Lattice Semiconductor(LSCC)2024-11-05 01:45Financial 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]