Lattice Semiconductor Reports Second Quarter 2022 Results

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. 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.

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									Six Months Ended
	July 2,			April 2,			July 3,			July 2,			July 3,
	2022			2022			2021			2022			2021
Revenue	$	161,372		$	150,515		$	125,905		$	311,887		$	241,621
Cost of sales		50,887			49,748			48,721			100,635			93,851
Gross margin		110,485			100,767			77,184			211,252			147,770
Operating expenses:
Research and development		33,613			32,555			27,454			66,168			51,520
Selling, general, and administrative		29,024			28,771			25,607			57,795			50,699
Amortization of acquired intangible assets		870			1,169			603			2,039			1,206
Restructuring		136			54			204			190			380
Acquisition related charges		56			455			—			511			—
Total operating expenses		63,699			63,004			53,868			126,703			103,805
Income from operations		46,786			37,763			23,316			84,549			43,965
Interest expense		(891	)		(708	)		(702	)		(1,599	)		(1,420	)
Other (expense) income, net		(243	)		(22	)		(135	)		(265	)		(297	)
Income before income taxes		45,652			37,033			22,479			82,685			42,248
Income tax expense (benefit)		1,120			955			641			2,075			1,597
Net income	$	44,532		$	36,078		$	21,838		$	80,610		$	40,651

Net income per share:
Basic	$	0.32		$	0.26		$	0.16		$	0.59		$	0.30
Diluted	$	0.32		$	0.26		$	0.15		$	0.57		$	0.29

Shares used in per share calculations:
Basic		137,424			137,500			136,388			137,462			136,394
Diluted		140,170			141,281			141,491			140,657			141,637

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

	July 2,		January 1,
	2022		2022
Assets
Current assets:
Cash and cash equivalents	$	117,882	$	131,570
Accounts receivable, net		93,380		79,859
Inventories, net		77,478		67,594
Other current assets		25,720		22,328
Total current assets		314,460		301,351

Property and equipment, net		42,741		38,094
Operating lease right-of-use assets		20,407		23,818
Intangible assets, net		27,218		29,782
Goodwill		315,358		315,358
Other long-term assets		16,944		18,091
	$	737,128	$	726,494

Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	39,336	$	34,597
Accrued expenses		29,082		26,444
Accrued payroll obligations		20,798		27,967
Current portion of long-term debt		17,192		17,173
Total current liabilities		106,408		106,181

Long-term debt, net of current portion		132,159		140,760
Long-term operating lease liabilities, net of current portion		15,917		19,248
Other long-term liabilities		46,723		48,672
Total liabilities		301,207		314,861

Stockholders' equity		435,921		411,633
	$	737,128	$	726,494

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

	Six Months Ended
	July 2,			July 3,
	2022			2021
Cash flows from operating activities:
Net income	$	80,610		$	40,651
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Stock-based compensation expense		27,249			22,374
Depreciation and amortization		14,272			11,759
Other non-cash adjustments		3,445			3,383
Net changes in assets and liabilities		(32,658	)		(7,463	)
Net cash provided by (used in) operating activities		92,918			70,704
Cash flows from investing activities:
Capital expenditures		(8,917	)		(4,413	)
Other investing activities		(5,368	)		(6,377	)
Net cash provided by (used in) investing activities		(14,285	)		(10,790	)
Cash flows from financing activities:
Repayment of long-term debt		(8,750	)		(4,375	)
Repurchase of common stock		(50,161	)		(40,113	)
Net cash flows related to stock compensation exercises		(32,182	)		(9,975	)
Net cash provided by (used in) financing activities		(91,093	)		(54,463	)
Effect of exchange rate change on cash		(1,228	)		(49	)
Net increase (decrease) in cash and cash equivalents		(13,688	)		5,402
Beginning cash and cash equivalents		131,570			182,332
Ending cash and cash equivalents	$	117,882		$	187,734

Supplemental disclosure of cash flow information and non-cash investing and financing activities:
Interest paid	$	1,337		$	1,180
Income taxes paid, net of refunds	$	2,355		$	1,805

Lattice Semiconductor Corporation Supplemental Historical Financial Information (unaudited)

	Three Months Ended
	July 2,			April 2,			July 3,
	2022			2022			2021
Balance Sheet Information
A/R Days Revenue Outstanding (DSO)		53			50			52
Inventory Days (DIO)		139			132			123

Revenue% (by Geography)
Asia		73	%		72	%		77	%
Americas		14	%		15	%		14	%
Europe (incl. Africa)		13	%		13	%		9	%

