Lattice Semiconductor Reports First Quarter 2022 Results

These non-GAAP measures are included solely for informational and comparative purposes and are not meant as a substitute for GAAP and should be considered together with the consolidated financial information located in the tables attached to this press release.

About Lattice Semiconductor Corporation:

Lattice Semiconductor (NASDAQ: LSCC) is the low power programmable leader. We solve customer problems across the network, from the Edge to the Cloud, in the growing communications, computing, industrial, automotive and consumer markets. Our technology, long-standing relationships, and commitment to world-class support let our customers quickly and easily unleash their innovation to create a smart, secure, and connected world.

For more information about Lattice, please visit www.latticesemi.com. You can also follow us via LinkedIn, Twitter, Facebook, YouTube, WeChat, Weibo or Youku.

Lattice Semiconductor Corporation Consolidated Statements of Operations (in thousands, except per share data) (unaudited)

	Three Months Ended
	April 2,			January 1,			April 3,
	2022			2022			2021
Revenue	$	150,515		$	141,795		$	115,716
Cost of sales		49,748			50,715			45,130
Gross margin		100,767			91,080			70,586
Operating expenses:
Research and development		32,555			30,229			24,066
Selling, general, and administrative		28,771			28,646			25,092
Amortization of acquired intangible assets		1,169			804			603
Restructuring		54			394			176
Acquisition related charges		455			1,171			—
Total operating expenses		63,004			61,244			49,937
Income from operations		37,763			29,836			20,649
Interest expense		(708	)		(657	)		(718	)
Other (expense) income, net		(22	)		(68	)		(162	)
Income before income taxes		37,033			29,111			19,769
Income tax expense (benefit)		955			579			956
Net income	$	36,078		$	28,532		$	18,813

Net income per share:
Basic	$	0.26		$	0.21		$	0.14
Diluted	$	0.26		$	0.20		$	0.13

Shares used in per share calculations:
Basic		137,500			137,048			136,401
Diluted		141,281			141,587			141,674

Lattice Semiconductor Corporation Condensed Consolidated Balance Sheets (in thousands) (unaudited)

	April 2,		January 1,
	2022		2022
Assets
Current assets:
Cash and cash equivalents	$	122,989	$	131,570
Accounts receivable, net		83,055		79,859
Inventories, net		71,773		67,594
Other current assets		21,368		22,328
Total current assets		299,185		301,351

Property and equipment, net		39,626		38,094
Operating lease right-of-use assets		22,378		23,818
Intangible assets, net		28,350		29,782
Goodwill		315,358		315,358
Other long-term assets		16,029		18,091
	$	720,926	$	726,494

Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	38,491	$	34,597
Accrued expenses		27,062		26,444
Accrued payroll obligations		16,328		27,967
Current portion of long-term debt		17,182		17,173
Total current liabilities		99,063		106,181

Long-term debt, net of current portion		136,461		140,760
Long-term operating lease liabilities, net of current portion		17,735		19,248
Other long-term liabilities		46,112		48,672
Total liabilities		299,371		314,861

Stockholders' equity		421,555		411,633
	$	720,926	$	726,494

Lattice Semiconductor Corporation Condensed Consolidated Statements of Cash Flows (in thousands) (unaudited)

	Three Months Ended
	April 2,			April 3,
	2022			2021
Cash flows from operating activities:
Net income	$	36,078		$	18,813
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Stock-based compensation expense		14,125			10,454
Depreciation and amortization		7,179			5,901
Other non-cash adjustments		1,740			1,679
Net changes in assets and liabilities		(15,917	)		(7,476	)
Net cash provided by (used in) operating activities		43,205			29,371
Cash flows from investing activities:
Capital expenditures		(4,426	)		(1,270	)
Other investing activities		(2,704	)		(3,056	)
Net cash provided by (used in) investing activities		(7,130	)		(4,326	)
Cash flows from financing activities:
Repayment of long-term debt		(4,375	)		—
Repurchase of common stock		(15,000	)		(15,002	)
Net cash flows related to stock compensation exercises		(25,028	)		(6,870	)
Net cash provided by (used in) financing activities		(44,403	)		(21,872	)
Effect of exchange rate change on cash		(253	)		(237	)
Net increase (decrease) in cash and cash equivalents		(8,581	)		2,936
Beginning cash and cash equivalents		131,570			182,332
Ending cash and cash equivalents	$	122,989		$	185,268

Supplemental disclosure of cash flow information and non-cash investing and financing activities:
Interest paid	$	552		$	592
Income taxes paid, net of refunds	$	761		$	675

Lattice Semiconductor Corporation Supplemental Historical Financial Information (unaudited)

	Three Months Ended
	April 2,			January 1,			April 3,
	2022			2022			2021
Balance Sheet Information
A/R Days Revenue Outstanding (DSO)		50			51			56
Inventory Days (DIO)		132			122			120

Revenue% (by Geography)
Asia		72	%		71	%		76	%
Americas		15	%		19	%		14	%
Europe (incl. Africa)		13	%		10	%		10	%

Revenue% (by End Market)
Communications and Computing		42	%		43	%		43	%
Industrial and Automotive		46	%		42	%		43	%
Consumer		10	%		9	%		10	%
Licensing and Services		2	%		6	%		4	%

