Lattice Semiconductor Corp. (LSCC) - Q2 2025 10-Q Summary
Business Context and Reporting Period
This report covers the quarterly period ended June 28, 2025 (Fiscal Q2 2025). Lattice Semiconductor Corporation is a provider of programmable logic semiconductor products, silicon-enabling products, and system solutions. The company operates as a single reportable segment serving Communications and Computing, Industrial and Automotive, and Consumer end markets.
Key Financial Metrics
| Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 |
|---|---|---|---|---|
| Revenue | $123.97M | $124.08M | $244.12M | $264.89M |
| Gross Margin | $84.75M (68.4%) | $84.75M (68.3%) | $166.48M (68.2%) | $180.96M (68.3%) |
| Net Income | $2.91M | $22.63M | $7.94M | $37.43M |
| Diluted EPS | $0.02 | $0.16 | $0.06 | $0.27 |
| Operating Cash Flow (YTD) | $70.42M (vs. $51.44M YTD 2024) | |||
| Cash & Equivalents | $107.16M (as of June 28, 2025) | |||
| Debt | $0 outstanding (Unused $350M revolving facility) |
Material Changes vs. Prior Period
- Revenue Stability: Q2 revenue remained flat year-over-year ($123.97M vs. $124.08M), while YTD revenue declined 7.8% due to softer demand in Industrial and Automotive markets.
- Profitability Decline: Net income dropped significantly to $2.91M from $22.63M in Q2 2024. This was driven by a sharp increase in operating expenses, particularly Selling, General, and Administrative (SG&A) expenses, which rose 74% to $34.81M.
- Expense Drivers: The increase in SG&A and R&D expenses was primarily due to the absence of a $15.1M stock compensation benefit recorded in Q2 2024 resulting from executive departures. Stock-based compensation expense increased to $24.09M in Q2 2025 from $3.22M in Q2 2024.
- End Market Shifts: Communications and Computing revenue grew 26% YoY, driven by data center demand. Conversely, Industrial and Automotive revenue fell 19% YoY due to inventory normalization and softer demand.
- Share Repurchases: The company repurchased 933,895 shares for $45.9M in Q2 2025. As of June 28, 2025, approximately $29.1M remained available under the $100M repurchase program.
Guidance, Outlook, and Risks
- Outlook: Management expects AI-related revenue to grow over the next few years, citing a diverse pipeline of design wins across all end markets. R&D expenses are expected to increase in absolute terms but decline as a percentage of revenue.
- Risks: Key risks include global economic uncertainty, inflationary pressures, and geopolitical tensions. The company is monitoring trade policies, tariffs, and export restrictions, particularly regarding China, which accounted for 52% of Q2 revenue.
- Restructuring: The company incurred $1.69M in restructuring costs in Q2 2025, primarily related to the Q3 2024 plan. The plan is expected to be largely complete by the end of fiscal 2025.
- Tax Legislation: The company is assessing the impact of the "Tax Act" enacted on July 4, 2025, which includes permanent extensions of certain provisions and modifications to the international tax framework.
Investor Verification Checklist
- Stock Compensation Volatility: Verify the sustainability of operating margins given the significant swing in stock-based compensation expense between Q2 2024 and Q2 2025.
- China Exposure: Assess the impact of potential trade restrictions or tariffs on the 52% of revenue derived from China.
- Inventory Levels: Monitor the "Days of inventory on hand" metric, which increased to 218 days, indicating potential overstocking relative to current demand.
- AI Growth Trajectory: Evaluate the specific contribution of AI-related applications to the growth in the Communications and Computing segment.
- Cash Burn vs. Repurchases: Review the balance between the $70.9M spent on share repurchases YTD and the company's cash flow generation capabilities in a softening market.