Lattice Semiconductor Corporation

Greetings and welcome to the Lattice Semiconductor Fourth Quarter Fiscal Year 2024 Earnings Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Rick Mouchet, Senior Vice President of IR. Please go ahead.

Thank you, Operator, and good afternoon, everyone. With me today are Ford Tamer, Lattice's CEO, Tanya Stevens, Lattice's Chief Accounting Officer and former Interim CFO, and Lorenzo Flores, Lattice's CFO. We'll provide a financial and business review of the fourth quarter of 2024 and the business outlook for the first quarter of 2025. 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 first quarter of 2025. 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-semi.com. Let me now turn the call over to our CEO, Ford Tamer.

Thank you, Rick. And thank you everyone for joining us on our call today. I've just returned from customer and partner meetings and sales conferences in North America, Asia Pacific, and Europe. We capped off the European sales conference with a very productive and promising executive summit with our top European customers, from the industrial, automotive, communications, and aerospace and defense sectors. We also visited Pune, India, where we inaugurated our new state-of-the-art R&D site. All of this came on the heels of our latest developers conference in December 2024. This was a highly successful event with 6,000 registrants and over 90 show floor demos. Many of you were able to hear directly from some of our leading customers and see firsthand how they're deploying the impressive innovations from Lattice in their systems. As a result of these events, I'm even more energized and confident in the long-term outlook for Lattice. Today, we're pleased to announce a further strengthening of our executive leadership team with three new additions, Lorenzo Flores, is joining Gladys as Chief Financial Officer from Intel, where he was CFO for the Foundry business. Prior to that, Lorenzo was Vice Chairman at Keoxia and CFO at Zynix. Nicole Singer is coming on board as our Chief People Officer from Sci-5, where she was CHRO. Prior to that, she was CHRO at Synaptics and Vice President of Human Resources at Xilinx. And we're promoting Erhan Shaikh to Senior Vice President of Worldwide Sales. Erhan has been at Lattice for over four years, and prior to that, he spent over 20 years in executive sales and field engineering roles at Altera, Xilinx, and Fungible. I am confident that this new team will make significant contributions to Lattice's next phase of growth. I'm also pleased to announce the appointment of Tanya Stevens to the role of Chief Accounting Officer. In her nearly six years at Lattice, Tanya has been a tremendous asset, most recently serving as our interim CFO. We are thrilled she will stay on this new role and look forward to continue working closely with her. Tanya's expanding scope along with Erhan's promotion demonstrate Lattice's bench strength. And when you combine Tanya's and Erhan's deep company backgrounds with the experienced industry veterans choosing to join Lattice, it is clear that we're building one of the semiconductor industry's strongest management teams which will enable us to build near-term and future shareholder value. At a high level, the overall FPGA market is continuing to grow in importance, driven by five secular trends acting as tailwinds, and Lattice is uniquely positioned to leverage those trends. First, AI is driving shorter system design cycles, which provide less time to integrate auxiliary functions. and FPGAs are best positioned to enable those functions. Second, as ASIC and ASSP development costs continue to increase, the bar rises for which functions could justify that ROI and that pushes more designs towards FPGAs. Third, as the cost of advanced nodes skyrockets, mature process FPGAs are much more economical to perform certain functions. Fourth, emerging applications like security have fast changing requirements. A perfect example is post quantum cryptography or PQC. Programmability is a much more effective solution than a fixed function ASIC that cannot easily be respawned. Lastly, edge AI is requiring contextual intelligence near the sensor. Lattice is already in these sockets today, performing other functions, which gives us a critical advantage with customers. And it is far better to implement TinyAI model in our far edge devices, which save processing power of the near edge inference chips for other tasks. Furthermore, the small and mid-range FPGA segments are growing faster than the rest of the market, led by new applications. Amongst them, data centers and cloud, robotics, industrial automation, self-driving cars, electrification, IoT, telematics, medical devices, as well as artificial intelligence across all these segments. These applications have driven an explosion of sensors everywhere, which require massive amounts of data to be bridged, aggregated, and fused to upstream processing units. Lattice has done a good job in these markets, and our goal is to lead