Lattice Semiconductor (LSCC) 30 Oct 232023 Q3 Earnings call transcript

Company Profile

Participants

Rick Muscha	executive
James Anderson	executive
Sherri Luther	executive
Mark Lipacis	analyst
Tristan Gerra	analyst
Blake Friedman	analyst
Christopher Rolland	analyst
Srinivas Pajjuri	analyst
Matthew Ramsay	analyst
David Williams	analyst
Ruben Roy	analyst

Call transcript

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Operator

Greetings, and welcome to the Lattice Semiconductor Third Quarter 2023 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Rick Muscha, Senior Director of Investor Relations. Thank you, Rick.

You may begin.

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'll the the business of provide review of the and a third XXXX business quarter fourth and for outlook of XXXX. financial quarter

underlying permit public of call. We intends additional XXXX. If using company's for such after a factors or to further fourth to By as actual a management any make performance non-GAAP this constitutes copy at obtained differ contained to that it done that forum, found the those to to or the updates during events measures the and certain the everyone from intend the company includes latticesemi.com. I projections statements company is would have XX-Ks, our or such such including earnings company. documents information, investors primarily the We results in to results of our information and documents official changes be are our today, This that our that that contain refer our identify call. and will a available materially. non-GAAP like you financial this projections analysis company's call, guidance statements the the to with press we materially performance of in actual risk conference we forward-looking forward-looking of If Investor that We caution during regarding announced disclosing you important SEC, and be time XX-Qs you to with quarter at statements. conference the website cause information currently or at not material could on any files trends. release, and call press may wish can release predictions Relations the communicate may call other X-Ks. These section based differ guidance, remind future we future provide that refer financial publicly this

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

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

James Anderson

to our Thank everyone, delivered operating the members quarterly you, of rate. [Audio family in forward terms a in maintaining both in XX% solutions, and of in strongest year-over-year, We expand us has results solid newest hardware Lattice at looking revenue of and on Developers Rick, continue the thank bond healthy product with today. gross X Gap] We're mid-range QX our and December. launch portfolio growth Conference for Lattice call expected the joining margins. you, of rapid portfolio and the software product our FPGA we history our while to Today, margins at

me Let few highlights. QX on a touch

a margin. X.X%, the We points operating expanded record achieved cash basis free we growth, to was flow to XX% basis increase XX.X%, addition XXX of we which non-GAAP gross year-over-year margin and XX generated revenue of margin QX an In non-GAAP points year-over-year. by

was of telecom we purpose infrastructure. We're segment current up year-over-year some data to the Let into high sequentially down servers applications, past of given in the the macroeconomic computing in a revenue market X% our in see and In has provide market. to me basis. the for sequential business XG and growth communications now growth this servers and by market, optimized experienced offset overview end on this in the expect by center and over quarters. softer in AI X% growth sequential was challenges uptick end an general driven part demand The quarter, both continue pleased

as and are growth well AI growing as content both our well center growth to in for we term, in this long believe purpose in infrastructure. the servers telecom data silver given and center continue networking we long-term segment general for positioned optimized opportunities Over data

XX% was the and industrial automotive X% year-over-year. declined to on Revenue sequentially market. and Turning up

the While current softness industry continue we're expect growth, did and with quarter. in this this very consistent trends, the market, to pleased we we into softness year-over-year market experience with broader sequential

Lattice However, market in we a some the automation highlights. the driving growth product continue address ADAS device we portfolio as believe with We We're industry's introduced and to new FPGA which integrated Lattice robotics new create this future continues infotainment company's expansion diverse seventh many functionality, in the map systems. for built first automotive streams use and CrossLink-NX, to to to as recently for cases. in Nexus the be revenue history, growing road we USB provide family expect now is Lattice. This strong long-term as is applications which opportunity industrial platform. product class largest family on well applicable the device I'll its

look the with our forward the We in on families expanding for to progress further greenfield new also Conference which be continue new platform to Lattice our of expected X with upon new device December. revenue opportunities early the pleased at bond We Developers creates Lattice. launch Lynas platform,

key our strategy. a component is Software of

our sharing which new software at forward today our customers portfolio to software to are enables also while products, new they pleased already the Avon conference for bonds multi-generations about Nexus December. long-term adoption continued faster customer accelerates customers on market our and our our our driving customer our platform. with leverage on I'm Overall, for The our execution. will We adoption As enable using time details developers look same stock current solutions. our faster that in

well rapid our core the call believe our excited we about long-term While we're continued continue and that turn to our headwinds across to Sherri growth in positioned macroeconomic I'll markets. CFO, not amend we markets, be for to of now product portfolio, over Luther. end our expansion we're the

