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LATTICE SEMICONDUCTOR CORP

For the period ended Mar 30, 2024. Filed Apr 30, 2024.

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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.

Mar 30, 2024 · Filed Apr 30, 2024

LSCC$113.89+8.4%Stored close · as of Nov 9, 2026

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Notes to Consolidated Financial Statements (unaudited)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note1 - Basis of Presentation

Lattice Semiconductor Corporation and its subsidiaries (“Lattice,” the “Company,” “we,” “us,” or “our”) develop technologies that we monetize through differentiated programmable logic semiconductor products, silicon-enabling products, system solutions, design services, and technology licenses.

Basis of Presentation and Use of Estimates

The accompanying Consolidated Financial Statements are unaudited and have been prepared in accordance with U.S. Generally Accepted Accounting Principles ("U.S. GAAP") and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission ("SEC"). In our opinion, they include all adjustments, consisting only of normal recurring adjustments, necessary for the fair presentation of results for the interim periods. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted as permitted by the SEC's rules and regulations for interim reporting. These Consolidated Financial Statements should be read in conjunction with our audited financial statements and notes thereto included in our Annual Report on Form10-K for the year ended* December 30, 2023 ("*2023 10-K").

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and judgments affecting the amounts reported in our consolidated condensed financial statements and the accompanying notes. We base our estimates and judgments on historical experience, knowledge of current conditions, and our beliefs of what could occur in the future considering available information. While we believe that our estimates, assumptions, and judgments are reasonable, they are based on information available when made, and because of the uncertainty inherent in these matters, the actual results that we experience* may*differ materially from these estimates under different assumptions or conditions. We evaluate our estimates and judgments on an ongoing basis.

We describe our accounting methods and practices in more detail in our2023 10-K. There have beenno changes to the significant accounting policies, procedures, or general information described in our2023 10-K that have had a material impact on our consolidated financial statements and related notes. Certain prior year balances have been reclassified to conform to the current year’s presentation.

Fiscal Reporting Periods

We report based on a52 or53-week fiscal year ending on the Saturday closest to* December 31.Our fiscal2024* will be a52-week year and will end on* December 28, 2024,and our fiscal2023* was a52-week year that ended* December 30, 2023.Ourfirst* quarter of fiscal2024 andfirst quarter of fiscal2023 ended on* March 30, 2024and April 1, 2023*, respectively. All references to quarterly financial results are references to the results for the relevant13-week fiscal period.

Concentrations of Risk

Potential exposure to concentrations of risk* mayimpact revenue and accounts receivable. Distributors have historically accounted for a significant portion of our total revenue. Revenue attributable to distributors as a percentage of total revenue was 87% and 88% for thefirst* quarters of fiscal2024 and2023, respectively. Distributors also account for a substantial portion of our net accounts receivable. Ourthree largest distributors accounted for 42%,30%, and 10% of net accounts receivable at* March 30, 2024* and 36%,29%, and 18% of net accounts receivable at* December 30, 2023*.

Note2 - Net Income per Share

Our calculation of the diluted share count includes the number of shares from our equity awards with market conditions or performance conditions that would be issuable under the terms of such awards at the end of the reporting period. For equity awards with a market condition, the number of shares included in the diluted share count as of the end of each period presented is determined by measuring the achievement of the market condition as of the end of the respective reporting periods. For equity awards with a performance condition, the number of shares that qualified for vesting as of the end of each period presented are included in the diluted share count when the condition for their issuance was satisfied by the end of the respective reporting periods. See"Note9 - Stock-Based Compensation" to our consolidated financial statements for further discussion of our equity awards with market conditions or performance conditions.

