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* January 3, 2026 ("*2025 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 our2025 10-K. Other than as described below, there have beenno changes to the significant accounting policies, procedures, or general information described in our2025 10-K that have had a material impact on our consolidated condensed financial statements and the accompanying notes. Certain prior year balances have been reclassified to conform to the current year’s presentation.

During2026, we initiated foreign currency hedging activities and, as a result, include the below additional accounting policies related to fair value and financial instruments:

Fair Value Accounting Policy

We apply the provisions of ASC820, Fair Value Measurement (ASC820*)*, to our assets and liabilities that we are required to measure at fair value pursuant to other accounting standards, including our derivative financial instruments. When determining fair value, we consider the principal or most advantageous market in which we would transact, as well as assumptions that market participants would use when pricing the asset or liability. All our financial assets and liabilities are measured and recorded at fair value on a recurring basis.

Financial Instrument Accounting Policy

In Fiscal2026, we began to use derivative financial instruments to manage our exposure to foreign currency exchange rate risk. We have entered into foreign currency forward contracts in relation to certain operating expense activities denominated in currencies other than the U.S. Dollar, and these contracts generally mature within12 months. We account for these instruments in accordance with ASC815, Derivatives and Hedging (ASC815), which requires that every derivative instrument be recorded as either an asset or liability measured at its fair value as of each reporting date.

ASC815 also requires that changes in the fair values of our derivatives be recognized in earnings, unless specific hedge accounting and documentation criteria are met. The accounting for changes in the fair value of a derivative depends on the intended use of the derivative and the resulting designation. Our foreign currency contracts are designated as cash flow hedges. As such, we record the change in fair value of a derivative in Other comprehensive income (loss), and the change is reclassified to earnings in the period that the hedged item affects earnings.

As of* April 4, 2026,*the notional value of our outstanding foreign currency forward contracts designated as cash flow hedges was $60 million.

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Fiscal Reporting Periods

We report based on a52 or53-week fiscal year ending on the Saturday closest to* December 31.Our fiscal2026* will be a52-week year and will end on* January 2, 2027,and our fiscal2025* was a53-week year that ended* January**3,* 2026. Ourfirst quarter of fiscal2026 andfirst quarter of fiscal2025 ended on* April 4, 2026and March 29, 2025*, 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, trade accounts receivable, cash and cash equivalents, and supply of wafers for our new products. Sales to distributors have historically accounted for a significant portion of our total revenue. Revenue attributable to distributors as a percentage of total revenue was 94% and 79% for thefirst* quarters of fiscal2026 and2025, respectively.

Distributors also account for a substantial portion of our net accounts receivable. At* April 4, 2026*, ourtwo largest distributors accounted for 52% and 38% of net accounts receivable, and at* January 3, 2026*, ourtwo largest distributors accounted for 62% and 28% of net accounts receivable. Concentration of credit risk with respect to trade accounts receivable is mitigated by our credit and collection process including active management of collections, credit limits, routine credit evaluations for essentially all customers, and secure transactions with letters of credit or advance payments where appropriate. We regularly review our allowance for doubtful accounts and the aging of our accounts receivable.

We limit our risk exposure related to cash and cash equivalents by placing our cash with high credit quality financial institutions. At times, such deposits* mayexceed Federal Deposit Insurance Corporation insurance limits. We havenot* experienced any losses on our deposits of cash and cash equivalents.

We rely on a limited number of foundries for our wafer purchases. We seek to mitigate the concentration of supply risk by establishing, maintaining, and managing multiple foundry relationships; however, certain of our products are sourced from a single foundry and changing fromone foundry to another can have a significant cost, or create delays in production or shipments, among other factors.

New Accounting Pronouncements

In* November 2024,the FASB issued ASU2024*-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic220*-40): Disaggregation of Income Statement Expenses*. This new guidance requires public entities to provide disaggregated disclosures, in the notes to the financial statements, of certain categories of expenses that are included in expense line items on the face of the income statement. The ASU* maybe applied prospectively or retrospectively and is effective for fiscal years beginning after December 15, 2026and for interim periods beginning after December 15, 2027.*Early adoption is permitted. We are currently evaluating the impact of adoption of this new guidance on our consolidated financial statements and disclosures.

In* September 2025,the FASB issued ASU2025*-06, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic350*-40): Targeted Improvements to the Accounting for Internal-Use Software*. This ASU is intended to simplify the recognition and disclosure guidance related to capitalized internal-use software costs by removing all references to software development project stages and introducing a more judgment-based framework. ASU2025-06 is effective for fiscal years beginning after* December 15, 2027,and for interim periods within those fiscal years, with early adoption permitted as of the beginning of a fiscal year. This standard may*be applied prospectively, retrospectively, or via a modified prospective transition method. We are currently evaluating the impact of adoption of this new guidance on our consolidated financial statements and disclosures.

