Estimates of future revenue are inherently uncertain due to, among other things, the high percentage of quarterly “turns” business. In addition, revenue is affected by such factors as global economic conditions, which may affect customer demand, pricing pressures, competitive actions, the demand for our Mature, Mainstream and New products, and in particular our iCE40™ and MachXO3L™ devices, the ability to supply products to customers in a timely manner, changes in our distribution relationships, or the volatility of our consumer business. Actual gross margin percentage and operating expenses could vary from the estimates on the basis of, among other things, changes in revenue levels, changes in product pricing and mix, changes in wafer, assembly, test and other costs, including commodity costs, variations in manufacturing yields, the failure to sustain operational improvements, the actual amount of compensation charges due to stock price changes. Any unanticipated declines in revenue or gross margin, any unanticipated increases in our operating expenses or unanticipated charges could adversely affect our profitability.
In addition to the foregoing, other factors that may cause actual results to differ materially from the forward-looking statements in this press release include global economic uncertainty, overall semiconductor market conditions, market acceptance and demand for our new products, the Company's dependencies on its silicon wafer suppliers, the impact of competitive products and pricing, technological and product development risks, the failure to achieve the anticipated benefits and synergies of the Silicon Image transaction. In addition, actual results are subject to other risks and uncertainties that relate more broadly to our overall business, including those risks more fully described in Lattice’s filings with the SEC including its annual report on Form 10-K for the fiscal year ended December 31, 2016, and Lattice’s quarterly reports filed on Form 10-Q.
You should not unduly rely on forward-looking statements because actual results could differ materially from those expressed in any forward-looking statements. In addition, any forward-looking statement applies only as of the date on which it is made. The Company does not intend to update or revise any forward-looking statements, whether as a result of events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.
Non-GAAP Financial Measures:
Included within this press release and the accompanying tables and notes are non-GAAP financial measures that supplement the Company's consolidated financial information prepared in accordance with U.S. GAAP. The non-GAAP measures presented exclude charges and adjustments primarily related to stock-based compensation, restructuring charges, acquisition-related charges, amortization of acquired intangible assets, impairment of intangible assets, purchase accounting adjustments, gain on sale of building, gain or loss on sale of business unit, and the estimated tax effect of these items. These charges and adjustments may be nonrecurring in nature but are a result of periodic or non-core operating activities of the Company. The Company describes these non-GAAP financial measures and reconciles them to the most directly comparable GAAP measures in the tables and notes attached to this press release.
The Company's management believes that these non-GAAP financial measures provide an additional and useful way of viewing aspects of our performance that, when viewed in conjunction with our GAAP results, provide a more comprehensive understanding of the various factors and trends affecting our ongoing financial performance and operating results than GAAP measures alone. In particular, investors may find the non-GAAP measures useful in reviewing our operating performance without the significant accounting charges resulting from the Silicon Image acquisition, alongside the comparably adjusted prior year results. Management also uses these non-GAAP measures for strategic and business decision-making, internal budgeting, forecasting, and resource allocation processes and believes that investors should have access to similar data when making their investment decisions.
In addition, the Company uses Adjusted EBITDA in calculating the annual excess cash flow debt payment. 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 Corporation (NASDAQ:LSCC) is a leader in smart connectivity solutions at the network edge, where the “things” of IoT live. Our low power FPGA, 60 GHz millimeter wave, video ASSP and IP products deliver edge intelligence, edge connectivity, and control solutions to the consumer, communications, industrial, compute, and automotive markets. Our unwavering commitment to our global customers enables them to accelerate their innovation, creating an ever better and more connected world.
For more information about Lattice please visit www.latticesemi.com.
Lattice Semiconductor Corporation, Lattice (& design), L (& design), iCE40 and MachXO3L, and specific product designations are either registered trademarks or trademarks of Lattice Semiconductor Corporation or its subsidiaries in the United States and/or other countries.
GENERAL NOTICE: Other product names used in this publication are for identification purposes only and may be trademarks of their respective holders.