Revenue% (by Channel)
Distribution		90	%		86	%		85	%
Direct		10	%		14	%		15	%

Lattice Semiconductor Corporation Reconciliation of U.S. GAAP to Non-GAAP Financial Measures (in thousands, except per share data) (unaudited)

	Three Months Ended
	April 2,		January 1,		April 3,
	2022		2022		2021
*Gross Margin Reconciliation*
GAAP Gross margin	$	100,767	$	91,080	$	70,586
Stock-based compensation - gross margin (1)		1,121		1,281		773
Non-GAAP Gross margin	$	101,888	$	92,361	$	71,359

*Gross Margin % Reconciliation*
GAAP Gross margin %	66.9	%	64.2	%	61.0	%
Cumulative effect of non-GAAP Gross Margin adjustments	0.8	%	0.9	%	0.7	%
Non-GAAP Gross margin %	67.7	%	65.1	%	61.7	%

*Research and Development Expense % (R&D Expense %) Reconciliation*
GAAP R&D Expense %	21.6	%	21.3	%	20.8	%
Stock-based compensation - R&D (1)	(3.4	)%	(3.3	)%	(2.5	)%
Non-GAAP R&D Expense %	18.2	%	18.0	%	18.3	%

*Selling, General, and Administrative Expense % (SG&A Expense %) Reconciliation*
GAAP SG&A Expense %	19.1	%	20.2	%	21.7	%
Stock-based compensation - SG&A (1)	(5.9	)%	(6.3	)%	(6.3	)%
Non-GAAP SG&A Expense %	13.2	%	13.9	%	15.4	%

*Operating Expenses Reconciliation*
GAAP Operating expenses	$	63,004		$	61,244		$	49,937
Stock-based compensation - operations (1)		(14,083	)		(13,658	)		(10,218	)
Amortization of acquired intangible assets		(1,169	)		(804	)		(603	)
Restructuring and other charges (2)		(509	)		(1,030	)		(176	)
Non-GAAP Operating expenses	$	47,243		$	45,752		$	38,940

*Income from Operations Reconciliation*
GAAP Income from operations	$	37,763	$	29,836	$	20,649
Stock-based compensation - gross margin (1)		1,121		1,281		773
Stock-based compensation - operations (1)		14,083		13,658		10,218
Amortization of acquired intangible assets		1,169		804		603
Restructuring and other charges (2)		509		1,030		176
Non-GAAP Income from operations	$	54,645	$	46,609	$	32,419

*Income from Operations % Reconciliation*
GAAP Income from operations %	25.1	%	21.0	%	17.8	%
Cumulative effect of non-GAAP Gross Margin and Operating adjustments	11.2	%	11.9	%	10.2	%
Non-GAAP Income from operations %	36.3	%	32.9	%	28.0	%

(1)		The non-GAAP adjustments for Stock-based compensation include related tax expenses.
(2)		Other charges includes Acquisition related charges in the three months ended January 1, 2022 of $1.2 million.

Lattice Semiconductor Corporation Reconciliation of U.S. GAAP to Non-GAAP Financial Measures (in thousands, except per share data) (unaudited)

	Three Months Ended
	April 2,		January 1,			April 3,
	2022		2022			2021
*Income Tax Expense (Benefit) Reconciliation*
GAAP Income tax expense (benefit)	$	955	$	579		$	956
Estimated tax effect of non-GAAP adjustments (3)		264		(40	)		(110	)
Non-GAAP Income tax expense (benefit)	$	1,219	$	539		$	846

*Net Income Reconciliation*
GAAP Net income	$	36,078		$	28,532	$	18,813
Stock-based compensation - gross margin (1)		1,121			1,281		773
Stock-based compensation - operations (1)		14,083			13,658		10,218
Amortization of acquired intangible assets		1,169			804		603
Restructuring and other charges (2)		509			1,030		176
Estimated tax effect of non-GAAP adjustments (3)		(264	)		40		110
Non-GAAP Net income	$	52,696		$	45,345	$	30,693

*Net Income Per Share Reconciliation*
GAAP Net income per share - basic	$	0.26	$	0.21	$	0.14
Cumulative effect of Non-GAAP adjustments		0.12		0.12		0.09
Non-GAAP Net income per share - basic	$	0.38	$	0.33	$	0.23

GAAP Net income per share - diluted	$	0.26	$	0.20	$	0.13
Cumulative effect of Non-GAAP adjustments		0.11		0.12		0.09
Non-GAAP Net income per share - diluted	$	0.37	$	0.32	$	0.22

Shares used in per share calculations:
Basic		137,500		137,048		136,401
Diluted		141,281		141,587		141,674

(1)		The non-GAAP adjustments for Stock-based compensation include related tax expenses.
(2)		Other charges includes Acquisition related charges in the three months ended January 1, 2022 of $1.2 million.
(3)		We calculate non-GAAP tax expense by applying our tax provision model to year-to-date and projected income after adjusting for non-GAAP items. The difference between calculated values for GAAP and non-GAAP tax expense has been included as the “Estimated tax effect of non-GAAP adjustments.”

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