UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
July 26, 2018
Lattice Semiconductor Corporation
(Exact name of registrant as specified in its charter)
Delaware | 000-18032 | 93-0835214 | ||
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) | ||
111 SW Fifth Ave, Ste 700
Portland, Oregon 97204
(Address of principal executive offices, including zip code)
(503) 268-8000
(Registrant's telephone number, including area code)
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company [ ]
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]
Item 2.02. Results of Operations and Financial Condition.
On July 26, 2018, Lattice Semiconductor Corporation (the “Company”) issued a press release announcing the Company's financial results for the second quarter ended June 30, 2018 and hosted a conference call to review these results for the period. Copies of the press release and the conference call presentation slides are furnished (not filed) as Exhibits 99.1 and 99.2, respectively, to this Current Report on Form 8-K. The information in Exhibits 99.1 and 99.2 shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
The following exhibits are being furnished herewith:
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
LATTICE SEMICONDUCTOR CORPORATION | |||
By: | /s/ Max Downing | ||
Date: | July 26, 2018 | Max Downing Chief Financial Officer | |
EXHIBIT INDEX
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Exhibit 99.1
NEWS RELEASE
For more information contact:
David Pasquale
Global IR Partners
914-337-8801
lscc@globalirpartners.com
LATTICE SEMICONDUCTOR REPORTS SECOND QUARTER OF 2018 RESULTS
Second Quarter 2018 Highlights:
• | Company continues to execute on business strategy; delivers improved results with revenue at $102.7 million |
• | Gross Margin of 48.9% on a GAAP basis and 57.2% on a non-GAAP basis |
• | Gross Margin on a GAAP basis adversely impacted by impairment charges related to discontinuation of non-core millimeter wave business |
• | Net Loss of $0.16 per share on a GAAP basis and Net Income of $0.10 per share on a Non-GAAP Basis |
* GAAP represents U.S. Generally Accepted Accounting Principles. Non-GAAP represents GAAP excluding the impact of certain activities which the Company's management excludes in analyzing the Company's operating results and in understanding trends in the Company's earnings. For a reconciliation of GAAP to non-GAAP results, see accompanying tables "Reconciliation of U.S. GAAP to Non-GAAP Financial Measures."
PORTLAND, OR - July 26, 2018 - Lattice Semiconductor Corporation (NASDAQ: LSCC), a leading provider of customizable smart connectivity solutions, announced financial results today for the fiscal second quarter ended June 30, 2018.
Selected Q2 2018 Financial Results and Comparisons (in thousands, except per share data)
GAAP — Three Months Ended | Non-GAAP — Three Months Ended | |||||||||||||||||||||||
June 30, 2018 | March 31, 2018 | July 1, 2017 † | June 30, 2018 | March 31, 2018 | July 1, 2017 † | |||||||||||||||||||
Revenue | $ | 102,715 | $ | 98,623 | $ | 94,137 | $ | 102,715 | $ | 98,623 | $ | 94,137 | ||||||||||||
Gross Margin % | 48.9 | % | 57.3 | % | 54.4 | % | 57.2 | % | 57.6 | % | 54.6 | % | ||||||||||||
Operating Expense | $ | 63,812 | $ | 57,316 | $ | 59,938 | $ | 39,945 | $ | 45,421 | $ | 46,009 | ||||||||||||
Net (Loss) Income | $ | (20,223 | ) | $ | (5,952 | ) | $ | (13,022 | ) | $ | 12,375 | $ | 6,118 | $ | 124 | |||||||||
Net (Loss) Income per share, basic and diluted | $ | (0.16 | ) | $ | (0.05 | ) | $ | (0.11 | ) | $ | 0.10 | $ | 0.05 | $ | — | |||||||||
†Results for periods in 2017 presented in accordance with ASC 605, which was in effect during that fiscal year.
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Glen Hawk, Interim Chief Executive Officer, said, "We exceeded our expectations for the second quarter of 2018. We are delivering revenue growth and higher profitability on a non-GAAP basis by focusing on our core business and further improving operational efficiencies. As an example, after pursuing strategic opportunities, we discontinued our non-core millimeter wave business, which was unable to achieve profitability levels necessary to warrant further investment. We remain committed to increasing shareholder value and are well-positioned for the future as our control, connect and compute solutions are ideally suited for the emerging IoT markets, particularly in the industrial segment."
