Quarterly Report for Quarter Ending September 28, 2024 (Form 10-Q)

lscc20240928_10q.htm

Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements that involve estimates, assumptions, risks, and uncertainties. Any statements about our expectations, beliefs, plans, objectives, assumptions, or future events or performance are not historical facts and may be forward-looking. We use words or phrases such as "anticipate," "believe," "could," "estimate," "expect," "intend," "plan," "possible," "predict," "projects," "may," "will," "should," "continue," "ongoing," "future," "potential," and similar words or phrases to identify forward-looking statements.

Forward-looking statements include, but are not limited to, statements about: our target or expected financial performance and our ability to achieve those results; our expectations related to attracting and retaining key personnel; future impacts of the ongoing military conflicts between Ukraine and Russia, and in the Middle East, and the outbreak of new, or expansion of current, military conflicts or terrorism; the impact of any continuing trade or travel restrictions on the export and import of products between the U.S. and China; the impact of any deterioration in relations between Taiwan and China, and other factors affecting military, political, or economic conditions in Taiwan or elsewhere in Asia; the impact of tariffs, trade sanctions, license requirements or similar actions on our suppliers and customers; the impact of inflationary pressures; future impacts of global pandemics, epidemics, and other public health problems; our business strategy; our opportunities to increase our addressable market; our expectations and strategies regarding market trends and opportunities, including market drivers such as wireless and wireline communications infrastructure deployments, data center servers and networking equipment, client computing platforms, industrial Internet of Things, factory automation, robotics, automotive electronics, smart homes, prosumers, and other applications; our expectations regarding the growth of AI-related revenue; our expectations regarding our customer base and the impacts of our customers' actions on our business; our expectations regarding both new and existing product offerings; our gross margin growth and our strategies to achieve gross margin growth and other financial results; our future investments in research and development; future financial results or accounting treatments; our judgments involved in accounting matters, including revenue recognition, inventories and cost of revenue, and income taxes; actions we may take regarding the design and continued effectiveness of our internal controls over financial reporting; our use of cash; our beliefs regarding the adequacy of our liquidity, capital resources and facilities; whether we will consider and act upon acquisition opportunities to extend our product, technology and product offerings, and the impact of such opportunities on our business; our expectations regarding taxes, including unrecognized tax benefits, and tax adjustments and allowances; whether we will pursue future stock repurchases and how any future repurchases will be funded; the future price volatility of our stock and the effects of that volatility; our ability to prevent and respond to information technology system failures, security breaches and incidents, cyber-attacks or fraud, and the occurrence and impact of such cybersecurity incidents; the costs of mitigating cybersecurity risks; the impact of artificial intelligence ("AI"); the impact of laws and regulations addressing privacy, data protection, and cybersecurity and our ability to comply with the same; our ability to comply with other laws and regulations, the costs of such compliance, and costs incurred if we fail to comply with such laws and regulations; and our beliefs regarding legal or administrative proceedings.

These forward-looking statements are based on estimates and assumptions that are subject to risks and uncertainties that could cause actual results to differ materially from those statements expressed in the forward-looking statements. The key factors, among others, that could cause our actual results to differ materially from the forward-looking statements include global economic conditions and uncertainty, including as a result of trade-related restrictions or tariffs, inflationary pressures, or the effect of any downturn in the economy on capital markets and credit markets; the effects of global military conflicts, pandemics or widespread global health problems and the actions by governments, businesses, and individuals in response to the situation, the effects of which may give rise to or amplify the risks associated with many of these factors listed here; our ability to attract and retain key personnel; and other factors more fully described herein or that are otherwise described from time to time in our filings with the Securities and Exchange Commission ("SEC"), including, but not limited to, the items discussed in Part I, Item 1A, "Risk Factors," in our Annual Report on Form 10-K for the fiscal year ended December 30, 2023 filed with the SEC on February 16, 2024 and any additional or updated risk factors discussed in any subsequent Quarterly Report on Form 10-Q filed since that date.

You should not unduly rely on forward-looking statements because our actual results could differ materially from those expressed by us. In addition, any forward-looking statement applies only as of the date of this filing. We do not plan to, and undertake no obligation to, update any forward-looking statements to reflect new information or new events, circumstances or developments, or otherwise.

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

LATTICE SEMICONDUCTOR CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)

See Accompanying Notes to Unaudited Consolidated Financial Statements.

LATTICE SEMICONDUCTOR CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited)

See Accompanying Notes to Unaudited Consolidated Financial Statements.

LATTICE SEMICONDUCTOR CORPORATION

CONSOLIDATED BALANCE SHEETS

(unaudited)

See Accompanying Notes to Unaudited Consolidated Financial Statements.

LATTICE SEMICONDUCTOR CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

See Accompanying Notes to Unaudited Consolidated Financial Statements.

LATTICE SEMICONDUCTOR CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(unaudited)

The following summarizes the changes in total equity for the nine-month period ended September 28, 2024:

The following summarizes the changes in total equity for the nine-month period ended September 30, 2023:

See Accompanying Notes to Unaudited Consolidated Financial Statements.

LATTICE SEMICONDUCTOR CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (continued)

(unaudited)

The following summarizes the changes in total equity for the three-month period ended September 28, 2024:

The following summarizes the changes in total equity for the three-month period ended September 30, 2023:

See Accompanying Notes to Unaudited Consolidated Financial Statements.

LATTICE SEMICONDUCTOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 1 - Basis of Presentation

Lattice Semiconductor Corporation and its subsidiaries ("Lattice," the "Company," "we," "us," or "our") develop technologies that we monetize through differentiated programmable logic semiconductor products, silicon-enabling products, system solutions, design services, and technology licenses.

Basis of Presentation and Use of Estimates

The accompanying Consolidated Financial Statements are unaudited and have been prepared in accordance with U.S. Generally Accepted Accounting Principles ("U.S. GAAP") and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission ("SEC"). In our opinion, they include all adjustments, consisting only of normal recurring adjustments, necessary for the fair presentation of results for the interim periods. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted as permitted by the SEC's rules and regulations for interim reporting. These Consolidated Financial Statements should be read in conjunction with our audited financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 30, 2023 ("2023 10-K").

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and judgments affecting the amounts reported in our consolidated condensed financial statements and the accompanying notes. We base our estimates and judgments on historical experience, knowledge of current conditions, and our beliefs of what could occur in the future considering available information. While we believe that our estimates, assumptions, and judgments are reasonable, they are based on information available when made, and because of the uncertainty inherent in these matters, the actual results that we experience may differ materially from these estimates under different assumptions or conditions. We evaluate our estimates and judgments on an ongoing basis.

We describe our accounting methods and practices in more detail in our 2023 10-K. There have been no changes to the significant accounting policies, procedures, or general information described in our 2023 10-K that have had a material impact on our consolidated financial statements and related notes. Certain prior year balances have been reclassified to conform to the current year's presentation.

