|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
|
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE QUARTERLY PERIOD ENDED
OR
|
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE TRANSITION PERIOD FROM __________ TO __________
Commission file number
LATTICE SEMICONDUCTOR CORPORATION
(Exact name of Registrant as specified in its charter)
|
State of
|
|
|
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
|
|
|
|
|
|
|
(Address of principal executive offices) |
(Zip Code) |
(
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
|
Title of each class |
Trading Symbol |
Name of each exchange on which registered |
|
|
|
|
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
|
|
Accelerated filer ☐ |
|
Non-accelerated filer ☐ |
Smaller reporting company
|
|
|
Emerging growth company
|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
| Number of shares of common stock outstanding as of October 27, 2022 |
|
LATTICE SEMICONDUCTOR CORPORATION
QUARTERLY REPORT ON FORM 10-Q
|
|
||
|
|
|
|
|
PART I. |
FINANCIAL INFORMATION |
Page |
|
|
|
|
|
Item 1. |
||
|
|
|
|
|
|
||
|
|
|
|
|
|
||
|
|
|
|
|
|
Consolidated Balance Sheets – October 1, 2022 and January 1, 2022 (unaudited) |
|
|
|
|
|
|
|
||
|
|
|
|
|
|
||
|
|
|
|
|
|
||
|
|
|
|
|
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
|
|
|
|
|
|
Item 3. |
||
|
|
|
|
|
Item 4. |
||
|
|
|
|
|
|
|
|
|
PART II. |
OTHER INFORMATION |
|
|
|
|
|
|
Item 1. |
||
|
|
|
|
| Item 1A. | Risk Factors | 26 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 26 |
|
Item 6. |
||
|
|
|
|
|
|
Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements that involve estimates, assumptions, risks, and uncertainties. Any statements about our expectations, beliefs, plans, objectives, assumptions, or future events or performance are not historical facts and may be forward-looking. We use words or phrases such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “plan,” "possible," “predict,” “projects,” “may,” “will,” “should,” “continue,” “ongoing,” “future,” “potential,” and similar words or phrases to identify forward-looking statements.
Forward-looking statements include, but are not limited to, statements about: our target or expected financial performance and our ability to achieve those results; future impacts of the ongoing COVID-19 pandemic, including as a result of actions by governments, businesses, and individuals in response to the situation, on consumer, industrial, labor, and financial markets, our business operations, supply chain and partners, financial performance, results of operations, financial position, and the achievement of our strategic objectives; future impacts of the military conflict between Ukraine and Russia; the impact of any continuing trade or travel restrictions on the export and import of products between the U.S. and China; our opportunities to increase our addressable market; our expectations and strategies regarding market trends and opportunities, including market segment drivers such as 5G infrastructure deployments, cloud and enterprise servers, client computing platforms, industrial Internet of Things, factory automation, automotive electronics, smart homes and prosumers; our expectations regarding our customer base; our expectations regarding product offerings; our gross margin growth and our strategies to achieve gross margin growth and other financial results; our future investments in research and development, and our research and development expense efficiency; future financial results or accounting treatments; our judgments involved in accounting matters, including revenue recognition, inventories and cost of revenue, and income taxes; actions we may take regarding the design and continued effectiveness of our internal controls over financial reporting; our use of cash; our beliefs regarding the adequacy of our liquidity, capital resources and facilities; whether we will consider and act upon acquisition opportunities to extend our product, technology and product offerings; the expected costs of our restructuring plans; our expectations regarding taxes, including unrecognized tax benefits, and tax adjustments and allowances; whether we will pursue future stock repurchases and how any future repurchases will be funded; our ability to prevent and respond to information technology system failures, security breaches and incidents, cyber-attacks or fraud; the impact of laws and regulations addressing privacy, data protection, and cybersecurity and our ability to comply with the same; and our beliefs regarding legal proceedings.
These forward-looking statements are based on estimates and assumptions that are subject to risks and uncertainties that could cause actual results to differ materially from those statements expressed in the forward-looking statements. The key factors, among others, that could cause our actual results to differ materially from the forward-looking statements include the effects of the ongoing COVID-19 pandemic and the actions by governments, businesses, and individuals in response to the situation, the effects of which may give rise to or amplify the risks associated with many of these factors listed here; global economic conditions and uncertainty; and other factors more fully described herein or that are otherwise described from time to time in our filings with the Securities and Exchange Commission ("SEC"), including, but not limited to, the items discussed in Part I, Item 1A, “Risk Factors,” in our Annual Report on Form 10-K for the fiscal year ended January 1, 2022 filed with the SEC on February 23, 2022 and any additional or updated risk factors discussed in any subsequent Quarterly Report on Form 10-Q filed since that date.
You should not unduly rely on forward-looking statements because our actual results could differ materially from those e xpressed by us. In addition, any forward-looking statem ent applies only as of the date of this filing. We do not plan to, and undertake no obligation to, update any forward-looking statements to reflect new information or new events, circumstances or developments, or otherwise.
PART I. FINANCIAL INFORMATION
LATTICE SEMICONDUCTOR CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
|
Three Months Ended |
Nine Months Ended |
|||||||||||||||
|
October 1, |
October 2, |
October 1, |
October 2, |
|||||||||||||
|
(In thousands, except per share data) |
2022 |
2021 |
2022 |
2021 |
||||||||||||
|
Revenue |
$ |
|
$ |
|
$ |
|
$ |
|
||||||||
|
Cost of revenue |
|
|
|
|
||||||||||||
|
Gross margin |
|
|
|
|
||||||||||||
|
Operating expenses: |
||||||||||||||||
|
Research and development |
|
|
|
|
||||||||||||
|
Selling, general, and administrative |
|
|
|
|
||||||||||||
|
Amortization of acquired intangible assets |
|
|
|
|
||||||||||||
|
Restructuring charges |
|
|
|
|
||||||||||||
|
Acquisition related charges |
|
|
|
|
||||||||||||
|
Total operating expenses |
|
|
|
|
||||||||||||
|
Income from operations |
|
|
|
|
||||||||||||
|
Interest expense |
(
|
) |
(
|
) |
(
|
) |
(
|
) | ||||||||
|
Other (expense) income, net |
(
|
) |
(
|
) |
(
|
) |
(
|
) | ||||||||
|
Income before income taxes |
|
|
|
|
||||||||||||
|
Income tax expense (benefit) |
|
(
|
) |
|
|
|||||||||||
|
Net income |
$ |
|
$ |
|
$ |
|
$ |
|
||||||||
|
Net income per share: |
||||||||||||||||
|
Basic |
$ |
|
$ |
|
$ |
|
$ |
|
||||||||
|
Diluted |
$ |
|
$ |
|
$ |
|
$ |
|
||||||||
|
Shares used in per share calculations: |
||||||||||||||||
|
Basic |
|
|
|
|
||||||||||||
|
Diluted |
|
|
|
|
||||||||||||
See Accompanying Notes to Unaudited Consolidated Financial Statements.
LATTICE SEMICONDUCTOR CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited)
|
Three Months Ended |
Nine Months Ended |
|||||||||||||||
|
October 1, |
October 2, |
October 1, |
October 2, |
|||||||||||||
|
(In thousands) |
2022 |
2021 |
2022 |
2021 |
||||||||||||
|
Net income |
$ |
|
$ |
|
$ |
|
$ |
|
||||||||
|
Other comprehensive income (loss): |
||||||||||||||||
|
Translation adjustment |
(
|
) |
(
|
) |
(
|
) |
(
|
) | ||||||||
|
Comprehensive income |
$ |
|
$ |
|
$ |
|
$ |
|
||||||||
See Accompanying Notes to Unaudited Consolidated Financial Statements.
