Lattice Semiconductor (LSCC) 13 Feb 232022 Q4 Earnings call transcript

Greetings, welcome to Lattice Semiconductor Fourth Quarter 2022 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note this conference is being recorded.

I will now turn the conference over to your host Rick Muscha, Lattice’s Director of Investor Relations.

begin. may You

and Jim operator, Luther, everyone. me With CFO. Thank Lattice's good President are Anderson, Sherri and today you, afternoon, CEO; Lattice's and

We the first of of XXXX. business XXXX financial the quarter will quarter and for fourth of review outlook business provide a the and

If not Investor the Relations copy at latticesemi.com. obtained of release earnings press in you can company be website have that found a our at our section

or today, to performance Company such like during statements everyone forward-looking including we our with events may future XX-Qs and materially. available remind may the and projections are We of wish currently XX-Ks, differ financial call would I X-Ks. to that our predictions or make the caution based that other We refer Company. that the future files regarding statements is actual to results you conference information the SEC, then you the on that documents

updates identify results official this statements. after could includes we and XXXX. changes publicly or the at material we intend call. a to or forum done be of that communicate a forward-looking If that constitutes any call, important this This factors materially contain quarter first press in release using for projections contained Company's time the any differ documents such public those will as guidance, such announced conference and to These our risk actual guidance call the cause from

performance non-GAAP trends. financial further additional management permit primarily and during information to information, with Company's intends disclosing of will We investors non-GAAP the underlying analysis call. provide refer measures this By to certain to

measures Relations that be we our at section provided found reconciliations on financial to financial GAAP measures Investor periods, can latticesemi.com. For of website the of these historical non-GAAP

the turn me Anderson, Let call over CEO. Jim our to now

for revenue by automotive record Lattice portfolio by on year and communications XX% results. everyone Annual growth in expanded computing. us Thank call we was strategic XXXX remarkable grew markets as financial you product and and and joining our delivered industrial for a our core today. and significantly thank you, Rick, our driven of

margin gross non-GAAP of net to basis points record we non-GAAP growth Full-year XXX XX% XX.X% expanded year-over-year. delivered and by annual income a

We also our launches, our multiple which mid-range successful doubles FPGA product launch including new the and with to hardware software expand Lattice of portfolio of company. market the product Avant continue platform, the addressable

the business Let the market market. our double-digit communications this provide revenue overview computing year for of full-year of by market, is me In now fourth an growth and increased XX%, end consecutive segment. which

client expansion drivers We data in continue center and growth networking. center content servers, wireless including this and new wins, to multiple XG have segment, long-term infrastructure greenfield computing data design

automotive Full-year revenue Turning the XX%, third market. segment. which year of now is double-digit industrial to and the growth increased for this consecutive

Lattice to We growth as as for continue market long-term as this grow opportunity industrial, strong automotive a applications our infotainment multiple see and business continues and such robotics, well systems. ADAS as across as to automation

now I'll of reflecting on only XXXX. end Turning consumer. some we've in our down accounted Since now for was electronics launched roadmap the Lattice softness Full-year platform. the consumer based the product families highlights. of revenue provide overall X%, the market. Nexus, five introduction X% to macroeconomic device revenue Consumer in

this production MachXOX-NX, in on track families of with The remains go XXXX and first in first the device customers. fifth in year. half family, four have production the We of ramping device launched half to which into

additional year. device to Nexus families We also launch expect two this

family as of pleased to our new with We new based Nexus revenue. layer device a of adds each continue ramp revenue be the products

overall next the expect Nexus portfolio to the continue revenue years. several to We ramp over

revenue revenue ramps the our our launch Avant portfolio Lattice addressable and greenfield an of with the expansion we expanded years. stream product to Nexus, creates doubles over market as Avant coming additional addition In portfolio our the Avant of continued further platform. gross

physical Our times than X to which faster applications times excited performance significant and differentiation our and Avant, smaller Each our to customers up competitor's power, systems. X for offers up lower times size these advantages provide device customers value are X.X of and devices. competitive about FPGA

of Nexus of the platform than device time. launched will Sonner Avant be will that a consist series over families

