Q3 2023 Lattice Semiconductor Corp Earnings Call

Greetings and welcome to the lattice semiconductor third quarter 2023 earnings call.

At this time all participants are in a listen only mode.

A brief question and answer session will follow the formal presentation.

If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.

As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host Rick Boucher.

Your director of Investor Relations.

You may begin.

Thank you operator, and good afternoon, everyone with me today are Jim Anderson, <unk>, President and CEO and Sherri Luther <unk> CFO.

We'll provide a financial and business review of the third quarter of 2023, and the business outlook for the fourth quarter of 2023.

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 that is semi dot com I.

I would like to remind everyone that during our conference call today, we may make projections or other forward looking statements regarding future events or the future financial performance of the company. We wish to caution you that such statements are predictions based on information that is currently available and that actual results may differ materially.

We refer you to the documents that the company files with yes, you'd see including our 10-K's 10-Q's and 8-K's. 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 fourth quarter of 2023.

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 went for 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.

Historical periods, we 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 Mad at semi Dot com.

Let me now I'll turn the call over to Jim Anderson, our CEO.

Thank you Rick and thank you everyone for joining us on our call today.

We delivered solid results in Q3 with quarterly revenue growth of 11% year over year, while maintaining healthy gross margins and operating margins and they let us have the strongest product portfolio in our history in terms of both hardware and software solutions and we continue to expand our product portfolio at a rapid rate, we're looking forward to the expected loss.

And the two newest members of our buying to mid range FPGA family.

Developers conference this summer let.

Let me touch on a few Q3 highlights in addition to the Q3 revenue growth we achieved a record non-GAAP gross margin of 76%, which was an increase of 110 basis points year over year, we expanded non-GAAP operating margin by 60 basis points year over year to 43% and region.

40% of free cash flow margin.

Let me now provide an overview of our business by end market.

In the communications and computing market revenue was up 6% sequentially and down 6% on a year over year basis, we're pleased to see the sequential uptick in this segment given some of the macroeconomic challenges in this end market has experienced over the past quarters. The sequential growth was driven in part by growth in data center servers or both.

General purpose.

These applications and we expect growth in servers to continue into the current quarter offset by softer demand in telecom infrastructure.

Over the long term, we continue to believe we are well positioned for growth in this segment given our growing content per server.

General purpose.

I used to be a guest centric than others as far as long term growth opportunities in data center networking and telecom infrastructure.

Turning now to the industrial and automotive market revenue declined 5% sequentially and was up 28% year over year.

While we're very pleased with the year over year growth, we did experience sequential softness in this market consistent with broader industry trends and we expect this American softness to continue into the current quarter.

However, we continue to expect this market to be a strong long term growth opportunity for lattice as we address some applications in industrial automation robotics, as well as automotive Adas and infotainment systems.

I'll now provide some product roadmap highlights we're driving the largest product portfolio expansion in the company's history, which we believe continues to create new future revenue streams for license. We recently introduced across the U N X. The seventh device family built on Atlanta snacks platform richness device family is the industry's first.

P J in its class with integrated U S functionality, which is applicable to many diverse use cases.

Also continue to be pleased with the progress on a new line of spar platform, which creates new greenfield revenue opportunities for lattice, we look forward to further expanding the pipeline.

The launch of two new five device families are lightest developers conference in early December.

Software is a key component of our strategy is our soccer accelerated customer adoption and enables faster time to market for our customers, while driving long term multi generational stickiness for our solutions.

Mindful also leverages the same soccer that our customers are already using today.

Access products, which enables faster customer adoption.

Pardon me, we look forward to sharing details about our software profile. They all other developers conference in December.

Overall, I'm pleased with our continued execution.

While we're not immune to macroeconomic headwinds in our end markets. We're excited about the continued rapid expansion of our product portfolio and we believe that we continue to be well positioned for long term growth across our core markets and now I'll turn the call over to our CFO Sherri Luther.

Thank you Jim.

We are pleased with our solid Q3 financial results on a year over year basis, we drove double digit revenue growth.

<unk> gross margin expansion and strong profitability.

We generated a record level of cash from operations.

To invest in our leadership product portfolio and return capital to shareholders through our 12th consecutive quarter of share buybacks.

Let me now provide a summary of our results.

Third quarter revenue was a record $192 2 million up 1% sequentially and up 11% year over year.

Sequential growth in the quarter was driven by communications and computing.

Year over year revenue growth was driven by industrial and automotive.

Our non-GAAP gross margin increased 10 basis points in Q3 compared to the prior quarter to a record, 76% and was up 110 basis points on a year over year basis.

Both the sequential and year over year increases in gross margin continued to be driven by our gross margin expansion strategy, which is in its fifth year.

non-GAAP operating expenses were $58 2 million compared to 58 million in the prior quarter and $51 3 million in the year ago quarter.

R&D expenses increased both sequentially and on a year over year basis, as we continue to make investments in our product roadmap.

Our non-GAAP operating margin was 43% in Q3 and was up 60 basis points compared to the year ago quarter.

Q3 earnings per diluted share with 53 cents compared to 48 cents in the year ago quarter, which represents 10% year over year growth.

Driving strong cash flow generation continues to be a key focus area for the company.

In Q3, we generated a free cash flow margin of 40% and returned capital to our shareholders by repurchasing $10 million in stock or approximately 110000 shares and the 12th consecutive quarter of our share repurchase program.

We ended the quarter with $114 million in cash.

Let me now review our outlook for the fourth quarter.

Revenue for the fourth quarter of 2023 is expected to be between 166 million and 186 million.

Gross margin is expected to be 75% plus or minus 1% on a non-GAAP basis.

Total operating expenses for the fourth quarter are expected to be between 57 million and 59 million on a non-GAAP basis.

In closing I am pleased with our financial results and continued execution.

While we are experiencing softness in some of our end markets. We remain focused on driving profitable long term growth.

Operator, we can now open the call for questions.

Thank you we will now be conducting a question and answer session.

If he would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate that your line is in the question queue.

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One moment, please while we poll for questions.

Thank you. Our first question comes from the line of Mark <unk> with Jefferies. Please proceed.

With your question.

Hi, Thanks for taking my question.

I had a question on.

Geographic trends can you talk about what you saw in the quarter geographically and how.

How things are playing out so far in Q4 would you expect those trends to continue in Q4.

Yeah.

Yeah, Thanks, Mark and I'll also talk about it in the context of the end markets as well.

So you know first of all for Q3.

First of all we were pleased with the revenue results in Q3, the sequential growth in the year over year, 11% growth.

In the comms and computing segment.

Look at Q3, we didn't see sequential uptick in revenue we were pleased with that.

That was one of the main drivers of that sequential growth from Q2 to Q3.

As data center servers, both general purpose servers as well as AI optimized servers from a geo perspective, it would be very much. The geo mix that you would expect for data for data center servers that go into both.

[noise] OEM server vendors as well as hyper scale or <unk>.

Just as a reminder, on that new generation of servers, that's starting to ramp here in the second half of the year and into next year, we do have significantly higher level of content and that new generation of servers. So that's a tailwind that we saw from Q2 to Q3, we expect that to continue.

Into Q4.

Now we are seeing in Q4, although we see servers being sequentially up within the communications and computing segment we.

We do see some headwinds and softer demand in communications specifically in five G.

Telecom infrastructure and.

That's both wireless and wireline infrastructure, we're seeing lower demand, we view that as really from lower capex spending driven by lower capex spending from telecom operators and that would be the geography that would be more from the European geography, Some Asia.

As well there.

It's softness around telecom infrastructure, and then net net for that Comms and computing segment. We expect as we go into Q4 from a sequential basis, we would expect that segment to be.

Flat to sequentially down with as I said with kind of server demand being up and and telecom infrastructure being down sequentially.

And then if I move over to the industrial Auto segment. Our other big segment. In Q3, you know first of all quite pleased with year over year growth that we saw in Q3, 28% year over year.

But towards the end of the end of Q3 really in the last kind of four to six weeks of Q3, we started to see demand soften from our industrial and automotive customers.

I would say that was really localized to the Asia geography.

And we expect that softness that we started to see at the end of Q3 extend into the current quarter in Q4 and.

And that's both a comment relative to the Asia geography, as well as in Q4 the current quarter.

We're starting to see demand softness in the Europe geography, as well and so we think that in a softening of demand that we saw towards the end of Q3 extends into Q4 and the net then is our industrial and auto segment, we're expecting that to be sequentially.

Down from Q3 to Q4, so hopefully that gives you some.

Callable by segment, but also to your question by geography as well.

That's very helpful. Thank you and if I may on a follow up can you talk about Ah bonds. It sounds like you are queuing up to more products our <unk>.

Problems in that family.

To launch.

How how should we think about our bonds relative to nexis and and and what do you think you really hit your stride on Ivan in terms of revenues.

Yeah, great. Thanks, Mark happy to talk about our bond for her I always I'm excited about our bond.

So first of all just in general we're really pleased with the continued progress on a bond to overall.

We launched that platform towards the end of.

Last year and just as a reminder, so violent as our new mid range FPGA platform. It doubles, our addressable market and what we're really excited about is it basically creates a entirely new greenfield revenue growth stream for the company. We feel really good about just the continued progress in execution on a bond you asked relative.

To Nexus.

When we look at the design win pipeline for Avant Yeah. It's a very strong it continues to grow and relative to Nexus I E. In terms of kind of at the same relative point in time, the pipeline is significantly larger, which we view as really positive.

In terms of revenue we continue to expect.

