Q2 2024 Lattice Semiconductor Corp Earnings Call

Operator: Greetings. Welcome to the Lattice Semiconductor second quarter 2024. At this time, all participants are in a listen only mode.

Operator: Welcome to the Lattice Semiconductor's second quarter, 2024, earliest call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation.

Speaker Change: Greetings. Welcome to the Lattice Semiconductor Second Quarter 2024 earnings call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation.

Operator: If anyone should require operator assistance during the conference, please press star zero on your telephone key panic. Please note this conference is being recorded.

If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Rick Muscha. You may begin.

Operator: A question-and-answer session will follow the formal presentation... If anyone should require operator assistance during a conference, please press star zero on your telephone. Please note this conference is being broadcast. I'll now turn the conference over to your host, Rick Muscha. You may begin. Thank you, Operator, and good afternoon, everyone. With me today are Esam Elashmawi, Lattice's interim CEO, and Sherri Luther, Lattice's CFO. We will provide a financial and business review for the second quarter of 2024 and the business outlook for the third quarter of 2024.

Rick Muscha: Now turn the conference over to you, Rick Muscha. You may begin.

Rick Muscha: Thank you, operator, and good afternoon, anyone. With me today, our son Elshmawi, Lattice's interim CEO, and Sherri Luther, Lattice's CFO, will provide a financial and business review of the second quarter of 2024 and the business outlook for the third quarter of 2024. If you have not obtained a copy of our earnings press release, they can be found at our company website in the Investor Relations section at www.LatticeSemiconductor.com. I would like to remind everyone that during our conference call today, we may make projections or other forward-looking statements regarding future events. For the future financial performance of the company, we wish the company that such statements are prediction-based on information that is currently available in the natural results major from material.

Operator: If you have not obtained a copy of our earnings press release, it can be found on our company website in the Investor Relations section at MattisSemi.com. I would like to remind everyone that during our conference call today, we may make projections or other forward-looking statements regarding future events 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 the actual results may differ materially.

Operator: We refer you to documents that the company files with the SEC, including our 10-K, 10-Q, and 8-K. These documents contain and identify important risk factors that could cause actual results to differ materially from those contained in our projections or forward-looking statements.

Rick Muscha: Thank you, Operator, and good afternoon, everyone. With me today are Esam Elashmawi, Lattice's interim CEO , and Sherri Luther, Lattice's CFO . We will provide a financial and business review of the second quarter of 2024 and the business outlook for the third quarter of 2024.

Speaker Change: 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 latticesemi.com.

Speaker Change: 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.

Speaker Change: We wish to caution you that such statements are predictions based on information that is currently available, and the actual results may differ materially. We refer you to documents that the company files with the SEC, including our 10-K, 10-Q, and 8-Ks.

Rick Muscha: We refer you to documents of the company files with ESBC, including our 10-K, 10-Qs, and 8-Ks. 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.

Speaker Change: 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.

Rick Muscha: This call includes and constitutes the company's official guides for the third quarter of 2020. If at any time after this call, we communicate any material changes to this guy, we intend that such updates will be done using a public forum, such as the press release will publicly announce on this call.

Rick Muscha: This call includes and constitutes the company's official guidance for the third quarter of 2024. If at any time after this call we communicate any material changes to this guidance, we intend that such updates will be done in a public forum, such as a press release or publicly announced conference call. We will refer primarily to non-GAAP financial measures during this call.

Speaker Change: This call includes and constitutes the company's official guidance for the third quarter of 2024. If at any time after this call we communicate any material changes to this guidance, we intend that such updates will be done using a public forum, such as a press release or publicly announced conference call.

Rick Muscha: We will refer primarily to non-GAAP financial measures during this call. By disposing certain non-GAAP information, management intent to provide investors with additional information to permit further analysis of the company's performance and underline trends. For historical periods, we provided reconciliation of the non-GAAP financial measure.

Speaker Change: We will refer primarily to non-GAAP financial measures during this call. By disclosing certain non-GAAP information, management intends to provide investors with additional information to permit further analysis of the company's performance and underlying trends.

Rick Muscha: By disclosing certain non-GAAP information, management intends to provide investors with additional information to permit further analysis of the company's performance and underlying trends. For historical periods, we've provided reconciliations of these non-GAAP financial measures to GAAP financial measures that can be found on the Investor Relations section of our website at matissemi.com. Now it's going to fall over to Esam Elashmawi, our interim CEO. Thank you, Rick, and thank you, everyone, for joining us on our call today.

Speaker Change: For 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 latticesemi.com. And now it's time to call over to Esam Elashmawi, our Interim CEO .

Rick Muscha: To get my financial measures, I can be found on the industrial relations section of our website at www.natathemi.com.

Esam Elashmawi: Now to the call over to us on most hours, our interim CEO.

Esam Elashmawi: Thank you, and thank you everyone for joining us on our call today. While many of our investors, analysts, and customers know me, I'd like to provide a recent introduction given our recent CDO transition. In the 60 years that I've been at Latice, Chief Strategy and Marketing Officer, I've been deeply involved in both the development and execution of our strategy. During that time, we have significantly strengthened our product portfolio by natural performance and competitive positions. Our accelerations of new product launches have created new growth opportunities and deepen our customer relationships. The opportunities that made me excited to join Latice back in 2018 are even more compelling today.

Rick Muscha: While many of our investors, analysts, and customers know me, I'd like to provide a brief introduction given our recent CEO transition. In the six years that I've been at Lattice as Chief Strategy and Marketing Officer, I've been deeply involved in both the development and execution of our strategy. During that time, we have significantly strengthened our product portfolio, financial performance, and competitive position. Our accelerated pace of new product launches has created new growth opportunities and deepened our customer relationships.

Isamu Oshinawe: Thank you, Rick, and thank you, everyone, for joining us on our call today. While many of our investors, analysts, and customers know me, I'd like to provide a brief introduction given our recent CEO transition.

Isamu Oshinawe: In the six years that I've been at Lattice as Chief Strategy and Marketing Officer, I've been deeply involved in both the development and execution of our strategy.

Isamu Oshinawe: During that time, we have significantly strengthened our product portfolio, financial performance, and competitive position. Our accelerated cadence of new product launches has created new growth opportunities and deepened our customer relationships.

Rick Muscha: The opportunities that made me excited to join Lattice back in 2018 are even more compelling today. Lattice is fortunate to have a deep bench of talent throughout our organization that is committed to building on our momentum and delivering future value creation for our customers and shareholders. As was previously announced, the Board of Directors has commenced a search process to identify a permanent CEO and will consider both internal and external candidates.

Isamu Oshinawe: The opportunities that made me excited to join Lattice back in 2018 are even more compelling today. Lattice is fortunate to have a deep bench of talent throughout our organization that is committed to building on our momentum and delivering future value creation for our customers and shareholders.

Esam Elashmawi: Latice is fortunate to have a defense of talent throughout our organization that is committed to building on our momentum and delivering future value creation for our customers and shareholders.

Esam Elashmawi: As was previously announced, the Board of Directors has come as a search process to identify a permanent CEO and will consider both internal and external candidates. While there is no specified timeline for completion, this search is the Board's highest priority. I am fully committed to that process and confident that the ultimate outcome will be in the best interest of all Latice statements.

Speaker Change: As was previously announced, the Board of Directors has commenced a search process to identify a permanent CEO and will consider both internal and external candidates.

Esam Elashmawi: While there is no specified timeline for completion, this search is the board's highest priority. I am fully committed to that process and confident that the ultimate outcome will be in the best interest of all Lattice stakeholders. Now moving to the second quarter of 2024, inventory normalization and near-term cyclic corrections continue as revenue declines 12% sequentially and 35% year over year. However, growth margins remain at 69%, and we continue to deliver profitability

Speaker Change: While there is no specified timeline for completion, this search is the board's highest priority. I am fully committed to that process and confident that the ultimate outcome will be in the best interest of all Lattice staples.

Esam Elashmawi: Now moving to the second quarter of 2024. The inventory normalization and near-term sickling corrections continue as revenue declined 12% sequentially and 35% year-over-year. Growth margins remain at 69%, and we continue to deliver profitability. In Q2, we continue to understand customer demand as inventory normalization continues. On an end-market basis, demand remains soft across industrial and automotive in Q2, with revenue down 23% sequentially as customers continue to reduce their inventory levels. We remain well positioned for growth over the longer term, with our differentiated hardware and software solutions. Within communication and computing, Q2 revenue was flat sequentially. Strength in data set and networking and servers help offset incremental weakness wireless communication.

Speaker Change: Moving to the second quarter of 2024, the inventory normalization and near-term cyclic corrections continued as revenue declined 12% sequentially and 35% year-over-year.

Speaker Change: Gross margins remained at 69%, and we continue to deliver profitability. In Q2, we continue to undershift to end customer demand as inventory denormalization continues.

Esam Elashmawi: In Q2, we continue to undershift to end customer demand as inventory denormalization continues. On an end-market basis, demand remains soft across industrial and automotive, with revenue down 23% sequentially as customers continue to reduce their inventory levels. We remain well-positioned for growth over the longer term with our differentiated hardware and software solutions. Within communications and computing, Q2 revenue was flat sequentially.

Speaker Change: On an end-market basis, demand remains soft across industrial and automotive Q2, with revenue down 23% sequentially as customers continue to reduce their inventory levels.

Speaker Change: We remain well-positioned for growth over the longer term with our differentiated hardware and software solutions. Within communications and computing, Q2 revenue would slack sequentially. Strength in data center networking and servers help offset incremental weakness in wireless communication.

Esam Elashmawi: Strength in data center networking and servers helped offset incremental weakness in wireless communication. As we discussed previously, we expect the inventory normalization cycle to continue through the second half of this year. We are seeing signs of improvement that, when combined with our new product ramp, we anticipate will lead to a return to growth. As for our product roadmap, we intend to continue investing in and accelerating our highly differentiated value portfolio.

Esam Elashmawi: As we discussed previously, we expect the inventory normalization cycle to continue through the second half of this year. We are seeing signs of improvement that, when combined with our new product ramps, we anticipate will each way return to growth. In terms of our product roadmap, we intend to continue investing in and accelerating our highly differentiated value portfolio. In our small SVP portfolio, our 7-to-by family is on track to start ramping in Q3. We recently announced the eight-to-by family, the Latest Mod XO5DNX, and the latest version of the Latest Century solution step. This combination extends our leadership and security-focused hardware and software solutions.

Speaker Change: As we discussed previously, we expect the inventory normalization cycle to continue through the second half of this year. We are seeing signs of improvement that, when combined with our new product ramp, we anticipate will lead to a return to growth.

Speaker Change: In terms of our product roadmap, we intend to continue investing in and accelerating our highly differentiated value portfolio.

Esam Elashmawi: In our small FBJ portfolio, our 7th device family is on track to start ramping in Q3. We recently announced the 8th device family, the Lattice MOC X05-DNX, and the latest version of the Lattice Sentry Solution Stack.

Speaker Change: In our small FBJ portfolio, our 7th device family is on track to start ramping in Q3. We recently announced the 8th device family, the Lattice Mach X05VNX, and the latest version of the Lattice Sentry Solution Stack.

Esam Elashmawi: This combination extends our leadership in security-focused hardware and software solutions. Last quarter, we talked about adding new Nexus device options to address increased customer demand. We're already delivering on that roadmap expansion, having recently launched CERDIS-NX28 and CERDIS-NX09, which offer class-leading power efficiency, small size, and reliability, with flexible migration options. These devices are designed to accelerate a broad range of communications, computing, industrial, and automotive applications.

Speaker Change: This combination extends our leadership in security-focused hardware and software solutions.

Esam Elashmawi: Last quarter, we talked about adding new nested-to-by options to address increased customer demand. We're already delivering on that roadmap expansion, having recently launched service NX-28 and service NX-09, which offer a class-leaving power efficiency, small size, and reliability with flexible migration options. These devices are designed to accelerate a broad range of communications, computing, industrial, and automotive applications. Customer feedback has been very positive as we continue to invest innovation fees in the small FPGA segment. In our mid-range FPGA portfolio, we've already launched three of on-devices. The first device of on-b achieved initial revenue class December, driven by numerous applications.

Speaker Change: Last quarter, we talked about adding new Nexus device options to address increased cluster demand.

Speaker Change: We're already delivering on that roadmap expansion, having recently launched CERDIS-NX28 and CERDIS-NX09, which offer class-leading power efficiency, small size, and reliability, with flexible migration options.

Speaker Change: These devices are designed to accelerate a broad range of communications, computing, industrial, and automotive applications. Customer feedback has been very positive as we continue to invest innovative speed in the small FPGA segment.

Esam Elashmawi: Customer feedback has been very positive as we continue to invest in innovative feed into the small FPGA segment. In our mid-range FPGA portfolios, we've already launched three Elantra by SAS. The first device, Avant-B, achieved initial revenue last December, driven by numerous applications.

Speaker Change: In our mid-range FPGA portfolio, we've already launched three Avant devices. The first device, Avant E, achieved initial revenue last December , driven by numerous applications.

Esam Elashmawi: We expect a bond E-series to ramp throughout the port of this year. We're on track and aimed for both a bond G and X to achieve initial revenue before the end of this year. Customer momentum remains robust. We'll recall 90% of the party customers who are on are already customers of Latest today, and a bond leverage is the same software that customers use today on Netflix. We are pleased with the market traction of a bond as it expands our stem and driver's expected additional long-term revenue and acceleration. As we have mentioned in previous calls, latest hardware and software solutions are increasingly being used in a wide variety of AI-related applications.

Esam Elashmawi: We expect the Avanti series to ramp throughout the course of this year. We're on track and aim for both Avanti and X to achieve initial revenue before the end of this year. Customer momentum remains robust. You'll recall 90% of the target customers for Avon are already customers of Lattice today, and Avon leverages the same software that customers use today on Netflix.

Speaker Change: We expect the Avant E Series to ramp throughout the course of this year. We're on track and aim for both Avant G and X to achieve initial revenues before the end of this year.

Speaker Change: Customer momentum remains robust. You'll recall 90% of the target customers for Avon are already customers of Lattice today. And Avon leverages the same software that customers use today on Nexus.

Esam Elashmawi: We are pleased with the market traction of Avant as it expands our SAM and DrySix product lines. Additional long-term revenue acceleration is expected. As we have mentioned in previous polls, Lattice hardware and software solutions are increasingly being used in a wide variety of AI-related applications. For example, in AI-optimized servers in the data center, where the system is running generative AI workloads, Lattice devices are used in the control, management, and security of the AI computing system.

Speaker Change: We are pleased with the market traction of Avant as it expands our SAM and DRACX, expecting additional long-term revenue acceleration.

Speaker Change: As we have mentioned in previous calls, Lattice hardware and software solutions are increasingly being used in a wide variety of AI-related applications. For example, in A-optimized servers in the data center, where the system is running generative AI workloads, Lattice devices are used in the control, management, and security of the AI computing system.

Esam Elashmawi: For example, an AI-optimized server in the data center, when a system is running generative AI workloads, latest devices are used in the control management security of the AI computing system. Another example is that the edge AI is able to application, when latest solutions are used for running the AI inference algorithms that provide features such as user presence and data detection.

Esam Elashmawi: Another example is in the Edge AI-enabled applications, where Lattice solutions are used to run the AI inference algorithms that provide features such as user presence and data detection, and Client and Industrial. Lastly, a third example is AI-enabled applications where Lattice solutions are used to aggregate and pre-process sensor data that is used for AI processing. I wanted to highlight that last quarter we began shipping a Lattice NVIDIA Edge AI solution to customers. This solution, which we first presented at our 2023 Developers Conference, is designed to accelerate the development of edge AI applications using the NVIDIA platform.

