Financial Data and Key Metrics - Q3 2024 revenue was $127.1 million, in line with guidance, up 2% sequentially but down 34% year-over-year due to inventory normalization [10][21] - Gross margin remained stable at 69% despite market softness [10][22] - Non-GAAP operating margin improved to 26.6% from 25.4% in the prior quarter, driven by disciplined expense management [23] - EBITDA margin increased to 33.7%, up 160 basis points sequentially [23] - Cash flow from operations more than doubled sequentially to $44 million, with free cash flow margin rising to 31% [24] - Q4 2024 revenue guidance is $112 million to $122 million, with gross margin expected to be 68% ±1% [25] Business Line Performance - Communications and computing revenue grew 12% sequentially, driven by strength in AI and general-purpose servers [10][21] - Industrial and automotive revenue declined 7% sequentially due to broader market demand softness and inventory normalization [10][21] - New product revenue continued to grow year-over-year, with strong design momentum and a robust backlog [11] Market Performance - The company outperformed peers in the small FPGA market segment, gaining market share [10] - Strong traction in Edge AI applications across servers, laptops, and industrial/automotive sectors, with design wins in top LiDAR companies and industrial vision panels [17] Strategy and Industry Competition - The company is focusing on low-power, small-size FPGA offerings, leveraging its leadership in the small to mid-range FPGA market [13] - A 14% workforce reduction was implemented to align resources with business needs and improve efficiency, with no impact on the product roadmap [14] - The company aims to achieve $1 billion in revenue by leveraging its addressable market and market opportunities [13] - Lattice is well-positioned in Edge AI, with applications in data center servers, AI-enabled clients, and industrial/automotive systems [17] Management Commentary on Operating Environment and Outlook - The company expects a U-shaped recovery in 2025, with low single-digit revenue growth and a return to 15%-20% growth targets by 2026 [12][58] - Management remains confident in the company's strategic plan, product differentiation, and market leadership [12] - The company anticipates double-digit earnings expansion in 2025, supported by cost reductions and revenue growth [15] Other Important Information - The company will host a Developers Conference in San Jose on December 10-11, showcasing its next-gen FPGA platforms and software tools [18] - Share buybacks continued in Q3, with $17 million repurchased, marking the 16th consecutive quarter of buybacks [24] Q&A Summary Question: Nexus product lifecycle and potential successor [27] - Nexus and Avant are driving strong revenue growth, with the company doubling down on both small and mid-range FPGA segments [28] Question: AI traction and sustainability [29] - AI-related revenue is estimated at around $100 million, with growing traction in servers, clients, and industrial/automotive applications [30] Question: U-shaped recovery and inventory normalization [32] - The company expects a U-shaped recovery, with inventory normalization expected by mid-2025 and revenue growth returning to 15%-20% by 2026 [33] Question: FPGA role in AI and networking [37] - Lattice FPGAs are used in various AI applications, including data center servers, IoT, and automotive, with a focus on low-power, small-size solutions [38] Question: Competitor performance comparison [41] - Lattice has outperformed competitors over the long term, gaining market share in the small to mid-range FPGA segment [42] Question: Workforce reduction impact [49] - The 14% workforce reduction is expected to benefit 2025 results, with high single-digit OpEx reduction and low double-digit EPS expansion [50] Question: Avant product rollout [52] - Avant remains on track, with strong design wins and expected revenue growth in 2025 [53] Question: Communications market outlook [54] - Communications revenue is expected to normalize and grow in the second half of 2025 [55] Question: Long-term growth targets [57] - The company reaffirmed its 15%-20% long-term revenue growth target, expecting to return to this range by 2026 [58] Question: Inventory visibility [59] - The company has good visibility into distributor inventory and expects it to normalize by mid-2025 [60][61] Question: Server content expansion [67] - Server content growth continues, with Lattice FPGAs designed into top server makers and increased demand expected in 2025 [67] Question: Design win pipeline [70] - The company has a strong pipeline of design wins across various applications, with no significant delays in product launches [71] Question: Workforce reduction details [73] - The workforce reduction was focused on optimizing resources across geographies, with no impact on the product roadmap [73]