Operator: Greetings and welcome to the Lattice Semiconductor 3rd quarter, 2023 earnings call. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation.

A small amount of initial revenue from avant.

This quarter in Q4.

As we've talked about in the past it would be a small amount of initial revenue, but it's an important milestone for us because it marks the beginning of that revenue ramp for a bond into.

Operator: If anyone to require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded.

Into 2024 25 and beyond.

We're also really excited about launching in the next two device families in the van lineup. That's the von <unk> Ax, we're expecting to launch that at the Developers' conference allowed US developers conference in early December. So you know stay tuned you'll hear more about that at the Developers' conference well, what's great about.

Rick Muscha: It is now my pleasure to introduce your host, Rick Muscha, to your director of investor relations. Thank you, Rick. You may begin. Thank you operator and good afternoon everyone.

Rick Muscha: With me today, our Jim Anderson, Lattice's president and CEO and Sherri Luther, Lattice's CFO, will provide a financial and business review of a third quarter of 2023 and a business outlook for the fourth quarter of 2023. 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 at Lattice Semiconductor. I would like to remind everyone that during our conference call today, we may make projections or other forward-looking statements regarding future events or the future financial performance of the company.

That is by the time of the developers conference.

Now have with the addition of <unk> will have three device families are three different avaya device families in the hands of our customers that address a really wide range of applications across that midrange FPGA market and a lot of diverse applications across our customer base and so really.

At about that and I'm excited to now once we put the all the samples in the hands of customers you know to really focus on driving that revenue ramp as we move forward.

Rick Muscha: We wish to caution you that such statements are predictions based on information that is currently available and that actually results made it from materially. We refer you to documents that the company files with ESCC, including our 10Ks, 10Qs and 8Ks. 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.

One other I guess note as a reminder, an avant is it does leverage the same software as Nexus. So we leverage the same software investments that we've been making on the Nexus platform a find it takes advantage of those as well. So anyway, we're happy to have certainly share more about our bonds the new versions.

Rick Muscha: This call includes and constitutes the company's official guidance for the fourth quarter of 2023. 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 form such as the press release or publicly announced conference call.

<unk>, except the Developers' conference in December.

Very helpful. Thank you.

Thank you. Our next question comes from the line of Tristan <unk> with Baird. Please proceed with your question.

Rick Muscha: We were for primarily to non-GAP financial measures during this call. By disclosing certain non-GAP 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 provided recommendations of these non-GAP financial measures to GAP financial measures that can be found on the Investor Relations section of our website at lettuceemite.com.

Hi, good afternoon, so it sounds like the revenue shortfall relative to your expectation for Q4 is on industrial and automotive related so.

Assuming that gives us about 95 million in Q4 for that segment that sit above the run rate of 22.

The question and I know you've mentioned the weakness in China.

Jim Anderson: 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. We delivered solvers out in Q3 with quarterly revenue growth of 11% year-to-year while maintaining healthy growth margins and evaporating margins.

How much further downside could there be in that segment, that's been growing very meaningfully over the past two years.

Where do you think your true demand quality revenue run rates baseline is in that market and what drove the significant growth in the past few quarters was it driven by inventory build versus cotton gains. So just trying to see where we could match for me.

Jim Anderson: Today, lettuce has the strongest product portfolio in our history, in terms of all hardware and software solutions, and we continue to expand our product portfolio at a rapid rate. We're looking forward to the expected launch of the two newest members of our avant-garde range FPGA family at the lettuce developers conference in December.

It was stable at one rate quarterly run rate in future quarters in that segment.

Yeah. Thanks, Kristen so on the kind of back half of your question.

Jim Anderson: Let me tell you a few Q3 highlights. In addition to the Q3 revenue growth, we achieved a record non-GAP gross margin of 70.6%, which was an increase of 110 basis points year-to-year. We expanded non-GAP operating margin by 60 basis points year-to-year to 40.3% and we generated 40% pre-cashful margin.

We really see the growth that we drove through the first three quarters of this year and remember that follows multiple years of double digit growth.

It really is content gains.

You know we've had significant design win growth over the past three to four years and that's led to multiple years of double digit growth and yeah. If you look at if you just take the midpoint of our guide for Q4, we would still expect industrial and automotive segment to be up on a year over year basis.

Jim Anderson: Let me now provide an overview of our business by and Mark Ed. In the communications and computing market, revenue was up 6% to quenchally and down 6% on the year-to-year basis. We're pleased to see the sequential uptick in this segment given some of the macroeconomic challenges this end market has experienced over the past quarters. The sequential growth was driven in part by growth in data center servers for both general purpose and AI optimized applications.

As for Q4 and for full year. This year, we would expect industrial and automotive to have again significant growth you know for the full year.

Jim Anderson: And we expect growth in servers to continue into the current quarter, offset by software demand and 5G telecom infrastructure. Over the long term, we continue to believe we are well positioned for growth in this segment, given our growing content prescriber in both general purpose and AI optimized data center servers, as well as long-term growth opportunities in data center networking and telecom infrastructure.

For 2023.

As we said, we really view that as driven by content gains and those content gains. We believe our your multi multiyear revenue streams right a lot of those design wins that we win or which.

Begun production those stay in production for in the industrial and automotive segment for sometimes 357 years or longer. So those are really long lifetime.

Jim Anderson: Turning out to the industrial and automotive market, revenue declined 5% sequentially and was up 28% to year-to-year. While we're very pleased with the year-to-year growth, we did experience a bunch of softness in this market, consistent with broader industry trends, and we expect this market softness to continue into the current quarter. However, we continue to expect this market to be a strong, long-term growth opportunity for Lattice as we address growing applications in industrial automation and robotics, as well as automotive aid as in the containment systems. An alpha-vinting product load map highlights.

Revenue streams and.

So when we talk to our customers, though about the kind of near term headwinds.

What our customers are saying is that is near term demand softening based on their customers so their customers placing.

Lower number of orders on them.

And what they've shared with US is they believe that that is really driven by a lower capex spending by their customers.

Due to higher interest rates higher cost of capital et cetera, So, but if we step back you know really quite pleased with the growth that we've driven in this segment over the past years, certainly this year as well and we continue to see industrial and automotive as a long term growth opportunity for the company we believe that.

Jim Anderson: We're driving the largest product portfolio expansion in the company's history, which we believe continues to create new future revenue streams for Lattice. We recently introduced Croscent UNX, the seventh device family built on the Lattice Nexus platform. This newest device family is the industry's first FPGN class with integrated USB functionality, which is applicable to many diverse use cases. We also continue to be pleased with the progress on our new Lattice Bond platform, which creates new green-cold revenue opportunities for Lattice. We look forward to further extending the platform with the expected launch of two new affluent device families at our Lattice developers conference in early December.

Industrial automation and robotics automotive electronics that these applications are in multiyear secular growth.

Trends that will last for many years over the long term and Atlantis and lattice devices are really well positioned to take advantage of the secular growth trends and well positioned to gain gain more content with our customers, especially with not just the continued expansion of our <unk> product line.

Jim Anderson: Software is a key component of our strategy as our software accelerates customer adoption and they enable faster time to market for our customers while driving long-term multi-generational sickness for our solutions. Bond will also leverage the same software that our customers are already using today on our current Nexus products, which enables faster customer adoption on our new bond platform. We look forward to sharing new details about our software portfolio at our developers conference in December.

But you know the beginning ramp of our bond product line and the build out of our bronze product line as well.

Thank you.

Maybe useful and then for my follow up.

You've mentioned in the past that you have varied at all.

Terms of N T.

So.

What's your expectation for pricing next year, I know youre, not providing guidance, but given the weakness.

Do you think that we get back to maybe a low single digit decline in pricing. That's what's a cup a definitive companies have reported so far.

Jim Anderson: Overall, I'm pleased with our continued execution. While we're not immune to macroeconomic headwinds in our end markets, we're excited about the continued rapid expansion of our product portfolio and we believe that we continue to be well-positioned for long-term growth across our core markets.

This earning season and where are your lead times currently to a quarter ago.

Sherri Luther: I'll now turn the call over to our CFO, Sheri Luther. Thank you, Jim. We are pleased with our solid Q3 financial results. On a year-over-year basis, we drove double-digit revenue growth, continued growth margin expansion, and strong profitability. We generated a record level of cash from operations, continued to invest in our and returned capital to shareholders through our 12th consecutive quarter of share buy-back.

Yeah. Thanks, Tristan on pricing, we see our pricing is generally stable and durable.

We're in our as Sherry.

You said in your prepared remarks, we're in our fifth year of our gross margin improvement strategy, which included better pricing optimization and I would say over those five years, which you know there've been many different insurance market conditions over those five years that over those five years, we found that our pricing.

It's very durable very stable and.

Sherri Luther: Let me now provide a summary of our results. Third quarter revenue with a record, 192.2 million, up 1% sequentially and up 11% year over year. Sequential growth in the quarter was driven by communications and computing. Year over year revenue growth was driven by industrial and automotive. Our non-gap growth margin increased 10 basis points in Q3 compared to the prior quarter to a record 70.6% and was up 110 basis points on a year over year basis.

No. We don't we don't have any reason to think that that would change rates. We believe that our pricing will remain a remainder a bowl on lean times a second part of your question I wouldn't say that our lead times are for us are really back to normal which normal we would say is kind of pre COVID-19 time.

There can always be a particular silicon package combination that might be in tight supply, but overall I would say our lead times are generally back back to normal and then just more broadly I would say just we view of the semiconductor supply chain overall is really kind of back to back to normal in terms of supply availability.