Speaker Change: Another example is in the Edge AI-enabled applications, where Lattice solutions are used to run the AI inference algorithms that provide features such as user presence and data detection in client and industrial systems.

Esam Elashmawi: In client and industrial business. Lastly, a third example is AI-enabled applications where Lattice solutions are used to aggregate and pre-cock that censor data that is used for AI processing. I wanted to highlight that last quarter we began shipment of Lattice and the VDS, SAAI solutions to customers. This solution, which we first presented at our 2020 Chief Developers Conference, is designed to accelerate the development of SAAI applications using the SAAI platform.

Speaker Change: Lastly, a third example is AI-enabled applications where Lattice solutions are used to aggregate and pre-process sensor data that is used for AI processing. I wanted to highlight that last quarter we began shipping of Lattice NVIDIA Edge AI solutions to customers.

Speaker Change: This solution, which we first presented at our 2023 Developers Conference, is designed to accelerate the development of edge AI applications using the NVIDIA platform.

Esam Elashmawi: I'm pleased to share that on December 10th and 11th, we'll be hosting our second Lattice Developers Conference, which will be held live and virtual on Saturday. Driven by our increase in ecosystem and customer base, we even expect industry keynote presentations and breakout sessions, and a robust showcase of FPJ-based technology demonstrations at new product announcements.

Esam Elashmawi: I'm pleased to share that on December 10th and 11th, we'll be hosting our second Lattice Developers Conference, which will be held live and virtual on Saturday. Driven by our increase in the ecosystem and customer base, you can expect industry keynote presentations and breakout sessions, a robust showcase of FPGA-based technology demonstrations, and new product announcements. In summary, we remain focused and continue to execute on our strategy. We believe Lattice is competitively well-positioned and in the middle of the largest product portfolio expansion in our history with strong customer momentum. I'll now turn the call over to our CFO, Sherri Luther. Thank you, Esam.

Speaker Change: I'm pleased to share that on December 10th and 11th, we'll be hosting our second Lattice Developers Conference, which will be held live and virtual on Saturday.

Speaker Change: Driven by our increase in ecosystem and customer base, you can expect industry keynote presentations and breakout sessions, a robust showcase of FPGA-based technology demonstrations, and new product announcements.

Esam Elashmawi: In summary, we remain focused and continue to execute on our strategy. We believe Lattice is competitively well-traditioned, and in the middle of the largest category of fashion in our history, the strong, flexible, and massive.

Speaker Change: In summary, we remain focused and continue to execute on our strategy. We believe Lattice is competitively well-positioned and in the middle of the largest product portfolio expansion in our history with strong customer momentum.

Sherri Luther: I'll now turn the follow-over to our CFO, Sherry Luther.

Speaker Change: I'll now turn the call over to our CFO , Sherri Luther.

Sherri Luther: Thank you, Tom.

Sherri R. Luther: Second quarter financial results reflect continued softness with revenue coming in slightly below the midpoint of our guide. However, both partners remain stable with continued profitability. With a strong focus on cash and capital allocation, we continue to return cash to shareholders to share in the company's success. Let me now provide a summary of our results. Second quarter revenue was $124.1 million, down 12% sequentially from the first quarter and down 35% year-over-year, reflecting continued inventory normalization in the industrial and automotive markets.

Sherri Luther: Second quarter financial results are going to continue softness for the revenue coming in slightly below the middle of our minds. So, as long as we remain stable, we continue soft liquidity. With a strong focus on cash and capital allocation, we continue to return cash to Sheryl. You're going to share about that.

Sherri R. Luther: Thank you, Esam. Second quarter financial results reflected continued softness with revenue coming in slightly below the midpoint of our guide.

Sherri R. Luther: Both markets remain stable with continued profitability. With a strong focus on cash and capital allocation, we continue to return cash to shareholders through share buybacks. Let me now provide a summary of our results.

Sherri Luther: Let me now provide a summary of our results. Second quarter revenue was 124.1 million cash, so it's actually from first voter and now 35% yield a year. We're reflecting continued inventory normalization in the industrial and automated market things. Our Q2 non-cat growth margin was 59% in line with prior holders, reflecting the availability of a little margin despite the near-term state response. Q2 non-cat operating expenses were 54 million; there are 54.9 billion in the prior list, and 58 million in the year over. During quarter, we remain disciplined, while continuing to invest in our long-term product portfolio.

Sherri R. Luther: Our Q2 non-gap growth margin was 69%, in line with the prior quotas, reflecting the stability of our growth margin despite the near-term stigma saw. Q2 non-gap operating expenses were $54 million compared to $54.9 million in the prior quarter and $58 million in the year of the war.

Sherri R. Luther: Second quarter revenue was $124.1 million, down 12% sequentially from first quarter and down 35% year-over-year, reflecting continued inventory normalization in the industrial and automotive markets.

Sherri R. Luther: Our Q2 non-gap growth margin was 69%, in line with the prior quarter, reflecting the stability of our growth margin despite the near-term stigma response.

Sherri R. Luther: Q2 non-gap operating expenses were $54 million compared to $54.9 million in the prior quarter and $58 million in the year before.

Sherri R. Luther: During this quarter, we remain disciplined while continuing to invest in our long-term. Our Q2 non-gas operating margin was 25.4% compared to 30% in the prior... Q2 non-GAAP earnings for diluted share were $0.23 compared to $0.29 on Friday. In Q2, we repurchased approximately 143,000 shares, or $10 million of stock, making Q2 our 15th consecutive quarter of executing share buybacks. Over that period, we have repurchased approximately 5.1 million shares, thereby reducing dilution by 3.8%.

Sherri R. Luther: During the quarter, we remain disciplined, while continuing to invest in our long-term products.

Sherri Luther: Our Q2 non-cat operating margin was 25.4% compared to 30% in the prior quarter. Q2 non-cat earnings for the limited share was 23% compared to 20% in the prior quarter. In Q2, we re-purchased approximately 143,000 shares or $10 million of stock, making Q2 our 15 consecutive quarter of executing share buyback by Vax. Over that period, we have re-purchased approximately 5.1 million shares, thereby reducing dilution by 3.8%.

Sherri R. Luther: Our Q2 non-gas operating margin was 25.4% compared to 30% in the prior quarter.

Sherri R. Luther: Q2 non-GAAP earnings for diluted share was $0.23 compared to $0.29 in the prior quarter.

Sherri R. Luther: In Q2, we repurchased approximately 143,000 shares, or $10 million of stock, making Q2 our 15th consecutive quarter of executing share buybacks.

Sherri R. Luther: Over that period, we have repurchased approximately 5.1 million shares, thereby reducing dilution by 3.8%.

Sherri Luther: Let me now review our outlook for the third quarter. The revenue for the third quarter of 2024 is expected to be between $117 million and $137 million. So, as margin, it is expected to be 69% plus or minus 1% on a non-cat basis. A little operating expenses for the third quarter are expected to be between $53 million and $55 million on a non-cat basis, which is in line with Q2 24 at the midpoint. As we continue to navigate the near-term cyclist's fondness in our annual events and the industry normalization of inventory, we remain focused on supporting the expansion of our product portfolio and continued execution.

Sherri R. Luther: Let me now review our outlook for the third floor. Revenue for the third quarter of 2024 is expected to be between $117 million and $137 million. Hence, its margin is expected to be 69% plus or minus 1% on a non-GAAP basis. Total operating expenses for the third quarter are expected to be between $53 million and $55 million on a non-GAAP basis, which is in line with Q2 2024 estimates.

Sherri R. Luther: Let me now review our outlook for the third floor.

Sherri R. Luther: Revenue for the third quarter of 2024 is expected to be between $117 million and $137 million.

Sherri R. Luther: The gross margin is expected to be 69% plus or minus 1% on a non-gap basis.

Sherri R. Luther: Total operating expenses for the third quarter are expected to be between $53 million and $55 million on a non-GAAP basis, which is in line with Q2-24 at the midpoint.

Operator: As we continue to navigate the near-term softness in our energy and the Industry Normalization of Inventory, we remain focused on supporting the expansion of our product portfolio and continued execution. Operator, that concludes my formal comments. We can now open the call for questions. Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone. A confirmation tone will indicate the line is in service. You may press star 2 if you would like to remove your question, for participants using speaker equipment.

Sherri R. Luther: As we continue to navigate the near-term stigmas softness in our end markets and the industry normalization of inventory, we remain focused on supporting the expansion of our product portfolio and continued execution.

Speaker Change: Operator, that concludes my formal comments. We can now open the call for questions.

Operator: At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate a line is in the question queue. You may press star two if you would like to remove your question from the queue for participants using speaker equipment, and maybe necessary to pick up your handset before pressing the start key. One moment, please, while we pull for a question.

Speaker Change: Thank you. At this time, we will be conducting a question and answer session.

Speaker Change: If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate a 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 key.

Operator: It may be necessary to pick up your handset before pressing these. One moment, please, while we poll for questions. And our first question comes from the line of David Williams with Benchmark. Please proceed with your. Hey, good afternoon, and thanks for letting me ask a question. I guess, Esam, can you talk a little bit about the design activity and maybe how the ramps have been impacted by the down cycle? Are you seeing anything there that's worth pointing out? And I'm just kind of wondering how that traction is continuing through this down cycle. Yeah, just a question, David.

Speaker Change: One moment, please, while we poll for questions.

David Williams: And our first question comes from the line of David Williams with Benchmark Company.

Speaker Change: And our first question comes from the line of David William with Benchmark Company. Please proceed with your question.

Esam Elashmawi: Hey, good afternoon, and thanks for letting me ask a question. I guess Assam can you talk a little bit about the design activity and maybe how the ramps have been impacted by the down cycle? Are you seeing anything there that's worth pointing to and just kind of wonder how that tracks into continuing to this discount cycle thinks.

David Neil Williams: Hey good afternoon and thanks for letting me ask a question. I guess Esam, can you talk a little bit about the design activity and maybe how the ramps have been impacted by the down cycle? Are you seeing anything there that's worth pointing to and just kind of wondering how that traction is continuing through this down cycle? Thanks.

Esam Elashmawi: Yeah, this question there is with regards to design activity. Just remind everyone we've got the strongest product portfolio in the history of the company, and most recently we just talked about expanding our next platform. We've got the new mock NXD device that we just launched, and we've got a bond as well that we've been talking about in our customer momentum. We've got a pretty exciting roadmap to come as well, but from a design activity perspective, we just completed two consecutive quarters of record design activity. And when I look at this, this is a type of stuff that when I talk to the team that we can control, we can't necessarily control the macro in the market, but we have good control over two things that matter to me.

Esam Elashmawi: With regard to design activity, just to remind everyone, we've got the strongest product portfolio in the history of the company, and most recently, we just talked about expanding our Nexus platform. We've got the new Mach NX-D device that we just launched, and we've got Avant as well, which we've been talking about. In terms of our customer momentum, Infiniti has never been as strong as it is now, and we've got a pretty exciting roadmap to come as well.

Asam: Yeah, good question, David.

Asam: With regards to design activity, just to remind everyone, we've got the strongest product portfolio in the history of the company, and

Asam: Most recently, we just talked about expanding our Nexus platform. We've got the new Mach-NX-D device that we just launched, and we've got Avant as well that we've been talking about. And our customer momentum in Infiniti has never been as strong as it is now. We've got a pretty exciting roadmap to come as well.

Esam Elashmawi: But from a design activity perspective, we just completed two consecutive quarters of record design activity, and when I look at this, this is the type of stuff that when I talk to the team about, we can control. We can't necessarily control the macro in the market, but we have good control over two things that matter to me, and that's number one, product development, getting differentiated products out into the market, both on the hardware and the software side, and also making sure that we drive more and more customers to Infiniti.

Asam: But from a design activity perspective, we just completed two consecutive quarters of record design activity.

Asam: And when I look at this, this is the type of stuff that, when I talk to the team, that we can control. We can't necessarily control the macro in the market, but we have good control over two things that matter to me, and that's number one, product development, getting differentiated products out into the market, both on the hardware and the software side.

Esam Elashmawi: And that's number one product development, getting differentiated products out into the market, both in the hardware and the software side, and also making sure that we drive more and more customer information. So I'm really proud of the team and what they've done from a design activity perspective over the last two quarters of those in two consecutive record quarters from a design activity.

Esam Elashmawi: So I'm really proud of the team and what they've done from a design activity perspective over the last two quarters, those being two consecutive record quarters in design activity. Now, the second part of your question on product ramps. I love product ramps. You know that getting new products into the market drives new spam opportunities, drives more market opportunities for us, but also drives new revenue streams. Even though the market is going through a cyclical downturn related to inventory normalization, what I can share with you is that if you look at our new products, for example, Nexus or Avant, and you look at the revenue from those products in the first half of 2024, it exceeded the revenue in the first half of 2023.

Asam: and also making sure that we drive more and more customer intimacy. So I'm really proud of the team and what they've done from a design activity perspective over the last two quarters, those being two consecutive record quarters from a design activity.

Esam Elashmawi: Now, the second part of your question on product ramps, I love product ramps. You know that getting new product into market drives new spam opportunities, it drives more market opportunities for us, but also drives new revenue stream. And even though the market is going through a cyclical downturn related to inventory normalization, what I can share with you is that if you look at our new products, for example, lip at next it or a bond. And you look at the revenue of those products in the first half of 2024; it exceeded the revenue in the first half of 2023, and that's a testament to why we keep emphasizing new products that are very differentiated and our software strategy of making it easier for customers to adopt them.

Asam: Now the second part of your question on product ramps. I love product ramps. You know that getting new products into market drives new spam opportunities, drives more market opportunities for us, but also drives new revenue streams.

Asam: And even though the market is going through a cyclical downturn related to inventory normalization, what I can share with you is that if you look at our new products, for example, look at Nexus or Avant.

Asam: And you look at the revenue of those products in the first half of 2024, it exceeded the revenue in the first half of 2023. And that's a testament to why we keep emphasizing new products that are very differentiated.

Esam Elashmawi: And that's a testament to why we keep emphasizing new products that are very differentiated and our software strategy of making it easier for customers to adopt them. And as such, we've made good progress on our new product ramps, and I'm excited about the second half of 2024.

Esam Elashmawi: And as such, we've got good product on our new product ramps. And I'm excited about the second half of 2024. We've talked about additional new product ramps. The seventh next is device to grant this quarter that's on track as well as the two additional bond devices, a bond. We expect initial revenue for those two devices by the end of the year and we're on track for that as well.

Asam: and our software strategy of making it easier for customers to adopt them. And as such, we've got good progress on our new product ramps. And I'm excited about the second half of 2024. We've talked about additional new product ramps. The 7th Nexus device should ramp this quarter. That's on track.

Sherri R. Luther: We've talked about additional new product ramps. The seventh Nexus device should ramp this quarter, that's on track, as well as the two additional Avant devices, Avant G and X. We expect initial revenue for those two devices by the end of this year, and we're on track for that as well. Great color there, thanks so much.

Asam: as well as the two additional Avant devices, Avant G and X. We expect initial revenue for those two devices by the end of this year, and we're on track for that as well.

David Williams: Great color there. Thanks so much.

Sherri R. Luther: And I guess maybe secondly, maybe for Sherri, the margin has been incredibly resilient here despite the lack of leverage. Can you walk us through maybe the incremental improvements you would expect to see as sales return and that leverage comes back? Are there structural things that you've done maybe through the downturn that will benefit on the upside? Thank you.

Sherri Luther: And I guess maybe secondly, maybe for Sherry, the margin has been incredibly resilient here by the lack of leverage. Can you walk us through maybe the incremental improvements you would expect to see a sales return that leverage, leverage comes back are there structural things that's done, ready to the downturn that will benefit on the outside. Thank you.

