The News: Lattice Semiconductor (LSCC) came out with quarterly earnings of $0.37 per share, beating the Zacks Consensus Estimate of $0.33 per share. This compares to earnings of $0.22 per share a year ago. These figures are adjusted for non-recurring items.
This quarterly report represents an earnings surprise of 12.12%. A quarter ago, it was expected that this chipmaker would post earnings of $0.27 per share when it actually produced earnings of $0.32, delivering a surprise of 18.52%.
Over the last four quarters, the company has surpassed consensus EPS estimates four times.
- Revenue increases 30% compared to Q1 2021 and 6% compared to Q4 2021
- Gross Margin expands to 66.9% / 67.7% for Q1 2022 on a GAAP / Non-GAAP basis, compared to 61.0% / 61.7%, respectively, for Q1 2021
- Net Income improves to $0.26 / $0.37 per diluted share for Q1 2022 on a GAAP / Non-GAAP basis, compared to $0.13 / $0.22, respectively, for Q1 2021
Analyst Take: The strong quarter for fabless chip makers continued with Lattice Semiconductor reporting its fiscal Q1 with an outsized result that included a beat and raise across the board.
While much of the market has grown wary of tech, this quarter’s results have continued to indicate strong demand for semiconductors and slight improvements in managing the supply chain from semi companies–Lattice being a great example of said execution.
Over the several quarters, we have been watching Lattice continue to outperform market expectations on strong semiconductor demand with its strategic focus on low-power FPGAs which address several key markets including 5G, Automotive, Industrial IoT, Client, and more.
The company is scaling its business through the continued development and diversification of its Nexus Platform, which launched in 2019, and now houses three device families to address its market segments. The focal point of its products includes low-power and faster performance.
The company has also seen material impacts through moving its revenue upstream to mid-tier FPGAs as well as through strategic partnerships.
Robust Growth in Key Business Segments
Lattice breaks its revenue down into two key segments. The first is communications and computing, and the second is industrial and automotive. Both areas are rapidly growing, and both segments have been impacted by the global supply chain issues (more below).
The communications and computing segment saw 27% YoY and 4% sequential growth. The company pointed to the growth in data center servers, client computing, and 5G infrastructure as the strength in this segment. Lattice is increasingly finding its FPGAs designed alongside general purpose CPUs and SOCs from the major client and datacenter chipmakers including AMD and Intel. Lattice FPGAs are found in countless designs and are used frequently as sidecars or as low-cost chips that are found in computers, mobile devices, and servers. The company also saw its recent partnership with Lenovo for its ThinkPad X1 hit store shelves this quarter, which should ramp to greater revenue over the next several quarters.
In the Automotive and Industrial space, the company saw an even more impressive 40% YoY with 16% sequential growth. With the growing demand for intelligent manufacturing, including the advent of the metaverse, which is a key trend for manufacturing.
The automotive market and its need for vast semiconductors continue to show an upward trajectory. With the number of semiconductors in every vehicle continuing to edge upwards, we believe this segment will continue to deliver results for Lattice. Furthermore, we see more significant investment in everything from more intelligence in rising ADAS levels, infotainment, telematics, and traditional/legacy sensing equipment in the automotive space.
Supply Chain Well Managed
With Semiconductors facing shortages in the supply chain, it would be reasonable to think Lattice could run into a slowdown, but the company’s earnings call indicated that the operations team has this well managed and seems to be in an excellent position to manage demand through the sustained shortage. This resiliency includes inventory levels that exceeded the previous quarter. Supply chain is an area to pay attention to for just about all companies right now, but based upon recent management of its supply chain it doesn’t present an area that should worry investors at this juncture.
Overall Impressions of Lattice Semiconductor Earnings
Lattice continues to perform well and has carved out an important niche in the low-power FPGA space. Its focus and continued product innovation are enabling sustained growth and differentiation even with tougher macroeconomic conditions looming.
The YoY increase coincides with the growing demand in its key areas, including 5G, Computing, Automotive, and IoT. The trajectory has proven to be durable over the past several quarters and the raised guidance should only give greater confidence the company has a handle on its business and short to mid-term growth trajectory.
Disclosure: Futurum Research is a research and advisory firm that engages or has engaged in research, analysis, and advisory services with many technology companies, including those mentioned in this article. The author does not hold any equity positions with any company mentioned in this article.
Analysis and opinions expressed herein are specific to the analyst individually and data and other information that might have been provided for validation, not those of Futurum Research as a whole.
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The original version of this article was first published on Futurum Research.
Daniel Newman is the Principal Analyst of Futurum Research and the CEO of Broadsuite Media Group. Living his life at the intersection of people and technology, Daniel works with the world’s largest technology brands exploring Digital Transformation and how it is influencing the enterprise. From Big Data to IoT to Cloud Computing, Newman makes the connections between business, people and tech that are required for companies to benefit most from their technology projects, which leads to his ideas regularly being cited in CIO.Com, CIO Review and hundreds of other sites across the world. A 5x Best Selling Author including his most recent “Building Dragons: Digital Transformation in the Experience Economy,” Daniel is also a Forbes, Entrepreneur and Huffington Post Contributor. MBA and Graduate Adjunct Professor, Daniel Newman is a Chicago Native and his speaking takes him around the world each year as he shares his vision of the role technology will play in our future.