Sherri Luther: Both the sequential and year over year increases in growth margin continue to be driven by our growth margin expansion strategy, which is in its fifth year. Non-gap operating expenses were 58.2 million compared to 58 million in the prior quarter and 51.3 million in the year ago quarter. R&D expenses increased both sequentially and on a year over year basis as we continue to make investments in our product roadmap. Our non-gap operating margin was 40.3% in Q3 and was up 60 basis points compared to the year ago quarter.

Great. Thank you very much.

Okay.

Thank you. Our next question comes from the line of Blake Friedman with Banc of America Securities. Please proceed with your question.

Hi, Thanks for taking my question just wanted to go back to <unk> and I'm just relative to 90 days ago have there been any changes related to your thoughts on how about is expected to ramp next year.

Have any of the recent macro developments impacted the timing of any customer ramps.

Sherri Luther: Q3 earnings per diluted share was 53 cents compared to 48 cents in the year ago quarter, which represents 10% year over year growth. Driving strong cash flow generation continues to be a key focus area for the company. In Q3 we generated a free cash flow margin of 40% and returned capital to our shareholders by repurchasing $10 million in stock or approximately $110,000 shares. In the 12th consecutive quarter of our sharing purchase program, we ended the quarter with 114 million in cash.

Thanks Blake.

I would say no I'm you know in terms of Chinas an event the only changes we've seen over the last 90 days would be continued growth in the design win pipeline, which we would've expected rate as we continue to engage with customers.

New device devices get closer to launch et cetera, we expect that overall pipeline to continue to grow so, but that's certainly one changes pipeline continuing to grow and then the only other changes are just our continued execution and progress on getting.

Sherri Luther: Let me now review our outlook for the fourth quarter. Revenue for the fourth quarter of 2023 is expected to be between 166 million and 186 million. Growth margin is expected to be 70.5% plus or minus 1% on a non-gap basis. Total operating expenses for the fourth quarter are expected to be between 57 million and 59 million on a non-gap basis.

<unk> ready for launch at the developers conference.

So and then the second part of your question it doesn't no changes relative to our thinking on how our bond twin would ramp next year over the following years, that's really driven.

Less by any macro changes more by just the level of customer engagement and design win progress and then the natural timing of our customers on you know when they selected a device to to they're just they're natural timeline to when they would enter production with those devices.

Sherri Luther: In closing, I am pleased with our financial results and continued execution. While we are experiencing softness in some of our end markets, we remain focused on driving profitable long-term growth.

Got it helpful. And then just as a quick follow up on Opex. If I look over the past few years, you know opex has kind of grown in the mid teen range on it on an annual basis, just kind of given the potential macro weakness over the next few quarters. Just curious how we should think about kind of the trajectory of opex moving forward. Thanks.

Operator: Operator, we can now open the call for questions. Thank you.

Operator: We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we pull for questions. Thank you.

Yeah. Thanks, Blake so from an Opex perspective, any well there you know there can be fluctuations from quarter declared a based on the timing of programs and things like that.

But you certainly have seen that over the past several years that we've been investing quite a bit and and our long term product portfolio and demand creation. So that's been going on now for several years and even in the current quarter the sequential or in the keeps me quarter sequentially as well as year over year, you've seen that we've increased our R&D spend and the investment.

Mark Lapassas: Our first question comes from the line of Mark Lapassas with Jeffries. Please proceed with your question. Hi, thanks for taking my question. I had a question on geographic trends. Can you talk about what you saw in the quarter, geographically, and how things are playing out so far in Q4? Would you expect those trends to continue in Q4? Thank you. Yeah, thanks, Mark.

It's that we're making so and investing in our product portfolio for the long term growth of the company that continues to be an area of focus for the company and we've talked about the fact that we're in the most rapid expansion of our product portfolio in the company's history, and so making sure that we make the right investments are very important there and so that that's definitely important to us.

To make sure that we do it in a disciplined way of course, but we're really pleased with that with.

The product launches are the customer momentum.

And you know as we look ahead. We can you can expect to continue to he has wanted to make sure that we are investing the right amount in our product portfolio.

Jim Anderson: And I'll also talk about it in the context to the end markets as well. So, you know, first of all, for Q3, you know, first of all, we're pleased with the revenue resulting Q3 in the sequential growth in the year of a year, 11% growth in the comms and computing segment. If we look at Q3, we did see sequential uptick in revenue. We were pleased with that. That was one of the main drivers of that sequential growth from Q2 to Q3 is data center servers, both general purpose servers, as well as AI optimized servers.

Just a reminder, that all providers from our Investor day earlier. This year, we talked about you know our opex.

30%.

Revenue and then R&D target at 18% to 20%. So you know that long term investment and it continues to be an area of focus for us.

Great. Thank you.

Thank you. Our next question comes from the line of Christopher Rolland with Susquehanna Susquehanna. Please proceed with your question.

Hi, guys. Thanks for the question.

Jim Anderson: From a geo perspective, it would be very much the geo mix that you would expect for data center servers that go into both OEM server vendors, as well as hyperscalers, just as a reminder on that new generation of servers that starting to ramp here in the second half of the year and into next year. We do have significantly higher level of content in that new generation of servers. So, that's a tailwind that we saw from Q2 to Q3.

So there've been a number of companies that have reset revenue our guidance recently.

And it's kind of spurred a revaluation of customer inventory and channel inventory out. There have you guys begun. This process are you really comfortable with understanding the level of inventory out there, particularly after this downturn.

Jim Anderson: We expect that to continue into Q4. Now, we are seeing in Q4, although we see servers being sequentially up within that communications and computing segment, we do see some headwinds and software demanding communication specifically in 5G telecom infrastructure. That's both wireless and wireline infrastructure. We're seeing lower demand. We do that is really from lower cap expending, driven by lower cap expending from telecom operators. And that would be the geography, that would be more from the European geography, some Asia as well, that's softness around telecom infrastructure.

<unk> are in demand at.

At least evident for for Q4.

Jim Anderson: And then net net for that comes in computing segment. We expect as we go into Q4, from a sequential basis, we would expect that segment to be flat sequentially down with, as I said, with kind of server demand being up and 5G telecom infrastructure being down sequentially.

And are there any patterns, you know geographically or end markets are or actually by a Disney themself themselves that you've you've noticed.

Yes, Thanks, Chris.

In terms of inventory, let me start with a distribution or channel inventory most of our revenue flow through vast majority of our revenue flows through distribution. So that's certainly really important to us we have very good visibility on distributor inventory when we look at distributor inventory, where it ended in Q3 I would say it very much.

Within the normal historical range for us or for Lantus in terms of our levels of DST inventory. So we see that does as healthy there are one or two.

Distributors that I would say are still on the relatively lean side in terms of inventories so they're a bit lean, but overall in aggregate.

Jim Anderson: And then if I move over to the industrial auto segment, our other big segment in Q3, you know, first of all, quite pleased with the year of year growth that we saw in Q3, 28% year over year. But towards the end of the end of Q3, really in the last kind of four to six weeks of Q3, we started to see demands often from our industrial automotive customers. I would say that was really localized to the Asia geography.

Our inventory level in the channel I would view as healthy and within our normal range and then if we move to end customer inventory shall we have thousands of end customers. So we don't have perfect visibility of and customer inventory.

Jim Anderson: And we expect that softness that we started to see at the end of Q3 extend into the current quarter Q4. And that's both a comment relative to the Asia geography, as well as in Q4, the current quarter, we're starting to see demand softness in the Europe geography as well. And so we think that a softening of demand that we saw towards the end of Q3 extends into Q4. And the net then is our industrial auto segment, we're expecting that to be sequentially down from Q3 to Q4. So hopefully that gives you some color both by segment but also to your question by geography as well. That's very helpful. Thank you.

There are some of our large strategic customers that give us visibility into their levels of inventory with those large strategic customers. We don't we don't see any obvious signs of excess inventory or pockets of inventory with those large strategic customers, but again, we don't have perfect visibility into that end customer inventory across all of our thousands of customers.

Great. Thanks, Shannon and perhaps another one for you.

So altera came out they had some kind of an interesting update on a kind of pre IPO track I guess first of all they talked about a decline in revenue it looks like maybe a third of their revenue peak to trough is their expectation for a decline I was.

During you know how you guys in terms of a an overall decline in revenue how you might see that.

Mark Lapassas: And if I may on the follow-up, can you talk about Avant? It sounds like you're queuing up two more products or products in that family to launch. How should we think about Avant relative to Nexus?

But also I just wanted your kind of take on refocusing on the low end with new products. They have coming in the first quarter of next year and also refocusing on the channel and industrial and auto I believe an area, where you've taken some convert considerable share.

Jim Anderson: And what do you think you really hit your stride on Avant in terms of revenues? Yeah, great. Thanks, Mark. Happy to talk about Avant. We're always excited about Avant. So, first of all, just in general, we're really pleased with the continued progress on Avant, overall. You know, we launched that platform towards the end of last year. And just as a reminder, Avant is our new mid-range FPGA platform. It doubles our addressable market.

Over the past few years thanks.

Jim Anderson: And what we're really excited about is it basically creates an entirely new greenfield revenue growth stream for the company. We feel really good about, you know, just the continued progress and execution on Avant. You asked relative to Nexus. When we look at the design line pipeline for Avant, it's very strong. It continues to grow and relative to Nexus in terms of kind of the same relative point in time. The Avant pipeline is significantly larger, which we've used really positive.

