Q4 2021 Lattice Semiconductor Corp Earnings Call
Good day, and thank you for standing by welcome to the lattice semiconductors.
Fourth quarter and full year attendance anyone conference call.
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I would now like to hand, the conference over to Mr. Rick machine.
That assists director of Investor Relations.
Please go ahead.
Thank you operator, and good afternoon, everyone with me today are Jim Anderson, <unk>, President and CEO and Sherri Luther <unk> CFO .
We will provide a financial and business review of the fourth quarter of 2021, and the business outlook for the first quarter of 2022.
If you have not obtained a copy of our earnings press release. It can be found at our company website in the Investor Relations section better semi dot com.
I would like to remind everyone that during our conference call today, we may make projections or other forward looking statements regarding future events for the future financial performance of the company we.
We wish to caution you that such statements are predictions based on information that is currently available.
Results may differ materially.
We refer you to documents that the company files with the SEC, including our 10-K 10-Q and 8-K. These documents contain and identify important risk factors that could cause the actual results to differ materially from those contained in our projections or forward looking statements.
This call includes and constitutes the company's official guidance for the first quarter of 2022, 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.
We will refer primarily to non-GAAP financial measures. During this call by disclosing certain non-GAAP information management intends to provide investors with additional information to permit further analysis of the company's performance and underlying trends.
For historical periods, we've provided reconciliations of these non-GAAP financial measures to GAAP financial measures that can be found on the Investor Relations section of our website at latest semi dot com.
Let me now turn the call over to Jim Anderson, our CEO .
Thank you Rick and thank you everyone for joining us on our call. Today 2021 was a pivotal year for lattice as we entered a new growth phase for the company driven by our leadership product portfolio and strong customer momentum.
Annual revenue grew by 26% with double digit growth at each of our three market segments non-GAAP gross margin expanded by 220 basis points year over year to a record 63, 2% and.
And we delivered record non-GAAP net income, which grew 54% year over year in 2021.
We also continued to expand our product portfolio with multiple hardware and software product launches.
In addition, we had a very strong finish to the year for the fourth quarter of 2021, we grew revenue 32% year over year with double digit year over year growth in each of our three market segments. We expanded non-GAAP gross margin by 350 basis points year over year to a record 65%.
As we continue to execute on our gross margin expansion strategy.
We drove a 65% year over year increase in non-GAAP net income and we further expanded our software portfolio with the acquisition of mere metrics let.
Let me now provide an overview of our business by end market for Q4 of 2021.
In the communications and computing market revenue increased 8% sequentially and 31% on a year over year basis. We continue to have multiple growth drivers in this segment, including data center servers client computing and <unk> infrastructure in.
In servers as we've discussed in previous calls our attach rate is now over onex revenue growth continued to be driven by expansion in both attach rates and asps as.
As we continue to drive an increase in <unk> dollars of content per server.
In client computing, we have multiple programs ramping and multiple opportunities for delivering new innovation to our customers. For example, Lenovo Atlantis recently announced a new partnership where our Nexus platform and our software solutions will be used in the Lenovo thinkpad product line to deliver advanced user.
<unk>, including immersive engagement and collaboration.
Lastly, in <unk> infrastructure, we're benefiting from ongoing global <unk> deployments with revenue higher both sequentially and year over year.
Turning now to the industrial and automotive market revenue increased 2% sequentially and was up 32% on a year over year basis, our business grew across multiple applications, such as industrial automation and robotics, where lattice solutions provide a significant competitive advantage to our customers over the past few years.
The industrial segment has been a key growth driver for the company and our product portfolio is well positioned to drive sustained long term growth we.
We are also pleased with our strong year over year growth in automotive, which remains a long term growth driver for us in applications, such as Adas and infotainment.
Turning now to consumer revenue was up 3% sequentially and was up 18% year over year with growth driven primarily by new applications that leverage our FPGA portfolio.
I'll now provide some product roadmap highlights since the introduction of latest access we've launched four device families based on the platform I am pleased to announce that <unk> entered production in Q4, we now have three device families in production and ramping with customers Cross link and ex <unk> and <unk>.