Max Downing, Chief Financial Officer, added, "The discontinuation of our millimeter wave business resulted in $24 million of primarily non-cash restructuring and impairment charges which impacted GAAP operating expenses and gross margin. Non-GAAP operating expenses for the second quarter were 12% lower, as compared to the first quarter of 2018, at $39.9 million, as we continue to execute improvements to our cost structure. Importantly, this does not yet reflect the expected $13 million annual operating expense reduction from the discontinuation of our millimeter wave business, which will start to benefit us in the third quarter. Our non-GAAP gross margin came in at the high end of our expectations at 57.2% reflecting the acceleration of server related sales and automotive and industrial applications. Another key takeaway from the quarter is that we made a $10 million discretionary payment against our corporate debt and continue to maintain a healthy balance of $106 million in cash and short-term investments."
Business Outlook - Third Quarter of 2018:
• | Revenue for the third quarter of 2018 is expected to be between approximately $100 million and $103 million. |
• | Gross margin percentage for the third quarter of 2018 is expected to be approximately 57% plus or minus 2% on both a GAAP and non-GAAP basis. |
• | Total operating expenses for the third quarter of 2018 are expected to be between approximately $44 million and $47 million on a GAAP basis and between approximately $39 million and $41 million on a non-GAAP basis. Both GAAP and non-GAAP operating expenses will reflect the initial benefits of the millimeter wave discontinuance. These savings are expected to be offset primarily by $1.5 million in mask and associated project costs related to new product advancements. |
* For a reconciliation of GAAP to non-GAAP business outlook, see accompanying tables "Reconciliation of U.S. GAAP to Non-GAAP Financial Measures."
Investor Conference Call / Webcast Details:
Lattice Semiconductor will review the Company's financial results for the fiscal second quarter of 2018 and business outlook for the third quarter of 2018 on Thursday, July 26 at 5:00 p.m. Eastern Time. The conference call-in number is 1-888-684-5603 or 1-918-398-4852 with conference identification number 6199158. An accompanying presentation and live webcast of the conference call will also be available on Lattice's website at www.latticesemi.com. The Company's financial guidance will be limited to the comments on its public quarterly earnings call and the public business outlook statements contained in this press release.
A replay of the call will be available approximately two hours after the conclusion of the live call through 11:59 p.m. Eastern Time on August 2, 2018, by telephone at 1-404-537-3406. To access the replay, use conference identification number 6199158. A webcast replay will also be available on the investor relations section of www.latticesemi.com.
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Forward-Looking Statements Notice:
The foregoing paragraphs contain forward-looking statements that involve estimates, assumptions, risks and uncertainties. Any statements about our expectations, beliefs, plans, objectives, assumptions or future events or performance are not historical facts and may be forward-looking. Such forward-looking statements include statements relating to: the expected $13 million annual operating expense reduction from the discontinuation of our millimeter wave business will start to benefit us in the third quarter; and the statements under the heading “Business Outlook - Third Quarter of 2018.” Other forward-looking statements may be indicated by words such as “will,” “could,” “should,” “would,” “may,” “expect,” “plan,” “project,” “anticipate,” “intend,” “forecast,” “future,” “believe,” “estimate,” “predict,” “propose,” “potential,” “continue” or the negative of these terms or other comparable terminology; and our expectation that we will remain focused on maximizing the leverage of our operating model and reduce our outstanding debt balance. Lattice believes the factors identified below could cause actual results to differ materially from the forward-looking statements.
Estimates of future revenue are inherently uncertain due to 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. 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 30, 2017, 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.
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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, inventory written off from the discontinuation of the Company's millimeter wave business, 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. 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 (NASDAQ: LSCC) is a leader in smart connectivity solutions at the network edge, where the “things” of IoT live. Our low power FPGA, and video ASSP 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 even better and more 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.
