Semiconductor designer Lattice (OTC:LTTC) Semiconductor (NASDAQ:LSCC) reported results in line with analysts' expectations in Q1 CY2024, with revenue down 23.6% year on year to $140.8 million. On the other hand, next quarter's revenue guidance of $130 million was less impressive, coming in 7.5% below analysts' estimates. It made a non-GAAP profit of $0.29 per share, down from its profit of $0.51 per share in the same quarter last year.
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Lattice Semiconductor (LSCC) Q1 CY2024 Highlights:
- Revenue: $140.8 million vs analyst estimates of $140.2 million (small beat)
- EPS (non-GAAP): $0.29 vs analyst estimates of $0.28 (1.8% beat)
- Revenue Guidance for Q2 CY2024 is $130 million at the midpoint, below analyst estimates of $140.5 million (implied operating income given gross margin and operating expense guide was below expectations)
- Gross Margin (GAAP): 68.3%, down from 69.8% in the same quarter last year
- Inventory Days Outstanding: 195, up from 174 in the previous quarter
- Free Cash Flow of $26.09 million, down 61.8% from the previous quarter
- Market Capitalization: $10.16 billion
A global leader in its category, Lattice Semiconductor (NASDAQ:LSCC) is a semiconductor designer specializing in customer-programmable chips that enhance CPU performance for intensive tasks such as machine learning.
Processors and Graphics ChipsThe biggest demand drivers for processors (CPUs) and graphics chips at the moment are secular trends related to 5G and Internet of Things, autonomous driving, and high performance computing in the data center space, specifically around AI and machine learning. Like all semiconductor companies, digital chip makers exhibit a degree of cyclicality, driven by supply and demand imbalances and exposure to PC and Smartphone product cycles.
Sales GrowthLattice Semiconductor's revenue growth over the last three years has been solid, averaging 18.6% annually. But as you can see below, its revenue declined from $184.3 million in the same quarter last year to $140.8 million. Semiconductors are a cyclical industry, and long-term investors should be prepared for periods of high growth followed by periods of revenue contractions (which can sometimes offer opportune times to buy).
This was a slow quarter for the company as its revenue dropped 23.6% year on year, in line with analysts' estimates. This could mean that the current downcycle is deepening.
Lattice Semiconductor's revenue growth has decelerated over the last three quarters and its management team projects revenue to fall next quarter. As such, the company is guiding for a 31.6% year-on-year revenue decline while analysts are expecting a 6.5% drop over the next 12 months.
Product Demand & Outstanding InventoryDays Inventory Outstanding (DIO) is an important metric for chipmakers, as it reflects a business' capital intensity and the cyclical nature of semiconductor supply and demand. In a tight supply environment, inventories tend to be stable, allowing chipmakers to exert pricing power. Steadily increasing DIO can be a warning sign that demand is weak, and if inventories continue to rise, the company may have to downsize production.
This quarter, Lattice Semiconductor's DIO came in at 195, which is 50 days above its five-year average, suggesting that the company's inventory has grown to higher levels than we've seen in the past.
Key Takeaways from Lattice Semiconductor's Q1 Results It was good to see Lattice Semiconductor beat analysts' EPS expectations this quarter. On the other hand, its revenue and implied operating profit guidance for next quarter missed analysts' expectations and its operating margin shrunk. Overall, this was a mixed quarter for Lattice Semiconductor. The company is down 2.6% on the results and currently trades at $74.9 per share.