Earnings call transcript Q1 2023

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Operator

Hello and welcome to the Lattice Semiconductor First Quarter 2023 Earnings Call. [Operator instructions] A question-and-answer session will follow the formal presentation.

As a reminder, this conference is being recorded.

It's now my pleasure to turn the call over to Rick Muscha, Senior Director of Investor Relations. Please go ahead.

Rick Muscha

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

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

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

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

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

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

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

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

Jim Anderson

year-over-year We Rick, and XX% in strong revenue, results year-over-year. growth delivered with today. on for you, call which record us non-GAAP grew with thank XX% and net quarterly QX, Thank our income joining everyone you

industry, momentum, strong the for core markets challenges immune portfolio, any execution. strategic growing not solid While we're growth to is customer in driven and macro-economic impacting product certainly demand leadership by our our

touch me highlights. QX Let few on a

to non-GAAP We with was addition further by enhanced product expanded record of expanded platform. the points In year-over-year XXX XX.X%. operating portfolio. XX%, achieved strong Then the on growth, gross portfolio increase launched to Nexus our software sixth to non-GAAP recent a family year-over-year. profit continued our margin a versions of of We solutions software launch of our XXX device which multiple as basis we we an we record basis expand stacks based points revenue

of our up Let was me and X% computing provide now basis. year-over-year sequentially X% revenue and a the In an market. overview on down business end market, by communications

decline revenue market server we in As softer expected, in sequential demand. was this to and industry-wide due primarily the segment

for to as growth as see and continue such we networking. center servers, driver However, and growth wireless data a designs data company, this content expansion as long-term multiple the new it includes client segment and computing vectors, greenfield infrastructure in center growth

year-over-year a automotive ADAS applications, the was industrial in on customer including infotainment automation of robotic, solutions industrial reflects adoption market, and wins Lattice sequentially revenue design XX% up QX and a basis. Turning well and now systems. increased XX% as of range across growth automotive as broad to strong new and

device production. QX, announce some We're Nexus production that family provide enter to MachXOX-NX to pleased in roadmap fifth which is highlights. our now I'll began product shipments

including and MachXOXT-NX, multiple platform. Lattice advanced applications, introduced built the recently data system control device machine Nexus on This also vision, and We networking, IoT. center family family industrial provides the sixth and

segment. Nexus-based expansion leadership in to and strengthened small products Nexus pleased the continued our adoption Overall, position the we continue and commitment investment further platform to broad be our FPGA our with of has our of

Avant™ as it Lattice families forward this to coming engagement new new in which targeted for creates our continue also and launched the launching continues opportunities new at Avant market mid-range platform, revenue ramps on years. our doubles applications early with addressable to FPGG greenfield over We be and Avant later to pleased Lattice is December. two year. and grow device Customer and we look momentum progress

been the now software Turning as faster customer in of of we've discussed Lattice strategy, strategy software our to is and our few component are our investments driving These a products. portfolio. over years, software past key investment adoption we've increasing

new long-term silicon stickiness the our QX, software we stacks, enablement expect portfolio at by our three the one customer Over our key to enabled half of customers delivering now which and to driver least momentum. our solution software of are expanding that the we're and we design of our of increases and a expanded products. wins capabilities of of our In solution stacks remain value

customer look In We summary, certainly positioned product to well sharing momentum more with financial strong to be secular macroeconomic XX. about Investor plans in markets challenges Lattice we're continues the on accelerating at forward while Day our an expanding not execution. immune and impacting industry, growth May future to portfolio, long-term our

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

Sherri Luther

Thank you, Jim.

are pleased record QX and double-digit our growth expansion. with continued growth with driven We by revenue in strong profitability margin financial results

to continue on generation in our while long-term cash We product investing focus roadmap.

