Executive Summary

Q4 2024 revenue was $117.4M, in line with prior guidance ($112–$122M), but down 7.6% q/q and 31.2% y/y; non-GAAP diluted EPS was $0.15 (at the low end of $0.15–$0.23 guidance) as a ~$7M one-time assembly/test materials charge reduced non-GAAP gross margin to 62.1% (would have been 68.1% ex-charge) .
Operating discipline continued: non-GAAP opex fell 2% q/q and 5% y/y; free cash flow margin was 33.8% and operating cash flow margin 38.7% in Q4, with the Board authorizing an additional $100M repurchase through 2025 .
Management guided Q1 2025 above Q4 guide midpoints: revenue $115–$125M, non-GAAP GM 69% ±100 bps, opex $50–$52M, EPS $0.20–$0.24; CEO said Q1 EPS guidance is above current consensus, with backlog strengthening and book-to-bill >1 for the first time in six quarters, signaling early-cycle recovery and potential stock catalysts .
Strategic positives: record 2024 design wins; double‑digit growth from new products (Nexus/Avant); far‑edge AI and post‑quantum cryptography (PQC) adoption highlighted as share-gain vectors; leadership strengthened with a new CFO, Chief People Officer, and WW Sales leader .

What Went Well and What Went Wrong

What Went Well
- “Record design wins” in 2024; new products Nexus and Avant grew double-digits y/y, with Avant ramping faster than Nexus at comparable points in the cycle .
- Cash generation and cost discipline: Q4 free cash flow margin 33.8%, opex reduced via a 14% workforce transformation and resource realignment (Pune R&D center opened) .
- Demand signals improved: stronger backlog and book-to-bill >1 for the first time in six quarters; management expects a U‑shaped 2025 recovery with mid-channel inventories guided to mid‑point by mid‑2025 .
What Went Wrong
- Top‑line/mix pressure: revenue down 31.2% y/y and 7.6% q/q on continued inventory normalization and macro softness; Industrial & Automotive revenue roughly halved y/y (to $49.2M) .
- Gross margin hit: ~$7M one‑time materials charge drove non‑GAAP GM to 62.1% (vs would‑be 68.1% and prior 69.0% in Q3) .
- GAAP charges: Q4 included a $13.9M impairment of acquired intangibles and a write‑off of a nonrecoverable cost‑basis investment, masking underlying opex progress on a GAAP basis .

Financial Results

Metric	Q4 2023	Q3 2024	Q4 2024
Revenue ($M)	170.6	127.1	117.4
GAAP Diluted EPS ($)	0.71	0.05	0.12
Non-GAAP Diluted EPS ($)	0.45	0.24	0.15
GAAP Gross Margin (%)	69.7%	69.0%	61.1%
Non-GAAP Gross Margin (%)	70.4%	69.0%	62.1% (68.1% ex-charge)
Non-GAAP Operating Margin (%)	37.8%	26.6%	17.1%
Adjusted EBITDA Margin (%)	43.1%	33.5%	24.8%
Operating Cash Flow Margin (%)	42.2%	34.6%	38.7%
Free Cash Flow Margin (%)	40.0%	31.0%	33.8%

Segment breakdown (Revenue $M):

End Market	Q4 2023	Q3 2024	Q4 2024
Communications & Computing	58.7	61.0	58.0
Industrial & Automotive	99.8	54.2	49.2
Consumer	12.1	11.9	10.2

KPIs:

KPI	Q4 2023	Q3 2024	Q4 2024
Days Sales Outstanding (DSO)	56	66	63
Days Inventory Outstanding (DIO)	175	242	207
Distribution % of Revenue	82%	95%	84%
Direct % of Revenue	18%	5%	16%

Notes: Q4 non-GAAP GM would have been 68.1% absent an ~$7M one‑time assembly/test materials charge . Q4 y/y and q/q decline figures (revenue −31.2% y/y; −7.6% q/q) per company tables .

Guidance Changes

Sequential guidance change (Q4 2024 guide vs Q1 2025 guide):

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue ($M)	Q4’24 vs Q1’25	$112–$122 (Q4’24)	$115–$125 (Q1’25)	Raised (midpoint +$3M)
Non-GAAP Gross Margin (%)	Q4’24 vs Q1’25	68% ±1% (Q4’24)	69% ±1% (Q1’25)	Raised
Non-GAAP OpEx ($M)	Q4’24 vs Q1’25	$52–$54 (Q4’24)	$50–$52 (Q1’25)	Lowered
Non-GAAP Tax Rate (%)	Q4’24 vs Q1’25	5–6% (Q4’24)	5–6% (Q1’25)	Maintained
Non-GAAP EPS ($)	Q4’24 vs Q1’25	$0.15–$0.23 (Q4’24)	$0.20–$0.24 (Q1’25)	Raised

