LATTICE SEMICONDUCTOR CORP 10-Q

lscc20220402_10q.htm     Table of Contents   UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One)     ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934   FOR THE QUARTERLY PERIOD ENDED April 2, 2022   OR     ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934   FOR THE TRANSITION PERIOD FROM __________ TO __________   Commission file number 000-18032     LATTICE SEMICONDUCTOR CORPORATION (Exact name of Registrant as specified in its charter)     State of Delaware 93-0835214 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)     5555 NE Moore Court , Hillsboro , OR 97124 (Address of principal executive offices) (Zip Code) ( 503 ) 268-8000 (Registrant's telephone number, including area code)   Securities registered pursuant to Section 12(b) of the Act:   Title of each class Trading Symbol Name of each exchange on which registered Common Stock, $.01 par value LSCC Nasdaq  Global Select Market   Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes ☒  No ☐   Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes ☒  No ☐   Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):   Large accelerated filer  ☒ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐   Emerging growth company ☐   If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐   Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes ☐   No ☒   Number of shares of common stock outstanding as of April 29, 2022 137,610,858     Table of Contents       LATTICE SEMICONDUCTOR CORPORATION QUARTERLY REPORT ON FORM 10-Q TABLE OF CONTENTS           Note Regarding Forward-Looking Statements 3       PART I. FINANCIAL INFORMATION Page       Item 1. Financial Statements 4         Consolidated Statements of Operations – Three Months Ended April 2, 2022 and April 3, 2021  (unaudited) 4         Consolidated Statements of Comprehensive Income – Three Months Ended April 2, 2022 and April 3, 2021  (unaudited) 5         Consolidated Balance Sheets – April 2, 2022 and January 1, 2022  (unaudited) 6         Consolidated Statements of Cash Flows – Three Months Ended April 2, 2022 and April 3, 2021  (unaudited) 7         Consolidated Statements of Stockholders' Equity – Three Months Ended April 2, 2022 and April 3, 2021  (unaudited) 8         Notes to Consolidated Financial Statements  (unaudited) 9       Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 17       Item 3. Quantitative and Qualitative Disclosures About Market Risk 24       Item 4. Controls and Procedures 24             PART II. OTHER INFORMATION         Item 1. Legal Proceedings 25       Item 1A. Risk Factors 25       Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 25       Item 5. Other Information 26       Item 6. Exhibits 26         Signatures 27   - 2 - Table of Contents       Note Regarding Forward-Looking Statements   This Quarterly Report on Form 10-Q contains forward-looking statements that involve estimates, assumptions, risks, and uncertainties. Any statements about our expectations, beliefs, plans, objectives, assumptions, or future events or performance are not historical facts and may be forward-looking. We use words or phrases such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “plan,” "possible," “predict,” “projects,” “may,” “will,” “should,” “continue,” “ongoing,” “future,” “potential,” and similar words or phrases to identify forward-looking statements.   Forward-looking statements include, but are not limited to, statements about: our target or expected financial performance and our ability to achieve those results; future impacts of the COVID-19 pandemic, including as a result of actions by governments, businesses, and individuals in response to the situation, on consumer, industrial, labor, and financial markets, our business operations, supply chain and partners, financial performance, results of operations, financial position, and the achievement of our strategic objectives; our opportunities to increase our addressable market; our expectations and strategies regarding market trends and opportunities, including market segment drivers such as 5G infrastructure deployments, cloud and enterprise servers, client computing platforms, industrial Internet of Things, factory automation, automotive electronics, smart homes and prosumers; our expectations regarding our customer base; our expectations regarding product offerings; our gross margin growth and our strategies to achieve gross margin growth and other financial results; our future investments in research and development, and our research and development expense efficiency; future financial results or accounting treatments; our judgments involved in accounting matters, including revenue recognition, inventories and cost of revenue, and income taxes; actions we may take regarding the design and continued effectiveness of our internal controls over financial reporting; our use of cash; our beliefs regarding the adequacy of our liquidity, capital resources and facilities; whether we will consider and act upon acquisition opportunities to extend our product, technology and product offerings; the expected costs of our restructuring plans; our expectations regarding taxes, including unrecognized tax benefits, and tax adjustments and allowances; whether we will pursue future stock repurchases and how any future repurchases will be funded; our ability to prevent and respond to information technology system failures, security breaches and incidents, cyber-attacks or fraud; the impact of laws and regulations addressing privacy, data protection, and cybersecurity and our ability to comply with the same; and our beliefs regarding legal proceedings.   