Yeah. So in the first part of your question I, you know I can only speak tire business and what we see you know what we see it largely covered I think in one of the earlier questions, which as you know overall for the full year. We're looking forward to another strong year for the full year in <unk>.

Overall growth despite the sequential guide down.

For Q4, if you look at where we're tracking for full year. We're you know we're pleased with the overall.

The overall track that we're on especially given some of the macroeconomic conditions that we're seeing in some of the end markets.

So we're pleased with our progress this year and this year to date.

No.

On the second part of your question what I would say is on competition is I would say the I'd start by saying the same thing that I said.

Jim Anderson: You know, in terms of revenue, we continue to expect a small amount of initial revenue from Avant, this quarter, Q4, as we've talked about in the past, it would be a small amount of initial revenue, but it's an important milestone for us because it marks the beginning of that revenue ramp for Avant into 2024, 25 and beyond. We're also really excited about launching the next two device families in the Avant lineup.

So over five years ago, when I joined the company in probably the lightest and plays are tired of hearing me say this but I continue to repeat it which is we will always assume there is robust competition in every market that we served in every product that we build rate that's our philosophy and so beginning in 2018, when I joined the company we.

We assumed that there would be robust competition, we plan our products accordingly.

And we feel really good about the competitive positioning of our products.

Jim Anderson: That's the Avant G&X. We're expecting to launch that at the developer's conference, a lot of developers' conference in early December. So, you know, stay tuned. You'll hear more about that at the developer's conference. But what's great about that is by the time of the developer's conference, we'll now have, with the addition of G&X, we'll have three device families, three different Avant device families in the hands of our customers that address a really wide range of applications across that mid-range FPGA market, and a lot of diverse applications across our customer base.

Both our small FPGA portfolio. The Nexus product line is very very competitive on power efficiency on size efficiency on features that we just launched our seventh device family based on the Nexus platform Fiverr in production and ramping number six and number seven.

Go we expect to go into production next year in the first and second half of next year respectively.

And then avant again, we feel really good about the competitive position of on time as we shared at the launch.

Jim Anderson: And so, really excited about that, and, you know, excited to now, once we put all the samples in the hands of customers, you know, to really focus on driving that revenue ramp as we move forward. And, you know, one other, I guess, note as a reminder on Avant is it does leverage the same software as Nexus, so we leverage the same software investments that we've been making in the Nexus platform Avant takes advantage of those as well. So, anyway, happy to certainly share more about Avant, the new versions, G&X, at the developer's conference in December. Very helpful. Thank you.

Last year, the power efficiency of a bond feature set the size efficiency are great. So we feel really good about that competitive positioning and clearly we'll share more about that at our developers conference that we have in December when we launch <unk>, but.

Yeah, I would say that you know, we'll always assume that there is robust competition in so and we will.

Our goal is to always make sure our products are absolute leadership in our markets and segments that they're targeting.

Great. Thanks, so much Jim.

Okay.

Thank you. Our next question comes from the line of Irene <unk> with Raymond James. Please proceed with your question.

Kristen Guerra: Our next question comes from the line of Kristen Guerra with Baird. Please proceed with your question. Hi, good afternoon. So, it sounds like the revenue shortfall wallet. Joseph to Expectation for Q4 is all industrial and automotive related so the swimming that gives us about 95 million in Q4 for that segment that's still above the one rate of 22. So the question and I know you've mentioned weakness in China. How much further downside could there be in that segment that's been growing very meaningfully over the past two years?

Thank you Jim you know given the macro weakness are you seeing any change in your customers I guess adoption of some of the new products I understand you have a lot of them coming up and in a lot of design activity out there, but given the macro do you see any impact at all.

Do they have on ramps in the next few quarters.

Yeah, Thanks screening and.

Let me address it in the more broad sense across all of our products and I can come back and touch on our bond specifically, but you know across all of our products, which would include a bump of not just but also nexus and even pre excess products.

Kristen Guerra: Where do you think you're true? What would demand Q1 rate baseline is in that market? And what would the significant growth in the past few quarters? Was it driven by inventory bill versus carbon gains? So just trying to see where we could land from a stable Q1 rate Q1 rate in future quarters in that segment.

Look at the design wins and the design win pipeline.

Through the first three quarters of this year.

We're seeing another very very healthy year of growth in our design wins.

This year and that follows multiple years of significant growth and so we're quite pleased with the continued expansion of the design win pipeline and of course that pipeline converts to revenue over the coming quarters. So we're pleased with that and we're actually pleased with that across.

Jim Anderson: Yeah, thanks Tristan. So on the kind of back half of your question, we really see the growth that we've grown through the first three quarters of this year. And remember that follows multiple years of double digit growth, really as content gains. You know, we've had significant design win growth over the past really three to four years, and that's led to multiple years of double digit growth. And yeah, if you look at if you could sort of take the midpoint of our guide for Q4, we would still expect industrial and automotive segment to be up on a year of a year basis for Q4.

Not just a bond, but nexus and I as I said, even pre nexus devices and important part of that design win growth is our software strategy I mentioned this in the prepared remarks, but you.

For over five years now we've been investing in our software portfolio. We've been building out a set of portfolio of application specific solution stacks that are targeted for specific end use cases and applications that make it a much very easy for customers to adopt.

Jim Anderson: And for full year this year, we would expect industrial and automotive to have again significant growth, you know, for the full year for 2023. And so as we said, we really do that as driven by content gains and those content gains. We believe our multi year revenue streams, right. A lot of those design wins that we win are which, you know, begun production, those stay in production for in the industrial and automotive segment for sometimes three, five, seven years or longer.

Our products and get to market quickly they help our customers.

Or switch from our competitors device to our device or customers that have maybe never used allowed us device before we're using a lot of innovation a new application that helps speed up that process and sell software, which has been one of the places that we've invested.

Significantly over the past years that certainly had a positive impact on the rate and pace of our our design wins and that benefits the nexus products <unk> products and because of bond leverages that that same software base that we've been building over the past.

Jim Anderson: So those are really long lifetime revenue streams. And so when we talk to our customers all about the kind of near term headwinds, what our customers are saying is that is near term demand, softening based on their customers, so their customers placing more number of orders on them. And that what they've shared with us is they believe that that's really driven by lower cap expending by their customers due to higher interest rates, higher cost of capital, et cetera.

Five years yeah.

Benefits avant as well and so we were pleased with back to kind of one of the original parts of your question. We're pleased with the rate and pace of Avant a design win growth and and we're looking forward to the to the revenue ramp.

You know starting as we expect at the very end of this year, but benefiting us in 2024 and 25 and beyond.

Got it. Thank you and then as a follow up Jim you talked about auto and industrial kind of weakening in Asia, maybe spreading beyond Asia into Europe as well.

Jim Anderson: So but if we step back, you know, really quite pleased with the growth that we've driven in this segment over the past years, certainly this year as well. And we continue to see industrial and automotive as a long-term growth opportunity for the company. We believe that industrial automation or robotics, automotive electronics, that these applications are in multi year secular growth trends that will last, you know, for many years over the long term in that lattice and lattice devices are really well positioned to take advantage of those secular growth trends and well positioned to gain gain more content. With our customers, especially with not just the continued expansion of our nexus product line, but the beginning ramp of our bond product line and the build out of our bond product line as well.

Nobody has a perfect visibility, but to the extent you can share with us what your customers are saying about you know how long these macro headwinds are going to continue and when some of these.

And I guess cross groundswell, what kind of bottom out.

And any color on that would be really helpful. Thank you.

Yes, Thanks, Irene Yeah, I think our I think our customers are struggling a little bit with how long.

That will be I think there their visibility.

Is a bit cloudy right.

Right now they're the when we talk with our customers. They are seeing that demand softness as they're really attributing that to again to a pullback in capex related to those higher interest rates higher cost of capital and as I shared earlier, we certainly saw that initially in the Asia.

Tristan Gerra: Thank you, that's very useful. And for my follow-up, you've mentioned in the past that you have very little in terms of LTSA. So, what's your expectation for pricing next year? I know you're not providing a guidance, but given the weakness, do you think that we get back to maybe a low single digit decline in pricing? That's what's a couple of final companies have reported so far. And where are your lead times currently, what it is to a quarter ago?

<unk> towards the end of our Q3 expecting that to continue into Q4, and then we expect to see that softening extended into Europe as well.

And you know, we'll give them at our next earnings call, we'll give more thoughts on what we're seeing in Q1 in next year at our next earnings call.

Thank you.

Thank you. Our next question comes from the line of Matt Ramsay with P. D. Cowen. Please proceed with your question.

Jim Anderson: Yeah, thanks, Tristan. On pricing, we see our pricing as generally stable and durable. You know, we're in our, as Sherri said in our prepared remarks, we're in our fifth year of our gross margin improvements strategy which included better pricing optimization. And I would say over those five years, which, you know, there have been many different sort of market conditions over those five years, that over those five years, we found that our pricing was very durable, very stable.

Yes. Thank you very much good afternoon guys.

Jim I wanted to dig into the trends in industrial and auto in that segment. So a few questions. There so apologies for the multipart thing but.

Could you help us a little bit first of all to break down that segment between the industrial and auto business just roughly percentages.

Part are you seeing any drastic.

Differences in lead time trends between the industrial business in the auto business, like which ones holding up better, which one worse and then lastly, if you could give us some visibility into specific customer or specific applications, where you're seeing this weakness.

