Lattice Semiconductor Reports First Quarter 2023 Results

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
	April 1,			December 31,			April 2,
	2023			2022			2022
Revenue	$	184,310		$	175,960		$	150,515
Cost of sales		55,709			53,894			49,748
Gross margin		128,601			122,066			100,767
Operating expenses:
Research and development		35,989			34,779			32,555
Selling, general, and administrative		32,578			32,355			28,771
Amortization of acquired intangible assets		870			870			1,169
Restructuring		30			46			54
Acquisition related charges		—			—			455
Total operating expenses		69,467			68,050			63,004
Income from operations		59,134			54,016			37,763
Interest expense, net		(555	)		(1,280	)		(708	)
Other (expense) income, net		(95	)		(24	)		(22	)
Income before income taxes		58,484			52,712			37,033
Income tax expense		2,561			799			955
Net income	$	55,923		$	51,913		$	36,078

Net income per share:
Basic	$	0.41		$	0.38		$	0.26
Diluted	$	0.40		$	0.37		$	0.26

Shares used in per share calculations:
Basic		137,418			137,095			137,500
Diluted		140,101			139,631			141,281

Lattice Semiconductor Corporation
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)

	April 1,		December 31,
	2023		2022
Assets
Current assets:
Cash and cash equivalents	$	112,136	$	145,722
Accounts receivable, net		90,822		94,018
Inventories, net		117,079		110,375
Other current assets		28,843		29,052
Total current assets		348,880		379,167

Property and equipment, net		51,086		47,614
Operating lease right-of-use assets		16,054		17,590
Intangible assets, net		23,930		25,070
Goodwill		315,358		315,358
Other long-term assets		12,321		13,914
	$	767,629	$	798,713

Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	40,843	$	42,036
Accrued liabilities		40,661		48,467
Accrued payroll obligations		15,654		36,870
Total current liabilities		97,158		127,373

Long-term debt		103,819		128,752
Long-term operating lease liabilities, net of current portion		12,012		13,618
Other long-term liabilities		39,666		41,807
Total liabilities		252,655		311,550

Stockholders' equity		514,974		487,163
	$	767,629	$	798,713

Lattice Semiconductor Corporation
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)

	Three Months Ended
	April 1,			April 2,
	2023			2022
Cash flows from operating activities:
Net income	$	55,923		$	36,078
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Stock-based compensation expense		14,255			14,125
Depreciation and amortization		8,090			7,179
Other non-cash adjustments		1,702			1,740
Net changes in assets and liabilities		(35,106	)		(15,917	)
Net cash provided by (used in) operating activities		44,864			43,205
Cash flows from investing activities:
Capital expenditures		(8,414	)		(4,426	)
Other investing activities		(2,615	)		(2,704	)
Net cash provided by (used in) investing activities		(11,029	)		(7,130	)
Cash flows from financing activities:
Repayment of long-term debt		(25,000	)		(4,375	)
Repurchase of common stock		(10,004	)		(15,000	)
Net cash flows related to stock compensation exercises		(32,552	)		(25,028	)
Net cash provided by (used in) financing activities		(67,556	)		(44,403	)
Effect of exchange rate change on cash		135			(253	)
Net increase (decrease) in cash and cash equivalents		(33,586	)		(8,581	)
Beginning cash and cash equivalents		145,722			131,570
Ending cash and cash equivalents	$	112,136		$	122,989

Supplemental disclosure of cash flow information and non-cash investing and financing activities:
Interest paid	$	1,849		$	552
Income taxes paid, net of refunds	$	413		$	761
Operating lease payments	$	2,000		$	1,884

Lattice Semiconductor Corporation
Supplemental Historical Financial Information
(unaudited)

	Three Months Ended
	April 1,			December 31,			April 2,
	2023			2022			2022
Balance Sheet Information
A/R Days Revenue Outstanding (DSO)		45			49			50
Inventory Days (DIO)		192			187			132

Revenue % (by Geography)
Asia		57	%		65	%		72	%
Americas		23	%		19	%		15	%
Europe (incl. Africa)		20	%		16	%		13	%

Revenue % (by End Market) *
Communications and Computing		36	%		42	%		43	%
Industrial and Automotive		59	%		51	%		46	%
Consumer		5	%		7	%		11	%

Revenue $M (by End Market) *
Communications and Computing	$	66.3		$	73.2		$	64.1
Industrial and Automotive	$	108.3		$	89.6		$	69.6
Consumer	$	9.7		$	13.2		$	16.8

Revenue % (by Channel)
Distribution		88	%		89	%		90	%
Direct		12	%		11	%		10	%

* During the first quarter of fiscal 2023, we realigned our end market categories. Prior periods have been reclassified to match current period presentation.