<unk>.
The fourth device family service <unk> was launched last June and remains on track to generate revenue in the first half of this year. We continue to be pleased with the broad adoption of our nexus platform across all our market segments, where the power efficiency and faster performance are helping our customers differentiate their applications and systems.
We look forward to significant product portfolio expansion this year with our new lattice of bond platform, which remains on track for launch in the second half of this year.
Ron will double our addressable market and will allow us to address the midrange FPGA applications customer engagement and momentum is very healthy and continues to grow available creates an additional new revenue stream for lattice as it ramps into production in future quarters.
Turning now to our software strategy as.
As we've discussed over the past few years, we've been increasing investments in our software portfolio.
These investments are focused on making it easier for our customers to adopt lattice products and get to market quickly.
We were very pleased to announce our acquisition of mere metrics in November which is an extension of our organic software strategy and adds complementary AI and computer vision capability to our existing solution stack portfolio. This provides us with an end to end AI and computer vision solution spanning from the hardware to the.
<unk> layer it will make it even easier for our customers to adopt lattice products.
Mir metric software has already been deployed on over $20 million end user systems.
We've been successfully working with the mirror metrics team for nearly two years, and we know them very well.
We're very pleased to now have been formally part of the lattice family.
In summary, we are excited to have entered a new growth phase for the company in 2021, and two achieved new record levels of gross margin and profitability.
Our results in 2021 are testament to the strategy that we first outlined at our Investor day in 2019, and the incredible hard work and dedication of the lattice team.
Want to thank the lattice team as well as our partners and customers for their collaboration support and superb execution in 2021.
Looking forward, we expect 2020 to be another year of strong growth for the company as we continue to execute our long term strategy momentum in engagement across our customer base has never been better, we're bringing new market leading products to our customers and we're very excited about the path in front of us over the coming years ill now.
Turn the call over to our CFO Sherri Luther.
Thank you Jim.
We are very pleased with our full year 2021 result, as we continue to execute to our financial targets.
Strong double digit year over year revenue growth gross margin expansion and record profitability.
While continuing to invest in our long term product roadmap.
We grew profit at two times the rate of our revenue growth in 2021 and.
And we generated a record level of cash from operations, while increasing the cash returned to shareholders through share buyback.
Let me now provide a summary of our results.
Fourth quarter revenue was $141 8 million up seven 5% sequentially from the third quarter and up 32% year over year.
Full year 2021 revenue with $515 3 million up 26% from 2020.
The double digit revenue growth for the full year 2021 was driven by strong growth in all of our market segments.
Our non-GAAP gross margin increased 150 basis points to a record 65, 1% in Q4 compared to the prior quarter and was up 350 basis points compared to the year ago quarter.
Both the sequential and year over year increases in gross margin continued to be driven by our gross margin expansion strategy.
We also benefited from higher IP revenue.
Our non-GAAP gross margin for the full year 2021 was 63, 2% to.
220 basis points from 2020.
Q4, non-GAAP operating expenses were $45 8 million compared to $43 8 million in the prior quarter and $37 5 million in the year ago quarter.
non-GAAP operating expenses for the full year 2081 increased to $170 million from $146 2 million, primarily driven by increased investment in our hardware and software portfolio.
Operating expenses remained below our 35% target.
Our non-GAAP operating margin increased 250 basis points to a record 32, 9% in Q4 compared to the prior quarter and was up 630 basis points compared to the year ago quarter.
We continue to balance operating margin growth with investment in the long term revenue growth and expansion of our business.
Our non-GAAP operating margin for the full year 2021, with 32% up 500 basis points from 2020.
Q4, non-GAAP earnings per diluted share was <unk> 32, compared to 19 in the year ago quarter, which represents 65% year over year growth.
non-GAAP diluted EPS for the full year 2021 was $1 six compared to <unk> 69 for the full year 2020. This.
This represents 54% year over year growth.
We continue to focus on driving strong cash flow for the full year 2021, we generated a record $168 million in cash from operations. This represents an increase of 83% compared to the cash generated from operations in 2020.
