LATTICE SEMICONDUCTOR CORP SEC 10-K Report
Lattice Semiconductor Corporation, a leading provider of low-power programmable logic devices, has released its Form 10-K report for fiscal 2024. The report highlights the company's financial performance, business operations, strategic initiatives, and the challenges it faces in the semiconductor industry.
Financial Highlights
Revenue: $509.4 million, a decrease of 31% compared to fiscal 2023, primarily due to softer demand in industrial and automotive applications, telecommunications infrastructure deployments, and continued inventory normalization by customers.
Gross Margin: $340.4 million, representing 66.8% of revenue, decreased by 300 basis points from fiscal 2023, primarily due to a $7.0 million one-time charge for expiring production materials and changes in product mix.
Income from Operations: $34.5 million, representing 6.8% of revenue, a significant decrease from $212.3 million in fiscal 2023.
Net Income: $61.1 million, which includes $27.7 million of income tax benefits due to the expiration of statutes of limitations that reduced uncertain tax positions.
Net Income per Share: Basic and Diluted both at $0.44, reflecting a decrease from $1.88 and $1.85 respectively in fiscal 2023.
Business Highlights
Revenue Segments: Lattice Semiconductor's revenue is divided into three primary end market groups: Communications and Computing, Industrial and Automotive, and Consumer. The Communications and Computing segment includes data center servers, networking equipment, and communications infrastructure. The Industrial and Automotive segment covers factory automation, robotics, and automotive electronics. The Consumer segment includes smart home and prosumer applications.
Geographical Performance: The company experienced a decrease in revenue from Asia due to macroeconomic conditions, while revenue from the Americas and Europe also declined, primarily due to reduced demand in the Industrial and Automotive end markets.
New Product Launches: Lattice introduced the Lattice Nexus™ 2 platform in 2024, building on its small FPGA leadership with improvements in power and performance efficiency, advanced connectivity, and security. The Lattice Avant™ platform, introduced in 2022, continues to support mid-range FPGA applications with best-in-class power efficiency and advanced connectivity.
New Production Launches: Lattice operates as a fabless semiconductor provider, relying on strategic relationships with foundries like TSMC, Samsung, and UMC for wafer fabrication. The company has not reported new production facilities but continues to leverage its existing partnerships for manufacturing.
Future Outlook: Lattice plans to continue investing in research and development to maintain its competitive position, focusing on new proprietary FPGA products, software development tools, and application-focused solutions. The company anticipates growth in AI-related applications across its end markets and expects to leverage its FPGA platforms to meet these demands.
Strategic Initiatives
Strategic Initiatives: Lattice Semiconductor Corporation has focused on strategic initiatives to enhance its product offerings and market position. The company has invested in research and development to deliver innovative products, particularly in high-growth areas such as Edge AI, 5G infrastructure, and platform security. Additionally, Lattice has engaged in restructuring activities to align resources with business needs, including workforce reductions and contract cancellations to optimize operations.
Capital Management: The company has actively managed its capital through a combination of debt repayment and share repurchase activities. Lattice entered into a 2022 Credit Agreement providing a $350 million revolving loan facility, which it has used for working capital and general corporate purposes. The company repaid its outstanding long-term debt balance during fiscal 2023, reducing interest expenses. Lattice also repurchased approximately 1.1 million shares of common stock for $67.0 million in fiscal 2024, reflecting its commitment to returning value to shareholders.
Future Outlook: Looking ahead, Lattice plans to continue its focus on strategic investments in research and development to drive innovation and growth in key markets. The company expects to increase its research and development expenses, although these are anticipated to decline as a percentage of revenue. Lattice also intends to explore acquisition opportunities to expand its product and technology portfolios. The company believes its financial resources, including cash flow from operations and credit facilities, will be sufficient to meet its liquidity and working capital needs over the next 12 months.
Challenges and Risks
Economic and Political Risks: Global operations expose Lattice to economic and political uncertainties, such as trade sanctions, tariffs, and geopolitical tensions, particularly between the U.S. and China. These factors could disrupt supply chains and impact the availability and cost of key materials.
Manufacturing Risks: The company relies on subcontractors for silicon wafer supply and assembly operations. Any disruption in these services, due to geopolitical risks or other factors, could lead to significant costs or delays.
Intellectual Property Risks: Lattice’s business strategy includes licensing intellectual property, which introduces risks related to revenue fluctuations and the protection of IP rights. The company’s participation in standards like HDMI is subject to variability in royalties.
Operational Risks: The proper functioning of IT systems is crucial, and any cybersecurity incidents could disrupt operations and compromise sensitive information. Additionally, the company faces challenges in attracting and retaining key personnel, which is critical for innovation and competitiveness.
Regulatory Risks: Compliance with evolving data privacy and security regulations, such as GDPR and CCPA, is complex and costly. Noncompliance could result in significant fines and reputational harm.
Market Risks: The semiconductor industry is cyclical, and downturns could lead to reduced demand for Lattice’s products. The company must continuously innovate to meet customer needs and maintain market acceptance.
Climate Change Risks: Climate change and related regulations could disrupt operations and supply chains, increase costs, and impact demand for products.
Management’s Discussion and Analysis: Management acknowledges the challenges posed by global economic conditions, including inflation and potential recessionary pressures. The company is focused on maintaining operational efficiency and cost management to mitigate these risks. Strategic initiatives include expanding product offerings and enhancing customer engagement to drive growth.
Quantitative and Qualitative Disclosures About Market Risk: Lattice is subject to market risks related to foreign currency exchange rate fluctuations, which could impact financial results. The company actively monitors these risks and employs strategies to mitigate potential adverse effects.
SEC Filing: LATTICE SEMICONDUCTOR CORP [ LSCC ] - 10-K - Feb. 14, 2025