LSCC - Earnings call transcript Q2 2018 | Lattice Semiconductor Corporation

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Operator

Good afternoon, ladies and gentlemen. Today's conference call is being recorded and will be made available by dialing 404-537-3406, conference ID 6199158, and will also be made available on the Lattice Web-site, www.lscc.com. I would now like to turn the call over to Mr. David Pasquale.

David Pasquale

Thank you, Operator. Semiconductor's XXXX Lattice Conference to everyone Second Results Quarter Call. Welcome

Officer. are from coverage Max Hawk, Financial We be would the Dougherty prepared us initiated to Company after Mr. for Downing, executives Q&A available Company Chief also Mr. Joining recently comments. and analyst, today Glen Charlie on the who will Lattice. CEO, Lattice's Lattice's welcome like Both & Interim Anderson,

Partners Investor please using yet not a of e-mail received get Global release, copy Web-site. off IR of or If the you have Semiconductor's a lscc@globalirpartners.com today's copy can Relations you release results Lattice of of section the

are statements differ involve cause promises actual the Before done we statements. FD. and as expectations. materially we a that includes and that review intention this Safe begin call announced performance constitutes will the call. This our in publicly conference Harbor call Company's forward-looking requirements cautioned I'll press Regulation the guidance intend statement. that comply fiscal relating results from uncertainties It the SEC that our information, time formal this financial this the Investors call If is quarter with or changes are such forward-looking remarks, nor They to communicate and forward-looking XXXX. guarantees. that of guidance, release updates matters a after of to neither to future risks performance for such official than may statements today, material be The those include other any discuss using forum historical other public we we at any third projected will

Company this and occur the our any forward-looking Exchange including with obligation such that publicly ended XX, fiscal uncertainties or our circumstances on The risks Form update to disclaims and call. detailed are of events filings and or after for any in Commission, reports XX-Q. XXXX to the revise year statements December Form XX-K reflect quarterly Securities Some our those

will be Generally also of remarks Regulation prepared G the Accounting requirements SEC presented Our GAAP. within Accepted or regarding Principles

for required by analysis you comparable use directly both during financial call non-GAAP data presented viewed with By to If and information trends. most uses to for the Company's substitute information non-GAAP on assess disclosing performance measures better this the presentation of financial accordance GAAP on the we Management the go operational information would non-GAAP be prepared ahead, be with provided financial the and operating to intends and Glen will to management turn by underlying GAAP investors and like Hawk. should Some further over At to provide Company's information, will results permit earnings to goals. time, us additional I Non-GAAP release. a Mr. non-GAAP Please any find reconciliation certain of basis. not a investors establish now in call, the sir. during as GAAP. measure to press a in measures this call performance

Glen Hawk

joining and today. everyone you, call Thank us for on you David, thank to our

expectations reduction. for the pleased for and of XXXX, expense revenue, that operating to second exceeded our We are quarter margins, for report for results

fundamentals ZTE being limited the factory as was compute which been up quarterly few As we down continues months what strong say. strategy, broad results lifted. We ago, doing due business, markets in recently ban, spending. server reduce to displays U.S. be with applications end growth, expanding to were revenue market our Communications core data you, Department I and continue the and has to a Strength saw markets our actions from both revenue automation. expenses, in center on margins, driven focusing by stressed execute our to video target to operating our from in delivering despite and Underlying industrial strength increased consistent Commerce such demand. clear solid we driving and very

sales As consumer MachXO family perspective, a From continues handsets. remains the was our solid product declining into to mobile down deliver on revenue. expected, workhorse and

Last in FPGA reiterate our XXXX with We compelling in this related through further strengths of a business. year alternatives run XX, but such $XX number Also period. seeing QX we whose stated our contributing millimeter in will contributions announced a results improve charges none necessary revenue our the action as million been strategic be to contribute this directionally elaborate took the our the We is discuss important further from meaningful focus year. expect our expectations, but ECPX to The per we the of for discontinuance like or to going business. but category our benefits this quarterly week, our would minutes. see not variant. and and in thereafter. will benefits proved commitment products core release Max a transition have in operational efforts, and wave reporting new opportunities we We on given which investments solid first July CrossLink revenue discontinuance and financial one-time here line to did were realized QX one to do press cause multiple I results markets action to business impact not our that product. efficiency not for path sharpen to in revenue momentarily. our our support on aligned performance levels I Max a is bottom are justify We We this our customers will viable. also of will few the achieve forward during the continue of significant that to approximately on did of pursued will to