of through to quarter capital our XXth We buybacks. also shareholders share our returned consecutive

provide now a our summary me results. of Let

fourth sequential was was $XXX.X QX revenue year-over-year. from sequentially million, consecutive up XXth growth. X% revenue the the and XX% quarter record a quarter First up quarter of

strategic and segments industrial continued communications to in computing. and market year-over-year and our of two automotive Revenue grow

year by compared its now XX strong sequential the to on execution margin basis a in driven be basis margin to Our up increases non-GAAP strategy, continue QX expansion XX.X% gross the increased fifth margin compared our record year-over-year in quarter Both gross is year. prior and point to quarter. the XXX growth was ago which to points and in

make we creation. prior $XX to SG&A in ago sequentially customer the in to $XX.X compared and portfolio, and operating million expenses continue year million investments $XX.X were million increased product Both the and our Non-GAAP in R&D quarter. demand support expenses quarter as

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

with the continue margin long-term will balance growth. expansion investments drive We revenue Lattice's operating that

non-GAAP compared changes share expense tax related reform represents primarily of of than $X.XX costs. per faster capitalization diluted revenue to $X.XX which ago growth, R&D due was million, to the year-over-year $X.X to to in increased earnings which QX quarter, is the rate QX XX% year growth. tax the

million quarter, of paid million a we to additional our revolver. our to Subsequent million in stock, credit continues generation the and with on shares be after on down we Cash an $XX cash quarter million $XX $XX $XXX or paid revolver. down ended XXX,XXX repurchasing also We priority. the credit the end in

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

closing, execution challenges our financial very with impacting macroeconomic I'm pleased continued In strong industry. results despite the and the

our continue when Day to our on build shareholder looking value. forward share will we XXth to of we plans We Investor how May long-term are

call the open for questions. now can we Operator,

Operator

Cowan. Ramsay [Operator from instructions] Our from TD question coming Matt today first is

now live. Your line is

Matt Ramsay

I Yes. is quarters growth, remarkable mentioned Sherri's you in of XX first afternoon up doing, wanted think say. lot better is let's very script put in guys the much. and which consecutive Good than QX, you everybody. I sequential revenue Jim, just XX% to Thank which she question, growth when start industry's my a

a the about particular, little the a you and bit talk comfortable where and continue tier gone you low do the now we distributor and one you as get further much in questions pace. similar drivers growth Thanks. the share levels? can to feel going you put still I of inventory could in with is channel us this you've consolidate at do If as market, forward the growth feel see then So growth, up comfortable, FPGA of to inventory maybe

Jim Anderson

so [indiscernible] of we particular, start quarters per a year, QX the with of like that grown over pleased growth. saw considering at consecutive we've I the good growth years, XX%. results said, year year-over-year over thanks and for We last we're the Yeah, Matt. for two Yeah, like feel the in XX quite in the especially question, XX%

So feel good that. we about

to markets and growth number positioned one, we things: company perspective, a long-term growth I strong have right two the attribute market really secular from the we Lattice-specific really and those it I markets. within think drivers

midst expansion the two number I then ever is say, done has largest history. in in company And portfolio portfolio product its would product Right now, we're the expansion. the of,

think good us positioned just of growth. And I so those for have both really

industrial robotics, continued on automotive the segment, certainly first -- little the pleased infotainment Industrial Automotive Industrial and systems. one, a more bit and just from like we're electronics perspective, market our color On in progress with a ADAS automation,

for are Lattice applications devices. applications those of All really good

to power of bring, efficiency delivering think, the the flexibility, us we we've and design our our by we're I The over that that to the entering in customers segments and customers, unique compelling years seeing wins that four that growth that accumulated software and three, those really wins one, all we're production. those really design bring solutions driven in last driven two, increasing help content those

we're pleased segment. growth that quite see in So the with we that

content stands in servers, that comms even think and growth to there of And computing, segment, center up growth even sequential in chalked from relative out on there. industry. vectors some that again, a perspective saw again good I expansion in specific And we we so in decline see wireless data growth networking, the we that segment, though a year-over-year number infrastructure, growth and

the And FPGA our then two Nexus. continue on to platform of on said, we out like product expansion, I number expand small