Lattice Semiconductor Corporation | ||||||||||||||||||||
Consolidated Statements of Operations | ||||||||||||||||||||
(in thousands, except per share data) | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||||||
September 30,
|
July 1,
|
October 1,
|
September 30,
|
October 1,
|
||||||||||||||||
Revenue | $ | 91,971 | $ | 94,137 | $ | 113,225 | $ | 290,695 | $ | 308,946 | ||||||||||
Costs and expenses: | ||||||||||||||||||||
Cost of sales | 38,649 | 42,928 | 45,801 | 125,332 | 125,992 | |||||||||||||||
Research and development | 25,648 | 26,820 | 27,747 | 79,857 | 91,270 | |||||||||||||||
Selling, general, and administrative | 21,290 | 21,938 | 29,244 | 67,133 | 75,857 | |||||||||||||||
Amortization of acquired intangible assets | 8,526 | 8,737 | 8,260 | 25,777 | 25,292 | |||||||||||||||
Restructuring | 3,071 | 1,576 | 317 | 4,713 | 8,316 | |||||||||||||||
Acquisition related charges | 681 | 867 | — | 3,208 | 94 | |||||||||||||||
Impairment of acquired intangible assets | 36,198 | — | 7,866 | 36,198 | 7,866 | |||||||||||||||
Gain on sale of building | (4,624 | ) | — | — | (4,624 | ) | — | |||||||||||||
129,439 | 102,866 | 119,235 | 337,594 | 334,687 | ||||||||||||||||
Loss from operations | (37,468 | ) | (8,729 | ) | (6,010 | ) | (46,899 | ) | (25,741 | ) | ||||||||||
Interest expense | (3,888 | ) | (4,656 | ) | (5,235 | ) | (14,112 | ) | (15,257 | ) | ||||||||||
Other (expense) income, net | (1,828 | ) | 564 | 209 | (1,412 | ) | 3,558 | |||||||||||||
Loss before income taxes and equity in net loss of an unconsolidated affiliate | (43,184 | ) | (12,821 | ) | (11,036 | ) | (62,423 | ) | (37,440 | ) | ||||||||||
Income tax (benefit) expense | (331 | ) | 47 | 971 | 234 | 7,410 | ||||||||||||||
Equity in net loss of an unconsolidated affiliate, net of tax | (199 | ) | (154 | ) | (407 | ) | (692 | ) | (1,085 | ) | ||||||||||
Net loss | $ | (43,052 | ) | $ | (13,022 | ) | $ | (12,414 | ) | $ | (63,349 | ) | $ | (45,935 | ) | |||||
Net loss per share, basic and diluted | $ | (0.35 | ) | $ | (0.11 | ) | $ | (0.10 | ) | $ | (0.52 | ) | $ | (0.38 | ) | |||||
Shares used in per share calculations, basic and diluted | 122,990 | 122,390 | 120,584 | 122,393 | 119,596 | |||||||||||||||
Lattice Semiconductor Corporation | |||||||
Consolidated Balance Sheets | |||||||
(in thousands) | |||||||
(unaudited) | |||||||
September 30,
|
December 31,
|
||||||
Assets | |||||||
Current assets: | |||||||
Cash, cash equivalents and short-term marketable securities | $ | 107,977 | $ | 116,860 | |||
Accounts receivable, net | 79,030 | 99,637 | |||||
Inventories | 77,482 | 79,168 | |||||
Other current assets | 19,913 | 19,035 | |||||
Total current assets | 284,402 | 314,700 | |||||
Property and equipment, net | 43,236 | 49,481 | |||||
Intangible assets, net of amortization | 52,966 | 118,863 | |||||
Goodwill | 267,514 | 269,758 | |||||
Deferred income taxes | 242 | 372 | |||||
Other long-term assets | 13,137 | 13,709 | |||||
$ | 661,497 | $ | 766,883 | ||||
Liabilities and Stockholders' Equity | |||||||
Current liabilities: | |||||||
Accounts payable and other accrued liabilities | $ | 70,542 | $ | 90,798 | |||
