Lattice Semiconductor (NASDAQ:LSCC) Reports Q4 In Line With Expectations, Next Quarter Sales Guidance Is Optimistic

Anthony Lee /
2023/02/13 4:06 pm EST

Semiconductor designer Lattice Semiconductor (NASDAQ:LSCC) reported results in line with analyst expectations in Q4 FY2022 quarter, with revenue up 24.1% year on year to $176 million. Guidance for next quarter's revenue was $180 million at the midpoint, which is 3.03% above the analyst consensus. Lattice Semiconductor made a GAAP profit of $51.9 million, improving on its profit of $28.5 million, in the same quarter last year.

Is now the time to buy Lattice Semiconductor? Access our full analysis of the earnings results here, it's free.

Lattice Semiconductor (LSCC) Q4 FY2022 Highlights:

  • Revenue: $176 million vs analyst estimates of $174.7 million (small beat)
  • EPS (non-GAAP): $0.49 vs analyst estimates of $0.48 (2.08% beat)
  • Revenue guidance for Q1 2023 is $180 million at the midpoint, above analyst estimates of $174.7 million
  • Free cash flow of $71.7 million, up 20.1% from previous quarter
  • Inventory Days Outstanding: 186, up from 159 previous quarter
  • Gross Margin (GAAP): 69.4%, up from 64.2% same quarter last year

Jim Anderson, president and CEO, said, "We grew revenue 28% for the full year 2022, with continued strong growth in our strategic segments of industrial and automotive, and communications and computing. We delivered 86% annual growth in net income on a GAAP basis and 64% on a non-GAAP basis. In December, we launched the Lattice Avant™ platform, which doubles our addressable market and creates new greenfield growth opportunities. As we begin 2023, while we’re certainly not immune to any macro-economic challenges impacting the industry, the Company is well positioned in secular growth markets, with an expanding product portfolio, accelerating customer momentum and strong financial execution. "

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.

The 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 Growth

Lattice Semiconductor's revenue growth over the last three years has been solid, averaging 18.5% annually. But as you can see below, last year has been stronger for the company, growing from quarterly revenue of $141.8 million to $176 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).

Lattice Semiconductor Total Revenue

This was a decent quarter for Lattice Semiconductor as revenues grew 24.1%, topping analyst estimates by 0.71%. This marks 9 straight quarters of revenue growth, which means the current upcycle has had a good run, as a typical upcycle tends to be 8-10 quarters.

However, Lattice Semiconductor believes the growth is set to continue, and is guiding for revenue to grow 19.6% YoY next quarter, and Wall St analysts are estimating growth 11.5% over the next twelve months.

In volatile times like these we look for robust businesses with strong pricing power. Unknown to most investors, this company is one of the highest-quality software companies in the world, and their software products have been the default standard in critical industries for decades. The result is an impressive business that is up an incredible 18,152% since the IPO. You can find it on our platform for free.

Product Demand & Outstanding Inventory

Days Inventory Outstanding (DIO) are an important metric for chipmakers, as it reflects the capital intensity of the business 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.

Lattice Semiconductor Inventory Days Outstanding

This quarter, Lattice Semiconductor’s inventory days came in at 186, 51 days above the five year average, suggesting that that inventory has grown to higher levels than what we used to see in the past.

Key Takeaways from Lattice Semiconductor's Q4 Results

Sporting a market capitalization of $11.1 billion, more than $145.7 million in cash and with positive free cash flow over the last twelve months, we're confident that Lattice Semiconductor has the resources it needs to pursue a high growth business strategy.

We were very impressed by the strong improvements in Lattice Semiconductor’s operating margin this quarter. And we were also glad to see the improvement in gross margin. On the other hand, it was less good to see the inventory levels increase. Overall, this quarter's results seemed pretty positive and shareholders can feel optimistic. The company is up 2.16% on the results and currently trades at $84.5 per share.

Should you invest in Lattice Semiconductor right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

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The author has no position in any of the stocks mentioned.