Fiscal Reporting Periods

We report based on a 52 or 53-week fiscal year ending on the Saturday closest to December 31. Our fiscal 2024 will be a 52-week year and will end on December 28, 2024, and our fiscal 2023 was a 52-week year that ended December 30, 2023. Our third quarter of fiscal 2024 and third quarter of fiscal 2023 ended on September 28, 2024 and September 30, 2023, respectively. All references to quarterly financial results are references to the results for the relevant 13-week or 39-week fiscal period.

Concentrations of Risk

Potential exposure to concentrations of risk may impact revenue and accounts receivable. Distributors have historically accounted for a significant portion of our total revenue. Revenue attributable to distributors as a percentage of total revenue was 95% and 90%for the third quarters of fiscal 2024 and 2023, respectively and 91% and 89% for the first nine months of fiscal 2024 and 2023, respectively. Distributors also account for a substantial portion of our net accounts receivable. At September 28, 2024, our twolargest distributors accounted for 42% and 37% of net accounts receivable, and at December 30, 2023, our threelargest distributors accounted for 36%, 29%, and 18%of net accounts receivable.

Note 2 - Net Income per Share

Our calculation of the diluted share count includes the number of shares from our equity awards with market conditions or performance conditions that would be issuable under the terms of such awards at the end of the reporting period. For equity awards with a market condition, the number of shares included in the diluted share count as of the end of each period presented isdetermined by measuring the achievement of the market condition as of the end of the respective reporting periods. For equity awards with a performance condition, the number of shares that qualified for vesting as of the end of each period presented are included in the diluted share count when the condition for their issuance was satisfied by the end of the respective reporting periods. See "Note 9 - Stock-Based Compensation"to our consolidated financial statements for further discussion of our equity awards with market conditions or performance conditions.

A summary of basic and diluted Net income per share is presented in the following table:

		Three Months Ended			Nine Months Ended
		September 28,			September 30,			September 28,			September 30,
(In thousands, except per share data)		2024			2023			2024			2023
Net income		$	7,190			$	53,788			$	44,617			$	160,355
Shares used in basic Net income per share			137,709				137,948				137,577				137,697
Dilutive effect of stock options, RSUs, ESPP shares, and equity awards with a market condition or performance condition			185				1,880				697				2,230
Shares used in diluted Net income per share			137,894				139,828				138,274				139,927
Basic Net income per share		$	0.05			$	0.39			$	0.32			$	1.16
Diluted Net income per share		$	0.05			$	0.38			$	0.32			$	1.15

The computation of diluted Net income per share excludes the effects of stock options, restricted stock units ("RSUs"), Employee Stock Purchase Plan ("ESPP") shares, and equity awards with a market condition or performance condition that are antidilutive, aggregating approximately the following number of shares:

		Three Months Ended			Nine Months Ended
		September 28,			September 30,			September 28,			September 30,
(In thousands)		2024			2023			2024			2023
Stock options, RSUs, ESPP shares, and equity awards with a market condition or performance condition excluded as they are antidilutive			2,364				448				976				223

Note 3 - Revenue from Contracts with Customers

Disaggregation of Revenue

The following tables provide information about revenue from contracts with customers disaggregated by channel and by geographical market, based on ship-to location of our customers:

		Three Months Ended			Nine Months Ended
Revenue by Channel		September 28,			September 30,			September 28,			September 30,
(In thousands)		2024			2023			2024			2023
Distributors		$	120,266				95	%		$	173,344				90	%		$	356,001				91	%		$	504,052				89	%
Direct			6,825				5	%			18,825				10	%			35,981				9	%			62,506				11	%
Total revenue		$	127,091				100	%		$	192,169				100	%		$	391,982				100	%		$	566,558				100	%
Revenue by Geographical Market
(In thousands)
China		$	49,671				39	%		$	64,114				34	%		$	154,702				39	%		$	175,670				31	%
Japan			16,633				13	%			25,689				13	%			64,782				17	%			94,434				17	%
Other Asia			13,508				11	%			27,532				14	%			35,375				9	%			72,009				12	%
Asia			79,812				63	%			117,335				61	%			254,859				65	%			342,113				60	%
Americas			19,156				15	%			33,209				17	%			74,745				19	%			107,780				19	%
Europe			28,123				22	%			41,625				22	%			62,378				16	%			116,665				21	%
Total revenue		$	127,091				100	%		$	192,169				100	%		$	391,982				100	%		$	566,558				100	%

Contract Balances

Our contract assets relate to our rights to consideration for licenses and royalties due to us as a member of the HDMI Founders consortium. The balance results primarily from the amount of estimated revenue related to HDMI that we have recognized to date, but which has not yet been distributed to us by the HDMI licensing agent. Contract assets are included in Prepaid expenses and other current assets on our Consolidated Balance Sheets. The following table summarizes activity during the first nine months of fiscal 2024:

(In thousands)
Contract assets as of December 30, 2023		$	11,194
Revenues recorded during the period			10,890
Transferred to Accounts receivable or collected			(6,316	)
Contract assets as of September 28, 2024		$	15,768

Contract liabilities are included in Accrued liabilities on our Consolidated Balance Sheets. The following table summarizes activity during the first nine months of fiscal 2024:

(In thousands)
Contract liabilities as of December 30, 2023		$	5,304
Accruals for estimated future stock rotation and scrap returns			12,527
Less: Release of accruals for recognized stock rotation and scrap returns			(12,015	)
Contract liabilities as of September 28, 2024		$	5,816

Note 4 - Balance Sheet Components

Accounts Receivable

Accounts receivable do not bear interest and are shown net of an allowance for expected lifetime credit losses, which reflects our best estimate of probable losses inherent in the accounts receivable balance, as described in our 2023 10-K.

		September 28,			December 30,
(In thousands)		2024			2023
Accounts receivable		$	91,465			$	104,373
Less: Allowance for credit losses			-				-
Accounts receivable, net of allowance for credit losses		$	91,465			$	104,373

Inventories

		September 28,			December 30,
(In thousands)		2024			2023
Work in progress		$	75,639			$	65,396
Finished goods			28,878				33,430
Total inventories, net		$	104,517			$	98,826

Property and Equipment - Geographic Information

Our Property and equipment, net by country at the end of each period was as follows:

		September 28,			December 30,
(In thousands)		2024			2023
United States		$	27,354			$	29,467
Taiwan			12,047				10,222
Philippines			5,064				4,602
China			2,554				2,778
Other			5,499				2,477
Total foreign property and equipment, net			25,164				20,079
Total property and equipment, net		$	52,518			$	49,546

Accrued Liabilities

Included in Accrued liabilities in the Consolidated Balance Sheets are the following balances:

		September 28,			December 30,
(In thousands)		2024			2023
Current portion of liability for non-cancelable contracts		$	13,241			$	11,418
Current portion of accrued restructuring			10,842				3,500
Current portion of operating lease liabilities			7,037				5,571
Contract liabilities			5,816				5,304
Foreign, VAT, and other taxes payable			2,663				6,758
Other accrued liabilities			1,559				3,497
Total accrued liabilities		$	41,158			$	36,048

Accrued Other Long-Term Liabilities

Included in Accrued other long-term liabilities in the Consolidated Balance Sheets are the following balances:

		September 28,			December 30,
(In thousands)		2024			2023
Long-term portion of uncertain tax positions		$	22,568			$	21,888
Long-term portion of liability for non-cancelable contracts			17,538				7,668
Other long-term liabilities			7,254				11,179
Total other long-term liabilities		$	47,360			$	40,735

Note 5 - Long-Term Debt

On September 1, 2022, we entered into an Amended and Restated Credit Agreement (the "2022 Credit Agreement"), which provides for a five-year secured revolving loan facility with an aggregate principal amount of up to $350 million.