Current portion of long-term debt | 22,243 | 33,767 | |||||
Deferred income and allowances on sales to sell-through distributors and deferred license revenue | 36,197 | 32,985 | |||||
Total current liabilities | 128,982 | 157,550 | |||||
Long-term debt | 280,381 | 300,855 | |||||
Other long-term liabilities | 33,842 | 38,048 | |||||
Total liabilities | 443,205 | 496,453 | |||||
Stockholders' equity | 218,292 | 270,430 | |||||
$ | 661,497 | $ | 766,883 | ||||
Lattice Semiconductor Corporation | ||||||||
Consolidated Statements of Cash Flows | ||||||||
(in thousands) | ||||||||
(unaudited) | ||||||||
Nine Months Ended |
||||||||
September 30,
|
October 1,
|
|||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (63,349 | ) | $ | (45,935 | ) | ||
Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 45,591 | 47,908 | ||||||
Impairment of acquired intangible assets | 36,198 | 7,866 | ||||||
Amortization of debt issuance costs and discount | 1,680 | 1,212 | ||||||
Loss on sale or maturity of marketable securities | 237 | 72 | ||||||
Gain on forward contracts | (72 | ) | — | |||||
Stock-based compensation expense | 9,286 | 12,107 | ||||||
(Gain) loss on disposal of fixed assets | (197 | ) | 263 | |||||
Gain on sale of building | (4,624 | ) | — | |||||
Loss (gain) on sale of business unit | 1,496 | (2,646 | ) | |||||
Equity in net loss of an unconsolidated affiliate, net of tax | 692 | 1,085 | ||||||
Changes in assets and liabilities: | ||||||||
Accounts receivable, net | 20,687 | (5,728 | ) | |||||
Inventories | 1,519 | (4,644 | ) | |||||
Prepaid expenses and other assets | 3,839 | (2,227 | ) | |||||
Accounts payable and accrued expenses (includes restructuring) | (17,901 | ) | 6,295 | |||||
Accrued payroll obligations | (2,002 | ) | (454 | ) | ||||
Income taxes payable | (711 | ) | 1,335 | |||||
Deferred income and allowances on sales to sell-through distributors | 3,862 | 3,067 | ||||||
Deferred licensing and services revenue | (485 | ) | (258 | ) | ||||
Net cash provided by operating activities | 35,746 | 19,318 | ||||||
Cash flows from investing activities: | ||||||||
Proceeds from sales of and maturities of short-term marketable securities | 9,689 | 11,977 | ||||||
Purchases of marketable securities | (7,420 | ) | (5,961 | ) | ||||
Proceeds from sale of building | 7,895 | — | ||||||
Cash paid for costs of sale of building | (1,004 | ) | — | |||||
Capital expenditures | (12,325 | ) | (13,991 | ) | ||||
Proceeds from sale of business unit, net of cash sold | 967 | 1,972 | ||||||
Cash paid for a non-marketable equity method investment | (2,000 | ) | (1,000 | ) | ||||
Cash paid for software licenses | (6,472 | ) | (7,370 | ) | ||||
Net cash used in investing activities | (10,670 | ) | (14,373 | ) | ||||
Cash flows from financing activities: | ||||||||
Restricted stock unit withholdings | (2,787 | ) | (2,883 | ) | ||||
Proceeds from issuance of common stock | 3,452 | 5,353 | ||||||
Repayment of debt | (33,679 | ) | (4,279 | ) | ||||
Net cash used in financing activities | (33,014 | ) | (1,809 | ) | ||||
Lattice Semiconductor Corporation | ||||||||
Consolidated Statements of Cash Flows (continued) | ||||||||