just ramp. Just kind of fifth us with just Number ahead getting got terms we is family in started production, just of Avant into and this launched year. revenue still device Avant of our We're six,

about And so excited continued expansion. we're pretty the product

it And And channel year, inventory When was our to of of QX last we of disti the the -- at the part our channel and inventory. relative from unchanged channel disti normal around and consider your is at inventory look end end relatively question levels was would distribution I relatively QX. still of what I think last inventory. low

our end not so term. at for the well company. look time, for you feel but challenges channel the long-term pretty the well, positioned bit growth when positioned healthy well and and markets, the we fluctuations and to over what's immune really macroeconomic demand inventory long feel in we over say, that's to need or We're that any any replenish a certainly of So we'll

Matt Ramsay

the for detail all so Thanks much and there. that

starting maybe industrial been that also seems and the As some some your turn. it's Sherri, temporary really, secret of no computing, and to that my be growth in the follow-up, really and in the auto being comps segment softness there's strong, build you but market bottoming softness mentioned in some server and commentary, PC to to

talk that So if should quarters particular maybe maybe when couple relative PC to those that lead do segment, server or start just of through times you in reacceleration of turn markets the you segment us devices of could about next us to of builds turn. around, could sort how ship if in think the your through end we kind if walk for

Jim Anderson

Yes. industry, Yes, just, we've Matt. softness and everybody some certainly seen along in the seen certainly in we've Thanks, PCs. unit else with most market servers end

us, bigger For is servers a factor.

as on is PCs revenue than see for point, opportunity in PCs at what continued we in company. TAM long-term a position large the although Our have larger much servers we this

four the least servers the year, row, been of years a -- now end area has and main growth servers, the compute Actually, grown digits that. that's being But four last in years. us a servers both hyperscale four double in at for as of to us space, of drivers for and great three last the for one enterprise of comms

factor But actually That's for revenue higher much in of That's the growth us, a most servers TAM. for terms in expansion. than rates, growth of server attach been higher unit underlying the server bigger by us has driven content that either been ASPs.

the for of continue content And Lattice. we that long expect expansion dollars and term, to be continued for driver the bigger to the us over

our be opportunity the and see We to factor to expect in that, great continued areas bigger growth. grow we of continue to that

just that to in in the our ahead pickup server start quarter a That maybe the of or that our the we servers ship, a getting would actual ordered said, there time. ahead market benefit to starts from when to from built demand, Generally, so system expect that. be benefit systems of getting chips or we to extent given end would

per around, to server of server. expect that ahead a our again, would we deployments and driven quarter So that dollars content that the pickup is But about see when yet. I'd again, segment majority more a stress growth of really of in

Matt Ramsay

Thank you much. jump queue. right. All very Congrats in back the I'll again.

Operator

you. Thank

from Next question is coming from Tristan Gerra Baird.

now Your line live. is

Tristan Gerra

your Could that if showing you you and of the results how terms about year? for sustainable and could guidance. the margin pricing and also about talk talk gross of driver rest the key expectation in the Great is, drivers for

Sherri Luther

you, question. the Thank Yes. for Tristan,

with So another basis XXX we're XX.X%, record us, -- year-over-year. really very quarter for our pleased points margin gross improvement

prepared driven since this in margin fifth improvement X,XXX As my of I we've our our remarks, in XXXX. we're started mentioned gross where we expansion program strategy, points year in basis now

the really And are drivers multiple factors.

products factors added that gross efficiencies, gross cost have our our our optimization, contributed product been of New to those to pricing margin, value all have items mix, have expanding margin.

time. margin, forward where focus gross May we'll look and we financial you at our updated that So XX, to give an we'll continue on on Day to Investor model

Jim Anderson

jump and in. Yes, I'll maybe

end question, to the also I think perspective. at the very address pricing pricing the of just asked Tristan Tristan, about

of is margin optimization been company. durable, our Sherri part We I now gross you're improvement we've past discipline that asking think better frankly, mentioned, within pricing the the over kind is just that initiative our working believe that on go-forward pricing included and pricing fifth as year of pricing.