Sherri Luther

you, Thank Jim.

to portfolio XXth capital results. gross shareholders in of generated consecutive double-digit pleased continue drove returned strong continued expansion operations, invest through of We a leadership growth, On level cash share our are from financial product a quarter our and buybacks. basis, profitability. with to QX year-over-year revenue solid margin our we We record and

ended in $XXX cash. quarter We the with million

X% of me $XXX now quarter. between expected Let is our fourth margin minus or million. expected to be plus the non-GAAP operating our be with Gross for the results continued Total a and XXXX quarter expected on are for for million be review between million and basis. In to is outlook basis. quarter fourth to $XXX am $XX XX.X%, Revenue and million $XX I pleased on fourth expenses the non-GAAP closing, a financial execution.

softness in questions. of call Operator, While profitable end markets, for focused we open on we growth. our experiencing the are can now long-term driving remain some we

Operator

you. Thank

question-and-answer line of comes the Mark will [Operator a be We with Jefferies. conducting Lipacis question session. now Our Instructions] first from

Mark Lipacis

QX? you question you saw about expect how Can things trends a trends. to out geographic QX? far what Would and quarter had in I geographically on so playing you talk in in continue those the are

James Anderson

markets Thanks, the Yes. And Mark. also well. context the I'll end as about of talk it in

pleased would center very as In That at servers hyperscalers. from as if all, of servers, server both AI all, we're the in QX see drivers that revenue. the OEM it one Computing was the QX, XX% center be you Comms the pleased were to QX, well of would [indiscernible]. with So and vendors purpose and We for results much geo first mix data we as in sequential perspective, general first look QX, at geo the as that. well servers optimized main segment, of growth did with sequential for year-over-year sequential revenue growth. servers. From the data as that a QX of growth expect uptick

of level second to significantly as half in here that's higher servers a Just the servers. year We that year. content a next of starting new on in new ramp do reminder of a the generation generation and into of have

So tailwind QX. QX that that's we to a from saw

that expect We continue QX. to into

that that see localized it big we're as within as that softness from Communications current we see softness seeing Asia and of other to the some end really go infrastructure. telecom then in Asia auto saw CapEx to we as customers. I well. That's would that's infrastructure. that lower and year-over-year that the say was comment geography, for the then being around expect to and more our demand. started last the some demand the starting And XX% driven would and QX, quite spending as be, CapEx European operators. first pleased and we Computing growth demand towards from sequentially geography And extend of would quarter, expect QX, in And we both into telecom QX, to Now net-net, lower kind Comms at Computing in all, of both soften segment, QX, geography. we're the move the the see weeks XG well. and that's from in the And view segment, We with be up telecom QX, into communication, geography, wireless that the automotive lower to current flat industrial in that see to QX, with, that in telecom with infrastructure segment, if to demand we sequentially. I headwinds that do be really wireline in segment, as well X a we by are being spending of seeing And QX really of year-over-year. the QX, we specifically from as said, infrastructure, XG the softer the servers our although and expect I quarter started over end Asia down a up as sequentially industrial see sequential server in being to relative Europe from basis, demand down geography QX would of kind softness segment we're we But to we we X

towards QX expecting we our net Auto And so segment, from saw QX and And to to sequentially be that the then, extends that that of think QX. we're demand QX. we down Industrial end of softening into is the

gives well. call your also but that geography question hopefully, both it So by to as some by you segment

Mark Lipacis

Avant? very we that follow-up, about on products on think your sounds stride talk do more I That's or Nexus? really in you what like products And to revenues? hit Avant queuing launch. if think should to X about you How And of terms can It up helpful. family may, you relative in the Avant you're

James Anderson

talk Yes. Great. Thanks, excited about always, are Avant. we I'm Avant Mark. Happy about to

of excited just And a the year. really towards first of just general, entirely market. the end an we're So on platform. continued last execution about we're in continued greenfield as for FPGA the progress what is We reminder, on It good about And addressable progress Avant. with pleased all, creates is the stream feel Avant overall. really new our mid-range basically revenue company. We a it growth and that new launched really our doubles platform Avant just

which larger, relative Avant, kind really of terms time, It of view asked when for grow. we Nexus, in the to we it's to same Nexus design the the win is pipeline continues very point in to strong. And Avant pipeline look You significantly as positive. at relative relative

