LATTICE SEMICONDUCTOR CORP

Previous wording

The end market data we use is derived from data provided to us by our customers. With a diverse base of customers who may manufacture end products spanning multiple end markets, the assignment of revenue to a specific end market requires the use of judgment. We also recognize certain revenue for which end customers and end markets are not yet known. We assign this revenue first to a specific end market using historical and anticipated usage of the specific products, if possible, and allocate the remainder to the end markets based on either historical usage for each product family or industry application data for certain product types.

Current wording

The end market data we use is derived from data provided to us by our distributors and end customers. With a diverse base of customers who may manufacture end products spanning multiple end markets, the assignment of revenue to a specific end market requires the use of judgment. We also recognize certain revenue for which end customers and end markets are not yet known. We assign this revenue first to a specific end market using historical and anticipated usage of the specific products, if possible, and allocate the remainder to the end markets based on either historical usage for each product family or industry application data for certain product types.

Previous wording

Revenue from the Communications and Computing end market decreased by 18% for the first quarter of fiscal 2024 compared to the first quarter of fiscal 2023 primarily due to weaker demand in telecommunications infrastructure deployments and end customers rebalancing their inventory levels, partially offset by stronger demand in data center applications.

Current wording

Revenue from the Communications and Computing end market decreased by 15% for the second quarter of fiscal 2024 compared to the second quarter of fiscal 2023 and decreased by 16% for the first six months of fiscal 2024 compared to the first six months of fiscal 2023 primarily due to weaker demand in telecommunications infrastructure deployments and end customers rebalancing their inventory levels, partially offset by stronger demand in data center applications.

Previous wording

Revenue from the Industrial and Automotive end market decreased by 30% for the first quarter of fiscal 2024 compared to the first quarter of fiscal 2023 primarily due to softer end market demand and end customers rebalancing their inventory levels.

Current wording

Revenue from the Industrial and Automotive end market decreased by 50% for the second quarter of fiscal 2024 compared to the second quarter of fiscal 2023 and decreased by 40% for the first six months of fiscal 2024 compared to the first six months of fiscal 2023 primarily due to softer end market demand and end customers rebalancing their inventory levels.

Previous wording

We sell our products to independent distributors and directly to customers. 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 the first quarter of fiscal 2024 and 2023, respectively.

Current wording

We sell our products to independent distributors and directly to customers. Distributors have historically accounted for a significant portion of our total revenue. Revenue attributable to distributors as a percentage of total revenue was 91% and 89% for the second quarter of fiscal 2024 and 2023, respectively, and 89% and 88% for the first six months of fiscal 2024 and 2023, respectively.

Previous wording

Gross margin, as a percentage of revenue, decreased 150 basis points in the first quarter of fiscal 2024 compared to the first quarter of fiscal 2023. Reduced margins were primarily due to changes in product mix between the periods presented.

Current wording

Gross margin, as a percentage of revenue, decreased 140 basis points in the second quarter of fiscal 2024 compared to the second quarter of fiscal 2023 and decreased by 150 basis points for the first six months of fiscal 2024 compared to the first six months of fiscal 2023. Reduced margins were primarily due to changes in product mix between the periods presented.

Previous wording

Research and development expense includes costs for compensation and benefits, stock-based compensation, engineering wafers, depreciation and amortization, licenses, and outside engineering services. These expenditures are for the design of new products, IP cores, processes, packaging, and software solutions. The increase in Research and development expense for thefirst quarter of fiscal 2024 compared to thefirst quarter of fiscal 2023 wasdue primarily to increased headcount-related costs, including stock-based compensation, and depreciation and amortization related to our research and development equipment and tools. We believe that investing in research and development is important to delivering innovative products to our customers.

Current wording

Research and development expense includes costs for compensation and benefits, stock-based compensation, engineering wafers, depreciation and amortization, licenses, and outside engineering services. These expenditures are for the design of new products, IP cores, processes, packaging, and software solutions. The decrease in Research and development expense for the second quarter of fiscal 2024 compared to the second quarter offiscal 2023 wasdue primarily to lower headcount-related costs, including stock-based compensation. The increase in Research and development expense for the first six months of fiscal 2024 compared to the first six months offiscal 2023 wasdue primarily to higher depreciation and amortization related to our research and development equipment and tools. We believe that investing in research and development is important to delivering innovative products to our customers.

Previous wording

Selling, general, and administrative expense includes costs for compensation and benefits related to selling, general, and administrative employees, commissions, depreciation, professional and outside services, trade show, and travel expenses. The increase in Selling, general, and administrative expense for the first quarter of fiscal 2024 compared to the first quarter of fiscal 2023 was primarily related to demand creation to support the long-term growth of our business in the areas of headcount-related costs, including stock-based compensation, and other costs such as legal expenses.

