Lattice Semiconductor (NASDAQ: LSCC) reported Q4 CY2024 results that met Wall Street’s revenue expectations. The company’s sales fell 31.2% year-on-year to $117.4 million, but this was in line with analysts’ projections. Despite the decline, the company’s outlook for Q1 CY2025 was slightly more optimistic, with revenue expected to reach $120 million, 1.4% above analyst estimates.
However, Lattice’s non-GAAP profit for the quarter of $0.15 per share fell short of analysts’ consensus of $0.19, representing a 20.7% miss.
Key Highlights for Q4 CY2024
Revenue: $117.4 million, compared to analyst estimates of $117.1 million, a 31.2% year-on-year decline.
Adjusted EPS: $0.15, below the expected $0.19, missing by 20.7%.
Revenue Guidance for Q1 CY2025: $120 million (above analyst estimates of $118.3 million).
Adjusted EPS Guidance for Q1 CY2025: $0.22, higher than analyst expectations of $0.21.
Operating Margin: -10.4%, down from 25.3% in the same quarter last year.
Free Cash Flow Margin: 33.8%, down from 40% in Q4 CY2023.
Inventory Days Outstanding: 206 days, a decrease from 241 days in the previous quarter.
Market Capitalization: $7.35 billion.
Ford Tamer, CEO of Lattice Semiconductor, emphasized the company’s achievements, noting record design wins and a reduced operating expense structure. He also highlighted a strong 31.8% adjusted EBITDA margin for 2024.
Company Overview
Lattice Semiconductor is a leading designer of programmable chips that enhance CPU performance, especially for applications like machine learning. The demand for processors and graphics chips is driven by trends in 5G, the Internet of Things (IoT), autonomous driving, and high-performance computing, particularly in AI and machine learning.
Like other semiconductor firms, Lattice faces cyclical challenges, with its performance influenced by supply-demand imbalances and product cycles in sectors such as PCs and smartphones.
Sales Performance and Long-Term Growth
Lattice Semiconductor’s long-term sales growth has been slower than expected. The company has shown a 4.7% annualized revenue growth over the last five years, which is below industry standards. Over the past two years, its revenue declined by 12.2%. This quarter, the company reported a 31.2% decline in sales compared to the same period last year.
Despite these challenges, analysts are optimistic, forecasting a 2.6% revenue growth over the next 12 months. This suggests that Lattice’s newer products and services could boost its performance, but it remains below average for the semiconductor sector.
Product Demand and Inventory Levels
Days Inventory Outstanding (DIO) is an important indicator for semiconductor companies, reflecting supply-demand trends and capital intensity. In this quarter, Lattice’s DIO was 206, 47 days above its five-year average. Although the company improved its inventory levels, the higher-than-average DIO could indicate that demand is weaker than expected, which may require adjustments in production.
Key Takeaways from Q4 Results
Lattice Semiconductor’s Q4 results were a mixed bag. While its revenue met expectations and its guidance for the next quarter came in slightly better than anticipated, its earnings missed analysts’ forecasts. Despite this, the company showed signs of improvement, with stronger backlog and an improved book-to-bill ratio, as noted by CEO Ford Tamer. This positive outlook helped the stock rise 8.7% to $59.15 following the announcement.
In conclusion, Lattice Semiconductor’s Q4 performance indicates a challenging but improving environment. The company’s ability to navigate market uncertainty and deliver slightly better-than-expected guidance offers hope for a recovery, though investors should be mindful of the ongoing cyclical risks in the semiconductor industry.
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