We also repurchased one 3 million shares or $70 million in stock under our stock buyback program exiting the year with $132 million in cash.
Let me take a moment to recap our acquisition of mirror metrics, which closed on November 12 2021.
We acquired narrow metrics common shares for $68 $5 million in an all cash transaction.
Nero metrics was immediately accretive in Q4 to gross margin and earnings per share.
We're excited about the software capabilities narrow metrics will bring in AI and computer vision applications, which will further expand our software portfolio.
Let me now review our outlook for the first quarter.
Revenue for the first quarter of 2022 is expected to be between $141 million and $151 million.
Gross margin is expected to be 66% plus or minus 1% on a non-GAAP basis.
Total operating expenses for the first quarter are expected to be between $46 million and $48 million on a non-GAAP basis.
In 2021, we drove strong revenue growth significant gross margin expansion and our profitability grew at two times the rate of our revenue growth.
As we begin 2022, we remain focused on continuing to drive sustained revenue growth and profit expansion.
Operator that concludes my formal comments, we can now open the call for questions.
As a reminder to ask a question you will need the brass far one on your telephone again that the star one.
Dara question Bastian.
Your first question comes from the line of Matt Ramsay of Cowen.
Yes. Thank you very much good afternoon, everyone.
Congrats Jim Sheri on him an amazing 2021.
My first question.
I noticed the growth has been accelerating so if you just look.
On a year over year basis, I think you were 19% in Q1 than the 25 to 28, and then delivered on it looks like 32% growth on a year over year basis in the fourth quarter.
Maybe you could walk us through the drivers of that growth acceleration that's happened in the last several quarters.
Try to level set us about what we should think on a go forward basis for growth.
Okay.
Yeah. Thanks, Matt So yes, we're certainly pleased with overall growth for last year, but as you said it was accelerating throughout the year with.
Exiting 32% year over year growth in Q4, it's really coming from our two primary strategic segments, which are comms and computing and industrial and automotive. If you look at those two segments. Both of those segments grew over 30% year over year in Q4.
So we're quite pleased with the progress there and Theres a number of different growth drivers that are underneath each one of those two segments and actually if you think back to 2019, when we first talked about the new company strategy that we were putting in place we talked about.
The fact that we expected the company to enter new growth phase in 2021 timeframe and for that growth to primarily be driven by comms and computing and industrial and auto and so we're really pleased to have delivered on that first of all the new growth phase starting in 2021 and <unk>.
<unk> growth, but also the growth coming from exactly where we thought comps computing and industrial auto and underneath there we're seeing growth in things like servers, where we continue to expand the dollars of content per server.
For lattice client computing, which is a new greenfield growth area for us that grew really well last year <unk> wireless infrastructure again grew very healthy on a year over year basis, and then great growth across industrial automation applications robotics applications and automotive electronics to so a lot of good stuff.
Loan growth drivers underneath those two segments and Thats really where we expect the growth to continue in 2022 and further out in years beyond 'twenty two as well.
It's really those two primary segments and then just as a reminder, we have new product cycles now starting to in 'twenty. One that was the first our first full year of.
Revenue contribution from Nexus, we started shipping Nexus based products at the very end of 2020 and 21 was the first full year of <unk> contribution to our revenue. So that that we expect <unk> to continue to ramp over the coming years. So that's a growth contributor here and then of course, we have avant ahead of us as well as we launch a bond in the second.
Half of this year and ramp it into production in outer quarters.
Growth contributor to show a number of different growth factors underneath that.
Thank you for all the color there Jim.
You mentioned.
Client computing and this has been something that's been I think going on behind the scene for a while but now that you've sort of announced the relationship with Lenovo on Nexus.
Maybe you could step back and give us a little bit.
I guess, a bigger picture of how you think about growth opportunities for you in the Cline and the notebook market for the company overall.
What what portions of the notebook Tam do you think are applicable to your products, what kind of asps might be looking for what kind of penetration rates or engagements just any kind of color of the PC market is huge.
So we're just trying to get a calibration of the expectations of growth into that space.
