Lattice Semiconductor Reports Fourth Quarter and Full Year 2020

Lattice Semiconductor Reports Fourth Quarter and Full Year 2020 Results

The Company's management believes that these non-GAAP financial measures provide an additional and useful way of viewing aspects of our performance that, when viewed in conjunction with our GAAP results, provide a more comprehensive understanding of the various factors and trends affecting our ongoing financial performance and operating results than GAAP measures alone. Management also uses these non-GAAP measures for strategic and business decision-making, internal budgeting, forecasting, and resource allocation processes and believes that investors should have access to similar data.

These non-GAAP measures are included solely for informational and comparative purposes and are not meant as a substitute for GAAP and should be considered together with the consolidated financial information located in the tables attached to this press release.

About Lattice Semiconductor Corporation:

Lattice Semiconductor (NASDAQ: LSCC) is the low power programmable leader. We solve customer problems across the network, from the Edge to the Cloud, in the growing communications, computing, industrial, automotive and consumer markets. Our technology, long-standing relationships, and commitment to world-class support lets our customers quickly and easily unleash their innovation to create a smart, secure and connected world.

For more information about Lattice, please visit www.latticesemi.com. You can also follow us via LinkedIn, Twitter, Facebook, YouTube, WeChat, Weibo or Youku.

Lattice Semiconductor Corporation
Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)

	Three Months Ended									Year Ended
	January 2,			September 26,			December 28,			January 2,			December 28,
	2021			2020			2019			2021			2019
Revenue	$	107,173		$	103,042		$	100,237		$	408,120		$	404,093
Cost of sales		42,312			40,736			40,944			162,814			165,671
Gross margin		64,861			62,306			59,293			245,306			238,422
Operating expenses:
Research and development		22,633			22,439			19,543			89,223			78,617
Selling, general, and administrative		24,534			23,758			20,924			95,331			82,542
Amortization of acquired intangible assets		603			603			3,390			4,449			13,558
Restructuring		(241	)		2,692			(55	)		3,937			4,664
Total operating expenses		47,529			49,492			43,802			192,940			179,381
Income from operations		17,332			12,814			15,491			52,366			59,041
Interest expense		(788	)		(792	)		(1,184	)		(3,702	)		(11,731	)
Other expense, net		(125	)		(70	)		(228	)		(208	)		(2,245	)
Income before income taxes		16,419			11,952			14,079			48,456			45,065
Income tax expense (benefit)		430			(655	)		92			1,064			1,572
Net income	$	15,989		$	12,607		$	13,987		$	47,392		$	43,493

Net income per share:
Basic	$	0.12		$	0.09		$	0.10		$	0.35		$	0.33
Diluted	$	0.11		$	0.09		$	0.10		$	0.34		$	0.32

Shares used in per share calculations:
Basic		136,104			135,598			133,691			135,220			132,471
Diluted		141,713			141,524			138,196			141,276			137,274

Lattice Semiconductor Corporation
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)

	January 2,		December 28,
	2021		2019
Assets
Current assets:
Cash and cash equivalents	$	182,332	$	118,081
Accounts receivable, net		64,581		64,917
Inventories, net		64,599		54,980
Other current assets		22,331		24,452
Total current assets		333,843		262,430

Property and equipment, net		39,666		39,230
Operating lease right-of-use assets		22,178		23,591
Intangible assets, net		6,321		6,977
Goodwill		267,514		267,514
Deferred income taxes		577		478
Other long-term assets		9,968		11,796
	$	680,067	$	612,016

Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	27,530	$	44,350
Accrued expenses		21,411		20,591
Accrued payroll obligations		18,028		13,404
Current portion of long-term debt		12,762		21,474
Total current liabilities		79,731		99,819

Long-term debt, net of current portion		157,934		125,072
Long-term operating lease liabilities, net of current portion		18,906		21,438
Other long-term liabilities		39,069		38,028
Total liabilities		295,640		284,357

Stockholders' equity		384,427		327,659
	$	680,067	$	612,016

Lattice Semiconductor Corporation
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)

	Year Ended
	January 2,			December 28,
	2021			2019
Cash flows from operating activities:
Net income	$	47,392		$	43,493
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		25,140			33,056
Stock-based compensation expense		40,372			18,899
Other non-cash adjustments		6,104			10,294
Net changes in assets and liabilities		(27,321	)		18,395
Net cash provided by operating activities		91,687			124,137
Cash flows from investing activities:
Capital expenditures		(12,121	)		(15,590	)
Other investing activities		(8,747	)		54
Net cash used in investing activities		(20,868	)		(15,536	)
Cash flows from financing activities:
Proceeds from long-term debt		50,000			206,500
Cash paid for debt issuance costs		—			(2,086	)
Repayment of long-term debt		(26,250	)		(321,408	)
Purchase of treasury stock		(14,989	)		—
Net cash flows related to stock compensation exercises		(16,862	)		7,082
Net cash used in financing activities		(8,101	)		(109,912	)
Effect of exchange rate change on cash		1,533			341
Net increase (decrease) in cash and cash equivalents		64,251			(970	)
Beginning cash and cash equivalents		118,081			119,051
Ending cash and cash equivalents	$	182,332		$	118,081

