Lattice Semiconductor Corporation

Welcome everyone to Lattice Semiconductor's second quarter 2021 conference call. I will now turn the call over to Mr. Rick Mouchet, Director of Investor Relations. Please go ahead, Mr. Mouchet.

Thank you, Operator, and good afternoon, everyone. With me today are Jim Anderson, Lattice's President and CEO, and Sherry Luther, Lattice's CFO. We'll provide a financial and business review of the second quarter of 2021 and the business outlook for the third quarter of 2021. If you have not obtained a copy of our earnings press release, it can be found at our company website in the investor relations section at LatticeSemi.com. I would like to remind everyone that during our conference call today, we may make projections or other forward-looking statements regarding future events or the future financial performance of the company. We wish to caution you that such statements are predictions based on information that is currently available and that actual results may differ materially. We refer you to the documents that the company files with the SEC, including our 10-Ks, 10-Qs, and 8-Ks. These documents contain and identify important risk factors that could cause the actual results to differ materially from those that are contained in our projections or forward-looking statements. This call includes and constitutes the company's official guidance for the third quarter of 2021. If at any time after this call we communicate any material changes to this guidance, we intend that such updates will be done using a public forum, such as a press release or publicly announced conference call. Some financial information that we present during the call will be provided on both a GAAP and a non-GAAP basis. By disclosing certain non-GAAP information, management intends to provide investors with additional information to permit further analysis of the company's performance and underlying trends. Management uses non-GAAP measures to better assess operating performance and to establish operational goals. For historical periods, we provided reconciliations of these non-GAAP financial measures to GAAP financial measures that can be found on the investor relations section of our website at latticeamide.com. Let me now turn the call over to Jim Anderson, our CEO.

Thank you, Rick, and thank you everyone for joining us on our call today. We're excited to be at the beginning of a new growth phase for Lattice, fueled by an expanded product portfolio and multiple growth vectors across our key end markets. We'll start by covering a few highlights from Q2 of 2021. We grew revenue 25% year-over-year and 9% sequentially, with double-digit year-over-year growth in each of our key market segments. We expanded non-GAAP gross margin by 80 basis points year-over-year to 62.1% as we continue to execute on our gross margin expansion strategy. We achieved record non-GAAP operating profit of 29%, while non-GAAP net income increased 49% year-over-year. We also expanded our product leadership with the June launch of Certus ProNX, our new advanced general purpose FPGA. Let me now provide an overview of our business by end market. In the communications and computing market, revenue increased 7% sequentially and 15% on a year-over-year basis. As we discussed at our recent Investor Day, our key long-term growth drivers in this segment are data center servers, client computing, and 5G infrastructure. In servers, growth was driven by expansion of both attach rate and ASPs as we continue to drive an increase in our dollar content per server with each new server generation. Client computing is a significant greenfield opportunity for us, with multiple programs ramping and multiple ways to bring new innovation to our customers. 5G infrastructure growth is driven by our higher content in 5G systems versus 4G systems and the continued worldwide build-out of 5G infrastructure. Communications and computing continues to be a long-term growth opportunity for the company. Turning out to the industrial and automotive market, revenue increased 15% sequentially and was up 47% on a year-over-year basis. Our business grew across multiple applications, such as industrial automation and robotics, where Lattice solutions provide significant competitive advantage and differentiation for our customers. We continue to deliver strong growth in the industrial segment, and our product portfolio is well-positioned to drive sustained long-term growth. Turning now to consumer, revenue was flat sequentially and was up 13% year-over-year. The quality of the revenue stream in consumer has improved over the past two years as we've targeted higher-value, multi-generational designs that better leverage our FPGA portfolio. We believe our consumer revenue is stabilized and has the potential for modest growth over the long term. I'll now provide some product roadmap highlights. I continue to be very pleased with our team's overall execution. With the June launch of Certus Pro NX, we have now launched four device families based on the Lattice Nexus platform since the platform was introduced in late 2019. We're excited about the Certus Pro NX family, which, relative to the competition, offers 4x lower power, best-in-class system bandwidth, and industry-leading reliability. Each of these advantages provides meaningful differentiation of value for our customers' applications and systems. Our first two device families, Crosslink NX and Certus NX, are in production and ramping with customers. The third device family, Mock NX, is on track to generate revenue by the end of this year. We continue to be very pleased with the broad adoption of our Nexus platform across our market segments. On our software roadmap, we continue to invest in tools, solutions, and software stacks to make it easy for our customers to adopt Lattice products and get to market quickly. During the quarter, we launched Lattice Automate, our solution stack focused on factory automation and robotics applications. Automate is the fourth installment in our application-specific solution stack portfolio and another proof point of our continued roadmap execution. And lastly, at our recent investor day, we announced our new Lattice of Bond platform, which will double our addressable market and will allow us to address mid-range FPGA applications. Execution is going well, and we remain on track for launch in the second half of next year. We've engaged with over 100 customers on Avant and are pleased with customer reception and momentum. In summary, we continued to execute well in Q2, and we're excited to be at the start of a new growth phase for Lattice, driven by our leadership product portfolio and multiple growth factors across our key end markets. I'll now turn the call over to our CFO, Sherry Luther.