# # #
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Lattice Semiconductor Corporation
Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
Three Months Ended | Six Months Ended | |||||||||||||||||||
June 30, 2018 | March 31, 2018 | July 1, 2017 | June 30, 2018 | July 1, 2017 | ||||||||||||||||
Revenue | $ | 102,715 | $ | 98,623 | $ | 94,137 | $ | 201,338 | $ | 198,724 | ||||||||||
Costs and expenses: | ||||||||||||||||||||
Cost of sales | 52,467 | 42,102 | 42,928 | 94,569 | 86,683 | |||||||||||||||
Research and development | 21,081 | 22,941 | 26,820 | 44,022 | 54,209 | |||||||||||||||
Selling, general, and administrative | 21,068 | 27,043 | 21,938 | 48,111 | 45,843 | |||||||||||||||
Amortization of acquired intangible assets | 4,523 | 5,636 | 8,737 | 10,159 | 17,251 | |||||||||||||||
Restructuring | 4,376 | 1,029 | 1,576 | 5,405 | 1,642 | |||||||||||||||
Acquisition related charges | 864 | 667 | 867 | 1,531 | 2,527 | |||||||||||||||
Impairment of acquired intangible assets | 11,900 | — | — | 11,900 | — | |||||||||||||||
116,279 | 99,418 | 102,866 | 215,697 | 208,155 | ||||||||||||||||
Loss from operations | (13,564 | ) | (795 | ) | (8,729 | ) | (14,359 | ) | (9,431 | ) | ||||||||||
Interest, net | (4,968 | ) | (5,114 | ) | (4,656 | ) | (10,082 | ) | (10,224 | ) | ||||||||||
Other (expense) income, net | (348 | ) | 554 | 410 | 206 | (77 | ) | |||||||||||||
Loss before income taxes | (18,880 | ) | (5,355 | ) | (12,975 | ) | (24,235 | ) | (19,732 | ) | ||||||||||
Income tax expense | 1,343 | 597 | 47 | 1,940 | 565 | |||||||||||||||
Net loss | $ | (20,223 | ) | $ | (5,952 | ) | $ | (13,022 | ) | $ | (26,175 | ) | $ | (20,297 | ) | |||||
Net loss per share, basic and diluted | $ | (0.16 | ) | $ | (0.05 | ) | $ | (0.11 | ) | $ | (0.21 | ) | $ | (0.17 | ) | |||||
Shares used in per share calculations, basic and diluted | 124,843 | 124,076 | 122,390 | 124,460 | 122,095 | |||||||||||||||
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Lattice Semiconductor Corporation
Consolidated Balance Sheets
(in thousands)
(unaudited)
June 30, 2018 | December 30, 2017 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash, cash equivalents and short-term marketable securities | $ | 105,785 | $ | 111,797 | ||||
Accounts receivable, net | 76,566 | 55,104 | ||||||
Inventories | 65,586 | 79,903 | ||||||
Other current assets | 21,729 | 16,567 | ||||||
Total current assets | 269,666 | 263,371 | ||||||
Property and equipment, net | 36,418 | 40,423 | ||||||
Intangible assets, net | 29,189 | 51,308 | ||||||
Goodwill | 267,514 | 267,514 | ||||||
Deferred income taxes | 192 | 198 | ||||||
Other long-term assets | 20,225 | 13,147 | ||||||
$ | 623,204 | $ | 635,961 | |||||
Liabilities and Stockholders' Equity | ||||||||
Current liabilities: | ||||||||
Accounts payable and other accrued liabilities | $ | 62,200 | $ | 64,821 | ||||
Current portion of long-term debt | 24,526 | 1,508 | ||||||
Deferred income and allowances on sales to distributors and deferred license revenue | — | 17,318 | ||||||
Total current liabilities | 86,726 | 83,647 | ||||||
Long-term debt | 265,699 | 299,667 | ||||||
Other long-term liabilities | 40,159 | 34,954 | ||||||
Total liabilities | 392,584 | 418,268 | ||||||
Stockholders' equity | 230,620 | 217,693 | ||||||
$ | 623,204 | $ | 635,961 | |||||
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Lattice Semiconductor Corporation
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Six Months Ended | |||||||
June 30, 2018 | July 1, 2017 | ||||||
Cash flows from operating activities: | |||||||
Net loss | $ | (26,175 | ) | $ | (20,297 | ) | |
Adjustments to reconcile net loss to net cash provided by operating activities: | |||||||