Core Insights - Lattice Semiconductor (LSCC) shares have declined by 29% year to date, underperforming the broader Zacks Computer and Technology sector, which has returned 25% [1] - The company has faced challenges due to weak demand in the Automotive and Industrial end markets, leading to inventory reductions by customers [3] - LSCC's revenue for the first half of 2024 was reported at $265 million, a 41% decrease from the previous year, primarily due to weaker telecommunications infrastructure demand [4] Financial Performance - In the trailing four quarters, LSCC's earnings have shown mixed results, beating estimates once, missing once, and matching twice, with an average negative surprise of 0.56% [2] - For Q3 2024, LSCC expects revenues between $117 million and $137 million, with a Zacks Estimate of $127 million indicating a year-over-year decline of 33.89% [5] - The Zacks Consensus Estimate for earnings in Q3 2024 is 24 cents per share, reflecting a year-over-year decline of 54.72% [6] Market Challenges - The company is experiencing ongoing inventory normalization and cyclic corrections, negatively impacting top-line growth [3][5] - Weakness in the Wireless Communication sector has also contributed to LSCC's underperformance [3] Product Development and Opportunities - Recent product launches, including the Lattice Avant-E FPGA and the MachXO5-NX family of FPGAs, are expected to enhance LSCC's market prospects [7][8] - The introduction of new products aimed at AI applications, such as those used in AI-optimized servers and robotics, may provide growth opportunities [9][10] Valuation and Market Position - LSCC currently reflects a stretched valuation with a Value score of F, trading at a forward Price/Sales ratio of 11.51X compared to the industry's 6.92X [11] - The company holds a Zacks Rank of 3 (Hold), suggesting that investors should wait for a more favorable entry point [11]

Investors were disappointed with Lattice's declining revenue and earnings. Disappointing second-quarter results Management tried to highlight the "durability" of Lattice's business model by pointing to the fact that the gross margin was relatively stable in the quarter, dipping slightly to 68.3% from 69.7% in the year-ago quarter. Lattice's management issued a third-quarter revenue outlook of $117 million to $137 million, which represents a 33.8% decline from Q3 2023 sales at the midpoint of guidance. Reven ...

Core Insights - Lattice Semiconductor's stock declined following a disappointing second-quarter earnings report, with revenue and profit falling below analyst expectations [1][4] - The company experienced a significant drop in sales within its automotive and industrial segments, which fell nearly 50% year-over-year [3][4] - A CEO change occurred during the quarter, with Jim Anderson leaving for a competitor, contributing to market volatility [1][6] Financial Performance - Revenue decreased by 35% year-over-year to $124.1 million, missing the consensus estimate of $130.2 million [4] - Net income plummeted 55% to $22.6 million, although analysts had anticipated an even steeper decline to $12.2 million [2] Market Reaction - Following the earnings report, Jefferies analysts revised their price target for Lattice from $88 to $65, citing previous expectations as "too high" and indicating a longer growth trajectory [5] - Shares of Lattice Semiconductor fell 8% to $50.55, marking a significant decline since the CEO's departure [6]

Core Viewpoint - Lattice Semiconductor reported disappointing second-quarter financial results and provided weak guidance for third-quarter revenue, leading to a decline in share price [4][5]. Financial Performance - Lattice Semiconductor reported quarterly earnings of 23 cents per share, missing the analyst consensus estimate of 24 cents per share [2]. - Quarterly sales were $124.076 million, which also fell short of the analyst consensus estimate of $130.172 million [2]. - The company expects third-quarter revenue to be between $117 million and $137 million, with a gross margin of 69%, plus or minus 1% [1]. Market Reaction - Following the announcement of the financial results and guidance, Lattice Semiconductor shares fell by 8.1%, trading at $50.50 [5]. Industry Context - The second-quarter results reflect the impact of cyclic industry headwinds, with ongoing inventory normalization observed in the industry [6]. - Despite current challenges, there are signs of improvement, and the company is focused on product portfolio expansion for long-term growth [6].