in this growing far-edge AI market segment. This is an example of just one of the catalysts that gives us added confidence in Lattice's long-term growth opportunities as we continue to execute. Over the near term, we're seeing improvement in customer consumption. We continue to ship below estimated true demand and are working closely with our customers to ensure we're effectively supporting their product roadmaps. We also continue to be encouraged with our stronger backlog and for the first time in six quarters, our book to bill ratio has been over one for the past few weeks. Taken together, this bodes well for our business in the coming quarters. Now moving on to our Q4 results. From a high level, Fourth quarter 2024 revenue was in line with our guidance at $117.4 million and developed as expected. On an end market basis, communications and computing was down 5% sequentially and industrial automotive was down 9%, primarily due to continued inventory normalization. We continue to make significant progress in the realignment of our resources to best support customer demand and ensure the long-term success of our company. In Q4, this included taking the opportunity to clean up a material liability we discovered after a comprehensive internal review. Tania will provide more details in her prepared remarks. We do not expect any additional one-time charges and are confident that this is another example of the specific actions we're vigorously implementing to position Lattice for sustained long-term success. Revenue for the full year 2024 was $509.4 million with a strong EBITDA margin of 31.8%. A bright spot to highlight is that our computing subsegment grew in 2024. Design win momentum continues to be robust as we achieved record design wins in 2024. Additionally, our new product momentum continues to be a highlight as revenue from our new products, including Nexus and Avant, grew double digits in 2024 compared to 2023. Earlier, you heard about our successful developers conference in December. There, with the launch of the Nexus 2 platform and two new Avant devices, we expanded our leadership in the small to mid-range FPGA segments. This further builds on Lattice's differentiation in low power, small size, cost-effective solution, and ease of use. These new offerings add connectivity advancements, performance optimizations, and leading security and reliability capabilities to meet the increasing demand for edge applications. We had multiple customer keynotes at our developers conference that demonstrated the significant benefits of using Lattice solutions in their systems. Furthermore, because of our focus on ease of use, We also introduced new tools and solutions to speed up our customers' deployments and time to market. If you're not able to attend in person, our website has multiple videos showcasing applications like Lattice Sense AI for Edge AI, Lattice Envision for embedded vision, Lattice Automate for factory automation, and Lattice Drive for automotive designs. We also introduced new versions of our award-winning Lattice Radiant and Lattice Propel software tools. This continued innovation in our software tools and solutions will enable customer differentiation and make our solutions stickier and multigenerational. Looking ahead, as you heard during last quarter's earnings call, we expect more of a U-shaped recovery in 2025. We are very pleased to be guiding our Q1 EPS above the current consensus estimates in a quarter when other companies in our industry are expecting a guide down. For the full year 2025, we continue to anticipate low single-digit revenue growth compared to the full year 2024. We expect that channel inventory will begin moving back to the midpoint of our target range and enable Lattice to execute to our long-term revenue growth target of 15% to 20% in 2026 and beyond. In summary, over the past five months since I joined Lattice, we've taken significant actions to drive the next phase of our growth. As you heard earlier, some of these actions included our holding three recent successful sales conferences across North America, Asia Pacific, and Europe, inaugurating our new state-of-the-art R&D design center in Pune, India, holding another highly successful developers conference, and expanding our product portfolio with Nexus 2, Avant, and associated IP tools and solutions. We're also continuing to focus on financial discipline. including a strategic and comprehensive 14% workforce transformation we implemented in Q3, a material liability charge that was taken in Q4 after a thorough year-end review, and the further strengthening of our executive team with key additions. All these actions, combined with an improvement in customer consumption, a stronger backlog, and book-to-bill ratio reaching over one for the past few weeks, provide us increased confidence. Overall, NIDIS remains committed to our long-term strategy, and we're very optimistic about 2025 and beyond. Let me now turn the call over to Tanya for a detailed review of our results. Tanya?