December family expect first later was and year. The Avant-E to two families launched this additional in launch we device

easier stacks few discussed As investments in we've to-date been a past quickly. are making we've market our making key customers element on software is adopt have more get strategy. to to Lattice and over We've roadmap. five the products software the it years, The solution portfolio for software our our and of launched

now previously, increases customers on mentioned the long-term software This the Nexus silicon of Avant new using products, products. the stickiness which are software one our our our value least enables at also of our customer that to leverages we today same already enabled over of our on of As adoption Avant. customers delivering we're solution that stacks. are half by five design wins our easy

was well growth XXXX for Lattice. for positioned another summary, execution. customer all hard their and the product rapidly in strong and momentum financial with consistent want team portfolio, Lattice I dedication. We're markets work growth secular thank accelerating In long-term expanding year a to

industry, the on certainly we're began of to continue full positioned and unlocking on strategy immune our company. focus the impacting to potential we As while to XXXX, any well macroeconomic long-term we're not challenges execute the

now Sherri to turn over our CFO, Luther. the call I'll

you, Thank Jim.

of results. margin We share the and cash X record rate to buybacks profit than drove XXXX. from are return profitability. through increased our strong grew shareholders debt more our operations revenue record pleased very of the We with generated expansion, growth, in revenue and times a at gross double-digit level significant and paydowns. cash full-year growth We We XXXX

computing, provide revenue was growth. driven was automotive. and and in quarter two was of our up strong and $XXX of results. markets quarter sequential revenue the from million, from growth X% QX the double-digit and consecutive now revenue strategic XXXX summary XXXX revenue our the up industrial sequentially a XXth up growth me Fourth Let by million, year-over-year. $XXX.X full-year Full-year quarter XX% end revenue XX% The XXXX. of communications for was third

XX% a QX, compared driven margin the up and the the XX record to continue Both gross sequential gross quarter our points we be which gross expansion year-over-year non-GAAP to points, to in basis quarter. was in Our basis in increases year and started XXX by ago strategy, margin to compared increased margin prior XXXX.

to and XXXX operating Non-GAAP from driven our prior primarily $XXX the gross portfolio. quarter. non-GAAP $XX.X $XXX full-year in million non-GAAP million for operating increased by Our in software to quarter million million, the expenses the XXXX. the million, investment and $XX.X margin year QX in hardware basis XXXX points were XXX XX.X%, from was compared expenses ago full-year for $XX.X increased up

the points quarter operating XXX and compared non-GAAP XX Our up increased to the ago year basis was compared basis to margin a in QX, points, XX.X% quarter. record prior to

and our We investing revenue continue to growth growth business balance expansion. in long-term with operating margin

the represents $X.XX operating up was non-GAAP compared Non-GAAP XX% the XXX $X.XX year-over-year full-year year QX ago quarter, $X.XX, was per XXXX. XXXX. in This the points XX% diluted the from for was represents year-over-year to compared margin which share XXXX for full-year full-year for basis Our $X.XX, growth. to XX.X%, non-GAAP XXXX diluted EPS earnings growth.

an be area flow continues cash to of for Strong Lattice. focus

generated in $XX from repurchased the record approximately ninth QX, $XXX of quarter Over we from X.X this making in shares. a we shares million increase million or XX%, stock, million repurchased compared we getting an In have QX represents the consecutive share period, operations, operations of XXX,XXX For full-year cash cash of generated XXXX. XXXX, our buybacks. approximately to that

revolver, our exiting on we credit down cash. million in the $XX paid million Lastly, with $XXX year

$XX to Revenue the Total a be XX% the on or non-GAAP me now to Let minus expected first million non-GAAP between million and for million. $XX be basis. expenses expected on review margin quarter. plus X% XXXX Gross a outlook our is and is of expected are quarter million first first for quarter for $XXX the basis. operating $XXX be to between

Stepping back, the pleased across of in key despite I'm some progress made economy. the with level XXXX turbulence macro metrics, broader tremendous many in we've financial very

strong begin continuing macroeconomic execution. to drive XXXX, focused about As remain we on are we but softness, potential vigilant financial laser

my that the Operator, for formal can concludes now open comments. call We questions.