Asam: Great color there. Thanks so much. And I guess maybe secondly, maybe for Sherri, the margin has been incredibly resilient here despite the lack of leverage.

Speaker Change: Can you walk us through maybe the incremental improvements you would expect to see as sales return and that leverage comes back? Are there structural things that you've done, maybe through the downturn, that will benefit on the upside? Thank you.

Sherri Luther: Yeah, thank you, David, for the question. We're certainly pleased with the 69% growth margin that we came in at during Q2. And, you know, I think that, of course, that can be fluctuations on a quarterly basis, that can occur in, you know, with respect to mix or even within our market segments, but we're really pleased with the progress there. And, you know, we made a call. We talked about it, certainly a lot in terms of our growth margin, the expansion strategy that we've been executing now into our sixth year. To date, we've improved our growth margin by 1200 basis points.

Sherri R. Luther: Yeah, thank you, David, for the question. We're certainly pleased with the 69% gross margin that we came in at during Q2. And, you know, I think that, of course, there can be fluctuations on a quarterly basis that can occur, you know, with respect to mix or even within our market segments, but we're really pleased with the progress there. And, you know, you may recall, we've talked about it certainly a lot in terms of our gross margin expansion strategy that we've been executing now into our sixth year, where to date, we've improved our gross margin by 1,200 basis points.

Sherri R. Luther: Yeah, thank you, David, for the question. We're certainly pleased with the 69% gross margin that we came in at during Q2. And, you know, I think that, of course, there can be fluctuations on a quarterly basis.

Sherri R. Luther: that can occur in, you know, with respect to mix or even within our market segments. But we're really pleased with the progress there. And, you know, you may recall, we've talked about it certainly a lot in terms of our gross margin expansion strategy that we've been executing now into our sixth year, where to date we've improved our gross margin by 1,200 basis points. So certainly that is something that we're really proud of.

Sherri Luther: So it's going to be bad. Is that, that is something that we're really proud of. And in fact, when you, when you think about resiliency, if I go back in time and I look at when our revenue was at a similar level as what it was in Q2, you know, growth margin was quite a bit lower at that time. I think it was somewhere in that, you know, low 62% range as compared to 69 of that we achieved in Q2. And I think that really speaks to the new products. It speaks to software attached. And we talked about that before in terms of the value add that software attached provides to our growth margin and new products.

Sherri R. Luther: So, certainly, that is something that we're really proud of. And, in fact, when you think about resiliency, if I go back in time and I look at when our revenue was at similar levels to what it was in Q2, you know, gross margin was quite a bit lower at that time. I think it was somewhere in the low 62% range as compared to the 69 that we achieved in Q2.

Sherri R. Luther: And in fact, when you think about resiliency, if I go back in time and I look at when our revenue was at similar levels as what it was in Q2,

Sherri R. Luther: You know, growth margin was quite a bit lower at that time, I think it was somewhere in the low 62% range.

Operator: And I think that really speaks to the new products. It speaks to software attach, and we've talked about that before in terms of the value add that software attach provides to our gross margin. And new products, and Nissan talked about a number of the new products that we've launched, you know, even more recently. So, I think that really is the big driver in terms of the, you know, the improvements that we've made in gross margin over time.

Sherri R. Luther: as compared to 69 that we achieved in Q2. And I think that really speaks to the new products.

Sherri R. Luther: It speaks to software attach, and we've talked about that before in terms of the value add that software attach provides to our growth margin, and new products, and Esam talked about a number of the new products that we've launched even more recently. So I think that really...

Sherri Luther: And anytime talked about the number of new products that we've launched, you know, even more recently. So I think that really, you know, the big driver in terms of the, you know, the improvements that we've made in growth margin over time. And, you know, when we look ahead, you know, certainly the guide of Q3 that's within the point 69% could certainly continue to expect that, you know, the strength and resiliency there. And our long-term model, you know, remains intact. We're still driving toward our long-term model of the low 70s. And that's something that will continue to focus on through our growth margin expansion strategy as we continue to look ahead.

Speaker Change: You know, the big driver in terms of the, you know, the improvements that we've made in gross margin over time. And, you know, when we look ahead, you know, certainly the guide of Q3, that's at the midpoint, 69%, but certainly continue to expect that, you know, the strength and resiliency there. And our long-term model, you know, remains intact. We're still driving toward our long-term model of the low 70s.

Operator: And, you know, when we look ahead, certainly the guide for Q3, that's at the midpoint 69%, but certainly continue to expect that, you know, the strength and resiliency there. And our long-term model, you know, remains intact. We're still driving toward our long-term target of the low 70s, and that's something that we'll continue to focus on through our gross margin expansion strategy as we continue to look ahead. Thank you again.

Speaker Change: And that's something that we'll continue to focus on through our growth margin expansion strategy as we continue to look ahead.

Speaker Change: Thank you again.

Esam Elashmawi: Thank you. Our next question comes from the line of Ruben Roy with Stiefel. Please proceed with your question. Yes, thank you. Esam, I'm wondering if you could maybe drill into the inventory commentary a little bit more. Last quarter, you know, this has been a persistent issue, obviously, but the last quarter, you guys talked about, you know, potentially seeing some growth second half over first half. You are talking about some signs of improvement today, and so I was just wondering if you could, you know, maybe give us a little detail on what you're hearing from your customers around inventory normalization. Are we, you know, getting there?

Ruben Roy: Our next question comes from the line of Ruben Roy with Diffle. Please proceed with your question. Yes.

Speaker Change: Thank you. Our next question comes from the line of Ruben Roy with Stiefel. Please proceed with your question.

Esam Elashmawi: Thank you.

Esam Elashmawi: Ethan, I'm wondering if you would maybe drill into the inventory commentary a little bit more. Last quarter, you know, this has been a persistent issue obviously, but the last quarter you guys talked about, you know, potentially seeing some growth second half over first half. You are talking about some signs of improvement today. And so I was just wondering if you can, you know, maybe give us a little detail on what you're hearing from your customers around that inventory normalization. Are we, you know, getting there? Is it something that you think, you know, we'll see the end of, you know, towards the end of Q3.

Ruben Roy: Yes, thank you. Esam, I'm wondering if you'd maybe drill into the inventory commentary a little bit more. Last quarter,

Ruben Roy: You know, this has been a persistent issue, obviously, but last quarter you guys talked about, you know, potentially seeing some growth second half over first half. You are talking about some signs of improvement today, and so I was just wondering,

Speaker Change: If you can, you know, maybe give us a little detail on what you're hearing from your customers around that inventory normalization. Are we, you know, getting there? Is it something that you think...

Esam Elashmawi: Is it something that you think we'll see the end of, you know, towards the end of Q3? And if so, how are you thinking about, you know, sort of the exit rate coming out of, you know, that normalization? Yeah, I think everybody knows I love to talk to customers. I do that quite often.

Esam Elashmawi: And if so, how are you thinking about, you know, sort of the exit rate and coming out of, you know, that normalization? That would be helpful.

Speaker Change: We'll see towards the end of Q3, and if so, how are you thinking about the exit rate coming out of that normalization? That would be helpful.

Sherri Luther: Thank you. Yeah, I think everybody knows I love this off the customer that quite often. In fact, two weeks ago, we had one of our key industrial accounts in, and I was chatting with them. And, as you can imagine, inventory normalization is one of the topics that we will always touch on. But as I talked to the customers, overall, there has been improvement in the inventory normalization, but it doesn't vary from customer to customer. Even within the customer, as I asked them about their inventory normalization, they'll even tell me there's different product lines that are at different states on product lines, which you normalization of the product lines, they still have access inventory that they need to be normalized.

Speaker Change: Yeah, I think everybody knows I love to talk to customers. I do that quite often.

Esam Elashmawi: In fact, two weeks ago, we had one of our key industrial accounts in, and I was chatting with them. And, as you can imagine, inventory normalization is one of the topics that we will always touch on. But as I talk to the customers, overall, there has been improvement in inventory normalization, but it does vary from customer to customer. Even within a customer, when I ask them about their inventory normalization, they'll even tell me there are different product lines that are in different states. Some product lines have already achieved normalization.

Speaker Change: In fact, two weeks ago, we had one of our key industrial accounts in, and I was chatting with them. And as you can imagine, inventory normalization is one of the topics that we will always touch on.

Speaker Change: But as I talked to the customers, overall, there has been improvement in the inventory normalization, but it does vary from customer to customer.

Speaker Change: Even within a customer, as I ask them about their inventory normalization, they'll even tell me.

Speaker Change: There's different product lines that are at different states. Some product lines achieve normalization, other product lines they still have...

Esam Elashmawi: Other product lines still have excess inventory that they need to normalize. And if we recall back to the beginning of the year, we said that we'd expect this inventory normalization to continue throughout 2024, but to a lesser extent in the second half of the year compared to the first half of the year. But if I look at Lattice specific items, again, the things that we control, it's the new product ramps that we talked about that are going to turn second for the year, getting the products out there. And then we're well positioned.

Esam Elashmawi: And if we call back to the beginning of the year, we said that we'd expect this inventory normalization to continue throughout 2024, but to a lesser extent on the second half of the year compared to the first half of the year. But if I look at latter specific items, again, the things that we've control is the new product ramps that we talked about that are going to turn seconds for the year, getting the products there. And then we're well positioned. We think we're still well positioned for long-term growth. We're in really good strategic core markets.

Speaker Change: access inventory that they need to go normalize. As we recall back to the beginning of the year, we said that we'd expect this inventory normalization to continue throughout 2024, but to a lesser extent on the second half of the year compared to the first half of the year.

Speaker Change: But if I look at Lattice-specific items, again, the things that we control, it's the new product routes that we talked about that are going to turn second for the year, getting the products out there. And then we're well-positioned. We think we're still well-positioned for long-term growth. We're in really good strategic core markets with Coms and Compute and Industrial and Auto with Lattice-specific growth drivers.

Sherri R. Luther: We think we're still well positioned for long term growth. We're in really good strategic core markets with confidence of youth and industrial and auto with Lattice specific growth drivers. So as we get out of this normalization and get the products ramped up, we feel like we're in a very good place. And Ruben, just to give you a little bit more color on inventory in the channel, the way that we're thinking about it, is that, you know, we, inventory in the channel is, you know, that's the inventory that's sitting at our distributors, and last quarter, as well, we had mentioned that, you know, inventory in the channel is more at pre-pandemic levels, in the range of pre-pandemic levels, and so the way that we thought last quarter, and we continue to see it this quarter, it's still towards the higher end of that range, but as we mentioned, you know, and on this call, as well as last quarter, we continue to undership towards what we consider to be true demand.

Sherri Luther: This will contribute an industrial and auto with a lot of specific growth divers. So as we get out of this normalization and get the products ramped up, we feel like we're in a very good.

Speaker Change: As we get out of this normalization and get the products ramped up, we feel like we're in a very good position.

Sherri Luther: and Ruben, just to give you a little bit more color on inventory in the channel. The way that we're thinking about it is that, you know, we inventory in the channel is, you know, that's the inventory that's sitting at our distributors. And last quarter, as well, we had mentioned that, you know, inventory in the channel is more at pre-pandemic levels in the range of pre-pandemic levels. And so the way that we thought last quarter, we continue to see if this quarter is still towards the higher end of that range. But, as we mentioned, you know, on this color, as well as last quarter, we continue to understand what we consider to be true demand.

Speaker Change: And Ruben, just to give you a little bit more color on inventory in the channel, the way that we're thinking about it is that, you know, we, inventory in the channel is, you know, that's the inventory that's sitting at our distributors.

Speaker Change: And last quarter, as well, we had mentioned that, you know, inventory in the channel is more at pre-pandemic levels.

Speaker Change: and the range of pre-pandemic levels. And so the way that we saw it last quarter and we continue to see it this quarter, it's still towards the higher end of that range.

Speaker Change: But as we mentioned, you know, and on this call as well as last quarter, we continue to undership to what we consider to be true demand.

Sherri R. Luther: This continued, you know, from Q1 into Q2, and certainly at the midpoint of our guide for Q3 revenue, we expect to continue to be undershipping to that true customer demand, and so that undershipping really allows for the inventory digestion or that inventory normalization that Esam was mentioning to occur, and to continue the second half, albeit at a lesser, somewhat lesser extent than what occurs during the first half, and the other part of it, just to kind of complete the thought with respect to inventory, is that, you know, we keep in touch very closely with our strategic customers and have a good feel for what, you know, the inventory that they have, the ending inventory that is that they have, but at the same time, we have over 10,000 customers, so it's really hard to have a perfect view of how much inventory is at all of our end customers, but having said that, certainly, you know, inventory in the channel is something that we continue to focus on. That's great color.

Sherri Luther: This continued, you know, from Q1 into Q2, and certainly at the midpoint of our guide for Q2 revenue, we expect to continue to be undershipping to that true customer demand. And so that undershipping really allows for the inventory digestion or that inventory normalization that Esam was mentioning to occur, and to continue the second half, albeit at a lesser, somewhat lesser extent than what occurs during the first half. And the other part of it, just to kind of complete the thought with respect to inventory, is that, you know, we keep in touch very closely with our strategic customers and have a good feel for what, you know, the inventory that they have, the envy inventory.

Speaker Change: This continued from Q1 into Q2, and certainly at the midpoint of our guide for Q3 revenue, we expect to continue to be under shipping to that true customer demand.

Speaker Change: And so that undershifting really allows for the inventory digestion or that inventory normalization that Esam was mentioning to occur and to continue in the second half, albeit at a lesser, somewhat lesser extent than what occurs during the first half. And the other part of it, just to kind of complete the thought with respect to inventory...

Speaker Change: is that we keep in touch very closely with our strategic customers and have a good feel for the inventory that they have, the ending inventory that is that they have. But at the same time, we have over 10,000 customers, so it's really hard to have a perfect view of how much inventory is at all of our end customers.

Sherri Luther: That is that they have, but at the same time, we have over 10,000 customers, so it's really hard to have a perfect view of how much inventory is at all of our end customers. But having said that, certainly, you know, inventory in the channel is something that we continue to focus on.

Speaker Change: But having said that, certainly, you know, inventorying the channel is something that we continue to focus on.

Sherri R. Luther: Thanks, Sherri. And I appreciate the complexity of the issue here. I guess for a quick follow-up, you know, just to follow on David's question, it's nice to see the stability and the gross margins with the revenue coming down. And as you mentioned, the margins were a lot lower the last time we saw these types of revenues. But I guess that's testament to your pricing optimization strategy.

Sherri Luther: That's great color. Thanks, Sherry. And I appreciate the complexity of the issue here. I guess for a quick follow-up, you know, just follow on David's question. You know, it's nice to see the stability and the gross margins with the revenue coming down. And, as you mentioned, you know, the margins were a lot lower the last time we saw these types of revenues, but I guess that's testament to your pricing optimizations strategy. I guess, Sherry, maybe if you can give us a little bit of an update on the pricing environment and how you're thinking about that going forward.

Speaker Change: That's great, Collar. Thanks, Sherri, and I appreciate the complexity of the issue here. I guess for a quick follow-up, just to follow on David's question, it's nice to see the stability and the gross margins with the revenue.

Speaker Change: Coming down, as you mentioned, you know, the margins were a lot lower the last time we saw these types of revenues, but I guess that's testament to your pricing optimization strategy. I guess, Sherri, maybe if you can give us a little bit of an update on the pricing environment and how you're thinking about that going forward.

Sherri Luther: Sure. So, from a pricing perspective, we're really seeing that our pricing is durable. You know, is that continues? I think it really goes back to the fact that, you know, our products are allowing our customers to really differentiate in their application. The number of new products that we have announced and continue to announce really helps our customers differentiate. And that is that; you know, that that matters a lot to them. And that is something that, you know, they're willing to gain more for products that really help them improve the, you know, the products that they are offering.

