LATTICE SEMICONDUCTOR CORP Q3 FY2024 earnings call

• Ford Tamer joined as CEO seven weeks prior, emphasizing stability and potential for value creation.
• Q3 2024 revenue was in line with guidance at $127.1 million. Gross margin held at 69%. New product revenue continues to grow year-over-year with robust design momentum and stronger backlog.
• Expect Q4 2024 revenue to be $112 million to $122 million. Anticipates low single-digit revenue growth in 2025 with channel inventory moving to midpoint enabling 15%-20% long-term growth.
• Implemented 14% headcount and non-headcount operating expense reduction to align resources and drive efficiency while maintaining product roadmap and customer support.
• Strong leadership position in core markets of communications, computing, industrial, and automotive, leveraging low power and small size differentiation. Significant traction in Edge AI with applications in servers, clients, industrial, and automotive.
• Upcoming Developers Conference in San Jose on December 10-11 to showcase portfolio including next-gen small FPGA platform, Avant portfolio expansion, and software tools.

Third quarter 2024 revenue was $127.1 million. On an end market basis, communications and computing was up 12% sequentially, driven by general purpose and AI servers. Industrial and automotive was down 7% sequentially, primarily due to broader market demand and inventory normalization. Communications and computing and industrial and automotive comprise over 90% of total Lattice revenue.

• Fourth quarter 2024 revenue expected $112 million to $122 million.
• Anticipates low single-digit revenue growth in 2025 compared to 2024, with expectation of channel inventory moving to midpoint enabling 15%-20% long-term revenue growth.
• Q4 2024 non-GAAP gross margin expected 68% plus or minus 1%, total operating expenses between $52 million and $54 million, tax rate 5%-6%, EPS $0.15 to $0.23.

Q: Regarding Nexus and AI traction, how is new product revenue growing and what's the AI revenue outlook?

A: Ford Tamer stated new product revenue continues to grow year-over-year, driven by Nexus and Avant. AI revenue is growing with engagement in server and client applications, including Dell XPS design opportunity and server shipments of latest NVIDIA Edge AI boards with progress at OCP.

Q: About U-shaped recovery and pricing, is December quarter the bottom and is pricing market-wide?

A: Ford Tamer said they believe in a U-shaped recovery with softness in industrial and automotive continuing through mid-2025. Pricing is mostly market-wide, with Lattice maintaining gross margin by being customer-friendly and ensuring supply chain without disruption.

Q: AI opportunities and microcontrollers, any thoughts?

A: Ford Tamer mentioned Lattice is involved in various AI applications like transceiver bridging, server applications, IOT, and clients. On microcontrollers, they partner with others and have development tools like Propel.

Q: Segment trends and consumption, why different from competitors?

A: Ford Tamer stated Lattice's performance is better over longer term, taking share in small to mid-range FPGA without SOC. POS is higher than current revenue as channel inventory normalizes mid-2025.

Q: Workforce reduction and OpEx, how does it affect 2025?

A: Tonya Stevens said operating expense guidance contemplates workforce reduction, expecting low double-digit EPS earnings expansion in 2025 due to 14% headcount and OpEx reductions and improving margin.