Supplemental disclosure of cash flow information and non-cash investing and financing activities:
Interest paid	$	3,700		$	10,995
Income taxes paid, net of refunds	$	1,868		$	3,393

Lattice Semiconductor Corporation
Supplemental Historical Financial Information
(unaudited)

	Three Months Ended									Year Ended
	January 2,			September 26,			December 28,			January 2,			December 28,
	2021			2020			2019			2021			2019
Balance Sheet Information
A/R Days Revenue Outstanding (DSO)		55			65			59
Inventory Days (DIO)		139			133			123

Revenue% (by Geography)
Asia		77	%		77	%		73	%		75	%		74	%
Americas		15	%		15	%		11	%		15	%		14	%
Europe (incl. Africa)		8	%		8	%		16	%		10	%		12	%

Revenue% (by End Market)
Communications and Computing		43	%		43	%		38	%		43	%		39	%
Industrial and Automotive		43	%		41	%		39	%		41	%		37	%
Consumer		10	%		10	%		18	%		11	%		19	%
Licensing and Services		4	%		6	%		5	%		5	%		5	%

Revenue% (by Channel)
Distribution		88	%		82	%		84	%		83	%		82	%
Direct		12	%		18	%		16	%		17	%		18	%

Lattice Semiconductor Corporation
Reconciliation of U.S. GAAP to Non-GAAP Financial Measures
(in thousands, except per share data)
(unaudited)

	Three Months Ended						Year Ended
	January 2,		September 26,		December 28,		January 2,		December 28,
	2021		2020		2019		2021		2019

*Gross Margin Reconciliation*
GAAP Gross margin	$	64,861	$	62,306	$	59,293	$	245,306	$	238,422
Stock-based compensation - gross margin (1)		1,104		1,022		440		3,818		1,422
Inventory adjustment related to restructured operations		—		—		—		—		(338	)
Non-GAAP Gross margin	$	65,965	$	63,328	$	59,733	$	249,124	$	239,506

*Gross Margin % Reconciliation*
GAAP Gross margin %	60.5	%	60.5	%	59.2	%	60.1	%	59.0	%
Cumulative effect of non-GAAP Gross Margin adjustments	1.1	%	1.0	%	0.4	%	0.9	%	0.3	%
Non-GAAP Gross margin %	61.6	%	61.5	%	59.6	%	61.0	%	59.3	%

*Research and Development Expense % (R&D Expense %) Reconciliation*
GAAP R&D Expense %	21.1	%	21.8	%	19.5	%	21.9	%	19.5	%
Stock-based compensation - R&D (1)	(2.6	)%	(2.8	)%	(1.6	)%	(2.7	)%	(1.4	)%
Non-GAAP R&D Expense %	18.5	%	19.0	%	17.9	%	19.2	%	18.1	%

*Selling, General, and Administrative Expense % (SG&A Expense %) Reconciliation*
GAAP SG&A Expense %	22.9	%	23.1	%	20.9	%	23.4	%	20.4	%
Stock-based compensation - SG&A (1)	(6.4	)%	(7.1	)%	(3.5	)%	(6.8	)%	(2.9	)%
Non-GAAP SG&A Expense %	16.5	%	16.0	%	17.4	%	16.6	%	17.5	%

*Operating Expenses Reconciliation*
GAAP Operating expenses	$	47,529		$	49,492		$	43,802		$	192,940		$	179,381
Stock-based compensation - operations (1)		(9,692	)		(10,189	)		(5,124	)		(38,324	)		(17,477	)
Amortization of acquired intangible assets		(603	)		(603	)		(3,390	)		(4,449	)		(13,558	)
Restructuring charges		241			(2,692	)		55			(3,937	)		(4,664	)
Impairment of acquired intangible assets		—			—			—			—			1,023
Non-GAAP Operating expenses	$	37,475		$	36,008		$	35,343		$	146,230		$	144,705

(1)

The non-GAAP adjustments for Stock-based compensation include related tax expenses.