Sherri R. Luther: I guess Sherri, maybe if you could give us a little bit of an update on the pricing environment and how you're thinking about that. Sure, sure. So, from a pricing perspective, we're really seeing that our pricing is durable as that continues. I think it really goes back to the fact that our products are allowing our customers to really differentiate in their applications. The number of new products that we have announced and continue to announce really helps our customers differentiate, and that matters a lot to them, and that is something that they're willing to pay more for products that really help them improve the products that they're offering.

Sherri R. Luther: Sure, sure. So, from a pricing perspective, we're really seeing that our pricing is durable, you know, that continues. I think it really goes back to the fact that, you know, our products are allowing our customers to really differentiate in their applications.

Speaker Change: The number of new products that we have announced and continue to announce really help our customers differentiate.

Speaker Change: And that matters a lot to them, and that is something that they're willing to pay more for, products that really help them improve the products that they're offering.

Sherri R. Luther: And so new products continue to be a key part of our pricing optimization strategy. We also see trends where customers want higher capacity, greater capability products, again driving the functionality of their products. So, we definitely see that our pricing is durable, and it certainly continues to be a key element of our pricing optimization and gross margin expansion strategy.

Sherri Luther: And so new products continue to be a key part of our pricing optimization strategy. We also see trends towards, you know, where customers want, you know, higher capacity, greater capability products. Again, you know, driving the functionality of their products. So we definitely see that our pricing is durable. And it certainly continues to be a key element of our pricing optimization growth margin expansion strategy.

Speaker Change: [inaudible]

Esam Elashmawi: And I'll add to that as well.

Sherri R. Luther: I think you're familiar with our software strategy. We're investing in our software solution stacks, and we look at the data, and clearly, the customers that are leveraging our software solution stacks are demanding a higher AFC, which helps our margins as well. All right.

Esam Elashmawi: I think you're familiar with our software strategy.

Esam Elashmawi: We're investing in our software solutions tax. And, you know, we look at the data and clearly the customers that are leveraging our software solutions, tax. That's demanding a higher AFC, which helps our margins as well. Right.

Speaker Change: You know, we look at the data and clearly the customers that are leveraging our software solutions are demanding a higher AFC, which helps our margins as well.

Speaker Change: Thank you.

Operator: Our next question comes from the line of John Vinh with KeyBank Capital Markets. Please proceed with your question. Great, thanks for taking my question. Esam, you mentioned in your prepared remarks that you're seeing signs of improvement. I'm wondering if you could just give us a little bit more color on, more specifically, where are you seeing those kind of green shoots?

John Vinh: Our next question comes from the line of John Vind with Cuban Capital Markets. Please proceed with your question. Great.

Speaker Change: Thank you. Our next question comes from the line of John Vinh with KeyBank Capital Markets. Please proceed with your question.

Esam Elashmawi: Thanks for taking my question. Esam, you mentioned in your prepared remarks that you're seeing signs of improvement. I'm wondering if you could just give us a little bit more color on more specifically. Where are you seeing those kinds of green shoots? And then, you know, based on kind of your current visibility. When do you guys think you'll be able to return to growth again?

John Nguyen Vinh: Great, thanks for taking my question. Esam, you mentioned in your prepared remarks that you're seeing signs of improvement. I'm wondering if you could just give us a little bit more color on, more specifically, where are you seeing those kind of green shoots? And then, you know, based on kind of your current visibility, when do you guys think you'll be able to return to growth again?

Esam Elashmawi: And then, you know, based on kind of your current visibility, when do you guys think you'll be able to return to growth again? Yeah, so let me take the first part of that question. What are the signs of improvement we see? Well, first, it starts with the customer goal. You know, I interact with customers quite a bit. We've talked about that.

Esam Elashmawi: Yeah, so let me take the first part of that question. What are the signs of improvement we've been able to first? This starts with the customer goal. You know, I interact with the customer side of it. We talked about that. We do see normalization at the customer side, and we do know that we are undershipping to demand. But also some of the operational indicators that we see as well. If you look at Q2 towards the second half of Q2, we start to see an update into booking. And that was a really good sign for us.

Esam: Yeah, so let me take the first part of that question. What are the signs of improvement we see? Well, first it starts with the customer goal. I know I interact with the customers quite a bit. We've talked about that. We do see normalization at the customer side, and we do know that we are under shipping to demand.

Esam Elashmawi: We do see normalization on the customer side, and we do know that we are under shipping to demand. But also, some of the operational indicators that we see as well. If you look at Q2, towards the second half of Q2, we start to see an uptick in bookings, and that was a really good sign for us.

Esam: but also some of the operational indicators that we see as well. If you look at Q2, towards the second half of Q2, we start to see an uptick in the bookings, and that was a really good sign for us. In fact, we're starting Q3 with a higher backlog than we started Q2 with.

Esam Elashmawi: In fact, we're starting Q3 with a higher backlog than we started Q2, and that's a good indication as well that things are starting to turn. So when you combine the customer inventory normalization, we're shipping under demand, we see bookings increasing, and then we start to see that our backlog going into the quarter is healthier, those are all signs for us.

Esam Elashmawi: In fact, we're starting Q3 with a higher backlog than we started Q2 with. And that's a good indication. As well, that things are starting to turn. So in some bind customer inventory normalization, we're shipping under demand. We see booking is increasing. And then we start to see that a backlog going into the quarter is healthier. Those are all signs for us.

Esam: And that's a good indication as well that things are starting to turn.

Esam: So when you combine the customer inventory normalization, we're shipping under demand, we see bookings increasing, and then we start to see that our backlogs going into the quarter is healthier. Those are all signs for us.

Esam Elashmawi: Then you start looking at the new product ramps that we talked about. New product ramps drive new revenue streams. I said in the earlier question the data points about how our new products actually grew in the first half of this year compared to the first half of last year. Those new products are expected to ramp up. We've got the seventh Nexus device that will ramp this quarter, and the additional Avant E will continue to ramp throughout this year, but we've got Avant G and X will start initial ramps, although small, those will be small, but those are initial ramps as well, which is a good sign that they'll continue to ramp further through 25 and 26. So when you look at these signs of improvement, we anticipate that we are in a return to Great. Thanks.

Esam Elashmawi: Then you start looking at the new product ramps that we talked about. New product ramps, right? I used the new revenue stream. I said in the earlier question, the data points about how our new products actually grew in the first half of this year compared to the first half of last year. Those new products are expected to ramp. We've got the seventh message device that will ramp this quarter in the additional bond. E will continue to ramp throughout this year, but we've got a bond G and X will start in the initial. Although small, those are small, but those are initial ramps as well, which are a good sign that it'll continue to ramp further through 25 and 26.

Esam: Then you start looking at the new product ramps that we talked about. New product ramps drives the new revenue streams, I said in the earlier question.

Esam: The data points about how our new products actually grew in the first half of this year compared to the first half of last year. Those new products are expected to ramp. We've got the seventh Nexus device that will ramp this quarter and the additional Avant.

Esam: E will continue to ramp throughout this year, but we've got Avanti and X will start initial, although small, those will be small. But those are initial ramps as well, which is a good sign that it will continue to ramp further through 25 and 26. And when you look at these signs of improvement, we anticipate that we are on a return to growth path.

Esam Elashmawi: So when you look at these signs of improvements, we anticipate that we are in a return to both of that.

Esam Elashmawi: Great. Thanks.

Esam Elashmawi: And then just a follow-up question on your server business. You know, I think one of your competitors continues to express confidence in terms of, you know, gaining some traction in the area of server security or PFR. I'm just wondering if you could just talk about your confidence level in terms of maintaining your position within the server business.

Esam Elashmawi: And then just a follow-up question on your server business. You know, I think one of your competitors continues to express confidence in terms of, you know, getting some traction in the area of service security or PFR. I'm just wondering if you could just talk about kind of your confidence level in terms of maintaining your position within the server business. And then as we look forward to kind of the ramp of next generation server platforms that Intel, I know your attach rate is above one as we think about how to grant rapids ramping in the second half of the year.

Speaker Change: Great, thanks. And then just a follow-up question on your server business, you know, I think one of your competitors continues to...

Speaker Change: Express Confidence in terms of, you know, getting some traction in the area of server security or PFR. I'm just wondering if you could just talk about kind of your...

Esam Elashmawi: And then as we look forward to kind of the ramp of next-generation server platforms at Intel, I know your attach rate is above one. As we think about Granite Rapids ramping in the second half of the year, are there still opportunities for you to increase your attach rates on servers or your content there? Yeah, good question.

Speaker Change: confidence level in terms of maintaining your position within the server business. And then as we look forward to kind of the ramp of next generation server platforms at Intel. I know your attack rate is above one. As we think about how the Granite Rapids ramping in the second half of the year.

Esam Elashmawi: There are still opportunities for you to increase your attach rates in servers or your content there.

Speaker Change: Are there still opportunities for you to increase your attach rates in servers or your content there?

Esam Elashmawi: Yeah, good question. From a server perspective, I think we've demonstrated that, over the last several generations, we've been increasing our attach rate. I remember my first investor day, which was in May of 2019. We were talking about a 25% attach rate; that forward to today, it's well above one. And if you look at the server generation that is shipping today, and you contact that with the prior generation, which is ramping down. Not only the attach rate gone up, but the complexity of the servers and through them, the need for more complex SDGA from Lattice, which is a higher ASC on average when you combine the higher attach rate with the higher ASP.

Esam Elashmawi: From a server perspective, I think we've demonstrated that over the last several generations, we've been increasing our attach rate. In fact, I remember my first Investor Day, which was in May of 2019, and I'm looking at this book here. We were talking about a 25% attach rate. Fast forward to today, and it's well above one.

Speaker Change: Yeah, good question. From a server perspective, I think we've demonstrated that over the last several generations, we've been increasing our attachment. I remember my first Investor Day, which was in May of 2019. We were talking about a 25% attach rate. Fast forward to today, it's well above one.

Esam Elashmawi: And if you look at the server generation that is shipping today and contrast that with the prior generation, which is ramping down, not only has the attach rate gone up, but the complexity of the servers has driven the need for more complex FPGAs from Lattice, which is a higher ASP on average. When you combine the higher attach rate with the higher ASP, on average, we're seeing about a 60% dollar increase in the generation of servers that are ramping today versus those that are ramping back.

Speaker Change: And if you look at the server generation that is shipping today, and you contrast that with the prior generation, which is ramping down.

Speaker Change: Not only has the attach rate gone up, but the complexity of the servers has driven the need for more complex FPGAs from Lattice, which is a higher ASP on average. When you combine the higher attach rate with the higher ASP,

Esam Elashmawi: On average, we're seeing about a 50% dollar increase in the generation of servers that are ramping today versus those that are ramping down. And we've got really good visibility on these architectures. And we know exactly what we're being used for, whether it be in control, management, or security type functions. In fact, if you look at the last developer's conference, even had a major hyper-scale or Meta presenting the value of lattice from a security perspective. And that does look like directly to your question on the FR. And then we have really, really good visibility, excellent visibility on the next generation of servers that are going to be deployed as well, whether it be from hyper-scalers, OEMs, or even ODMs. And we see there that our attach rate is going up again.

Speaker Change: On average, we're seeing about a 60% dollar increase in the generation of servers that are ramping today versus those that are ramping back.

Esam Elashmawi: And we've got really good visibility on these architectures, and we know exactly what we're being used for, whether it be in control, management, or security-type functions. In fact, if you look at the last developer conference, we even had a major hyperscaler meta presenting the value of Lattice from a security perspective.

Speaker Change: And we've got really good visibility on these architectures.

Speaker Change: And we know exactly what we're being used for, whether it be in control, management, or security-type functions. In fact, if you look at the last developers conference, we even had a major hyperscaler meta presenting the value of Lattice from a security perspective.

Esam Elashmawi: And that does relate directly to your question on VFR. And then we have really, really good visibility, excellent visibility on the next generation of servers that are going to be deployed as well, whether it be from hyperscalers, OEMs, or even ODMs. And we see there that our attach rate is going up again. And we also know that those are also becoming more complex, and that they're leveraging even more complex FPGAs. And most recently, we announced the mock XO5D with our updated Century solution stack for next-generation PFR type applications.

Speaker Change: And that does relate directly to your question on CFR.

Speaker Change: And then we have really, really good visibility, excellent visibility on the next generation of servers that are going to be deployed as well, whether it be from hyperscalers, OEMs, or even ODMs. And we see there that our catch rate is going up again. And we also know that those are also becoming more complex and that they're leveraging even more complex FPGAs. And most recently, we announced the MOC XL5D with our updated Century Solution Stack for the next generation PFR type applications.

Esam Elashmawi: And we also know that those are also becoming more complex and that they're leveraging even more complex SDGA. And most recently, we announced a lot of XO5D with our updated sensory solution stack for the next generation CFR type applications. So we feel very good about our position in the market. We continue to make good progress in increasing our attach rate generation over generation, as well as delivering products that are very compelling and differentiated from a server security perspective.

Esam Elashmawi: So we feel very good about our position in the market. We continue to make good progress in increasing our attach rate generation over generation, as well as delivering products that are very compelling and differentiated from a server security perspective. And then one final thing I want to point out is why an FPGA is good for security, because that's really, really important. FPGAs provide programmability.

Speaker Change: So, we feel very good about our position in the market. We continue to make good progress in increasing our tax rate generation over generation, as well as delivering products that are very compelling and differentiated from a server security perspective.

Esam Elashmawi: And then one final thing I want to point out is why an SDGA for security, because that's really, really important. SDGA provides programmability. And when you think about security and security threats, we provide something called Crystal Agility, which allows the customers to update their security crystal algorithms real time in the field when an incident occurs. It's always a race between the adversaries and those that are trying to protect their system. An SDGA with programmability provides crystal agility that you need that from an SDGA perspective.

Speaker Change: And then one final thing I want to point out is why an FPGA for security, because that's really, really important.

Esam Elashmawi: And when you think about security and security threats, we provide something called crystal agility, which allows customers to update their security crystal algorithms in real time in the field when an incident occurs. It's always a race between the adversaries and those that are trying to protect the system. An FPGA with programmability provides crystal agility, but you need that from an FPGA perspective.

Speaker Change: FPGAs provide programmability, and when you think about security and security threats we provide something called crystal agility, which allows the customers to update their security crystal algorithms real time in the field when an incident occurs.

Speaker Change: It's always a race between the adversaries and those that are trying to protect the system. An FDGA with programmability provides critical agility, but you need that from an FDGA perspective.

Esam Elashmawi: Great, thank you. Thank you. Our next question comes from the line of Matt Ramsey with TD Cowan.

Speaker Change: Great, thank you.

Matt Ramsey: Our next question comes from the line of Matt Ramsey with TD Cowan.

Speaker Change: Thank you. Our next question comes from the line of Matt Ramsey with TD Cowan. Please proceed with your question.

Esam Elashmawi: Please proceed with your question. Yeah, thank you very much. Good afternoon, guys. I think you described it well in some of your opening comments, things in the business that will last for the long term and maybe some things in the macro. So I have kind of a couple of questions.

Matthew D. Ramsay: Yeah, thank you very much. Good afternoon guys. I think you described it well in some of your opening comments. There's some...

Matt Ramsey: Please join me in your opening comment. There's some things in the business that, over the long term, your team can control and maybe some things in the macro and the shorter term that you can't. So I've kind of a couple questions on both.

Matthew D. Ramsay: things in the business that, over the long term...