also In initial be for past. Avant beyond. We're small terms the small next milestone developers revenue, amount expecting the We're beginning of to the in That's we to because revenue It launching continue device initial and launch we've expect revenue, into of conference, Lattice a QX and us amount lineup. talked really Avant-G 'XX that will ramp December. of ,as Developers a of marks quarter early the excited from Avant about Conference it's at for X. it but Avant an in important revenue this XXXX, families about the the in X that

tuned. stay So

of have G developers with a lot X FPGA about of of of diverse device of really customers applications more what's is hear device families, market You'll wide time across at by Avant applications great base. the hands in our now the different across range mid-range But we'll and the about the have that families X, conference, developers that the and X customer a addition conference. we'll our that address

on excited about to as that. in all software I move note, customers same forward. so as And that is the the samples now it we as does excited we focus revenue hands once leverage ramp guess, Avant other, driving And really a the reminder, one of Nexus. put And really on

takes Avant investments well. leverage the making same those of advantage the Nexus on we we've soccer as been So platform, that

new ] GNX the [ So about share Conference Developers anyway, happy Avant, to versions, the certainly more in at December.

Operator

question Our Gerra of from the comes next with line Tristan Baird.

Tristan Gerra

expectations to related. it all relative and industrial QX automotive So sounds revenue is like the shortfall for

above that's So rate assuming the that us for about that in million run QX 'XX. still gives segment, of $XX

rate, been growing inventory weakness So much downside by that be in your over the see rate run land a and mentioned where in the that could do further the from China know it run that quarters growth significant run you've in in baseline just few you true driven rate how market? And quarters? that's meaningfully I think demand X in years, future to we Was versus content stable there question, quality is the segment trying revenue segment? bill in very what So past quarterly was where could gains? past

James Anderson

Yes. Thanks, Tristan.

full half the content growth X first really through on again, at, industrial And of up of of automotive year expect gains. industrial QX, X see growth. growth. of for take of design of on win led you growth if quarters that's we and double-digit multiple to year-over-year that this growth sort for would automotive kind the multiple this look the years, still So year. the our really, We've the have, expect a basis yes, for significant remember, years that guide your for back would to X we as And if can follows we and to year. over drove QX. we significant you Really segment years full be question, year, the past, and had of to And double-digit midpoint for

XXXX. For

our X, And revenue driven automotive by we wins we of production, streams, X, gains win and lot so right? which sometimes really we content years in stay those believe as or the multiyear for longer. X for, begun that that, are, said, production and design in content those segment do as those industrial gains A we

softening customers when So the on customers, is streams. what And, that their really our those long talk are revenue about near-term customers. seeing of demand are to based near-term lifetime headwinds, is so our kind though, we

So their interest higher them. that, of higher with really cost lower they've us to customers is et And what capital shared they spending by lower by that's of number on customers orders that due rates, cetera. believe placing driven CapEx their

Automotive years well. robotics, segment certainly So, that We that these pleased believe this year, really this we but of well secular Industrial the in company. past a see many applications and back, we've as that continue for growth automation, last with as if we And to the the multiyear in driven long-term will are quite step that growth electronics over and over industrial advantage trends product opportunity well. the growth Devices for automotive Avant gain product positioned and to that really take beginning the Lattice the those just ramp the line, expansion Lattice product of well of with and not customers, of growth to especially with are term our continued more long Avant positioned secular build-out our our and content Nexus our but as line year trends line

Tristan Gerra

That's have mentioned very useful. for follow-up, you've that LTSA. And then in in the little past very of my you terms

ago? a And pricing? expectation guidance, given season. next not analog year? weakness, back so know a do think low times I providing decline couple where get this a to you relative that quarter maybe you're what's your pricing reported but earnings So, currently your lead have single-digit what the a to in That's for companies we far are of

James Anderson

reason Tristan. in those And there pricing sort said have I to any generally prepared we strategy, been and of pricing, Over Sherry in as our conditions stable. margin year over her say that X we gross our we Thanks, years, which right? durable, our On have that, of very stable remarks, different years, was in optimization. we're those our, those change, market improvement durable very pricing would we're pricing X as don't X would found many that over Yes. included years. which think see better fifth And our

normal kind are, always back silicon package combination supply would are time. normal second is then I pre-COVID in I durable. to to pricing On will say of believe remain for availability. of really say times, that your kind would is really overall chain So would would I particular the normal. might lead supply the back broadly, we but part our be view a us tight say of just, generally lead back overall, supply, are normal, say just And of semiconductor in times more terms There that to we times be lead question, can our which remain that we

Operator

from Securities. Our the question of of next comes Blake with America Friedman Bank line

