Lattice Semiconductor Corporation

Good day and thank you for standing by. Welcome to the Lattice Semiconductor's fourth quarter and full year 2021 conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. If you require any further assistance, please press star 0. I would now like to hand the conference over to Mr. Rick Mache, Lattice's Director of Investor Relations. Please go ahead.

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 fourth quarter of 2021 and the business outlook for the first quarter of 2022. If you have not obtained a copy of our earnings press release, it can be found on our company website in the investor relations section at lettucefemi.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 actually results may differ materially. We refer you to 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 contained in our projections or forward-looking statements. This call includes and constitutes the company's official guidance for the first quarter of 2022. 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 publicly announced conference call. We refer primarily to non-GAAP financial measures during this call. 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. For historical periods, we provide reconciliations of these non-GAAP financial measures to GAAP financial measures that can be found on the investor relations section of our website at latissemi.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. 2021 was a pivotal year for Lattice as we entered a new growth phase for the company, driven by our leadership product portfolio and strong customer momentum. Annual revenue grew by 26%, with double-digit growth in each of our three market segments. Non-GAAP gross margin expanded by 220 basis points year over year to a record 63.2%. And we delivered record non-GAAP net income, which grew 54% year over year in 2021. We also continued to expand our product portfolio with multiple hardware and software product launches. In addition, we had a very strong finish to the year. For the fourth quarter of 2021, we grew revenue 32% year over year, with double-digit year-over-year growth in each of our three market segments. We expanded non-GAAP gross margin by 350 basis points year-over-year to a record 65% as we continue to execute on our gross margin expansion strategy. We drove a 65% year-over-year increase in non-GAAP net income, and we further expanded our software portfolio with the acquisition of Mirametrics. Let me now provide an overview of our business buy-in market for Q4 of 2021. In the communications and computing market, revenue increased 8% sequentially and 31% on a year-over-year basis. We continue to have multiple growth drivers in this segment, including data center servers, client computing, and 5G infrastructure. In servers, as we've discussed in previous calls, our attach rate is now over 1x. Revenue growth continues to be driven by expansion of both the tax rates and ASPs as we continue to drive an increase in Lattice's dollars of content per server. In client computing, we have multiple programs ramping and multiple opportunities for delivering new innovation to our customers. For example, Lenovo and Lattice recently announced a new partnership where our Nexus platform and our software solutions will be used in the Lenovo ThinkPad product line to deliver advanced user experiences, including immersive engagement and collaboration. Lastly, in 5G infrastructure, we're benefiting from ongoing global 5G deployments with revenue higher both sequentially and year-over-year. Turning now to the industrial and automotive market, revenue increased 2% sequentially and was up 32% on a year-over-year basis. Our business grew across multiple applications, such as industrial automation and robotics, where Lattice solutions provide a significant competitive advantage to our customers. Over the past few years, the industrial segment has been a key growth driver for the company, and our product portfolio is well-positioned to drive sustained long-term growth. We are also pleased with our strong year-over-year growth in automotive, which remains a long-term growth driver for us in applications such as ADAS and infotainment. Turning out to consumer, revenue is up 3% sequentially and was up 18% year-over-year, with growth driven primarily by new applications that leverage our FPGA portfolio. I'll now provide some product roadmap highlights. Since the introduction of Lattice Nexus, we've launched four device families based on the platform. I'm pleased to announce that Mach NX entered production in Q4. We now have three device families in production and ramping with customers, Crosslink NX, Certus NX, and Mach NX. The fourth device family, Certus Pro NX, was launched last June and remains on track to generate revenue in the first half of this year. We continue to be pleased with the broad adoption of our Nexus platform across all our market segments, where the power efficiency and faster performance are helping our customers differentiate their applications and systems. We look forward to significant product portfolio expansion this year with our new Lattice Avant platform, which remains on track for launch in the second half of this year. Avant will double our addressable market and will allow us to address the mid-range FPGA applications. Customer engagement and momentum is very healthy and continues to grow. Avon will create an additional new revenue stream for Lattice as it ramps into production in future quarters. Turning now to our software strategy. As we've discussed over the past few years, we've been increasing investments in our software portfolio. These investments are focused on making it easier for our customers to adopt Lattice products and get to market quickly. We were very pleased to announce our acquisition of Mirametrix in November, which is an extension of our organic software strategy and adds complementary AI and computer vision capability to our existing solution stack portfolio. This provides us with an end-to-end AI and computer vision solution spanning from the hardware to the application layer and will make it even easier for our customers to adopt Lattice products. Mirrormetrics software has already been deployed on over 20 million end user systems. We've been successfully working with the Mirrormetrics team for nearly two years and we know them very well. We're very pleased to now have them formally part of the Lattice family. In summary, we're excited to have entered a new growth phase for the company in 2021 and to achieve new record levels of gross margin and profitability. Our results in 2021 are a testament to the strategy that we first outlined at our investor day in 2019 and the incredible hard work and dedication of the Lattice team. I want to thank the Lattice team as well as our partners and customers for their collaboration, support, and superb execution in 2021. Looking forward, we expect 2022 to be another year of strong growth for the company as we continue to execute our long-term strategy. Momentum and engagement across our customer base has never been better. We're bringing new market-leading products to our customers, and we're very excited about the path in front of us over the coming years. I'll now turn the call over to our CFO, Sherry Luther.