

 

$

641

 

 

$

(655

)

Estimated tax effect of non-GAAP adjustments (2)

 

 

183

 

 

 

(33

)

 

 

478

 

Non-GAAP Income tax expense (benefit)

 

$

(289

)

 

$

608

 

 

$

(177

)

Net Income Reconciliation

 

 

 

 

 

 

 

 

 

 

 

 

GAAP Net income

 

$

26,739

 

 

$

21,838

 

 

$

12,607

 

Stock-based compensation - gross margin (1)

 

 

1,056

 

 

 

995

 

 

 

1,022

 

Stock-based compensation - operations (1)

 

 

10,704

 

 

 

11,533

 

 

 

10,189

 

Amortization of acquired intangible assets

 

 

603

 

 

 

603

 

 

 

603

 

Restructuring and other charges

 

 

701

 

 

 

204

 

 

 

2,692

 

Estimated tax effect of non-GAAP adjustments (2)

 

 

(183

)

 

 

33

 

 

 

(478

)

Non-GAAP Net income

 

$

39,620

 

 

$

35,206

 

 

$

26,635

 

Net Income Per Share Reconciliation

 

 

 

 

 

 

 

 

 

 

 

 

GAAP Net income per share - basic

 

$

0.20

 

 

$

0.16

 

 

$

0.09

 

Cumulative effect of Non-GAAP adjustments

 

 

0.09

 

 

 

0.10

 

 

 

0.11

 

Non-GAAP Net income per share - basic

 

$

0.29

 

 

$

0.26

 

 

$

0.20

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP Net income per share - diluted

 

$

0.19

 

 

$

0.15

 

 

$

0.09

 

Cumulative effect of Non-GAAP adjustments

 

 

0.09

 

 

 

0.10

 

 

 

0.10

 

Non-GAAP Net income per share - diluted

 

$

0.28

 

 

$

0.25

 

 

$

0.19

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares used in per share calculations:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

136,638

 

 

 

136,388

 

 

 

135,598

 

Diluted

 

 

141,632

 

 

 

141,491

 

 

 

141,524

 

(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.”





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