Yes, the client computing market.
Pretty excited about that market to you're absolutely right. It's a huge market it's a huge.
Device and device Tam in terms of units.
If you look at Pcs, well over 300 million units per year. So, it's a tremendous greenfield growth opportunity for us and there's a number of different capabilities. So we can bring to that market platform hardware security.
Video aggregation also artificial intelligence processing for all sorts of enhanced user experiences.
On which we talked about with the Lenovo announcement led us in <unk>.
<unk> had around the thinkpad, so we're pretty excited about the long term opportunity here.
We had a couple we had a couple of platforms customer platforms that started ramping in 2020 and that helped drive really good growth in 2021 and continue into 2022. The Lenovo announcement. These are new additional platforms that will drive further revenue growth.
And then we're also working with.
Other Oems to bring new platforms to market as well. So we've got a number of new design wins kind of the pipeline that are yet to.
To ramp into revenue. So we feel like we've got a good healthy pipeline as well, but yes, when we look at.
For instance, the server market, where we have over the past years done a great job I think of expanding our attach rates raising our asps, bringing more content to server and then when we look at client that market being 20 times plus the size of the server market, it's actually more than 20 times.
We're pretty excited about the growth opportunities over the long term for us in and clients. So yes, we do see it as a good growth opportunity long term.
Thank you very much Jim Congrats again I'll jump back in the queue.
Thanks, Matt Your next.
Your next question comes from Derek Sorry, Berg of Colliers to Katie.
Yes, hi, everyone. Thanks for taking the questions.
Great progress on gross margins. So Sherry wanted to start with you are clearly a very strong Q1 gross margin guide can you just give us some color on what's driving that and then I've a follow up.
Sure. Thanks for the question. So when you if you recall back in 2019, when we laid out our gross margin expansion strategy.
We talked about.
We were going to grow our gross margin over.
Over the long term and in fact, each and every year. Since then we've gone to our gross margin by an order of magnitude of a couple of hundred basis points each year.
And for our total if you take it to our most recent quarter Q4 was 65, 1% than a total improvement there of 790 basis points. So really pleased with with the progress there, but this is something that that we have been working on since 2019, and so while we generated improvements in Q4.
<unk> of 150 basis points sequentially, and 350 basis points year over year. This is something gross margin expansion is something that we've been executing on that strategy for multiple years now.
And so when you when you look at sort of what it's made up of I've made up of many factors, including pricing optimization product cost efficiencies higher gross margin on our new products and so when you look at our Q1 guide and look at the midpoint there of 66%.
It's really a reflection of our continued gross margin expansion of our strategy continuing improvements in gross margin from that strategy as we look ahead.
Got it and then Jim sort of beyond growth drivers just building up the earlier question I'm curious what the limiting factors are to growth. This year I think consensus is expecting low teens for the year you guys are targeting double digit growth.
That is sort of universally accepted as a low power leader. So are you guys.
Sort of just waiting for new product generations to come to market is it supply just wondering what are some of the lending limiting factors to you guys maintaining the growth rate you experienced in 2021 for this year. Thanks.
Thanks Derek.
We expect our 2022 as I said in my prepared remarks to be another strong year of growth for the for the company I think.
First of all it crossed our big market segments of Comms and computing industrial and automotive as I mentioned earlier number of good application drivers that we have underneath that but also as I mentioned new product cycles right. So for instance, with Nexus going now into its second full year.
Ram we expect that to be a good growth contributor this year and in coming years, and then avant further out in time as well as even the <unk> products. We are seeing really good healthy growth from preen excess products last year, we expect that to continue this year as well so we're seeing healthy demand we're expecting our <unk>.
Supply to be higher in 2022 than we saw in 'twenty. One we were able to grow our supply in 'twenty. One we expect to grow again supply in 2022. So again, we've we expect 22 to be a very good good year good growth year for the company.
Got it thank you.
Your next question comes from Tristan <unk> of Baird.
Hi, good afternoon.
Just a follow up on your gross margin commentary for Q1 are there.