The revolving loans under the 2022 Credit Agreement may be repaid and reborrowed at our discretion, with any remaining outstanding principal amount due and payable on the maturity date of the revolving loan on September 1, 2027. At September 28, 2024 and December 30, 2023, we had no borrowings outstanding under the 2022 Credit Agreement, as we paid off the outstanding balance of our revolving loans during the third quarter of fiscal 2023.

We pay a quarterly commitment fee of 0.20% on the unused portion of the revolving facility. Interest expense related to our long-term debt was included in Interest expense on our Consolidated Statements of Operations as follows:

		Three Months Ended			Nine Months Ended
		September 28,			September 30,			September 28,			September 30,
(In thousands)		2024			2023			2024			2023
Contractual interest		$	-			$	83			$	-			$	2,701
Amortization of original issuance discount and debt costs			67				67				200				200
Total interest expense related to long-term debt		$	67			$	150			$	200			$	2,901

Note 6 - Restructuring

In September 2024, our management commenced an internal restructuring plan ("the Q3 2024 Plan"), which includes a global workforce reduction. Under this plan, we have accrued restructuring costs of approximately $6.5 million through September 28, 2024. The Q3 2024 plan is expected to be largely complete in the first half of fiscal year 2025.

Under the Q3 2023 Plan, which is described in the 2023 10-K, we incurred restructuring costs of approximately $0.3 million and approximately $5.3 million during the third quarter and first nine months, respectively, of fiscal 2024. Under this plan, approximately $7.3 million of total costs have been incurred through September 28, 2024. The Q3 2023 Plan is expected to be largely complete by the end of fiscal year 2024.

Other restructuring activity in the periods presented consisted of expense adjustments on previous plans. Costs and adjustments on restructuring plans are recorded to Restructuring on our Consolidated Statements of Operations. The restructuring accrual balance is presented in Accrued liabilities and in Other long-term liabilities on our Consolidated Balance Sheets. The following table displays the activity related to our restructuring plans:

(In thousands)		Severance & Related (1)			Lease Termination & Fixed Assets			Other (2)			Total
Accrued Restructuring at December 30, 2023		$	1,490			$	4,508			$	620			$	6,618
Restructuring			11,851				(49	)			(620	)			11,182
Costs paid or otherwise settled			(4,012	)			(1,094	)			-				(5,106	)
Accrued Restructuring at September 28, 2024		$	9,329			$	3,365			$	-			$	12,694
Accrued Restructuring at December 31, 2022		$	400			$	5,892			$	640			$	6,932
Restructuring			1,365				58				4				1,427
Costs paid or otherwise settled			(446	)			(1,083	)			(24	)			(1,553	)
Accrued Restructuring at September 30, 2023		$	1,319			$	4,867			$	620			$	6,806

(1)	Includes employee relocation and outplacement costs
(2)	Includes termination fees on the cancellation of certain contracts

Note 7 - Leases

We have operating leases for corporate offices, sales offices, research and development facilities, storage facilities, and a data center. All of our facilities are leased under operating leases, which expire at various times through 2029, with a weighted-average remaining lease term of 3.1 years and a weighted-average discount rate of 6.0% as of September 28, 2024.

We recorded fixed operating lease expenses of $2.1 million and $2.0 million for the third quarter of fiscal 2024 and 2023, respectively, and $6.4 million and $5.8 million for the first nine months of fiscal 2024 and 2023, respectively.

The following table presents the lease balance classifications within the Consolidated Balance Sheets and summarizes their activity during the first nine months of fiscal 2024:

Operating lease right-of-use assets		(In thousands)
Balance as of December 30, 2023		$	14,487
Right-of-use assets obtained for new lease contracts during the period			7,288
Amortization of right-of-use assets during the period			(5,674	)
Impairment of right-of use asset during the period (recorded in Restructuring charges)			(384	)
Adjustments for present value and foreign currency effects			64
Balance as of September 28, 2024		$	15,781

Operating lease liabilities		(In thousands)
Balance as of December 30, 2023		$	16,310
Lease liabilities accrued for new lease contracts during the period			7,288
Accretion of lease liabilities			764
Operating cash used for payments on lease liabilities			(6,972	)
Adjustments for present value and foreign currency effects			360
Balance as of September 28, 2024			17,750
Less: Current portion of operating lease liabilities (included in Accrued liabilities)			(7,037	)
Long-term operating lease liabilities, net of current portion		$	10,713

Maturities of operating lease liabilities as of September 28, 2024 are as follows:

Fiscal year		(In thousands)
2024 (Remaining quarter)		$	2,192
2025			6,946
2026			4,642
2027			2,855
2028			2,272
Thereafter			475
Total lease payments			19,382
Less: amount representing interest			(1,632	)
Total lease liabilities		$	17,750

Lease obligations for facilities restructured prior to the adoption of Topic 842 totaled approximately $3.4 million at September 28, 2024 and is recorded in Accrued liabilities and in Other long-term liabilities on our Consolidated Balance Sheets.

Note 8 - Intangible Assets

In connection with our past acquisitions, we have recorded identifiable intangible assets. On our Consolidated Balance Sheets at September 28, 2024 and December 30, 2023, Intangible assets, net are shown net of accumulated amortization of $148.3 million and $144.9 million, respectively. Additionally, we enter into license agreements for third-party technology and record them as intangible assets. These licenses are being amortized to Research and development expense over their estimated useful lives.

