Second Quarter 2017 Financial Highlights*:

• Revenue of $94.1 million.
• On a GAAP basis, net loss of $13.0 million or $0.11 per basic and diluted share.
• On a Non-GAAP basis, net income of $124 thousand or $0.00 per basic and diluted share.
• Gross margin of 54.4% on a GAAP basis and 54.6% 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) — August 8, 2017 — Lattice Semiconductor Corporation (NASDAQ: LSCC), the leading provider of customizable smart connectivity solutions, announced financial results today for the fiscal second quarter ended July 1, 2017.

The Company reported revenue for the second quarter of 2017 of $94.1 million, which decreased 10.0% sequentially, as compared to the first quarter 2017 revenue of $104.6 million, and decreased 5.1%, as compared to the second quarter 2016 revenue of $99.2 million.

Gross margin on a GAAP basis was 54.4% for the second quarter of 2017, as compared to the first quarter of 2017 gross margin of 58.2% and 58.9% for the second quarter of 2016. Gross margin for the second quarter of 2017 was 54.6% on a non-GAAP basis, as compared to 58.4% for the first quarter of 2017 and 59.1% for the second quarter of 2016.

Total operating expenses for the second quarter of 2017 were $59.9 million on a GAAP basis, as compared to $61.5 million for the first quarter of 2017 and $64.8 million for the second quarter of 2016. Total operating expenses were $46.0 million for the second quarter of 2017 on a non-GAAP basis, as compared to $47.7 million for the first quarter of 2017, and $50.8 million for the second quarter of 2016.

GAAP net loss for the second quarter was $13.0 million ($0.11 per basic and diluted share), with net income of $0.1 million ($0.00 per basic and diluted share) on a non-GAAP basis. This compares to a net loss on a GAAP basis in the prior quarter of $7.3 million ($0.06 per basic and diluted share), with net income on a non-GAAP basis in the prior quarter of $7.1 million ($0.06 per basic and diluted share), and compares to a net loss on a GAAP basis in the year ago period of $13.8 million ($0.12 per basic and diluted share), with net income of $0.2 million ($0.00 per basic and diluted share) on a non-GAAP basis. GAAP results for the second quarter of 2017 reflect $1.6 million in restructuring charges, $0.9 million in acquisition related charges, less than $0.1 million in tax expense, $8.7 million in amortization of acquired intangible assets, and $2.9 million in stock-based compensation expense. GAAP results for the first quarter of 2017 reflect less than $0.1 million in restructuring charges, $1.7 million in acquisition related charges, $0.5 million in tax expense, $8.5 million in amortization of acquired intangible assets, and $3.8 million in stock-based compensation expense. 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.

Darin G. Billerbeck, President and Chief Executive Officer, said, "Revenue declined in the second quarter due to lower shipments to handset customers along with continued macro softness in the China communications market. Despite the near term environment, we are very encouraged by the pace and attractiveness of our design wins and the growth prospects in handsets and other smart consumer devices at large OEMs. While revenue during the third quarter is likely to be relatively flat sequentially, we expect to see an uptick in the fourth quarter of 2017 based on our strategy to continue growing our base FPGA business along with investing in the next wave of growth initiatives, including mmWave, Human Machine Interface and Artificial Intelligence."

Max Downing, Chief Financial Officer, added, "During the second quarter of 2017, we generated $3.8 million in cash flow from operations and paid approximately $30.0 million in debt payments ($22.9 million for principal and $7.1 million for interest) as compared to debt payments of $15.8 million in the prior quarter ($10.8 million for principal and $5.0 million for interest). As part of our efforts to maximize profitability, we are taking decisive actions to right size our cost and operating structure to focus on the areas of our business with the highest strategic value and greatest return. We currently expect to exit the third quarter of 2017 with quarterly non-GAAP operating expenses reduced to approximately $43 million to $45 million. Other infrastructure activities we have in place are expected to help us further reduce our quarterly non-GAAP operating expense level to approximately $40 million, while also achieving a non-GAAP operating income target of 20% by the end of the first quarter of 2018."