LATTICE SEMICONDUCTOR CORP

Previous wording

Lattice develops technologies that we monetize through differentiated programmable logic semiconductor products, silicon-enabling products, system solutions, design services, and licenses. Lattice 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.

Current wording

Lattice develops technologies that we monetize through differentiated programmable logic semiconductor products, silicon-enabling products, system solutions, design services, and technology licenses. Lattice is the low power programmable leader. We solve customer problems across the network, from the Edge to the Cloud, in the 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.

Previous wording

Lattice has focused its strategy on delivering programmable logic products and related solutions based on low power, small size, and ease of use. We also serve our customers with IP licensing and various other services. Our product development activities include new proprietary products, advanced packaging, existing product enhancements, software development tools, soft IP, and system solutions for high-growth applications such as Edge AI, 5G infrastructure, platform security, and factory automation.

Current wording

Lattice has focused its strategy on delivering programmable logic products and related solutions based on low power, small size, and ease of use. We also serve our customers with IP licensing and various other services. Our product development activities include new proprietary products, advanced packaging, existing product enhancements, software development tools, soft IP, and system solutions for high-growth applications such as Edge AI, wireless and wireline infrastructure, platform security, and factory automation.

Previous wording

We believe the following accounting policies and the related estimates are critical in the portrayal of our financial condition and results of operations, and require management's most difficult, subjective, or complex judgments. See Note 1 - Nature of Operations and Significant Accounting Policies to our Consolidated Financial Statements in Part II, Item 8 of this report for further information on the significant accounting policies and methods used in the preparation of the consolidated financial statements.

Current wording

We believe the following accounting policies and the related estimates are critical in the portrayal of our financial condition and results of operations, and require management's most difficult, subjective, or complex judgments. See Note 1 - Basis of Presentation and Significant Accounting Policies to our Consolidated Financial Statements in Part II, Item 8 of this report for further information on the significant accounting policies and methods used in the preparation of the consolidated financial statements.

Previous wording

Inventories are stated at the lower of actual cost (determined using the first-in, first-out method) or net realizable value. We review and set standard costs quarterly to approximate current actual manufacturing costs. Our manufacturing overhead standards for product costs are calculated assuming full absorption of actual spending over actual costs. The valuation of inventory requires us to estimate excess or obsolete inventory. Material assumptions we use to estimate necessary inventory carrying value adjustments can be unique to each product and are based on specific facts and circumstances. In determining provisions for excess or obsolete products, we consider assumptions such as changes in business and economic conditions, projected customer demand for our products, and changes in technology or customer requirements. The creation of such provisions results in a write-down of inventory to net realizable value and a charge to Cost of revenue. If in any period we anticipate a change in assumptions such as future market or economic conditions to be less favorable than our previous estimates, additional inventory write-downs may be required and would be reflected in Cost of revenue, resulting in a negative impact to our gross margin in that period. If in any period we are able to sell inventories that had been written down to a level below the ultimate realized selling price in a previous period, related revenue would be recorded with a lower or no offsetting charge to Cost of revenue resulting in a net benefit to our gross margin in that period.

Current wording

Inventories are stated at the lower of actual cost (determined using the first-in, first-out method) or net realizable value. We review and set standard costs quarterly to approximate current actual manufacturing costs. Our manufacturing overhead standards for product costs are calculated assuming full absorption of actual costs. The valuation of inventory requires us to estimate excess or obsolete inventory. Material assumptions we use to estimate necessary inventory carrying value adjustments can be unique to each product and are based on specific facts and circumstances. In determining provisions for excess or obsolete products, we consider assumptions such as changes in business and economic conditions, projected customer demand for our products, and changes in technology or customer requirements. The creation of such provisions results in a write-down of inventory to net realizable value and a charge to Cost of revenue. If in any period we anticipate a change in assumptions such as future market or economic conditions to be less favorable than our previous estimates, additional inventory write-downs may be required and would be reflected in Cost of revenue, resulting in a negative impact to our gross margin in that period. If in any period we are able to sell inventories that had been written down to a level below the ultimate realized selling price in a previous period, related revenue would be recorded with a lower or no offsetting charge to Cost of revenue resulting in a net benefit to our gross margin in that period.

Previous wording

As part of our regular financial review process, we also assess the likelihood that our tax reporting positions will ultimately be sustained on examination by the taxing authorities, based on the technical merits of the position. To the extent it is determined it is more likely than not (a likelihood of more than 50 percent) that some portion or all of a tax reporting position will ultimately not be recognized and sustained, a provision for unrecognized tax benefit is provided by either reducing the applicable deferred tax asset or accruing an income tax liability. Our judgment regarding the sustainability of our tax reporting positions may change in the future due to changes in U.S. or international tax laws and other factors. These changes, if any, may require material adjustments to the related deferred tax assets or accrued income tax liabilities and an accompanying reduction or increase in income tax expense which may result in a corresponding increase or decrease in net income in the period when such determinations are made. Accordingly, the fourth quarter of fiscal 2024 included $27.7 million of income tax benefits due to the expiration of statutes of limitations that reduced our uncertain tax positions. We recognize the tax impact of including certain foreign earnings in U.S. taxable income as a period cost.

