8-K: Lattice Semiconductor Reports First Quarter 2024 Results Amidst Industry Headwinds

Lattice Semiconductor announced its first quarter 2024 financial results, showing a revenue of $140.8 million and a GAAP net income of $0.11 per diluted share, impacted by near-term industry challenges.

Summary

• Lattice Semiconductor reported a first quarter 2024 revenue of $140.8 million.
• The company's GAAP gross margin was 68.3%, and GAAP net income was $0.11 per diluted share.
• On a non-GAAP basis, the gross margin was 69%, and net income per diluted share was $0.29.
• The results reflect the impact of cyclical industry headwinds.
• The company is executing on a significant product portfolio expansion.
• Lattice continued its share repurchase program for the fourteenth consecutive quarter.
• The company expects second quarter 2024 revenue to be between $120 million and $140 million.
• Non-GAAP gross margin for the second quarter is expected to be 69.0% plus or minus 1%.
• Non-GAAP total operating expenses for the second quarter are expected to be between $54 million and $56 million.

Sentiment

Score: 4

Explanation: The sentiment is moderately negative due to the significant revenue decline and reduced profitability, although the company is taking steps to mitigate the impact of industry headwinds and is investing in long-term growth.

Positives

• Lattice is executing on the largest product portfolio expansion in its history.
• The company continues to invest for long-term growth.
• Lattice has maintained a disciplined approach to spending.
• The company has returned capital to shareholders through share repurchases for the fourteenth consecutive quarter.
• Lattice secured a new AI-PC win with Dell Latitude models.
• The company launched an enhanced version of the award-winning Lattice ORAN solution stack.
• Lattice released a new version of the award-winning Lattice Radiant software.
• Lattice received multiple industry awards, including the 2024 Top Workplace USA Award, 2024 BIG AI Excellence Award Winner, and 2024 Globee Cybersecurity Awards.

Negatives

• The company experienced a significant decrease in revenue, with a 17.5% quarter-over-quarter and 23.6% year-over-year decline.
• GAAP net income per share decreased from $0.71 in Q4 2023 to $0.11 in Q1 2024.
• Income from operations decreased by 61.6% quarter-over-quarter and 72.0% year-over-year on a GAAP basis.
• Net income decreased by 85.0% quarter-over-quarter and 73.5% year-over-year on a GAAP basis.
• Gross margin percentage decreased by 140 basis points quarter-over-quarter and 150 basis points year-over-year on a GAAP basis.
• Research and development expenses increased by 550 basis points quarter-over-quarter and 930 basis points year-over-year as a percentage of revenue on a GAAP basis.
• Selling, general, and administrative expenses increased by 560 basis points quarter-over-quarter and 820 basis points year-over-year as a percentage of revenue on a GAAP basis.

Risks

• The company is facing near-term cyclical industry headwinds.
• Global economic conditions may affect customer demand.
• The semiconductor industry is cyclical, which can impact revenue.
• Pricing and inflationary pressures could affect profitability.
• Competitive actions may impact market share.
• International trade disputes and sanctions pose a risk.
• Global pandemics could have a potential impact on operations.
• Changes in revenue levels, product pricing, and manufacturing costs could affect gross margin.
• Variations in manufacturing yields and the failure to sustain operational improvements could impact results.
• Stock price changes could affect compensation charges.

Future Outlook

The company expects second quarter 2024 revenue to be between $120 million and $140 million, with a non-GAAP gross margin of 69.0% plus or minus 1% and non-GAAP total operating expenses between $54 million and $56 million.

Management Comments

• Jim Anderson, president and CEO, stated that first quarter 2024 results came in as expected and reflect the near-term impact of cyclic industry headwinds.
• Jim Anderson also noted that the company is well-positioned for the long-term due to its product portfolio expansion.
• Sherri Luther, CFO, mentioned that the company remains disciplined in its spending while investing for long-term growth.
• Sherri Luther also highlighted the company's continued return of capital to shareholders through share repurchases.

Industry Context

The results reflect the broader semiconductor industry's cyclical nature and current headwinds, with Lattice experiencing a downturn in revenue similar to other companies in the sector. However, the company's focus on product expansion and long-term growth positions it to potentially outperform competitors in the future.

Comparison to Industry Standards

• Lattice's revenue decline of 23.6% year-over-year is significant and indicates a challenging quarter compared to the broader semiconductor industry, which has seen varied results depending on specific sectors and customer bases.
• Companies like Xilinx (now part of AMD) and Intel's FPGA division have also faced similar headwinds, but their scale and diversification may have provided some buffer.
• Lattice's gross margin of 68.3% (GAAP) is competitive but slightly lower than some of its peers, which often aim for 70% or higher in the FPGA space.
• The company's focus on low-power programmable solutions aligns with industry trends towards energy efficiency and edge computing, which could provide a competitive advantage in the long term.
• The continued investment in R&D, as indicated by the increase in R&D expenses, is consistent with industry best practices for maintaining a competitive edge in the technology sector.

Legal Proceedings

• Legal expenses associated with the defense of claims that are outside the ordinary course of business that were brought against the Company by Steven A.W. De Jaray, Perienne De Jaray and Darrell R. Oswalde are included in the non-GAAP adjustments.

Stakeholder Impact

• Shareholders may be concerned about the significant decrease in revenue and profitability.
• Employees may be affected by the company's cost management measures.
• Customers may be impacted by the company's product portfolio expansion and new software releases.
• Suppliers may be affected by changes in the company's production and demand.
• Creditors may be impacted by the company's financial performance and debt levels.

Next Steps

• The company will review its financial results and business outlook on a conference call on April 29, 2024.
• Lattice will continue to execute on its product portfolio expansion.
• The company will focus on managing expenses and investing for long-term growth.
• Lattice will continue its share repurchase program.

Key Dates

Keywords

semiconductor, FPGA, programmable logic, low power, AI, artificial intelligence, ORAN, Radiant software, financial results, revenue, gross margin, net income, share repurchase