operational these will compelling help efficiencies delivering will become more our capture future success, on growth but For from profitable innovations opportunities. to us come

nanometers We of to IP implement for offer customers the For we the stack, and silicon reception now as also and intelligence. QX can In Progress IoT. year. inferencing. later of important name advanced with we families complete a our machine of this as out launch expect Lattice use artificial sensAI data new limited the on suite low-powered example, with which multiple QX from that sampling enables product tape our pleased are a to a on as implies we track products is well for centers software platform security XX features, for began

the In of XXXX, XXXX terms and of expectations of between to million be approximately $XXX our specific revenue third for the million. quarter quarter $XXX third is for expected

are plus GAAP value. $XX basis million XX%, margin $XX minus we on and between Total $XX GAAP million on summary, approximately a a expenses million quarter building focused X%, basis. and gross to be and a non-GAAP a are non-GAAP operating For expect and between shareholder third on million both on expected $XX the we for In basis. or fully

financial underscores at performance Our one Lattice the a profitability. focus from to revenue-driven driven by improved shift increased

that to and We are business and operational AI higher-margin trends associated and improving mix volatile promise deemphasizes delivering emerging handsets industrial, pivots efficiencies a markets the IoT. with on and such as less our of automotive, and

turn over our to now details financial on call the me Max results. for Let Max?

Max Downing

Thank you, Glen.

to our start second factored in R&D to our reduced Before through the decision I of a the into our This millimeter will like annual will summarize business. This the headcount. results, and reduction $XX impacts result is through the financial to discontinue million benefit outlook. walk expenses, in action wave operating third quarter primarily I'd quarter

expenses, in $XX in that full inventory a of impairment impairment component and and recorded in asset XXXX. of that operating million a quarter $XX approximately is assets approximately costs. operating approximately these is These as million of action quarter second sales, amounting that and second of a write-down The severance expenses are recorded expenses. million that GAAP Our other recorded in as recorded cost $X restructuring GAAP quarter were charges acquired in include as of of write-offs charges included operating the to approximately of intangible resulted restructuring $X charges million component

$X.X impact cash million. action in to $X.X this expect million approximately We to quarter of third the have

on Moving onto of quarters. to above an to and $XXX.X was range the X.X%, financial increases first we results, our our expectations which was to at in consistent $XXX quarter, are revenue million, our for expected in million second million up $XX revenue compared the growth $X.X just Compared quarter quarter million. industrial seen computing, primarily the previous second have or drivers with

connectivity This expected. for as an growth we to performing in revenue inventory growth consumer experienced X%. revenue positively $X increasing approximately related approximately royalty market. on our quarter. approximately by revenue saw our the million from and second settlements. revenue of services our demand audit in control inventory applications licensing is in also new distributor We more increased is the products We full-year to expect applications as about still well rules than impact increase to $X million servers We This million in $X serve

million million full-year to services, product to from in benefit growth licensing range. And full-year Specifically, and for inventory benefit $X insignificant. we expect $X be the the expect the resulting distributor revenue to to be we

During did to million the revenue royalties because rules. second our were collect as quarter, cash of the unable we XXXX recognize of for new we that HDMI revenue $X.X

market revenue industrial in We down relatively to million consumer see and reflects quarter of flat third both guidance sequentially. our communications $XXX million Our strength $XXX and sequential and computing. staying auto

decline the our quarter continues expect and our quarter. in outpaces as to our grow inventory to over distributor We quarter sell-through third shipments

in GAAP second recurrence we we audit XX.X% the the In in the not to on margin XX.X% addition, was royalty the first basis quarter. a settlements compared of from expect do benefited Gross quarter.

second millimeter shutdown $X.X Our of of quarter related gross write-off includes to approximately points inventory directly million or wave business. the basis XXX margin GAAP roughly the

margin reflecting an market higher-than-expected end as revenue. XX%, gross held XX% mix licensing non-GAAP better-than-expected range strong to compared XX.X% services of and Our to at expected including

