Lattice Semiconductor Corporation (NASDAQ:LSCC) Q1 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call presents a mixed picture. Revenue declined YoY but increased QoQ, and gross margins improved significantly. However, guidance is weak with low single-digit growth expected for 2025. Share repurchases are positive, but the lack of detailed guidance and avoidance of specifics in the Q&A raise concerns. The market's reaction is likely to be muted, resulting in a neutral stock price movement over the next two weeks.
Key Financial Performance
Revenue $120.1 million, reflecting a 15% decline compared to the year ago period, but a 2% increase compared to Q4.
Gross Margin 69%, up 690 basis points compared to Q4, reflecting the durability of the business model despite lower revenue levels.
Non-GAAP Operating Expense $51.4 million, a 6% decrease compared to the year ago period, reflecting a focus on operational efficiency.
Non-GAAP Operating Margin 26.2%, reflecting the durability of the business model and operational efficiency.
EBITDA Margin 33.4%, demonstrating the results of financial discipline.
Non-GAAP EPS $0.22, in line with guidance.
GAAP Net Cash Flow from Operating Activities $31.9 million, with a GAAP operating cash flow margin of 26.5%.
Free Cash Flow $23.3 million, with a 19.4% free cash flow margin.
Share Repurchase Approximately $25 million of common stock repurchased, reducing dilution by 4.6%.
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Operating Highlights
New Product Revenue Growth: Revenue from our new products continues to grow at a strong double digit pace both sequentially and year-on-year.
Product Roadmap Execution: We continue to aggressively execute our strategy, diligently deliver on our product roadmap and prioritize and support our customers’ deployments.
Market Expansion in FPGAs: We have also expanded our new design win rates on small and mid-range FPGAs at record levels.
Growth in End Markets: Communications and computing delivered its first year-on-year growth in two years and industrial and automotive grew 6% sequentially.
New Opportunities in AI and Robotics: We’re also seeing revenue and design win growth in exciting areas like Generative AI and data centers, robotics in industrial, in-cabin and ADAS in Automotive.
Operational Efficiency: Non-GAAP operating expense was $51.4 million, a 3% decrease compared to Q4 and a 6% decrease compared to the year ago period.
Cost Control Measures: We are actively monitoring the situation, especially as it relates to potential impact to our second half outlook.
Capital Allocation Strategy: Returning capital to shareholders remains a key component of our capital allocation strategy.
Focus on R&D and Innovation: We are investing in CapEx in support of engineering and operations projects.
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Risk or Challenges
Tariff Impact: The company is monitoring the situation regarding new tariffs affecting the global economy and the semiconductor industry. While no material impact has been observed, potential indirect impacts are a concern.
Supply Chain Risks: Lattice relies on foundries in Taiwan, Korea, and Japan for wafers and assembly partners in Malaysia and Taiwan. The structure of the supply chain may mitigate direct tariff impacts, but logistical and economic disruptions are a risk.
Market Volatility: The company acknowledges historic volatility and uncertainty in the market, which could affect future performance and customer demand.
Economic Factors: The broader industry is navigating a dynamic macro environment, which may influence Lattice's second half outlook.
Customer Demand: The company is cautious about the second half outlook, which is dependent on the resolution of tariff situations and corresponding customer demand.
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Guidance & Outlook
Design Win Rates: Expanded new design win rates on small and mid-range FPGAs at record levels.
Product Roadmap: Continuing to execute strategy and deliver on product roadmap.
Market Positioning: Lattice is uniquely positioned to enable the next wave of innovation across key verticals.
Investment Focus: Investing in R&D and product innovation to strengthen leadership in small and mid-range FPGA markets.
Customer Engagements: Focused on driving innovation and expanding customer engagements.
Q2 Revenue Guidance: Expected revenue in the range of $118.5 million to $128.5 million.
Q2 Gross Margin Guidance: Expected gross margin of 69% plus or minus 1% on a non-GAAP basis.
Q2 Operating Expenses Guidance: Total OpEx expected to be between $50.5 million and $52.5 million on a non-GAAP basis.
Q2 Net Income Guidance: Expected net income between $0.22 and $0.26 per share on a non-GAAP basis.
Long-term Outlook: Expect a U-shaped recovery long-term with steady growth in revenue and profitability.
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Shareholder Return Plan
Share Repurchase Program: During the quarter, we repurchased approximately $25 million of common stock under our existing buyback program. The company has now repurchased a total of approximately 6.4 million shares, reducing dilution by 4.6%. We have approximately $75 million remaining under the most recent Board authorization.
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Key Q&A
Q:Any update to the 2025 outlook?
A:We see no change at this point. We see three improving demand signals, including improved customer consumption, higher beginning backlog, and a better book-to-bill ratio that continues to be above 1.
Q:Is there anything we should be thinking about between the comms and computing segments regarding growth rates for 2025?