LATTICE SEMICONDUCTOR CORPORATION
CONSOLIDATED BALANCE SHEETS
(unaudited)
|
October 1, |
January 1, |
|||||||
|
(In thousands, except share and par value data) |
2022 |
2022 |
||||||
|
ASSETS |
||||||||
|
Current assets: |
||||||||
|
Cash and cash equivalents |
$ |
|
$ |
|
||||
|
Accounts receivable, net of allowance for credit losses |
|
|
||||||
|
Inventories, net |
|
|
||||||
|
Prepaid expenses and other current assets |
|
|
||||||
|
Total current assets |
|
|
||||||
|
Property and equipment, less accumulated depreciation of $ at October 1, 2022 and $ at January 1, 2022 |
|
|
||||||
|
Operating lease right-of-use assets |
|
|
||||||
|
Intangible assets, net |
|
|
||||||
|
Goodwill |
|
|
||||||
|
Other long-term assets |
|
|
||||||
|
Total assets |
$ |
|
$ |
|
||||
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
||||||||
|
Current liabilities: |
||||||||
|
Accounts payable |
$ |
|
$ |
|
||||
|
Accrued expenses |
|
|
||||||
|
Accrued payroll obligations |
|
|
||||||
|
Current portion of long-term debt |
|
|
||||||
|
Total current liabilities |
|
|
||||||
|
Long-term debt, net of current portion |
|
|
||||||
|
Long-term operating lease liabilities, net of current portion |
|
|
||||||
|
Other long-term liabilities |
|
|
||||||
|
Total liabilities |
|
|
||||||
|
Contingencies (Note 12) |
||||||||
|
Stockholders' equity: |
||||||||
|
Preferred stock, $ par value, shares authorized, issued and outstanding |
|
|
||||||
|
Common stock, $ par value, shares authorized; shares issued and outstanding as of October 1, 2022 and shares issued and outstanding as of January 1, 2022 |
|
|
||||||
|
Additional paid-in capital |
|
|
||||||
|
Accumulated deficit |
(
|
) |
(
|
) | ||||
|
Accumulated other comprehensive loss |
(
|
) |
(
|
) | ||||
|
Total stockholders' equity |
|
|
||||||
|
Total liabilities and stockholders' equity |
$ |
|
$ |
|
||||
See Accompanying Notes to Unaudited Consolidated Financial Statements.
LATTICE SEMICONDUCTOR CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
|
Nine Months Ended |
||||||||
|
October 1, |
October 2, |
|||||||
|
(In thousands) |
2022 |
2021 |
||||||
|
Cash flows from operating activities: |
||||||||
|
Net income |
$ |
|
$ |
|
||||
|
Adjustments to reconcile net income to net cash provided by (used in) operating activities: |
||||||||
|
Depreciation and amortization |
|
|
||||||
|
Stock-based compensation expense |
|
|
||||||
|
Amortization of right-of-use assets |
|
|
||||||
|
Impairment of operating lease right-of-use asset |
|
|
||||||
|
Other non-cash adjustments |
|
|
||||||
|
Changes in assets and liabilities: |
||||||||
|
Accounts receivable, net |
(
|
) |
(
|
) | ||||
|
Inventories, net |
(
|
) |
(
|
) | ||||
|
Prepaid expenses and other assets |
(
|
) |
(
|
) | ||||
|
Accounts payable |
|
|
||||||
|
Accrued expenses |
|
(
|
) | |||||
|
Accrued payroll obligations |
|
|
||||||
|
Operating lease liabilities, current and long-term portions |
(
|
) |
(
|
) | ||||
|
Net cash provided by (used in) operating activities |
|
|
||||||
|
Cash flows from investing activities: |
||||||||
|
Capital expenditures |
(
|
) |
(
|
) | ||||
|
Cash paid for software and intellectual property licenses |
(
|
) |
(
|
) | ||||
|
Net cash provided by (used in) investing activities |
(
|
) |
(
|
) | ||||
|
Cash flows from financing activities: |
||||||||
|
Restricted stock unit tax withholdings |
(
|
) |
(
|
) | ||||
|
Proceeds from issuance of common stock |
|
|
||||||
|
Repurchase of common stock |
(
|
) |
(
|
) | ||||
|
Proceeds from long-term debt, net of issuance costs |
|
|
||||||
|
Repayment of long-term debt |
(
|
) |
(
|
) | ||||
|
Net cash provided by (used in) financing activities |
(
|
) |
(
|
) | ||||
|
Effect of exchange rate change on cash |
(
|
) |
(
|
) | ||||
|
Net increase (decrease) in cash and cash equivalents |
(
|
) |
(
|
) | ||||
|
Beginning cash and cash equivalents |
|
|
||||||
|
Ending cash and cash equivalents |
$ |
|
$ |
|
||||
|
Supplemental disclosure of cash flow information and non-cash investing and financing activities: |
||||||||
|
Interest paid |
$ |
|
$ |
|
||||
|
Operating lease payments |
$ |
|
$ |
|
||||
|
Income taxes paid, net of refunds |
$ |
|
$ |
|
||||
|
Accrued purchases of plant and equipment |
$ |
|
$ |
|
||||
|
Operating lease right-of-use assets obtained in exchange for lease obligations |
$ |
|
$ |
|
||||
See Accompanying Notes to Unaudited Consolidated Financial Statements.
LATTICE SEMICONDUCTOR CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(unaudited)
The following summarizes the changes in total equity for the nine-month period ended October 1, 2022:
|
Common Stock ($.01 par value) |
Additional Paid-in |
Accumulated |
Accumulated Other Comprehensive |
|||||||||||||||||||||
|
(In thousands, except par value data) |
Shares |
Amount |
Capital |
Deficit |
Loss |
Total |
||||||||||||||||||
|
Balances, January 1, 2022 |
|
$ |
|
$ |
|
$ |
(
|
) | $ |
(
|
) | $ |
|
|||||||||||
|
Components of comprehensive income, net of tax: |
||||||||||||||||||||||||
|
Net income for the nine months ended October 1, 2022 |
— |
|
|
|
|
|
||||||||||||||||||
|
Other comprehensive income (loss) |
— |
|
|
|
(
|
) |
(
|
) | ||||||||||||||||
|
Total comprehensive income |
|
|
|
|
|
|||||||||||||||||||
|
Common stock issued in connection with employee equity incentive plans, net of shares withheld for employee taxes |
|
|
(
|
) |
|
|
(
|
) | ||||||||||||||||
|
Stock-based compensation expense |
— |
|
|
|
|
|
||||||||||||||||||
|
Repurchase of common stock |
(
|
) |
(
|
) |
(
|
) |
|
|
(
|
) | ||||||||||||||
|
Balances, October 1, 2022 |
|
$ |
|
$ |
|
$ |
(
|
) | $ |
(
|
) | $ |
|
|||||||||||
The following summarizes the changes in total equity for the nine-month period ended October 2, 2021:
|
Common Stock ($.01 par value) |
Additional Paid-in |
Accumulated |
Accumulated Other Comprehensive |
|||||||||||||||||||||
|
(In thousands, except par value data) |
Shares |
Amount |
Capital |
Deficit |
Loss |
Total |
||||||||||||||||||
|
Balances, January 2, 2021 |
|
$ |
|
$ |
|
$ |
(
|
) | $ |
(
|
) | $ |
|
|||||||||||
|
Components of comprehensive income, net of tax: |
||||||||||||||||||||||||
|
Net income for the nine months ended October 2, 2021 |
— |
|
|
|
|
|
||||||||||||||||||
|
Other comprehensive income (loss) |
— |
|
|
|
(
|
) |
(
|
) | ||||||||||||||||
|
Total comprehensive income |
|
|
|
|
|
|||||||||||||||||||
|
Common stock issued in connection with employee equity incentive plans, net of shares withheld for employee taxes |
|
|
(
|
) |
|
|
(
|
) | ||||||||||||||||
|
Stock-based compensation expense |
— |
|
|
|
|
|
||||||||||||||||||
|
Repurchase of common stock |
(
|
) |
(
|
) |
(
|
) |
|
|
(
|
) | ||||||||||||||
|
Balances, October 2, 2021 |
|
$ |
|
$ |
|
$ |
(
|
) | $ |
(
|
) | $ |
|
|||||||||||
See Accompanying Notes to Unaudited Consolidated Financial Statements.
LATTICE SEMICONDUCTOR CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (continued)
(unaudited)
The following summarizes the changes in total equity for the three-month period ended October 1, 2022:
|
Common Stock ($.01 par value) |
Additional Paid-in |
Accumulated |
Accumulated Other Comprehensive |
|||||||||||||||||||||
|
(In thousands, except par value data) |
Shares |
Amount |
Capital |
Deficit |
Loss |
Total |
||||||||||||||||||
|
Balances, July 2, 2022 |
|
$ |
|
$ |
|
$ |
(
|
) | $ |
(
|
) | $ |
|
|||||||||||
|
Components of comprehensive income, net of tax: |
||||||||||||||||||||||||
|
Net income for the three months ended October 1, 2022 |
— |
|
|
|
|
|
||||||||||||||||||
|
Other comprehensive income (loss) |
— |
|
|
|
(
|
) |
(
|
) | ||||||||||||||||
|
Total comprehensive income |
|
|
|
|
|
|||||||||||||||||||
|
Common stock issued in connection with employee equity incentive plans, net of shares withheld for employee taxes |
|
|
(
|
) |
|
|
(
|
) | ||||||||||||||||
|
Stock-based compensation expense |
— |
|
|
|
|
|
||||||||||||||||||
|
Repurchase of common stock |
(
|
) |
(
|
) |
(
|
) |
|
|
(
|
) | ||||||||||||||
|
Balances, October 1, 2022 |
|
$ |
|
$ |
|
$ |
(
|
) | $ |
(
|
) | $ |
|
|||||||||||
The following summarizes the changes in total equity for the three-month period ended October 2, 2021:
|
Common Stock ($.01 par value) |
Additional Paid-in |
Accumulated |
Accumulated Other Comprehensive |
|||||||||||||||||||||
|
(In thousands, except par value data) |
Shares |
Amount |
Capital |
Deficit |
Loss |
Total |
||||||||||||||||||
|
Balances, July 3, 2021 |
|
$ |
|
$ |
|
$ |
(
|
) | $ |
(
|
) | $ |
|
|||||||||||
|
Components of comprehensive income, net of tax: |
||||||||||||||||||||||||
|
Net income for the three months ended October 2, 2021 |
— |
|
|
|
|
|
||||||||||||||||||
|
Other comprehensive income (loss) |
— |
|
|
|
(
|
) |
(
|
) | ||||||||||||||||
|
Total comprehensive income |
|
|
|
|
|
|||||||||||||||||||
|
Common stock issued in connection with employee equity incentive plans, net of shares withheld for employee taxes |
|
|
(
|
) |
|
|
(
|
) | ||||||||||||||||
|
Stock-based compensation expense |
— |
|
|
|
|
|
||||||||||||||||||
|
Repurchase of common stock |
(
|
) |
(
|
) |
(
|
) |
|
|
(
|
) | ||||||||||||||
|
Balances, October 2, 2021 |
|
$ |
|
$ |
|
$ |
(
|
) | $ |
(
|
) | $ |
|
|||||||||||
See Accompanying Notes to Unaudited Consolidated Financial Statements.