Financial Data and Key Metrics Changes - Q2 2024 revenue was $124.1 million, down 12% sequentially and down 35% year-over-year, attributed to inventory normalization in industrial and automotive segments [6][11] - Non-GAAP gross margin for Q2 was 69%, consistent with prior quarters, indicating stability despite cyclic softness [6][10] - Q3 2024 revenue is expected to be between $117 million and $137 million, with gross margin projected at 69% plus or minus 1% [11] Business Line Data and Key Metrics Changes - The industrial and automotive market segments continue to experience inventory normalization, impacting overall revenue [6][10] - New product launches, including the seventh Nexus device and two Avant devices, are expected to drive future revenue growth [14][42] Market Data and Key Metrics Changes - The company is seeing a normalization in customer inventory, with some product lines achieving normalization while others still have excess inventory [36][37] - The server and data center networking segments showed strength, contributing to flat quarter-over-quarter performance in the compute market [71] Company Strategy and Development Direction - The company is focused on expanding its product portfolio and enhancing customer relationships, with a strong emphasis on AI-related applications [3][4] - Management is committed to a gross margin expansion strategy, having improved gross margin by 1,200 basis points over six years [15][22] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the second half of 2024, citing signs of improvement in bookings and backlog, indicating a potential return to growth [43][59] - The company remains well-positioned for long-term growth, particularly in the industrial market, targeting double-digit growth rates [85][109] Other Important Information - The search for a permanent CEO is ongoing, with both internal and external candidates being considered [3] - The company has seen record design activity over the last two quarters, indicating strong customer engagement [34][91] Q&A Session Summary Question: What are the signs of improvement in inventory normalization? - Management noted that there has been improvement in inventory normalization, but it varies by customer and product line [36][37] Question: How is the pricing environment affecting margins? - The pricing is durable, with customers willing to pay more for differentiated products, contributing to margin stability [38][39] Question: What is the outlook for the server business? - The attach rate for servers has increased significantly, and management is confident in maintaining their market position [44][45] Question: How is the company addressing inventory normalization? - The company is under-shipping to true demand to facilitate inventory digestion, which is expected to continue into the second half of the year [37][72] Question: What is the expected growth rate for the industrial segment? - The industrial segment is expected to achieve healthy double-digit growth, supported by differentiated products and strong customer relationships [85][109]

Core Viewpoint - Lattice Semiconductor reported disappointing earnings and revenues for the quarter ended June 2024, missing consensus estimates and showing a significant decline compared to the previous year [2][8]. Financial Performance - Lattice posted revenues of $124.08 million, missing the Zacks Consensus Estimate by 4.59%, and down from $190.08 million year-over-year [2]. - The company reported earnings of $0.23 per share, below the Zacks Consensus Estimate of $0.24 per share, and a decrease from $0.52 per share a year ago [8]. - The earnings surprise for the quarter was -4.17%, with no surprise reported in the previous quarter [1]. Stock Performance - Lattice shares have declined approximately 20.2% since the beginning of the year, contrasting with the S&P 500's gain of 14.5% [3]. - The company has surpassed consensus EPS estimates only once in the last four quarters [9]. Future Outlook - The current consensus EPS estimate for the upcoming quarter is $0.30 on revenues of $142.43 million, and for the current fiscal year, it is $1.18 on revenues of $566.87 million [5]. - The estimate revisions trend for Lattice is mixed, leading to a Zacks Rank of 3 (Hold), indicating expected performance in line with the market [12]. - The sustainability of the stock's price movement will depend on management's commentary during the earnings call [10]. Industry Context - The Electronics - Semiconductors industry is currently ranked in the top 39% of over 250 Zacks industries, suggesting a favorable outlook compared to lower-ranked industries [13].