Matthew D. Ramsay: Your team can control and maybe some things in the macro in the shorter term then that you can't so I've kind of a couple questions on both

Esam Elashmawi: I guess in the longer term stuff with the product portfolio, I think it's a really, really good thing, and I've said it many times, the vast, vast majority of the Avant customers, learnings there and some software compatibilities there. I wonder if there are new, emerging opportunities with some of those customers or maybe even new customers for Avant that opened new TAM that you weren't considering in the past. I think we're all trying to figure out how big that TAM is for a bond.

Esam Elashmawi: I guess in the longer term, stuff with the product portfolio. It I think it's a really, really good thing that you guys have said it many in many different forums that the vast, vast majority of the event customer base is the same as the next customer base. There's some learnings there, and some software compatibility to there. But I wonder if there are new emerging opportunities that maybe you didn't foresee when some of those customers, already even new customers for a bond, that open new TAM that you weren't considering in the past. I mean, I think we're all trying to figure out how big that TAM for a bond actually is as a ramps up.

Matthew D. Ramsay: I guess in the...

Matthew D. Ramsay: The longer term stuff with the product portfolio, I think it's a really, really good thing that, and you guys have said it in many different forums, that the vast, vast majority of

Speaker Change: The Avant customer base is the same as the Nexus customer base, and there's some learnings there and some software compatibilities there.

Speaker Change: I wonder if there are new emerging opportunities

Speaker Change: with some of those customers, or maybe even new customers for Avant that opened new TAM that you weren't considering in the past. I mean, I think we're all trying to figure out how big that TAM for Avant actually is as it ramps up. So are there new things that we should be thinking about, or should we just sort of think about the opportunity with the customers you currently have?

Esam Elashmawi: Are there new things that we should be thinking about? Yeah, you brought up a few good points about Avant. Just as a reminder for everybody on the call, you know, Avant more than doubles our market opportunity. If you look at the small FBGA, SAM, that we provided at our last Investor Day, which is about $4.5 billion, the mid-range devices, which is Avant, are up 5.5, so a little bit more than half that.

Esam Elashmawi: So are there new things that we should be thinking about, or should we just sort of think about the opportunity with the customers you currently have?

Esam Elashmawi: Yeah, you have a few good points on a bond.

Esam Elashmawi: This is a reminder for everybody on the call: you know, a lot more than doubled our market opportunity. If you look at small FBBA and that we provide a massive best today, which is about four and a half billion, the mid range devices, which is a lot of 5.5, so a little bit more than double our market opportunity. So it opens up a good market for us that doesn't cannibalize our small FBGA. And, as you mentioned, it looked at 90% of those target customers. There are already customers of Lattice and they know our software tools and our software solution stacks that we build are designed for both a bond as well as an exit and pre-next system devices as well.

Speaker Change: Yeah, you brought up a few good points on Avant, just as a reminder for everybody on the call, you know, Avant more than doubles our market opportunity. If you look at small FBGA, SAM, that we provided our last investor day, which is about $4.5 billion.

Speaker Change: The mid-range devices, which is around 5.5, so a little bit more than half, doubled our

Esam Elashmawi: So it opens up a good market for us that doesn't cannibalize our small FBGA. And as you mentioned, if you look at 90% of those target customers, they're already customers of Lattice, and they know our software tools and our software solution stack that we built are designed for both Avant as well as Nexus and pre-Nexus devices as well.

Speaker Change: So it opens up a good market for us that doesn't cannibalize our small FPGA. And as you mentioned, if you look at 90% of those target customers, they're already customers of Lattice, and they know our software tools and our software solutions stack that we built are designed for both Avant as well as Nexus and pre-Nexus devices as well.

Esam Elashmawi: So there's a lot of opportunities, and we're making really good progress. We launched the Avant E, which is our edge optimized FBGA for a bond at the end of 2022. And we saw initial revenue on that. And most recently, at our last developer conference, we announced the Avant G and the Avant X, which is our general purpose and advanced connectivity FBBA.

Esam Elashmawi: So there's a lot of opportunities, and we're making really good progress. We launched the Avant E, which is our edge-optimized FBGA for Avant at the end of 2022, and we saw initial revenue on that. And most recently, at our last Developers Conference, we announced the Avant G and the Avant X, which are our general purpose and advanced connectivity FBGAs.

Speaker Change: So there's a lot of opportunities, and we're making really good progress. We've launched the Avant E, which is our edge-optimized FPGA for Avant.

Speaker Change: At the end of 2022, and we saw initial revenue on that, and most recently at our last developers conference, we announced the Avant G and the Avant X, which is our general purpose and advanced connectivity at CDA.

Esam Elashmawi: With regards to applications, we're really excited about the type of applications we're engaged in. The bond opens up not just control opportunities that we're very good at and low power control, but opens up data pack opportunities for us, and we see opportunities in that some of data networking data center network perspective, which is a good growth for us. And again, we saw growth in our data center, not working this quarter. But also we saw applications around storage that we did not anticipate with storage type applications that would leverage Avant as well. And then as we continue to look at our AI related revenue, we're starting to see also opportunity for we can leverage a launch an additional AI stuff that we weren't anticipating before in the application.

Esam Elashmawi: With regard to applications, we're really excited about the type of applications we're engaged in. Avant opens up not just control opportunities that we're very good at, low-power control, but it opens up data packet opportunities for us, and we see opportunities in that from a data networking, data center network perspective, which is good growth for us. And again, we saw growth in our data center networking this quarter. But also, we saw applications around storage that we did not anticipate, with storage-type applications that could leverage Avant as well.

Speaker Change: With regards to applications, we're really excited about the type of applications we're engaged in. So Yvonne opens up not just control opportunities that we're very good at, low power control, but opens up data pack opportunities for us, and we see opportunities in that.

Speaker Change: from a data networking lab.

Speaker Change: Data Center Network perspective, which is a good growth for us, and again, we saw growth in our data center networking this quarter.

Speaker Change: But also we saw applications around storage that we did not anticipate with storage-type applications that could leverage Avante as well.

Esam Elashmawi: And then as we continue to look at our AI-related revenue, we're starting to see opportunities where we can leverage Avant and additional AI stuff that we weren't anticipating before in key applications. So the team does a really, really good job of not just going into traditional applications but working with our customers to find new ways to leverage our FBGAs and applications. And I think we've demonstrated that in the past when we talked about security, which was new to Lattice just in the last five years, as well as a lot of what we're doing with computer vision, which is new to Lattice as well.

Speaker Change: And then as we continue to look at our AI-related revenue, we're starting to see also opportunities where we can leverage a launch.

Speaker Change: and additional AI stuff that we weren't anticipating before in the application.

Esam Elashmawi: So the team does a really, really good job of not just selling into traditional applications, but working with our customers to find new ways to leverage our FBGA and applications. And I think we've demonstrated that in the past when we talked about security, which was new. The lattice just in the last five years, as well as a lot of what we're doing with that computer vision, which is the lattice as well. So I'm excited about the opportunities ahead of us with not just Iran, but also Nexus devices as well.

Speaker Change: The team does a really, really good job of not just selling into traditional applications, but working with our customers to find new ways to leverage our FPGAs and applications. And I think we've demonstrated that in the past when we talked about security, which was new to Lattice just in the last five years, as well as a lot of what we're doing with computer vision.

Esam Elashmawi: So I'm excited about the opportunities ahead of us, with not just Avant but also Nexus devices as well. Thank you for that, Itam. I guess now... engineering terminology stuff, I guess I have two questions. First, wine.

Speaker Change: who just moved to Lattice as well. So I'm excited about the opportunities ahead of us, with not just the VON, but also Nexus devices as well.

Matt Ramsey: Thank you for that.

Matt Ramsey: I guess now. for the near-term stuff.

Speaker Change: Thank you for that Esam. I guess now for the nearer term stuff, I guess I have two questions. The first one is...

Matt Ramsey: I guess I have two questions. The first one is, I'm not necessarily surprised given where the macro is and what the industrial weakness we've seen from a number of your peer companies that the guidance for the September quarter was a little bit weaker than I think we at all forecast, but this is the first time I can remember when you guys actually missed a guided quarter in June, right? So the June result came in. I know, 5% below the original guidance. And I'm just kind of wondering what happened in 3rd quarter relative to the visibility that you thought you might have had when you guided the quarter originally and with our big things that shifted in 3rd quarter.

Esam Elashmawi: I'm not necessarily surprised given where the macro is and what the industrial, [inaudible] This is the first time I can remember when you guys actually missed the guy that was 5% below the original guide. I'm just kind of wondering what happened intra-quarter relative to the visibility that you thought you might have had when you got into the quarter. Shifted Intercorder, and I guess the second question in the near term, gave a couple of data points in one of your earlier answers that... First half this year versus first half last year, some of the new products, and that's essentially all next, were actually up year-over-year in revenue. The corollary to that is that the pre-Nexus products are down. $100 million plus, half over half, this year versus last.

Speaker Change: I'm not necessarily surprised given where the macro is and what the industrial weakness we've seen from a number of your peer companies that

Speaker Change: The guidance for the September quarter was a little bit weaker than I think we had all forecast.

Speaker Change: This is the first time I can remember when you guys actually missed the guided quarter in June , right? So the June results came in, I don't know, 5% below the original guidance. And I'm just kind of wondering what happened intra-quarter relative to the visibility that you thought you might have had when you guided the quarter originally.

Sherri Luther: And I guess the second question in the near-term, it's on you gave a couple of data points in one of your earlier answers that first half this year versus first half last year, some of the new products, and that's essentially all Nexus at this point I would think, were actually up year over year in revenue, which I guess the corollary to that is the pre-Nexus products are down 100 million plus half over half this year versus last year. So you guys have given a lot of commentary about where customer inventory might be, where channel inventory might be. Could you update us on those metrics on just the pre Nexus product?

Speaker Change: And I guess the second question in the near term, Esam, you gave a couple of data points in one of your earlier answers that first half this year versus first half last year, some of the new products, and that's essentially all Nexus at this point, I would think.

Speaker Change: We're actually up year-over-year in revenue, which I guess the corollary to that is the pre-Nexus products are down.

Speaker Change: $100 million plus, half over half, this year versus last year. So, you guys have given a lot of commentary about where customer inventory might be, where channel inventory might be.

Esam Elashmawi: You guys have given a lot of commentary about where customer inventory might be, where channel inventory might be. Please do update us on those metrics on just the pre- are we getting closer? Transcripts provided by Transcription Outsourcing, LLC.

Speaker Change: Could you update us on those metrics on just the pre-Nexus products? Are we getting closer to being through this? And do you have visibility on the pre-Nexus products? What seem to be...

Sherri Luther: Are we getting closer to being through this, and do you have visibility on the pre Nexus products? Would it seem to be where the majority of the headwinds have been in revenue?

Esam Elashmawi: Thanks. Yeah, so let me talk about the first bullet first, which is the industrial and midpoint. We have slightly below our midpoint, and that was primarily different by industrial and auto. And we continue to shift under to demand. I think we talked about that at a prior question as well. And we do want to get the inventory have customers normalize. That's really important for us, which is why we shift under to demand. But I want to point out again that if you look at that industrial segment, it's a really good, well, striver for a lot of that long term, secular growth related to industrial.

Speaker Change: where the majority of the headwinds have been in revenue. Thanks.

Esam Elashmawi: Yeah, so let me talk about the first bullet first, which is the industrial and our midpoint. We hit slightly below our midpoint, and that was primarily driven by the industrial and auto sectors. And we continue to shift under to demand. I think we talked about that in a previous question as well.

Speaker Change: Yeah, so let me talk about the first bullet first, which is the industrial and our midpoint. We hit slightly below our midpoint, and that was primarily driven by industrial and auto, and we continue to shift under to demand. I think we talked about that at a prior question as well. And we do want to get the inventory, have our customers normalize. That's really important for us, which is why we shift under to demand.

Esam Elashmawi: And we do want to get the inventory of our customers normalized. That's really important for us, which is why we shift under to demand. But I want to point out again that if you look at that industrial segment, it's a really good growth driver for Lattice. There's a long-term secular growth related to industrial.

Speaker Change: But I want to point out again that if you look at that industrial segment, it's a really

Esam Elashmawi: We've demonstrated that over the past several years with strong double-digit growth in industrial, and we expect to get back to that as well. Our products are just a really good fit for industrial-type applications, such as robotics and factory automation. And Avant helps that as well.

Speaker Change: Lattice is a good growth driver for Lattice. It's a long-term, secular growth related to industrial. We've demonstrated that over the past several years with strong double-digit growth in industrial, and we expect to get back to that as well. Our products are just a really good fit for industrial-type applications, examples in robotics and factory automation.

Esam Elashmawi: We've demonstrated that over the past several years was strong, double-digit growth in industrial. Let me expect to get back to that as well. Our products are just a really good fit for industrial type applications, examples and robotics and factory automation. And a lot helps that as well. In fact, some of the key a lot wins that we're tracking to ramp up in 2024 are with industrial accounts as well. So although there's some short-term cyclical normalization, we have to go through. We feel very good about our position in the industrial market.

Esam Elashmawi: In fact, some of the key Avant wins that we're tracking to ramp up in 2024 are with industrial accounts as well. So although there's some short-term cyclical normalization we have to go through, we feel very good about our position in the industrial market. Now, the second part of your question, Nexus versus pre-Nexus, it's always good to see new products ramping up, and we love both our Nexus and pre

Speaker Change: and Abbas helped out as well, in fact, some of the key Abbas.

Speaker Change: wins that we're tracking to ramp up in 2024 are with industrial accounts as well. So although there's some short-term cyclical normalization we have to go through, we feel very good about our position in the industrial market.

Esam Elashmawi: Now, the second part of your question: Nexus versus pre-Nexus. It's always good to see new products ramping. And we love both our Nexus and pre-Nexus devices. But as customers ramp up new products, you have less formalization of inventory to worry about what the new products are wrapping than older products that they stop up perhaps entire years. And this is why we love having new products that are very differentiated. They create new revenue streams. They ramp up, and they allow our customers to change even more. Yes, pre Nexus is down more, but that's probably aligned with the rest of the industry and what we're doing, which is really trying to shift on their true demand.

Speaker Change: Now, the second part of your question, nexus versus pre-nexus.

Esam Elashmawi: But as customers ramp up new products, you have less formalization of inventory to worry about with the new products that are ramping up than with older products that they stocked up, perhaps in prior years. And this is why we love having new products that are very differentiated. They create new revenue streams, they ramp up, and they allow our customers to differentiate even more. Yes, pre-Nexus is down more, but that's probably aligned with the rest of the industry and what we're doing, which is really trying to ship on their true demand. But we are shipping Nexus. There's strong demand for Nexus, and the normalization for these new products isn't the same as the older products. Thank you very much, Esam.

Speaker Change: It's always good to see new products ramping and we love both our Nexus and P-Nexus devices.

Speaker Change: But as customers ramp up new products, you have less informalization of inventory to worry about with the new products that are ramping than older products that they stocked up perhaps in prior years.

Speaker Change: And this is why we love having new products that are very differentiated. They create new revenue streams, they ramp up, and they allow our customers to differentiate even more.

Speaker Change: Yes, pre-Nexus is down more, but that's probably aligned with the rest of the industry and what we're doing, which is really trying to shift on their true demand. But we are shipping Nexus. There's strong demand for Nexus and the normalization for these new products isn't the same as the older products.

Esam Elashmawi: But we are shipping Nexus. They're strong demand for Nexus and the normalization for these new products is the same as the older products.

Esam Elashmawi: Thank you very much, Esam.

Esam Elashmawi: I'll jump back in the queue.

Speaker Change: Thank you very much Esam. I'll jump back in the queue.

Esam Elashmawi: Thank you. Our next question comes from the line of Melissa Weathers with Deutsche Bank. Please proceed with your question. Hi there.