LATTICE SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 1 - 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 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 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 Form 10 -K for the year ended January 1, 2022 (" 2021 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 our 2021 10 -K. There have been no changes to the significant accounting policies, procedures, or general information described in our 2021 10 -K that have had a material impact on our consolidated financial statements and related notes. The purchase price allocation for our acquisition of Mirametrix, Inc. in November 2021 has been substantially completed, but may be subject to revision as we perform and complete more detailed analysis of certain tax matters. Certain prior year balances have been reclassified to conform to the current year’s presentation.
Fiscal Reporting Periods
We report based on a 52 or 53 -week fiscal year ending on the Saturday closest to December 31. Our fiscal 2022 will be a 52 -week year and will end on December 31, 2022, and our fiscal 2021 was a 52 -week year that ended January 1, 2022. Our third quarter of fiscal 2022 and third quarter of fiscal 2021 ended on October 1, 2022 and October 2, 2021 , respectively. All references to quarterly financial results are references to the results for the relevant 13 -week or 39 -week fiscal period.
Concentrations of Risk
Potential exposure to concentrations of risk
may
impact 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
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 "Note 9 - Stock-Based Compensation" to our consolidated financial statements for further discussion of our equity awards with market conditions or performance conditions.
A summary of basic and diluted Net income per share is presented in the following table:
|
Three Months Ended |
Nine Months Ended |
|||||||||||||||
|
October 1, |
October 2, |
October 1, |
October 2, |
|||||||||||||
|
(in thousands, except per share data) |
2022 |
2021 |
2022 |
2021 |
||||||||||||
|
Net income |
$ |
|
$ |
|
$ |
|
$ |
|
||||||||
|
Shares used in basic Net income per share |
|
|
|
|
||||||||||||
|
Dilutive effect of stock options, RSUs, ESPP shares, and equity awards with a market condition or performance condition |
|
|
|
|
||||||||||||
|
Shares used in diluted Net income per share |
|
|
|
|
||||||||||||
|
Basic Net income per share |
$ |
|
$ |
|
$ |
|
$ |
|
||||||||
|
Diluted Net income per share |
$ |
|
$ |
|
$ |
|
$ |
|
||||||||
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:
|
Three Months Ended |
Nine Months Ended |
|||||||||||||||
|
October 1, |
October 2, |
October 1, |
October 2, |
|||||||||||||
|
(in thousands) |
2022 |
2021 |
2022 |
2021 |
||||||||||||
|
Stock options, RSUs, ESPP shares, and equity awards with a market condition or performance condition excluded as they are antidilutive |
|
|
|
|
||||||||||||
Note 3 - Revenue from Contracts with Customers
Disaggregation of revenue
The following tables provide information about revenue from contracts with customers disaggregated by major class of revenue, revenue by channel, and by geographical market, based on ship-to location of the customer :
|
Three Months Ended |
Nine Months Ended |
|||||||||||||||||||||||||||||||
|
Revenue by Channel |
October 1, |
October 2, |
October 1, |
October 2, |
||||||||||||||||||||||||||||
|
(In thousands) |
2022 |
2021 |
2022 |
2021 |
||||||||||||||||||||||||||||
|
Product revenue - Distributors |
$ |
|
|
% | $ |
|
|
% | $ |
|
|
% | $ |
|
|
% | ||||||||||||||||
|
Product revenue - Direct |
|
|
% |
|
|
% |
|
|
% |
|
|
% | ||||||||||||||||||||
|
Licensing and services |
|
|
% |
|
|
% |
|
|
% |
|
|
% | ||||||||||||||||||||
|
Total revenue |
$ |
|
|
% | $ |
|
|
% | $ |
|
|
% | $ |
|
|
% | ||||||||||||||||
|
Revenue by Geographical Market |
||||||||||||||||||||||||||||||||
|
(In thousands) |
||||||||||||||||||||||||||||||||
|
United States |
$ |
|
|
% | $ |
|
|
% | $ |
|
|
% | $ |
|
|
% | ||||||||||||||||
|
Other Americas |
|
|
% |
|
|
% |
|
|
% |
|
|
% | ||||||||||||||||||||
|
Americas |
|
|
% |
|
|
% |
|
|
% |
|
|
% | ||||||||||||||||||||
|
China |
|
|
% |
|
|
% |
|
|
% |
|
|
% | ||||||||||||||||||||
|
Japan |
|
|
% |
|
|
% |
|
|
% |
|
|
% | ||||||||||||||||||||
|
Other Asia |
|
|
% |
|
|
% |
|
|
% |
|
|
% | ||||||||||||||||||||
|
Asia |
|
|
% |
|
|
% |
|
|
% |
|
|
% | ||||||||||||||||||||
|
Europe |
|
|
% |
|
|
% |
|
|
% |
|
|
% | ||||||||||||||||||||
|
Total revenue |
$ |
|
|
% | $ |
|
|
% | $ |
|
|
% | $ |
|
|
% | ||||||||||||||||
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 has not yet been collected from the customers of 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 the first nine months of fiscal 2022 :
|
(In thousands) |
||||
|
Contract assets as of Year Ended January 1, 2022 |
$ |
|
||
|
Revenues recorded during the period |
|
|||
|
Transferred to Accounts receivable or collected |
(
|
) | ||
|
Contract assets as of October 1, 2022 |
$ |
|
Contract liabilities are included in Accrued expenses on our Consolidated Balance Sheets. The following table summarizes activity during the first nine months of fiscal 2022 :
|
(In thousands) |
||||
|
Contract liabilities as of Year Ended January 1, 2022 |
$ |
|
||
|
Accruals for estimated future stock rotation and scrap returns |
|
|||
|
Less: Release of accruals for recognized stock rotation and scrap returns |
(
|
) | ||
|
Contract liabilities as of October 1, 2022 |
$ |
|
Note 4 - Balance Sheet Components
Accounts Receivable
Accounts receivable do not 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 our 2021 10 -K.