Blake Friedman

I there the XX to been is to any to timing And year? Avant and to days next Avant, on expected any changes ramps just recent go macro back how have of customer just any related to your wanted relative have ramp thoughts developments the impacted ago, of

James Anderson

Blake. Thanks, no. say I would

closer The days design in pipeline, XX terms In continued engage as cetera. Avant be growth of get changes devices the expected, Avant. new changes continue with last et over seen the device, we've win customers we which right, we would to to have as in, only launch, would

We expect to pipeline to grow. continue overall that

certainly grow. developers So, launch our continuing execution other ready And that's conference. getting then on just the to one change for at change is but progress Avant-GNX is only pipeline and the continued

win second more and of doesn't, they to So, of thinking they really our the and question, how would level when on would ramp by with by just years. changes line when device macro That's to to no our and the customer less driven progress over a the natural any on the devices. just then Avant their engagement part following year of next your enter design natural changes those relative timing customers selected then production time

Blake Friedman

the potential an past just as this macro on the And few has the few of quarters. mid-teen OpEx. kind range kind over next If grown look weakness just basis, a then Helpful. follow-up years, quick I annual on over in of OpEx given

OpEx trajectory forward? should curious think about how we Just the of moving kind of

Sherri Luther

Blake. Thanks, Yes.

But that. our been investing seen years perspective, fluctuations based product over portfolio certainly quite while timing I bit several a on you past in long-term creation. demand that the and can like quarter-to-quarter things from programs the So be OpEx an that and we've there from of mean have

now on the sequential, or spend the as the several going year-over-year, sequentially and the investments seen QX we've well our that increased in Even years. making. for been that's current R&D in as quarter we're So quarter, you've that

our that about most portfolio So area portfolio to for product company. an that the history. product company the in We've focus talked expansion the the company's in our of investing the long-term continues be in rapid of we're the of growth for fact

sure making And so the right make important are investments there. that very we

to do that's sure make that definitely way. us. important We we so a want And it in to disciplined

we us the as right that customer the to we're But investing portfolio. in launches, sure to to make want look really see we product course. are Of continue and expect can pleased ahead, product momentum, you our amount with the

The other Investor just of from year, R&D this Day we revenue our and target OpEx, a our XX%. is reminder that, then I'll at XX% to provide XX% talked earlier about

So be continues long-term that investment focus to us. of is, area for an

Operator

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

Christopher Rolland

channel So reset out inventory really least you are Are revenue ] Disty with out revaluation Have kind actually inventory customer for of there this patterns the a spurred particularly that by or companies evident demand been there that understanding have And level guidance And have process? there. downtick or comfortable guys noticed? there markets this themselves begun QX? and [ you recently. number at of inventory after a end it's of geographically any in you've of

James Anderson

Chris. Yes. Thanks,

of with inventory. a our In distribution majority inventory, our or me terms distribution. flows let revenue Most of through vast through flows of revenue start channel

important us. So certainly that's to really

for normal inventory, historical range I for of it QX, disty much say inventory Lattice or good in ended within we where the us of have distributing at when visibility in would on distributor We terms look very inventory. levels very

I terms are inventory, So are lean X they're side X see bit but healthy. There or in a relatively say, still overall, that the as distributors on as lean, of so that level would move so of in normal channel, in and the as then healthy we end inventory, range. customer within aggregate, view inventory customers. thousands we have to if end I would And our we

customers. strategic perfect with have visibility we customers, inventory with any that large into don't obvious large have visibility don't inventory us those large give our of are and of inventory. customers across customer thousands of all of their those inventory don't There end we we customer So inventory of strategic of or strategic into some But again, that signs of levels pockets see excess perfect visibility our customers.

Christopher Rolland

And you. for Great. another one perhaps

to revenue. that? So I of quarter Is X/X a Altera came few and of believe, interesting an see their also you of out. first I of on your wanted end revenue, kind decline of I decline channel It in of about area an where track. next overall refocusing decline first low of refocusing Auto, pre-IPO They trough, had have guess, with you've on there in products wondering a how guys for And talked all, was kind revenue they years. expectation take over might the new maybe looks coming year. update how considerable But on in an they like some some Industrial terms peak the I just you also, on the the and share past kind in taken

James Anderson

Yes.