X%, underway. the quarter our departure or traditional market in minus minus margin automotive XX%, guidance a our guidance have X%, XX%, end reflects and or and of our plus third in confidence both expansion is that plus we Our initiatives industrial from strength which

is in $XX.X were compared millimeter and The to On over in million, the the $X $XX quarter expenses includes incline expenses the million. in restructuring first the quarter. first $XX wave in over operating This from impairment decline expense million business. CEO quarter $XX.X related our operating guidance were the $XX.X million a transitions. operating related about of first Second our reflects million Board under quarter second were million non-recurrence XX% to and shutdown quarter. The GAAP expenses quarter million charges of of quarter of which million $X down quarter $XX.X $XX.X basis, to in to quarter charges non-GAAP million

structure headcount controls project-related saw $X.X cyclical related a cost we to million decline quarter timing. and declines in approximately And finally, $X over approximately spending contributed of million addition, In in other improvement. quarter

development. to primarily project offset by millimeter discontinuance, expense the $X.X initial benefits related of non-GAAP in to new wave costs Our $XX product and the million reflects million third million quarter associated operating $XX guidance mask of

with principal goals of we've second debt or of future payments. the or today, and with made millimeter for from approximately loss with quarter was structure net business. income In share and and share that includes $XX million alignment the during basic GAAP approximately diluted diluted basic ended This our we investments us and million our first quarter approximately to here net our made. per charges of $XXX the basis, We diluted share, associated and principal $XX.X per second the quarter and in flexibility Our delever $XX approximately $X.XX restructuring $X.X for payment. million share. excited the $XX.X quarter, $X.XX million the million cash million $XX.X payments impairment progress Sitting including allowing quarter. On proud per a discretionary non-GAAP or a basic shutdown cost million, or both per short-term of wave I'm debt improvement of the $X.XX an was discretionary balance sheet, $X.XX healthy

consistently of Our portion and concludes can metrics solid importantly, established the Operator, the This as improving, leverage have this key momentum to questions. go foundation we we call. leverage more we now profitability open forward. are a but for call my

Operator

[Operator line comes first & Instructions] Anderson Charlie the question Company. of Your from with Dougherty

Charlie Anderson

Congrats on performance guys. the solid

expenses. the with to a ZTE since ZTE changed wanted has year in obviously, cetera, in, operating et changes start I out, started lot So,

sort maybe you and that wonder any on few wouldn't to you I mind of degree year the follow-ups. recalibrating I've got if just So us a then can,

Glen Hawk

is Glen. This

guidance quarterly As we given provide Max out. that you full do We has know, not provide guidance. year and

far of year are to first strong pleased a We the we're very forward so and that well. the very, as made QX we've half progress the looking by in

Charlie Anderson

Okay, great.

in think just similar way, I relates quarter could it a come maybe a type there, to you a on, come were in general, As seeing are of there? where roughly what impacts and you tariff seeing as they customer, in add are what you ZTE, they in guys different back terms way, a color you do kind last gave they little of back

Glen Hawk

impact. the tariff's I ZTE, companies the times are would not date other tend a the they most affected and be lot like products you customers other that as are boat pretty we because to and similar ZTE with some smooth shape in in little To case, With that a tariff our the buy of out we that with good to little initial you are of issue part. concerns sell out speak, signals well. to the situation lumpy like separate get a address to are we this in try so this that things versus for a are to those where supply-chain a that. In products as products the latter a the they from perspective, re-engaging first, bit and to semiconductor regards regards

are but decisions we which certainly And all they their so make so, have about of than any at restock last didn't larger most as we to needs, like customers mentioned meet to to the they X%. rate would able quarter speak. that not We start to

is where they going Rarely, our forward. is top X% top that in are don't It we so say ZTE should fit traditionally this noteworthy had been larger in than think that quarter. is at We I I'll the ballpark, within but ZTE customers. five changing because never, that for sure, it significant. are see box.

Charlie Anderson

of could guidance for I just count, on us then interest number fronts [indiscernible] And was you anything on Max, and Great. directionally, from rate you share there tax maybe QX? QX. changing curious expense, on gave a

Max Downing

of with I about tax is do of X.X rate, typically expect And our right relatively as being consistent I And bit north it. full-year focus LIBOR then the interest, a kind it not much dilution involved quarter, little at first this dollar million where to half, tend grows. share way, this I small on how of tax rate would on not that be think Our I on expense, point maybe inclining around as $X.X I cash but think respect X% that's the it tax overall to per as in fairly expense to for with about amount count year, a think the I given year on would With and our the will million tax to tax point expense. $X it bit was much. with a be

Charlie Anderson

Okay, so great. Thanks much.