[Financial Highlights](index=1&type=section&id=Financial%20Highlights) Lattice Semiconductor reported Q2 2024 revenue of $124.1 million, a significant year-over-year decrease, reflecting cyclic industry headwinds [GAAP Financial Results](index=1&type=section&id=GAAP%20Financial%20Results) GAAP results for Q2 2024 show a significant year-over-year decline in revenue and net income, with diluted EPS at $0.16 Q2 2024 GAAP Financial Performance | Metric | Q2 2024 | Q1 2024 | Q2 2023 | Q/Q Change | Y/Y Change | | :--- | :--- | :--- | :--- | :--- | :--- | | **Revenue** | $124,076K | $140,815K | $190,079K | (11.9)% | (34.7)% | | **Gross Margin %** | 68.3% | 68.3% | 69.7% | — | (140) bps | | **Income from Operations** | $22,565K | $16,574K | $53,070K | 36.1% | (57.5)% | | **Net Income** | $22,631K | $14,796K | $50,644K | 53.0% | (55.3)% | | **Net Income per Share - Diluted** | $0.16 | $0.11 | $0.36 | $0.05 | $(0.20) | - The CEO attributed the results to the impact of cyclic industry headwinds, while noting early signs of improvement as the industry undergoes inventory normalization[23](index=23&type=chunk) [Non-GAAP Financial Results](index=1&type=section&id=Non-GAAP%20Financial%20Results) Non-GAAP results for Q2 2024 show revenue of $124.1 million and a 56.7% year-over-year decline in net income Q2 2024 Non-GAAP Financial Performance | Metric | Q2 2024 | Q1 2024 | Q2 2023 | Q/Q Change | Y/Y Change | | :--- | :--- | :--- | :--- | :--- | :--- | | **Revenue** | $124,076K | $140,815K | $190,079K | (11.9)% | (34.7)% | | **Gross Margin %** | 69.0% | 69.0% | 70.5% | — | (150) bps | | **Income from Operations** | $31,526K | $42,238K | $75,968K | (25.4)% | (58.5)% | | **Net Income** | $31,432K | $40,258K | $72,509K | (21.9)% | (56.7)% | | **Net Income per Share - Diluted** | $0.23 | $0.29 | $0.52 | $(0.06) | $(0.29) | - The CFO highlighted the durability of the business model with stable gross margin, disciplined spending, and continued capital return to shareholders through share repurchases for the 15th consecutive quarter[40](index=40&type=chunk) [Business Highlights and Outlook](index=2&type=section&id=Business%20Highlights%20and%20Outlook) Lattice expanded its FPGA portfolio and security solutions while projecting Q3 2024 revenue between $117 million and $137 million [Q2 2024 Business Highlights](index=2&type=section&id=Q2%202024%20Business%20Highlights) Lattice expanded its Certus-NX FPGA portfolio and MachXO5D-NX security solutions, earning industry recognition - **Portfolio Expansion:** Launched Certus™-NX-28 and Certus™-NX-09 devices, expanding leadership in small FPGAs[41](index=41&type=chunk) - **New Security Solutions:** Introduced the Lattice MachXO5D™-NX family of secure control FPGAs and an updated Lattice Sentry™ solution stack[41](index=41&type=chunk) - **Industry Recognition:** Received multiple awards for its hardware/software security portfolio and corporate sustainability[41](index=41&type=chunk) - **Upcoming Event:** Announced the second annual Developers Conference for December 10-11, 2024[41](index=41&type=chunk) [Q3 2024 Business Outlook](index=2&type=section&id=Q3%202024%20Business%20Outlook) For Q3 2024, Lattice projects revenue between $117 million and $137 million, with a non-GAAP gross margin of approximately 69.0% Q3 2024 Guidance | Metric | Guidance Range | | :--- | :--- | | **Revenue** | $117 million to $137 million | | **Gross Margin % (Non-GAAP)** | 69.0% ± 1% | | **Total Operating Expenses (Non-GAAP)** | $53 million to $55 million | [Consolidated Financial Statements (GAAP)](index=5&type=section&id=Consolidated%20Financial%20Statements%20(GAAP)) GAAP financial statements reveal a year-over-year decline in revenue and net income, with stable total assets and reduced cash from operations [Consolidated Statements of Operations](index=5&type=section&id=Consolidated%20Statements%20of%20Operations) For Q2 2024, revenue declined to $124.1 million year-over-year, with net income significantly decreasing to $22.6 million Statement of Operations Highlights (in thousands) | Line Item | Three Months Ended June 29, 2024 | Three Months Ended July 1, 2023 | | :--- | :--- | :--- | | **Revenue** | $124,076 | $190,079 | | **Gross Margin** | $84,751 | $132,561 | | **Total Operating Expenses** | $62,186 | $79,491 | | **Income from Operations** | $22,565 | $53,070 | | **Net Income** | $22,631 | $50,644 | [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 29, 2024, total assets were $827.5 million, slightly down from year-end 2023, with cash at $109.2 million Balance Sheet Highlights (in thousands) | Line Item | June 29, 2024 | December 30, 2023 | | :--- | :--- | :--- | | **Cash and cash equivalents** | $109,216 | $128,317 | | **Inventories, net** | $101,556 | $98,826 | | **Total current assets** | $353,204 | $367,946 | | **Total assets** | $827,520 | $840,894 | | **Total current liabilities** | $80,284 | $97,400 | | **Total liabilities** | $128,671 | $148,874 | | **Stockholders' equity** | $698,849 | $692,020 | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operating activities for the six months ended June 29, 2024, decreased to $51.4 million, with continued share repurchases Cash Flow Highlights - Six Months Ended (in thousands) | Line Item | June 29, 2024 | July 1, 2023 | | :--- | :--- | :--- | | **Net cash provided by operating activities** | $51,442 | $115,458 | | **Net cash used in investing activities** | $(18,188) | $(17,742) | | **Net cash used in financing activities** | $(51,733) | $(139,445) | | **Net (decrease) in cash** | $(19,101) | $(41,949) | | **Repurchase of common stock** | $(29,999) | $(20,006) | [Supplemental Financial Information](index=8&type=section&id=Supplemental%20Financial%20Information) Supplemental data shows Asia as the largest market and Industrial & Automotive as the primary end market, with increased operational metrics Revenue Breakdown by Geography, End Market, and Channel (Q2 2024 vs. Q2 2023) | Category | Metric | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | :--- | | **Geography** | Asia | 67% | 63% | | | Americas | 19% | 17% | | | Europe | 14% | 20% | | **End Market** | Industrial & Automotive | 47% | 61% | | | Communications & Computing | 44% | 34% | | | Consumer | 9% | 5% | | **Channel** | Distribution | 91% | 89% | | | Direct | 9% | 11% | Key Operational Metrics (Days) | Metric | Q2 2024 | Q1 2024 | Q2 2023 | | :--- | :--- | :--- | :--- | | **A/R Days Outstanding (DSO)** | 76 | 64 | 46 | | **Inventory Days (DIO)** | 236 | 195 | 177 | [Reconciliation of GAAP to Non-GAAP Measures](index=9&type=section&id=Reconciliation%20of%20GAAP%20to%20Non-GAAP%20Measures) Detailed reconciliations from GAAP to non-GAAP results highlight adjustments for stock-based compensation and restructuring, leading to a higher non-GAAP net income [Gross Margin and Operating Expense Reconciliation](index=9&type=section&id=Gross%20Margin%20and%20Operating%20Expense%20Reconciliation) Adjustments for stock-based compensation and other items reconciled GAAP gross margin to 69.0% non-GAAP, and operating expenses to $54.0 million non-GAAP Q2 2024 Gross Margin Reconciliation (in thousands) | Description | Amount | | :--- | :--- | | **GAAP Gross margin** | $84,751 | | Stock-based compensation | $805 | | **Non-GAAP Gross margin** | $85,556 | Q2 2024 Operating Expenses Reconciliation (in thousands) | Description | Amount | | :--- | :--- | | **GAAP Operating expenses** | $62,186 | | Stock-based compensation - operations | $(2,343) | | Litigation expense | $(1,065) | | Amortization of acquired intangible assets | $(869) | | Restructuring, transformation, and other | $(3,879) | | **Non-GAAP Operating expenses** | $54,030 | [Net Income and EPS Reconciliation](index=10&type=section&id=Net%20Income%20and%20EPS%20Reconciliation) GAAP net income of $22.6 million was reconciled to non-GAAP net income of $31.4 million, primarily due to stock-based compensation and restructuring Q2 2024 Net Income Reconciliation (in thousands) | Description | Amount | | :--- | :--- | | **GAAP Net income** | $22,631 | | Stock-based compensation (total) | $3,148 | | Litigation expense | $1,065 | | Amortization of acquired intangible assets | $869 | | Restructuring, transformation, and other | $3,879 | | Tax effect and other tax adjustments | $(160) | | **Non-GAAP Net income** | $31,432 | Q2 2024 Diluted EPS Reconciliation | Description | Amount | | :--- | :--- | | **GAAP Net income per share - diluted** | $0.16 | | Cumulative effect of Non-GAAP adjustments | $0.07 | | **Non-GAAP Net income per share - diluted** | $0.23 |

Ratings help investors make a qualitative, apples-to-apples comparison of stocks. Analysts rate stocks on a scale of strong sell and rise to a sell, hold, buy, with strong buy being the highest. Naturally, those with strong buy ratings are considered the cream of the crop. However, ratings aren't everything. Investors should still err on the side of caution and conduct their due diligence, as highly rated artificial intelligence stocks don't automatically mean it's a sure winner. Ratings are just a piece of ...

sankai Lattice Semiconductor Corporation (NASDAQ:LSCC) experienced a huge decline in share price on Monday, June 3, 2024, as a result of Dell Technologies' (DELL) Q1 earnings announcement. Despite the decline in share price, management at Dell voiced strength across AI infrastructure and positive growth for legacy servers, which are areas in which Lattice chips can be found. Despite growing demand for the next generation of server infrastructure, the stock sold off, along with many of the associated IT infr ...