Lattice Semiconductor Reports Fourth Quarter and Full Year 2023

Lattice Semiconductor Reports Fourth Quarter and Full Year 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, or Weibo.


Lattice Semiconductor Corporation Consolidated Statements of Operations (in thousands, except per share data) (unaudited)

	Three Months Ended								Year Ended
	December 30,			September 30,		December 31,			December 30,			December 31,
	2023			2023		2022			2023			2022
Revenue	$	170,596		$	192,169	$	175,960		$	737,154		$	660,356
Cost of sales		51,649			57,608		53,894			222,484			208,306
Gross margin		118,947			134,561		122,066			514,670			452,050
Operating expenses:
Research and development		39,787			42,048		34,779			159,770			135,767
Selling, general, and administrative		34,661			33,217		32,355			137,244			122,076
Amortization of acquired intangible assets		869			870		870			3,478			3,778
Restructuring		481			1,509		46			1,908			2,551
Acquisition related		—			—		—			—			511
Total operating expenses		75,798			77,644		68,050			302,400			264,683
Income from operations		43,149			56,917		54,016			212,270			187,367
Interest income (expense), net		1,453			954		(1,280	)		2,041			(4,146	)
Other income (expense), net		802			14		(24	)		545			(1,109	)
Income before income taxes		45,404			57,885		52,712			214,856			182,112
Income tax (benefit) expense		(53,302	)		4,097		799			(44,205	)		3,230
Net income	$	98,706		$	53,788	$	51,913		$	259,061		$	178,882

Net income per share:
Basic	$	0.72		$	0.39	$	0.38		$	1.88		$	1.30
Diluted	$	0.71		$	0.38	$	0.37		$	1.85		$	1.27

Shares used in per share calculations:
Basic		137,686			137,948		137,095			137,694			137,321
Diluted		139,114			139,828		139,631			139,790			140,667

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

	December 30,		December 31,
	2023		2022
Assets
Current assets:
Cash and cash equivalents	$	128,317	$	145,722
Accounts receivable, net		104,373		94,018
Inventories, net		98,826		110,375
Other current assets		36,430		29,052
Total current assets		367,946		379,167

Property and equipment, net		49,546		47,614
Operating lease right-of-use assets		14,487		17,590
Intangible assets, net		20,974		25,070
Goodwill		315,358		315,358
Deferred income taxes		57,762		1,022
Other long-term assets		14,821		12,892
	$	840,894	$	798,713

Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	34,487	$	42,036
Accrued liabilities		36,048		48,467
Accrued payroll obligations		26,865		36,870
Total current liabilities		97,400		127,373

Long-term debt		—		128,752
Long-term operating lease liabilities, net of current portion		10,739		13,618
Other long-term liabilities		40,735		41,807
Total liabilities		148,874		311,550

Stockholders' equity		692,020		487,163
	$	840,894	$	798,713

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

	Year Ended
	December 30,			December 31,
	2023			2022
Cash flows from operating activities:
Net income	$	259,061		$	178,882
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Stock-based compensation expense		70,197			55,530
Depreciation and amortization		34,432			29,323
Change in deferred income tax provision		(58,614	)		(1,420	)
Other non-cash adjustments		7,017			8,415
Net changes in assets and liabilities		(42,505	)		(31,924	)
Net cash provided by (used in) operating activities		269,588			238,806
Cash flows from investing activities:
Capital expenditures		(20,098	)		(23,338	)
Other investing activities		(13,152	)		(11,594	)
Net cash provided by (used in) investing activities		(33,250	)		(34,932	)
Cash flows from financing activities:
Proceeds from long-term debt, net of issuance costs		—			148,597
Repayment of long-term debt		(130,000	)		(178,750	)
Repurchase of common stock		(80,004	)		(110,132	)
Net cash flows related to stock compensation exercises		(43,713	)		(47,787	)
Net cash provided by (used in) financing activities		(253,717	)		(188,072	)
Effect of exchange rate change on cash		(26	)		(1,650	)
Net increase (decrease) in cash and cash equivalents		(17,405	)		14,152
Beginning cash and cash equivalents		145,722			131,570
Ending cash and cash equivalents	$	128,317		$	145,722