our add like feel of we've pricing the software, our tremendous our amount muscles would like portfolio. adoption increasing adoption now strong and around pricing we is customers solution to over rate's or a we so also, of XX%. what attach durable. is from higher-level some software feel our content our rate software we see added And application stack, we've And And built I

by adopted helps drive and solutions also better to it's higher helps our secure that ASPs the And better long term. customer us customers, -- software, and ASPs over our higher when us generally for

well. time And so that's over as ASPs a net tailwind to our

Tristan Gerra

follow-up, Great. And mentioned then rate the attach one you've my above center. in for data

this increase. will You you continue Q&A just the to that expect attach mentioned on rate

go outpace continue What obviously, further? for rate So go to where if attach you drivers, you to to talk the center the data to as and/or going to about could driver ASPs beyond units? they today are the are expect be even

new of Or existing or Is you Any addressing products? on more in address center? feel that do functionality that that color that going path to you your reliant be on products data. for is expansion data there already that can continued

Jim Anderson

the of which per it's question, which Yes, well to say, are we a continue the rate above drive let to combined see both attach On would I great me ASP server. across talk parts, or And motherboard are for places opportunities itself about chips the additional rates, more it's Tristan. more different the dollars one-x, expansion, Lattice and content attach multiple now, server, for motherboard server the lattice attached being just can where whether infrastructure of the cards chips see that to be sort adopted. used into the within on we or

developing, And to bring functionality, more the and And through so capability we're new four through we opportunity servers, with one. then we just been you years. to our of to doing the as we bring more to and opportunities see see like there, additional more new alluded number and that over well, products, kind to even number we've out is as capability continue content devices five new past software just two, Avant coming this,

for to And the growth so rates, continued more continue growth that brings continue opportunity combine good we company. in a to to area you higher as attach really this when with ASPs see content, bring which

opportunity detail kind And about data us Investor continued server specific We'll to center in we of bit some a this the you examples upcoming where give infrastructure talk Day. little and in should expect of our more at see segment. more

Operator

coming is Rolland from from question Susquehanna. Christopher Next

live. now is line Your

Christopher Rolland

I was as before, the I guys you I percentage a have question. growing it's total Hey think this auto don't more. a feeling INA about but was bit in now. given little wondering guys. for I have wondering, Thanks of a

love the know mentioned And segments. you of is rank what's industrial You that? force bit automation? I'd there, little a it really to ADAS too. also, just but love guys would of purely Or kind color then driving sometimes

Jim Anderson

Chris. Yes. Thanks,

it's efficient, where right? we're places automotive growing the electronic different used but pleased that's So yes, of on chip automotive applications, and be we increasing applications, power progress many provide electronics a applications, EV in on ADAS with like infotainment automotive, for a electronics. within for content can continued adaptable very even also gas-powered flexible, the combination both And cars,

the we're seen year growth we've overall with that grew pleased So recent the in very full and industrial strong. most automotive

above QX, most think again that. but And recent actually it year-over-year, automotive business in I the grew was well quarter, about we very saw automotive. strong growth XX% in our

pipeline area exciting kind ahead a of and we so compelling really that design we And company; very the for win this good growth have us. of as see

we growth. is now And segment, the that smaller that that it. of pleased feel but we're with about said, so good growth still of And it the portion

strong industrial well. we seeing robotics applications growth in But as automation are

bit has pleased with to the seeing Although over and automotive the quarters, robotics. it the especially relates many past faster. quite a in automation growth when different been throughout growing applications, segment industrial we're We're still

Christopher Rolland

Great, of could idea yes. segments you you you think can the And and next if we quarter? an kind or in strength where the us less of give rank if -- have may force more

Jim Anderson

the look expect industrial be the of for if terms sequentially QX, in QX, I computing growth midpoint. up flat, and midpoint expect I take guide next guided comms sequentially the and would sequential be on to we've a basis, on in the of certainly, you our Well, you overall, expect if quarter, but sequential would revenue I automotive. up would at sequentially. to based