questions, So we which we're in for is in full only full the what strong covered, what the can the of first see part growth guide the speak of another your terms think, overall, we year and overall to kind question, earlier business in looking for of sequential down despite of one our the forward I see to QX. year year, I largely for

the track of year, pleased conditions look some we're given for overall we're full especially we're where seeing that overall in some you markets. that the end with the at the tracking of If macroeconomic on, we're

pleased year our So and this with progress to we're year date. this

which the would say is there's on we the, in competition is part second start would I ago, me joined That's but I the the continue to over will thing we that right? serve robust Lattice tired question, every employees build, when philosophy. we that market the would I what X said every saying and I of it, that competition hearing is, by are years company product assume our say on probably say your always same and this, Now, I of I repeat

competition. our competitive line Both #X set. we And device when about products The Nexus our of be #X accordingly. and good assumed competitive so we plan size FPGA robust on We And X just very efficiency, feel efficiency, on XXXX, go. product joined launched products. in production will seventh beginning would on based platform, We power I very, positioning the Nexus ramping. that is our and there the family the on feature are portfolio. small really our company, in

We expect production into Avant, to year, go half in about and really the Avant. position year next second then we competitive again, And respectively. first of good feel next of

year, Avant, great. shared we the launch at set As feature the power efficiency last of the are size, efficiency

we competition. we'll in assume So when really more competitive there's good Developers that at we'll would robust feel we always about That that share And that about we But positioning. say clearly, yes, Avant-GNX. Conference. that December have launch I

And our markets the that they're to make in so, products is and and are targeting. always segments absolute we'll, sure our goal leadership

Operator

of Our the Srini with Pajjuri question next comes Raymond line from James.

Srinivas Pajjuri

understand, at the Avant of a are you lot the given I guess, coming products? the have you quarters? few weakness, change them a there. you Jim, of macro up of seeing I to some impact out new next any do macro, the see given in design all lot of in adoption ramps any activity the and But your customers',

James Anderson

all broad specifically. wins on can seeing and but me Avant which of Thanks, come Srini. I our Nexus and healthy this quarters across sense design very that Avant and we're year, our this win would first the pipeline, through And it and the across significant follows But in years wins at address design another very, growth. our products, of look design of year, I of products, not year If touch growth the include just, but products. and all Yes. multiple let the in pre-Nexus X even and of also more back

expansion so quarters. And that pleased converts continued win the course, pipeline over pipeline. design of with the of the we're And quite revenue to coming

it now, investing just with we're win and, mentioned that the our software set for either targeted a solution cases part over in very of important actually is that out make as remarks. products easy So adopt We've to our stacks are said, even specific They years that to design market get that of from pre-Nexus competitor's across Nexus customers been X a up maybe we're have applications software before much not using never help in a But pleased to help speed growth end used with strategy. our application, I device in that for and or An devices. customers I device portfolio. prepared and customers switch portfolio they our quickly. been that Avant, use building process. device but for new we've or a Lattice our pleased application-specific device a this that. And Lattice

which benefits rate Avant pace well. the of building The benefits X has Nexus positive significantly it wins. And And a so one that as past been because we've had software, that that over the products. been past that pre-Nexus places years. design product, the And years, of Avant leverages that impact we've same software base the invested certainly That the over on our and

we but win rate ramp the us pleased pace of XXXX of the end 'XX at pleased back with And the original design parts of so beyond. of we're your and expect to benefiting and year, this as looking very starting question, growth. with, we're we're forward the revenue and And to one in Avant

Srinivas Pajjuri

helpful. you it. I crosscurrents be when will customers kind Any and really this what some continue are and any can about share perfect Got has Asia a thoughts and talked macro Europe visibility, of spreading weakening you extent guess, with as and And about these demand as nobody and to of that going kind beyond saying how your follow-up, out? Jim, headwinds long in guess Asia would to but bottom I well. auto us industrial the are color into maybe of on

James Anderson

our Yes. with are how Thanks, will bit customers little long Srini. Yes, struggling I that think be. a

our attributing that right in as And on shared of we give our QX, seeing their when call. capital. expecting we're in give, I And at saw the Europe again, cost we QX. to really at they're we next visibility in earnings interest extended with continue pullback softness then expect thoughts our earlier, year bit the towards customers, of that And QX higher that is that more They're think to softening rates, the, seeing see a that what a and into higher I we'll into end initially call, talk we'll demand they're well. as earnings certainly related now. our Asia cloudy to geography to to next next as CapEx those

Operator

next Our Ramsey the Cowen. of Matt line with question from TD comes

Matthew Ramsay

wanted I into segment. Industrial in Jim, in trends dig to Auto and the that

there. questions few a So

you specific standpoint? where have the get mean you're could that from seeing help things drastic talked differences you some for or into in the give wanted are visibility multipart specific which us I an to which that little where break Industrial seeing a the if that percentages? business, weakened and then all, Auto holding bit lead So segment are worse? And time to up more things specific, could, the generally, call down part, thing, business you could between very up and end really the just you're where one's trends but, better, holding application as apologies seeing us I of so far between seeing a and business, roughly like Industrial Second if first lastly, Auto to about you any has one's customer weakness? bit, things applications you're this and