We recorded amortization expense related to intangible assets on the Consolidated Statements of Operations as presented in the following table:

		Three Months Ended			Nine Months Ended
		September 28,			September 30,			September 28,			September 30,
(In thousands)		2024			2023			2024			2023
Research and development		$	299			$	277			$	812			$	818
Amortization of acquired intangible assets			870				870				2,609				2,609
		$	1,169			$	1,147			$	3,421			$	3,427

Note 9 - Stock-Based Compensation

Total stock-based compensation expense included in our Consolidated Statements of Operations is presented in the following table:

		Three Months Ended			Nine Months Ended
		September 28,			September 30,			September 28,			September 30,
(In thousands)		2024			2023			2024			2023
Cost of revenue		$	(62	)		$	1,035			$	1,593			$	3,402
Research and development			7,995				7,020				21,958				20,006
Selling, general, and administrative			8,665				8,609				14,760				29,000
Total stock-based compensation		$	16,598			$	16,664			$	38,311			$	52,408

Market-Based and Performance-Based Stock Compensation

In the first and third quarters of fiscal 2024, we granted awards of RSUs with a market condition to certain executives. Under the terms of these grants, the RSUs with a market condition vest after a three-year period based on the Company's total shareholder return ("TSR") relative to the Russell 3000 index, which condition is measured for the grants on either the third anniversary of the grant date, or equally on the first, second, and third anniversary of the grant date, depending on the executive. The awards may vest at 250% or 200%, depending on the executive, if the 75thpercentile of the market condition is achieved, with 100% of the units vesting at the 55thpercentile, zerovesting if relative TSR is below the 25thpercentile, and vesting scaling for achievement between the 25thand 75thpercentile.

In the second and third quarters of fiscal 2024, we also granted awards of RSUs with a performance condition to certain executives. Under the terms of these grants, the RSUs with a performance condition will vest if the Company achieves year-over-year revenue growth in excess of an industry benchmark, and the number of shares vested will scale for achievement of year-over-year revenue growth compared to certain targets, with maximum vesting up to 250%. The performance condition will be measured annually after each fiscal year-end for one-fourth of the grants beginning in fiscal 2025 through the end of fiscal 2028. Vesting of these awards occurs 13 months after the end of each measurement period and the entire award cannot be fully earned until five and a half years from grant date.

In the third quarter of fiscal 2024, we also granted awards of RSUs with a market condition to our new chief executive officer with vesting tied to the Company's stock price appreciation. The number of shares that become eligible to vest can range from 25% to 250% of the target number of shares, based on the Company's stock price growth over the 6-year service period, which ranges from 25% to 200% stock price growth calculated based on the simple average of the closing Company share price for the trailing 60 trading days up to and including the measurement date. No vesting occurs for stock price growth below 25%. Vesting will occur annually after 3 years for a portion of the vesting eligible RSUs.

In the first nine months of fiscal 2024, certain awards with a market condition or performance condition granted in prior fiscal years vested. During the first quarter of fiscal 2024, the market condition for awards granted to certain executives in the first quarter of fiscal 2021 exceeded the 75thpercentile of their TSR condition, and these awards vested at 250% or 200%, as applicable for the respective executive. Also during the first quarter of fiscal 2024, the second tranche of awards granted in fiscal 2021 and 2022 with a performance condition vested. Under the terms of these grants, the RSUs with a performance condition will vest based on the Company generating specified levels of year-over-year revenue growth, which are measured annually for one-fourth of the grants after each fiscal year-end through the end of fiscal 2024, with vesting of each tranche occurring 13 months after the performance condition is met. Vesting of these awards scales for achievement of year-over-year revenue growth compared to certain targets, with maximum vesting up to 200%. The second tranche of these awards vested at the 200% level of achievement, as the Company met the maximum year-over-year revenue growth performance criteria as of December 31, 2022. For the third tranche of these awards, the Company met the year-over-year revenue growth performance criteria at the 116.3% level of achievement as of December 30, 2023.

For our awards with a market condition or performance condition, we incurred stock compensation expense of approximately $4.5 million, partially offset by benefits from forfeitures of approximately $2.9 million due to executive departures, in the third quarter of fiscal 2024. In the first nine months of fiscal 2024, we recorded benefits from forfeitures of approximately $18.0 million due to executive departures, which was partially offset by stock compensation expense of approximately $16.5 million. We incurred stock compensation expense of approximately $5.1 million and $21.0 million in the third quarter and first nine months of fiscal 2023, respectively. These amounts are recorded as components of total stock-based compensation.

The following table summarizes the activity for our awards with a market condition or performance condition:

(Shares in thousands)		Total
Balance, December 30, 2023			852
Granted			1,641
Effect of vesting multiplier			284
Vested			(541	)
Canceled			(391	)
Balance, September 28, 2024			1,845

Note 10 - Common Stock Repurchase Program

On November 30, 2023, we announced that our Board of Directors had approved a stock repurchase program pursuant to which up to $250 million of outstanding common stock could be repurchased from time to time (the "2024 Repurchase Program"). The duration of the 2024 Repurchase Program is through December 28, 2024.

During the third quarter of fiscal 2024, we repurchased 370,309 shares for $17.0 million, or an average price paid per share of $45.91, under the 2024 Repurchase Program. During the first nine months of fiscal 2024, we have repurchased a total of 778,591 shares for $47.0 million, or an average price paid per share of $60.36. All repurchases were open market transactions funded from available working capital. All shares repurchased pursuant to the 2024 Repurchase Program were retired by the end of the third quarter of fiscal 2024. As of September 28, 2024, the remaining portion of the amount authorized for the 2024 Repurchase Program is approximately $203.0 million.

Note 11 - Income Taxes

We are subject to federal and state income tax as well as income tax in the foreign jurisdictions in which we operate. For the third quarter of fiscal 2024 and 2023, we recorded income tax expense of approximately $1.0 million and $4.1 million, respectively. For the first nine months of fiscal 2024 and 2023, we recorded income tax expense of approximately $5.2 million and $9.1 million, respectively. Income taxes for the three and nine-month periods ended September 28, 2024 and September 30, 2023 represent tax at the federal, state, and foreign statutory tax rates in addition to federal tax credits, withholding taxes, excess benefits from stock compensation, as well as other non-deductible items in federal, state, and foreign jurisdictions. The difference between the U.S. federal statutory tax rate of 21% and our effective tax rates for the three and nine months ended September 28, 2024 resulted primarily from non-deductible items in federal, state, and foreign jurisdictions, foreign rate differentials, federal tax credits, and the discrete impacts of excess tax benefits from stock compensation and for the three and nine months ended September 30, 2023 resulted primarily from U.S. valuation allowance, foreign withholding taxes, foreign rate differentials, and the discrete impacts of excess tax benefits from stock compensation.

The portion of our uncertain tax positions (including penalties and interest) recorded as a liability was $22.6million and $21.9 million at September 28, 2024 and December 30, 2023, respectively, and is included as a component of Other long-term liabilities on our Consolidated Balance Sheets. The resolution of audits or expiration of statute of limitations could reduce our uncertain tax positions. The estimated potential reduction in our uncertain tax positions in the next 12 months is up to $36.0 million.

