Lattice Semiconductor Corporation

Hello, and welcome to the Lattice Semiconductor first quarter 2023 earnings call. If anyone should require operator assistance, please press star zero on your telephone keypad. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Rick Miche, Senior Director, 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 first quarter of 2023 and the business outlook for the second quarter of 2023. 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'd 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 actual results may differ materially. We refer you to the documents that the company files with the FCC, 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 2023. 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. 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 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. We delivered strong results in Q1 with record quarterly revenues percent year-over-year and non-GAAP net income growth of 36 percent year-over-year. While we're certainly not immune to any macroeconomic challenges impacting the industry, growth in our core strategic markets is driven by growing demand for our leadership product portfolio, strong customer momentum, and solid execution. Let me touch on a few Q1 highlights. In addition to the strong revenue growth, we expanded non-gap gross margin by 260 basis points year over year to a record 70.3%. We achieved record non-gap operating profit of 41%, which was an increase of 470 basis points year over year. We further expanded our product portfolio with the recent launch of the sixth device family based on our Nexus platform. Then we launched enhanced versions of multiple software solution stacks continued to expand our software portfolio. Let me now provide an overview of our business by end market. In the communications and computing market, revenue was down 9% sequentially and up 4% on a year-over-year basis. As we expected, the sequential decline in revenue in this segment was primarily due to softer industry-wide server and market demand. However, we continue to see this segment as a long-term growth driver for the company as it includes multiple growth factors, such as content expansion and data center servers, new greenfield client computing designs, and growth in wireless infrastructure and data center networking. Turning now to the industrial and automotive market, revenue increased 21% sequentially and was up 55% on a year-over-year basis. Q1 growth reflects strong customer adoption of Lattice solutions in new design wins across a broad range of applications, including industrial automation and robotics, as well as automotive ADAS and infotainment systems. I'll now provide some product roadmap highlights. We're pleased to announce that Mach X05NX began production shipments in Q1, which is our fifth Nexus device family to enter production. We also recently introduced Mach X05 TNX, the sixth family built on the Lattice Nexus platform. This device family provides advanced system control in multiple applications, including data center networking, machine vision, and industrial IoT. Overall, we continue to be pleased with the broad adoption of our Nexus-based products, and our commitment to continued investment and expansion of our Nexus platform has further strengthened our leadership position in the small FPGA segment. We also continue to be pleased with progress on our new Lattice Avant platform, which launched in early December. Avant is targeted at mid-range FPGA applications and doubles our addressable market and creates new greenfield revenue opportunities for Lattice as it ramps over the coming years. Customer engagement and momentum continues to grow, and we look forward to launching two new Avant device families later this year. Turning now to our software strategy, As we discussed over the past few years, software is a key component of our strategy, and we've been increasing investment in our software portfolio. These investments are driving faster customer adoption of Lattice products. Over half of our new silicon design wins are now enabled by at least one of our software solution stacks, which increases the value that we're delivering to our customers and the long term stickiness of our products. In Q1, we expanded the capabilities of three of our solution stacks, and we expect our expanding software portfolio to remain a key driver of customer enablement and momentum. In summary, while we're certainly not immune to any macroeconomic challenges impacting the industry, Lattice continues to be well-positioned in long-term secular growth markets with an expanding product portfolio, accelerating customer momentum, and strong financial execution. We look forward to sharing more about our future plans at our investor day on May 15th. I'll now turn the call over to our CFO, Sherry Luther.