Current wording

As part of our regular financial review process, we also assess the likelihood that our tax reporting positions will ultimately be sustained on examination by the taxing authorities, based on the technical merits of the position. To the extent it is determined it is more likely than not (a likelihood of more than 50 percent) that some portion or all of a tax reporting position will ultimately not be recognized and sustained, a provision for unrecognized tax benefit is provided by either reducing the applicable deferred tax asset or accruing an income tax liability. Our judgment regarding the sustainability of our tax reporting positions may change in the future due to changes in U.S. or international tax laws and other factors. These changes, if any, may require material adjustments to the related deferred tax assets or accrued income tax liabilities and an accompanying reduction or increase in income tax expense which may result in a corresponding increase or decrease in net income in the period when such determinations are made. The expiration of statutes of limitations may decrease our uncertain tax positions.

Previous wording

Revenue from the Communications and Computing end market decreased by 11% in fiscal 2024 compared to fiscal 2023 primarily due to softer end market demand in telecommunications infrastructure deployments and from continued inventory normalization by customers, partially offset by stronger demand in data center applications.

Current wording

Revenue increased $13.9 million, or 3%, in fiscal 2025 compared to fiscal 2024, primarily due to stronger demand in data center applications, including general-purpose and AI-specific servers, as well as wireline networking components, partially offset by softer Industrial and Automotive end market demand and from continued inventory normalization by customers.

Previous wording

We sell our products globally to a broad base of customers in three primary end market groups: Communications and Computing, Industrial and Automotive, and Consumer. Across our end markets, our products are increasingly used for AI-related applications, including device usage in AI-optimized servers in data centers, AI-enabled PCs, and AI-enabled robotics and ADAS systems, among others. We also provide IP licensing and services to these end markets.

Current wording

We sell our products globally to a broad base of customers in three primary end market groups: Communications and Computing, Industrial and Automotive, and Consumer. Across our end markets, our products are increasingly used in AI-related applications, including device usage in AI-optimized servers in data centers, AI-enabled PCs, and AI-enabled robotics and ADAS systems, among others. We also provide IP licensing and services to these end markets.

Previous wording

Revenue from the Industrial and Automotive end market decreased by 45% in fiscal 2024 compared to fiscal 2023, primarilydueto softer end market demand and from continued inventory normalization by customers.

Current wording

Revenue from the Industrial and Automotive end market decreased by 18% in fiscal 2025 compared to fiscal 2024, primarilydueto softer end market demand and from continued inventory normalization by customers.

Previous wording

While we do not consider AI applications as a distinct end market, we expect AI-related revenue to grow over the next few years based on the growing pipeline of AI-related design wins. Our AI revenue is derived from applications across all three of our end market segments.

Current wording

While we do not consider AI applications as a distinct end market, we expect AI-related revenue to grow over the next few years based on the growing pipeline of AI-related design wins in a diverse set of applications across all three of our end market segments.

Previous wording

We have a diverse base of customers where distributors represent a significant portion of our total revenue. Our revenue by geographical market is based on the ship-to location of our customers, which can vary from time to time. Revenue from Asia decreased in fiscal 2024 compared to fiscal 2023 primarily due to the macroeconomic environment in the region, while revenue from the Americas and Europe decreased due to reduced demand in these regions for our products in the Industrial and Automotive end market.

Current wording

We have a diverse base of customers where distributors represent a significant portion of our total revenue. Our revenue by geographical market is based on the ship-to location of our customers, which can vary from time to time. Revenue in all regions for fiscal 2025 compared to fiscal 2024 has been impacted by the global macroeconomic environment.

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.

Current wording

Selling, general, and administrative expense includes headcount-related costs, including cash- and stock-based compensation and benefits, related to selling, general, and administrative employees, commissions, depreciation, professional and outside services, trade show, and travel expenses.

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 8 - Restructuring to our Consolidated Financial Statements in Part II, Item 8 of this report.

Current wording

Restructuring and other 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 8 - Restructuring to our Consolidated Financial Statements in Part II, Item 8 of this report.

Previous wording

For fiscal 2024 compared to fiscal 2023, the change in Other income (expense), netwas primarily due to a $2.0 million write-off of a non-recoverable cost-method investment, and to foreign currency effects.

Current wording

For fiscal 2025 compared to fiscal 2024, the change in Other income (expense), netwas primarily due to a $2.0 million write-off of a non-recoverable cost-method investment in the prior year period, and to foreign currency effects.

Previous wording

Our Income tax (benefit) expense on worldwide income for fiscal 2024 includes $27.7 million of income tax benefits due to the expiration of statutes of limitations that reduced our uncertain tax positions, as well as federal tax credits, and stock-based compensation. The lower income tax benefit in fiscal 2024 was primarily due to the reduction in valuation allowance over the $56.9 million of U.S. Federal deferred tax assets in 2023. The income tax benefit from the release of a portion of the valuation allowance was partially offset by an increase in expense in fiscal 2023 as compared to fiscal 2022 primarily due to increased worldwide income and U.S. tax on foreign operations.