James Anderson

Matt. Thanks, Yes.

three was do best each that think of one I my parts. I'll those. hit to

smaller you into but Industrial than the On Industrial, out the has Industrial. We are on won't specifically, industrial. Automotive been small just we the that majority quarter. relatively the faster a just auto, so part for weighted instance, heavily is segment, of is of comments times, definitely towards Lattice, the number for repeat percentage. I anticipate to automotive this more automotive, Automotive subsegments the that break Auto as don't at Automotive. but a revenue think over about segment. of it part that of of do talked of our to start past we is look and kind reminder, if the a in, a qualitatively, growing Industrial quarters, soften we market breakdown overall segment, more I

demand market us, that automotive in Just is of new start fact terms interest sales. there's largely the been the to affect car the that belief the end of is rates higher lots behind restocking

begins And so this we're quarter. assuming that, to that soften market

part towards Industrial. I significant time time second between us we weighted the the again, question, heavily any see more segment two. But that the the for lead differences of differences is between your think much two don't On on lead

bit And to impact little because its be heavier of a so on industrial weighting. more the tend focused we

many part of talked applications. But I that think those the On applications, geography. is third kind It's was many customers, your we really say specific question, is softness I what the we've seen within which would broad-based that of about demand customers different around geographies, broad-based. by across and

we're that I broad-based and like softening. seeing really, robotics as we I applications, really industrial things So applications. Yes, automation, anticipate it a pretty certainly across would categorize would automotive electronics.

Matthew Ramsay

of you would a all environment dial Or you margin? make in that this and on certain side operating I question. launch, patience We, products? see I to for margins Is talked free spending? I question, and the up company basis the and appreciate trend you about it. these guys with about through cash the that earlier multipart of basis. think have the But new that and we the you on end products you are Avant see because Sherry. cash other a with about is a question where Jim end an or think would an where there free and are confidence you the about markets floors of lot and Got you back And My the to sort performance quick got going sort in of a the flow spend really second flow margin floor on the cyclicality a OpEx. when

Sherri Luther

Yes, Matt.

of been on. with in would we've I to quite the that that the front, focusing a is that something We've long-term been we put for company Investor definitely to launched. say R&D Day is, bit all for new we've the doing that growth products So But at the OpEx that investing be target is our XX% the out particular, important. And continues on XX%. spend, of

long-term model remains model, that intact. as So a

what very that. I looking in what pleased way, flow. we free that has is of been in that's making the way that with think, strong those in strong really we're free cash you see has in though, we've a always for disciplined so We're be would what a very consider been terms company We, QX cash and we'll of, guide can to I way at the cash the like. the disciplined looking say investing investments way. And continue flow terms generation,

margin, we're We focus that on are continue things. to that. continue gross on on margin making to thrilled in that focus XX% gross good and we really results. our free was focus expansion margin believe right the cash flow area. sure margin our Gross for on strategy the investing durable. We'll is quarter we'll that to And We'll execute continue

year. we execute continue that So we'll that long-term this put to our out really earlier we just model view toward

Operator

[Operator the comes with Williams line Benchmark. from next Instructions] Our David question of

David Williams

think first, Jim, guess, talk industrial opportunities how the would is the Or be I It a the a be kind greenfield more two? of mix you. Would the a for auto you about be there? relative if And to where optimal just could business? I'm is would see there of just XX-XX? is you wondering maybe maybe optimization about the understanding what mix small do you if that those think for opportunity a growth you it So segment. less

James Anderson

Yes. David. Thanks,

rear auto area recent auto, smaller auto, industrial the the we Actually, wins front video that past ADAS within The some the of used of models in do systems. the was us but be we faster-growing device definitely, gets is So Lattice at that between been gets infotainment customer that's the has of applications Mazda in or a component, system. with new the stream. and ADAS cars one the data preprocessing The for it used the vehicle. would It address and over that were in of announced quarters. to used the would a stream their camera the

And very we applications. But in so other well. typical, get there's very as that application typical used that's many that a automotive examples application, Mazda

over to industry combination for and electronics semiconductor the power applications. those The all customize do and devices those area for well those well. that just size support efficiency over being obvious the positioned electronics that's benefits reprogram We growth really an secular flexibility and the the being our service really term. ability an specific all, the long terms for see amount Lattice long company automotive area of strong see see of the great feature can as, of growth of growth we power to area first kind as applications. And term incredible So for automotive of efficient, in kind very continue as automotive efficient to a interconnect overall, having devices but as a we of why definitely we