Supplemental disclosure of cash flow information and non-cash investing and financing activities:
Interest paid	$	3,240		$	3,973
Income taxes paid, net of refunds	$	15,754		$	4,621
Operating lease payments	$	8,344		$	7,419

Lattice Semiconductor Corporation Supplemental Historical Financial Information (unaudited)

	Three Months Ended									Year Ended
	December 30,			September 30,			December 31,			December 30,			December 31,
	2023			2023			2022			2023			2022
Balance Sheet Information
A/R Days Revenue Outstanding (DSO)		56			50			49
Inventory Days (DIO)		175			165			187

Revenue % (by Geography)
Asia		60	%		61	%		65	%		60	%		71	%
Americas		22	%		17	%		19	%		20	%		15	%
Europe (incl. Africa)		18	%		22	%		16	%		20	%		14	%

Revenue % (by End Market) *
Communications and Computing		34	%		36	%		42	%		35	%		43	%
Industrial and Automotive		59	%		57	%		51	%		59	%		48	%
Consumer		7	%		7	%		7	%		6	%		9	%

Revenue $M (by End Market) *
Communications and Computing	$	58.7		$	68.4		$	73.2		$	257.6		$	282.9
Industrial and Automotive	$	99.8		$	109.9		$	89.6		$	433.5		$	319.4
Consumer	$	12.1		$	13.9		$	13.2		$	46.1		$	58.1

Revenue % (by Channel)
Distribution		82	%		90	%		89	%		87	%		89	%
Direct		18	%		10	%		11	%		13	%		11	%

* 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						Year Ended
	December 30,		September 30,		December 31,		December 30,		December 31,
	2023		2023		2022		2023		2022
*Gross Margin Reconciliation*
GAAP Gross margin	$	118,947	$	134,561	$	122,066	$	514,670	$	452,050
Stock-based compensation - gross margin (1)		1,111		1,053		1,056		4,612		4,310
Non-GAAP Gross margin	$	120,058	$	135,614	$	123,122	$	519,282	$	456,360

*Gross Margin % Reconciliation*
GAAP Gross margin %	69.7	%	70.0	%	69.4	%	69.8	%	68.5	%
Stock-based compensation - gross margin (1)	0.7	%	0.6	%	0.6	%	0.6	%	0.6	%
Non-GAAP Gross margin %	70.4	%	70.6	%	70.0	%	70.4	%	69.1	%

*Research and Development Expense % (R&D Expense %) Reconciliation*
GAAP R&D Expense %	23.3	%	21.9	%	19.8	%	21.7	%	20.6	%
Stock-based compensation - R&D (1)	(4.6	)%	(3.7	)%	(3.0	)%	(3.9	)%	(3.2	)%
Non-GAAP R&D Expense %	18.7	%	18.2	%	16.8	%	17.8	%	17.4	%

*Selling, General, and Administrative Expense % (SG&A Expense %) Reconciliation*
GAAP SG&A Expense %	20.3	%	17.3	%	18.4	%	18.6	%	18.5	%
Stock-based compensation - SG&A (1)	(5.3	)%	(4.6	)%	(4.7	)%	(5.3	)%	(5.1	)%
Litigation expense (2)	(1.2	)%	(0.6	)%	(0.6	)%	(0.5	)%	(0.4	)%
Non-GAAP SG&A Expense %	13.8	%	12.1	%	13.1	%	12.8	%	13.0	%

*Operating Expenses Reconciliation*
GAAP Operating expenses	$	75,798		$	77,644		$	68,050		$	302,400		$	264,683
Stock-based compensation - operations (1)		(16,811	)		(15,956	)		(13,584	)		(67,340	)		(54,119	)
Litigation expense (2)		(2,098	)		(1,103	)		(1,081	)		(3,928	)		(2,727	)
Amortization of acquired intangible assets		(869	)		(870	)		(870	)		(3,478	)		(3,778	)
Restructuring and other		(525	)		(1,509	)		(46	)		(1,952	)		(3,062	)
Non-GAAP Operating expenses	$	55,495		$	58,206		$	52,469		$	225,702		$	200,997