Note 12 - Contingencies

Legal Proceedings

On or about December 19, 2018, Steven De Jaray, Perienne De Jaray and Darrell Oswald (collectively, the "Plaintiffs") commenced an action against the Company in the Multnomah County Circuit Court of the State of Oregon, in connection with the sale of certain products by the Company to the Plaintiffs in or around 2008. The Plaintiffs alleged the Company violated the Lanham Act, engaged in negligence, fraud, and breach of contract by failing to disclose to the Plaintiffs the export-controlled status of the subject parts. In January 2019, we removed the action to the United States District Court for the District of Oregon (the "Court"). On May 24, 2023, the Plaintiffs filed a second amended complaint, which added Apex-Micro Manufacturing Corporation ("Apex-Micro") as a plaintiff and removed the violation of the Lanham Act claim. The Plaintiffs sought damages of $180 million, punitive damages, and other remedies. On January 18, 2024, the court dismissed the claims against the Company by Ms. De Jaray and Mr. Oswald. The trial for the remaining claims was held from January 30, 2024 to February 15, 2024. On February 13, 2024, the Court granted the Company's Rule 50 motion in part and entered judgment in the Company's favor as to all of Mr. De Jaray's claims and Apex-Micro's negligence claims. On February 15, 2024, the jury found that the Company was not liable for all outstanding claims and judgment was entered in favor of the Company. On March 15, 2024, Mr. De Jaray and Apex-Micro filed a Notice of Appeal to the United States Court of Appeals for the Ninth Circuit. On March 18, 2024, Ms. De Jaray filed a separate Notice of Appeal. Ms. De Jaray's appeal was dismissed for failure to prosecute on August 1, 2024. In response to Mr. De Jaray and Apex Micro's request for an extension, their appeal opening brief was due October 7, 2024. Mr. De Jaray and Apex Micro failed to file their appeal opening brief on October 7^th. Mr. De Jaray's and Apex Micro's appeal was dismissed for failure to prosecute on October 30, 2024.

From time to time, we are exposed to certain additional asserted and unasserted potential claims. We review the status of each significant matter and assess its potential financial exposure. If the potential loss from any claim or legal proceeding is considered probable and a range of possible losses can be estimated, we then accrue a liability for the estimated loss. Legal proceedings are subject to uncertainties, and the outcomes are difficult to predict. Because of such uncertainties, accruals are based only on the best information available at the time. As additional information becomes available, we reassess the potential liability related to pending claims and litigation and may revise estimates.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read along with the unaudited consolidated financial statements and notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q, as well as the audited consolidated financial statements and notes thereto and Management's Discussion and Analysis of Financial Condition and Results of Operations in our 2023 10-K.

Overview

Lattice Semiconductor Corporation and its subsidiaries ("Lattice," the "Company," "we," "us," or "our") develop technologies that we monetize through differentiated programmable logic semiconductor products, silicon-enabling products, system solutions, design services, and technology licenses. Lattice is the low power programmable leader. We solve customer problems across the network, from the Edge to the Cloud, in the Communications, Computing, Industrial, Automotive, and Consumer markets. Our technology, long-standing relationships, and commitment to world-class support helps our customers quickly and easily unleash their innovation to create a smart, secure, and connected world.

Lattice has focused its strategy on delivering programmable logic products and related solutions based on low power, small size, and ease of use. We also serve our customers with intellectual property ("IP") licensing and various other services. Our product development activities include new proprietary products, advanced packaging, existing product enhancements, software development tools, soft IP, and system solutions for high-growth applications such as Edge Artificial Intelligence, wireless and wireline infrastructure, platform security, and factory automation.

Critical Accounting Policies and Use of Estimates

Critical accounting policies are those that are both most important to the portrayal of a company's financial condition and results of operations, and that require management's most difficult, subjective, and complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. There have been no material changes to the items that we disclosed as our critical accounting policies and estimates in Management's Discussion and Analysis of Financial Condition and Results of Operations in our 2023 10-K.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and judgments affecting the amounts reported in our consolidated condensed financial statements and the accompanying notes. We base our estimates and judgments on historical experience, knowledge of current conditions, and our beliefs of what could occur in the future considering available information. While we believe that our estimates, assumptions, and judgments are reasonable, they are based on information available when made, and because of the uncertainty inherent in these matters, actual results may differ materially from these estimates under different assumptions or conditions. We evaluate our estimates and judgments on an ongoing basis.

Impact of Global Economic Activity on our Business

Increased financial market volatility, inflationary pressure, interest rate changes, recessionary concerns, uncertainty in the financial and banking industry, and geopolitical tension continue to impact business globally and may impact our operations by causing disruption to our labor markets and supply chains. The extent to which increased financial market volatility, inflationary pressures, global pandemics, and related uncertainty will impact our business activities will depend on future developments that are highly uncertain and cannot be predicted at this time. Additionally, our business is impacted by the cyclic correction affecting the broader semiconductor industry, which has seen softened demand across our end markets.

Results of Operations

Key elements of our Consolidated Statements of Operations, including as a percentage of revenue, are presented in the following table:

		Three Months Ended			Nine Months Ended
		September 28,			September 30,			September 28,			September 30,
(In thousands)		2024			2023			2024			2023
Revenue		$	127,091				100.0	%		$	192,169				100.0	%		$	391,982				100.0	%		$	566,558				100.0	%
Gross margin			87,688				69.0				134,561				70.0				268,647				68.5				395,723				69.8
Research and development			41,398				32.6				42,048				21.9				120,722				30.8				119,983				21.2
Selling, general and, administrative			30,994				24.4				33,217				17.3				87,468				22.3				102,583				18.1
Amortization of acquired intangible assets			870				0.7				870				0.5				2,609				0.7				2,609				0.5
Restructuring			6,899				5.4				1,509				0.8				11,182				2.9				1,427				0.3
Income from operations		$	7,527				5.9	%		$	56,917				29.6	%		$	46,666				11.9	%		$	169,121				29.9	%

Revenue by End Market

We sell our products globally to a broad base of customers in three primary end market groups: Communications and Computing, Industrial and Automotive, and Consumer. Across our end markets, our products are increasingly used for Artificial Intelligence ("AI")-related applications, including device usage in AI-optimized servers in data centers, AI-enabled PCs, and AI-enabled robotics and ADAS systems, among others. We also provide IP licensing and services to these end markets.

Within these end markets, there are multiple drivers, including:

•	Communications and computing: data center servers and networking equipment, client computing platforms, and wireless and wireline communications infrastructure deployments,
•	Industrial and automotive: factory automation, robotics, automotive electronics, and industrial Internet of Things ("IoT"),
•	Consumer: smart home, prosumer, and other applications.

The end market data we use is derived from data provided to us by our distributors and end customers. With a diverse base of customers who may manufacture end products spanning multiple end markets, the assignment of revenue to a specific end market requires the use of judgment. We also recognize certain revenue for which end customers and end markets are not yet known. We assign this revenue first to a specific end market using historical and anticipated usage of the specific products, if possible, and allocate the remainder to the end markets based on either historical usage for each product family or industry application data for certain product types.