David Williams

and on this robust secondly, just, that Sherry, I rebound? just we've trajectory then time the first guess, that and past. more really then is the the does pointing there that about seeing incrementally gross And to softer outlook. been opportunity be here, upside And it's it I think in maintained we're talked you margin, you in it? But on confidence that give maybe the could and the sustainability resiliency this signal does And greater of the surprisingly

Sherri Luther

David. Thanks, Yes.

a record. margin, XX.X% gross So

that mean XXX fifth and prepared we've continue basis that that But is something the focus to we're factors there. well on now, my with So as our an mentioned points in on. we the sequential thrilled as area we're been I margin really in year-over-year improvement. I year gross improvement executing or and remarks rather of

at X It or next guide, We continue range, midpoint it quarter. plus gross a a on minus right, the XX.X% you X%. to in quarter range. to is focus the from margin can of is But our see fluctuations

Day on and our to That's year, towards will margin, And XXs%. long-term this low and continue we increased focus when continue you gross where our to earlier Investor drive look our to we'll margin gross margin believe our model, we We is gross that. durable. at the target target

James Anderson

I'll gross margin of just Yes. we've rate. a is seen on add, benefits attach the And software maybe one

As of Sherry things fluctuate one software think But mentioned, gross that margin on quarter-to-quarter like can based we just trends of benefits gross longer-term product. attach. mix margin the our

half generally actually we've which of has seen a the we into combination adopt six software associated software a software Silicon a attach, stacks higher Lattice they're customers percentage launched call with ASP we've the higher Design usually As now ASP has means over solution higher silicon and gross when of win wins using solution have of one higher that and what a market. And stack, margin it. a that that design all

time the see that think benefit I one software higher that's we tailwinds at over adoption time. of over So the and

Operator

Ruben next question Our line the from comes Stifel. of Roy with

Ruben Roy

about to like Avant. you'd Jim, you said talk

than for most another and same Or going Is remember that targeted pipeline correctly, maybe sort around Avant about a Nexus. Edge feature it pipeline this Avant to set, processing a guess, broadened at towards of talk question I activity? question So comment the of point your is, kind the being at initial if had area was larger line of you think, was has, the I the And the potentially that bit? if on if could was design significantly AI. reason, Edge and I that this time for specifically has SKU whatever seeing where that the you're on I ask the and point,

James Anderson

of Thanks, talking about tired get Avant. never Yes. Ruben. I'll

problem Avant. no Yes. another the question with asking So on

or like Avant artificial the And industrial year of actually actually And was in ago, the we Avant-E the we more different Edge. some the said, good I of applications seen platform to growth coming with really as the revenue well. stands around intelligence Edge automotive doing expect applications processing inference other the device for lots the family applications, launched E that platform products applications, Avant-E are was the launched to at are that as optimized pipeline about the initial a initial And the the growth of some in So edge actually that more AI along applications, pipeline. things we first applications. and from in we where seeing out. actually, ramp. of of we've the with come has sequence initial do the When and

will and first to was launched samples family first be And customers, delivered to the we we that because that so deliver the that the product revenue. begins that product that first

to pipeline the AI And initial build, so Edge we that's general, win will, kind of to revenue Edge that's because where started that and where generate. product design that's expect streams around and first more start where, to the is optimized in applications,

conference we're excited those in December. launch we'll I earlier, Avant-GNX, follow-on as the about very developers And well. of Now as those device the products families shared at we'll

other the conference will that about that at certainly address developers talk December. a Now range applications those of in too. And about, excited more we're we'll

December. tuned. And about stay in so you'll more that hear We'll,

Ruben Roy

Got Great. it.

Okay.

