The Six Five team discusses Lattice Q4 FY2023 and 2023 Earnings.
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Transcript:
Patrick Moorhead: Let’s go into Lattice Q4 and Q4 23 and overall earnings for the year. So overall, they had a miss on revenue by about 3% EPS, small beat, maybe we’d call that beat. And the forecast was about $25 million less than consensus. And you can imagine what the response was. I think they were off single digit percent.
What I did is I did a drill down into the call, Jim Anderson’s call, to go through, I’m really looking for what’s the drill-down on some future opportunities? And one of those is AI. And for the first time, the company said that they gave a revenue percentage that AI is delivering. For ’23, it was 13%, and they said they expect to double this over the next few years. I wish they would’ve said 2024, but they said, “Over the next few years,” which, “Over the next few years,” versus 2024 is tough for people to know exactly what that means. I really did enjoy, though, the drill-down of where the applications that are driving AI… So first of all, AI servers, the control management, security, and Dan, when we did the walkthrough of the AWS Silicon Lab, whose chip did we see on the main board of the Trainium and Inferentia systems?
We saw Lattice chip, and yeah, Lattice. Yeah, you’re on mute. And then I went to Azure’s Silicon Lab, and guess what I saw on their both Cobalt and Maya servers? Lattice semiconductor. So that’s what that is. AI PCs, user presence and gaze control, so somebody’s looking over your shoulder, it does it very, very… It’s programmable, but it’s also very low power on PCs from Lenovo. Probably the biggest surprise for me though was their inclusion in ADAS. So they’re doing data pre-processing, and I think I need to drill in and ask Jim what he meant by this, ADAS, a quote/unquote “monster crossover vehicles”. Don’t know exactly what that means. I don’t think he means monster trucks, but I’m pretty sure that that’s very large crossover, which was kind of cool. You had no idea. I could guess that they were involved in the pre-process, but not the actual ADAS.
Finally, software attach at 50%, and most popular is SenseAI. Just to make a long story longer, some of the Avant, which is their mid-range solution, they brought out some really good points. First revenue for Avant E is comms gateways, industrial engine controls, LIDAR applications, pretty cool. LIDAR does take a lot of processing power. The next products after Avant E are Avant G and X, driving revenue in 2024, likely toward the back half.
And finally, 90% of the target Avant customers are already customers of the overall company, which to me, leads me to believe they will have a easier chance of moving these customers up the stack, particularly given that Nexus software, which is their lower performance, lower power, is compatible with Avant. So any software that you get on Nexus, it’s compatible with Avant. I think it’s a great story here. I think the company has a great future, and quite frankly, the markets you would expect, they were dragging them down or down. Telco, down. Shocking, right? We just talked about Cisco. So anyways, market versus self-inflicted. Dan, you’re on mute.
Daniel Newman: Darn lawn mower.
Patrick Moorhead: I thought you told me you mowed your own lawn?
Daniel Newman: I am.
Patrick Moorhead: Okay, so what-
Daniel Newman: We’re talking AI.
Patrick Moorhead: It’s an automated lawn mower, I knew it.
Daniel Newman: I have, yeah, so the iRobot for my lawn.
Patrick Moorhead: So smart.
Daniel Newman: You’d have to understand, it’s true. Hey, so listen, Lattice Semi had a remarkable run of almost 12 quarters of incredible growth, beats, raises across the board. The last two quarters have been harder for the company. Now you said this, I’m going to reiterate it, not self-inflicted. Let me point out why I don’t believe it’s self-inflicted. The markets it’s in are diverse, but the markets that it focuses on are, in many cases, in what would be considered a recession or pullback at the current juncture. But you look across the year, so the quarter is great from an earnings standpoint. Everybody likes to do that, it’s a reason to create a moment for options. CBOE loves quarterly earnings. Companies mostly focus on annual runs, and they make decisions based on the company’s overall performance. 12% growth for the year, Pat, so their revenue’s double-digit growth.
Now, that’s pulled back. It was higher because of the last couple of quarters. Pat, incredible operational management of the company, 70.4% gross margin. By the way, expanded 130 basis points year on year. So better than ’22. And then, earnings per share rose by 14%. So you look at what does a company need to do? Well, you grow earnings double digits, you expand your margins substantially, and north of 70% in the semi-space, and you grow revenue double digits. And yeah, you’ve slowed down. So that’s what you’re looking at right now. You’re looking at slowing growth against year on a year over year basis, and against targets, but a very, very good overall performance. And I love how you broke down the AI opportunity. And by the way, I don’t really love how you broke down the AI opportunity, I love how they broke down the AI opportunity so you could break down the AI opportunity.
Hey, Pat, you getting hot in there? Getting a little warm. You got too many Six Five layers-
Patrick Moorhead: Ahh, ahh.
Daniel Newman: Look, I expect continued improvement. They’re in the right spaces. They’re diversified. They have a tailwind of AI and they’re not overly rotated or dependent. And plus, with the Avant opportunity, they’ve really nicely positioned themselves and scaled their TAM. They’re still growing. So yes, not fast enough, and expectations have been set high. That’s what you get for being a well-run company, Jim, Sam, and team. But we do see a lot of potential in where you’re heading. I like that you’re calling out the AI opportunity.
I’d like to think that that was my idea. I’m not sure if it actually was my idea, but I’ve been saying for a long time, companies that can quantify their AI opportunity are going to get a better reaction from the street, because people want to understand, “Can you make money from AI?”
Author Information
Daniel is the CEO of The Futurum Group. Living his life at the intersection of people and technology, Daniel works with the world’s largest technology brands exploring Digital Transformation and how it is influencing the enterprise.
From the leading edge of AI to global technology policy, Daniel makes the connections between business, people and tech that are required for companies to benefit most from their technology investments. Daniel is a top 5 globally ranked industry analyst and his ideas are regularly cited or shared in television appearances by CNBC, Bloomberg, Wall Street Journal and hundreds of other sites around the world.
A 7x Best-Selling Author including his most recent book “Human/Machine.” Daniel is also a Forbes and MarketWatch (Dow Jones) contributor.
An MBA and Former Graduate Adjunct Faculty, Daniel is an Austin Texas transplant after 40 years in Chicago. His speaking takes him around the world each year as he shares his vision of the role technology will play in our future.