Any onetime items that are benefiting that Q1 gross margin outlook you've mentioned the IP you benefiting Q4 is that a factor for Q1 is.
Matrix are still contributing.
I guess the point that the question.
Whether we should expect further gross margin expansion through the rest of the year as you continue to execute on pricing or are there.
Recurring factors benefiting gross margin in Q1.
Yes. So thank you Justin so when you look at our guide for Q1, 66% at the midpoint a few things that you had asked if there is any one time items in fact, IP being a little bit higher in Q4, typically we expect IP to be in sort of that $3 million to $5 million range. So.
I, probably wouldnt expect it to be as high as Q4 was key for us a little bit outside of the range that it typically is it can fluctuate on a quarterly basis, so that would be something where you would actually expect it to come down in Q1.
The other thing I will just highlight as well in Q4 neuro metrics was not a full quarter.
With less than a full quarter and so when you look at Q1, it will be a full quarter.
As a matter of metrics revenue and then just to calibrate because you don't break out in your metrics, but just to calibrate when when we announced the acquisition of their metrics, we said that their their FY 'twenty one fiscal year revenue was $9 million for their full year. So is it just to calibrate you guys on how big that is.
And then when you.
When you look out beyond we don't guide beyond Q1.
But I'll just say that.
The gross margin expansion strategy that we laid out in 2019, we're continuing to execute on that.
The pricing optimization product cost efficiencies and a higher margin on our newer products are all elements of that strategy that will continue to execute on.
Great and then for my follow up could.
Could you elaborate on what makes you win.
Yes.
I know that this was not really a traditional marketplace PGA.
Now you're getting is really the next generation of your design win momentum.
Oh really.
Are you seeing some of the socket.
And the thing that ultimately can get integrated with the with the deposits here.
What.
Customers really appreciating.
Solutions you offer that.
Design wins.
Thanks, Tristan I wouldn't characterize it as we're really helping bring new capabilities to the PC I think if you look at for instance.
The recent announcement from Lenovo and led us about the new capabilities that we'll be bringing to the thinkpad product line together, that's really about bringing new capabilities that haven't existed in the past and so it's it's greenfield really in the sense that it's.
It's new revenue growth for us, but also greenfield in the sense that it's new capabilities that we're bringing the way that we're helping bring to the industry.
And we've got a roadmap of those capabilities. So it's not just a single single set of capabilities, but its a road map over time of additional capabilities that we expect to bring over the coming years, and we're partnering with multiple different Oems across the industry to bring those capabilities. So we're pretty excited about the value that we can.
And in terms of enhanced user experiences I would also point out that it's more than just bringing the piece of silicon.
It's really a full solution. It's the silicon it's the solution stacks that we have been organically investing in over the past three years and mirror metrics as part of that solution as well. So it's the ability to bring not just the hardware device, but full solution all the way from the hardware up through the application layer, which I think is pretty unique.
For lattice and so yes, we're pretty pretty excited about some of the growth potential that we see ahead of us.
Great. Thank you very much.
Thanks Tristan.
Once again, if you would like to ask a question. Please press star one on your telephone.
Next question is from Mark <unk> of Jefferies.
Hi, Thanks for taking my questions.
First one if I may.
Jim can you help us understand right now and maybe as a follow up to your last answer when you talk about.
Okay.
Right.
Thanks.
It's a sales process.
All right.
Today is it is it chip led versus <unk>.
Versus software led.
And maybe another way to say as that is.
Are your customers looking at the software first and then the chip gets dragged along with it or is it the other way around.
As part of that could you talk about the growth that you've seen over the last four quarters.
Is there a separate software line item that you can quantify it.
And then I had a follow up thank you.
Okay.
Thanks, Mark Yeah in terms of the chip versus software led I.
I would say it depends a little bit on the customer, but I think about it more as a solution led right, where it's a combination of the chip and the software together.
That allows us to bring.
A full solution to the customer and along with that software to get to allow the customer to switch to lattice devices easily quickly to switch from competitor devices to our devices to make that transition very easy and then to get to market quickly and of course, it creates stickiness for us long term as well now certainly.
