LATTICE SEMICONDUCTOR CORP Q1 FY2025 earnings call

• The company is monitoring the impact of new tariffs on the global economy and industry, with no material impact seen yet but being proactive. • Q1 results were in line with expectations: revenue $120.1M, non-GAAP gross margin 69%, adjusted EBITDA 33.4%. • Continued to ship below estimated true demand while working with customers. • End markets like comms, computing, industrial, and automotive show growth. • Showcased innovative solutions at Embedded World in Nuremberg. • Internal quarterly business reviews show momentum in Nexus and Avant product families. • Balance sheet is strong, debt-free, and $25M of common stock was repurchased during the quarter. • Focus on cost controls, operational efficiency, and delivering value for shareholders.

In Q1 2025, Lattice delivered revenue of $120.1 million. Non-GAAP gross margin was 69%. Non-GAAP operating expense was $51.4 million. Non-GAAP operating margin was 26.2% and EBITDA margin was 33.4%. Non-GAAP EPS was $0.22. Communications and computing delivered its first year-on-year growth in two years. Industrial and automotive grew 6% sequentially, marking the first quarter of sequential growth in six quarters.

• For Q2 2025, revenue is expected to be in the range of $118.5 million to $128.5 million. • Non-GAAP gross margin is expected to be 69% plus or minus 1%. • Total OpEx is expected to be between $50.5 million and $52.5 million. • Income tax rate is expected to be between 5% and 6%. • Net income is expected to be between $0.22 and $0.26 per share. • Expect steady growth in revenue and profitability, with channel inventory continuing to decrease, but cautious on the second half outlook due to tariffs.

• Potential indirect impacts from new tariffs on the global economy and industry. • Macro uncertainties and geopolitical situations that could materially affect actual results compared to projections.

Q: Melissa Weathers asked about the comms and computing segment decline and growth rates.

A: Ford Tamer explained that the comms and compute segment decline was mainly due to client revenue decline on older platforms, but server and communication businesses have grown sequentially, with server driven by strengths in server segment and communication by wireline applications like data center infrastructure, NIC card switches, etc.

Q: Srini Pajjuri inquired about tariffs and end markets.

A: Ford Tamer stated that the cloud is very strong with 2025 CapEx looking good and 2026 expected to improve, industrial PMI above 50 for past four years showing improvement, and automotive being flat.

Q: Christopher Rolland asked about inventory.

A: Lorenzo Flores mentioned internal inventory dropped $8 million quarter-on-quarter, and while channel inventory is being managed, they are cautiously working to reduce it, with a focus on aggressive working capital management.

Q: David Williams asked about server strength and design wins.

A: Ford Tamer said server has opportunities in AI, security, and connectivity, and design wins are strong with a robust pipeline that includes pre-Nexus, Nexus, and Avant products.

Q: Gary Mobley asked about gross margin and competitive landscape.

A: Ford Tamer discussed maintaining 70% gross margin and the competitive advantage of Lattice's Lot 4 architecture over competitors' Lot 6 architecture in small and mid-range FPGAs.

Q: Tristan Gerra asked about Nexus revenue rollover and inventory.

A: Ford Tamer and Lorenzo Flores discussed the long ramp time of FPGAs, systematic expansion of product families, and management of inventory as part of ongoing business operations.

Q: Quinn Bolton asked about China impact and competition.

A: Ford Tamer and Lorenzo Flores discussed China revenue, product origin and tariff implications, and Lattice's growth in China due to product differentiation, while noting potential sectoral tariffs and mitigation efforts.

Q: Joshua Buchalter asked about new product growth.

A: Ford Tamer stated new product growth is expected to accelerate, with high teens in 2025 and mid-20s in 2026, driven by ASP increases from pre-Nexus to Nexus and Nexus to Avant.

Q: Ezra Weener asked about inventory and full-year guidance.

A: Ford Tamer cited improving demand signals (customer consumption, beginning backlog, book-to-bill) as confidence for growth, with caution on second half due to tariffs.

Q: Duksan Jang asked about gross margin impact of new products.

A: Lorenzo Flores discussed ASP increases from pre-Nexus to Nexus and Nexus to Avant contributing to margin improvement.

Q: Kevin Garrigan asked about industrial growth and AI in industrial.

A: Ford Tamer explained industrial segments have growth, with FPGAs playing a role in supporting AI workloads in industrial applications as pre-processing elements.