Current wording

Our income tax expense (benefit) for fiscal 2025 was driven primarily by nondeductible expenses related to stock‑based compensation, partially offset by federal tax credits. The income tax benefit in fiscal 2024 includes $27.7 million of income tax benefits due to the expiration of statutes of limitations that reduced our uncertain tax positions, combined with federal tax credits and the impact of stock‑based compensation.

Previous wording

Adjusted EBITDA is a non-GAAP financial measure that we define as net income before net interest income (expense), income tax (benefit) expense, depreciation and amortization, stock-based compensation, and other items that are considered unusual or not representative of underlying trends of our business, including but not limited to: litigation expense outside the ordinary course of business, restructuring, transformation, and other charges, impairments, and other non-recurring charges, if applicable for the periods presented.

Current wording

Adjusted EBITDA is a non-GAAP financial measure that we define as net income before net interest income (expense), income tax expense (benefit), depreciation and amortization, stock-based compensation, and other items that are considered unusual or not representative of underlying trends of our business, including but not limited to: legal expense outside the ordinary course of business, transformation charges incurred in connection with our multi‑year strategic initiative to realign our organizational structure and modernize our technology platforms, restructuring, impairments, and other charges, if applicable for the periods presented.

Previous wording

As of December 28, 2024, we had Cash and cash equivalents of $136.3 million, of which approximately $71.2 million in Cash and cash equivalents 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 December 28, 2024, we could access all cash held by our foreign subsidiaries without incurring significant additional expense.

Current wording

As of January 3, 2026, we had Cash and cash equivalents of $133.9 million, of which approximately $73.6 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 January 3, 2026, we could access all cash held by our foreign subsidiaries without incurring significant additional expense.

Previous wording

The net increase in Cash and cash equivalents of $8.0 million between December 30, 2023 and December 28, 2024 was primarily driven by cash flows from the following activities:

Current wording

The net decrease in Cash and cash equivalents of $2.4 million between December 28, 2024 and January 3, 2026 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 was $140.9 million in fiscal 2024 compared to $269.6 million in fiscal 2023. This decrease of $128.7 million was primarily driven by a decrease of $159.8 million provided by operating activities, partially offset by $31.1 million of net changes in working capital, primarily in Accounts receivable 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 was $175.1 million in fiscal 2025 compared to $140.9 million in fiscal 2024. This increase of $34.2 million was primarily driven by $17.9 million more cash provided by net income adjusted for non-cash items coupled with $16.3 million of net changes in working capital.

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 fiscal 2024 was $37.7 million compared to $33.3 million in fiscal 2023.

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 fiscal 2025 was $62.3 million compared to $37.7 million in fiscal 2024.

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 fiscal 2024 was $94.5 million compared to $253.7 million in fiscal 2023. This $159.2 million decrease was due to the following activities. During fiscal 2024, we had no balance outstanding on our long-term debt, while during fiscal 2023 we made discretionary payments totaling $130.0 million on revolving loans under the 2022 Credit Agreement. We repurchased approximately 1.1 million shares of common stock for $67.0 million in fiscal 2024 compared to repurchases of approximately 1.2 million shares of common stock for $80.0 million in fiscal 2023. Payments for tax withholdings on vesting of RSUs partially offset by employee exercises of stock options used net cash flows of $27.5 million in fiscal 2024, a decrease of approximately $16.2 million from the net $43.7 million used in fiscal 2023.

Current wording

Financing activities — Financing cash flows consist primarily of repurchases of common stock, tax payments related to the net share settlement of restricted stock units, and proceeds from the acquisition of common stock under our employee stock purchase plan. Net cash used by financing activities in fiscal 2025 was $115.7 million compared to $94.5 million in fiscal 2024. This $21.2 million increase was due to the following activities. During fiscal 2025, we repurchased approximately 1.8 million shares of common stock for $100.0 million compared to fiscal 2024, where we repurchased approximately 1.1 million shares of common stock for $67.0 million. Payments for tax withholdings on vesting of RSUs partially offset by purchases under the employee stock purchase plan used net cash flows of $15.7 million in fiscal 2025, a decrease of approximately $11.8 million from the net $27.5 million used in fiscal 2024.

Previous wording

Accounts receivable, net as of December 28, 2024 decreased by approximately $23.3 million, or approximately 22%, 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.

Current wording

Accounts receivable, net as of January 3, 2026 increased by approximately $21.2 million, or approximately 26%, compared to December 28, 2024. This increase was due to order scheduling through the fourth quarter. 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

The information contained under the heading "New Accounting Pronouncements" in Note 1 - Nature of Operations and Significant Accounting Policies to our Consolidated Financial Statements in Part II, Item 8 of this report is incorporated by reference into this Part II, Item 7.

Current wording

The information contained under the heading "New Accounting Pronouncements" in Note 1 - Basis of Presentation and Significant Accounting Policies to our Consolidated Financial Statements in Part II, Item 8 of this report is incorporated by reference into this Part II, Item 7.