Lattice Semiconductor (NASDAQ:LSCC) released first-quarter financial results and hosted an earnings call on Monday. Read the complete transcript below.
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View the webcast at https://edge.media-server.com/mmc/p/o73e9jtw/
Summary
Lattice Semiconductor Corp reported a strong Q1 2026 with revenue of $170.9 million, marking a 42% year-over-year growth, driven by momentum in data center AI applications.
The company announced a planned acquisition of AMI, aiming to create a comprehensive secure management and control platform, enhancing long-term growth opportunities.
Guidance for Q2 2026 indicates revenue of $185 million at the midpoint, representing nearly 50% year-over-year growth, with EPS expected to grow by 80% year-over-year.
Operational highlights include a reduction in channel inventory from three months to close to two months, and a strategic focus on compute and communications markets.
Management expressed confidence in sustained above-market growth, highlighting strong demand trends across AI servers, networking, and industrial automation, with a robust backlog extending into 2027.
Full Transcript
OPERATOR
Ladies and gentlemen, greetings and welcome to The Lattice Semiconductor first quarter 2026 earnings conference call. At this time, all participants are in the listen only mode. A brief question and answer session will follow the formal presentation. If anyone requires operator assistance during the conference, please signal an operator by pressing Star and zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your Host for today, Mr. Rick Mushe, Vice President of Investor Relations. Please go ahead.
Rick Mushe (Vice President of Investor Relations)
Thank you Operator and good afternoon everyone. With me today are Ford Tamer, Lattice CEO Lorenzo Flores, Lattice’s CFO and Sanjoy Maite, AMI CEO will provide a financial and business review of the first quarter of 2026, an overview of the AMI acquisition and the business outlook for the second quarter of 2026. Both a copy of our earnings press release and the press release announcing our planned acquisition of AMI can be found at our Company website in the Investor Relations section at latticemi.com I would like to remind everyone that during our conference call today we may make projections or other forward looking statements regarding future events or the future financial performance of the Company. We wish to caution you that such statements are predictions based on information that is currently available and that actual results may differ materially. We refer you to the documents that the Company files with the SEC, including our 10-Ks, 10-Qs, and 8-Ks. These documents contain and identify important risk factors that could cause the actual results to differ materially from those contained in our projections or forward looking statements. This call includes and constitutes the Company’s official guidance for the second quarter of 2026.. If at any time after this call we communicate any material changes to this guidance, we intend that such updates will be done using a public forum such as a press release or publicly announced conference call. We will refer primarily to non GAAP financial measures during this call. By disclosing certain non GAAP information, Management intends to provide investors with additional information to permit further analysis of the Company’s performance and underlying trends for historical periods. We provided reconciliations of these non GAAP financial measures to GAAP financial measures that can be found on the Investor Relations section of our website@latticemi.com lastly, we’ve streamlined our financial reporting to better align with our strategic focus. Beginning this quarter, we’ll break out revenue across two primary end markets, compute and Communications and industrial and embedded. Our consumer business is now included within the Industrial and embedded end market. For comparability, we’ve recast all prior period results so you can make a direct apples to apples comparison with that I’ll turn the call over to our CEO Borg Tamer.