The following are examples of end market applications for the periods presented:

Communications and Computing	Industrial and Automotive	Consumer
Wireless	Security and Surveillance	Cameras
Wireline	Machine Vision	Displays
Data Networking	Industrial Automation	Wearables
Server Computing	Robotics	Televisions
Client Computing	Automotive	Home Theater
Data Storage	Drones	Sound Systems
Cloud	Factory Automation
Hyperscalers

The composition of our revenue by end market is presented in the following table:

		Three Months Ended			Nine Months Ended
		September 28,			September 30,			September 28,			September 30,
(In thousands)		2024			2023			2024			2023
Communications and Computing		$	60,961				48.0	%		$	68,311				35.5	%		$	170,108				43.4	%		$	198,876				35.1	%
Industrial and Automotive			54,242				42.7				109,944				57.2				187,753				47.9				333,713				58.9
Consumer			11,888				9.3				13,914				7.3				34,121				8.7				33,969				6.0
Total revenue		$	127,091				100.0	%		$	192,169				100.0	%		$	391,982				100.0	%		$	566,558				100.0	%

Revenue from the Communications and Computing end market decreased by 11% for the third quarter of fiscal 2024 compared to the third quarter of fiscal 2023 and decreased by 14% for the first nine months of fiscal 2024 compared to the first nine months of fiscal 2023 primarily due to weaker demand in telecommunications infrastructure deployments and end customers rebalancing their inventory levels, partially offset by stronger demand in data center applications.

Revenue from the Industrial and Automotive end market decreased by 51% for the third quarter of fiscal 2024 compared to the third quarter of fiscal 2023 and decreased by 44% for the first nine months of fiscal 2024 compared to the first nine months of fiscal 2023 primarily due to softer end market demand and end customers rebalancing their inventory levels.

While we do not consider AI applications as a distinct end market, we expect AI-related revenue to grow over the next few years based on the growing pipeline of AI-related design wins. Our AI revenue is derived from applications across all three of our end market segments.

Revenue by Geography

We have a diverse base of customers where distributors represent a significant portion of our total revenue. Our revenue by geographical market is based on the ship-to location of our customers, which can vary from time to time. Revenue from Asia decreased in the periods presented primarily due to the macroeconomic environment in the region, while revenue from the Americas and Europe decreased due to reduced demand in these regions for our products in the Industrial and Automotive end market.

The composition of our revenue by geography is presented in the following table:

		Three Months Ended			Nine Months Ended
		September 28,			September 30,			September 28,			September 30,
(In thousands)		2024			2023			2024			2023
Asia		$	79,812				62.8	%		$	117,335				61.1	%		$	254,859				65.0	%		$	342,113				60.4	%
Americas			19,156				15.1				33,209				17.3				74,745				19.1				107,780				19.0
Europe			28,123				22.1				41,625				21.6				62,378				15.9				116,665				20.6
Total revenue		$	127,091				100.0	%		$	192,169				100.0	%		$	391,982				100.0	%		$	566,558				100.0	%

Revenue from Customers

We sell our products to independent distributors and directly to customers. Distributors have historically accounted for a significant portion of our total revenue. Revenue attributable to distributors as a percentage of total revenue was 95% and 90%for the third quarter of fiscal 2024 and 2023, respectively, and 91% and 89% for the first nine months of fiscal 2024 and 2023, respectively.

Gross Margin

The composition of our Gross margin, including as a percentage of revenue, is presented in the following table:

		Three Months Ended			Nine Months Ended
		September 28,			September 30,			September 28,			September 30,
(In thousands)		2024			2023			2024			2023
Gross margin		$	87,688			$	134,561			$	268,647			$	395,723
Gross margin percentage			69.0	%			70.0	%			68.5	%			69.8	%

Gross margin, as a percentage of revenue, decreased 100 basis points in the third quarter of fiscal 2024 compared to the third quarter of fiscal 2023 and decreased by 130 basis points for the first nine months of fiscal 2024 compared to the first nine months of fiscal 2023. Reduced margins were primarily due to changes in product mix between the periods presented.

Operating Expenses

Research and Development Expense

The composition of our Research and development expense, including as a percentage of revenue, is presented in the following table:

		Three Months Ended							Nine Months Ended
		September 28,			September 30,							September 28,			September 30,
(In thousands)		2024			2023			% change			2024			2023			% change
Research and development		$	41,398			$	42,048				(1.5	)%		$	120,722			$	119,983				0.6	%
Percentage of revenue			32.6	%			21.9	%							30.8	%			21.2	%

Research and development expense includes headcount-related costs, including cash- and stock-based compensation and benefits, R&D equipment, engineering wafers, licenses, and outside engineering services. These expenditures are for the design of new products, IP cores, processes, packaging, and software solutions. The decrease in Research and development expense for the third quarter of fiscal2024compared to the third quarter of fiscal 2023was due primarily to lower costs for R&D equipment and outside services, partially offset by increased headcount-related costs. The increase in Research and development expense for the first nine months of fiscal2024compared to the first nine months of fiscal 2023was due primarily to increased headcount-related costs, partially offset by lower costs for R&D equipment and outside services. We believe that investing in research and development is important to delivering innovative products to our customers.

Selling, General, and Administrative Expense

The composition of our Selling, general, and administrative expense, including as a percentage of revenue, is presented in the following table:

		Three Months Ended							Nine Months Ended
		September 28,			September 30,							September 28,			September 30,
(In thousands)		2024			2023			% change			2024			2023			% change
Selling, general, and administrative		$	30,994			$	33,217				(6.7	)%		$	87,468			$	102,583				(14.7	)%
Percentage of revenue			24.4	%			17.3	%							22.3	%			18.1	%

Selling, general, and administrative expense includes costs for compensation and benefits related to selling, general, and administrative employees, commissions, depreciation, professional and outside services, trade show, and travel expenses. The decrease in Selling, general, and administrative expense for the third quarter of fiscal 2024 compared to the third quarter of fiscal 2023 was primarily due to lower headcount-related costs and legal expenses. The decrease in Selling, general, and administrative expense for the first nine months of fiscal 2024 compared to the first nine months of fiscal 2023 was primarily due to a reduction in stock compensation expense from the forfeiture of equity awards by departing executives and lower headcount-related costs, partially offset by other costs such as legal expenses.

Amortization of Acquired Intangible Assets

The composition of our Amortization of acquired intangible assets, including as a percentage of revenue, is presented in the following table:

		Three Months Ended							Nine Months Ended
		September 28,			September 30,							September 28,			September 30,
(In thousands)		2024			2023			% change			2024			2023			% change
Amortization of acquired intangible assets		$	870			$	870				0.0	%		$	2,609			$	2,609				0.0	%
Percentage of revenue			0.7	%			0.5	%							0.7	%			0.5	%

Amortization of acquired intangible assets was flat between the third quarter and first nine months of fiscal 2024 and the third quarter and first nine months of fiscal 2023.