Operator

Your the next question Christopher of comes from line Rolland IG. with Susquehanna

David Haberle

Haberle as of about to after there your David not with Chris. is announced point? guys sounds on cut weren't the departure now any this core wave, out, this right behalf just business that business, guess, point, just where you are millimeter economics of a are at the at we running cost economics or you other enough good kind are saving areas the you the justifiable start just as think like from This I which

Glen Hawk

Glen. is This

correct, For took on. spending level you one with than was the project that, part. action investing of of for that in pretty that most if the what it's But now we're comfortable most certainly small right we part, larger you the areas we're will. Other pruning, are

David Haberle

half quarter of it. And $XX kind a the in goal in earlier think to to million a mask the guys year Got set excluding I costs OpEx second the had in you of year. get

wave excluding OpEx like out, should take should about kind we cost? how is that going about million, million think off of just our that say kind forward $XX and target mask now goal millimeter we $X look of that of here So, do what

Max Downing

that of drive horizon, from mid-term would to from down is I room more us go rate it where our run over think I expect think sort to here we where there normalized be and the is to David, at I can X% today. X%

David Haberle

meaningfully can two for then revenue And me, for next industrial automotive traction that the is I Is part a there it nice in right Got that's wait from to about on see, that be continues last any or you it, one that in progress the winner the segment? contribution how once to business? year guys, of of one design and kind talk like happening ramp thanks. now is going and what automotive guess we or now guys front, you win again

Glen Hawk

provide area they think and You we're that color them, differently. little Lattice two bit behave that we'll on Historically, segments, this focus bet, a we David, I is more on that as industrial auto, clearly going an and forward. combined those has and seeing

especially design online in those As some noted those sooner than auto. our improvements you revenue, have come industrial were meaningful in of wins result, showing Typically much year-over-year. in

The answer So, industrial have side that, improvements very as is but design type up that talking your time Automotive, it come that. all the revenue. design from to terms a that of forward-looking things we're will it wins, are the of a about shows stand, we revenue-wise reason keep today we comment. and pleased before question, emphasizing with real take virtually of currently actually the in the win some progress

David Haberle

All questions. my right, taking thanks for

Operator

Your Craig-Hallum. of Richard line Shannon next the from with question comes

Richard Shannon

confidence what exactly some for a my underway. I'm Max, result here notes trying ask I confidence Wonder can margins. my as you to second – well. of opportunities guide nice taking and gross Maybe in find in A us in – that your help something if regarding question your mentioned questions having you means. Thanks expansion think I'll here. on understand nice the quarter a

Max Downing

some into visibility expansion a in In more result and level, been investments channel, enhancements et zero-in and made cost tools, that the systems us. on the as improve. refinements expansion margin in product on leverage, long-term looking sales for And and stated, much supply data we while. horizon at continue we at structure As as will as focus customer over well cetera, chain that's deliver to that the expect us have pricing, of and intense know, level, that our the we've opportunities we've really margin part helping you for to as a

Richard Shannon

healthy of have and be you what about well growth think activities on gross gross from where those several people quarters would ideas how to where a most go mix Given bucket, the probably any best that seems I you as thinking automotive assume are which industrial can us out? as have, margins come margins your

Max Downing

do third in quarter we I the we're and in we pursue traditional with think guide we comfortable guiding near-term see guide our Yes, will as up X. the add raising from or stepping of feel do plus very at We our and this XX, range point. initiatives. only cost obviously our these that that some period minus

saving range, that, within we But talk to and guided think realizing at closer fall costs we'll money know, You we money get the benefits sometimes. will upside that about that from time. those as

Richard Shannon

for question of We'll to enough. update have fair analyst at talked know you maybe process but nanometers? maybe and Last and that Okay, three on quarters product or fall, if us thought two XX look you Glen, I you the to have me, with last the breadth forward ago, your about expect update. profile can this event including lines