you. line comes Instructions] first conducting Please Thank with Blair. question. William we time, Our a question-and-answer at the your Vecchi question be Alessandra And will with this from of proceed session. [Operator

taking the again a in for trends puts on see of helped execution so trend be might companies speak? to around you weakening, Lattice only this think my as it but of you rolling you the walk few through I some this and us around topic, question which you'll that the cycle, fielding recession, in tremendous has and just whether and whether one to semi congratulations inventory later that lower tough Thanks forward? is tremendous, see any of, any takes correction, had we kind the move environment. us questions Can the what's On hasn't buck the in macro

I for Think, question. Alex, thanks, the

I in there's the is over certainly have think and pressures. recessionary last specific do sustainable to any lot Lattice immune three not years macroeconomic think we've really or a seen to I drivers But company that consistent way. the growth inflationary a that certainly of two grow helped in

we XXXX we're all, really and year saw of that strong pleased last follows a in the growth with of XX%. that year First of growth XX%

you just and have competitors. industrial but either just wins across of years market the to and shared in Sherri see for software And where wins of the sequential a in very in production existed XXth that if instance also we've highlight we're consecutive represent segments, are competitors actually And combined customers. and not two automotive, growing design in now are about are QX in constant our design that we've row to other largest through look ramping, displaced places quarter our grown that prepared a was different industrial and automotive segments, have which added microcontroller and as multiple we segments have competitors Both the those within computing and are growth few market remarks, just before. in systems places And been pleased within of and new for content market XX% number industrial hasn't our Where we've FPGAs, of growth those we either her of many where our those additional particular, those auto. segments specific or double-digits in now FPGA revenue. a those

that's us grew industrial really that growth year. we segment, so helped XX% year-over-year very and last automotive solid in And which

specific row. has our now the forward, look years double-digits expand then Lattice data provides we into centers. for data networking seeing that a center a into growth communications within again, to of We've in, growth opportunity consecutively us the content instance, in centers, four We we're over of see for we is we we're infrastructure, of there there And data was continue so wireless in in years, more computing, us to opportunity And content grown of gains good where and that We year saw dollars as driving XX% segment markets. different amount for continue see specific another expand. that number year. nice per lot servers content last to go server go see seen in coming growth places additional growth servers that so that area those XG last

I'd then from highlight that multiple cycles we lastly, a have we're product through. new perspective, And going product

at are into year. launched and five families, one production production, device fifth the first Nexus platform have goes recent in look you platform, most families four the we If of our production in half this in device

then to going of of customer in excited we're that this of we're launch Avant. more And us. course, really Avant And ahead two out front momentum is the year. about around have us, still We

the excited. again, pretty across vectors pressures certainly immune the but to growth that industry, macroeconomic some not specific we're lattice definitely So

help continent Great. in year-over-year on? that a industrial? and traction a Europe content then share really It a obviously specifically? function like gain think really you're one of And where beyond growth. Does industrial? gains as has Is things Is Can a getting just it has spread us within period function going the you EMEA the some outpaced as that about seems follow-up. geography in

Yes, definitely.

and industrial towards weighted more is marks automotive. that Europe in So,

industrial certainly automotive sort seen geography. seen and over growth strong and weighted as in in why is growth industrial Europe we've seen we've revenue strong towards of particularly So that We've auto, because kind of Europe globally. our that's grow

With go you. into Thank that, back I'll queue.

Alex. Thanks,

of Company. with comes from question. line Please Our Williams next proceed David your question Benchmark with the

the and time ask Hey, appreciate question. thanks to

tell guess of us maybe add around execution also we've lot in durability know about kind you really just me can solid this macro. you first market for seems gross the developing is there's quarter discussion, the tailwinds level, you margins understand us we've but very this like congratulations past, just and question level? talked if wondering And the my perspective, it the on help of headwinds I you Let the margin know on Sherri here. how but the but this and gross company will I about my at kind just of a think given be a there? I had maybe from some durable Can