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A summary of basic and diluted Net income per share is presented in the following table:

Three Months Ended
March 30,April 1,
(In thousands, except per share data)20242023
Net income$14,796$55,923
Shares used in basic Net income per share137,475137,418
Dilutive effect of stock options, RSUs, ESPP shares, and equity awards with a market condition or performance condition1,2992,683
Shares used in diluted Net income per share138,774140,101
Basic Net income per share$0.11$0.41
Diluted Net income per share$0.11$0.40

The computation of diluted Net income per share excludes the effects of stock options, restricted stock units ("RSUs"), Employee Stock Purchase Plan ("ESPP") shares, and equity awards with a market condition or performance condition that are antidilutive, aggregating approximately the following number of shares:

Three Months Ended
March 30,April 1,
(In thousands)20242023
Stock options, RSUs, ESPP shares, and equity awards with a market condition or performance condition excluded as they are antidilutive950141

Note3 - Revenue from Contracts with Customers

Disaggregation of Revenue

The following tables provide information about revenue from contracts with customers disaggregated by channel and by geographical market, based on ship-to location of our customer:

Three Months Ended
Revenue by Channel · March 30, · April 1,
(In thousands) · 2024 · 2023
Distributors$123,20587%$161,34688%
Direct17,61013%22,96412%
Total revenue$140,815100%$184,310100%
Revenue by Geographical Market
(In thousands)
China56,87240%55,72230%
Japan24,98818%30,01716%
Other Asia10,5688%20,01611%
Asia92,42866%105,75557%
Americas31,98022%41,90323%
Europe16,40712%36,65220%
Total revenue$140,815100%$184,310100%

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Contract Balances

Our contract assets relate to our rights to consideration for licenses and royalties due to us as a member of the HDMI Founders consortium. The balance results primarily from the amount of estimated revenue related to HDMI that we have recognized to date, but which hasnot yet been distributed to us by the HDMI licensing agent. Contract assets are included in Prepaid expenses and other current assets on our Consolidated Balance Sheets. The following table summarizes activity during thefirst**three months of fiscal2024:

(In thousands)
Contract assets as of December 30, 2023$11,194
Revenues recorded during the period3,947
Transferred to Accounts receivable or collected(418)
Contract assets as of March 30, 2024$14,723

Contract liabilities are included in Accrued liabilities on our Consolidated Balance Sheets. The following table summarizes activity during thefirst**three months of fiscal2024:

(In thousands)
Contract liabilities as of December 30, 2023$5,304
Accruals for estimated future stock rotation and scrap returns4,551
Less: Release of accruals for recognized stock rotation and scrap returns(3,364)
Contract liabilities as of March 30, 2024$6,491

Note4 - Balance Sheet Components

Accounts Receivable

Accounts receivable donot bear interest and are shown net of an allowance for expected lifetime credit losses, which reflects our best estimate of probable losses inherent in the accounts receivable balance, as described in our2023 10-K.

March 30,December 30,
(In thousands)20242023
Accounts receivable$98,940$104,373
Less: Allowance for credit losses——
Accounts receivable, net of allowance for credit losses$98,940$104,373

Inventories

March 30,December 30,
(In thousands)20242023
Work in progress$67,605$65,396
Finished goods27,77933,430
Total inventories, net$95,384$98,826

Property and Equipment – Geographic Information

Our Property and equipment, net by country at the end of each period was as follows:

March 30,December 30,
(In thousands)20242023
United States$31,917$29,467
Taiwan9,15210,222
Philippines4,9184,602
China2,7622,778
Other2,6412,477
Total foreign property and equipment, net19,47320,079
Total property and equipment, net$51,390$49,546

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Accrued Liabilities

Included in Accrued liabilities in the Consolidated Balance Sheets are the following balances:

March 30,December 30,
(In thousands)20242023
Liability for non-cancelable contracts$10,520$11,418
Contract liabilities6,4915,304
Current portion of operating lease liabilities6,0655,571
Foreign, VAT, and other taxes payable4,8096,758
Other accrued liabilities4,1646,997
Total accrued liabilities$32,049$36,048

Note5 - Long-Term Debt

On* September 1, 2022,we entered into an Amended and Restated Credit Agreement (the“2022* Credit Agreement”), which provides for afive-year secured revolving loan facility with an aggregate principal amount of up to $350 million.

The revolving loans under the2022 Credit Agreement* maybe repaid and reborrowed at our discretion, with any remaining outstanding principal amount due and payable on the maturity date of the revolving loan on September 1, 2027.At March 30, 2024* and* December 30, 2023*, we hadno borrowings outstanding under the2022 Credit Agreement, as we paid off the outstanding balance of our revolving loans during thethird quarter of fiscal2023.