| October 1, | January 1, | |||||||
|
(In thousands) |
2022 |
2022 |
||||||
|
Accounts receivable |
$ |
|
$ |
|
||||
|
Less: Allowance for credit losses |
|
|
||||||
|
Accounts receivable, net of allowance for credit losses |
$ |
|
$ |
|
||||
Inventories
| October 1, | January 1, | |||||||
|
(In thousands) |
2022 |
2022 |
||||||
|
Work in progress |
$ |
|
$ |
|
||||
|
Finished goods |
|
|
||||||
|
Total inventories, net |
$ |
|
$ |
|
||||
Accrued Expenses
Included in Accrued expenses in the Consolidated Balance Sheets are the following balances:
|
October 1, |
January 1, |
|||||||
|
(In thousands) |
2022 |
2022 |
||||||
|
Liability for non-cancelable contracts |
$ |
|
$ |
|
||||
|
Current portion of operating lease liabilities |
|
|
||||||
|
Contract liability under ASC 606 |
|
|
||||||
|
Taxes payable |
|
|
||||||
|
Other accrued expenses |
|
|
||||||
|
Total accrued expenses |
$ |
|
$ |
|
||||
Property and Equipment – Geographic Information
Our Property and equipment, net by country at the end of each period was as follows:
| October 1, | January 1, | |||||||
|
(In thousands) |
2022 |
2022 |
||||||
|
United States |
$ |
|
$ |
|
||||
|
Taiwan |
|
|
||||||
|
Philippines |
|
|
||||||
|
China |
|
|
||||||
|
Other |
|
|
||||||
|
Total foreign property and equipment, net |
|
|
||||||
|
Total property and equipment, net |
$ |
|
$ |
|
||||
Cloud Based Computing Implementation Costs
We capitalize the implementation costs for cloud computing arrangements, which are recorded in Prepaid expenses and other current assets and Other long-term assets on our Consolidated Balance Sheets. The following table summarizes activity during the first nine months of fiscal 2022 :
|
(In thousands) |
||||
|
Cloud based computing implementation costs as of January 1, 2022 |
$ |
|
||
|
Costs capitalized |
|
|||
|
Amortization |
(
|
) | ||
|
Cloud based computing implementation costs as of October 1, 2022 |
$ |
|
On
September 1, 2022,
we entered into an Amended and Restated Credit Agreement (the
“2022
Credit Agreement”), which provides for a
-year secured revolving loan facility with an aggregate principal amount of up to $
We drew down an initial $
At our option, the revolving loans accrue interest at a per annum rate based on ranges determined by our consolidated total leverage ratio of either (i) the base rate (as defined in the
2022
Credit Agreement) plus a margin ranging from
With the amendment of our
2019
Credit Agreement pursuant to the
2022
Credit Agreement, we capitalized $
The revolving loans under the
2022
Credit Agreement
may
be 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.
During the
first
six
months of fiscal
2022
, we paid required quarterly installments totaling $
The fair value of our long-term debt approximates the carrying value, which is reflected in our Consolidated Balance Sheets as follows:
| October 1, | January 1, | |||||||
|
(In thousands) |
2022 |
2022 |
||||||
|
Principal amount |
$ |
|
$ |
|
||||
|
Unamortized original issuance discount and debt costs |
(
|
) |
(
|
) | ||||
|
Less: Current portion of long-term debt |
|
(
|
) | |||||
|
Long-term debt, net of current portion and unamortized debt issue costs |
$ |
|
$ |
|
||||
As of
October 1, 2022
, the effective interest rate
on the revolving loan was
|
Three Months Ended |
Nine Months Ended |
|||||||||||||||
|
October 1, |
October 2, |
October 1, |
October 2, |
|||||||||||||
|
(In thousands) |
2022 |
2021 |
2022 |
2021 |
||||||||||||
|
Contractual interest |
$ |
|
$ |
|
$ |
|
$ |
|
||||||||
|
Amortization of original issuance discount and debt costs |
|
|
|
|
||||||||||||
|
Total interest expense related to long-term debt |
$ |
|
$ |
|
$ |
|
$ |
|
||||||||
In
September 2022,
our management approved and implemented additional contract cancellations and headcount reductions under the
Q2
2019
Sales Plan, which focused on a restructuring of the global sales organization. With these actions, we incurred approximately $
Under the
June 2017
Plan, which is described in the
2021
10
-K, we incurred approximately $
These expenses were recorded to Restructuring charges on our Consolidated Statements of Operations. The restructuring accrual balance is presented in Accrued expenses and in Other long-term liabilities on our Consolidated Balance Sheets. The following table displays the activity related to our restructuring plans:
|
(In thousands) |
Severance & Related (1) |
Lease Termination & Fixed Assets |
Other (2) |
Total |
||||||||||||
|
Accrued Restructuring at January 1, 2022 |
$ |
|
$ |
|
$ |
|
$ |
|
||||||||
|
Restructuring charges |
|
|
|
|
||||||||||||
|
Costs paid or otherwise settled |
(
|
) |
(
|
) |
|
(
|
) | |||||||||
|
Accrued Restructuring at October 1, 2022 |
$ |
|
$ |
|
$ |
|
$ |
|
||||||||
|
Accrued Restructuring at January 2, 2021 |
$ |
|
$ |
|
$ |
|
$ |
|
||||||||
|
Restructuring charges |
|
|
|
|
||||||||||||
|
Costs paid or otherwise settled |
(
|
) |
(
|
) |
(
|
) |
(
|
) | ||||||||
|
Accrued Restructuring at October 2, 2021 |
$ |
|
$ |
|
$ |
|
$ |
|
||||||||
|
( 1 ) |
Includes employee relocation and outplacement costs |
|||||||||||||||||||
|
( 2 ) |
Includes termination fees on the cancellation of certain contracts |
|||||||||||||||||||
We have operating leases for corporate offices, sales offices, research and development facilities, storage facilities, and a data center, the terms of which are described in our
2021
10
-K. All of our facilities are leased under operating leases, which expire at various times through
2028,
with a weighted-average remaining lease term of
We recorded fixed operating lease expenses of $
The following table presents the lease balance classifications within the Consolidated Balance Sheets and summarizes their activity during the first nine months of fiscal 2022 :
|
Operating lease right-of-use assets |
(in thousands) |
|||
|
Balance as of January 1, 2022 |
$ |
|
||
|
Right-of-use assets obtained for new lease contracts during the period |
|
|||
|
Amortization of right-of-use assets during the period |
(
|
) | ||
|
Impairment of right-of use asset during the period (recorded in Restructuring charges) |
(
|
) | ||
|
Adjustments for present value and foreign currency effects |
(
|
) | ||
|
Balance as of October 1, 2022 |
$ |
|
||
|
Operating lease liabilities |
(in thousands) |
|||
|
Balance as of January 1, 2022 |
$ |
|
||
|
Lease liabilities incurred for new lease contracts during the period |
|
|||
|
Accretion of lease liabilities |
|
|||
|
Operating cash used by payments on lease liabilities |
(
|
) | ||
|
Adjustments for present value and foreign currency effects |
(
|
) | ||
|
Balance as of October 1, 2022 |
|
|||
|
Less: Current portion of operating lease liabilities (included in Accrued expenses) |
(
|
) | ||
|
Long-term operating lease liabilities, net of current portion |
$ |
|
||
Maturities of operating lease liabilities as of October 1, 2022 are as follows:
|
Fiscal year |
(in thousands) |
|||
|
2022 (Remaining quarter) |
|
|||
|
2023 |
|
|||
|
2024 |
|
|||
|
2025 |
|
|||
|
2026 |
|
|||
|
Thereafter |
|
|||
|
Total lease payments |
|
|||
|
Less: amount representing interest |
(
|
) | ||
|
Total lease liabilities |
$ |
|
||
Lease obligations for facilities restructured prior to the adoption of Topic
842
totaled approximately
$
In connection with our acquisition of Mirametrix, Inc. in
November 2021,
we recorded identifiable intangible assets during fiscal year
2021.
On our Consolidated Balance Sheets at
October 1, 2022
and
January 1, 2022,
Intangible assets, net are shown net of accumulated amortization of
$
We recorded amortization expense related to intangible assets on the Consolidated Statements of Operations as presented in the following table:
|
Three Months Ended |
Nine Months Ended |
|||||||||||||||
|
October 1, |
October 2, |
October 1, |
October 2, |
|||||||||||||
|
(In thousands) |
2022 |
2021 |
2022 |
2021 |
||||||||||||
|
Research and development |
$ |
|
$ |
|
$ |
|
$ |
|
||||||||
|
Amortization of acquired intangible assets |
|
|
|
|
||||||||||||
| $ |
|
$ |
|
$ |
|
$ |
|
|||||||||
Note 9 - Stock-Based Compensa tion
Total stock-based compensation expense included in our Consolidated Statements of Operations is presented in the following table:
|
Three Months Ended |
Nine Months Ended |
|||||||||||||||
|
October 1, |
October 2, |
October 1, |
October 2, |
|||||||||||||
|
(In thousands) |
2022 |
2021 |
2022 |
2021 |
||||||||||||
|
Cost of revenue |
$ |
|
$ |
|
$ |
|
$ |
|
||||||||
|
Research and development |
|
|
|
|
||||||||||||
|
Selling, general, and administrative |
|
|
|
|
||||||||||||
|
Total stock-based compensation |
$ |
|
$ |
|
$ |
|
$ |
|
||||||||
Market-Based and Performance-Based Stock Compensation
In the
first
quarter of fiscal
2022,
we granted awards of RSUs with a market condition to certain executives. Under the terms of these grants, the RSUs with a market condition vest over a
-year period based on the Company’s total shareholder return ("TSR") relative to the Russell
2000
index, which condition is measured for the grants on the
third
anniversary of the grant date. The awards
may
vest at
In the
first
nine
months of fiscal
2022,
certain awards with a market condition or performance condition granted in prior fiscal years have vested. During the
first
quarter of fiscal
2022
, the market condition for awards granted to certain executives in the
first
quarter of fiscal
2019
exceeded the
|
(Shares in thousands) |
Total |
|||
|
Balance, January 1, 2022 |
|
|||
|
Granted |
|
|||
|
Effect of vesting multiplier |
|
|||
|
Vested |
(
|
) | ||
|
Balance, October 1, 2022 |
|
|||
Note 10 - Common Stock Repurchase Program
On
November 8, 2021,
we announced that our Board of Directors had approved a stock repurchase program pursuant to which up to $
On
August 8, 2022,
we announced that our Board of Directors had approved a stock repurchase program pursuant to which up to an additional $
Under these plans during the
first
nine
months of fiscal
2022,
we have repurchased a total of
We are subject to federal and state income tax as well as income tax in the foreign jurisdictions in which we operate. For the
third
quarter of fiscal
2022
and
2021
, we recorded income tax expense of approximately $
We updated our evaluation of the valuation allowance position in the United States through October 1, 2022 and concluded that we should continue to maintain a full valuation allowance against the net federal and state deferred tax assets. In making this evaluation, we exercised significant judgment and considered estimates about our ability to generate revenue and taxable profits sufficient to offset expenditures in future periods within the U.S. We will continue to evaluate both positive and negative evidence in future periods to determine if we will realize the net deferred tax assets. We do have a valuation allowance in any foreign jurisdictions as we have concluded it is more likely than not that we will realize the net deferred tax assets in future periods.