Jim Anderson: And, you know, we don't, we don't have any reason to think that that would change, right? So, we believe that our pricing will remain, remain durable. On lead times, the second part of your question, I would say that lead times for us are really back to normal, which normal we would say is kind of pre-COVID time. You know, there can always be a, you know, particular silicon package combination that might be in tight supply, but overall, I would say our lead times are generally back to normal. And then just more broadly, I would say, just review the, you know, semiconductor supply chain overall is really kind of back to, back to normal in terms of supply availability.

Operator: Great.

Operator: Thank you very much.

Call. So far has talked about things very generally and I wanted to get a bit more specific if you could as to where you're seeing things that are holding up and where you're seeing things that have really weakened from an end application standpoint. Thanks.

Yes, Thanks, Matt.

I think those three parts. So I'll do my best to hit each one of those on on the breakdown of industrial and auto just as a reminder for ladder. If you look at that segment we are.

Definitely more heavily weighted towards industrial and automotive automotive is a relatively small percentage, we don't break out into sub segments.

Blake Friedman: Thank you. Our next question comes from a line of Blake Friedman with Bank of America securities. Please proceed with your question. Hi, thanks for taking my question. Just wanted to go back to Avant, and I'm just melted to 90 days ago. Have there been any changes related to your thoughts on how Avant is expected to ramp next year, and have any of the recent macro development impact of the timing of any customer is.

Just qualitatively that the majority of our revenue is industrial a lot.

It was a smaller part of that segment, but it has been over the past quarters, the faster growing part of the segment.

Industrial I think we talked about a number of times, so I won't kind of repeat the comments on industrial automotive more specifically.

We do anticipate automotive.

Blake Friedman: Thanks, Blake. I would say no, you know, in terms of changes on Avant, the only changes we've seen in the last 90 days would be, you know, continued growth in the design line pipeline, which we would have expected, right? As we continue to engage with customers as new devices, Avant devices get closer to launch, etc. We expect that overall pipeline to continue to grow. So, but that's certainly one changes pipeline continuing to grow.

Automotive market overall to start to soften in for instance, this quarter.

The belief is that the higher interest rates.

The fact that the theres been the restocking of car lots is largely behind us start to.

Affect the end market demand in terms of new automotive sales and so we're assuming that that market begins to soften this quarter on the second part of your question on lean time differences between the two I don't think we see any significant lead time differences between the two.

Blake Friedman: And then the only other changes, you know, are just our continued execution and progress on, you know, getting Avant GNX ready for launch at the developers conference. So, and then the second part of your question doesn't know changes relative to our thinking on how Avant would would ramp next year over the following years. That's really driven less by any macro changes more by just the level of customer engagement and design when progress. And then the natural timing of our customers on, you know, when they selected a device to just their natural timeline to when they would enter production with those devices.

But again that that segment for us is much more heavily weighted towards industrial.

And so we tend to be a little bit more focused on the industrial impact because it's a because of its heavier weighting on the third a third.

Third part of your question, which I think was around specific customers and applications. What I would say is that the demand softness that we've seen is really broad based it's we kind of talked about by geography, but within those geographies broad based across many customers. Many different applications. So we're certainly seeing that occur.

Jim Anderson: And then just as a quick follow-up on OPEX, if I look over the past few years, you know, OPEX has kind of grown in this mid-team range on an annual basis, just kind of given the potential macro weakness over the next few quarters, just curious how we should think about kind of the trajectory of OPEX moving forward. Thanks. Yeah, thanks, Blake. So from an OPEX perspective, I mean, while there, you know, there can be fluctuations from quarter to quarter based on the timing of programs and things like that.

Christ AR things like industrial automation applications robotics applications I, Yeah, I wouldn't I would really and we anticipate automotive electronics I would really like.

Categorize it as a it's a pretty broad based softening.

Got it. Thank you gentlemen, I appreciate the patience with the multipart question.

Second question really quick for Sherry.

You and I've talked a lot about the performance of the company on a free cash flow margin basis, and I think you got a question earlier about opex, but when you think about sort of floors and margins on an operating basis or a floor in free cash flow margin is there a certain <unk>.

Jim Anderson: But you certainly have seen that over the past several years that we've been investing quite a bit in our long-term product portfolio and demand creation. So that's been going on now for several years. And even in the current quarter, the sequential or in the Q3 quarter, sequentially, as well as year over year, you've seen that we've increased our R&D spend and the investments that we're making. So investing in our product portfolio for the long-term growth of the company that continues to be an area of focus for the company.

Trend that you would see in the end markets that would make you dial back spending or is this an environment, where you have all these new products with the bonds that are about to launch and you guys are going to sort of spend through the cyclicality in and see.

See where we end up on the other side because of the confidence in the product.

Jim Anderson: You know, we've talked about the fact that we're in the most rapid expansion of our product portfolio in the company's history. And so, you know, making sure that we make the right investments are very important there. And so that that's definitely important to us. We want to make sure that we do it in a discipline way, of course, but we're really pleased with with the, you know, the products, the customer momentum.

Yeah, Matt So I would say that you know on the <unk>.

Opex front investing for the long term growth of the company as you know is definitely something we then focus on focusing on we've been doing that quite a bit with all of the new products that we've launched them, but you know that.

That is and continues to be important and and the target that we put out at our Investor day for our R&D spend in particular is 18% to 20%. So it's a as a long term model that model remains intact.

Jim Anderson: And, you know, as we look ahead, you can expect to continue to see us want to make sure that we are investing the right amount in our product portfolio. The other is just a reminder that all provided from our investor day earlier this year, we talked about, you know, our OPEX, you know, 30 percent of revenue and then R&D target at 18 to 20 percent. So, you know, that long-term investment is continues to be an area of focus for us.

Blake Friedman: Great. Thank you.

Though what I would say is that you know the way we've been investing has always been in and what we consider to be a disciplined way and so we will continue I'm looking at the way that we're making those investments in a very disciplined way and you know and in terms of you know what you can see the guide for Q4. It in terms of what that's looking like we you know the company is very strong.

Christopher Rollins: Our next question comes from the line of Christopher Rollins with Suscojana. Please proceed with your question. Hi, guys. Thanks for the question. So there have been a number of companies that have reset revenue guidance recently. And it's kind of spurred a re-evaluation of customer inventory and channel inventory out there. Have you guys begun this process? Are you really comfortable with understanding the level of inventory out there? Particularly after this down tick in demand, at least evident for Q4. And are there any patterns, you know, geographically or end markets, or actually by just to themselves, themselves that you've noticed?

Our free cash flow strong cash generation free cash flow, we're really pleased with that we.

I'm thrilled that we you know 40% on a free cash flow margin for the quarter was it was really good results and.

We'll continue to focus on on that will continue to focus on making sure that we're investing in the right things gross margin, we believe our gross margins durable.

And we will continue to execute on our gross margin expansion strategy and focus on that area. So you know, we just really view that you know well continue to execute towards our long term model that we put out earlier this year.

Yeah.

Thank you.

As a reminder, if you would like to ask a question. Please press star one on your telephone keypad.

Question comes from the line of David Williams with Benchmark. Please proceed with your question.

Hey, good afternoon. Thanks for taking my question. So I guess, Jim first just kind of understanding how small the auto is relative to the industrial segment. It is a greenfield opportunity for you and just wondering if you could maybe talk about where you see the growth opportunities there and what you think the mix optimization would be if you think about those two would put it.

Jim Anderson: Yeah, thanks, Chris. In terms of inventory, let me start with distribution or channel inventory. Most of our revenue flows through vast majority of our revenue flows through distributions. That's certainly really important to us. We have very good visibility on distributor inventory. When we look at distributed inventory, where it ended in Q3, I would say very much within the normal historical range for us, or for lattice, in terms of levels of difty inventory.

Jim Anderson: So we see that as healthy. There are one or two distributors that I would say are still on the relatively lean side in terms of inventory. So they're a bit lean, but overall in aggregate, our inventory level and channel, I would view as healthy and within normal range. And then if we move to end customer inventory, so we have thousands of end customers. So we don't have perfect visibility of end customer inventory.

We are 50 50 or is there maybe a less of it makes it would be a more optimal for the business.

Yeah. Thanks, David So definitely the auto within industrial and auto auto is a smaller component.

But it has been a faster growing area for us over the past quarters. The applications that we would address would be Adas and infotainment systems.

Actually one of the recent wins that we announced with the customer was in Mazda New Mazda models of cars were used in their Adas system.

The latest device gets used between the the camera that's at the front or the rear of the vehicle. It gets used in that data stream to do some preprocessing of the video stream and so that's a very typical that Mazda application very typical application that we'd get used in automotive applications, but theres.

Jim Anderson: There are some of our large strategic customers that give us visibility into their levels of inventory with those large strategic customers. We don't see any obvious signs of access to inventory or pockets of inventory with those large strategic customers. But again, we don't have perfect visibility into that end customer inventory across all of our thousands of customers.

Many other examples as well I'm.

So we do see you know automotive electronics over the long term as first of all.

Christopher Rollins: Great, thanks, Jim, and perhaps another one for you.

Kind of an obvious secular growth area for the semiconductor industry overall, but definitely a great growth area for lattice and as well the combination of our devices being very power efficient very size of fish and having an incredible amount of flexibility in terms of the inner interconnect that we can serve us.

Jim Anderson: So, Altera came out, they had some kind of an interesting update on a kind of pre-IPO track. I guess first of all, they talked about a decline in revenue. It looks like maybe a third of their revenue.

And the ability to reprogram those devices and customize those for specific applications. We see all those kind of feature and in power efficiency benefits as being really well positioned.

