Darin G. Billerbeck, President and Chief Executive Officer, said, "Q4 came in as expected but we are disappointed by a payment delay for an IP contract we signed prior to our Q3 earnings call. While this timing issue resulted in lower than expected revenue and non-GAAP gross margin in Q4, we expect to recognize the revenue and associated cost of sales when payments are received. For 2015, our GAAP revenue increased 10.9%, marking our third consecutive year of double digit revenue growth. Normally, we would be excited by double digit growth, however, we had expected our revenue to be substantially higher at our largest OEMs. Clearly, macro-economic challenges, including softness in multiple segments of the consumer market, impacted both our Imaging and FPGA businesses more severely than anticipated. We exited 2015 with confidence as a more diversified company, with the addition of Imaging and mmWave solutions to our already sought after low power FPGA capabilities. The considerable progress we made in 2015, including our integration of Silicon Image positions us to expand in multiple markets with our broader solutions portfolio, while reducing our reliance on one big OEM in our consumer business. We also remained diligent in our focus on our cost structure, which led to our proactive resizing of our company in late Q3. This, combined with the $49 million in synergies actioned related to our acquisition of Silicon Image, gives us confidence we can achieve our profitability goals in 2016 - even on our current lower revenue base. While ongoing macro weakness will impact our two largest customers in consumer in the first quarter of 2016, we believe this will represent a low point for the year, followed by a healthy uptick in the second half.”
Joe Bedewi, Corporate Vice President and Chief Financial Officer, added, “2015 was a challenging year as we developed and executed our synergy and integration plans and drove major operational and cost efficiency improvements across our organization. Since our acquisition of Silicon Image in early March, we have identified and actioned synergy savings of approximately $49 million. We remain focused on execution and exited 2015 with an improved cost structure and multi-year product roadmap in place. We are now on a path to sustained higher profitability as we leverage the cost synergies we achieved in 2015. We believe a 20% operating margin is realistic as we exit 2016, and expect to maintain gross margins in our target range of the mid-50% level. We plan to drive meaningfully higher free cash flow and debt reduction at the current revenue level and with expected revenue growth in the second half of 2016.”
Recent Business Highlights:
- Honored as Huawei Core Partner: Huawei Technology Co., Ltd. recognized Lattice for the fourth time with a “2015 Core Partner” award for its ongoing commitment to excellence, quality, delivery, technology cooperation and service to Huawei.
- Qualcomm and Lattice Launch Joint Quick Charge Solution: Lattice's flexible charging controller family, the LIF-UC™ family, was selected to support the Qualcomm® Quick Charge™ standard. The joint solution provides fast time to market and is optimized for flexibility in supporting multiple charging profiles, so that one charger can power today and tomorrow’s mobile devices.
- Delivering Wireless Connectivity at Multi-Gigabit Speeds: Lattice's SiBEAM Inc. released a next gen USB 3.0 adapter reference design supporting the IEEE 802.11ad wireless standard (also known as WiGig®) for wireless connectivity at gigabit per second speeds over the 60 GHz frequency band. The reference design lets OEMs add wireless gigabit connectivity to laptop and desktop computers and is designed to be fully complementary and interoperable end-to-end with Qualcomm Atheros’ 802.11ad networking solution.
- Salcomp Designs Lattice’ FPGA into USB Type-C Charger: Lattice’s LIF-UC port controllers offer a seamless connection to the AC/DC controller within the charger to enable a simple and low cost design. Using an FPGA architecture, Lattice’s solution delivers the flexibility needed to enable customization to differentiate Salcomp’s SPEEDY power adapter. Salcomp will continue to use Lattice’s upgradeable port controller for future USB Type-C accessories that intelligently deliver higher wattage to mobile devices.
Business Outlook - First Quarter and Full Year 2016:
- Revenue for the first quarter of 2016 is expected to be between approximately $95 million and $101 million on a non-GAAP basis, as compared to the fourth quarter of 2015, with revenue for the full year 2016 expected to be approximately $460 million to $470 million on a non-GAAP basis.
- Gross margin percentage for both the first quarter and full year 2016 is expected to be approximately 56.0% plus or minus 2% on a non-GAAP basis.
- Total operating expenses, excluding acquisition or restructuring related charges, are expected to be approximately $49.6 million plus or minus 3% on a non-GAAP basis for the first quarter of 2016, and approximately $175 million plus or minus 3% on a non-GAAP basis for the full year 2016, which includes the benefit of synergy savings.
- Restructuring charges are expected to be approximately $2.1 million for the first quarter of 2016 and approximately $2.8 million for the full year 2016.
- Acquisition related charges, including amortization of acquired intangible assets are expected to be approximately $8.9 million in the first quarter of 2016, and approximately $35.8 million for the full year 2016.