Lattice Semiconductor Corporation

Greetings. Welcome to the BADIS Semiconductor Second Quarter 2023 earnings call. At this time, all participants are on a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Rick Mouchet, Senior Director of Investor Relations. May we begin?

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 2023 and the business outlook for the third 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 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 containing our projections or forward-looking statements. This call includes and constitutes the company's official guidance for the third 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, atlantasemi.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've delivered strong results in the first half of 2023, with first half revenue growing 20% year over year and non-GAAP net income increasing 29% over the same period. We're pleased with our first half results, but we're even more excited about the path moving forward as we continue to drive the largest product portfolio expansion in the company's history. Let me touch on a few Q2 highlights. We achieved record revenue growth in Q2, with growth of 18% year over year. Q2 was also our 13th consecutive quarter of sequential growth. We expanded non-GAAP gross margin by 140 basis points year-over-year to a record 70.5%, and non-GAAP net income increased 23% year-over-year. Let me now provide an overview of our business buy-in market. In the communications and computing market, revenue was down 3% sequentially and down 11% on a year-over-year basis. The sequential decline was primarily due to software and market demand in communications infrastructure applications, which was partially offset by sequential growth in computing, where we saw strong demand in data center applications, such as servers used for artificial intelligence. Turning now to the industrial and automotive market, revenue increased 7% sequentially and was up 55% year-over-year. Our strong growth was across multiple applications, such as industrial automation and robotics, as well as automotive ADAS and infotainment systems. We continue to deliver robust growth in this segment, and we believe our product portfolio is well-positioned to drive sustained long-term growth. I'll now provide some product roadmap highlights. At our Analyst and Investor Day in May, we detailed the broad and rapid expansion of our product portfolio. We're driving the largest product portfolio expansion in the company's history, which continues to create new revenue streams for Lattice. We've launched six device families to date based on our Nexus platform with five of those device families in production and ramping with customers. On our new Lattice Avant mid-range FPGA platform, we launched the first device family at the end of last year and continue to expect to generate revenue from this family before the end of this year. with the revenue ramp continuing into next year and the following years. In addition, we remain on track to further expand the Avant platform offerings with the planned launch of two new Avant device families at our Lattice Developers Conference in Q4. Turning now to our software portfolio, software is a key component of our strategy and it's an important part of how we enable our customers. We built a portfolio of application-specific software solution stacks, which accelerates customer adoption and enables faster time to market for our customers. We recently launched Lattice Drive, which is our sixth software solution stack and is targeted at a variety of automotive electronics applications. We believe customer adoption of our software drives long-term multi-generational stickiness for our solutions. Overall, we continue to be pleased with our execution of our portfolio expansion and the customer momentum that it's generating. While we're certainly not immune to any macroeconomic challenges impacting the industry, we believe Lattice continues to be well-positioned for long-term growth and expansion. I'll now turn the call over to our CFO, Sherry Luther.