To support automotive applications and that's why we continue to see automotive electronics as just a really strong growth area for the company over the long term.

Jim Anderson: But also, I just wanted you to kind of take on refocusing on the low end with new products they have coming in the first quarter of next year, and also refocusing on the channel, an industrial and auto, I believe an area where you've taken some considerable share over the past few years. Thanks. Yeah, so in the first part of your question, I can only speak to our business and what we see, what we see, the largely covered, I think, in one of the earlier questions, which is, overall, for the full year, we're looking forward to another strong year for the full year in terms of overall growth.

Okay.

Thanks for the color there and then secondly, we've.

We've talked about the gross margin and it's been surprisingly robust here and you pointed to that resiliency in the past, but I think this is the first time that we're seeing it really maintained on the softer outlook I guess does that give you greater confidence just in that trajectory in the sustainability of it and then does this maybe signal there could be more upside.

<unk> incrementally on the rebound thank you.

Yeah. Thanks, David So you know our gross.

Gross margin was 17, 6% a record so we're really thrilled with that and and the sequential improvement as well up 110 basis points, our year over year rather improvement.

Jim Anderson: Kind of despite the sequential guide down for Q4, if you look where we're tracking for full year, we're pleased with the overall track that we're on, especially given some of the macroeconomic conditions that we're seeing in some of the end markets. So we're pleased with our progress this year and this year to date.

But gross margin is something an area that we continue to focus on anywhere in our fifth year now as I mentioned in my prepared remarks, and you know that the factors that we've we've been executing on there. We continue to focus on you can see fluctuations in gross margin from one quarter to the next quarter, but you know what at the midpoint of our guide.

Jim Anderson: Now, on the second part of your question, what I would say is, on competition is, I would say the, I would start by saying the same thing that I said, you know, over five years ago, and I joined the company and probably the lattice employees are tired of hearing me say this, but I continue to repeat it, which is, we will always assume there's robust competition in every market that we served and every product that we build, right? That's our philosophy.

It is a range right, 75% plus or minus 1%. It is a range. We will continue to focus on on gross margin and we believe our gross margin is durable and you know when you look at our Investor day earlier, this year, where we.

We increased our gross margin target to the low seventy's that it's you know that's our long term target model in and will continue to drive toward that and maybe I'll just add.

Jim Anderson: And so, beginning in 2018, when I joined the company, we assumed that there would be robust competition, we plan our products accordingly. And we feel really good about the competitive positioning of our products. Both our small FPGA portfolio, the Nexus product line is very, very competitive on power efficiency, on size efficiency, on feature set. You know, we just launched our seventh device family based on the Nexus platform, five are in production and ramping number six and number seven will go, we expect to go into production next year and the first and second half of next year respectively.

One of the benefits we've seen.

On gross margin as our software attach rate as Sherry mentioned.

Margin can fluctuate quarter to quarter based on things like just mix of product, but one of the longer term trends that are that we think benefits our gross margin software attach as we've seen.

<unk> seen a higher percentage actually now over half of all latter silicon design wins have a what we call our software attach which means they are using one of the six software solution stacks that we've launched into the market and when customers adopt that solution stack that combination of silicon and <unk>.

Jim Anderson: And then Avant, again, we feel really good about the competitive position of Avant, as we shared at the launch last year, the power efficiency of Avant, feature set, the size efficiency are great. So, we feel really good about that competitive positioning and clearly we'll share more about that at the developer's conference that we have in December when we launch Avant GNX. But yeah, I would say that, you know, we'll always assume that there's robust competition. And so, and we'll, you know, our goal is to always make sure our products are absolute leadership in the markets and segments that they're targeting.

Software generally has a higher ASP and higher asps.

Design win usually has a higher gross margin associated with it. So I think that's one of the the tailwind over times at higher software adoption and the benefit that we see over time.

Thank you.

Our next question comes from the line of Ruben Roy with Stifel. Please proceed with your question.

Thank you Jim you said you like to talk about advanced So I was going to ask another question on avant and specifically around the pipeline and your comment on the pipeline at this point being significantly larger than.

Jim Anderson: Thank you so much Jim. Thank you.

Srinivas Pajjuri: Our next question comes from the line of Srinivas Pajjuri with Raymond James. Please proceed with your question. Thank you. Jim, you know, given the macro weakness, are you seeing any change in your customers, I guess, adoption of some of the new products? I understand you have a lot of them coming up and a lot of design activity out there. But given the macro, do you see any impact at all to have on ramps in the next few quarters?

You know kind of the same time line for Nexus and I think the question is I think if I remember correctly the initial avant.

SKU was.

A feature set I guess that was targeted towards edge processing and end potentially as AI is is that sort of the.

Area, where you're seeing most of the design activity or you know at this point is that broadened for whatever reason if it has if you could maybe talk about that a bit.

Yes, Thanks, Reuben I'll never get tired of talking about a bond so no problem with asking another question on mind.

Jim Anderson: Yeah, thanks, Srinivas Pajjuri, and let me address it in the more broad sense across all of our products, and I can come back and touch on a bond specifically. But you know, across all of our products, which would include a vompid not just but also nexus and even pre nexus products. You know, if I look at the design wins and the design win pipeline through the first three quarters of this year, you know, we're seeing another very, very healthy year of growth in our design wins this year.

So as I said, we are seeing.

Good growth of the pipeline and actually edge AI applications are.

Some of the initial growth that we've seen in the pipeline and where we expect some of the initial revenue to.

To come from in the initial ramp and that's actually has more to do with the sequence.

The products coming out when we launched the <unk> bond platform about a year ago I was the first device family that we have launched with along with the platform was the avant E and he actually stands for edge in the event. He was actually optimize more around edge applications things like doing artificial.

Jim Anderson: And that follows multiple years of significant growth. And so we're quite pleased with the continued expansion of the design win pipeline. And of course that pipeline converts to revenue over the coming quarters. So we're pleased with that. And we're actually pleased with that across not just a bond, but nexus and as I said, even pre nexus devices. An important part of that design win growth is our software strategy. I mentioned this in the prepared remarks, but, you know, for over five years now, we've been investing in our software portfolio.

Intelligence or inference processing at the edge in lots of different applications industrial applications automotive applications.

Other applications as well and so because that was the first product <unk>.

Family that we launched in the first samples that we delivered to customers that'll be the first product that begins to deliver revenue and so that's where and that's because AD products more optimized round edge applications edge AI in general.

Jim Anderson: We've been building out a set portfolio of application specific solutions tax that are targeted for specific and use cases and applications that make it much very easy for customers to adopt our products and get to market quickly. They help our customers either switch from a competitor's device to our device or customers that have maybe never used a lattice device before or using a lattice device in a new application, they help speed up that process.

That's where the kind of initial design win pipeline started to build and that's where the first revenue streams will we expect to start to generate now the the follow on device families of Ala and <unk>.

We're very excited about those products as well and as I shared earlier will will launch those at the Developers' conference in December now those will address a range of other applications that we're excited about too and we will we'll certainly talk more about that at the Developers' conference in December and so stay tuned we'll you'll hear about more of a.

Jim Anderson: And so software, which has been one of the places that we've invested significantly over the past years, that certainly had a positive impact on the rate and pace of our design wins. And that benefits the nexus products, the pre nexus products. And because of bond leverages that that same software base that we've been building over the past five years, it lent benefits of bond as well. And so, you know, we were pleased with back to kind of one of the original parts of your question.

That in December.

Got it great. Okay. So if I could ask a quick follow up.

I don't think you've talked about client side Pcs.

I don't think you mentioned it this quarter and maybe not last maybe you could give us an update especially with some new.

Jim Anderson: We're pleased with the rate and pace of a bond design win growth. And we're looking forward to the to the revenue ramp. You know, starting as we expect at the very end of this year, but benefiting us in 2024 and 25 and beyond. Thank you.

Processor, skus coming out and some excitement around potentially AI.

Centric notebook computers being done is there an opportunity for you folks with either content gains or are you seeing any design activity around that front at this point or is it too early.

Yeah. In fact, thank you for asking that happy to touch on that yes.

Srinivas Pajjuri: And as a follow up, Jim, you talked about auto and industrial kind of weakening in Asia and maybe spreading beyond Asia and to Europe as well, with us. What your customers are saying about how long this macro headwinds are going to continue and when some of these demand and cross currents will kind of bottom out. Any thoughts on any color on that would be really helpful. Thank you. Yeah, thanks, Trini. Yeah, I think our customers are struggling a little bit with how long that will be.

Yes, sure and client we continued to to view client as a large very large system Tam opportunity for us.

And we've.

We've announced a number of customers that we're already engaged with in the past, we had announced that lattice devices and software are used on Lenovo thinkpad devices.

G Graham series of shoes, but there are other.

Client Oems that we're working with as well.

It's a little too early to talk about those publicly but we're really excited about those engagements and we'll definitely share more about that as those get launched and enter production, but yeah lattice devices great.

Srinivas Pajjuri: I think their visibility is a bit cloudy right now. When we talk with our customers, they're seeing that demand softness as they're really attributing that to, again, to pullback and catbacks related to those higher interest rates, higher cost of capital. And as I shared earlier, we certainly saw that initially in the Asia Geography towards the end of our Q3 expecting that to continue into Q4. And then we expect to see that softening extended to Europe as well.

You know are a great solution for doing edge AI applications in client devices.

In particular, we can help drive battery savings we can help.