Our liability recorded for uncertain tax positions (including penalties and interest) wa
s $
Legal Matters
On or about
December 19, 2018,
Steven A.W. De Jaray, Perienne De Jaray and Darrell R. Oswald (collectively, the “Plaintiffs”) commenced an action against the Company and several unnamed defendants in the Multnomah County Circuit Court of the State of Oregon, in connection with the sale of certain products by the Company to the Plaintiffs in or around
2008.
The Plaintiffs allege that we violated The Lanham Act, engaged in negligence and fraud by failing to disclose to the Plaintiffs the export-controlled status of the subject parts. The Plaintiffs seek damages of $
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.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read along with the unaudited consolidated financial statements and notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q, as well as the audited consolidated financial statements and notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2021 10-K.
Overview
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 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 helps our customers quickly and easily unleash their innovation to create a smart, secure, and connected world.
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 intellectual property ("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 Artificial Intelligence, 5G infrastructure, platform security, and factory automation.
Critical Accounting Policies and Use of Estimates
Critical accounting policies are those that are both most important to the portrayal of a company's financial condition and results of operations, and that require management's most difficult, subjective, and complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. There have been no significant changes to the items that we disclosed as our critical accounting policies and estimates in Management's Discussion and Analysis of Financial Condition and Results of Operations in our 2021 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, actual results may differ materially from these estimates under different assumptions or conditions. We evaluate our estimates and judgments on an ongoing basis.
Impact of COVID-19 and Global Economic Activity on our Business
The ongoing COVID-19 pandemic, increasing market volatility, inflationary pressure, and geopolitical tension continue to impact business globally and may impact our operations on an ongoing basis by causing disruption to our labor markets and supply chains. The COVID-19 pandemic, including the resurgence of cases relating to the spread of new variants, has and continues to impact worldwide economic activity and poses the risk that our employees, contractors, suppliers and other partners may be prevented from conducting business activities. The extent to which the COVID-19 pandemic, increasing financial market volatility, inflationary pressure and related uncertainty will impact our business activities will depend on future developments that are highly uncertain and cannot be predicted at this time.
Results of Operations
Key elements of our Consolidated Statements of Operations, including as a percentage of revenue, are presented in the following table:
|
Three Months Ended |
Nine Months Ended |
|||||||||||||||||||||||||||||||
|
October 1, |
October 2, |
October 1, |
October 2, |
|||||||||||||||||||||||||||||
|
(In thousands) |
2022 |
2021 |
2022 |
2021 |
||||||||||||||||||||||||||||
|
Revenue |
$ | 172,509 | 100.0 | % | $ | 131,911 | 100.0 | % | $ | 484,396 | 100.0 | % | $ | 373,532 | 100.0 | % | ||||||||||||||||
|
Gross margin |
118,732 | 68.8 | 82,825 | 62.8 | 329,984 | 68.1 | 230,595 | 61.7 | ||||||||||||||||||||||||
|
Research and development |
34,820 | 20.2 | 28,769 | 21.8 | 100,988 | 20.8 | 80,289 | 21.5 | ||||||||||||||||||||||||
|
Selling, general and, administrative |
31,926 | 18.5 | 26,272 | 19.9 | 89,721 | 18.5 | 76,971 | 20.6 | ||||||||||||||||||||||||
|
Amortization of acquired intangible assets |
869 | 0.5 | 603 | 0.5 | 2,908 | 0.6 | 1,809 | 0.5 | ||||||||||||||||||||||||
|
Restructuring charges |
2,315 | 1.3 | 166 | 0.1 | 2,505 | 0.5 | 546 | 0.1 | ||||||||||||||||||||||||
|
Acquisition related charges |
— | — | — | — | 511 | 0.1 | — | — | ||||||||||||||||||||||||
|
Income from operations |
$ | 48,802 | 28.3 | % | $ | 27,015 | 20.5 | % | $ | 133,351 | 27.5 | % | $ | 70,980 | 19.0 | % | ||||||||||||||||
Revenue by End Market
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. We also provide IP licensing and services to these end markets.
Within these end markets, there are multiple segment drivers, including:
|
• |
Communications and computing: 5G infrastructure deployments, client computing platforms, and cloud and enterprise servers, |
|
• |
Industrial and automotive: industrial Internet of Things ("IoT"), factory automation, robotics, and automotive electronics, |
|
• |
Consumer: smart home, and prosumer. |
We also generate revenue from the licensing of our IP, the collection of certain royalties, patent sales, the revenue related to our participation in consortia and standard-setting activities, and services. While these activities may be associated with multiple markets, Licensing and services revenue is reported as a separate end market as it has characteristics that differ from other categories, most notably a higher gross margin.
The end market data below is derived from data provided to us b y our customers. Wi th a diverse base of customers who may manufacture end products spanning multiple end markets, the assignment of revenue to a specific end market requires the use of judgment. We also recognize certain revenue fo r which end customers an d end markets are not yet known. We assign this revenue first to a specific end market using historical and anticipated usage of the specific products, if possible, and allocate the remainder to the end markets based on either historical usage for each product family or industry application data for certain product types.
The following are examples of end market applications for the periods presented:
|
Communications and Computing |
Industrial and Automotive |
Consumer |
Licensing and Services |
|
Wireless |
Security and Surveillance |
Cameras |
IP Royalties |
|
Wireline |
Machine Vision |
Displays |
Adopter Fees |
|
Data Backhaul |
Industrial Automation |
Wearables |
IP Licenses |
|
Server Computing |
Robotics |
Televisions |
Patent Sales |
|
Client Computing |
Automotive |
Home Theater |
|
|
Data Storage |
Drones |
|
|
The composition of our revenue by end market is presented in the following table:
|
Three Months Ended |
Nine Months Ended |
|||||||||||||||||||||||||||||||
|
October 1, |
October 2, |
October 1, |
October 2, |
|||||||||||||||||||||||||||||
|
(In thousands) |
2022 |
2021 |
2022 |
2021 |
||||||||||||||||||||||||||||
|
Communications and Computing |
$ | 70,522 | 40.9 | % | $ | 55,827 | 42.3 | % | $ | 203,723 | 42.1 | % | $ | 157,732 | 42.2 | % | ||||||||||||||||
|
Industrial and Automotive |
85,730 | 49.7 | 58,953 | 44.7 | 229,820 | 47.4 | 166,137 | 44.5 | ||||||||||||||||||||||||
|
Consumer |
10,968 | 6.3 | 12,637 | 9.6 | 38,255 | 7.9 | 37,676 | 10.1 | ||||||||||||||||||||||||
|
Licensing and Services |
5,289 | 3.1 | 4,494 | 3.4 | 12,598 | 2.6 | 11,987 | 3.2 | ||||||||||||||||||||||||
|
Total revenue |
$ | 172,509 | 100.0 | % | $ | 131,911 | 100.0 | % | $ | 484,396 | 100.0 | % | $ | 373,532 | 100.0 | % | ||||||||||||||||
Revenue from the Communications and Computing end market increased by 26% for the third quarter of fiscal 2022 compared to the third quarter of fiscal 2021 and increased by 29% for the first nine months of fiscal 2022 compared to the first nine months of fiscal 2021 primarily due to our key growth drivers in data center servers, client computing and 5G infrastructure.
Revenue from the Industrial and Automotive end market increased by 45% for the third quarter of fiscal 2022 compared to the third quarter of fiscal 2021 and increased by 38% for the first nine months of fiscal 2022 compared to the first nine months of fiscal 2021 primarily due to strong customer adoption in a broad range of applications, including industrial automation and robotics. Growth in Automotive was driven by the adoption of new designs in advanced driver assistance ("ADAS") and infotainment applications.