Context on Q4’24 delivery vs guide: revenue of $117.4M was within $112–$122M; non-GAAP GM printed 62.1% due to a one‑time charge (would have been 68.1%, in line with prior 68% ±1%); non-GAAP EPS was $0.15 (would have been ~$0.20 ex-charge) .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q-2 and Q-1)	Current Period (Q4 2024)	Trend
Inventory normalization / channel health	Q2: “inventory normalization,” signs of improvement ; Q3: continued normalization; GM stable 69%; workforce actions announced .	Book-to-bill >1 (first time in 6 quarters); backlog stronger; disti inventory targeting mid-point (~3 months) by 2025; Lattice inventory and consumption improving .	Improving trajectory into 2025.
Gross margin / one-time items	Q2/Q3: GM resilient at ~69% (non-GAAP) .	Q4 non-GAAP GM 62.1% due to ~$7M one-time charge; would have been 68.1% ex-charge .	Transitory hit; underlying mix/margin intact.
New products (Nexus/Avant) & ramp	Q2/Q3: portfolio expansion (security stacks, Nexus devices); developers conference announced .	Double-digit new product growth in 2024; Avant ramping faster than Nexus; mid-teens % of revenue vs single-digit in 2023 .	Accelerating contribution.
Far-edge AI use cases	Q2: solution stacks (sensAI, Sentry) expanded .	Lattice positioning at “far edge” near sensors; low-power, fast boot advantages; >50 FPGAs per server rack use-cases cited .	Strengthening narrative and customer evidence.
Security / PQC	Q2: Sentry/security stack updates .	Only vendor with available PQC solution; NIST timeline; broad Tier-1 designs; pairing with Caliptra (Microsoft keynote) .	Emerging share-gain driver.
Regional / end markets	Q3: mix shift; I&A under pressure .	Automotive recovery noted; communications slightly stronger q/q; all segments expected to grow into Q1 .	Stabilizing to improving.
R&D footprint / costs	Q3: 14% workforce reduction; opex efficiency .	New Pune, India R&D site scaling to ~100; intent to grow capability at lower cost geos .	Structural opex leverage.

Management Commentary

“We are starting to see signs of improvement in the broader market environment as evidenced by our stronger backlog and improved book to bill” .
“Revenue…was $117.4 million…non-GAAP gross margin would have been 68.1%…before the impact of an approximately $7.0 million one-time charge” .
“For the first time in 6 quarters, our book-to-bill ratio has been over 1 for the past few weeks…This bodes well for our business” .
“Our computing subsegment grew in 2024…new products…grew double digits in 2024 compared to 2023” .
“We are very pleased to be guiding our Q1 EPS above the current consensus estimate” .
“We inaugurated our new…R&D site in Pune, India” .

Q&A Highlights

End‑market color: Automotive stabilizing/recovering; communications slightly stronger q/q; expectation for all segments to grow into Q1 .
Server/computing content: Management cited ~50% content increase generation‑to‑generation and broad attach across security, I/O expansion, bridging; >50 FPGAs per rack example .
Inventory path: Disti inventory targeted to midpoint (~3 months) during 2025; improvement contingent on continued market recovery; Lattice-owned inventory trending down .
Strategy focus: Remain centered on small/mid‑range FPGAs; no ambition to pursue high‑end/cloud FPGAs; partner ecosystem approach emphasized .
PQC timeline/opportunity: Only vendor with shipping PQC solution; strong Tier‑1 adoption; solutions may evolve with standards .

Estimates Context

We attempted to retrieve Wall Street consensus (S&P Global) for Q4 2024 and forward, but the request failed due to provider rate limits. As a result, we cannot definitively classify Q4 revenue/EPS as beats or misses versus consensus. Values would have been retrieved from S&P Global.*
Management stated “we are very pleased to be guiding our Q1 EPS above the current consensus estimate,” implying near‑term EPS expectations could move higher; the formal Q1 guide is EPS $0.20–$0.24, non‑GAAP GM 69% ±1%, and opex $50–$52M .

* Values retrieved from S&P Global (consensus data unavailable due to rate limits).

Key Takeaways for Investors

Recovery signals: Book‑to‑bill >1 and improving backlog are positive early‑cycle indicators; watch for Q1 execution within the higher sequential guide (revenue $115–$125M, GM ~69%) .
Margin normalization: Ex one‑time charge, Q4 non‑GAAP GM would have been 68.1%, consistent with prior levels—supporting the view that the Q4 GM dip was transitory .
Product mix tailwind: New products (Nexus/Avant) are scaling (mid‑teens of revenue vs single‑digit in 2023), positioning LSCC for share gains as far‑edge AI and security workloads proliferate .
Security/PQC as a differentiator: Being first with PQC solutions and alignment with Caliptra can expand attach in networking/security, a credible structural catalyst .
Cost leverage: Opex discipline and footprint shifts (e.g., Pune) support sustained margin recovery as volumes improve; Q1 non‑GAAP opex guided down to $50–$52M .
Channel/inventory: DSO/DIO improved sequentially in Q4; management targets disti inventory at midpoint by 2025—monitor progress as a gating factor to accelerating growth .
Capital returns: Continued buybacks (17th consecutive quarter; new $100M authorization) provide downside support while growth drivers play out .

LATTICE SEMICONDUCTOR CORP (LSCC)·Q4 2024 Earnings Summary