Depreciation and amortization | 22,425 | 30,497 | |||||
Impairment of acquired intangible assets | 11,900 | — | |||||
Amortization of debt issuance costs and discount | 1,058 | 1,354 | |||||
(Gain) loss on sale or maturity of marketable securities | (1 | ) | 200 | ||||
Gain on forward contracts | (36 | ) | (26 | ) | |||
Stock-based compensation expense | 7,200 | 6,772 | |||||
Gain on disposal of fixed assets | (93 | ) | (61 | ) | |||
Gain on sale of assets and business units | — | (300 | ) | ||||
Impairment of cost-method investment | — | 493 | |||||
Changes in assets and liabilities: | |||||||
Accounts receivable, net | (19,654 | ) | 12,846 | ||||
Inventories | 14,687 | 689 | |||||
Prepaid expenses and other assets | (7,891 | ) | 2,822 | ||||
Accounts payable and accrued expenses (includes restructuring) | 7,095 | (13,554 | ) | ||||
Accrued payroll obligations | (1,716 | ) | (1,894 | ) | |||
Income taxes payable | 851 | (355 | ) | ||||
Deferred income and allowances on sales to distributors | — | (7,342 | ) | ||||
Deferred licensing and services revenue | (68 | ) | (330 | ) | |||
Net cash provided by operating activities | 9,582 | 11,514 | |||||
Cash flows from investing activities: | |||||||
Proceeds from sales of and maturities of short-term marketable securities | 2,500 | 7,200 | |||||
Purchases of marketable securities | (9,603 | ) | (7,420 | ) | |||
Capital expenditures | (4,105 | ) | (7,035 | ) | |||
Proceeds from sale of assets and business unit, net of cash sold | — | 300 | |||||
Short-term loan to cost-method investee | — | (1,000 | ) | ||||
Cash paid for software licenses | (3,981 | ) | (4,149 | ) | |||
Net cash used in investing activities | (15,189 | ) | (12,104 | ) | |||
Cash flows from financing activities: | |||||||
Restricted stock unit withholdings | (1,369 | ) | (1,748 | ) | |||
Proceeds from issuance of common stock | 6,409 | 2,931 | |||||
Repayment of debt | (12,009 | ) | (33,679 | ) | |||
Net cash used in financing activities | (6,969 | ) | (32,496 | ) | |||
Effect of exchange rate change on cash | (540 | ) | 950 | ||||
Net decrease in cash and cash equivalents | (13,116 | ) | (32,136 | ) | |||
Beginning cash and cash equivalents | 106,815 | 106,552 | |||||
Ending cash and cash equivalents | $ | 93,699 | $ | 74,416 | |||
Supplemental cash flow information: | |||||||
Change in unrealized (gain) loss related to marketable securities, net of tax, included in Accumulated other comprehensive loss | $ | (2 | ) | $ | 71 | ||
Income taxes paid, net of refunds | $ | 2,057 | $ | 976 | |||
Interest paid | $ | 9,177 | $ | 12,094 | |||
Accrued purchases of plant and equipment | $ | 354 | $ | 2,216 | |||
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Lattice Semiconductor Corporation
- Supplemental Historical Financial Information -
(unaudited)
Three Months Ended | Six Months Ended | |||||||||||||
June 30, 2018 | March 31, 2018 | July 1, 2017 | June 30, 2018 | July 1, 2017 | ||||||||||
Operations and Cash Flow Information | ||||||||||||||
Percent of Revenue | ||||||||||||||
Gross Margin | 48.9 | % | 57.3 | % | 54.4 | % | 53.0 | % | 56.4 | % | ||||
R&D Expense | 20.5 | % | 23.3 | % | 28.5 | % | 21.9 | % | 27.3 | % | ||||
SG&A Expense | 20.5 | % | 27.4 | % | 23.3 | % | 23.9 | % | 23.1 | % | ||||
Depreciation and amortization (in thousands) | 10,069 | 12,356 | 15,201 | 22,425 | 30,497 | |||||||||
Stock-based compensation expense (in thousands) | 2,400 | 4,800 | 2,929 | 7,200 | 6,772 | |||||||||
Restructuring and severance related charges (in thousands) | 4,376 | 1,029 | 1,576 | 5,405 | 1,642 | |||||||||
Net cash provided by operating activities (thousands) | 7,124 | 2,458 | 3,849 | 9,582 | 11,514 | |||||||||