Revenue from the Consumer end market decreased by 13% for the third quarter of fiscal 2022 compared to the third quarter of fiscal 2021 primarily due to macroeconomic weakness in Consumer, and increased by 2% for the first nine months of fiscal 2022 compared to the first nine months of fiscal 2021 primarily due to increased demand for our products in Consumer end market applications over the year-to-date periods.
Revenue from the Licensing and services end market increased by 18% for the third quarter of fiscal 2022 compared to the third quarter of fiscal 2021 and increased by 5% for the first nine months of fiscal 2022 compared to the first nine months of fiscal 2021 primarily due to increased royalties.
Revenue by Geography
We assign revenue to geographies based on ship-to location of the customer.
The composition of our revenue by geography is presented in the following table:
|
Three Months Ended |
Nine Months Ended |
|||||||||||||||||||||||||||||||
|
October 1, |
October 2, |
October 1, |
October 2, |
|||||||||||||||||||||||||||||
|
(In thousands) |
2022 |
2021 |
2022 |
2021 |
||||||||||||||||||||||||||||
|
Asia |
$ | 122,860 | 71.2 | % | $ | 98,897 | 75.0 | % | $ | 350,332 | 72.3 | % | $ | 283,742 | 76.0 | % | ||||||||||||||||
|
Americas |
23,154 | 13.4 | 20,261 | 15.4 | 66,976 | 13.8 | 53,930 | 14.4 | ||||||||||||||||||||||||
|
Europe |
26,495 | 15.4 | 12,753 | 9.6 | 67,088 | 13.9 | 35,860 | 9.6 | ||||||||||||||||||||||||
|
Total revenue |
$ | 172,509 | 100.0 | % | $ | 131,911 | 100.0 | % | $ | 484,396 | 100.0 | % | $ | 373,532 | 100.0 | % | ||||||||||||||||
Revenue from Customers
We sell our products to independent distributors and directly to customers. Distributors have historically accounted for a significant portion of our total revenue, and the two distributor groups noted below individually accounted for more than 10% of our total revenue in the periods covered by this report .
The composition of our revenue by customer is presented in the following table:
|
% of Total Revenue |
% of Total Revenue |
|||||||||||||||
|
Three Months Ended |
Nine Months Ended |
|||||||||||||||
|
October 1, |
October 2, |
October 1, |
October 2, |
|||||||||||||
|
2022 |
2021 |
2022 |
2021 |
|||||||||||||
|
Weikeng Group |
31.1 | % | 44.0 | % | 32.9 | % | 39.1 | % | ||||||||
|
Arrow Electronics Inc. |
24.7 | 30.0 | 27.2 | 26.9 | ||||||||||||
|
Other distributors |
33.7 | 15.6 | 29.4 | 21.9 | ||||||||||||
|
All distributors |
89.5 | 89.6 | 89.5 | 87.9 | ||||||||||||
|
Direct customers |
7.4 | 7.0 | 7.9 | 8.9 | ||||||||||||
|
Licensing and services revenue |
3.1 | 3.4 | 2.6 | 3.2 | ||||||||||||
|
Total revenue |
100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||
Gross Margin
The composition of our Gross margin, including as a percentage of revenue, is presented in the following table:
|
Three Months Ended |
Nine Months Ended |
|||||||||||||||
|
October 1, |
October 2, |
October 1, |
October 2, |
|||||||||||||
|
(In thousands) |
2022 |
2021 |
2022 |
2021 |
||||||||||||
|
Gross margin |
$ | 118,732 | $ | 82,825 | $ | 329,984 | $ | 230,595 | ||||||||
|
Gross margin percentage |
68.8 | % | 62.8 | % | 68.1 | % | 61.7 | % | ||||||||
|
Product gross margin % |
67.8 | % | 61.5 | % | 67.3 | % | 60.5 | % | ||||||||
|
Licensing and services gross margin % |
100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||
Gross margin, as a percentage of revenue, increased 600 basis points in the third quarter of fiscal 2022 compared to the third quarter of fiscal 2021 and increased by 640 basis points in the first nine months of fiscal 2022 compared to the first nine months of fiscal 2021. Improved margins were driven by benefits from our pricing optimization and gross margin expansion strategy.
Because of its higher margin, the licensing and services portion of our overall revenue can have a disproportionate impact on Gross margin.
Operating Expenses
Research and Development Expense
The composition of our Research and development expense, including as a percentage of revenue, is presented in the following table:
|
Three Months Ended |
Nine Months Ended |
|||||||||||||||||||||||
|
October 1, |
October 2, |
October 1, |
October 2, |
|||||||||||||||||||||
|
(In thousands) |
2022 |
2021 |
% change |
2022 |
2021 |
% change |
||||||||||||||||||
|
Research and development |
$ | 34,820 | $ | 28,769 | 21.0 | % | $ | 100,988 | $ | 80,289 | 25.8 | % | ||||||||||||
|
Percentage of revenue |
20.2 | % | 21.8 | % | 20.8 | % | 21.5 | % | ||||||||||||||||
Research and development expense includes costs for compensation and benefits, stock compensation, engineering wafers, depreciation, licenses, and outside engineering services. These expenditures are for the design of new products, IP cores, processes, packaging, and software solutions. The increase in Research and development expense for the third quarter and first nine months of fiscal 2022 compared to the third quarter and first nine months of fiscal 2021 was due primarily to increased headcount-related costs as we continue to invest in our long-term product roadmap. We believe that investing in research and development is important to delivering innovative products to our customers and, therefore, we expect to continue to increase our investment in research and development.
Selling, General, and Administrative Expense
The composition of our Selling, general, and administrative expense, including as a percentage of revenue, is presented in the following table:
|
Three Months Ended |
Nine Months Ended |
|||||||||||||||||||||||
|
October 1, |
October 2, |
October 1, |
October 2, |
|||||||||||||||||||||
|
(In thousands) |
2022 |
2021 |
% change |
2022 |
2021 |
% change |
||||||||||||||||||
|
Selling, general, and administrative |
$ | 31,926 | $ | 26,272 | 21.5 | % | $ | 89,721 | $ | 76,971 | 16.6 | % | ||||||||||||
|
Percentage of revenue |
18.5 | % | 19.9 | % | 18.5 | % | 20.6 | % | ||||||||||||||||
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. The increase in Selling, general, and administrative expense for the third quarter and first nine months of fiscal 2022 compared to the third quarter and first nine months of fiscal 2021 was due primarily to increased headcount-related costs to support ongoing customer growth, and to increased legal expenses primarily related to the defense of claims outside the ordinary course of business.
Amortization of Acquired Intangible Assets
The composition of our Amortization of acquired intangible assets, including as a percentage of revenue, is presented in the following table:
|
Three Months Ended |
Nine Months Ended |
|||||||||||||||||||||||
|
October 1, |
October 2, |
October 1, |
October 2, |
|||||||||||||||||||||
|
(In thousands) |
2022 |
2021 |
% change |
2022 |
2021 |
% change |
||||||||||||||||||
|
Amortization of acquired intangible assets |
$ | 869 | $ | 603 | 44.1 | % | $ | 2,908 | $ | 1,809 | 60.8 | % | ||||||||||||
|
Percentage of revenue |
0.5 | % | 0.5 | % | 0.6 | % | 0.5 | % | ||||||||||||||||
The increase in Amortization of acquired intangible assets for the third quarter and first nine months of fiscal 2022 compared to the third quarter and first nine months of fiscal 2021 is due to the amortization expense for new intangible assets added in the fourth quarter of fiscal 2021 through the acquisition of Mirametrix, Inc., partially offset by end of the amortization period during the first quarter of fiscal 2022 for acquired intangible assets from previous acquisitions.
Restructuring Charges
The composition of our Restructuring charges, including as a percentage of revenue, is presented in the following table:
|
Three Months Ended |
Nine Months Ended |
|||||||||||||||||||||||
|
October 1, |
October 2, |
October 1, |
October 2, |
|||||||||||||||||||||
|
(In thousands) |
2022 |
2021 |
% change |
2022 |
2021 |
% change |
||||||||||||||||||
|
Restructuring charges |
$ | 2,315 | $ | 166 | 100+% | $ | 2,505 | $ | 546 | 100+% | ||||||||||||||
|
Percentage of revenue |
1.3 | % | 0.1 | % | 0.5 | % | 0.1 | % | ||||||||||||||||
Restructuring charges are comprised of expenses resulting from consolidation of our facilities, cancellation of contracts, and headcount reductions. Details of our restructuring plans and expenses incurred under them are discussed in "Note 6 - Restructuring" to our Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q. Restructuring charges increased in the third quarter and first nine months of fiscal 2022 compared to the third quarter and first nine months of fiscal 2021 primarily due to lease right-of-use impairment and contract termination fees in the current year periods, as compared to minimal activity in the prior year.
