LATTICE SEMICONDUCTOR CORP

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.Ourthird* quarter of fiscal2024 andthird quarter of fiscal2023 ended on* September 28, 2024and September 30, 2023*, respectively. All references to quarterly financial results are references to the results for the relevant13-week or39-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 95% and 90% for thethird* quarters of fiscal2024 and2023, respectively and 91% and 89% for thefirst nine months of fiscal2024 and2023, respectively. Distributors also account for a substantial portion of our net accounts receivable. At* September 28, 2024*, ourtwo largest distributors accounted for 42% and 37% of net accounts receivable, and at* December 30, 2023*, ourthree largest distributors accounted for 36%,29%, and 18% of net accounts receivable.

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:

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:

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 customers:

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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**nine months of fiscal2024:

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

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.

Inventories

Property and Equipment – Geographic Information

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

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Accrued Liabilities

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

Accrued Other Long-Term Liabilities

Included in Accrued other long-term liabilities in the Consolidated Balance Sheets are the following balances:

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 September 28, 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:

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Note6 - Restructuring

In* September 2024,our management commenced an internal restructuring plan ("theQ3* 2024 Plan"), which includes a global workforce reduction. Under this plan, we have accrued restructuring costs of approximately $6.5 million through* September 28, 2024.TheQ3* 2024 plan is expected to be largely complete in thefirst half of fiscal year2025.

Under theQ3 2023 Plan, which is described in the2023 10-K, we incurred restructuring costs of approximately $0.3 million and approximately $5.3 million during thethird quarter andfirst nine months, respectively, of fiscal2024. Under this plan, approximately $7.3 million of total costs have been incurred through* September 28, 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. Costs and adjustments on 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:

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 3.1 years and a weighted-average discount rate of 6.0% as of* September 28, 2024*.

We recorded fixed operating lease expenses of $2.1 million and $2.0 million for thethird quarter of fiscal2024 and2023, respectively, and $6.4 million and $5.8 million for thefirst nine months of fiscal2024 and2023, respectively.

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

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Maturities of operating lease liabilities as of* September 28, 2024* are as follows:

Lease obligations for facilities restructured prior to the adoption of Topic842 totaled approximately$3.4 million at* September 28, 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* September 28, 2024* and* December 30, 2023*, Intangible assets, net are shown net of accumulated amortization of$148.3 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: