Lattice Semiconductor Corporation

Greetings and welcome to the Lattice Semiconductor First Quarter 2024 Earnings Call. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Rick Muscha, Vice President of Investor Relations. Thank you. You may 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 first quarter of 2024 and the business outlook for the second quarter of 2024. 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 contained in our projections or forward-looking statements. This call includes and constitutes the company's official guidance for the second quarter of 2024. 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 lattice.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. Q1 24 results were in line with expectations for revenue, margin, and profitability. The industrial and automotive segment was down 25% sequentially as demand softened and customers reduced their inventory levels. The communications and computing segment was down 7% sequentially in Q1. Within that segment, computing was sequentially up on stronger demand for our products used in servers, which was offset by weaker demand in the communication segment. We expect Q2 revenue to be down sequentially from Q1, primarily driven by softer end customer demand and continued inventory normalization. In particular, we're seeing incremental softness in the communication segment related to weaker telecommunications infrastructure deployments. Looking forward to the second half of the year, Based on our current view of anticipated near-term business conditions, we continue to expect revenue in the second half of 2024 to be higher than the first half. We believe the second half improvement will be driven by improving end market conditions as end customer inventory levels normalize, as well as new Nexus and Avant product ramps. Turning now to our product portfolio, In our small FPGA portfolio, we now have seven Nexus device families launched and six in production and the seventh going into production in Q3. We recently shared with our customers the latest small FPGA product roadmap. This includes continued expansion of the number of Nexus device options coming to market over the coming quarters, which received a very positive reaction from our customers. In our mid-range FPGA portfolio, we now have three Avant device families in the hands of our customers. The first device family, Avant E, achieved initial revenue at the end of 2023, and we expect revenue to ramp through the course of this year and into the coming years. The second and third device families, Avant G and X, are expected to achieve initial revenue toward the end of this year and to ramp over the following years. As a reminder, 90% of the target customers for Avant are already customers of Lattice today, and Avant leverages the same software that customers use today on Nexus. The strong competitive differentiation of Avant, which we demonstrated at a recent developers conference, combined with our software support continues to produce a healthy growing design opportunity pipeline. As we discussed on our previous earnings call, Lattice hardware and software solutions are increasingly being used in a wide variety of AI related applications. For example, in AI optimized servers in the data center where the system is running generative AI workloads, Lattice devices are used in the control management and security of the AI computing system. Another example is in AI enabled PCs where Lattice hardware and software solutions are used to run the AI inference algorithm that provides features such as user presence and gaze detection. We recently shared that Lattice is designed into multiple new Dell Latitude systems, which we expect to benefit us in the second half of this year. In these types of AI applications, software is a key part of our strategy and how we enable customers in adopting our solutions. In summary, we're excited to be in the midst of the largest product portfolio expansion in our history, which is driving strong customer momentum. Despite near-term industry headwinds, the company is well positioned with a rapidly expanding product portfolio, and we remain focused on long-term value creation. I'll now turn the call over to our CFO, Sherry Luther.