Ford Tamer (CEO)
Thank you Rick and welcome everyone to our first quarter earnings call. Lattice has delivered an excellent start to 2026 with results that underscore both strong market tailwinds and our disciplined execution against a clear strategy. Our first quarter performance exceeded expectations and our second quarter outlook reflect our expected continued momentum across the business. This is the seventh earnings call since I joined Lattice and I hope we have now demonstrated that we consistently say what we do and do what we say and these positive factors in aggregate provide the foundation for our proposed acquisition of AMI. This acquisition positions Lattice to create the industry’s most comprehensive secure management and control platform and enables us to deepen our customer relationships and expand our long term growth opportunity. Now turning to our results and outlook, revenue for the first quarter was $170.9 million representing 42% year over year growth with strength across all end markets. Our compute and communications end market achieved record revenue driven by continued momentum and data center AI application. In Q1, 62% of our revenue came from compute and communications products. With expanding opportunities ahead, as Rick highlighted in the safe harbor, we have now merged our industrial and automotive end market with our consumer end market into what we now term Industrial and Embedded. The revenue from our Industrial and Embedded end market grew more than 20% sequentially, reflecting improving market conditions and expanding adoption of Lattice solutions. As importantly, along with increased consumption channel inventory reduced from three months last quarter to close to two months of inventory on hand and we expect this trend to continue to under two months and Q2. As we anticipated, profitability grew faster than revenue. With EPS up 86% year over year, these results demonstrate the operating leverage in our model and our ability to scale efficiently. As revenue accelerates, demand trends continue to build across AI servers, networking, industrial automation and emerging physical AI applications. We are seeing accelerated bookings which now support a strong backlog that extends well into 2027. We’re also witnessing improved customer visibility and healthy design win momentum across our FPGA portfolio. Taken together, we’re confident that we’re in the early innings of a month to year growth cycle and in our ability to deliver sustained above market growth for the foreseeable future. Our results also highlight the progress we’ve made in evolving Lattice into a system level solutions company. Customers increasingly value Lattice not just for low power programmable hardware, but for complete solutions spanning connectivity, security, management and control. As system complexity increases, particularly in AI driven and advanced computing architectures, our customers are giving their highest priority to platforms that reduce integration risk, shorten development cycles and enable faster deployment at scale. These trends continue to expand Lattice’s role within customer systems, increase attach rates and drive higher value per design. We also continue to benefit from our everywhere companionship strategy, positioning Lattice broadly across the ecosystem. Rather than competing with CPUs, GPUs, or other processors, our low power FPGAs enable and enhance them, providing secure boot power sequencing, platform management, I O aggregation, sensor bridging and control. This approach allows Lattice to participate across hyperscale data centers, communication infrastructure, industrial automation, aerospace and defense, automotive, medical and emerging physical AI applications while remaining silicon agnostic and ecosystem neutral. Looking to the second quarter, our revenue guidance of $185 million at the midpoint represents nearly 50% year over year growth. This underscores our confidence in the accelerating momentum of the business. Our Midpoint eps outlook of $0.44 reflects roughly 80% year over year growth. It highlights the powerful operating leverage in our model and differentiated products we bring to market. We maintain a disciplined capital strategy and believe we’ll be able to consistently drive earnings growth that significantly outpaces revenue growth and we are committed to continue to do so. Turning now to the planned acquisition of AMI we announced earlier today, we are excited to have signed a definitive agreement to acquire AMI, a leader in firmware, orchestration and system level manageability. The combination of Lattice’s low power programmable hardware was AMI’s industry leading solutions including BIOS, BMC and Platform Security create the industry’s most complete secure management and control platform. Together we’ll enable customers to accelerate development, simplify system integration and bring increasingly complex platforms to market faster across AI servers, advanced compute, communication infrastructure and industrial applications. Strategically, this acquisition represents a pivotal milestone in advancing Lattice long term growth strategy. AMI’s firmware is expected to remain processor and silicon agnostic, preserving open ecosystems and customer choice, while lattice FPGAs provide a complementary hardware foundation, reinforcing our everywear companionship strategy. We expect this transaction to be accretive to gross margin, free cash flow and EPS on a non GAAP basis. It also supports our trajectory toward exceeding a $1 billion annual revenue run rate by the end of 2026. We look forward to welcoming the talented AMI team to Lattice and expect this combination to strengthen our system level roadmap and long term growth profile significantly. Looking forward, we’re encouraged by the continued durability of demand across our end markets, the depth of customer engagement and the expanding role Lattice plays in next generation system with a differentiated strategy, a scalable financial model and an increasingly complete platform spanning hardware, firmware, security, manageability and control. We are confident that Lattice is exceptionally well positioned for the future. With that, I’ll turn the call over to Lorenzo for a comprehensive review of our first quarter results.