The software investments that we've made I think have helped to open new doors for us at at new customers I think at existing customers. It has helped us expand our share of wallet, but also open new doors to new customers.
But I still think it's really about the total solution and when you look at that revenue, we really view it as revenue from the combined hardware software solution. So we at this point.
Premier metrics, we don't have a separate software monetization revenue stream for instance, but with the acquisition of mirror metrics mirror metrics does bring with it an existing software revenue stream and over time I think there is opportunity for us to not.
Just grow the mere metrics revenue stream, but use that as a basis to look for how do we how do we drive greater monetization of lattice the full latter software portfolio over time.
That's very helpful. Okay, and then a follow up if I may.
Let me talk about <unk>.
Moving into the mid range with our bonds.
This year can you talk about the.
Competitive.
Dynamics there and.
Now that.
The AMD xilinx.
<unk> has been approved.
Assuming that it closes does that does that.
Does that mean.
Do you view that.
Positive for the competitive dynamics into the area of trying to get into with the bonds or is it.
Do you think it increases the competitive dynamics and Thats all I had thank you.
Yeah. Thanks, Mark the short answer on the last part of your question is we don't believe it changes the competitive dynamics acquisition of Xilinx by AMD.
We believe the competitive landscape really remains the same we do think that the competitive landscape in mid range is favorable right now and this based on what our customers have told us and.
It was back in 2019, when we were introducing our <unk> product line to our customers and Nexus is of course focused on small the small FPGA part of the market as we were introducing nexus to our customers. We've got great feedback on Nexus great feedback on the power efficiency of the architecture well one of the other things the customer.
<unk> asked us for is hey can you extend your power efficient architecture up into mid range, because we don't see.
We don't see a lot of innovation happening in mid range FPGA as you flattish is clearly innovating and small FPGA is can you extend your innovation into mid range as well because we love the power efficient architecture, and so we had enough customers ask us about that that we took a serious look at that and began investing.
Back in 2019, and a bond and those customers have helped guide us in terms of the product definition and capabilities. So yes, we see a good market opportunity in mid range FPGA based on the customer feedback as.
As well as our own view of the competitive.
The competitive landscape, there and we're really excited to bring <unk> to market.
As I mentioned in the prepared remarks, we plan to launch a bond in the second half of this year as we've said before we have over 100 customers engaged.
Bond and we think it's going to be a really exciting product and.
And our customers are definitely anxious.
<unk> awaiting it and we're pretty excited about it.
Okay.
Great. Thank you so much.
Thanks, Mark Your next question comes from David Williams of benchmark.
Hey, good afternoon, and thanks for letting me ask the question and congrats on the solid progress.
First I wanted to ask just maybe about the industrial automotive segment its been strong and it seems like this quarter maybe sequentially if it didnt grow as much as we had thought just wondering if there were anything particular there. If this is maybe supply constraints or timing or anything in particular about that market may be constraining the growth this quarter.
Yes, Thanks, David I don't think there is anything in particular was constraining the growth this quarter we've seen.
Really good solid growth from that.
From that segment, if I look kind of on.
On a full year basis in 'twenty, one industrial auto grew 32% year over year and that follows a strong year of growth in 2020, so even though.
In 2020 in the industrial auto segment was relatively weak for the industry. Overall, we grew double digits in 2020 in that segment and so we've had two good years of very strong growth. So I wouldn't read too much into the quarter to quarter sequential progress, we feel pretty good about the growth that.
We've seen over the last couple of years in this segment, we feel very good about the design win pipeline that we have in front of us and the ability to continue to to grow and expand in this segment lattice devices are just a great fit for industrial automation and robotics applications as well as automotive applications in <unk>.
As in infotainment. So we expect this to continue to be a growth driver for us in 2022 and beyond.
Okay great.
And then maybe just from a revenue split geographically it seemed like the Americas. It was up quite a bit is this just more maybe a product ramping or is that something that you think is more of a trend over time or are you developing I guess new relationships in the Americas.
Would maybe change that diversity.
Geographic diversification.