(in thousands) | ||||||||
(unaudited) | ||||||||
Nine Months Ended |
||||||||
September 30,
|
October 1,
|
|||||||
Effect of exchange rate change on cash | 1,381 | (579 | ) | |||||
Net (decrease) increase in cash and cash equivalents | (6,557 | ) | 2,557 | |||||
Beginning cash and cash equivalents | 106,552 | 84,606 | ||||||
Ending cash and cash equivalents | $ | 99,995 | $ | 87,163 | ||||
Supplemental cash flow information: | ||||||||
Change in unrealized loss related to marketable securities, net of tax, included in Accumulated other comprehensive loss | $ | 72 | $ | 50 | ||||
Income taxes paid, net of refunds | $ | 2,308 | $ | 7,250 | ||||
Interest paid | $ | 16,379 | $ | 13,849 | ||||
Accrued purchases of plant and equipment | $ | 51 | $ | 1,678 | ||||
Note receivable resulting from sale of business unit | $ | 3,050 | $ | — | ||||
Lattice Semiconductor Corporation | |||||||||||||||
- Supplemental Historical Financial Information - | |||||||||||||||
(unaudited) | |||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30,
|
July 1,
|
October 1,
|
September 30,
|
October 1,
|
|||||||||||
Operations and Cash Flow Information | |||||||||||||||
Percent of Revenue | |||||||||||||||
Gross Margin | 58.0 | % | 54.4 | % | 59.5 | % | 56.9 | % | 59.2 | % | |||||
R&D Expense | 27.9 | % | 28.5 | % | 24.5 | % | 27.5 | % | 29.5 | % | |||||
SG&A Expense | 23.1 | % | 23.3 | % | 25.8 | % | 23.1 | % | 24.6 | % | |||||
Depreciation and amortization (in thousands) | 15,094 | 15,201 | 15,556 | 45,591 | 47,908 | ||||||||||
Stock-based compensation expense (in thousands) | 2,514 | 2,929 | 4,309 | 9,286 | 12,107 | ||||||||||
Restructuring and severance related charges (in thousands) | 3,071 | 1,576 | 317 | 4,713 | 8,316 | ||||||||||
Net cash provided by (used in) operating activities (thousands) | 24,232 | 3,849 | (13,339 | ) | 35,746 | 19,318 | |||||||||
Capital expenditures (in thousands) | 5,290 | 3,661 | 3,889 | 12,325 | 13,991 | ||||||||||
Repayment of debt (in thousands) | — | 22,899 | 875 | 33,679 | 4,279 | ||||||||||
Interest paid (in thousands) | 4,285 | 7,069 | 4,585 | 16,379 | 13,849 | ||||||||||
Taxes paid (cash, in thousands) | 1,332 | 754 | 2,386 | 2,308 | 7,250 | ||||||||||
Balance Sheet Information | |||||||||||||||
Current Ratio | 2.2 | 2.3 | 2.2 | ||||||||||||
A/R Days Revenue Outstanding | 78 | 84 | 76 | ||||||||||||
Inventory Months | 6.0 | 5.5 | 5.3 | ||||||||||||
Revenue% (by Geography) | |||||||||||||||
Asia | 75 | % | 69 | % | 74 | % | 71 | % | 70 | % | |||||
Europe (incl. Africa) | 12 | % | 11 | % | 12 | % | 11 | % | 14 | % | |||||
Americas | 13 | % | 20 | % | 14 | % | 18 | % | 16 | % | |||||
Revenue% (by End Market) | |||||||||||||||
Communications and Computing | 30 | % | 29 | % | 27 | % | 29 | % | 30 | % | |||||
Mobile and Consumer | 28 | % | 27 | % | 31 | % | 29 | % | 27 | % | |||||
Industrial and Automotive | 37 | % | 32 | % | 33 | % | 33 | % | 34 | % | |||||
Licensing and Services | 5 | % | 12 | % | 9 | % | 9 | % | 9 | % | |||||
Revenue% (by Channel) | |||||||||||||||
Sell-through distribution | 68 | % | 66 | % | 62 | % | 65 | % | 58 | % | |||||
Direct | 32 | % | 34 | % | 38 | % | 35 | % | 42 | % | |||||