*Income from Operations Reconciliation*
GAAP Income from operations	$	43,149	$	56,917	$	54,016	$	212,270	$	187,367
Stock-based compensation - gross margin (1)		1,111		1,053		1,056		4,612		4,310
Stock-based compensation - operations (1)		16,811		15,956		13,584		67,340		54,119
Litigation expense (2)		2,098		1,103		1,081		3,928		2,727
Amortization of acquired intangible assets		869		870		870		3,478		3,778
Restructuring and other		525		1,509		46		1,952		3,062
Non-GAAP Income from operations	$	64,563	$	77,408	$	70,653	$	293,580	$	255,363

(1)		The non-GAAP adjustments for Stock-based compensation include related 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									Year Ended
	December 30,			September 30,			December 31,			December 30,			December 31,
	2023			2023			2022			2023			2022
*Income from Operations % Reconciliation*
GAAP Income from operations %		25.3	%		29.6	%		30.7	%		28.8	%		28.4	%
Cumulative effect of non-GAAP Gross Margin and Operating adjustments		12.5	%		10.7	%		9.5	%		11.0	%		10.3	%
Non-GAAP Income from operations %		37.8	%		40.3	%		40.2	%		39.8	%		38.7	%

*Other Income (Expense) Reconciliation*
GAAP Other income (expense), net	$	802	$	14	$	(24	)	$	545	$	(1,109	)
Loss on re-financing of long-term debt		—		—		4			—		739
Non-GAAP Other income (expense), net	$	802	$	14	$	(20	)	$	545	$	(370	)

*Income Tax (Benefit) Expense Reconciliation*
GAAP Income tax (benefit) expense	$	(53,302	)	$	4,097		$	799	$	(44,205	)	$	3,230
Estimated tax effect of non-GAAP adjustments		1,170			1,467			187		5,679			938
Non-cash changes in net deferred income taxes (3)		56,913			—			—		56,913			—
Change in tax law (4)		(764	)		(766	)		—		(2,881	)		—
Non-GAAP Income tax expense	$	4,017		$	4,798		$	986	$	15,506		$	4,168

*Net Income Reconciliation*
GAAP Net income	$	98,706		$	53,788		$	51,913		$	259,061		$	178,882
Stock-based compensation - gross margin (1)		1,111			1,053			1,056			4,612			4,310
Stock-based compensation - operations (1)		16,811			15,956			13,584			67,340			54,119
Litigation expense (2)		2,098			1,103			1,081			3,928			2,727
Amortization of acquired intangible assets		869			870			870			3,478			3,778
Restructuring and other		525			1,509			46			1,952			3,062
Loss on re-financing of long-term debt		—			—			4			—			739
Estimated tax effect of non-GAAP adjustments		(1,170	)		(1,467	)		(187	)		(5,679	)		(938	)
Non-cash changes in net deferred income taxes (3)		(56,913	)		—			—			(56,913	)		—
Change in tax law (4)		764			766			—			2,881			—
Non-GAAP Net income	$	62,801		$	73,578		$	68,367		$	280,660		$	246,679

(1)		The non-GAAP adjustments for Stock-based compensation include related 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)		Non-cash changes in net deferred income taxes associated with the release of the valuation allowance against $56.9 million of our U.S. deferred tax assets in the fourth quarter of fiscal 2023.
(4)		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.

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

	Three Months Ended							Year Ended
	December 30,			September 30,		December 31,		December 30,		December 31,
	2023			2023		2022		2023		2022
*Net Income Per Share Reconciliation*
GAAP Net income per share - basic	$	0.72		$	0.39	$	0.38	$	1.88	$	1.30
Cumulative effect of Non-GAAP adjustments		(0.26	)		0.14		0.12		0.16		0.50
Non-GAAP Net income per share - basic	$	0.46		$	0.53	$	0.50	$	2.04	$	1.80

GAAP Net income per share - diluted	$	0.71		$	0.38	$	0.37	$	1.85	$	1.27
Cumulative effect of Non-GAAP adjustments		(0.26	)		0.15		0.12		0.16		0.48
Non-GAAP Net income per share - diluted	$	0.45		$	0.53	$	0.49	$	2.01	$	1.75

Shares used in per share calculations:
Basic		137,686			137,948		137,095		137,694		137,321
Diluted		139,114			139,828		139,631		139,790		140,667

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