Yes, definitely a great question, David Yes, we actually made some significant investments in our sales and application engineering team.
In North America in particular in 2019, we believed that we were very underpenetrated in the North America.
Geography, and there was a lot of growth untapped growth potential. So we made some significant investments in our sales leadership and sales kind of feet on the street. Both in terms of account management as well as very importantly application engineering resources and what Youre seeing is now.
The payoff on that investment and trade, so youre seeing growth accelerate significantly in North America.
We're really pleased with that that's a direct result of those investments that we made back in 2019 I think it's also a testament to the to the great product lineup that we have today and the roadmap moving forward. So if I look at the product portfolio today I think it's the strongest product portfolio that the company has ever had.
In its history, if you look at both hardware and software together and then a very strong roadmap in front of us not just in small FPGA, but as we were mentioning earlier with the new <unk> platform, which will launch second half of this year moving us into mid range FPGA, Our North America customers as well as all of our worldwide customers see that.
<unk> roadmap ahead see us investing in really innovative competitive products and.
And I think thats generating a lot of engagement and momentum in our customer base certainly in North America, but also in our European theater in APAC as well.
Thanks, so much I appreciate the time.
Thanks, David.
As a reminder, in order to ask a question. Please press star one on your telephone.
Next question comes from Christopher Rolland of Susquehanna.
Hey, guys. Thanks for the question.
Around gross margin I believe your long term guidance was maybe 65%.
And.
<unk> guide is now beyond that.
And I know you don't guide more than one quarter, but I guess I was wondering first of all when we might get an update on that number and then secondly, hypothetically why couldn't this number be 70%.
Given.
You have this mix with a bond launching you have continued revenue growth here.
General mix up in products.
Thank you Chris for the question so in terms of our long term model.
We put that out at our Investor day in May of last year.
It was really a multiyear long term model so.
Our model that we want to achieve over multi years and so that's the way that we're looking at it of course, they always want to meet and exceed the model.
The way that we're looking at that and then in terms of.
Our results and why can't it be greater than 70% or significantly higher.
While we're really pleased with the results that we've achieved to date and we talked I talked about this a little earlier in the call 790 basis points since the end of 2018.
But our plan is to continue to execute on our gross margin expansion strategy.
<unk> optimization product cost efficiencies and also.
Newer products, bringing a higher margin to the table. So that's what we're going to continue to do and.
Evaluate the long term model is as we move forward, but that's how we're thinking about it.
Okay.
Okay.
Right.
Secondly.
A bunch of your FPGA competitors, although they may be more in the mid range.
Have astronomical lead times.
They've started to affect other businesses as well like networking for example.
I guess for Jim what kind of effect is this having on your business here.
Is this driving share gains or the two products, that's not really fun fungible or replaceable.
And then.
Maybe just talk about the overall rising tide from missing parts and using FPGA is to replace those.
What are the.
Kind of benefits on your business.
Thanks, Chris on the first part I would say that we have.
Definitely seen especially over the last six months an acceleration in <unk>.
Customers.
Customers shifting from our competitor devices FPGA devices to lattice devices.
I think thats a combination of two factors I think it's partially.
Our strong product portfolio, I think our customers see us investing in.
Our strong portfolio, both from a hardware and a software perspective, and a strong roadmap moving forward. So I think that gives them confidence that were were there with them today will be there for them in the future and then I do think some of the supply chain constraints.
<unk> accelerated customers move towards us and we're seeing that across a number of different markets I would say, especially in the industrial segment in particular and so yes, I think we are benefiting.
Fitting from that and I think that is I think that is sticky customer business that.
I think we will retain a long term and then in the second part of your question, which I think was more about.
I think you are getting more at FPGA is replacing other types of devices.
For instance, like Microcontrollers I would say there again, yes, we continue to see.
Good shift.
A good number of customers shifting from microcontroller designs to our lattice FPGA is and again theres technical reasons for that because.
A lot of our customers add things like artificial intelligence capability inference capability to their edge devices. The lattice FPGA is our naturally a good match for that they have higher performance per watt than for instance, a microcontroller and we have a tremendous amount of software to offer our customers to make that transition easy.