Acquisition Related Charges
The composition of our Acquisition related charges, including as a percentage of revenue, is presented in the following table:
|
Three Months Ended |
Nine Months Ended |
|||||||||||||||||||||||
|
October 1, |
October 2, |
October 1, |
October 2, |
|||||||||||||||||||||
|
(In thousands) |
2022 |
2021 |
% change |
2022 |
2021 |
% change |
||||||||||||||||||
|
Acquisition related charges |
$ | — | $ | — | — | % | $ | 511 | $ | — | 100.0 | % | ||||||||||||
|
Percentage of revenue |
— | % | — | % | 0.1 | % | — | % | ||||||||||||||||
For the first nine months of fiscal 2022, Acquisition related charges were attributable to our acquisition of Mirametrix in November 2021 and were comprised primarily of professional services including legal and accounting fees.
Interest Expense
The composition of our Interest expense, including as a percentage of revenue, is presented in the following table:
|
Three Months Ended |
Nine Months Ended |
|||||||||||||||||||||||
|
October 1, |
October 2, |
October 1, |
October 2, |
|||||||||||||||||||||
|
(In thousands) |
2022 |
2021 |
% change |
2022 |
2021 |
% change |
||||||||||||||||||
|
Interest expense |
$ | (1,267 | ) | $ | (661 | ) | 91.7 | % | $ | (2,866 | ) | $ | (2,081 | ) | 37.7 | % | ||||||||
|
Percentage of revenue |
(0.7 | )% | (0.5 | )% | (0.6 | )% | (0.6 | )% | ||||||||||||||||
Interest expense is primarily related to our long-term debt. This interest expense is comprised of contractual interest and amortization of original issue discount and debt issuance costs based on the effective interest method. The increase in Interest expense for the third quarter and first nine months of fiscal 2022 compared to the third quarter and first nine months of fiscal 2021 was driven by the increase in the effective interest rate on our long-term debt.
Other (Expense) Income, net
The composition of our Other (expense) income, net, including as a percentage of revenue, is presented in the following table:
|
Three Months Ended |
Nine Months Ended |
|||||||||||||||||||||||
|
October 1, |
October 2, |
October 1, |
October 2, |
|||||||||||||||||||||
|
(In thousands) |
2022 |
2021 |
% change |
2022 |
2021 |
% change |
||||||||||||||||||
|
Other (expense) income, net |
$ | (820 | ) | $ | (87 | ) | 100+% | $ | (1,085 | ) | $ | (384 | ) | 100+% | ||||||||||
|
Percentage of revenue |
(0.5 | )% | (0.1 | )% | (0.2 | )% | (0.1 | )% | ||||||||||||||||
The changes in Other (expense) income, net for the third quarter and first nine months of fiscal 2022 compared to the third quarter and first nine months of fiscal 2021 were primarily due to the $0.7 million loss on refinancing of our long-term debt during the period.
Income Taxes
The composition of our Income tax expense (benefit) is presented in the following table:
|
Three Months Ended |
Nine Months Ended |
|||||||||||||||||||||||
|
October 1, |
October 2, |
October 1, |
October 2, |
|||||||||||||||||||||
|
(In thousands) |
2022 |
2021 |
% change |
2022 |
2021 |
% change |
||||||||||||||||||
|
Income tax expense (benefit) |
$ | 356 | $ | (472 | ) | 100+% | $ | 2,431 | $ | 1,125 | 100+% | |||||||||||||
Our Income tax expense (benefit) is composed primarily of foreign income and withholding taxes, partially offset by benefits resulting from the release of uncertain tax positions due to statute of limitation expirations that occurred in the respective periods. The increase in tax expense in the third quarter and first nine months of fiscal 2022 as compared to the third quarter and first nine months of fiscal 2021 is primarily due to increased worldwide income and changes in uncertain tax positions.
Liquidity and Capital Resources
The following sections discuss material changes in our financial condition from the end of fiscal 2021, including the effects of changes in our Consolidated Balance Sheets, and the effects of our credit arrangements and contractual obligations on our liquidity and capital resources. There continues to be uncertainty around the extent and duration of the disruption to our business, including from the effects of the ongoing COVID-19 pandemic, market volatility, and the rising rate of inflation, which may impact our liquidity and working capital needs in future periods.
We have historically financed our operating and capital resource requirements through cash flows from operations, and from the issuance of long-term debt to fund acquisitions. Cash provided by or used in operating activities will fluctuate from period to period due to fluctuations in operating results, the timing and collection of accounts receivable, and required inventory levels, among other things.
We believe that our financial resources, including current cash and cash equivalents, cash flow from operating activities, and our credit facilities, will be sufficient to meet our liquidity and working capital needs through at least the next 12 months. On September 1, 2022, we entered into our 2022 Credit Agreement, as described in " Note 5 - Long-Term Debt " under Part I, Item 1 of this report. As of October 1, 2022, we did not have significant long-term commitments for capital expenditures. For further information on our cash commitments for operating lease liabilities, see Note 7 - Leases under Part I, Item 1 of this report.
In the future, we may continue to consider acquisition opportunities to further extend our product or technology portfolios and further expand our product offerings. In connection with funding capital expenditures, acquisitions, securing additional wafer supply, increasing our working capital, or other operations, we may seek to obtain equity or additional debt financing. We may also seek to obtain equity or additional debt financing if we experience downturns or cyclical fluctuations in our business that are more severe or longer than we anticipated when determining our current working capital needs.
Cash and cash equivalents
|
(In thousands) |
October 1, 2022 |
January 1, 2022 |
$ Change |
% Change |
||||||||||||
|
Cash and cash equivalents |
$ | 118,766 | $ | 131,570 | $ | (12,804 | ) | (9.7 | )% | |||||||
As of October 1, 2022, we had Cash and cash equivalents of $118.8 million, of which approximately $21.1 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 October 1, 2022, we could access all cash held by our foreign subsidiaries without incurring significant additional expense.
The net decrease in Cash and cash equivalents of $12.8 million between January 1, 2022 and October 1, 2022 was primarily driven by cash flows from the following activities:
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 for the first nine months of fiscal 2022 was $156.8 million compared to $116.1 million for the first nine months of fiscal 2021 . This increase of $40.8 million was primarily driven by an increase of $73.7 million provided by improved operating performance, partially offset by $32.9 million of net changes in working capital, primarily from cash used by inventories and accounts receivable . We are using cash provided by operating activities to fund our operations.
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 the first nine months of fiscal 2022 was $21.4 million compared to $16.7 million in the first nine months of fiscal 2021.
Financing activities — Financing cash flows consist primarily of activity on our long-term debt, proceeds from the exercise of options to acquire common stock, tax payments related to the net share settlement of restricted stock units, and repurchases of common stock. In September 2022, we entered into our 2022 Credit Agreement and drew down an initial $150.0 million revolving loan at closing, which we used to pay off the $150.0 million outstanding balance on our previous term and revolving loans. In connection with the 2022 Credit Agreement, we paid $1.4 million in debt issuance costs. During the first nine months of fiscal 2022, we paid required quarterly installments on our previous long-term debt totaling $8.8 million. Payments for tax withholdings on vesting of RSUs partially offset by employee exercises of stock options used net cash flows of $45.7 million in the first nine months of fiscal 2022, an increase of approximately $9.4 million from the net $36.3 million used in the first nine months of fiscal 2021. During the first nine months of fiscal 2022, we also repurchased approximately 1.7 million shares of common stock for $90.1 million, as further discussed below under "Share Repurchase Program."
Accounts receivable, net
|
(In thousands) |
October 1, 2022 |
January 1, 2022 |
Change |
% Change |
||||||||||||
|
Accounts receivable, net |
$ | 100,446 | $ | 79,859 | $ | 20,587 | 25.8 | % | ||||||||
|
Days sales outstanding - Overall |
53 | 51 | 2 | |||||||||||||
Accounts receivable, net as of October 1, 2022 increased by approximately $20.6 million, or 26% , compared to January 1, 2022. This increase resulted primarily from higher revenue shipments in the third quarter of fiscal 2022 compared to the year-end period. 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.
Inventories
|
(In thousands) |
October 1, 2022 |
January 1, 2022 |
Change |
% Change |
||||||||||||
|
Inventories |
$ | 93,964 | $ | 67,594 | $ | 26,370 | 39.0 | % | ||||||||
|
Days of inventory on hand |
159 | 122 | 37 | |||||||||||||
Inventories as of October 1, 2022 increased $26.4 million, or approximately 39%, compared to January 1, 2022 primarily to meet the increased demands of our customers.