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

	Three Months Ended
	April 1,		December 31,		April 2,
	2023		2022		2022
*Gross Margin Reconciliation*
GAAP Gross margin	$	128,601	$	122,066	$	100,767
Stock-based compensation - gross margin (1)		1,023		1,056		1,121
Non-GAAP Gross margin	$	129,624	$	123,122	$	101,888

*Gross Margin % Reconciliation*
GAAP Gross margin %	69.8	%	69.4	%	66.9	%
Cumulative effect of non-GAAP Gross Margin adjustments	0.5	%	0.6	%	0.8	%
Non-GAAP Gross margin %	70.3	%	70.0	%	67.7	%

*Research and Development Expense % (R&D Expense %) Reconciliation*
GAAP R&D Expense %	19.5	%	19.8	%	21.6	%
Stock-based compensation - R&D (1)	(3.0	)%	(3.0	)%	(3.4	)%
Non-GAAP R&D Expense %	16.5	%	16.8	%	18.2	%

*Selling, General, and Administrative Expense % (SG&A Expense %) Reconciliation*
GAAP SG&A Expense %	17.7	%	18.4	%	19.1	%
Stock-based compensation - SG&A (1)	(4.7	)%	(4.7	)%	(5.9	)%
Litigation expense (2)	(0.2	)%	(0.6	)%	—	%
Non-GAAP SG&A Expense %	12.8	%	13.1	%	13.2	%

*Operating Expenses Reconciliation*
GAAP Operating expenses	$	69,467		$	68,050		$	63,004
Stock-based compensation - operations (1)		(14,296	)		(13,584	)		(14,083	)
Litigation expense (2)		(288	)		(1,081	)		—
Amortization of acquired intangible assets		(870	)		(870	)		(1,169	)
Restructuring and other charges		(30	)		(46	)		(509	)
Non-GAAP Operating expenses	$	53,983		$	52,469		$	47,243

*Income from Operations Reconciliation*
GAAP Income from operations	$	59,134	$	54,016	$	37,763
Stock-based compensation - gross margin (1)		1,023		1,056		1,121
Stock-based compensation - operations (1)		14,296		13,584		14,083
Litigation expense (2)		288		1,081		—
Amortization of acquired intangible assets		870		870		1,169
Restructuring and other charges		30		46		509
Non-GAAP Income from operations	$	75,641	$	70,653	$	54,645

*Income from Operations % Reconciliation*
GAAP Income from operations %	32.1	%	30.7	%	25.1	%
Cumulative effect of non-GAAP Gross Margin and Operating adjustments	8.9	%	9.5	%	11.2	%
Non-GAAP Income from operations %	41.0	%	40.2	%	36.3	%

(1)		The non-GAAP adjustments for Stock-based compensation include related payroll tax expenses.
(2)		Legal expenses associated with the defense of claims that are outside the ordinary course of business that were brought against the Company by Steven A.W. De Jaray, Perienne De Jaray and Darrell R. Oswalde.

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

	Three Months Ended
	April 1,			December 31,			April 2,
	2023			2022			2022
*Other (Expense) Income Reconciliation*
GAAP Other (expense) income, net	$	(95	)	$	(24	)	$	(22	)
Loss on re-financing of long-term debt		—			4			—
Non-GAAP Other (expense) income, net	$	(95	)	$	(20	)	$	(22	)

*Income Tax Expense Reconciliation*
GAAP Income tax expense	$	2,561		$	799	$	955
Estimated tax effect of non-GAAP adjustments		1,670			187		264
Change in tax law (3)		(1,012	)		—		—
Non-GAAP Income tax expense	$	3,219		$	986	$	1,219

*Net Income Reconciliation*
GAAP Net income	$	55,923		$	51,913		$	36,078
Stock-based compensation - gross margin (1)		1,023			1,056			1,121
Stock-based compensation - operations (1)		14,296			13,584			14,083
Litigation expense (2)		288			1,081			—
Amortization of acquired intangible assets		870			870			1,169
Restructuring and other charges		30			46			509
Loss on re-financing of long-term debt		—			4			—
Estimated tax effect of non-GAAP adjustments		(1,670	)		(187	)		(264	)
Change in tax law (3)		1,012			—			—
Non-GAAP Net income	$	71,772		$	68,367		$	52,696

*Net Income Per Share Reconciliation*
GAAP Net income per share - basic	$	0.41	$	0.38	$	0.26
Cumulative effect of Non-GAAP adjustments		0.11		0.12		0.12
Non-GAAP Net income per share - basic	$	0.52	$	0.50	$	0.38

GAAP Net income per share - diluted	$	0.40	$	0.37	$	0.26
Cumulative effect of Non-GAAP adjustments		0.11		0.12		0.11
Non-GAAP Net income per share - diluted	$	0.51	$	0.49	$	0.37

Shares used in per share calculations:
Basic		137,418		137,095		137,500
Diluted		140,101		139,631		141,281

(1)		The non-GAAP adjustments for Stock-based compensation include related payroll tax expenses.
(2)		Legal expenses associated with the defense of claims that are outside the ordinary course of business that were brought against the Company by Steven A.W. De Jaray, Perienne De Jaray and Darrell R. Oswalde.
(3)		Adjustments for Change in tax law reflect an increase in our provision for U.S. tax on foreign operations resulting from The 2017 Tax Cuts and Jobs Act and is related to the capitalization and subsequent amortization of R&D costs for tax purposes.

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