Lattice Semiconductor (NASDAQ: $LSCC) is a manufacturer of programmable logic devices based in Hillsboro, Oregon. Founded in 1983, Lattice designs and sells low-power field-programmable gate arrays (FPGAs) and related semiconductors for communications, computing, consumer, industrial, automotive and other applications. Its chips and solutions aim to help customers implement designs and bring products to market faster.
Lattice Semiconductor Corporation reported its fourth quarter and full year 2023 results on Monday, February 12, 2024, showing declines in revenue and income but strong margins.
Fourth Quarter Results
Lattice’s revenue for the fourth quarter declined 3% year-over-year to $170.6 million. On a sequential basis, revenue fell 11% from the third quarter. The company’s GAAP gross margin was 69.7% in the fourth quarter, up from 69.4% in the year-ago period. Its adjusted gross margin rose 40 basis points to 70.4%.
On the bottom line, Lattice posted a GAAP net income of $98.7 million or $0.71 per diluted share, representing increases of 90% and 34%, respectively, from the prior-year quarter. However, excluding one-time items, net income was $62.8 million or $0.45 per share on a non-GAAP basis – down 8% year-over-year. Fourth quarter revenue was below analysts’ estimates of $176.5 million, while adjusted EPS met analysts’ estimates of $0.45.
“We achieved double-digit annual revenue growth in 2023, with record gross margin and continued profit expansion,” said Lattice President and CEO Jim Anderson.
He added, “Despite near-term cyclical industry headwinds, we continue to be well positioned for the long-term with a rapidly expanding product portfolio and strong customer momentum.”
Lattice Semiconductor Full Year Results
For the full year 2023, Lattice’s revenue climbed 12% to $737.2 million, driven by growth in the communications, computing, industrial and automotive end markets. GAAP net income surged 45% to $259.1 million or $1.85 per diluted share. Excluding one-time items, full-year non-GAAP net income increased 14% to $280.7 million or $2.01 per share.
The company saw robust margin expansion in 2023, with non-GAAP gross margin up 130 basis points to 70.4% and non-GAAP operating margin rising to 39.8%, a new record.
Share Repurchases and Cash Flow
During the fourth quarter, Lattice repurchased approximately 900,000 shares, the thirteenth consecutive quarterly repurchase of shares during which the company has bought back around 4.8 million shares.
The company returned $80 million to shareholders for the full year, a drop from the $110.13 million in share repurchases in FY22. Lattice revealed an expansion of its share repurchase program to an extra $250 million of outstanding common stock, with a December 2024 expiry date.
It generated an operating cash flow of $269.6 million in 2023 and ended the year debt-free with cash and cash equivalents of $128.3 million on its balance sheet.
Business Outlook
For the first quarter of 2024, Lattice forecast revenues of $130 million to $150 million, a 24% Y/Y decline and below estimates of $174.4 million at the midpoint. Its non-GAAP gross margin is projected to be approximately 69% plus or minus 1%.
“Despite near-term cyclical industry headwinds, we continue to be well positioned for the long-term with a rapidly expanding product portfolio and strong customer momentum,” CEO Anderson reiterated.
Lattice Semiconductor Stock Performance
LSCC stock has been on an upward trend, as evidenced by the performance of the company on the Nasdaq stock exchange on Monday, February 12, 2024. Lattice stock closed at $71.00 per share, gaining $1.26 or 1.81% during the trading session. During the afternoon trading session on Tuesday, February 13, 2024, Lattice stock was up 5.30% at $74.76 per share as of 12:13 PM EST.
Lattice stock’s upswing is expected to continue in 2024 despite the market challenges. The stock has also gained massively from its 52-week low of $51.96, which it recorded in late 2023. However, it is trading at a discount to its 52-week high of $98.30. Lattice’s latest earnings report highlights the company’s resilience in the long run.
Thoughts Going Forward
In spite of a broad range of macroeconomic uncertainties, Lattice Semiconductor is well-positioned to sail through unscathed and grow sustainably in the long term. The company is riding the wave of increasing 5G infrastructure and electric vehicle adoption, where its space and power-efficient FPGAs enable higher efficiency and speed. Importantly, the company’s growth into Industrial and Automotive higher-margin markets provides it with revenue diversification.
In addition, Lattice’s relentless investment in research and development, plus the new product launches, ensures that it will remain at the edge of innovation for the foreseeable future. If the demand from end consumers stabilizes in 2024 and inflation eases, Lattice will be in a position to experience double-digit top and bottom-line growth. Its strong cash position offers it ample room to finance organic growth.
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