Capital expenditures (in thousands) | 2,301 | 1,804 | 3,661 | 4,105 | 7,035 | |||||||||
Repayment of debt (in thousands) | 11,134 | 875 | 22,899 | 12,009 | 33,679 | |||||||||
Interest paid (in thousands) | 4,757 | 4,420 | 7,069 | 9,177 | 12,094 | |||||||||
Taxes paid (cash, in thousands) | 2,017 | 40 | 754 | 2,057 | 976 | |||||||||
Balance Sheet Information | ||||||||||||||
Current Ratio | 3.1 | 4.2 | 2.3 | |||||||||||
A/R Days Revenue Outstanding | 68 | 61 | 84 | |||||||||||
Inventory Months | 3.8 | 5.6 | 5.5 | |||||||||||
Revenue% (by Geography) | ||||||||||||||
Asia | 76 | % | 73 | % | 69 | % | 74 | % | 70 | % | ||||
Europe (incl. Africa) | 12 | % | 12 | % | 11 | % | 12 | % | 11 | % | ||||
Americas | 12 | % | 15 | % | 20 | % | 14 | % | 19 | % | ||||
Revenue% (by End Market) | ||||||||||||||
Communications and Computing | 29 | % | 28 | % | 29 | % | 29 | % | 29 | % | ||||
Mobile and Consumer | 24 | % | 27 | % | 27 | % | 25 | % | 29 | % | ||||
Industrial and Automotive | 43 | % | 41 | % | 32 | % | 42 | % | 30 | % | ||||
Licensing and Services | 4 | % | 4 | % | 12 | % | 4 | % | 12 | % | ||||
Revenue% (by Channel) * | ||||||||||||||
Distribution | 86 | % | 87 | % | 76 | % | 87 | % | 73 | % | ||||
Direct | 14 | % | 13 | % | 24 | % | 13 | % | 27 | % | ||||
* | During the first quarter of 2018, we updated our channel categories to group all forms of distribution into a single channel. Prior periods have been reclassified to match current period presentation. |
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Lattice Semiconductor Corporation
- Reconciliation of U.S. GAAP to Non-GAAP Financial Measures -
(in thousands, except per share data)
(unaudited)
Three Months Ended | Six Months Ended | |||||||||||||||||||
June 30, 2018 | March 31, 2018 | July 1, 2017 | June 30, 2018 | July 1, 2017 | ||||||||||||||||
Gross Margin Reconciliation | ||||||||||||||||||||
GAAP Gross margin | $ | 50,248 | $ | 56,521 | $ | 51,209 | $ | 106,769 | $ | 112,041 | ||||||||||
Inventory write-off related to restructured operations | 8,277 | — | — | 8,277 | — | |||||||||||||||
Stock-based compensation - gross margin | 196 | 237 | 180 | 433 | 408 | |||||||||||||||
Non-GAAP Gross margin | $ | 58,721 | $ | 56,758 | $ | 51,389 | $ | 115,479 | $ | 112,449 | ||||||||||
Gross Margin % Reconciliation | ||||||||||||||||||||
GAAP Gross margin % | 48.9 | % | 57.3 | % | 54.4 | % | 53.0 | % | 56.4 | % | ||||||||||
Cumulative effect of non-GAAP Gross Margin adjustments | 8.3 | % | 0.3 | % | 0.2 | % | 4.4 | % | 0.2 | % | ||||||||||
Non-GAAP Gross margin % | 57.2 | % | 57.6 | % | 54.6 | % | 57.4 | % | 56.6 | % | ||||||||||
Operating Expenses Reconciliation | ||||||||||||||||||||
GAAP Operating expenses | $ | 63,812 | $ | 57,316 | $ | 59,938 | $ | 121,128 | $ | 121,472 | ||||||||||
Amortization of acquired intangible assets | (4,523 | ) | (5,636 | ) | (8,737 | ) | (10,159 | ) | (17,251 | ) | ||||||||||
Restructuring charges | (4,376 | ) | (1,029 | ) | (1,576 | ) | (5,405 | ) | (1,642 | ) | ||||||||||
Acquisition related charges (1) | (864 | ) | (667 | ) | (867 | ) | (1,531 | ) | (2,527 | ) | ||||||||||
Impairment of acquired intangible assets | (11,900 | ) | — | — | (11,900 | ) | — | |||||||||||||
Stock-based compensation - operations | (2,204 | ) | (4,563 | ) | (2,749 | ) | (6,767 | ) | (6,364 | ) | ||||||||||
Non-GAAP Operating expenses | $ | 39,945 | $ | 45,421 | $ | 46,009 | $ | 85,366 | $ | 93,688 | ||||||||||
(Loss) Income from Operations Reconciliation | ||||||||||||||||||||
GAAP Loss from operations | $ | (13,564 | ) | $ | (795 | ) | $ | (8,729 | ) | $ | (14,359 | ) | $ | (9,431 | ) | |||||