Lattice Semiconductor Corporation
Reconciliation of U.S. GAAP to Non-GAAP Financial Measures
(in thousands, except per share data)
(unaudited)

	Three Months Ended								Year Ended
	January 2,			September 26,		December 28,			January 2,		December 28,
	2021			2020		2019			2021		2019

*Income from Operations Reconciliation*
GAAP Income from operations	$	17,332		$	12,814	$	15,491		$	52,366	$	59,041
Stock-based compensation - gross margin (1)		1,104			1,022		440			3,818		1,422
Inventory adjustment related to restructured operations		—			—		—			—		(338	)
Stock-based compensation - operations (1)		9,692			10,189		5,124			38,324		17,477
Amortization of acquired intangible assets		603			603		3,390			4,449		13,558
Restructuring charges		(241	)		2,692		(55	)		3,937		4,664
Impairment of acquired intangible assets		—			—		—			—		(1,023	)
Non-GAAP Income from operations	$	28,490		$	27,320	$	24,390		$	102,894	$	94,801

*Income from Operations % Reconciliation*
GAAP Income from operations %	16.2	%	12.4	%	15.5	%	12.8	%	14.6	%
Cumulative effect of non-GAAP Gross Margin and Operating adjustments	10.4	%	14.1	%	8.8	%	12.4	%	8.9	%
Non-GAAP Income from operations %	26.6	%	26.5	%	24.3	%	25.2	%	23.5	%

*Other Expense Reconciliation*
GAAP Other expense	$	(125	)	$	(70	)	$	(228	)	$	(208	)	$	(2,245	)
Loss on refinancing of long-term debt		—			—			—			—			2,235
Non-GAAP Other expense	$	(125	)	$	(70	)	$	(228	)	$	(208	)	$	(10	)

*Income Tax Expense (Benefit) Reconciliation*
GAAP Income tax expense (benefit)	$	430		$	(655	)	$	92		$	1,064	$	1,572
Estimated tax effect of non-GAAP adjustments (2)		(393	)		478			(11	)		—		—
Non-GAAP Income tax expense (benefit)	$	37		$	(177	)	$	81		$	1,064	$	1,572

(1)		The non-GAAP adjustments for Stock-based compensation include related tax expenses.
(2)		We calculate non-GAAP tax expense by applying our tax provision model to year-to-date and projected income after adjusting for non-GAAP items. The difference between calculated values for GAAP and non-GAAP tax expense has been included as the “Estimated tax effect of non-GAAP adjustments.”

Lattice Semiconductor Corporation
Reconciliation of U.S. GAAP to Non-GAAP Financial Measures
(in thousands, except per share data)
(unaudited)

	Three Months Ended									Year Ended
	January 2,			September 26,			December 28,			January 2,		December 28,
	2021			2020			2019			2021		2019

*Net Income Reconciliation*
GAAP Net income	$	15,989		$	12,607		$	13,987		$	47,392	$	43,493
Stock-based compensation - gross margin (1)		1,104			1,022			440			3,818		1,422
Inventory adjustment related to restructured operations		—			—			—			—		(338	)
Stock-based compensation - operations (1)		9,692			10,189			5,124			38,324		17,477
Amortization of acquired intangible assets		603			603			3,390			4,449		13,558
Restructuring charges		(241	)		2,692			(55	)		3,937		4,664
Impairment of acquired intangible assets		—			—			—			—		(1,023	)
Loss on refinancing of long-term debt		—			—			—			—		2,235
Estimated tax effect of non-GAAP adjustments (2)		393			(478	)		11			—		—
Non-GAAP Net income	$	27,540		$	26,635		$	22,897		$	97,920	$	81,488

*Net Income Per Share Reconciliation*
GAAP Net income per share - basic	$	0.12	$	0.09	$	0.10	$	0.35	$	0.33
Cumulative effect of Non-GAAP adjustments		0.08		0.11		0.07		0.37		0.29
Non-GAAP Net income per share - basic	$	0.20	$	0.20	$	0.17	$	0.72	$	0.62

GAAP Net income per share - diluted	$	0.11	$	0.09	$	0.10	$	0.34	$	0.32
Cumulative effect of Non-GAAP adjustments		0.08		0.10		0.07		0.35		0.27
Non-GAAP Net income per share - diluted	$	0.19	$	0.19	$	0.17	$	0.69	$	0.59

Shares used in per share calculations:
Basic		136,104		135,598		133,691		135,220		132,471
Diluted		141,713		141,524		138,196		141,276		137,274

(1)		The non-GAAP adjustments for Stock-based compensation include related tax expenses.
(2)		We calculate non-GAAP tax expense by applying our tax provision model to year-to-date and projected income after adjusting for non-GAAP items. The difference between calculated values for GAAP and non-GAAP tax expense has been included as the “Estimated tax effect of non-GAAP adjustments.”

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