Prove security of the system a number of different applications that we were getting designed into and yeah. We continue to see this as a good growth area for the company and we'll share additional OEM engagements and design wins as those come closer to production.

Jim Anderson: And, you know, we'll give at our next earnings call. We'll get more thoughts on what we're seeing in Q1 and next year at our next earnings call. Thank you.

Great. Thank you Jim.

Thanks.

Matt Ramsey: Our next question comes from a line of Matt Ramsey with PD Cowan. Please proceed with your question. Yes, thank you very much.

Yeah.

Thank you.

If you would like to ask a question. Please press star one on your telephone keypad.

Jim Anderson: Good afternoon, guys. I wanted to dig into the trends in industrial and auto in that segment. So a few questions there. So apologies for the multi part thing. But maybe could you help us a little bit? First of all, to break down that segment between the industrial and auto business just roughly percentages. Second part, are you seeing any drastic differences in lead time trends between the industrial business and the auto business, like which one's holding up better, which one works.

Our next question comes from the line of Quinn Bolton with Needham. Please proceed with your question.

Thanks for taking my questions first for for sure and then one question for Jim Sheri.

On the gross margin as revenue pulls back is there any sort of significant under absorption or our operations costs that could start to be a factor for gross margin and then second it looks like at the analyst day or Investor Day, you set a target for Opex would be 30% of sales at the midpoint of guidance.

Jim Anderson: And then lastly, if you could give us some visibility into specific customer or specific applications where you're seeing this weakness. I mean, the call so far has talked about things very generally, and I wanted to get a bit more specific if you could as to where you're seeing things that are holding up and where you're seeing things that are really weakened from an end application standpoint.

In December it looks like Opex is going to be about 33% of sales is there an upper threshold, where you would start to cut absolute opex or could you see opex moving into the mid <unk> for a period of time as you invest in the long term business.

Yeah. Thanks, Glenn so from a gross margin perspective.

Jim Anderson: Thanks. Yeah, thanks, math. I think those three parts. I'll do my best to hit each one of those on the breakdown of industrial and auto just as a reminder for lattice. If you look at that segment, we are definitely more heavily weighted towards industrial than automotive automotive is a relatively small percentage. We don't break out into sub segments, but just qualitatively that the majority of our revenue is industrial auto is a smaller part of that segment, but it has been over the past quarters, the faster growing part of the segment.

You know the way the way I would look at it as you know we've contemplated all of US all of those sorts of things into our into the guide for Q4 to 78, 5% plus or minus 1% now the the gross margin expansion strategy that we've been executing on now for five years or in its fifth year. You know there are multiple factors there that we've talked about in the past that have had any.

That is to really get value for our products and in some of those do include product cost efficiencies, Jim talked about the software attach new products mix. There. There are so many various factors that are with our built into our gross margin expansion strategy that.

Jim Anderson: Industrial, I think we talked about a number of times, so I won't kind of repeat the comments on industrial automotive more specifically. We do anticipate automotive, the automotive market overall to start to soften in, for instance, this quarter. Just the belief is that the higher interest rates, the fact that there's been the restocking of car lots is largely behind us start to affect the end market demand in terms of new automotive sales, and so we're assuming that that market begins to soften this quarter.

Those are all fully contemplated as part of the guide that we provided for Q4 and again, we believe our gross margin is durable and will continue to drive toward our long term target model that we put out at our Investor day earlier this year from an Opex perspective, 30%, it's a long term.

Model right, that's our target and within that we talked about the R&D, 18% to 20% in SG&A I tend to 12%. So in terms of an upper limit on our Opex are the way that I would answer that is that you know we we continue to focus on making sure that we're making the right investments for the company for the long term growth of the car.

We want to do it in a disciplined way and will continue to manage the business in that way and we've made a ton of progress in terms of all the investments we've made with the products that we've launched to date.

Jim Anderson: On the second part of your question, on the lead time differences between the two, I don't think we see any significant lead time differences between the two. But again, that segment for us is much more heavily weighted towards industrial, and so we tend to be a little bit more focused on the industrial impact because it's because of its heavier weighting. On the third part of your question, which I think was around specific customers and applications, what I would say is that the demand talkness that we've seen is really broad based.

You know what we want to continue that focus because that's a long term growth of the company.

So you can see fluctuations on a quarterly basis as I mentioned before from an opex perspective, but that will still drive toward our target model that we put out at our Investor day.

Great and then for Jim I know, you've said multiple times. The one pipeline is bigger than the Nexus pipeline it at that.

Given point in time, but I guess, I'm wondering and I hope this doesn't come across as a very simple question, but does that translate into a faster revenue ramp for <unk> or is it just that the Tam is much bigger for von <unk>.

Jim Anderson: We kind of talked about by geography, but within those geographies, broad based across many customers, many different applications, so we're certainly seeing that across things like industrial automation, applications, robotics applications. Yeah, I would really anticipate automotive electronics. I would really categorize it as a pretty broad based software.

<unk> higher.

Asps and so the pipeline is bigger but it doesn't you know people shouldn't necessarily read into a faster event revenue ramp then nexus and I guess, where I'm getting this as youre getting lots of questions from investors. After the close kind of you know he can have on ramp help offset some of this macro weakness that you're seeing and still allow you to.

Matt Ramsey: Thank you, Jim, and I appreciate the patience with the multi-part question.

Sherri Luther: My thing is, really quick for Sherri. You and I talked a lot about the performance of the company on a free cash flow margin basis. It's just an environment where you have all these new products with a bond that are about to launch and you guys are going to sort of spend through the cyclicality and see where we end up on the other side because of the confidence in the products. Thanks.

Sort of grow in 2024, thank you.

Yeah, I think that what I would say is that avant design win pipeline being larger than Nexus is.

Certainly obviously positive we certainly expected that but yet it's still it's good to see that the.

The pipeline.

The whole idea of the pipeline is that it converts to revenue over time I think the major.

If you if you look at the major limiter or or governor over the revenue ramp over time once we put the samples in the hands of customers, it's actually more of the customers' rate and pace of being able to bring that product to market they're on their own natural.

Sherri Luther: Yeah, Matt, so I would say that on the op-ex front investing for the long-term growth of the company is definitely something we've been focusing on. We've been doing that quite a bit with all of the new products that we've launched. But that continues to be important and the targets that we put out at our investor day for R&D spend in particular is 18-20%. So as a long-term model, that model remains intact.

We'll beat rate in natural platform refreshes and so bill as we win designs they'll design avant in at the next of.

Platform refresh rate and so.

Sherri Luther: I think though what I would say is that the way we've been investing has always been in what we consider to be a disciplined way and so we'll continue looking at the way that we're making those investments in a very disciplined way. And in terms of the guide for Q4 and in terms of what that's looking like, the company has a very strong free cash flow, a strong cash generation, free cash flow.

That's more of the regime or the governor of that that growth rate over time of a bond.

Once we put the samples in customers' hands and then what I would say is I would refer you back to the Investor day that we did earlier this year, where we tried to characterize or give a sense of of how to think about both the continued ramp of our small FPGA products. We expect those to continue to grow over the long term.

Sherri Luther: We're really pleased with that. We're thrilled that we 40% free cash flow margin for the quarter was really good results and we'll continue to focus on that. We'll continue to focus on making sure that we're investing in the right things. Growth margin, we believe our growth margin is durable. We'll continue to execute on our growth margin expansion strategy and focus on that area. So we just really view that we'll continue to execute toward our long-term model that we put out earlier this year.

Operator: Thank you.

But then how to think about how avant layers on top of that over a multiyear period.

Got it thank you Jim.

Thanks.

Thank you, ladies and gentlemen that was our final question I would now like to turn the floor back over to lattices, President and CEO, Jim Anderson for closing comments.

Yes. Thank you operator, and thanks again, everybody for joining us on the call today, where we're pleased with the.

The solid results in Q3 and.

We're really excited to continue to execute on what we see as the biggest product portfolio expansion in the company's history and excited to share more about that at our developers conference in December.

Operator: As a reminder, if you would like to ask a question, please press star one on your telephone keypad.

David Williams: Our next question comes from the line of David Williams with Benchmark. Please proceed with your question. Hey, good afternoon. Thanks for taking my question. So I guess Jim, first, just kind of understanding how small the auto is relative to the industrial segment. It is a green fill opportunity for you and just wondering if you could maybe talk about where you see the growth opportunities there and what you think the mix optimization would be if you think about those two, would it be a 50-50 or is there maybe less of a mix that be more optimal for the business?

So thanks for the time and operator that concludes today's call.

Thank you. This concludes today's teleconference. You may now disconnect your lines at this time. Thank you for your participation.

Okay.

Goodbye.

[music].

Okay.

David Williams: Yeah, thanks David. So definitely, you know, the auto within industrial auto auto is a smaller component, but it has been a faster growing area for us over the past quarters. The applications that we would address would be ADAS and infotainment systems. Actually, one of the recent wins that we announced with the customer was in Mazda, new Mazda models of cars were used in their ADAS system. The lattice device gets used between the camera that's at the front or the rear of the vehicle.

Hum.

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Uh-huh.

[music].

Okay.

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[noise] [music].

David Williams: It gets used in that data stream to do some pre-processing of the video stream. And so that's a very typical Mazda application, very typical application that we get used in automotive applications, but there's many other examples as well. So we do see, you know, automotive electronics over the long term as, first of all, kind of an obvious secular growth area for the semiconductor industry overall, but definitely a great growth area for lattice as well.