The Days of inventory on hand ratio compares the inventory balance at the end of a quarter to the cost of sales in that quarter. We calculate Days of inventory on hand on the basis of a 365-day year as Inventories at the end of the quarter divided by Cost of sales during the quarter annualized and then multiplied by 365.
Credit Arrangements
On September 1, 2022, we entered into our 2022 Credit Agreement. The details of this arrangement are described in " Note 5 - Long-Term Debt " in the Notes to Consolidated Financial Statements of this Quarterly Report on Form 10-Q .
As of October 1, 2022 , we had no used or unused credit arrangements beyond the secured revolving loan facility described in the 2022 Credit Agreement.
Share Repurchase Program
See Part II, Item 2, “Unregistered Sales of Equity Securities and Use of Proceeds,” of this Quarterly Report on Form 10-Q for more information about the share repurchase program.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily a result of fluctuations in foreign currency exchange rates and interest rates. We assess these risks on a regular basis and have established policies that are designed to protect against the adverse effects of these and other potential exposures. There have been no material changes to either the foreign currency exchange rate risk or interest rate risk previously disclosed in Part II, Item 7A, "Quantitative and Qualitative Disclosures About Market Risk," of our Annual Report on Form 10-K for the fiscal year ended January 1, 2022.
ITEM 4. CONTROLS AND PROCEDURES
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
In connection with the filing of this Quarterly Report on Form 10-Q, our management, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls were effective as of the end of the period covered by this report.
Changes in Internal Control over Financial Reporting
There were no changes in our internal controls over financial reporting (as defined in Rules 13a-15(f) under the Exchange Act) that occurred during the third quarter of fiscal 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. We do not believe there has been any material impact to our internal controls over financial reporting notwithstanding that most of our employees are working remotely due to the COVID-19 pandemic. We continue to monitor and assess any potential impact of the COVID-19 pandemic on the design and operating effectiveness of our internal controls.
Inherent Limitations on Effectiveness of Controls
We do not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
PART II. OTHER INFORMATION
The information set forth above under " Note 12 - Contingencies - Legal Matters " contained in the Notes to Consolidated Financial Statements is incorporated herein by reference.
In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the risk factors associated with our business previously described in Part I, Item 1A, “Risk Factors,” in our Annual Report on Form 10-K for the fiscal year ended January 1, 2022 ("2021 10-K"). There have been no material changes in the risk factors included in our 2021 10-K, and this report should be read in conjunction with the risk factors set forth in our 2021 10-K. The additional risks described below supplement the risk factors described in our 2021 10-K based on information currently known to us and recent developments since the filing date of that report. If any of these risks occur, our business, financial condition, operating results, and cash flows could be materially adversely affected, and the trading price of our common stock could decline. These risk factors are not the only risks facing our company. Additional risks and uncertainties not presently known to us or that we may currently deem to be immaterial, including those discussed below, could materially adversely affect our business, financial condition, or operating results.
Worldwide political and economic conditions may create uncertainties that could adversely affect our business. For example, the continuing military conflict between Ukraine and Russia, as well as the financial and trade-related restrictions associated with Russia and Belarus and economic sanctions on certain individuals and entities in Russia and Belarus, may further disrupt global supply chains and could result in shortages of key materials that our suppliers and foundry partners require to satisfy our needs. Furthermore, any deterioration in the relations between Taiwan and China, and other factors affecting military, political or economic conditions in Taiwan, could adversely impact our third-party manufacturing partners and suppliers located in Taiwan, which could disrupt our business operations. Geopolitical tensions or conflicts may also create a heightened risk of cyberattacks. The ongoing COVID-19 pandemic and adverse macroeconomic conditions, such as rising inflation and labor shortages, may affect demand for our products or increase our product or labor costs, negatively impacting our revenues, gross margins, and overall financial results. Additionally, the U.S. government recently announced new controls regarding semiconductor- and supercomputer-related products and new restrictions affecting U.S. persons’ ability to send certain chips and chip-related technology and software to China without an export license which may impact the global supply chain. We also may be impacted by changes in the tax laws of the United States and foreign jurisdictions. President Biden signed into law the Inflation Reduction act of 2022 (“IRA”) on August 16, 2022 and the CHIPS and Science Act of 2022 on August 9, 2022. These laws implement new tax provisions and provide for various incentives and tax credits, including a 1% excise tax on certain stock repurchases made by publicly traded US corporations after December 31, 2022. Although such events have not significantly affected our business or operations, the ultimate impact is unknown and future developments could adversely affect our operating results and financial condition.
These factors, together with all of the other information in this Quarterly Report on Form 10-Q, including our unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q, should be carefully considered before making an investment decision relating to our common stock.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Issuer Purchases of Equity Securities
On November 8, 2021, we announced that our Board of Directors had approved a stock repurchase program pursuant to which up to $100 million of outstanding common stock could be repurchased from time to time (the "2022 Repurchase Program"). The duration of the 2022 Repurchase Program is through the end of December 2022. Under the 2022 Repurchase Program during the third quarter of fiscal 2022, we repurchased 680,098 shares for $39.7 million, or an average price paid per share of $58.40.
On August 8, 2022, we announced that our Board of Directors had approved a stock repurchase program pursuant to which up to an additional $150 million of outstanding common stock could be repurchased from time to time (the "2023 Repurchase Program"). The duration of the 2023 Repurchase Program is through the end of December 2023. Under the 2023 Repurchase Program during the third quarter of fiscal 2022, we repurchased 4,829 shares for $0.3 million, or an average price paid per share of $54.08.
Under these plans during the first nine months of fiscal 2022, we have repurchased a total of 1,663,282 shares for $90.1 million, or an average price paid per share of $54.19. All repurchases were open market transactions funded from available working capital. All shares repurchased pursuant to the 2022 and 2023 Repurchase Programs were retired by the end of the third quarter of fiscal 2022.
The following table contains information regarding our repurchases of our common stock that is registered pursuant to Section 12 of the Securities Exchange Act of 1934 during the third quarter of fiscal 2022.
|
Period |
Total Number of Shares Purchased |
Average Price Paid per Share |
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (a) |
Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs ($M) (b) |
||||||||||||
|
July 3, 2022 through July 30, 2022 |
— | $ | — | — | $ | 39.7 | ||||||||||
|
July 31, 2022 through August 27, 2022 |
487,535 | $ | 59.78 | 487,535 | $ | 160.6 | ||||||||||
|
August 28, 2022 through October 1, 2022 |
197,392 | $ | 54.86 | 197,392 | $ | 149.7 | ||||||||||
|
Total |
684,927 | $ | 58.36 | 684,927 | $ | 149.7 | ||||||||||
| (a) | All repurchases during the quarter were open-market transactions funded from available working capital made under the authorization from our board of directors to purchase up to $100.0 million of our common stock announced November 8, 2021 and under the authorization from our board of directors to purchase up to $150.0 million of our common stock announced August 8, 2022. | |
| (b) | As of October 1, 2022, this amount consisted of the remaining portion of the $150.0 million program authorized through the end of December 2023 that was announced August 8, 2022. We do not plan to make further repurchases pursuant to the 2022 Repurchase Program, which was due to expire at the end of December 2022, because as of August 31, 2022 we had repurchased the maximum dollar value of shares authorized under the 2022 Repurchase Program. |
|
Exhibit Number |
|
Description |
|
|
|
|
| 10.1 | Amended and Restated Credit Agreement, dated as of September 1, 2022, by and among Lattice Semiconductor Corporation, as borrower, the lenders from time to time party thereto, and Wells Fargo Bank, National Association, as administrative agent. (Incorporated by reference to Exhibit 10.1 filed with the Company's Current Report on Form 8-K filed September 2, 2022). | |
|
31.1 |
|
|
|
|
|
|
|
31.2 |
|
|
|
|
|
|
|
32.1 |
|
|
|
|
|
|
|
32.2 |
|
|
|
|
|
|
|
101.INS |
|
Inline XBRL Instance Document (the Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document) |
|
|
|
|
|
101.SCH |
|
Inline XBRL Taxonomy Extension Schema Document |
|
|
|
|
|
101.CAL |
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document |
|
|
|
|
|
101.DEF |
|
Inline XBRL Taxonomy Extension Definition Linkbase Document |
|
|
|
|
|
101.LAB |
|
Inline XBRL Taxonomy Extension Label Linkbase Document |
|
|
|
|
|
101.PRE |
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document |
| 104 | Cover Page Interactive Data File - formatted in Inline XBRL and included in Exhibit 101 |
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
LATTICE SEMICONDUCTOR CORPORATION |
|
|
( Registrant) |
|
|
|
|
|
/s/ Sherri Luther |
|
|
Sherri Luther |
|
|
Chief Financial Officer |
|
|
(Principal Financial and Accounting Officer) |
Date: November 1, 2022