Lorenzo Flores (CFO)
Lorenzo thank you Ford and good afternoon everyone. We will begin with an overview of our first quarter, 2026 financial performance and our second quarter outlook, followed by an overview of our planned AMI acquisition. With a quarter this good and guidance this strong, it is worth repeating some of what Ford said. Revenue reached $170.9 million, growing 42% year over year and 17% quarter over quarter. Earnings performance was even stronger as Q1 non GAAP EPS demonstrated the leverage in our model. EPS grew more than 80% year over year to 41 cents, a 30% increase quarter over quarter and above the high end of our guidance. We expect Q2 to continue this growth trend and I’ll detail our guidance in a few moments. Back to Q1 revenue growth was driven by a record performance in compute and communications, up 86% year over year and 15% sequentially. We continue to benefit from strong data center growth as Ford told you. Additionally, our industrial and embedded end market grew 21% quarter over quarter, primarily driven by increased demand in factory automation, robotics and medical applications. Q1 non GAAP gross margin was a little better than expected at 70% up 60 basis points quarter over quarter and 100 basis points year over year. Our gross margin continues to reflect the value and differentiation our products provide for our customers. Non GAAP operating expense was $60.8 million, up roughly 8% sequentially and 18% on a year over year basis. Much of the sequential increase is from performance based bonuses and commissions. As our revenue and profitability are exceeding expectations. We also continue to invest in order to capitalize on our near and long term opportunities. Our Q1 non GAAP operating margin expanded 370 basis points to 34.4% and our EBITDA margin increased 310 basis points to 39.6%. Both were a little better than expected. Q1 cash flow was impacted by last year’s annual bonus payout as well as revenue linearity in the quarter associated with our rapid growth. GAAP net cash flow from operating activities for the first quarter of 2026 was 50.3 million compared to 57.6 million in Q4. Free cash flow trended with operating cash flow in Q1 free cash flow was $39.7 million, down from $44 million in Q4. We expect a strong recovery of cash flow as we continue to grow. During Q1 we repurchased $15 million of stock. We ended the quarter with $140 million in cash and no debt. Now for our guidance, we are targeting closing the AMI acquisition in Q3. So this guidance reflects expectations for Lattice stand alone in Q2 2026. We expect revenues to grow in the range of $175 million to $195 million at the midpoint of this range. This is almost 50% growth from Q2 25 and 8% over Q1. We expect gross margin to be 70% plus or minus 1% on a non GAAP basis. We expect non GAAP operating expense to be between 64 and $67 million. Most of the growth in OPEX will be in R and D and reflects disciplined investments to drive long term sustained revenue growth. We expect income tax rate for Q2 to be between 4% and 6% on a non GAAP basis. We anticipate non GAAP EPS to be in the range of $0.42 per share and $0.46 per share. At the midpoint of this guidance, we expect that we would again exceed 80% year over year earnings growth as we continue to demonstrate the leverage in our model. Turning now to the AMI transaction, I am just as excited as for our Board of Directors and our leadership team that we have entered into a definitive agreement to acquire ami. AMI is a leader in platform firmware, secure boot device management and system control software. This acquisition represents a strategic expansion of Lattice’s capabilities to deliver system level solutions, further accelerating our growth. The total consideration of the deal is expected to be $1.65 billion with $1 billion of cash and $650 million of equity. This is approximately 5.4 million shares. Based on the closing price on May 1, we expect the acquisition to be equally compelling from a financial perspective. With ami, we expect our revenue to exceed an annual run rate of $1 billion by the end of this year. We anticipate AMI’s software centric asset light model will further enhance Lattice’s already strong business model. We expect that the transaction will be immediately accretive to gross margin, free cash flow and EPS on a non …
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