And I think that the benefits of the lattice product lineup as well as some of the constraints that our customers have seen in supply have.
Those two combination those two factors combined have helped push customers to lattice, maybe even faster than what they originally anticipated. So I think we're quite pleased with the customer momentum right now I would say the level of momentum and engagement is the highest its ever been in the company's history and we're very pleased about.
That.
Thanks, Tim and I'll get back in line.
Thanks, Chris.
Your last question comes from the line of Daniel.
Troy.
With West Park capital.
Thank you Hey, Jim I, just had a quick follow up on the mayor of metrics and the discussion around monetization of software and member metrics.
Typically.
I was wondering if you could just spend a minute on that and trying to understand mirror metrics sounds like at least initially.
Certainly plays into some of your consumer facing end markets client computing, probably other consumer.
Right.
And just wondering in terms of monetization are you leading with the sale of biometrics software and those types of cases like Lenovo or in some cases as mayor metrics pull FPGA, then and that would be how you monetize the software I just wanted to maybe understand that sales process a little bit better.
Yes, good question Ruben and I would say the answer is yes to ball right in some cases mirror metrics kind of leads the sale and pulls the silicon through and in other cases, our existing position across multiple different applications and industries helps pull mirror metrics into account.
We have over 9000 customers, we had many many more customers than mere metrics, which was a relatively small company and so we're able to introduce smear metrics now to.
An incredibly wide range of customers certainly client computing devices is.
A place where your metrics has already done well, but we see applications beyond that you mentioned into consumer devices, but I would also mention industrial automation and robotics automotive electronics mirror metrics is kind of core capability is not just artificial intelligence, but computer vision technology.
In particular, and we see applications for computer vision across multiple different.
Markets that we serve so I think there is there is again, it's kind of yes to both of your questions I think mere metrics will pull silicon through but we will be able to introduce mirror metrics to accounts that they've never had access to before and and in terms of monetization.
I think mere metrics already brings its existing revenue stream with that and Sherry calibrated you earlier and just kind of the size of that at least last year. Our intention of course is to to grow that mirror metrics revenue stream and then to drive some of the revenue synergies that I just talked to.
Beyond that.
Okay, that's very helpful and.
CRE was that just now on the on the gross margin I guess, that's part of it.
But I guess, sorry, I understand what youre, saying, 65% target that you gave us less than a year ago as the multi year sort of target and it may be ebbs and flows depending on.
Other considerations, but in terms of your answer to an earlier question just around some of your expansion strategy.
Thought I heard you say that they are.
There is still some room left I guess is the way to frame.
Those expansion strategies, whether they're cost efficiencies or pricing optimization for the rest of this year, which sounds like it will keep the gross margins, perhaps a little bit above that target.
In the near term is that the way you were trying to frame that answer.
Yes, maybe Ruben maybe I'll add a little bit of additional color. On this is I would say, we're we're very committed to continuing to expand our gross margin over time I think you can you can see that commitment over the last three years right 2019 2020 in 2021, all three of those years, we delivered about.
200 basis points of expansion on an annual basis in each one of those three years. So I think we've demonstrated not only our commitment but a track record of gross margin expansion certainly our intention to continue.
To drive margin expansion, where we can and number of different initiatives.
To go do that trade, so I guess that would be the additional color I'd provide on margin.
Good enough and yes, congrats game on that so thanks very much.
Thanks Robyn.
This concludes the Q&A session I will now hand, the call back to that as the CEO , Jim Anderson for closing remarks.
Alright, Thank you operator, and thanks again, everybody for joining us on today's call. We're very pleased to have delivered strong revenue growth gross margin expansion and record profitability in 2021, I think lattice really entered a new growth phase a new accelerated growth phase in 2021, we're really excited about the year ahead.
Ahead of us, especially given the strong momentum we have across our customer base and the continued expansion of the product portfolio. So thank you for joining US again today and we look forward to providing you with more updates in the future operator that concludes today's call.
This concludes today's conference call you may now disconnect.
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