Thanks, and question. thanks David, Yes. for the

really QX improvement and of basis we're margin points XXX sequentially in with record gross So, basis XX points pleased our year-over-year. XX%,

strategy. points we've As complete executing to drive and margin year that strategy basis a This the since with on now strategy that end actually be XXXX our been been executed the our reminder, executing that we've that of since expansion results on have gross able XXXX. that on X,XXX fourth strategy we've been would

it, multiple course, now, so for key products. strategy being really part our that the that's a get our strategy of executing pricing driving been we've the And full-years of again, optimization on been been factors this that of have for one, value four elements to really

New for are Nexus, products be margin gross example, like accretive. have designed to --

value efficiencies. And gross so to has margin mix, they've as product as has added cost our

we those on durable. for we've many We're products. way been part is to for to make that that DNA, full-years, factors, and and so work many really years that the it's business really manage the pleased gross our if feel the really get ARM able been of margin we our so with with value so progress for there you of drivers, our will, And now our executing that our we've four

And continues a us. be so for gross to area margin focus

to looking much interest get an you Avant that can additional didn't well. that so as about guess color, new Avant. the or you I you you one thinking the sense couldn't seeing. area Nexus there you previously the service existing And Jim customers pull line revenue Okay. helpful. can then -- maybe platform, lines? you their the improve that is maybe Thanks you're for Or you, then in are to Nexus kind just also gain customers coming very this And do seeing you of Are customers for that sockets? are with from the service with product some maybe your that Maybe

Just about that for kind Avant? you're of customer seeing base curious

December, comments. in saw quite launch Avant were And so Yes. kind and if happy of a bit We're Thanks, customer at you David. really customer to that actually Avant that had participation launch of that you're excited about we the December. testimonials event, we event, different and in in actually many

really for lot is Avant with power that's efficient excitement combine So to goes And you beneficial on think efficiency helps meaningful I that top really size. X better that benefits of we're see a adding customers. you customers. of them the much are device physical base more can content design to these really X.X that and differentiation clearly the the our there's when That software systems bringing our better level in customer times And that. to platform times to our up of around

And and Nexus base that developed for look target content great so already a between for the today. as when using the XX% software Lattice that means Avant customers. Avant, leverageable by that That customer customer we've And existing also to that target we is that pre-Nexus is for Lattice customer the of Avant, and customers there's is they're XX% all that our thing versus at of means software Lattice customers well. target that devices base overlap

you point number of we at platform ago is was very funnel engagement a launched or strong. in win compare Avant what same exceeding Nexus the Avant of that progress win the years if compare momentum design win and you kind Nexus, terms progress versus if in customer customer So the at design time. far design in time, same driving point of relative Actually

forward but to again, can yes, sales the about of tell about in team it, future. looking very of I us you excited So it. Avant really growth certainly years excited our many ahead is

the question Cowen. Ramsay next from line our of your with And with question. comes proceed Matt Please

I much. team. semiconductor among the market question, consensus for to margin, of right guide, is that's my mean you Good the ahead guidance congrats the think March I well definitely quarter guess really XX% really, impressive, Jim, gross first Sherri, to so sticks whole the very I And for afternoon. now? Thank related out

weakness of some from makers box In that of the very particular, carrier And some the of in I correction we've some guess seen market secret the folks. no market the the the a feeling infrastructure in also server and bit as space in notebook terms short-term CapEx of are wireless units from in and well.

you wondered and could market juxtaposed little So you those most trends that'd against weaker. the and upside some computing I and on driven Thank clarify if of be automotive and it's just by great. the assume a end walk But comps through that maybe you. I of industrial could maybe that, guidance, bit if

that wins deployment. within be to Communications QX to we design Matt, clearly, If and take down guidance sequentially expect the level, sequentially you the mentioned guided at underneath QX server that the to midpoint if continuing primarily some total at segments, the market we the Thanks, overall of industry computing, do seen in But to you we've be for expect softness from automotive QX from is that question. with and QX, a QX industrial that our covers sequentially. of different Yes, the what for so and company what's segment. driving has up you to look yes, see ramp up consumption

do sequentially that down. to be we So segment expect

normal seasonality tracking And QX expect within QX. down consumer. to also we be then from More to consumer, sequentially

markets. bit of the of by So overall that's a end color kind little

Thanks, Appreciate Jim. it.