Revenue% (by End Market)
Communications and Computing		44	%		42	%		42	%
Industrial and Automotive		46	%		46	%		45	%
Consumer		8	%		10	%		10	%
Licensing and Services		2	%		2	%		3	%

Revenue% (by Channel)
Distribution		89	%		90	%		88	%
Direct		11	%		10	%		12	%

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

	Three Months Ended
	July 2,		April 2,		July 3,
	2022		2022		2021
*Gross Margin Reconciliation*
GAAP Gross margin	$	110,485	$	100,767	$	77,184
Stock-based compensation - gross margin (1)		1,011		1,121		995
Non-GAAP Gross margin	$	111,496	$	101,888	$	78,179

*Gross Margin % Reconciliation*
GAAP Gross margin %	68.5	%	66.9	%	61.3	%
Cumulative effect of non-GAAP Gross Margin adjustments	0.6	%	0.8	%	0.8	%
Non-GAAP Gross margin %	69.1	%	67.7	%	62.1	%

*Research and Development Expense % (R&D Expense %) Reconciliation*
GAAP R&D Expense %	20.8	%	21.6	%	21.8	%
Stock-based compensation - R&D (1)	(3.0	)%	(3.4	)%	(3.4	)%
Non-GAAP R&D Expense %	17.8	%	18.2	%	18.4	%

*Selling, General, and Administrative Expense % (SG&A Expense %) Reconciliation*
GAAP SG&A Expense %	18.0	%	19.1	%	20.3	%
Stock-based compensation - SG&A (1)	(4.9	)%	(5.9	)%	(5.7	)%
Non-GAAP SG&A Expense %	13.1	%	13.2	%	14.6	%

*Operating Expenses Reconciliation*
GAAP Operating expenses	$	63,699		$	63,004		$	53,868
Stock-based compensation - operations (1)		(12,694	)		(14,083	)		(11,533	)
Amortization of acquired intangible assets		(870	)		(1,169	)		(603	)
Restructuring and other charges		(192	)		(509	)		(204	)
Non-GAAP Operating expenses	$	49,943		$	47,243		$	41,528

*Income from Operations Reconciliation*
GAAP Income from operations	$	46,786	$	37,763	$	23,316
Stock-based compensation - gross margin (1)		1,011		1,121		995
Stock-based compensation - operations (1)		12,694		14,083		11,533
Amortization of acquired intangible assets		870		1,169		603
Restructuring and other charges		192		509		204
Non-GAAP Income from operations	$	61,553	$	54,645	$	36,651

*Income from Operations % Reconciliation*
GAAP Income from operations %	29.0	%	25.1	%	18.5	%
Cumulative effect of non-GAAP Gross Margin and Operating adjustments	9.1	%	11.2	%	10.6	%
Non-GAAP Income from operations %	38.1	%	36.3	%	29.1	%

(1)

The non-GAAP adjustments for Stock-based compensation include related tax expenses.

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

	Three Months Ended
	July 2,		April 2,		July 3,
	2022		2022		2021
*Income Tax Expense (Benefit) Reconciliation*
GAAP Income tax expense (benefit)	$	1,120	$	955	$	641
Estimated tax effect of non-GAAP adjustments (2)		175		264		(33	)
Non-GAAP Income tax expense (benefit)	$	1,295	$	1,219	$	608

*Net Income Reconciliation*
GAAP Net income	$	44,532		$	36,078		$	21,838
Stock-based compensation - gross margin (1)		1,011			1,121			995
Stock-based compensation - operations (1)		12,694			14,083			11,533
Amortization of acquired intangible assets		870			1,169			603
Restructuring and other charges		192			509			204
Estimated tax effect of non-GAAP adjustments (2)		(175	)		(264	)		33
Non-GAAP Net income	$	59,124		$	52,696		$	35,206

*Net Income Per Share Reconciliation*
GAAP Net income per share - basic	$	0.32	$	0.26	$	0.16
Cumulative effect of Non-GAAP adjustments		0.11		0.12		0.10
Non-GAAP Net income per share - basic	$	0.43	$	0.38	$	0.26

GAAP Net income per share - diluted	$	0.32	$	0.26	$	0.15
Cumulative effect of Non-GAAP adjustments		0.10		0.11		0.10
Non-GAAP Net income per share - diluted	$	0.42	$	0.37	$	0.25

Shares used in per share calculations:
Basic		137,424		137,500		136,388
Diluted		140,170		141,281		141,491

(1)		The non-GAAP adjustments for Stock-based compensation include related tax expenses.
(2)		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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