Note2 - Net Income per Share

We compute basic earnings per share based on the weighted average number of shares of common stock outstanding during the period. We compute diluted earnings per share based on the weighted average number of shares of common stock outstanding plus potentially dilutive shares of common stock outstanding during the period, if applicable. Potentially dilutive shares of common stock from employee equity incentive awards are determined by applying the treasury stock method to the assumed exercise of outstanding stock options, the assumed vesting of outstanding restricted stock units ("RSUs") and restricted stock awards ("RSAs"), and the assumed issuance of common stock under the stock purchase plan.

Our calculation of potentially dilutive shares 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 employee equity incentive awards that are antidilutive, aggregating less than 0.1 million shares for thefirst quarter of fiscal2026 and 0.9 million shares for thefirst quarter of fiscal2025.

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. Revenue is attributed to geographic regions based on the ship-to location of the customer. The Greater China geography includes revenue associated with shipments to both Hong Kong and mainland China. Products shipped to Hong Kong* maysubsequently be transferred to mainland China or other destinations, and products shipped to mainland China may*similarly move through intermediary locations.

Contract Balances

Our contract assets relate primarily 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 fiscal2026:

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Contract liabilities are included in Accrued liabilities on our Consolidated Balance Sheets. The following table summarizes activity during thefirst**three months of fiscal2026:

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 our2025 10-K.

Inventories

Property and Equipment – Geographic Information

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

Accrued Liabilities

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

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Other Long-Term Liabilities

Included in 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. We have azero drawn balance on this facility, and effective* December 10, 2025,*we deliberately reduced the aggregate available principal amount from up to $350 million to up to $200 million. This reduction lowered our carrying costs. We intend to use the revolving loan facility for working capital and general corporate purposes as appropriate.

The revolving loan facility 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 April 4, 2026* and* January 3, 2026*, we hadno borrowings outstanding under the2022 Credit Agreement. We pay a quarterly commitment fee of 0.20% on the unused portion of the revolving facility.

Note6 - Restructuring

Under theQ3 2024 Plan, which is described in our2025 10-K, we incurred restructuring costs of $0.4 million and $0.1 million, respectively, in thefirst quarter of fiscal2026 and2025. Under this plan, $11.4 million of total costs have been incurred through* April 4, 2026.TheQ3* 2024 Plan is expected to be largely complete by the end of thesecond quarter of fiscal year2026.

Other restructuring activity in the periods presented consisted of expense adjustments on previous plans. Costs and adjustments on restructuring plans are recorded to Restructuring and other 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

Our facilities for corporate offices, sales offices, research and development facilities, storage facilities, and a data center, are all leased under operating leases, which expire at various times through2035. Our leases have remaining lease terms of less than 1 year up to 9 years, some of which include options to extend for up to 5 years, and some of which include options to terminate within 1 year. The weighted-average remaining lease term was 6.2 years and the weighted-average discount rate was 4.9% as of* April 4, 2026*.

We recorded fixed operating lease expenses of $2.4 million and $2.1 million for thefirst quarter of fiscal2026 and2025, respectively.

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The following table presents the lease balance classifications within the Consolidated Balance Sheets and summarizes their activity during thefirst three months of fiscal2026:

Maturities of operating lease liabilities as of* April 4, 2026* are as follows:

Note8 - Intangible Assets

In connection with our previous acquisitions and purchases of certain intellectual property assets, we have recorded identifiable intangible assets related to existing technology, customer relationships, and trade name / trademarks. We amortize the intangible assets using the straight-line method over their estimated useful lives. Additionally, we have entered into license agreements forthird-party technology and recorded them as intangible assets. These licenses are being amortized to Research and development expense over their estimated useful lives. On our Consolidated Balance Sheets at* April 4, 2026* and* January 3, 2026*, Intangible assets, net are shown net of accumulated amortization of $166.3 million and $165.7 million, respectively.

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

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Note9 - Stock-Based Compensation

Total stock-based compensation expense included in our Consolidated Statements of Operations is presented in the following table:

Market-Based and Performance-Based Stock Compensation

During thefirst quarter of fiscal2026, the market condition for awards granted to certain executives in thefirst quarter of fiscal2023 exceeded the 25th percentile of their total shareholder return ("TSR") condition, and these awards vested at 87%. Also during thefirst quarter of fiscal2026, the market condition for thefirst tranche of awards granted to certain executives in thefirst quarter of fiscal2025 exceeded the 75th percentile of their TSR condition, and these awards vested at 200%.

For our awards with a market condition or performance condition, we incurred stock-based compensation expense of $10.6 million and $4.2 million, respectively, in thefirst quarter of fiscal2026 and2025. These amounts are recorded as components of total stock-based compensation expense.

The following table summarizes the activity for our awards with a market condition or performance condition:

Incentive Compensation Settled In Equity

Under our Corporate Incentive Plan, incentive payments* maybe made in cash or in shares of our Common Stock, or a combination of both, as determined at the discretion of the Compensation Committee of our Board of Directors. To the extent incentive payments are settled in equity under the2023* Equity Incentive Plan, the number of shares of our Common Stock to be issued is determined by dividing the eligible employee’s incentive payment value by the30-calendar day average closing price of our Common Stock during the period ending the day before the date of settlement. Under this methodology, the value of the shares of our Common Stock issued on the settlement date could differ from the incentive payment value accrued. Any shares of our Common Stock issued to settle incentive payments under this plan vest immediately upon issuance.