Inventory write-off related to restructured operations | 8,277 | — | — | 8,277 | — | |||||||||||||||
Stock-based compensation - gross margin | 196 | 237 | 180 | 433 | 408 | |||||||||||||||
Amortization of acquired intangible assets | 4,523 | 5,636 | 8,737 | 10,159 | 17,251 | |||||||||||||||
Restructuring charges | 4,376 | 1,029 | 1,576 | 5,405 | 1,642 | |||||||||||||||
Acquisition related charges (1) | 864 | 667 | 867 | 1,531 | 2,527 | |||||||||||||||
Impairment of acquired intangible assets | 11,900 | — | — | 11,900 | — | |||||||||||||||
Stock-based compensation - operations | 2,204 | 4,563 | 2,749 | 6,767 | 6,364 | |||||||||||||||
Non-GAAP Income from operations | $ | 18,776 | $ | 11,337 | $ | 5,380 | $ | 30,113 | $ | 18,761 | ||||||||||
(Loss) Income from Operations % Reconciliation | ||||||||||||||||||||
GAAP Loss from operations % | (13.2 | )% | (0.8 | )% | (9.3 | )% | (7.1 | )% | (4.7 | )% | ||||||||||
Cumulative effect of non-GAAP Gross Margin and Operating adjustments | 31.5 | % | 12.3 | % | 15.0 | % | 22.1 | % | 14.1 | % | ||||||||||
Non-GAAP Income from operations % | 18.3 | % | 11.5 | % | 5.7 | % | 15.0 | % | 9.4 | % | ||||||||||
(1) Legal fees and outside services that were related to our proposed acquisition by Canyon Bridge Acquisition Company, Inc. | ||||||||||||||||||||
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Lattice Semiconductor Corporation | ||||||||||||||||||||
- Reconciliation of U.S. GAAP to Non-GAAP Financial Measures - | ||||||||||||||||||||
(in thousands, except per share data) | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||||
June 30, 2018 | March 31, 2018 | July 1, 2017 | June 30, 2018 | July 1, 2017 | ||||||||||||||||
Income Tax Expense Reconciliation | ||||||||||||||||||||
GAAP Income tax expense | $ | 1,343 | $ | 597 | $ | 47 | $ | 1,940 | $ | 565 | ||||||||||
Estimated tax effect of non-GAAP adjustments (2) | (258 | ) | 62 | 663 | (196 | ) | 360 | |||||||||||||
Non-GAAP Income tax expense | $ | 1,085 | $ | 659 | $ | 710 | $ | 1,744 | $ | 925 | ||||||||||
Net (Loss) Income Reconciliation | ||||||||||||||||||||
GAAP Net loss | $ | (20,223 | ) | $ | (5,952 | ) | $ | (13,022 | ) | $ | (26,175 | ) | $ | (20,297 | ) | |||||
Inventory write-off related to restructured operations | 8,277 | — | — | 8,277 | — | |||||||||||||||
Stock-based compensation - gross margin | 196 | 237 | 180 | 433 | 408 | |||||||||||||||
Amortization of acquired intangible assets | 4,523 | 5,636 | 8,737 | 10,159 | 17,251 | |||||||||||||||
Restructuring charges | 4,376 | 1,029 | 1,576 | 5,405 | 1,642 | |||||||||||||||
Acquisition related charges (1) | 864 | 667 | 867 | 1,531 | 2,527 | |||||||||||||||
Impairment of acquired intangible assets | 11,900 | — | — | 11,900 | — | |||||||||||||||
Stock-based compensation - operations | 2,204 | 4,563 | 2,749 | 6,767 | 6,364 | |||||||||||||||
Gain on sale of business unit | — | — | (300 | ) | — | (300 | ) | |||||||||||||
Estimated tax effect of non-GAAP adjustments (2) | 258 | (62 | ) | (663 | ) | 196 | (360 | ) | ||||||||||||
Non-GAAP Net income | $ | 12,375 | $ | 6,118 | $ | 124 | $ | 18,493 | $ | 7,235 | ||||||||||
Net (Loss) Income Per Share Reconciliation | ||||||||||||||||||||
GAAP Net loss per share - basic and diluted | $ | (0.16 | ) | $ | (0.05 | ) | $ | (0.11 | ) | $ | (0.21 | ) | $ | (0.17 | ) | |||||
Cumulative effect of Non-GAAP adjustments | 0.26 | 0.10 | 0.11 | 0.36 | 0.23 | |||||||||||||||
Non-GAAP Net income per share - basic and diluted | $ | 0.10 | $ | 0.05 | $ | — | $ | 0.15 | $ | 0.06 | ||||||||||
Shares used in per share calculations: | ||||||||||||||||||||
Basic | 124,843 | 124,076 | 122,390 | 124,460 | 122,095 | |||||||||||||||
