Lattice Semiconductor Corporation

Good day and thank you for standing by. Welcome to the Lattice Semiconductor Corporation's first quarter of 2022 conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. And to ask a question during the session, you will need to press star 1 on your telephone. In addition, if you require any assistance, please press star 0. And now, it is my pleasure to hand the conference over to your first speaker today, Rick Mouchet, Senior Director of Investor Relations. Thank you. 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 first quarter of 2022 and the business outlook for the second quarter of 2022. 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 the actual results made different 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 contained in our projections or forward-looking statements. This call includes and constitutes the company's official guidance for the second quarter of 2022. If at any time after this call we communicate any material changes to this, we intend that such updates will be done using a public forum, such as a press release or publicly announced conference call. We will 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 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 latticecemi.com. Let me now turn the call over to our CEO, Jim Anderson.

Thank you, Rick, and thank you, everyone, for joining us on our call today. We had a strong start to the year with our Q1 revenue growing at 30% year-over-year and our Q1 non-GAAP net income growing at 72% year-over-year. Our strong revenue and profit growth is driven by our strategic focus and expansion in secular growth markets, our rapidly expanding product portfolio, and our relentless focus on execution. We see growing momentum across our customer base where we're increasing our share of wallet with our strategic customers and experiencing an acceleration of customer conversions to lattice products. Let me now touch on a few highlights from Q1 of 22. Coming off a strong Q4, we grew revenue 6% sequentially in Q1 with double-digit year-over-year growth in each of our three market segments. We expanded non-GAAP gross margin by 600 basis points year-over-year to a record 67.7% in Q1, which marked the beginning of our fourth year of executing on the gross margin expansion strategy that we established at the beginning of 2019. We achieved record non-gap operating profit of 36.3%, an increase of 830 basis points year over year. And I'm pleased to announce that Certus Pro NX began production shipments in Q1, which is our fourth Nexus device family to enter production. Let me now provide an overview of our business by end market. In the communications and computing market, revenue increased 4% sequentially and 27% on a year-over-year basis. As we've highlighted previously, our key growth drivers include data center servers, client computing, and 5G infrastructure. In servers, our attach rate has grown to over 1x, and we expect this growth trend to continue as new server architectures provide Lattice with more opportunities to increase content. In client computing, the Lenovo ThinkPad design that we announced at CES is now in production, and we expect additional customer platforms to begin ramping in the coming quarters. In 5G infrastructure, we continue to benefit from this long-term opportunity given our higher content in 5G versus 4G systems and the continued worldwide build-out of 5G infrastructure. Turning now to the industrial and automotive market, Revenue increased 16% sequentially and was up 40% on a year-over-year basis. Q1 growth in the industrial segment reflects strong customer adoption in a broad range of applications, including industrial automation and robotics. As we've discussed in prior calls, we are seeing an accelerated pace of our customers converting designs from a competitor's FPGA or microcontroller to a lattice FPGA. Customers are continuing their designs to Lattice to take advantage of the market-leading power efficiency, flexibility, and software content that we provide. The accelerated pace of design conversions contributed to the strong revenue growth we achieved in Q1. We're also pleased with our strong growth in automotive applications. Our growth in automotive is driven by the ramp of new Lattice designs in ADAS and infotainment applications. Turning out to consumer, revenue increased 15% sequentially and 19% year over year. Revenue growth is primarily driven by new applications such as smart home and prosumer that leverage our differentiated 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. Certus Pro NX entered production in Q1 and provides better power efficiency, best in class system bandwidth, and a much smaller footprint than competitive devices. We now have four Nexus device families in production and ramping with customers, and we have additional Nexus devices planned for launch over the coming quarters. We continue to be pleased with the broad adoption of our Nexus platform across all our market segments. We're also excited about our upcoming Lattice Avant platform. Avant will double our addressable market. It has 5x the capacity of our Nexus platform and will allow us to address mid-range FPGA applications. Customer engagement and momentum continues to grow and Avant will create an additional new revenue stream for Lattice with ASPs that are 10 to 20 times higher than our current ASPs when it begins ramping into production. Execution remains on track for launch in the second half of this year, and we expect to hold a public event for our Avant customers and partners in Q4 of this year. Turning now to our software strategy, as we've discussed previously, we've been increasing investment in our software portfolio. Our fifth solution stack will be focused on 5G OMRAN applications and is expected to launch in Q2. Beyond the continued expansion of our software solution stacks, we're pleased that the integration of the mirror metrics acquisition that we completed in Q4 2021 has already started to open new customer and market opportunities for Lattice. In summary, we're very pleased with our outstanding results in Q1. These results are directly attributed to our focus on the right growth markets, our rapidly expanding product portfolio, and the consistent execution of our strategy. We're off to a strong start in Q1, and we continue to expect 2022 to be another robust year of growth for Lattice. I'll now turn the call over to our CFO, Sherry Luther.