Christopher Rolland

opinion? just of wireless highly wireline, on in up kind any there Are and comms, then drivers And significant lastly, what's your there? helpful. going here Very coming

Jim Anderson

I sequential seen. has consistent of bit with pretty what weakness in think a see infrastructure, did industry is we which QX, the In wireless

compute, being of it but of comms that server, a that we well. little saw and wireless sequential drop part bit infrastructure in as primarily So

we as especially to see in base forward, the wireless for XG growth stations Moving related a infrastructure. content of we that still given great the long-term comm infrastructure have company, equipment amount greater other area and

The data about that is other area about talked we've we're of more recently excited growth center networking. that

our good now. and detail We a we'll pipeline design in in And continue a growth weeks there see all touch to of Day this, again, very from healthy at well. on more of win as couple there Investor

Christopher Rolland

Thanks so much. appreciate, Really Jim.

Operator

from next [Operator Our Rosenblatt Hans Securities. is question coming Mosesmann Instructions] from

Your line now live. is

Hans Mosesmann

market. new Most in that, is been curious, dynamic winning? in guys, congratulations. win, component until tough those specific software design where engagements I is for a the questions a have big competitive Hey Jim, Thanks. my the Good of answered. am design results the that up But you're sockets of new what

Jim Anderson

Yes.

got your I think we've I back comment, like themselves. to of really the just in want the with feel general. devices good that software in general, start competitive part I'll position come a we to but

look efficiency times you there, other extremely FPGAs at competition, we're two If able than power incredible size physical devices to that's Nexus, are competitive are our smaller. that to much where advantages much, deliver out versus three better our

even really at feel device we positioned the just So well level, competitively. I think

similar Avant, on year more device first as we to have and the the in planning family launched based And to device we're then -- we're future. this we've Avant, for two families launch come more

there. well really positioned feel also We competitively

add But when for capabilities to think compelling And our I portfolio devices to we've makes think years, five are that so a the I the themselves really four that past we that over and customers. combination software out the built competitive. then

but from but over common does solution of number our products software a our software And Our helps revenue. get software customer applications. helps design drive is that I helps quickly, time them seeing great as customers device improve XX%. that our that And quickly. also to to importantly, and the in for quickly, our very We're more mentioned, our of switch stacks five their device either market easily solutions competitor's those market to now helps helps them software to time rate application-specific is adoption software what solution attach now one, different solutions, that, there's portfolio,

solutions. entire software, stickiness also silicon. That We creates software, long-term it system-level it's the their more our solution, for multigenerational believe including integrated for into creates our much once that stickiness

continue software we're investment in the company. big So and investment area that fifth the stickiness level the creates. we for -- year We've feel of competitiveness there of a very now it there, our increased It's about and certainly to be for potential and the we been good moving excited investment about growing forward.

Hans Mosesmann

want there what to to That's what I to Specifically, what your recently? doing compete the looking but down is get in FPGA? against compete their that? for, small competition are how Jim, great. behavior. any is, there does That's I'm Or against they you competition

"Hey, got use Your you. is to customer like, behavior I

only get. really That's this." what I'm the You're address trying can that guy to

Jim Anderson

that Lattice. think I is doing or the what it's unique Well, we're to specific marketplace in believe we

really with so think of and that's tightly combination And stacks, application offering place. in silicon believe I compelling coupled competitive that cargo we the solution specific a that,

that something software. recognize our That's think the that's our really we seeing for that and think I rates adoption versus differentiated we our believe we're that And competition. customers and by appreciate that's definitely announced more

Hans Mosesmann

Great. Thank you very much.