Restructuring

The composition of our Restructuring activity, including as a percentage of revenue, is presented in the following table:

		Three Months Ended							Nine Months Ended
		September 28,			September 30,							September 28,			September 30,
(In thousands)		2024			2023			% change			2024			2023			% change
Restructuring		$	6,899			$	1,509				100+%			$	11,182			$	1,427				100+%
Percentage of revenue			5.4	%			0.8	%							2.9	%			0.3	%

Restructuring activity is generally comprised of expenses resulting from workforce reductions, cancellation of contracts, and consolidation of our facilities. Details of our restructuring plans and expenses accrued under them are discussed in "Note 6 - Restructuring" to our Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q. Restructuring costs increased in the third quarter and first nine months of fiscal 2024 compared to the third quarter and first nine months of fiscal 2023 primarily due to higher severance costs.

Interest Income (Expense), net

The composition of our Interest expense, net, including as a percentage of revenue, is presented in the following table:

		Three Months Ended							Nine Months Ended
		September 28,			September 30,							September 28,			September 30,
(In thousands)		2024			2023			% change			2024			2023			% change
Interest income (expense), net		$	936			$	954				(1.9	)%		$	3,176			$	588				100+%
Percentage of revenue			0.7	%			0.5	%							0.8	%			0.1	%

Interest income (expense) for the third quarter of fiscal 2024 compared to the third quarter of fiscal 2023 was essentially flat. The change in Interest income (expense) for the first nine months of fiscal 2024 compared to the first nine months of fiscal 2023 was driven by increased interest income, coupled with decreased interest expense as we paid off the outstanding balance of our long-term debt during the third quarter of fiscal 2023.

Other Income (Expense), net

The composition of our Other income (expense), net,including as a percentage of revenue, is presented in the following table:

		Three Months Ended							Nine Months Ended
		September 28,			September 30,							September 28,			September 30,
(In thousands)		2024			2023			% change			2024			2023			% change
Other income (expense), net		$	(249	)		$	14				(100+)%			$	(41	)		$	(257	)			(84.0	)%
Percentage of revenue			(0.2	)%			0.0	%							(0.0	)%			(0.0	)%

The change in Other income (expense)for the third quarter and first nine months of fiscal 2024 compared to the third quarter and first nine months of fiscal 2023 was primarily due to foreign currency effects.

Income Tax Expense

The composition of our Income tax expense is presented in the following table:

		Three Months Ended							Nine Months Ended
		September 28,			September 30,							September 28,			September 30,
(In thousands)		2024			2023			% change			2024			2023			% change
Income tax (benefit) expense		$	1,024			$	4,097				(75.0	)%		$	5,184			$	9,097				(43.0	)%

Our Income tax expense is partially offset by federal tax credits and excess tax benefits from stock-based compensation. The lower income tax expense for the current year periods was primarily due to decreased worldwide income, partially offset by the valuation allowance over the federal deferred tax assets present during 2023.

Liquidity and Capital Resources

The following sections discuss material changes in our financial condition from the end of fiscal 2023, including the effects of changes in our Consolidated Balance Sheets, and the effects of our credit arrangements and contractual obligations on our liquidity and capital resources. There continues to be uncertainty around the extent of market volatility, inflationary pressures, interest rate changes, recessionary concerns, uncertainty in the financial and banking industry, and geopolitical tension, which may impact our liquidity and working capital needs in future periods.

We have historically financed our operating and capital resource requirements through cash flows from operations, and from the issuance of long-term debt to fund acquisitions. Cash provided by or used in operating activities will fluctuate from period to period due to fluctuations in operating results, the timing and collection of accounts receivable, and required inventory levels, among other things.

We believe that our financial resources, including current cash and cash equivalents, cash flow from operating activities, and our credit facilities, will be sufficient to meet our liquidity and working capital needs through at least the next 12 months. On September 1, 2022, we entered into our 2022 Credit Agreement, as described in "Note 5 - Long-Term Debt" under Part I, Item 1 of this report. As of September 28, 2024, we did not have significant long-term commitments for capital expenditures. For further information on our cash commitments for operating lease liabilities, see "Note 7 - Leases" under Part I, Item 1 of this report.

In the future, we may continue to consider acquisition opportunities to further extend our product or technology portfolios and further expand our product offerings. In connection with funding capital expenditures, acquisitions, securing additional wafer supply, increasing our working capital, or other operations, we may seek to obtain equity or additional debt financing. We may also seek to obtain equity or additional debt financing if we experience downturns or cyclical fluctuations in our business that are more severe or longer than we anticipated when determining our current working capital needs.

Cash and cash equivalents

(In thousands)		September 28, 2024			December 30, 2023			$ Change			% Change
Cash and cash equivalents		$	124,283			$	128,317			$	(4,034	)			(3.1	)%

As of September 28, 2024, we had Cash and cash equivalents of $124.3 million, of which approximately $48.4 million was held by our foreign subsidiaries. We manage our global cash requirements considering, among other things, (i) available funds among our subsidiaries through which we conduct business, (ii) the geographic location of our liquidity needs, and (iii) the cost to access international cash balances. The repatriation of non-US earnings may require us to withhold and pay foreign income tax on dividends. This should not result in our recording significant additional tax expense as we have accrued expense based on current withholding rates. As of September 28, 2024, we could access all cash held by our foreign subsidiaries without incurring significant additional expense.

The net decrease in Cash and cash equivalents of $4.0 million between December 30, 2023 and September 28, 2024 was primarily driven by cash flows from the following activities:

Operating activities - Cash provided by operating activities results from net income adjusted for certain non-cash items and changes in assets and liabilities. Cash provided by operating activities for the first nine months of fiscal 2024 was $95.5 million compared to $197.6 million for the first nine months of fiscal 2023. This decrease of $102.1 million was primarily driven by $124.1 million less cash provided by net income adjusted for non-cash items, partially offset by $22.0 million of net changes in working capital, primarily in Accounts receivable and Accrued liabilities.

Investing activities - Investing cash flows consist primarily of transactions related to capital expenditures and payments for software and intellectual property licenses. Net cash used by investing activities in the first nine months of fiscal 2024 was $27.7 million compared to $25.3 million in the first nine months of fiscal 2023.