A:The comms and compute segment decline has been driven mainly by a client revenue decline related to older platforms. Both our server and communication businesses have grown sequentially nicely for the past two quarters.
Q:Can you discuss some of the conversations that you’ve had with your customers regarding tariffs?
A:We continue to see the cloud to be very strong and discussions with cloud customers point to strong 2025 CapEx.
Q:Is the new product growth driven by ASP strength or units?
A:The strength is really driven by the differentiation in our product that we think is related to the architecture choices we’ve made.
Q:Can you update us on inventory in the comms and industrial segments?
A:We haven’t provided granularity in the different end markets that are in the channel. We see the channel inventory decline.
Q:Can you tell us where you exited Q1 relative to the three months target for channel inventory?
A:We haven’t disclosed that.
Q:Are you seeing any abnormal orders in your end markets?
A:We don’t see any material changes in behaviors based on what we’re seeing in our data.
Q:Can you provide any thoughts on how you might be different strategically or financially from your predecessor as CFO?
A:I approach this business fundamentally, focusing on driving growth of shareholder value faster than the market.
Q:How do you see your penetration going forward in terms of content in the server market?
A:We continue to find new opportunities in servers around AI, around security, around connectivity.
Q:Can you size the magnitude of your design wins?
A:The design win pipeline is quite strong and we are confident that it will result in growth.
Q:Can you clarify the competitive environment for low power small size FPGAs?
A:We feel very confident that our Lot 4 architecture is going to have sustainable long-term size, power and performance advantages.
Q:When should we expect revenue from Nexus to start rolling over?
A:Nexus accelerates in 2026, Avant accelerates in 2027.
Q:Can you walk us through any potential tariff impact on your China business?
A:The percent of revenue that is consumed in China is far lower than what is shipped to China.
Q:Can you give us a sense of how much of your revenue actually stays in China?
A:We haven’t broken it up in the past, so we’re probably not going to break it up.
Q:What gives you confidence in the reacceleration in the back half despite inventory taking longer?
A:The three improving demand signals: improved customer consumption, higher beginning backlog, and a better book-to-bill ratio.
Q:Should we expect the 2026 growth rate to remain in place?
A:We don’t see any fundamental change in the outlook we have.
Q:Can you quantify the impact of new products on margins?
A:There’s a nice ASP increase from pre-Nexus to Nexus and from Nexus to Avant.
Q:Are you seeing industrial growing across the board?
A:We definitely are seeing some of the segments that are growing faster.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on channel inventory levels relative to their target, stating they haven't disclosed that information. Additionally, they did not break down the revenue consumed in China or provide clarity on abnormal order behaviors in their end markets.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
ADAS Automotive
AI video
AR VR
Automotive AR
CEO Flores
Cryptography belief
Director Investor
Embedded World
FPGAs record
Investor Relations
Nexus product
Nuremberg industry
Post Quantum
Quantum Cryptography
Relations afternoon
Relations section
Semiconductor inline
Transcript Semiconductor
VR consumer
area center
catalyst mid
engagement term
expectation Greetings
inline expectation
line margin
mid solution
need Post
record level
relationship roadmaps
roadmap deployment
roadmaps discussion
situation
tariff
value product
LSCC Transcript
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Lattice Semiconductor Corporation (LSCC) Q3 2025 Earnings Call Transcript
Positive11-4
The earnings call reveals strong growth expectations, particularly in communications and compute, with a promising outlook for industrial and automotive segments. Significant design wins in AI and data centers bolster future prospects. Although gross margins are stable, revenue from new products is rising, and increased free cash flow margins are anticipated. The Q&A session provided clarity on growth drivers and market trends, despite some vague responses. Overall, the company's optimistic guidance and strong market positioning suggest a positive stock price movement over the next two weeks.
Lattice Semiconductor Corporation (LSCC) Q2 2025 Earnings Call Transcript
Positive8-4
The earnings call summary shows strong financial performance with record design win momentum and robust new product revenue growth. The Q&A session indicates confidence in future growth, especially in AI and automotive sectors, and highlights strong market positioning and shareholder returns. Although there are some uncertainties in gross margins and inventory, the overall sentiment remains positive, bolstered by optimistic guidance and strategic focus on innovation and market expansion.
Lattice Semiconductor Corporation (NASDAQ:LSCC) Q1 2025 Earnings Call Transcript
Unknown5-7
The earnings call presents a mixed picture. Revenue declined YoY but increased QoQ, and gross margins improved significantly. However, guidance is weak with low single-digit growth expected for 2025. Share repurchases are positive, but the lack of detailed guidance and avoidance of specifics in the Q&A raise concerns. The market's reaction is likely to be muted, resulting in a neutral stock price movement over the next two weeks.
LSCC Slides
LSCC Report
Frequently Asked Questions
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They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.