David Williams: The combination of our devices being very power efficient, very size efficient, having an incredible amount of flexibility in terms of the interconnect that we can service and the ability to reprogram those devices and customize those for specific applications. We see all those kind of feature and power efficiency benefits as being really well positioned to support automotive applications. And that's why we continue to see automotive electronics as just a really strong growth area for the company over the long term.

Sherri Luther: Thank you for the color there and then secondly just Sherri you know we've talked about the gross margin and it's been surprisingly robust here and you pointed to that resiliency in the past but I think this is the first time that we're seeing it really maintained on this off the outlook and I guess does that give you greater confidence just in that trajectory and the sustainability of it and then does this maybe signal there could be more upside opportunity incrementally on the rebound. Thank you.

Sherri Luther: Yeah, thanks David so you know gross margin you know 70.6% a record so we're really filled with that and the sequential improvement as well of 110 basis points or year over year rather improvement but the margin is something an area that we continue to focus on and we were in our fifth year now as I mentioned in my prepared remarks and you know the factors that we've we've been executing on there we continue to focus on you can see fluctuations and gross margin from one quarter to the next quarter but you know at the midpoint of our of our guide it is a range right 70.5% plus or minus 1% it is a range we will continue to focus on on gross margin and we believe our gross margin is is is durable and you know when you look at our investor day earlier this year where we you know increased our gross margin target to the low 70s it's you know that's our long-term target model and we'll continue to to drive towards that. Yeah maybe I'll just add you know one of the benefits we've seen on gross margin is software attach rate you know as Sherry mentioned you know gross margin can fluctuate quarter to quarter based on things like just mix of product but one of the longer term trends that that we think it benefits our gross margin is software attach as we've seen a higher percentage actually now over half of all a lot of silicon design winds have a what we call a software attach which means they're using one of the six software solution stacks that we've launched into the market and when customers adopt that solution stack that combination of silicon and software generally has a higher ASP and that higher ASP design wind usually has a higher gross margin associated with it. So I think that's one of the tail winds over times at higher software adoption and the benefit that we see over time. Thank you.

Ruben Roy: Our next question comes from the line of Ruben Roy with Steve Foll. Please proceed with your question. Thank you.

Jim Anderson: Jim you said you like to talk about a bond so I was going to ask another question on a bond and specifically around the pipeline and your comment on the pipeline at this point and being significantly larger than you know kind of the same time line for nexus and the question is I think if I remember correctly the initial a bond skew was had a feature set I guess that was targeted towards edge processing and potentially you know the same time line for nexus and the question is I think if I remember correctly the initial a bond skew was had a feature set I guess that was targeted towards edge processing and the edge AI is that sort of the area where you're seeing you know most of the design activity or you know at this point has that broadened for whatever reason if it has if you could maybe talk about that. Yeah, thanks Ruben, I'll never get tired of talking about a bond, so no problem with asking another question on a bond.

Jim Anderson: Yeah, as I said, we are seeing really good growth of the pipeline. And actually, a GI applications are some of the initial growth that we've seen in the pipeline and where we expect some of the initial revenue to come from in the initial ramp. And that's actually has more to do with the sequence of the products coming out. When we launched the bond platform about a year ago, the first device family that we launched along with the platform was the event E and E actually stands for edge and the event E was actually optimize more around edge applications, things like doing artificial intelligence or inference processing at the edge in lots of different applications, industrial applications, automotive applications, other applications as well.

Jim Anderson: And so because that was the first product family that we launched and the first samples that we delivered to customers, that will be the first product that begins to deliver revenue. And so that's where, and because that products more optimized around edge applications, edge AI in general, that's where the kind of initial design when pipeline started to build and that's where the first revenue streams will we expect to start to generate.

Jim Anderson: Now the the following device families of a lot G and X were very excited about those products as well. And as I shared earlier, we'll, we'll launch those at the developer's conference in December. Now those will address a range of other applications that we're excited about to and we'll, we'll certainly talk more about that at the developer's conference in December. And so, you know, stay tuned. We'll, you'll hear more about that in December. Got it. Great. Okay.

Jim Anderson: So if I could ask a quick follow up, I don't think you've talked about client side PCs. I don't think you mentioned that this, this quarter or maybe not last, maybe you'd give us an update, especially with, you know, some new process excuse coming out and some excitement around potentially, you know, AI, centric, no computers being done. Is there an opportunity for for you folks with either content gains or are you seeing any design activity around that front at this point?

Jim Anderson: Where's it to early? Yeah, in fact, thank you for asking that happy to touch on that. Yes, so in client, we continued to view client as a large, a very large system Tam opportunity for us. And we've announced a number of customers that were already engaged with in the past. We had announced that lattice devices and software are used on Lenovo ThinkPad devices, LG Gram series, ASUS, but there are other client OEMs that we're working with as well.

Jim Anderson: It's a little too early to talk about those publicly, but we're really excited about those engagements and we'll definitely share more about that as those get launched and enter production. But yeah, lattice devices, great, you know, great solution for doing edge AI applications in client devices, you know, in particular, we can help drive battery savings. We can help improve security of the system a number of different applications that we were getting designed into.

Jim Anderson: And yeah, we continue to see this as a good growth area for the company and, you know, we'll share additional OEM engagements and design wins as those come closer to production. Great, thank you Jim. Thank you. As our minor, if you would like to ask a question, please press star one on your telephone keypad.

Quinn Bolton: Our next question comes from a line of Quinn Bolton with Needham. Please proceed with your question. Thanks for taking my questions.

Sherri Luther: First for Sherri and then the next question for Jim Sherri. On the gross margin is revenue pulls back? Is there any sort of significant underabsorption or operations cost that could start to be a factor for gross margin and then second looked like at the analyst day or sorry investor day you set a target for Optics be 30% of sales. At the midpoint of guidance in December look like Optics is going to be about 33% of sales.

Sherri Luther: Is there an upper threshold where you would start to cut absolute Optics or you know could you see Optics moving into the mid 30s for a period of time as you invest in the long term business. Yeah, thanks Quinn. So from a gross margin perspective you know the way I would look at it is you know we've contemplated all of those sorts of things into the guide for Q4. So 70.5% plus or minus 1%.

Sherri Luther: Now the gross margin expansion strategy that we've been executing on now for five years or in its fifth year. You know there are multiple factors there we've talked about in the past that have enabled us to really get value for our products and some of those do include product cost efficiencies Jim talked about the software attached new products mix there's there's so many various factors that are with our built into our gross margin expansion strategy that you know those are all fully contemplated as part of the guide that we provided for Q4.

Sherri Luther: And again we believe our our gross margin is durable and will continue to to drive toward the long term target model that we put out at our investor day earlier this year. From an Optics perspective 30% it's a long term you know model right that's our target and within that you know we talked about the R&D 18 to 20% and SGNA 10 to 12% so in terms of an upper limit on our Optics the way that I would answer that is that you know we we continue to focus on making sure that we're making the right investments for the company for the long term gross of the company we want to do it in a disciplined way.

Sherri Luther: And we'll continue to manage the business in that way we've made a ton of progress in terms of all the investments we've made with the products that we've launched to date and you know one we want to continue that focus because that's the long term gross of the company and so you know you can see fluctuations on a quarterly basis as I mentioned before from an Optics perspective but but we'll still drive toward our target model that we put out at our investor day.

Jim Anderson: Great and then for Jim I know you said multiple times the Vaughan pipeline is bigger than the Nexus pipeline at you know the given point in time but I guess I'm wondering and I hope this doesn't come across as a very simple question but does that translate into a faster revenue ramp for Vaughan or is it just that the TAM is much bigger for Vaughan it's you know 10X higher ASPs and so the pipeline's bigger. But it doesn't you know people shouldn't necessarily read into a faster event revenue ramp than Nexus and I guess where I'm getting this is you're getting lots of questions from investors after the close kind of you know hey can a vaughan ramp help offset some of this macro weakness, that you're seeing, and still allow you to sort of grow in 2024.

Jim Anderson: Thank you. Yeah, I think that what I would say is that Avant design when pipeline being larger than nexus is, you know, certainly obviously positive. We certainly expected that, but it's still it's good to see that. The pipeline, you know, the whole idea of the pipeline is that it converts to revenue over time. I think the major, if you look at the major limiter or governor over the revenue ramp over time, once we put the samples in the hands of customers, it's actually more the customer's rate and pace of being able to bring that product to market.

Jim Anderson: They're on their own natural beat rate and natural platform refreshes. And so they'll, as we win designs, they'll design Avant in at the next of platform refresh rate. And so that's more of the rate or the governor of that growth rate over time of Avant once we put the samples in customer's hands. And then I, what I would say is I would refer you back to the investor day that we did earlier this year, where we tried to characterize or give a sense of how to think about both the continued ramp of our small FPGA products. We expect those to continue to grow over the long term, but then how to think about how Avant layers on top of that over a multi-year period. Got it. Thank you, Jim. Thanks.

Jim Anderson: Thank you.

Operator: Ladies and gentlemen, that was our final question.

Jim Anderson: I would now like to turn the floor back over to Lattice's president and CEO Jim Anderson for closing comments. Yeah, thank you, operator. And thanks again, everybody for joining us on the call today. We're pleased with the solid results in Q3. And we're really excited to continue to execute on what we see as the biggest product portfolio expansion in the company's history. And excited to share more about that at our developers conference in December. So thanks for the time and operator that concludes today's call. Thank you.

Operator: This concludes today's teleconference. You may now disconnect your lines at this time. Thank you for your participation. Goodbye. Thank you.

Operator: Lattice Semiconductor Corp