Melissa Weathers: Our next question comes from the line of Melissa Weathers. Would you please proceed with your question.

Speaker Change: Thank you. Our next question comes from the line of Melissa Weathers with Deutsche Bank. Please proceed with your question.

Melissa Weathers: Hi there.

Esam Elashmawi: Thank you for taking my question. We've talked a lot about industrial, but I just want to double-click on comms and compute and what you guys saw in the quarter.

Esam Elashmawi: Thank you for taking my question. We've talked a lot about industrial. I just want to double-click on Combs and Compute and what you guys saw in the quarter, at least by my model.

Melissa Weathers: Hi there. Thank you for taking my question. We've talked a lot about industrial. I just want to double click on comms and compute and what you guys saw in the quarter. At least by my model, it seems like you may have upsided expectations from what you

Esam Elashmawi: It seems like you may have subsided expectations from what you gave last quarter. So can you talk about where you believe we are in the cycle for both the comms and the compute and market? Yeah, so in comms and compute, what we said was it was flat quarter over quarter, and it was primarily driven by strength in server as well as data center networking. But our 5G wireless was down, as you had expected when we talked about that in our Q1 earnings call. And what we talked about from a server perspective, again, is our tax rate dollar content.

Speaker Change: gave last quarter. So, can you talk about where you believe we are in the cycle for both the comms and the compute end market?

Esam Elashmawi: At least by my model, it seems like you may have exceeded expectations from what you gave last quarter. So can you talk about where you believe we are in the cycle for both the comms and the compute end market? Yeah, so in comms and compute, what we said was, it was flat quarter over quarter. And it was primarily driven by strength in server as well as data center networking.

Speaker Change: Yeah, so in Coms and Compute, what we said was it was flat quarter over quarter.

Speaker Change: And it was primarily driven by strength in server as well as data center networking.

Speaker Change: But our 5G wireless was down as we had expected when we talked about that in our Q1 earnings call.

Esam Elashmawi: But our 5G wireless was down, as we had expected when we talked about that in our Q1 earnings call. And what we talked about from a server perspective, again, is our tax rate, dollar content, and we expect that to go up. And on data center networking, this was something that we talked about at our last investor day that we introduced for the first time. And we are now being designed into switches and routers and data center networking.

Speaker Change: And what we talked about from a server perspective, again, is our tax rate, dollar content, we expect that to go up. And on the data center networking, this was something that we talked about at our last investor day that we introduced for the first time.

Esam Elashmawi: We expect that to go up and on the data center networking. This was something that we talked about our last Investor Day that we introduced for the first time. And we are now being designed into switches and routers and data center networking. And although it's a smaller portion of the overall revenue, still in constant computing area that we see both for both Nexus as well as a lot of applications. But from a 5G wireless, I don't think we're unique that we're still seeing softness in 5G wireless. I think this is something that seems useful. And until the price of deployments reduces, the cost of tactics reduces.

Speaker Change: And we are now being designed into switches and routers and data center networking. And although it's a smaller portion of the overall revenue, still in content, it's an area that we see growth for both Nexus as well as Avat type applications.

Esam Elashmawi: And although it's a smaller portion of the overall revenue still in comms and compute, it's an area that we see growth for both Nexus as well as Avatar applications. But from the 5G wireless perspective, I don't think we're unique in that we're still seeing softness in 5G wireless.

Speaker Change: But from a 5G wireless, I don't think we're unique, that we're still seeing softness in 5G wireless. I think this is something that's meaningful.

Speaker Change: And until the price of deployments reduces, the cost of packets reduces, I don't think anybody's anticipating a strong return in the 5G wireless end market.

Esam Elashmawi: I don't think anybody's anticipating a strong return in the 5G wireless market.

Melissa Weathers: Thank you. And I guess as we think about selling versus sell-through. How do we bridge the gap once the inventory gets cleared? Like how sharp of a snapback can we expect? I know the FPGA market has seen different trends throughout the cycles.

Esam Elashmawi: I think this is something that's useful, and until the price of deployments reduces, and the cost of packets reduces, I don't think anybody's anticipating a strong return on the 5G wireless end market. Thank you. And I guess, as we think about sell-in versus sell-through, how do we bridge the gap? Once the inventory gets cleared, how sharp of a snapback can we expect? I know the FPGA market has seen differing trends throughout the cycles. But I like it.

Speaker Change: Thank you. And I guess, as we think about sell-in versus sell-through, how do we bridge the gap once the inventory gets cleared? Like, how sharp of a snapback can we expect? I know the FPGA market has seen differing trends throughout the cycles, but like,

Sherri Luther: But like, is it the case where, as soon as that inventory gets sold through, then things will snap back very hard, or are you expecting more of a gradual recovery in both your industrial market and your housing computing and market? Yeah, Melissa, so the way that we're thinking about that is, is this inventory normalization, who's been occurring through the first half of the year and it's going to continue into the second half, and then we expect it to dissipate. And so it's really, you know, us undershipping so that undershipping demand so that this inventory consumption can occur.

Esam Elashmawi: Is it the case that as soon as that inventory gets sold through, then... Things will snap back very hard, or are you expecting more of a gradual recovery in both your industrial market and your computing end market? Yeah, Melissa, so the way that we're thinking about that is this inventory normalization has been occurring through the first half of the year, and it's going to continue into the second half, and then we expect it to dissipate.

Speaker Change: Is it the case where as soon as that inventory gets sold through, then...

Speaker Change: Things will snap back very hard, or are you expecting more of a gradual recovery in both your industrial market and your computing end market?

Sherri R. Luther: And so it's really, you know, us undershipping so that demand can occur, so that this inventory consumption can occur, and that will occur at the end customers. And then as it occurs there, it comes out, you know, the distributors, consumption goes up at the distributors as well in terms of receiving the inventory that's in the channel. And so, what we've said is we expect that to continue into the second half, but we'll start to dissipate in a second. Perfect.

Speaker Change: Yeah, Melissa, so the way that we're thinking about that is this inventory normalization has been occurring through the first half of the year and it's going to continue into the second half.

Speaker Change: And then we expect it to dissipate. And so it's really us undershipping demand so that this inventory consumption can occur. And that will occur at the end customers. And then as it occurs there, it comes out in the distributors, consumption goes up at the distributors as well in terms of receiving the inventory that's in the channel. And so what we've said is we expect that to continue into the second half, but we'll start to dissipate in the second half.

Sherri Luther: And that will occur at the end customers, and then as it occurs there, it comes out, you know, the distributors. A consumption goes up at the distributors as well in terms of the receiving inventory that's in the channel. And so, so what we said is we expect that to continue into the second half, but we'll start to dissipate in the second half.

Sherri Luther: Perfect.

Speaker Change: Perfect. Thank you.

Sherri R. Luther: Thank you. Thank you. Our next question comes from the line of Quinn Bolton with Needham and Company. Please proceed with your question. Hi, Esam and Sherri.

Quinn Bolton: Our next question comes from the line of Quinn Bolton with Needham and Company. Please proceed with your question. Hi, I guess I just wanted to come back. I think last quarter, you were pretty confident that revenue would increase in the second half over the first half as a result of the dissipation of the inventory normalization process. and then the latest Pacific drivers for the 6th and 7th Nexus family, the Evon family, and the new Dell Latitude product ramp. I haven't heard you guys sort of make that statement yet on this call, and so I'm just wondering if you could give us your thoughts half over half.

Speaker Change: Bye bye.

Speaker Change: Thank you. Our next question comes from the line of Quinn Bolton with Needham and Company. Please proceed with your question.

Esam Elashmawi: I guess I just wanted to come back. I think last quarter, you were pretty confident that revenue would increase in the second half over the first half as a result of the dissipation, Lattice-specific drivers for the 6th and 7th Nexus families, the Yvonne family, and the Dutelle Latitude product ramp. I haven't heard you guys sort of make that statement yet on this call, and so I'm just wondering if you could give us your thoughts half-over-half.

Nathaniel Quinn Bolton: Hi, Esam and Sherri, I guess I just wanted to come back, I think last quarter,

Nathaniel Quinn Bolton: You were pretty confident that revenue would increase in the second half over the first half.

Speaker Change: As a result of the dissipation of the inventory normalization process and then the lattice-specific drivers for the 6th and 7th Nexus family, the Yvonne family, and the new Dell Latitude product ramp, I haven't heard you guys sort of make that statement

Speaker Change: yet on this call. And so I'm just wondering if you give us your thoughts half over half. It certainly seems like you've said that many of those working pieces are still in place, but I'm just wondering, can you give us your sense? Do you still think second half revenue is up over first half revenue?

Esam Elashmawi: It certainly seems like you've said that many of those working pieces are still in place, but I'm just wondering... Give us your sense, do you still think second half revenue is up over first half revenue? Yeah, I mean, today, on today's call, we're really focusing on the Q3 guide based on the data we have today. But as we talked about, we do see signs of improvement. We do know that we're under shipping demand.

Esam Elashmawi: It certainly seems like you've said that many of those working pieces are still in place, but I'm just wondering, can you give us your sense? Do you still think second half revenue is up over first half revenue? Yeah, today on today's call, we're really focusing on the Q3 dies, based on the data we have today. But, as we talked about, we do see signs of improvement. We do know that we're undershipping demand. We do know that the normalization with our customers, we continue through the year but to a lesser extent in the second half versus the first half. But as we get into the Q3 earnings call, we'll provide more color for Q4 and what we see for the second half of the year.

Speaker Change: Yeah, today on today's call we're really focusing on the Q3 guide based on the data we have today.

Speaker Change: But as we talked about, we do see signs of improvement. We do know that we're under shipping demand. We do know that the normalization with our customers will continue through the year, but to a lesser extent in the second half versus the first half.

Esam Elashmawi: We do know that normalization with our customers will continue through the year, but to a lesser extent in the second half versus the first half. But as we get into the Q3 earnings call, we'll provide more color for Q4 and what we see for the second half of the year.

Speaker Change: But as we get into the Q3 earnings call, we'll provide more color for Q4 and what we see for the second half of the year.

Esam Elashmawi: Got it.

Esam Elashmawi: And then the second question for me, just sort of on a competitive front, wondering if you might give us an update back in January, what are your competitors? End of life for almost 300 small FPGA parts with no replacement provided, and I think that left an opportunity for your sales and FAE team to come in and try to convert some of those designs over to Lattice. How successful have you been in converting some of those competitors' designs over to us? Yeah, I mean, every time a competitor does a favor for us like that, we capitalize on it.

Esam Elashmawi: And then the second question from me is just sort of on a competitive friend, wondering if you might give us an update back in January or what are your competitors in the life? Almost 300 small FPGA ports with no replacements provided. And I think that left an opportunity for your sales and if they team to come in and try to convert some of those designs over to Lattice. How successful have you been on converting some of those competitors' designs over to Lattice? Yeah, and every time competitors have a favor for us, for like a week after we capitalize on it, our team's done a really good job.

Speaker Change: Got it. And then the second question for me is just sort of on a competitive front. I wonder if you might give us an update back in January . What are your competitors?

Speaker Change: End-of-life to almost 300 small FPGA parts with no replacements provided, and I think that left an opportunity for your sales and FAE team to come in and try to convert some of those designs over to Lattice. How successful have you been on converting some of those competitors' designs over to Lattice?

Speaker Change: Lattice.

Speaker Change: Yeah, I mean, every time a competitor does us a favor for a flight, we capitalize on it. Our team's done a really good job, and it's helped that we've been building good customer momentum over the past few years.

Esam Elashmawi: Our team's done a really good job, and it helps that we've been building good customer momentum over the past few years. With our product differentiation, they see our roadmap, they're participating in our roadmap, they're investing time in Lattice, and that's been going well. When I talk about the expansion of Nexus and the prepared remarks, if you recall, I said we're adding more device options for Nexus.

Esam Elashmawi: And it helps that we've been building good customer momentum over the past few years with our product differentiation. They see our roadmap that participating in our roadmap. They're investing time with Lattice, and that's been going well. When I talk also about the expansion of Nexus in the prepared remarks, if you recall, I said we're adding more device options for Nexus. Those device options that we're adding is to give our customers more choices. And in some cases, that helps accelerate some of these end-of-life from our competitors as well. But our sales team does a really outstanding job.

Speaker Change: with our product differentiation. They see our roadmap, they're participating in our roadmap.

Speaker Change: They're investing time with Lattice, and that's been going well. When I talk also about the expansion of Nexus in the prepared remarks, if you recall, I said we're adding more device options for Nexus.

Esam Elashmawi: Those device options that we're adding are to give our customers more choices, and in some cases, that helps accelerate some of these end-of-life for my competitors as well. But our sales team does a really outstanding job, and I think we've built a lot of credibility with our customers that we do capitalize every time somebody does an end-of-life product line. Thank you, Esam. Operator, are you there? Operator, are you still there? So if anybody can hear us, we're still on the line, just awaiting the operator to respond. Do I hang up and die back here, or what? The bridge seems to be experiencing some technical difficulties, so we'll just stay on the line and wait. Oh, can you hear me?

Speaker Change: Those device options that we're adding is to give our customers more choices.

Speaker Change: And in some cases, that helps accelerate someone's end-of-life from our competitors as well. But our sales team does a really outstanding job, and I think we've built a lot of credibility with our customers that we do capitalize every time somebody does an end-of-life product line.

Esam Elashmawi: And I think we've built a lot of credibility with our customers that we do capitalize every time somebody does that end-of-life product learning.

Esam Elashmawi: Thank you, sir.

Speaker Change: Thank you, Esam.

Speaker Change: Operator?

Operator: Operator, are you okay? Operator, are you still there? So if anybody is here, we're still on the line, just waiting for the operator to respond.

Speaker Change: Operator, you are...

Speaker Change: Operator, are you still there?

Speaker Change: So if anybody can hear us, we're still on the line, just awaiting the operator to respond.

Operator: I ain't up and down that camera though. The bridge seems to be experiencing some technical difficulties, so we'll just stay on the line and wait.

Speaker Change: The bridge seems to be experiencing some technical difficulties, so we'll just stay on the line and wait.

Operator: Oh, can you hear me? Yes, we do. Okay, I do apologize. I was going through some technical difficulties on my end here.

Speaker Change: Oh, can you hear me?

Operator: Yeah, can we count them all? Okay, I do apologize for going too slow. Technical difficulty on my end. Our next question comes from the line of Chris Rolland with Susquehanna International Group. Please proceed with your question. Hey guys, thanks for the question. I was wondering if you guys were avoiding me or not. That would have been a sneaky way. No, seriously, just maybe a softball first.

Speaker Change: Yes, we got all of them.

Speaker Change: Okay, I do apologize. I was going through some technical difficulties.

Chris Rolland: Our next question comes from the line of Chris Rolland with Susquehanna International.

Esam Elashmawi: Are you guys seeing any new applications that you learned of from your customers that you think are kind of interesting or cool or needle-moving? And perhaps one of these might be in the PC space with Lunar Lake or Strixpoint, these new things coming. I know you do human presence detection there, but any other kind of PC-driven applications or other applications that you have learned of that you think could eventually be pretty big applications?

Speaker Change: on my end here.

Speaker Change: Our next question comes from the line of Chris Rolland with Susquehanna International. Please proceed with your question.

Chris Rolland: Please proceed with your question. Hey guys, thanks for the question.

Christopher Adam Jackson Rolland: Hey guys thanks for the question. I'm glad to hear a voice there. I was wondering if you guys were avoiding me or not. That would have been a sneaky way.