Financing activities - Financing cash flows consist primarily of activity on our long-term debt, repurchases of common stock, tax payments related to the net share settlement of restricted stock units, and proceeds from the exercise of options to acquire common stock. Net cash used by financing activities in the first nine months of fiscal 2024 was $71.6 million compared to $203.1 million in the first nine months of fiscal 2023. This $131.5 million decrease was due to the following activities. During the first nine months of fiscal 2024, we had no balance outstanding on our long-term debt, while during the first nine months of fiscal 2023 we made discretionary payments totaling $130.0 million on revolving loans under the 2022 Credit Agreement. During the first nine months of fiscal 2024, we repurchased approximately 0.8 million shares of common stock for $47.0 million compared to repurchases in the first nine months of fiscal 2023 of approximately 0.4 million shares of common stock for $30.0 million. Payments for tax withholdings on vesting of RSUs partially offset by employee exercises of stock options used net cash flows of $24.6 million in the first nine months of fiscal 2024, a decrease of approximately $18.5 million from the net $43.1 million used in the first nine months of fiscal 2023.

Accounts receivable, net

(In thousands)		September 28, 2024			December 30, 2023			$ Change			% Change
Accounts receivable, net		$	91,465			$	104,373			$	(12,908	)			(12.4	)%
Days sales outstanding			66				56				10

Accounts receivable, net as of September 28, 2024 decreased by approximately $12.9 million, or 12%, compared to December 30, 2023. This decrease was due to lower revenue shipments as well as the timing of when our customers want our products. We calculate Days sales outstanding on the basis of a 365-day year as Accounts receivable, net at the end of the quarter divided by sales during the quarter annualized and then multiplied by 365.

Inventories

(In thousands)		September 28, 2024			December 30, 2023			$ Change			% Change
Inventories		$	104,517			$	98,826			$	5,691				5.8	%
Days of inventory on hand			242				175				67

Inventories as of September 28, 2024 increased $5.7 million, or approximately 6%,compared to December 30, 2023 primarily as a result of product buildup ahead of new product ramps and end customers rebalancing their inventory levels. Days of inventory on hand increased over the period due to lower revenue.

The Days of inventory on hand ratio compares the inventory balance at the end of a quarter to the cost of sales in that quarter. We calculate Days of inventory on hand on the basis of a 365-day year as Inventories at the end of the quarter divided by Cost of sales during the quarter annualized and then multiplied by 365.

Credit Arrangements

On September 1, 2022, we entered into our 2022 Credit Agreement. The details of this arrangement are described in "Note 5 - Long-Term Debt" in the Notes to Consolidated Financial Statements of this Quarterly Report on Form 10-Q.

As of September 28, 2024, we had no used or unused credit arrangements beyond the secured revolving loan facility described in the 2022 Credit Agreement.

Share Repurchase Program

See Part II, Item 2, "Unregistered Sales of Equity Securities and Use of Proceeds," of this Quarterly Report on Form 10-Q for more information about the share repurchase program.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily a result of fluctuations in foreign currency exchange rates and interest rates. We assess these risks on a regular basis and have established policies that are designed to protect against the adverse effects of these and other potential exposures. There have been no material changes to either the foreign currency exchange rate risk or interest rate risk previously disclosed in Part II, Item 7A, "Quantitative and Qualitative Disclosures About Market Risk," of our 2023 10-K.

ITEM 4. CONTROLS AND PROCEDURES

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

In connection with the filing of this Quarterly Report on Form 10-Q, our management, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the period covered by this report. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls were effective as of the end of the period covered by this report.

Changes in Internal Control over Financial Reporting

There were no changes in our internal controls over financial reporting (as defined in Rules 13a-15(f) under the Exchange Act) that occurred during the third quarter of fiscal 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

We do not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The information set forth above under "Note 12 - Contingencies - Legal Proceedings" contained in the Notes to Consolidated Financial Statements is incorporated herein by reference.

ITEM 1A. RISK FACTORS

In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the risk factors associated with our business previously described in Part I, Item 1A, "Risk Factors," in our 2023 10-K. There have been no material changes in the risk factors included in our 2023 10-K, and this report should be read in conjunction with the risk factors set forth in our 2023 10-K. These risk factors are not the only risks facing our company. Additional risks and uncertainties not presently known to us or that we may currently deem to be immaterial could materially adversely affect our business, financial condition, or operating results, including those related to adverse macroeconomic conditions, such as rising inflation and labor shortages, which may affect demand for our products or increase our product or labor costs, negatively impacting our revenues, gross margins, and overall financial results. If any of these risks occur, our business, financial condition, operating results, and cash flows could be materially adversely affected, and the trading price of our common stock could decline. These factors, together with all of the other information in this Quarterly Report on Form 10-Q, including our unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q, should be carefully considered before making an investment decision relating to our common stock.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuer Purchases of Equity Securities

On November 30, 2023, we announced that our Board of Directors had approved a stock repurchase program pursuant to which up to $250 million of outstanding common stock could be repurchased from time to time (the "2024 Repurchase Program"). The duration of the 2024 Repurchase Program is through December 28, 2024. During the third quarter of fiscal 2024, we repurchased 370,309 shares for $17.0 million, or an average price paid per share of $45.91. All repurchases were open market transactions funded from available working capital. All shares repurchased pursuant to the 2024 Repurchase Program were retired by the end of the third quarter of fiscal 2024.

The following table contains information regarding our repurchases of our common stock that is registered pursuant to Section 12 of the Securities Exchange Act of 1934 during the third quarter of fiscal 2024.

Period		Total Number of Shares Purchased			Average Price Paid per Share			Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (a)			Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs ($M) (b)
June 30, 2024 through July 27, 2024			-			$	-				-			$	220.0
July 28, 2024 through August 24, 2024			370,309			$	45.91				370,309			$	203.0
August 25, 2024 through September 28, 2024			-			$	-				-			$	203.0
Total			370,309			$	45.91				370,309			$	203.0

(a)		All repurchases during the quarter were open-market transactions funded from available working capital made under the authorization from our Board of Directors to purchase up to $250.0 million of our common stock announced November 30, 2023.
(b)		As of September 28, 2024, this amount consisted of the remaining portion of the $250.0 million program authorized through December 28, 2024 that was announced November 30, 2023.

ITEM 6. EXHIBITS

Exhibit Number		Description
10.1		Lattice Semiconductor Corporation 2023 Equity Incentive Plan Form of Restricted Stock Award Agreement
10.2		Lattice Semiconductor Corporation 2023 Equity Incentive Plan Form of Restricted Stock Unit Award Agreement (Performance-Based)
31.1		Certification of Chief Executive Officer pursuant to the Securities Exchange Act of 1934 Rule 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certification of Chief Financial Officer pursuant to the Securities Exchange Act of 1934 Rule 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1		Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2		Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS		Inline XBRL Instance Document (the Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)
101.SCH		Inline XBRL Taxonomy Extension Schema Document
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104		Cover Page Interactive Data File - formatted in Inline XBRL and included in Exhibit 101

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	LATTICE SEMICONDUCTOR CORPORATION
	(Registrant)
	/s/ Tonya Stevens
	Tonya Stevens
	Interim Chief Financial Officer
	(Principal Financial and Accounting Officer)

Date: November 4, 2024