So that you Or especially quarter this if update, around I don't coming or don't I could PCs. you've being give mentioned client-side I content ask are an SKUs Or maybe there gains? about AI-centric with not is activity done. for opportunity processor you this potentially a computers us out either early? last. you Is talked it quick any think seeing can Maybe think new follow-up. around at point? you it design with front excitement some notebook folks an and some too

James Anderson

Yes.

for of as getting those great, as devices. In battery production. for production. us. that Lattice But touch that thank very solution well, we'll of designed a And Happy applications fact, a there the we'll to In to in you a engagements that. design as can that. a as are early too as engaged good publicly, company for this TAM and we number those we're to it's yes, that we client, in yes, software but to working we've for security and the past, to definitely Gram a enter And we with closer area other doing come devices see share OEM wins can we're on LG help client And those system, improve continue Asus large are announced launched view on We more In we're different drive AI large, but devices, continue about and those asking particular, a applications additional a opportunity Series, about client the engagements. we Yes, that great we're growth to share excited with. had number little already really into. system devices, client about customers ThinkPad OEMs get talk Lenovo are and that savings. announced help Lattice Edge

Operator

next the Quinn [Operator comes Instructions] of question Needham. Bolton line from Our with

Unknown Analyst

costs for any for question Is pulls back, Sherry for target and second, there revenue the that long-term into the then Analyst XX% a significant OpEx on sales. set you you of invest like absolute the it business? Day, of be could looks a is Day, Sherry, be in there you could Avant as to where in moving Investor going OpEx for see for December, to then XX% under-absorption Jim. sort looks or upper midpoint of factor as And of First about to threshold at guidance or Or margin? an start gross is sorry, cut operations sales. start gross of At the like you OpEx? a be margin the would OpEx to period mid-XXs time

Sherri Luther

Thanks, Yes. Quinn.

for So from the a of the all gross is margin perspective, those I things at into we've QX. it contemplated way guide would look

XX.X% X%. or minus So plus

its strategy in our expansion fifth about past there margin now enabled executing gross us get are we've in been years multiple year, that have value the we've to for really or there X that talked the for Now on products. factors that

our we of QX. And margin model, the our perspective, SG&A those XX%, attach all and Day guide a at to And believe various part that drive put those some we the to contemplated That's XX% so is strategy into XX%. about it's do include model products new this are provided From to software gross mix. earlier fully long-term right? our R&D many the Investor we durable XX% factors, Jim at an product built that XX% our we and again, talked are are target. continue that gross toward efficiencies. And OpEx expansion target will the about that within There cost for that, long-term year. talked as of margin the out

progress the is to So would that a company. making upper company I focus investments sure that company. an to the to made our OpEx, the that's it the date. And right that long-term business we'll the continue limit in manage and the making to made we've way, for long-term that we've We We've terms a in the of way. in continue on want investments want disciplined terms of on the focus of ton to in launched because growth with products that that for the of of do way answer we the that continue growth we all we're

basis, at can put perspective, from on drive you so And our before, as model a Day. I fluctuations toward mentioned still our will we quarterly an Investor target but OpEx see that out

Unknown Analyst

Nexus I than but across know pipeline XXx for is the just is does the revenue I'm I Avant, a ramp pipeline come Or and Avant this Great. And very the then But that the much I bigger is hope said point question, at in wondering, you've as guess given multiple into it translate ASPs. it's Avant? TAM doesn't for time. higher times, that bigger faster for a simple Jim,

you're pipeline but people of faster Nexus. some And doesn't, a I than shouldn't guess where revenue questions Avant And is into the so I'm this read it getting necessarily ramp bigger, grow lots is ramp getting from of in XXXX? this macro investors and after seeing of that the you close, kind sort Thank hey, of, you're can you. Avant weakness help to allow still offset

James Anderson

Yes.

revenue would obviously converts certainly pipeline, The I but I it's time. that, Nexus win see what idea larger is the pipeline over expected is that that. design than of good positive. say being to think that to We Avant it's the pipeline that whole still, is

pace the once beat the able rate market. we over of platform refreshes. time, if the ramp major to the on the customers rate own They're product look in and bring hands natural limiter the customers, actually that you of put major, at over revenue governor their or being I to natural samples think to it's and more

refresh they'll as And we win platform they'll, so the at designs, in design next Avant rate.

tried of I rate the And more in say would hands. put rate is would the customers' then the over I, that And of of what so I samples time we about a growth or ramp back bond how once governor that's where give a both our think FPGA characterize Day that sense did the earlier you we year, to refer to of the this to or products. we of Investor of continued small

Avant layers over that on think multiyear long how to those continue grow term, expect period. but of a to how then the top about We over to

Operator

turn our you. like over I that would Ladies to floor Jim the Thank now final to Lattice's comments. President gentlemen, closing and question. for back was and CEO, Anderson,

James Anderson

in everybody, to and what history December. the conference and biggest continue us thanks in we're company's more QX on expansion joining portfolio to share pleased we the developers at call solid really with operator, you, We're results again, in about excited to the our today. Thank see and that on execute the as Yes. for excited product

time. So call. thanks that the And for operator, concludes today's

Operator

Thank you. This concludes today's teleconference.

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

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