Lattice Earnings

The Six Five team discusses Lattice Earnings.

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Transcript:

Daniel Newman: Pat, Lattice has been a multi quarter darling of this chip run and chip glut and then this chip shortage. Frankly, it was a company that I think we credited Jim Anderson and his leadership team with running extremely well throughout tumultuous times, getting into the right markets, and really creating a strong lead in the low end FPGI space. The company had another good quarter, record revenue. Now, no, it was slower growth, slower sequential, good margin performance, solid year-on-year earnings per share. But like so many companies, sometimes that growth, beat, raise musical chairs game does stop. This was the quarter where that music did stop for the first time, and I think it was like a dozen quarters. The guide was conservatively and down for the company, and this is really associated with the industrials. Industrials, say that again.

The company has rallied with the strength of industrial, but we actually saw in Qualcomm’s numbers, which you’ll talk about, Silicon Labs numbers, which were both IoT industrial and…. that market just got clobbered. Now, frankly, not the case for Lattice, which had solid performance, but it did slow. That slowing is what’s causing the conservative guidance, and that conservative guidance caused a pretty negative reaction on Wall Street. But coming out of these earnings, I just got to say, Pat, I think the company is really well positioned. I think they’ve been conservative. They’ve guided correctly. They’ve been building the right products. They’ve been getting into areas like AI, FPGAs for things like computer vision and other critical designs for security in laptops and automotive, in servers. The company’s also expanding into that middle class. It feels like a middle class of FPGAs that doesn’t really exist in a significant way.

You have that really high end, the Xilinx part of the market, the PSG part of Intel that’s spinning off. But on the lower to middle end, Lattice seems really well positioned to gain market share. It’s really just ramping. It’s Avant product. So while, of course, we always want the guide up, you know the drill, Pat, beat, beat, raise, beat, beat, raise, the music can’t go forever. But I actually think overall, it was a solid quarter amidst some pretty significant headwinds. If you saw that jobs report that came out today, I think we’re going to find out at some point that a lot of the data we’ve been getting is horse poo-poo for a while now. The feeling in the market isn’t nearly as good as what I’m actually seeing in the market. Starting to see some of these slowdowns, some slightly weaker guides is probably a good thing. Also, starting to see turns in some of the things that have been incredibly weak over the last few quarters, years is also a good sign because we know the economy is cyclical.

Patrick Moorhead: Dan, you left me a little air, not a lot, but-

Daniel Newman: Talk about anything you want.

Patrick Moorhead: No, listen, none of this is self-inflicted other than if you look at 14 quarters of revenue, gross margin, EPS and operating profit improvements as self-inflicted, the markets that are down they were down in and there’s really… they’ve done a decent job making up increasing market share and B, getting into brand new markets that’s so far… don’t yawn on me, buddy. They’ve been able to overcome at least eat the yawn. Geez. It’s like, “Oh, it’s so inter….

Yo, listen, 5G telecom down, not a shock, all of IoT, first it was the consumer IoT and then it was the industrial IoT. Auto up with many automakers except for Tesla as we saw with ON Semiconductor. So great lineup. They’re increasing their TAM with Avant by at least 50%. So it’s not like some big conundrum of where they’re going to get their growth from. Markets go up, they’re going to go up. They’re going to continue to gain market share in areas that their competitors have left uncovered and even areas where they’re converting a low-end processor or microcontroller to an FPGA. So all in all, I’m not panicked and nobody else should be. I don’t trade in the stock. I don’t trade in any of our paid clients or anybody I’ve signed an NDA with, so…