days some future up inventory -- is Just inventory sales balance And maybe quite a Sherri, couple could there sell might a the over and the of you bit, and perspective? be there's conversely, what that Or we through last of pieces of be growth? might inventory on -- puts like as it much sold preparation don't that? into mean sort quarters a you. in as would know I is that as thought or what you a walk sheet and haven't digging follow-up, and maybe as bit takes Just little just in us for the the forecast my from Thank of it building helpful. looking in it you're

Matt. Thanks, Sure.

customers, actually two product growth years ramping ramping of with over that inventory that we So of design year. and so choose in our the if are support wins We that's in increased devices inventory in you increase to growth new we remarks going or production consistent this and be of the half prepared pretty mentioned production rather past in terms of in And we've that been may recall, to to terms four Jim that have or support saying first his business. and to have in Nexus exactly we what ramps, is did. the we one

growth inventory increase our and may we certainly going that forward, customers And growth. the continue products to new business, do, So and inventory. support support demand for driving anything to to future to

a that operations from look and cash other in if I'll QX and mention our that think from operations, operations flow it's our thing for our cash record at XXXX prepared at my record from The was remarks also free cash a I cash with XX%. is you

the growth our but profitability, only So revenue really and with cash pleased also from we're operations. generated really, not

lifecycles of that very very, as our other of our and result you thing is is that leave risk very on obsolescence the that. leave just comments with that, long products So a have low I'll I'll

of right want we've feel inventory support that with make we in that growth. our comfortable of that sure we again So and to the amount customers have to got level inventory future very the

Thanks, Sherri. Appreciate it.

the Oh one comes Christopher for Rolland? Rolland Our next Please from line question with standby with your question. second. SIG. of Christopher proceed sorry

hear Can you me?

you. hear Yes, we can

example, talk of just you are most great. about question Can FPGAs getting automotive. there? me? the traction of that around part That'd And it most your the the that the you looks design Thank in about like applications be of for presentation, as us can tons group now size Great, great. Okay, wins, of talk guys most like hear you. of then is Can have you an the my idea ones you that maybe Can multi automotive the address. kind give uptake?

Thanks, Chris. Yes.

automotive break grew Overall, a year segment. that you we separately can and kind Within that. But out So within last year. color significantly that, automotive little than faster just I we grew what automotive give bit actually of last XX%. don't more saw industrial

of different portion infotainment are growing the smaller So segment, we're that the say, -- that ADAS getting of it's designed that getting that automotive into in the still place probably the more definitely Infotainment, -- applications. of there's into across I and but designed is segment. portion typically And more strength faster often places we're would is many applications.

one there's center done give automobiles. to for the Just example, aggregation instance, a in be to lot needs that of,

the different those before many sent sensor automobile. inputs so preprocessed sensor to or devices different find Lattice all function. across there's -- you'd main to back the doing from they're aggregated, So that process sensors devices be the Those need of

some for side mirrors, also mirrors. rearview as of Lattice doing You'd devices mirrors the as instance, electronic, video well functions find in, like

the excited in strong. not but about yes, over line but we of the we number with automotive, win past quite well. growth we're pleased the in design Avant, of just as applicability into also we're And saw front overall, also its different product see funnel revenue is that places, our So that newest quite and automotive year us

competitive Avant mid-range the well? segue, for both from And low-end the the Can a market pricing you around how then guys through seeing also as what but as to should share, might I and as you're competitors expect second for but what in can this terms market we well, have Avant, environment of, cycle if the kind things overall of the question particular. you describe, are period well. wondering, also we of lineup now? low-end talk for great the That's at was Jim, Nexus in current changed where in around my you about

product correct Yes. pleased Thanks, what portfolio we call we four FPGAs small industry with your portfolio Chris. would just we’re with strongest very I the pre-Nexus you competitive it FPGA Nothing hands we're have making gross we look you but I just to combine clear. quite small about that is, low-end. portfolio we strongest software be devices yes, or plus But in product built say out just the there. the that don't with we think the XX% the terminology, significant We in low-end Nexus, not about that the and progress FPGAs, And over in good feel frankly, small Look, to -- have -- call for we it years that. the margin. we're down very, at the that's when last