We pay a quarterly commitment fee of 0.20% on the unused portion of the revolving facility. Interest expense related to our long-term debt was included in Interest expense on our Consolidated Statements of Operations as follows:

Three Months Ended
March 30, · April 1,
(In thousands) · 2024 · 2023
Contractual interest$-$1,785
Amortization of original issuance discount and debt costs6767
Total interest expense related to long-term debt$67$1,852

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Note6 - Restructuring

Under theQ3 2023 Plan, which is described in the2023 10-K, we incurred restructuring costs of approximately $2.3 million during thefirst quarter of fiscal2024. Under this plan, approximately $4.3 million of total costs have been incurred through* March 30, 2024.TheQ3* 2023 plan is expected to be largely complete by the end of fiscal year2024.

Other restructuring activity in the periods presented consisted of expense adjustments on previous plans. These costs, and adjustments on previous restructuring plans, are recorded to Restructuring on our Consolidated Statements of Operations. The restructuring accrual balance is presented in Accrued liabilities and in Other long-term liabilities on our Consolidated Balance Sheets. The following table displays the activity related to our restructuring plans:

(In thousands)Severance & Related (1)Lease Termination & Fixed AssetsOther (2)Total
Accrued Restructuring at December 30, 2023$1,490$4,508$620$6,618
Restructuring2,341(17)(620)1,704
Costs paid or otherwise settled(2,979)(354)—(3,333)
Accrued Restructuring at March 30, 2024$852$4,137$—$4,989
Accrued Restructuring at December 31, 2022$400$5,892$640$6,932
Restructuring(1)31—30
Costs paid or otherwise settled(107)(363)(2)(472)
Accrued Restructuring at April 1, 2023$292$5,560$638$6,490
(1)Includes employee relocation and outplacement costs
(2)Includes termination fees on the cancellation of certain contracts

Note7 - Leases

We have operating leases for corporate offices, sales offices, research and development facilities, storage facilities, and a data center. All of our facilities are leased under operating leases, which expire at various times through2029, with a weighted-average remaining lease term of 3.6 years and a weighted-average discount rate of 6.0% as of* March 30, 2024*.

We recorded fixed operating lease expenses of $2.1 million and $1.9 million for thefirst quarter of fiscal2024 and2023, respectively.

The following table presents the lease balance classifications within the Consolidated Balance Sheets and summarizes their activity during thefirst three months of fiscal2024:

Operating lease right-of-use assets · (In thousands)
Balance as of December 30, 2023$14,487
Right-of-use assets obtained for new lease contracts during the period4,684
Amortization of right-of-use assets during the period(1,865)
Adjustments for present value and foreign currency effects(267)
Balance as of March 30, 2024$17,039
Operating lease liabilities · (In thousands)
Balance as of December 30, 2023$16,310
Lease liabilities incurred for new lease contracts during the period4,684
Accretion of lease liabilities268
Operating cash used for payments on lease liabilities(2,099)
Adjustments for present value and foreign currency effects(299)
Balance as of March 30, 202418,864
Less: Current portion of operating lease liabilities (included in Accrued liabilities)(6,065)
Long-term operating lease liabilities, net of current portion$12,799

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Maturities of operating lease liabilities as of* March 30, 2024* are as follows:

Fiscal year(In thousands)
2024 (Remaining 3 quarters)$5,114
20256,098
20264,492
20272,783
20282,232
Thereafter447
Total lease payments21,166
Less: amount representing interest(2,302)
Total lease liabilities$18,864

Lease obligations for facilities restructured prior to the adoption of Topic842 totaled approximately$4.1 million at* March 30, 2024* and is recorded in Accrued liabilities and in Other long-term liabilities on our Consolidated Balance Sheets.

Note8 - Intangible Assets

In connection with our past acquisitions, we have recorded identifiable intangible assets. On our Consolidated Balance Sheets at* March 30, 2024* and* December 30, 2023*, Intangible assets, net are shown net of accumulated amortization of$146.0 million and $144.9 million, respectively. Additionally, we enter into license agreements forthird-party technology and record them as intangible assets. These licenses are being amortized to Research and development expense over their estimated useful lives.

We recorded amortization expense related to intangible assets on the Consolidated Statements of Operations as presented in the following table:

Three Months Ended
March 30,April 1,
(In thousands)20242023
Research and development$266$270
Amortization of acquired intangible assets870870
$1,136$1,140
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