Current wording

Selling, general, and administrative expense includes costs for compensation and benefits related to selling, general, and administrative employees, commissions, depreciation, professional and outside services, trade show, and travel expenses. The decrease in Selling, general, and administrative expense for the second quarter and first six months of fiscal 2024 compared to the second quarter and first six months of fiscal 2023 was primarily due to the benefits to stock compensation expense from the forfeiture of equity awards by departing executives, partially offset by other costs such as legal expenses.

Previous wording

Amortization of acquired intangible assets was flat between the first quarter of fiscal 2024 and the first quarter of fiscal 2023.

Current wording

Amortization of acquired intangible assets was flat between the second quarter and first six months of fiscal 2024 and the second quarter and first six months of fiscal 2023.

Previous wording

Restructuring activity is generally comprised of expenses resulting from workforce reductions, cancellation of contracts, and consolidation of our facilities. Details of our restructuring plans and expenses incurred under them are discussed in "Note 6 - Restructuring" to our Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q. Restructuring costs increased in the first quarter of fiscal 2024 compared to the first quarter of fiscal 2023 primarily due to higher costs in the current year period for severance as compared to minimal restructuring activity in the prior year period.

Current wording

Restructuring activity is generally comprised of expenses resulting from workforce reductions, cancellation of contracts, and consolidation of our facilities. Details of our restructuring plans and expenses incurred under them are discussed in "Note 6 - Restructuring" to our Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q. Restructuring costs increased in the second quarter and first six months of fiscal 2024 compared to the second quarter and first six months of fiscal 2023 primarily due to higher costs in the current year periods for severance as compared to minimal restructuring activity in the prior year periods.

Previous wording

The change in Interest income (expense) for the first quarter of fiscal 2024 compared to the first quarter of fiscal 2023 was driven by increased interest income, coupled with decreased interest expense as we paid off the outstanding balance of our long-term debt during the third quarter of fiscal 2023.

Current wording

The change in Interest income (expense) for the second quarter and first six months of fiscal 2024 compared to the second quarter and first six months of fiscal 2023 was driven by increased interest income, coupled with decreased interest expense as we paid off the outstanding balance of our long-term debt during the third quarter of fiscal 2023.

Previous wording

The change in Other income (expense) for the first quarter of fiscal 2024 compared to the first quarter of fiscal 2023 was primarily due to foreign currency effects.

Current wording

The change in Other income (expense) for the second quarter and first six months of fiscal 2024 compared to the second quarter and first six months of fiscal 2023 was primarily due to foreign currency effects.

Previous wording

Our Income tax expense is partially offset by federal tax credits and excess tax benefits from stock-based compensation. The lower income tax expense for the prior year period was primarily due to the valuation allowance over the federal deferred tax assets present during 2023.

Current wording

Our Income tax expense is partially offset by federal tax credits and excess tax benefits from stock-based compensation. The lower income tax expense for the current year periods was primarily due to decreased worldwide income, partially offset by the valuation allowance over the federal deferred tax assets present during 2023.

Previous wording

As of March 30, 2024, we had Cash and cash equivalents of $107.5 million, of which approximately $51.8 million was held by our foreign subsidiaries. We manage our global cash requirements considering, among other things, (i) available funds among our subsidiaries through which we conduct business, (ii) the geographic location of our liquidity needs, and (iii) the cost to access international cash balances. The repatriation of non-US earnings may require us to withhold and pay foreign income tax on dividends. This should not result in our recording significant additional tax expense as we have accrued expense based on current withholding rates. As of March 30, 2024, we could access all cash held by our foreign subsidiaries without incurring significant additional expense.

Current wording

As of June 29, 2024, we had Cash and cash equivalents of $109.2 million, of which approximately $43.1 million was held by our foreign subsidiaries. We manage our global cash requirements considering, among other things, (i) available funds among our subsidiaries through which we conduct business, (ii) the geographic location of our liquidity needs, and (iii) the cost to access international cash balances. The repatriation of non-US earnings may require us to withhold and pay foreign income tax on dividends. This should not result in our recording significant additional tax expense as we have accrued expense based on current withholding rates. As of June 29, 2024, we could access all cash held by our foreign subsidiaries without incurring significant additional expense.

Previous wording

The net decrease in Cash and cash equivalents of $20.9 million between December 30, 2023 and March 30, 2024 was primarily driven by cash flows from the following activities:

Current wording

The net decrease in Cash and cash equivalents of $19.1 million between December 30, 2023 and June 29, 2024 was primarily driven by cash flows from the following activities:

Previous wording

Operating activities — Cash provided by operating activities results from net income adjusted for certain non-cash items and changes in assets and liabilities. Cash provided by operating activities for the first three months of fiscal 2024 was $29.5 million compared to $44.9 million for the first three months of fiscal 2023. This decrease of $15.4 million was primarily driven by $34.7 million less cash provided by net income adjusted for non-cash items, partially offset by $19.3 million of net changes in working capital, primarily from cash provided by Accrued payroll obligations and Inventories.