Esam Elashmawi: I was wondering if you guys were avoiding me or not. That would have been a secret way. No, seriously, just maybe a softball first. Are you guys seeing any new applications that you've learned of from your customers that you think are kind of interesting or cool or needle moving. And perhaps one of these might be in the PC space with Lunar Lake or Strix Point these new things coming. I know you do human presence detection there, but any other kind of PC driven applications or other applications that you learned of that you think could eventually be pretty big applications.

Esam Elashmawi: Yeah, on the PC side, I think you're aware that we do a lot when it comes to having artificial intelligence, person detection, and gaze detection on client devices. But we're also part of the ecosystem partners with the large PC OEMs, because they enable AI PCs, and you'll see even on their reference designs that they point to Lattice as an ecosystem partner, so we benefit from those partnerships as well. The other needle moving thing that I'll talk about that I'm excited about is when we talked about AI in a prepared remark, the NVIDIA Lattice solution for AI.

Speaker Change: Are you guys seeing any new applications that you learned of from your customers that you think are kind of

Speaker Change: interesting or cool or needle-moving and perhaps one of these might be in the PC space.

Speaker Change: with Lunar Lake or Strixpoint.

Speaker Change: Presence Detection there, but any other kind of PC driven applications or other applications that you learned of that you think could eventually be pretty big applications.

Esam Elashmawi: Yeah, I'm the PC side. I think you're aware that we do a lot when it comes to adding artificial intelligence, person detection, gay detection on client devices. But we're also part of the ecosystem partners with the large PC OEM because they enable a IPC's and you'll be even on the reference designs. As they'll point to lattice as well as an ecosystem partner, so we benefit from those appointments as well. The other needle moving thing that I'll talk about that I'm excited about is when we talked about AI in a prepared remarks, the Nvidia Lattice solution for AI.

Speaker Change: Yeah, on the PC side, I think you're aware that we do a lot when it comes to adding artificial intelligence, person detection, gaze detection on client devices, but we're also part of the ecosystem partners with the large PC OEM, because they enable AI PCs, and you'll see even on their reference designs.

Speaker Change: They'll point to Lattice as well as an ecosystem partner, so we benefit from those appointments as well. The other needle-moving thing that I'll talk about, that I'm excited about, is when we talked about AI and the ProtegraMARC.

Esam Elashmawi: And we talked about this; we introduced the concept and our last developers' forum in December. And the problem statement is that a lot of companies want to have high performance AI on the edge that they can't afford the latency to go into a data. and if you look at all the sensor deployments that are out there in the world over a billion sensors, there's no easy way to get those sensors to work with compute platform. And so, Vidya and Lattice partnered on a solution that we introduced last December, on how we can aggregate that sensor data, pre-process it and actually with some specific solutions around how do we do how we make that compatible with intelligence.

Esam Elashmawi: And we talked about this, we introduced the concept at our last developer forum in December. And if you look at all the sensor deployments that are out there in the world, over a billion sensors, there's no easy way to get those sensors to work with compute platforms. And so NVIDIA and Lattice partnered on a solution that we introduced last December on how we can aggregate that sensor data, preprocess it, and actually with some specific solutions around how do we do, how do we make that compatible with NVIDIA CUDA.

Speaker Change: The NVIDIA Lattice solution for AI. And we talked about this, we introduced the concept at our last developers forum in December . And the problem statement is that a lot of companies want to have

Speaker Change: high-performance AI on the edge that they can't afford the latency to go into a data center.

Speaker Change: And if you look at all the sensor deployments that are out there in the world, over a billion sensors, there's no easy way to get those sensors to work with compute platforms.

Speaker Change: And so NVIDIA and Lattice partnered on a solution that we introduced last December on how we can aggregate that sensor data, pre-process it, and actually with some

Speaker Change: Specific solutions around how do we do, how do we make that compatible within Yakuuta.

Esam Elashmawi: Yes, we've actually started to ship boards to customers now, and customers are starting to deploy those systems. So that's exciting for me as well, but see us bring that type of a solution to the industry.

Esam Elashmawi: We've actually started to ship boards to customers now, and customers are starting to deploy those systems. So that's exciting for me as well, to see us bring that type of a solution to the industry. But those are, again, two examples, one referring to the PCs that you talked about and another one. That's, that's, that's fantastic.

Speaker Change: We've actually started to ship boards to customers now, and customers are starting to deploy those systems.

Speaker Change: So that's exciting for me as well, to see us bring that type of a solution to the industry. But those are, again, two examples, one referring to PCs that you talked about and another one.

Esam Elashmawi: But those are, again, two examples: one referring to PC that you talked about and another one. That's fantastic.

Sherri R. Luther: Thank you, Esam. And then, maybe for Sherri, I didn't totally understand the channel inventory comment. You guys have previously said that inventory was back to pre-pandemic levels, so I guess I missed the nuance there. You know, are you saying those levels are just too high, or customers have now expressed a preference to drag below? I missed the nuance there, and then, you know, perhaps we can put some numbers around some of this stuff, like...

Esam Elashmawi: Thank you, Esam.

Speaker Change: That's fantastic. Thank you, Esam. And then maybe for Sherri, I didn't totally understand the channel inventory comments.

Sherri Luther: And then maybe for Sherri, I didn't totally understand the channel inventory comments. You guys have previously said that inventory was back to pre-pandemic levels. So I guess I missed the nuance there.

Speaker Change: You guys have previously said that inventory was back to pre-pandemic levels.

Sherri Luther: Are you saying those levels are just too high, or customers have now expressed a preference to drag below? I missed the nuance there, and then perhaps we can put some numbers around some of this stuff.

Speaker Change: I guess I missed the nuance there.

Speaker Change: You know, are you saying those levels are just too high, or customers have now expressed a preference to drag below? I missed the nuance there, and then, you know, perhaps we can put some numbers around some of this stuff, like...

Sherri Luther: Like if you could give us channel inventory numbers, like either dollars or days, and then maybe this would also help us understand it from a dollar perspective, how much you're shipping below true demand or if you guys have perhaps a normalized quarterly number in mind, if you were shipping normally. And I think just quantitatively, if you guys were to provide any of those numbers, I think it would paint the picture very well. Yeah, so what I was saying earlier was that the range that our distributor inventory, that is inventory in the channel, the range that that currently is, is at pre-pandemic level, but it is at the higher end of that range.

Sherri R. Luther: If you could give us channel inventory numbers, like either dollars or days, and then maybe this would also help us understand, from a dollar perspective, how much you're shipping below true demand, or if you guys have perhaps a normalized quarterly number in mind if you were shipping normally.

Speaker Change: If you could give us channel inventory numbers, like either dollars or days.

Speaker Change: And then, you know, maybe this would also help us understand it from a dollar perspective.

Speaker Change: how much you're shipping below true demand or if you guys have...

Speaker Change: Perhaps a normalized quarterly number in mind, if you were shipping normally, and I think just quantitatively, if you guys were to provide any of those numbers, I think it would paint the picture very well.

Sherri R. Luther: I think just quantitatively, if you guys were to provide any of those numbers, I think it would paint the picture very well. Yeah, so what I was saying earlier was that the range of our distributor inventory, that is, inventory in the channel, the range that that currently is, is that pre-pandemic level, but it is at the higher end of that range. And so that's the similar commentary that we provided last quarter as well. So it's within the range, but it's the highest of the range.

Speaker Change: Yeah, so what I was saying earlier was that the range that our distributor inventory, that is inventory in the channel, the range that that currently is, is at pre-pandemic levels, but it is at the higher end of that range. And so that's the similar commentary that we have provided last quarter as well.

Sherri Luther: And so that's the similar commentary that we have provided last quarter as well. So it's within the range behind the range.

Sherri R. Luther: We have not communicated what that range is, but the range that we consider normal for our business is at pre-pandemic levels. And so because it's at the higher end of what we consider to be sort of a normal range, if you will, that is why we are under shipping demand so that that inventory consumption can occur over time. And I mean, the other color I can give you on that is that if you go back to during COVID.

Sherri Luther: We haven't communicated exactly. We have not communicated what that range is, but you know, what we the range that we can sit on normal for business is that pre-pandemic levels. And so, because it's at the higher end of what we consider to be, you know, sort of normal range, if you will, that is why we are undershipping demand so that that inventory consumption can occur over time. And I mean, the other color I can give you on that is that if you go back to during COVID, we were we had communicated, you know, multiple quarters in a row that our distributor inventory in the channel was at very low levels.

Speaker Change: So it's within the range, but it's the highest of the range.

Speaker Change: We haven't communicated exactly.

Speaker Change: We have not communicated what that range is, but the range that we consider normal for our business is at pre-pandemic levels.

Speaker Change: And so, because it's at the higher end of what we consider to be, you know, sort of normal range, if you will.

Speaker Change: That is why we are under shipping demand, so that that inventory consumption can occur over time. And, I mean, the other color I can give you on that is that if you go back to during COVID,

Sherri R. Luther: We had communicated, you know, multiple quarters in a row that our distributor inventory in the channel was at very low levels and that we knew it would need to be replenished and that it would be replenished over time. So contrast that with where we are now, where it's a little bit toward the higher end of the range, and so that's why we want to undership demand so that inventory normalization can occur, and continue to occur over the second half, where it will start to dissipate so that inventory digestion can occur. And could we get a sense of how much you're shipping below true demand?

Speaker Change: We had communicated, you know, multiple quarters in a row that our distributor inventory in the channel was at very low levels.

Sherri Luther: And that we knew it would need to be the replenish and that it would be replenished over time. So contrast that with where we are now, where it's a little bit toward the higher end of the range. And so that's why we want to undership demand so that inventory normalization can occur continues to occur over the second half, but we'll start to dissipate.

Speaker Change: and that we knew it would need to be replenished and that it would be replenished over time.

Speaker Change: So contrast that with where we are now, where it's a little bit toward the higher end of the range, and so that's why we want to undership demand, so that inventory normalization can occur, continue to occur over the second half, and we'll start to dissipate, so that inventory digestion can occur.

Sherri Luther: So that inventory digestion can occur.

Esam Elashmawi: Can we get a sense on how much you're shipping below true demand, or if this wasn't occurring, what your normalized revenues would be? Yeah, so there's two ways we know we're shipping under two demand. One is the customer conversations that I talked about where we talked with them on a regular basis. We asked the questions, "How are you doing?" Is it getting normalized? That's the number one. Number two is if you look at what the distributor is shifting out the door versus what we shifted to the distributors, we know that they shift more to their concerns than what we shifted to them, which is what Sherri is alluding to, that the dollars of inventory in our channel are, definition, that would be decreasing.

Speaker Change #100: And could we get a sense on how much you're shipping below true demand or if if this wasn't occurring what what your normalized revenues would be?

Esam Elashmawi: Or if this wasn't occurring, what would your normalized revenues be? Yeah, so there's two ways we know we're shifting under two demands. One is the customer conversations that I talked about where we talk with them on a regular basis. We ask the questions, "How are you doing? Is it getting normalized?" That's number one.

Speaker Change #101: Yeah, so there's two ways we know we're shipping under to demand. One is the customer conversations that I talked about where we

Speaker Change #101: We talk with them on a regular basis. We ask the questions, how are you doing? Is it getting normalized? That's number one. Number two is...

Sherri R. Luther: Number two, if you look at what the distributors shift out the door versus what we shift to the distributors, we know that they shift more to their customers than what we shift to them, which is what Sherri is alluding to, that the dollars of inventory in our channel, by definition, would be decreasing. But we're at healthy nominal levels, but we're on the high side of that, is what she was referring to. So we're not concerned with the level of inventory. Okay, thanks. Thank you. Our next question comes from the line of Tristan Gerra. Thanks for seeing me. Take care. Hi, good afternoon.

Speaker Change #101: If you look at what the distributors ship out the door versus what we ship to the distributors, we know that they ship more to their customers than what we ship to them, which is what Sherri is alluding to, that the dollars of inventory in our channels, by definition, that would

Esam Elashmawi: But we're at healthy nominal levels, but we're on the high side of that, is what she was referring to. But we're not concerned with the level of inventory we have in our channel today. Okay, thanks.

Sherri R. Luther: We're at healthy nominal levels, but we're on the high side of that is what she was referring to. But we're not concerned with the level of inventory we have in our channel today.

Speaker Change #102: Okay, thanks.

Tristan Yarin: Our next question comes from the line of Tristan Yarin with There. Please proceed with the question. Hi, good afternoon.

Speaker Change #103: Thank you. Our next question comes from the line of Tristan Gerra with Baird. Please proceed with your question.

Esam Elashmawi: Looking at industrial and automotive, and I know you've mentioned you're under shipping and demand, if I annualize the $58 million you reported for Q2 for that, you're basically 50 percent above a pre-COVID level, which was 2019, so that's inferring about a nine percent CAGR. We know that the whole industry, at least on the industrial side, has been around 3%. So you've been getting shares; you've probably benefited from some pricing.

Esam Elashmawi: Looking at industry oil and automotive, and I know you've mentioned your under shipping and demand. If I analyze the 58 million reported for Q2 for that segment, you're basically 50% above pre-COVID level, which was 2019. So that's inferring about a 9% tager. We know that the whole industry, at least on the industrial side, has been around 3%, so you've been getting share; you've probably benefited from some pricing.

Tristan Garrett: Hi, good afternoon. Looking at industrial and automotive, and I know you've mentioned your undershipping and demand, if I annualize the $58 million you reported for Q2 for that segment,

Speaker Change #105: You're basically 50% above pre-COVID level, which was 2019, so that's inferring about a 9% CAGR.

Speaker Change #106: We know that the whole industry, at least on the industrial side, has been around 3%, so you've been getting shares, you've probably benefited from some pricing.

Esam Elashmawi: So the question is, what is the kind of CAGR that you're looking at in industrial for the next several years? And how much contribution you got the past few years from... What I'm trying to get at is even if we assume that Q2 is kind of a bottom, are we going to see those revenues eventually rebounding double-digit because you're undershipping, or is it kind of the new normal from which you re getting back to a normal growth rate? Any bigger number would be useful to tie this up with the 9% inferred since 2019.

Esam Elashmawi: So the question is, what is the kind of tager that you're looking at in industrial for the next several years? And how much contribution you've got the past few years from pricing and share again, and where I'm trying to get at is even if we assume that Q2 is kind of a bottom, are we going to see those world news eventually rebounding double digit because you're under shipping? I think it was kind of the new normal from which you're getting back to a normal growth rate, but any taget number would be useful to kind of tie this up with the 9% inferred since 2019.

Speaker Change #107: So the question is, what is the kind of CAGR that you're looking at in industrial for the next several years and how much contribution you got the past few years from

Speaker Change #108: Pricing and share gain and and and where I'm trying to get at is you know even if we assume that Q2 is kind of a bottom

Speaker Change #109: Are we going to see those revenues eventually rebounding double-digit because you're undershipping or is it kind of the new normal from which you're getting back to a normal growth rate? But any bigger, you know, number would be, growth would be, would be useful to kind of

Speaker Change #112: tie this up with the 9% inferred, you know, since 2019.

Esam Elashmawi: Yeah, and that's been a really good segment for us, and you alluded to that, Chris: the growth that we've had in the past. And what's driven that growth is our differentiated products that are just really suited well for this segment. You know, the power, the form factor, what we can do in adding more intelligence to systems. The customers are just adopting it, and we have been growing to an eye rate in the market overall, as you alluded to as well. When you look at all those fundamentals and combine that with the customer intimacy that's getting stronger and stronger, we're still targeting a good, healthy double-digit growth within that market.

Esam Elashmawi: Yeah, and industrial has been a really good segment for us. And you alluded to that, Tristan, of the growth that we've had in the past. And what's driven that growth is our differentiated products that are just really suited well for this segment. You know, the O-Power, the form factor, what we can do in adding more intelligence to systems.

