Lattice Semiconductor's CEO Discusses Q2 2012 Results - Earnings Call Transcript

Lattice Semiconductor Corporation (LSCC)

Q2 2012 Earnings Call

July 19, 2012 5:00 pm ET

Executives

David Pasquale – Global IR Partners

Darin G. Billerbeck – President and Chief Executive Officer

Joseph Bedewi – Corporate Vice President and Chief Financial Officer

Analysts

Nick Clare – Robert W. Baird

Ian Ing – Lazard Capital Markets

Richard C. Shannon – Craig-Hallum Capital Group LLC

Bill Joseph Dezellem – Tieton Capital Management LLC

David Duley – Steelhead Securities

Paul McWilliams – NexTag

Presentation

Operator

Good afternoon. My name is David and I will be your conference operator today. At this time, I would like to welcome everyone to the Lattice Semiconductor Second Quarter 2012 Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks there will be a question-and-answer session. (Operator Instructions). Thank you.

I would now like to turn the call over to Mr. David Pasquale with Global IR Partners. Sir, you may begin your conference.

David Pasquale

Thank you, operator. Welcome everyone to Lattice Semiconductor second quarter 2012 results conference call. Joining us today from the company are Mr. Darin G. Billerbeck, the Company’s President and CEO. Mr. Joe Bedewi, Lattice’s Chief Financial Officer is online as well. Both executives will be available for Q&A after the prepared comments.

If you have not yet received a copy of today’s results release, please e-mail Global IR Partners using lscc@globalirpartners.com or you can get a copy of the release off of the Investor Relations section of Lattice Semiconductor’s website.

Before we begin the formal remarks, I’ll review the Safe Harbor statement. It is our intention that this call will comply with the requirements of SEC Regulation FD. This call includes and constitutes the Company’s official guidance for the third quarter of fiscal 2012. 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.

The matters that we discuss today, other than historical information, include forward-looking statements relating to our future financial performance and other performance expectations. Investors are cautioned that forward-looking statements are neither promises nor guarantees. They involve risks and uncertainties that may cause actual results to differ materially from those projected in the forward-looking statements.

Some of those risks and uncertainties are detailed in our filings with the Securities and Exchange Commission including our fiscal year 2011 Form 10-K and our quarterly report on Form 10-Q. The Company disclaims any obligation to publicly update or revise any such forward-looking statements to reflect events or circumstances that occur after this call. Our prepared remarks also will be presented within the requirements of SEC Regulation G regarding Generally Accepted Accounting Principals or GAAP.

I would like to now turn the call over to Mr. Darin Billerbeck. Please go ahead, sir.

Darin G. Billerbeck

Thank you, David, and thanks to everyone for joining us on our call today. In terms of Q2, revenue was $70.8 million with a 52.3% gross margin. Results for the second quarter 2012 reflect the continued effects of the macro headwinds and the impact of customer mix on our business. From a high level we continue to achieve new product growth. Unfortunately our strong new product growth has been offset by the continued weakness especially in Europe. In addition to the weakness in Europe, we expect softness in the North American consumer market. Finally, growth from our strategic account was a positive, but adversely it impacting our gross margin. Can you guys hear us, by the way? I hope so, okay. On prior calls, we mentioned that revenue growth did not resume, we would take further actions in some of our operating costs. Hey David, I don’t know if you could hear us. But we are hearing a lot of background noise.

Joseph Bedewi

Operator?

Operator

Yes sir, I’m trying to figure out, where that noise is coming from.

Darin G. Billerbeck

Yeah, you’re coming to fine. Okay, okay, we will continue. On prior calls, we mentioned that revenue growth did not resume, we would take further actions in some of our operating expenses. During Q2, we’ve reduced our overall head count by approximately 5%. Reduction in workforce was across the Board and was intend to further streamline our cost structure. I want to be clear however, that we remain fully committed to executing our product roadmap or continuing to provide excellent customer support.

Our recent foundry partner announcement with UMC was another step to increase our new product innovation, lower our cost, and further advance our non-volatile memory technology acquired from SiliconBlue. Q2 highlights and developments included, shipping our One Millionth MachXO2 Programmable Logic Device, production release of our iCE40 family, sampling our high density ECP4 FPGA, releasing the latest version of our new power management architecture and being recognized by Huawei as the only FPGAs acquired to receive their coveted Quality Supplier Award.

In terms of adding color for the second quarter, the revenue mix of New, Mainstream and Mature was 20%, 60% and 20% of revenue respectively in Q2. Revenues from our new products were up 21% quarter-on-quarter, reflecting the strength in our ECP3 product shipments. Mainstream products were up about 11% quarter-on-quarter. Revenue from the mature products, we’re down about 35% when compared to the prior quarter primarily due to the softness in European distribution. The revenue mix between FPGA and PLD products was 35% and 65% respectively.

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