Glen Hawk

goes XO very in very been portion more customers the new quickly, our use platform line, for works what R&D XX platform be important A and product we'll us. platform, and big products are in the IP, just about us technology continue a clarification, that to just what deploying from effort a software. pursuing, reusable much not line, to and and has efficiently design on, ECP real is and we several successful today Richard, focused silicon the and the product iCE the the we're that is lines enable just it's into both the will need correctly, quite software that nanometers also years our developing our that of to but this line is

up clarified and SiliconBlue, might acquisitions You really Image. had platforms, last four technology one, very have that that different the made, that remembered several from with wound Silicon from one I fall two original Lattice Lattice we from after

going really this is us R&D forward. So, terms efficiency in help of going to

Richard Shannon

Excellent.

of that's Thank think all you. for out line. me, guys. I'll I step

Operator

Your comes next Invesco. Biskupski with from question Mietek

Mietek Biskupski

you was how quarter? quarter. any did as out you for or the on into Congratulations Can of approximation the give last us much sold of channel,

Max Downing

third quarter, in expect the to we do what channel So, inventory? respect with

Mietek Biskupski

or for more channel [indiscernible] just was – anything X how X how the – was sold this that, into or much much did underlying million No, was like you sales or how much sold quarter, here, out? it million

Max Downing

the second quarter? In

Mietek Biskupski

Second quarter, yes.

Max Downing

yes. Okay,

answer quarter. We growth, So, first then X.X in And kind sell-through consumption the of in to channel quarter sell-through million million growth Does consumption did quarter. from then of to quarter we growth second inventory expect and third X quarter decline about to to channel that million. that inclined in have X second X% about third our continue question? about the the inventory your

Mietek Biskupski

perfect. Got you, that's

taking step where buying in granular I in bump third and ZTE, can back, actually strong and sales from that that, are products of strength up going you are quarter more quarter understand, Just detail of give any the type of ahead to are are a first in [indiscernible]? as seeing us what and you the if come markets people second then

Glen Hawk

sorry, the QX question for for QX I'm or general? or just was in more

Mietek Biskupski

generally and as QX, for like. you Really

Glen Hawk

Okay.

prior seeing is clearly relative QX as I spot. We're certainly industrial quarter to bright we year, prior think mentioned, a certainly a the for broad-based increase. to relative and the pretty

factory noteworthy particular. things robotics applications the include and of end automation in Some like

Intel to video really into or that pleased in with we is the of area the ideal using shortfalls and continues actually our would going in the servers. communications, servers customers. reception matching others. some lot which onto Believe from another the video call computing bright up, the products be Another well what not, communications segment, us. mixing was very particular data to from walls. thanks strength that's center of our other communications platform And that's are some sensors, spot industrial Purley We're is and of and what displays A for you are and ZTE, products call so space in for it our despite very of

Mietek Biskupski

much. Great. so Thanks

Operator

of question Co. Dougherty & from Anderson the Charlie with line next comes Your

Charlie Anderson

wonder, if suppose potential So patents innovator follow-up the on I millimeter had early to any speak a pretty monetize is I just could was wave. quick there IBM to you there. Glen, there? I

So, there, on that possibility a here as the have you if value through Thanks. and out? we went if wonder process with that's

Glen Hawk

the at Yes, value those have was Charlie, we've around everything thing QX certainly out that monetize the like for how quarters did One QX best I'd some get to shareholders. looked prior combined. of our and the in I the patents total believe two and XXXX. we can is we actually of we year, point XX million for

So we monetizing. that had are pursue do taken have you But other we in will right, that action earlier. still patents we assets

Charlie Anderson

Okay, great. Thanks so much.

Operator

And no for to Hawk, remarks. the CEO, further there back turn would call at are questions Glen to time. I this closing like

Glen Hawk

Thank season, you, taking us again to the the and during hear Lattice. appreciate thank you especially today's joining an you update to time, on for We on call. reporting busy everyone operator,

We paying out as further some encourage of innovations may take are forward. Operator, with reach we're to operating going to call. have. trends are key appreciate any the the and we're additional enhancing see that you is and the advantage business key your excited follow-up that takeaways about support we questions continued we're our improvements market pursuing our that I shareholder you non-GAAP achieving Again, we mentioned, we of to to concludes our some today's that value, strategy, results, and our corporate continuing actively from we higher profitability, delivering debt, our efficiency down execute In progress, we're mentioned, call summary, we're had outlook.

Operator

call. conference today's concludes This

disconnect. now may You

Lattice Semiconductor (LSCC) 26 Jul 182018 Q2 Earnings call transcript