Lattice Semiconductor Corporation — Q1 FY2024 Form 10-Q
Period and context: The filing covers the 13 weeks ended March 30, 2024, compared with the 13 weeks ended April 1, 2023. The request metadata says “2023 Q1,” but the filing itself reports Q1 FY2024. Lattice develops programmable logic semiconductors and related products and services.
Financial results
| Metric | Q1 FY2024 | Q1 FY2023 | Change |
|---|---|---|---|
| Revenue | $140.8 million | $184.3 million | Down 23.6% |
| Gross margin | $96.2 million; 68.3% | $128.6 million; 69.8% | Down 1.5 percentage points |
| Operating income | $16.6 million; 11.8% of revenue | $59.1 million; 32.1% of revenue | Down 72.0% |
| Net income | $14.8 million | $55.9 million | Down 73.5% |
| Diluted EPS | $0.11 | $0.40 | Down $0.29 |
| Operating cash flow | $29.5 million | $44.9 million | Down $15.4 million |
Gross margin pressure was attributed primarily to product mix. Operating expenses rose to $79.6 million from $69.5 million, including higher R&D and SG&A spending and $1.7 million of reported restructuring expense. Stock-based compensation was $18.5 million, up from $14.3 million.
Liquidity, debt, and cash flows
- Cash and cash equivalents were $107.5 million at March 30, 2024, down $20.9 million from year-end 2023; approximately $51.8 million was held by foreign subsidiaries.
- Current assets were $340.7 million and current liabilities were $81.6 million. The company reported no borrowings under its $350 million revolving credit facility; the facility matures September 1, 2027.
- Investing activities used $7.7 million, including $3.4 million of capital expenditures and $4.3 million for software and IP licenses. Financing activities used $42.2 million, including $20.0 million of share repurchases and $22.7 million for RSU tax withholdings.
- Accounts receivable was $98.9 million; days sales outstanding increased to 64 from 56 at the prior year-end. Inventory was $95.4 million; days of inventory on hand rose to 195 from 175.
- Management believes cash, operating cash flow, and credit facilities will meet liquidity and working capital needs for at least the next 12 months.
Material changes and operating trends
- Revenue declined across the two largest end markets: Communications and Computing fell 18% to $54.6 million, and Industrial and Automotive fell 30% to $75.3 million. Consumer revenue increased 13% to $10.9 million.
- Management attributed the declines to softer end-market demand and customer inventory rebalancing, including weaker telecom infrastructure demand. Data center demand partially offset the Communications and Computing decline.
- Revenue by geography shifted: Asia represented 65.6% of revenue versus 57.4% a year earlier; Europe declined to 11.7% from 19.9%. China revenue increased to $56.9 million from $55.7 million, while Japan, other Asia, the Americas, and Europe declined.
- Distributors accounted for 87% of revenue. Three distributors represented 42%, 30%, and 10% of net receivables at quarter-end, highlighting customer/channel concentration.
- Net interest income was $1.3 million versus net interest expense of $0.6 million, reflecting increased interest income and repayment of debt in 2023.
Outlook, risks, and unusual items
- No specific near-term revenue or earnings guidance is provided in the supplied filing text. Management expects AI-related revenue to grow over the next few years, citing a growing pipeline of AI-related design wins.
- The company cited the semiconductor industry’s cyclical correction and softened demand across end markets, alongside macroeconomic uncertainty, inflation, interest-rate changes, geopolitical tensions, and possible supply-chain disruption.
- A Q3 2023 restructuring plan incurred approximately $2.3 million of costs in the quarter and approximately $4.3 million cumulatively through March 30, 2024; the plan is expected to be largely complete by fiscal year-end 2024.
- The company won a jury verdict in a legal case seeking $180 million plus punitive damages, but plaintiffs filed appeals in March 2024. The appeal remained pending at filing.
- The board’s $250 million repurchase authorization runs through December 28, 2024. The company repurchased 264,880 shares for $20.0 million at an average $75.50 per share in the quarter; $230.0 million remained authorized.
- Management reported disclosure controls were effective and no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Confirm the intended reporting period: the filing is Q1 FY2024, notwithstanding the request metadata’s “2023 Q1.”
- Track whether customer inventory normalization and weak demand continue, especially in Industrial and Automotive and communications infrastructure.
- Monitor inventory days, receivables days, distributor concentration, and the impact of channel orders on reported revenue.
- Assess whether planned AI-related growth and R&D investment translate into revenue and margin recovery.
- Follow the pending legal appeals, restructuring completion and costs, and use of the remaining repurchase authorization.