think the ever it's history FPGA the product market. And to with portfolio frankly, strongest small the I company's that had its respect in

of applications Nexus built, has on in that driving And on pre-Nexus devices segment. the those of we've the line, into software is kind feel about we we're course, that the life even of, growth the good we added momentum for growth pre-Nexus by the many so device, also but new pre-Nexus top devices devices. of product that the breathe helped, which on, new And that really newest our

pricing, about question a had you when pricing then call our would very durable. I And

we're that XXXX, now earlier, would or year As and strategy. over off that into of years our strategy, optimization execution we we've pricing four of which of now pricing our Sherri fifth seen our beginning beginning the And the durability been fifth very optimization pricing say strong. has quite at that I year, mentioned kicked the

to the certainly We And to competition, good so your in are just around some of competitors to competition. but on But this Avant at our efficiency very take we smaller pricing our better performance seriously. the this think that in feel Avant the up power briefly. really mentioned I many product to times of X.X stayed well Avant and platform paranoid cases. about touch competitive you device X -- relative Avant a twice amazing. all And question sizes delivers than And is the then and as certainly strength December, times back we back And really competition. launch line durability. shared The up I

assumed always mid-range be robust FPGAs. we've in competition there'll Now

assuming Avant, built that to face the are And the of combination XX% already roadmap fact of the that so Avant, I we've Avant Nexus our target from the think software customers a we'll the that's competition. of Lattice robust of But customers competitiveness leveraged today.

in good grow Just coming product latest put Avant us to the the for line years. a the over product position

you, Thanks, Thank Jim. team.

Chris. Thanks,

Our the with Instructions] Securities. Please next question Mosesmann your question. with Rosenblatt line [Operator of Hans from comes proceed

weren't related Thanks. Congratulations, guys. in this. Most supply have your of comment times? my quarter there inventories, issues that you on but missed I quarter? And questions may Can may any that have have last been answered, just lead -- channel come up the last

earlier, about that, was was Actually, inventory. you so Hans. when Thanks, about talking asked she Sherri Lattice-owned talking I'm Yes. glad

quite inventory, QX to The distributors in saw lean, channel from sequentially Now is QX vast quite distribution. flow fact we through to if and revenue is QX. roughly channel channel our slightly the of continues to majority sitting be inventory you and our It lean. flat, at which our that's inventory from look QX, at down inventory

ended and if year remains But channel seen at in the distributors many lean that compare And norms. over would years, historical you we look the inventory, we've where we that consider point of in the inventory to relative inventory the need we XXXX and get distributor what what to that inventory. some more our back coming quarters, replenish -- at -- we consider it levels to over historic normal do over norms you the

down lead your of in second general, was say, around our I would terms part In improve. times, continue have and to lead times come

well certainly improved and the supply capacity availability. our over of assembly as as capacity availability semiconductor supply the certainly test in at terms think That wafers, just overall and last as has houses. XX-months chain chain improved I of

And so down. certainly seeing lead times come

expect We lead to improve. times to continue

past And quarter. of of in note out disruptions, that question of in part terms any supplier was over issues. Nothing then around the terms of last your sticks suppliers

-- we inventory, Our is and been Lattice Sherri view build able inventory chain build positive we've touched supply growth. quite on as running as very which to well actually support to

supply would the moment. I overall the So well at say running chain quite

Congrats again. Thank you. Great.

Hans. Thanks,

And for end Jim we call CEO, of over session. the back I'll the have to closing reached now the And question-and-answer Anderson, Lattice’s remarks. turn

and us Thank on for today's everyone call. you, thanks joining operator,

So look year XXXX, for when was another really Lattice. we great back

certainly again, support XXXX, and I all our forward kick we to customers also drive dedication to as customers. team, rapidly So our I not Lattice, the overall Lattice we're we lines in as thank as the our well off of -- but years. year XXXX, another just once for for partners past as levels want new Lattice looking And product to for want and of the to their innovation expand but continue strong

today's that Operator, concludes call.

concludes today's conference. this And

disconnect at time. Thank may this your You participation. your you for lines