Diluted - GAAP (3) | 124,843 | 124,076 | 122,390 | 124,460 | 122,095 | |||||||||||||||
Diluted - Non-GAAP (3) | 125,620 | 125,144 | 124,527 | 125,432 | 124,276 | |||||||||||||||
(1) Legal fees and outside services that were related to our proposed acquisition by Canyon Bridge Acquisition Company, Inc. | ||||||||||||||||||||
(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.” | ||||||||||||||||||||
(3) Diluted shares are calculated using the GAAP treasury stock method. In a loss position, diluted shares equal basic shares. | ||||||||||||||||||||
10
Lattice Semiconductor Corporation | ||||||||||||||||
- Reconciliation of U.S. GAAP to Non-GAAP Financial Measures - | ||||||||||||||||
(in thousands, except per share data) | ||||||||||||||||
(unaudited) | ||||||||||||||||
Three Months Ended | ||||||||||||||||
September 29, 2018 | ||||||||||||||||
Business Outlook - Third Quarter 2018 | Low | Midpoint | High | |||||||||||||
GAAP Operating expenses | $ | 44,000 | $ | 45,500 | $ | 47,000 | ||||||||||
Cumulative effect of Non-GAAP Operating expense adjustments (4) | (5,000 | ) | (5,500 | ) | (6,000 | ) | ||||||||||
Non-GAAP Operating expenses | $ | 39,000 | $ | 40,000 | $ | 41,000 | ||||||||||
(4) Includes estimated Amortization of acquired intangible assets and Stock-based compensation included in Operating Expenses |
11
Exhibit 99.2 LATTICE SEMICONDUCTOR Q2 2018 Earnings Call July 2018
Safe Harbor This presentation contains forward-looking statements that involve estimates, assumptions, risks and uncertainties, including statements relating to our expectation that we will continue to successfully execute on the return-to-growth strategy we outlined at last fall’s investor day; and the statements under the heading “Business Outlook – Third Quarter of 2018.” Factors that may cause actual results to differ materially from the forward-looking statements in this presentation include global economic uncertainty, overall semiconductor market conditions, market acceptance and demand for our new and existing products, the Company's dependencies on its silicon wafer suppliers, the impact of competitive products and pricing, technological and product development risks. 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 30, 2017 and quarterly filings. Certain information in this presentation is identified as having been prepared on a non-GAAP basis. Management uses non-GAAP measures to better assess operating performance and to establish operational goals. Non-GAAP information should not be viewed by investors as a substitute for data prepared in accordance with GAAP. 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. [2]
Q2 2018 Exceeded Overall Expectations ☐ Continuing Execution on Business Strategy ☐ Achieving Operating Efficiency Improvements ☐ Delivering Higher non-GAAP Profitability ☐ Actively Paying Down Corporate Debt ☐ Further Enhancing Shareholder Value [3]
Q2 2018 Summary GAAP NON-GAAP Q2 2018 Q1 2018 Change Q2 2018 Q1 2018 Change Revenue $102.7M $98.6M $4.1M $102.7M $98.6M $4.1M Gross Margin % 48.9% 57.3% (8.4)% 57.2% 57.6% (0.04)% OpEx $63.8M $57.3M $6.5M $39.9M $45.4M ($5.5)M Net (Loss) Income $(20.2)M $(6.0)M ($14.2)M $12.4M $6.1M $6.3M EPS (diluted) $(0.16) $(0.05) ($0.11) $0.10 $0.05 $0.05 . Lattice continuing to execute; delivers improved results exceeding overall expectations for the second quarter of 2018 . Discontinuation of non-core millimeter wave business resulted in $24M of primarily non-cash restructuring charges which impacted GAAP operating expenses and gross margin . Operating expenses on a non-GAAP basis reduced to $39.9M, which does not reflect the expected $13M annual operating expense reduction from the discontinuation of Company’s millimeter wave business . Continues to maintain a healthy balance sheet; made $10M discretionary payment against corporate debt [4]