In thefirst quarter of fiscal2026, we settled a portion of the incentive compensation accrued during fiscal2025 by issuing shares of our Common Stock with a total value of $5.8 million to certain employees.

Note10 - Common Stock Repurchase Program

On* December 5, 2025,we announced that our Board of Directors had approved a stock repurchase program pursuant to which up to $250 million of outstanding common stock could be repurchased from time to time (the"2026* Repurchase Program"). The2026 Repurchase Program hasno termination date and* may*be suspended or discontinued at any time.

During thefirst quarter of fiscal2026, we repurchased 165,913 shares for $15.0 million, for an average price paid per share of $90.41, under the2026 Repurchase Program. All repurchases were open-market transactions funded from available working capital. All shares repurchased pursuant to the2026 Repurchase Program were retired upon settlement. As of* April 4, 2026*, the remaining portion of the amount authorized for the2026 Repurchase Program is $235.0 million.

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Note11 - Income Taxes

We are subject to federal and state income tax as well as income tax in the foreign jurisdictions in which we operate.

For thefirst quarter of fiscal2026 and2025, we recorded income tax expense of $5.4 million and $3.0 million, respectively. Income taxes for thethree-month period ended* April 4, 2026and March 29, 2025* represent tax at the federal, state, and foreign statutory tax rates in addition to federal tax credits, stock-based compensation and other non-deductible items in federal, state, and foreign jurisdictions. The difference between the U.S. federal statutory tax rate of 21% and our effective tax rates for thethree months ended* April 4, 2026* and thethree months ended* March 29, 2025* resulted primarily from stock-based compensation expense, partially offset by foreign rate differentials.

The portion of our uncertain tax positions (including penalties and interest) recorded as a liability was$2.1 million at both* April 4, 2026* and* January 3, 2026*, and is included as a component of Other long-term liabilities on our Consolidated Balance Sheets.

Note12 - Contingencies

Legal Proceedings

From time to time, we are exposed to certain additional asserted and unasserted potential claims. We review the status of each significant matter and assess its potential financial exposure. If the potential loss from any claim or legal proceeding is considered probable and a range of possible losses can be estimated, we then accrue a liability for the estimated loss. Legal proceedings are subject to uncertainties, and the outcomes are difficult to predict. Because of such uncertainties, accruals are based only on the best information available at the time. As additional information becomes available, we reassess the potential liability related to pending claims and litigation and* may*revise estimates.

Note13 - Segment Reporting

As of* April 4, 2026,*we have determined that the Company operates in asingle operating and reportable segment: the core Lattice business, which includes silicon-based and silicon-enabling products, evaluation boards, development hardware, and related intellectual property licensing, services, and sales.

The following table sets forth the Company’s revenue, significant expenses, and net income by its single operating and reportable segment:

Note14 - Subsequent Event

On* May 4, 2026,the Company, certain of its wholly owned subsidiaries, AMI TopCo, Inc. (“AMI”) and THL AMI Aggregator, LP (solely in its capacity as the representative of securityholders of AMI) entered into an Agreement and Plan of Merger (the “Merger Agreement”). The Merger Agreement provides, among other things, that on the terms and subject to the conditions set forth therein, the Company will acquire AMI on a cash-free/debt-free basis (the “Acquisition”) for total consideration of$1 billion in cash and $650 million in the Company’s common stock, subject to customary adjustments set forth in the Merger Agreement. Pursuant to the Merger Agreement, the number of shares of the Company's common stock adjusts based on the trading price of the Company’s common stock prior to the completion of the Acquisition, subject to a minimum of approximately 5.2 million shares and a maximum of approximately 6.1 million shares, which includes certain Company equity awards to be granted to AMI employees with an estimated aggregate value of approximately $57.3 million based on the closing price of the Company’s common stock as of May 1, 2026of $120.96. In connection with entering into the Merger Agreement, the Company entered into a commitment letter (the “Commitment Letter”), dated as of May 4, 2026,with Wells Fargo Bank, N.A., Wells Fargo Securities, LLC and Morgan Stanley Senior Funding, Inc. (the “Commitment Parties”), pursuant to which, subject to the terms and conditions set forth therein, the Commitment Parties have committed to provide a senior secured 364-day term loan facility in an aggregate principal amount of up to $950.0 million and a senior secured revolving credit facility in an aggregate principal amount of up to $200.0 million. The foregoing description of the Merger Agreement, the Commitment Letter, and the transactions contemplated thereby doesnot* purport to be complete and is subject to, and qualified in its entirety by reference to, the full text of the Merger Agreement and the Commitment Letter, copies of which will be filed as exhibits to the Company’s Quarterly Report on Form10-Q for the fiscal quarter ending* July 4, 2026.*

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