Current wording

Operating activities — Cash provided by operating activities results from net income adjusted for certain non-cash items and changes in assets and liabilities. Cash provided by operating activities for the first six months of fiscal 2024 was $51.4 million compared to $115.5 million for the first six months of fiscal 2023. This decrease of $64.1 million was primarily driven by $80.5 million less cash provided by net income adjusted for non-cash items, partially offset by $16.4 million of net changes in working capital, primarily in Accrued liabilities and Accrued payroll obligations.

Previous wording

Investing activities — Investing cash flows consist primarily of transactions related to capital expenditures and payments for software and intellectual property licenses. Net cash used by investing activities in the first three months of fiscal 2024 was $7.7 million compared to $11.0 million in the first three months of fiscal 2023. This decrease of $3.3 million is primarily a result of reduced capital expenditures.

Current wording

Investing activities — Investing cash flows consist primarily of transactions related to capital expenditures and payments for software and intellectual property licenses. Net cash used by investing activities in the first six months of fiscal 2024 was $18.2 million compared to $17.7 million in the first six months of fiscal 2023.

Previous wording

Financing activities — Financing cash flows consist primarily of activity on our long-term debt, repurchases of common stock, tax payments related to the net share settlement of restricted stock units, and proceeds from the exercise of options to acquire common stock. Net cash used by financing activities in the first three months of fiscal 2024 was $42.2 million compared to $67.6 million in the first three months of fiscal 2023. This $25.4 million decrease was due to the following activities. During the first three months of fiscal 2024, we had no balance outstanding on our long-term debt, while during the first quarter of fiscal 2023 we made discretionary payments totaling $25.0 million on revolving loans under the 2022 Credit Agreement. During the first three months of fiscal 2024, we repurchased approximately 0.3 million shares of common stock for $20.0 million compared to repurchases in the first three months of fiscal 2023 of approximately 0.1 million shares of common stock for $10.0 million. Payments for tax withholdings on vesting of RSUs partially offset by employee exercises of stock options used net cash flows of $22.2 million in the first three months of fiscal 2024, a decrease of approximately $10.4 million from the net $32.6 million used in the first three months of fiscal 2023.

Current wording

Financing activities — Financing cash flows consist primarily of activity on our long-term debt, repurchases of common stock, tax payments related to the net share settlement of restricted stock units, and proceeds from the exercise of options to acquire common stock. Net cash used by financing activities in the first six months of fiscal 2024 was $51.7 million compared to $139.4 million in the first six months of fiscal 2023. This $87.7 million decrease was due to the following activities. During the first six months of fiscal 2024, we had no balance outstanding on our long-term debt, while during the first six months of fiscal 2023 we made discretionary payments totaling $85.0 million on revolving loans under the 2022 Credit Agreement. During the first six months of fiscal 2024, we repurchased approximately 0.4 million shares of common stock for $30.0 million compared to repurchases in the first six months of fiscal 2023 of approximately 0.2 million shares of common stock for $20.0 million. Payments for tax withholdings on vesting of RSUs partially offset by employee exercises of stock options used net cash flows of $21.7 million in the first six months of fiscal 2024, a decrease of approximately $12.7 million from the net $34.4 million used in the first six months of fiscal 2023.

Previous wording

Accounts receivable, net as of March 30, 2024 decreased by approximately$5.4 million, or 5%, compared to December 30, 2023. This decrease was due to lower revenue shipments. We calculate Days sales outstanding on the basis of a 365-day year as Accounts receivable, net at the end of the quarter divided by sales during the quarter annualized and then multiplied by 365.

Current wording

Accounts receivable, net as of June 29, 2024 decreased by approximately$0.9 million, or 1%, compared to December 30, 2023. This decrease was due to lower revenue shipments as well as the timing of when our customers want our products. We calculate Days sales outstanding on the basis of a 365-day year as Accounts receivable, net at the end of the quarter divided by sales during the quarter annualized and then multiplied by 365.

Previous wording

Inventories as of March 30, 2024 decreased$3.4 million, or approximately 4%, compared to December 30, 2023 primarily as a result of the timing of shipments to satisfy customer demand.

Current wording

Inventories as of June 29, 2024 increased$2.7 million, or approximately 3%, compared to December 30, 2023 primarily as a result of new product ramps. Days of inventory on hand increased over the period due to lower revenue.