Speaker Change #111: Yeah, and that has been a really good segment for us, and you alluded to that, Tristan, of the growth that we've had in the past.

Speaker Change #110: And what's driven that growth is our differentiated products that are just really suited well for this segment. You know, the old power, the form factor, what we can do in adding more intelligence to systems.

Tristan Garrett: The customers are just adopting it, and we have been growing at a higher rate than the market overall, as you alluded to as well.

Esam Elashmawi: The customers are just adopting it, and we have been growing at a higher rate than the market overall, as you alluded to as well. When you look at all those fundamentals and combine that with the customer intimacy that's getting stronger and stronger, we're still targeting good, healthy, double-digit growth within that end market. That segment is a good portion of the lattice revenue.

Tristan Garrett: When you look at all those fundamentals and you combine that with the customer intimacy that's getting stronger and stronger, we're still targeting a good, healthy double-digit growth within that end market. That segment is a good portion of the lattice revenue.

Esam Elashmawi: That's that that that segment is a good portion of the lattice revenue.

Esam Elashmawi: We gain a financial target our last investor day that we expect the company to grow in the next three to four years. Between 15 to 20% as a boss, revenue layers on top of our small FDA revenue, and we're still committed to that target. Our product portfolio, so strong, if it ever has been, we're introducing more products. We just introduced more devices last quarter at our developers conference. We have more announcements of new products that are being announced. These are very differentiated products defined by our customers as well, so we feel good about our position in the industrial market and that we can continue with double-digit growth within that segment.

Esam Elashmawi: We gave a financial target at our last investor day that we expect the company to grow in the next three to four years between 15% to 20% as a lot of revenue layers on top of our small FPGA revenue, and we're still committed to that target. Our product portfolio, as strong as it ever has been, we're introducing more products. We just introduced more devices last quarter at our developers conference. You'll hear more announcements of new products that are being announced.

Tristan Garrett: We gave a financial target our last Investor Day that we expect the company to grow in the next three to four years.

Tristan Garrett: between 15% to 20% as a lot of revenue layers on top of our small FPGA revenue, and we're still committed to that target.

Tristan Garrett: Our product portfolio, as strong as it ever has been, we're introducing more products. We just introduced more devices last quarter at our Developers Conference. You'll hear more announcements of new products that are being announced.

Esam Elashmawi: These are very differentiated products defined by our customers as well, so we feel good, Okay, that's useful. And then, I know you've said Avent is on track, but given the excess inventories, and it's not necessarily just at Disti's but also at your actual industrial end customer, could that mean that Avent could ramp a little bit lower, at a lower rate than you would expect a few quarters ago, just because you need to get a new product refreshes, and you've got a, they've got Yeah, there's really no indication that inventory normalization is going to affect the ramp of Avant. Avant is still early in its development cycle.

Tristan Garrett: These are very differentiated products defined by our customers as well, so we feel good about our position in the industrial market and that we can continue with double-digit growth within that segment.

Esam Elashmawi: Okay, that's useful.

Esam Elashmawi: And then I know you've said a van is on track, but given the excess inventories and it's not necessarily just at deceased but also at your actual industrial and customer, could that mean that a van could ramp a little bit lower at a lower rate than you would expect a few quarters ago, just because you need to get a, you know, a new product refreshes and you get a kind of fresh to order products first, or are you getting any indication of that at this point? Yeah, there's really no indication that the inventory normalization is going to affect the ramp of a van.

Speaker Change #114: Okay that's useful and then I know you've said event is on track but given the excess inventories and and it's not necessarily just at disties but also

Speaker Change #113: at your actual industrial end customer. Could that mean that a vent could wamp a little bit?

Speaker Change #115: lower at a lower rate than you would expect a few quarters ago just because you need to get a, you know, new product refreshes, and you've got a, they've got a kind of flush to all the products first. Or are you getting any indication of that at this point?

Speaker Change #116: Yeah, there's really no indication that the inventory normalization is going to affect the RAMP of a launch.

Esam Elashmawi: A van is still early in its cycle; customers are adopting it; they're ramping up into that with their products.

Esam Elashmawi: Customers are adopting it. They're ramping up with their products. And again, if you recall my prior question, I kind of gave a data point that new products have ramped up in the first half of 24 versus the first half of 23. And so, I mean, I'm very intimate with the field and the marketing team at Avant.

Speaker Change #116: The launch is still early in the cycle. Customers are adopting it. They're wrapping up with their products. And again, if you recall to a prior question, I kind of gave a data point that new products have wrapped in the first half of 24 versus the first half of 23.

Esam Elashmawi: And again, as we call it to a higher question, I kind of get a data point that new products have ramped in the first half of 24, after the first half of 23. And so, I mean, I'm very intimate with the field and the marketing team a lot. There's no, let me put it this way, there's no inventory normalization problem with our online. And customers want to get those new products that they're designing with a van through the market. As fast as they can, they want to get their products out; they want to get their revenues going; they want to show differentiated products as well.

Speaker Change #117: And so, I mean, I'm very intimate with the field and the marketing team at Avast.

Esam Elashmawi: We don't see, there's no, let me put it this way, there's no inventory normalization problem with our Avant pipeline. And customers want to get those new products that they're designing with Avant into the market as fast as they can. They want to get their products out.

Speaker Change #117: We don't see, there's no, let me put it this way, there's no inventory normalization problem with our online supply line. And customers want to get those new products that they're designing with the bonds to the market as fast as they can. They want to get their products out, they want to get their revenues going, they want to show differentiated products as well.

Esam Elashmawi: They want to get their revenue going. They want to show differentiated products as well. Great. Thank you very much. Thank you. Thank you, Tristan.

Esam Elashmawi: Great.

Esam Elashmawi: Thank you very much.

Speaker Change #118: Great. Thank you very much.

Esam Elashmawi: Thank you. And our next question comes from the line of Srini Pajjuri with Raymond James. Please proceed with your question. Thank you.

Speaker Change #118: Thank you. Thank you, Tristan.

Srinivas Pajjuri: And our next question comes from a line of serenity, a Missouri with Raymond James. Please proceed with your question. Thank you.

Speaker Change #119: Thank you. And our next question comes from the line of Srinivas Pajjuri with Raymond James. Please proceed with your question.

Esam Elashmawi: A couple of short term questions. You talked about booking, stabilizing a bed, and also backlog being a little better than Q2 as we look out to Q3. Just curious, is this primarily the inventory normalization that you talked about, or do you think the new products are driving this improvement in backlog? Or, you know, you also talked about the server, you know, cycle being strong as well. So if you could just give us some color as to what you think is driving the improvement in backlog. Yeah, it's a combination of multiple factors that clearly the new product ramp that orders come in that sounds from a booking perspective.

Esam Elashmawi: Esam, you talked about bookings stabilizing a bit and also backlog being a little better than Q2 as we look out to Q3. Just curious, is this primarily the inventory normalization that you talked about, or do you think the new products are driving this improvement in backlog? Or, you know, you also talked about the server cycle being strong as well. So if you could just give us some color as to what you think is driving the improvement in battery life. Yeah, it's a combination of multiple factors.

Srinivas Reddy Pajjuri: Thank you. A couple of short-term questions. Esam, you talked about booking, stabilizing a bit, and also backlog.

Speaker Change #121: being little better than Q2 as we look out to Q3.

Srinivas Reddy Pajjuri: I'm just curious, is this primarily the inventory normalization that you talked about, or do you think the new products are driving this improvement in backlog? Or you also talked about the server cycle being strong as well, so if you could just give us some color as to what you think is driving the improvement in backlog.

Esam Elashmawi: Clearly, the new product ramps up as orders come in. That helps from a booking perspective. Our design wins.

Speaker Change #122: Yeah, it's a combination of multiple factors. Clearly, the new product Ram says orders come in, that sounds from a booking perspective.

Esam Elashmawi: Our design wins. I did also give a data point that we had record design activity in the last two quarters. It's been doing a really good job getting customers to design Madison to the pockets that are opportunity for us. That drives also additional booking, as those products wrap. Part of it is normalization as well. So I think it's multiple factors that, when combined, we again have a second half of Q2 saw an uptick in the monkey bridge, which is a good sign for us. Okay, got it.

Esam Elashmawi: I did also give a data point that we had record design activity in the last two quarters. The team's been doing a really good job of getting customers to design Lattice into the socket. That's our opportunity for us.

Speaker Change #123: Our design wins. I did also give a data point that we had record design activity in the last two quarters.

Speaker Change #124: The team's been doing a really good job on getting customers to design Lattice into the socket. That's our opportunity for us.

Esam Elashmawi: That drives additional bookings as those products ramp up. Part of it is normalization as well. I think it's multiple factors that, when combined, we again saw an uptick in bookings in the second half of Q2, which is a good sign for us. Okay.

Speaker Change #124: That drives also additional bookings as those products wrap. Part of it is normalization as well, so I think it's multiple factors that when combined, we again at the second half of Q2 saw an uptick in the bookings, which is a good sign for us.

Esam Elashmawi: And then, just to follow up on the other bucket, the compute bucket, I'm guessing the server and compute are now much bigger than the comms. If you could maybe help quantify how big, you know, compute is in that bucket. And then, also talk about maybe where we are in that cycle. I know, you know, you're seeing a 50% content increase with the current generation of servers. If you can, maybe talk about where we are.

Esam Elashmawi: And then just to follow up on the other bucket, the compute bucket, I'm guessing the server and computer is now much bigger than the cons. If you could maybe, you know, help quantify how big, you know, computers of that bucket. And then also talk about maybe where we are in that cycle. You know, you're seeing a 50% content increase with the current generation of servers if you can maybe talk about where we are. And then as we look out to the next few quarters, you know, you have new platforms ramping. And just curious if you should expect a similar type of content increase as we go from South Florida to Granite and then from Genoa to Turing.

Speaker Change #125: Okay, got it. And then just to follow up on the...

Speaker Change #126: The other bucket, the compute bucket, I'm guessing the server and compute is now much bigger than the comms. If you could maybe help quantify how big.

Speaker Change #127: you know, computers of that bucket. And then also talk about maybe where we are in that cycle. I know, you know, you're seeing a 50% content increase.

Esam Elashmawi: And then as we look out to the next few quarters, you know, you have new platforms ramping up, and I was just curious if you should expect a similar type of content increase as we go from Sapphire to Granite and then from Genoa to Turin. Yeah, I want to point out that there's always going to be some fluctuations quarter to quarter, but if you look at our server revenue overall, it tends to go up.

Speaker Change #127: with the current generation of servers. If you can maybe talk about where we are. And then as we look out to the next few quarters, you know, you have...

Speaker Change #128: new platforms ramping and just curious if you should expect a similar type of content increase as we go from Sapphire to Granite and then from Genoa to Turin. Thank you.

Esam Elashmawi: Thank you. Yeah, I want to point out that there's always going to be some fluctuations quarter to quarter, but if you look at our server revenue overall, it tends to go up. The reason why is, again, the higher tax rates, the higher ASTs that Christopher customers are adopting. And we also broke it out in the past; you've heard me talk about this. There's a general preferred servers, but there's also the AI-specific servers. And in the AI specific servers, what we said in the past and folks true is that the attachment is equal or higher than general preferred server.

Speaker Change #129: Yeah, I want to point out that there's always going to be some fluctuations quarter-to-quarter, but if you look at our server revenue overall it tends to go up and the reason why is again the higher tax rate.

Esam Elashmawi: And the reason why is, again, the higher tax rates, the higher ASPs that server customers are adopting. And we also broke it out in the past, you've heard me talk about this, there are general purpose servers, but there are also AI-specific servers. And in the AI-specific servers, what we've said in the past, is that the tax rate is equal to or higher than general purpose servers. In fact, if I look at the next generation of AI servers being deployed, we see a good increase in the tax rate there, as well as in the general purpose servers as well.

Speaker Change #130: to hire ASCs that server customers are adopting. And we also broke it out in the past. You've heard me talk about this. There's the general purpose servers, but there's also the AI specific servers.

Speaker Change #130: And in the AI-specific servers, what we've said in the past, and it holds true, is that the attach rate is equal or higher than general-purpose servers.

Esam Elashmawi: In fact, if I look at the next generation AI servers, are being deployed, we see a good increase of attachment there as well as in the general preferred servers as well. We have really good visibility over the next architecture for both AI specific as well as general purpose. And the lattice team with our customers are doing a really good job and innovating and bringing more value to this market. So although we haven't quantified the dollar increase for the next generation, the current generation has a 50% dollar increase for the fire generation. We expect an increase in dollar as well.

Speaker Change #130: If I look at the next generation AI servers that are being deployed, we see a good increase of the tax rate there, as well as in the general purpose servers as well. We have really good visibility over the next architectures for both AI-specific as well as general purpose.

Esam Elashmawi: We have really good visibility into the next architectures for both AI-specific as well as general purpose. And the Lattice team, together with our customers, is doing a really good job of innovating and bringing more value to this market. So although we haven't quantified the dollar increase for the next generation, the current generation has a 50% dollar increase over the prior generation. We'd expect an increase in dollars as well; we just have not quantified it. And we'll do that as they start to ramp into production. But we do see a higher tax rate, and we do see the adoption of FPGAs with a higher ASP.

Speaker Change #131: and the Lattice team, with our customers, are doing a really good job at innovating and bringing more value to this market.

Speaker Change #131: So, although we haven't quantified the dollar increase for the next generation, the current generation has a 50% dollar increase to the prior generation.

Esam Elashmawi: We just have not quantified it, and we'll do that as they'll start to ramp into production. But we do see in the higher tax rate, and we do see the adoption of FBGA with the higher ASTs. Right.

Speaker Change #131: We'd expect an increase in dollar as well, we just have not quantified it, and we'll do that as they'll start to ramp into production. But we do see a higher tax rate, and we do see the adoption of FPGAs with a higher AFP.

Esam Elashmawi: Thanks, everyone. Thanks, everyone. Thanks, everyone. Thank you, Trini.

Speaker Change #132: Got it. Thanks, Esam.

Jamie: Thank you, Jamie.

Rick Muscha: And we have reached the end of the question-and-answer session on the alternative call back over to management for close remarks. All right. Thank you, operator, and thank you, everyone, for joining us about today's call. While the industry continues to go through a period of inventory normalization, we're starting to see signs of improvement.

Speaker Change #134: Thank you and we have reached the end of the question and answer session. I'll now turn the call back over to management for a closing remarks.

Esam Elashmawi: Thank you, and we have reached the end of the question and answer session. I'll now turn the call back over to management for a closed end. All right. Thank you, operator, and thank you, everyone, for joining us on today's call. While the industry continues to go through a period of inventory normalization, we're starting to see signs of improvement. We continue to execute on our ongoing product portfolio expansion and remain well-positioned for long-term growth.

Speaker Change #135: All right, thank you, operator, and thank you, everyone, for joining us on today's call. While the industry continues to go through a period of inventory normalization, we're starting to see signs of improvement.

Rick Muscha: We continue to execute on our ongoing product portfolio expansion and remain well positioned for long term growth. Operator that concludes today's call.

Speaker Change #135: We continue to execute on our ongoing product portfolio expansion and remain well-positioned for long-term growth. Operator, that concludes today's call.

Operator: Operator, that concludes today's call. Thank you. This concludes today's conference, and you may disconnect your line. Thank you for your participation. Goodbye!

Operator: Now you just concludes today's conference and you may just connect you live at this time. Thank you for your participation.

Speaker Change #136: Thank you. This concludes today's conference and you may disconnect your line at this time.

Operator: Goodbye.

Speaker Change #136: Thank you for your participation.

Speaker Change #136: [inaudible]

Rick Muscha: John Williams, John Vinh, Srinivas Pajjuri, Mark Lipacis, John Vinh, Srinivas Pajjuri