Revenue ($M) Q2 2018 Financial Highlights $120 $90 Q2 2018 Revenue was $102.7 million $60 . Q2 revenue was above our expectations $30 . Demand led by increases in Industrial and Computing $0 Discontinuation of non-core, unprofitable millimeter wave business 2Q17 3Q17 4Q17 1Q18 2Q18 . Company continues to execute improvements to cost structure Non-GAAP Gross Margin (%) . Action expected to result in $13M annual operating expense reduction starting in Q3 60% . Resulted in approximately $24M of primarily non-cash restructuring and impairment charges which impacted Q2 2018 GAAP operating expenses and gross margin 50% Q2 2018 Gross margin was 48.9% on a GAAP basis and 57.2% on a non- GAAP basis. 40% 2Q17 3Q17 4Q17 1Q18 2Q18 . Non-GAAP gross margin exceeds expectations on strategic shift to de- Non-GAAP EPS emphasize volatility of consumer handsets while focusing on Industrial, Computing and Automotive markets 0.12 Q2 2018 Operating expenses were $63.8 million on a GAAP basis and $39.9 0.08 million on a Non-GAAP basis. 0.04 . Non-GAAP operating expenses better than expectations 0.00 Q2 2018 net loss of $(0.16) per basic and diluted share on a GAAP basis, 2Q17 3Q17 4Q17 1Q18 2Q18 and net income of $0.10 per basic and diluted share on a non-GAAP basis [5]
Q3 2018 Financial Guidance Low Midpoint High Revenue $100M $101.5M $103M Gross margin % 55% 57% 59% GAAP Operating expenses $44M $45.5M $47M Non-GAAP Operating expenses $39M $40M $41M “We are delivering revenue growth and higher profitability on a non-GAAP basis by focusing on our core business and further improving operational efficiencies. As an example, after pursuing strategic opportunities, we discontinued our non-core millimeter wave business, which was unable to achieve profitability levels necessary to warrant further investment. We remain committed to increasing shareholder value and are well-positioned for the future as our control, connect and compute solutions are ideally suited for the emerging IoT markets, particularly in the industrial segment.” Glen Hawk, Interim Chief Executive Officer [6]
Lattice’s Focus at The Intelligent Edge COMPUTE Making the “Things” of IoT smart & autonomous, decentralizing decisions with Artificial Intelligence Future Growth Driver for Lattice CONNECT New Market Needs Emerging Lattice Leveraging Existing Linking components and systems together Products CONTROL Proven Growth Driver for Lattice Expands Lattice Incumbency at the Edge Directing how things work together, and keeping them secure Provides Financial Stability for Lattice Lattice is the Market Leader [7]
Lattice Solves “Edge Computing” Challenges Devices at the edge of the network must quickly and autonomously make decisions, as well as fit into compact spaces and minimize power use ENERGY EFFICIENCY World’s lowest power mobile FPGA Integrated DSP and block RAM accelerate computing ARTIFICIAL INTELLIGENCE Lattice’s highest functional density Enhanced DSP and parallel processing 30% lower power consumption Full-featured AI stack includes modular hardware, neural network IP, software, reference designs, and custom design services from partners [8]
Lattice Value Proposition Compelling & Differentiated Solutions Smallest Production SIZE PRICED Lowest Fastest to POWER MARKET [9]
Q2 2018 Exceeded Overall Expectations ☐ Continuing Execution on Business Strategy ☐ Achieving Operating Efficiency Improvements ☐ Delivering Higher non-GAAP Profitability ☐ Actively Paying Down Corporate Debt ☐ Further Enhancing Shareholder Value [10]