Operator

Next is David question Benchmark Williams from from Company. coming

is now line live. Your

David Williams

the taking afternoon. Good congrats and Thanks the execution. on for Hey. question

geographic Just a you perspective anything quarter. surprised from during that quickly, maybe the mix

was Europe anything down a the terms Americas a quarter, what bit potential maybe you're and there. of improvement? this in seeing quite again rebound And just if then but wondering Asia drove

Jim Anderson

David. Thanks,

breakdown revenue And it so where actually geography, where that's doesn't Lattice just revenue, by end product the reminder, the is necessarily a shipped to that's are So consumed. shipped. reflect as products

So want that outset. from I the to just say

shipped, where geography. got the in a shipped assembled system you mind, to keep and different So that will of is Lattice there lot the product times be a to

see strong said, to Europe. North continued with growth number Now customers over a seen those that yes, in growth certainly we're of We've America quarters. and pleased

term. some of server But to of in we softness are seen across we expectations about good have longer attribute geography. the softness the we the geographies Asia, terms for when in Many look demand. growth talked Asia our We in instance. servers term, long We earlier some that over that see assembled

David Williams

customers, that the Great. standpoint fungibility, about is obviously, but maybe the about stack? from of maybe think of and not fungibility And kind for software and you But modestly, talk maybe just those just specifics products that inventory have customers? and between flat, between are you much the products fairly different those levels fungibility then just can a there

Jim Anderson

Yes. There's very high fungibility.

the the almost certainly same product FPGA of things one products they're about because like get things market can great of FPGA across that every we about adopted the serve. One I is is, programmable,

So we often popular every we see, that being market serve. single across products, used especially those our we see often

across the real And so that's great business. I to there's fungibility and markets strength our think a

Operator

[Operator is Instructions] Our coming from question next Ruben Roy from Stifel.

Your line is now live.

Ruben Roy

guess been most questions a of I I software. did Jim, my on have question answered, have but

started of I bit this. when half the talk attach You about and having think soft involved. over design you to sort the little a cores wins little And software guess IP a these rates some about

Is maybe use upper end and keep attach number limit wouldn't and limits the see growth? customers come software stacks, where for there there build Or that applications going markets eventually, are we that or i.e., your software an kind it, some XXX%, up? of not if will software rate, just you but is

Jim Anderson

Yes. Thanks, Ruben.

know think and to it of We just I that limit would is. believe don't modules. that yet. programming what can't there I is. assume But hit lot that that their exactly the and adopt yes, not is the know There customers yet. certain of We want we software specific or I that that portion will upper hit say our limit. a we've of own adopt believe software don't use But always won't do own some don't be would yes, a we've stack. work We customers what themselves portion an

Ruben Roy

of And way of markets terms of pulling and Great. through coming pre-Nexus -- at and follow-up are and the software stacks in interest of customers, products, Avant sort of the addressing new that course, would software say? a up. software is looking the you focus investors products, us lot of to is Nexus on you're adoption But sort and, the

Jim Anderson

the quite while that's that's older existing of so and new correct. We've portfolio around we've actually lengthening Ruben, have just the a Yes, of but cases, software seen rejuvenating to one of of the other the that products, a been benefits products is enabling and software that lot and yes, lifetime absolutely and for rejuvenate question, seen, helping not a in driving great the products, kind products.

So of that with quite activate that very low. incremental to pleased because very, the older investment amount on products we're is

growth and as to year's so grow good the or be growth, us way and a enablement. recent driver well, least to it's seen well. And QX products is that our products really look we pre-Nexus most for due us growth very a in If last certainly healthy we have so continued continue of ROI a to part at as for big software pre-Nexus at

Operator

That does to Mr. question-and-answer the conclude our session. floor ahead, CEO, to over turn back go sir. I'd like Please Anderson.

Jim Anderson

forward in to all more on Day Investor at future being May certainly Yes. of we everyone, QX and for sharing course, on today. results today's operator, the Operator, plans concludes again, details about our Thank our that look you, call thanks strong We're of pleased with continued our XX. call. and and execution

Operator

you. Thank

for and wonderful have now a day. may you your disconnect your lines, You participation thank today. We

Lattice Semiconductor (LSCC) 1 May 232023 Q1 Earnings call transcript