These forward-looking statements are based on estimates and assumptions that are subject to risks and uncertainties that could cause actual results to differ materially from those statements expressed in the forward-looking statements. The key factors, among others, that could cause our actual results to differ materially from the forward-looking statements include the effects of the COVID-19 pandemic and the actions by governments, businesses, and individuals in response to the situation, the effects of which may give rise to or amplify the risks associated with many of these factors listed here; global economic conditions and uncertainty; and other factors more fully described herein or that are otherwise described from time to time in our filings with the Securities and Exchange Commission, including, but not limited to, the items discussed in Part I, Item 1A, “Risk Factors,” in our Annual Report on Form 10-K for the fiscal year ended January 1, 2022 and any additional or updated risk factors discussed in any subsequent Quarterly Report on Form 10-Q filed since that date.   You should not unduly rely on forward-looking statements because our actual results could differ materially from those e xpressed by us. In addition, any forward-looking statem ent applies only as of the date of this filing. We do not plan to, and undertake no obligation to, update any forward-looking statements to reflect new information or new events, circumstances or developments, or otherwise.   - 3 - Table of Contents       PART I. FINANCIAL INFORMATION   ITEM 1. FINANCIAL STATEMENTS   LATTICE SEMICONDUCTOR CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)       Three Months Ended       April 2,     April 3,   (In thousands, except per share data)   2022     2021   Revenue   $ 150,515     $ 115,716   Cost of revenue     49,748       45,130   Gross margin     100,767       70,586   Operating expenses:                 Research and development     32,555       24,066   Selling, general, and administrative     28,771       25,092   Amortization of acquired intangible assets     1,169       603   Restructuring charges     54       176   Acquisition related charges     455       —   Total operating expenses     63,004       49,937   Income from operations     37,763       20,649   Interest expense     ( 708 )     ( 718 ) Other (expense) income, net     ( 22 )     ( 162 ) Income before income taxes     37,033       19,769   Income tax expense     955       956   Net income   $ 36,078     $ 18,813                     Net income per share:                 Basic   $ 0.26     $ 0.14   Diluted   $ 0.26     $ 0.13                     Shares used in per share calculations:                 Basic     137,500       136,401   Diluted     141,281       141,674         See Accompanying Notes to Unaudited Consolidated Financial Statements.   - 4 - Table of Contents     LATTICE SEMICONDUCTOR CORPORATION CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited)       Three Months Ended       April 2,     April 3,   (In thousands)   2022     2021   Net income   $ 36,078     $ 18,813   Other comprehensive income (loss):                 Translation adjustment     ( 253 )     ( 237 ) Comprehensive income   $ 35,825     $ 18,576         See Accompanying Notes to Unaudited Consolidated Financial Statements.   - 5 - Table of Contents     LATTICE SEMICONDUCTOR CORPORATION CONSOLIDATED BALANCE SHEETS (unaudited)       April 2,     January 1,   (In thousands, except share and par value data)   2022     2022   ASSETS                 Current assets:                 Cash and cash equivalents   $ 122,989     $ 131,570   Accounts receivable, net of allowance for credit losses     83,055       79,859   Inventories, net     71,773       67,594   Prepaid expenses and other current assets     21,368       22,328   Total current assets     299,185       301,351   Property and equipment, less accumulated depreciation of $112,401 at April 2, 2022 and $109,905 at January 1, 2022     39,626       38,094   Operating lease right-of-use assets     22,378       23,818   Intangible assets, net     28,350       29,782   Goodwill     315,358       315,358   Other long-term assets     16,029       18,091   Total assets   $ 720,926     $ 726,494                     LIABILITIES AND STOCKHOLDERS' EQUITY                 Current liabilities:                 Accounts payable   $ 38,491     $ 34,597   Accrued expenses     27,062       26,444   Accrued payroll obligations     16,328       27,967   Current portion of long-term debt     17,182       17,173   Total current liabilities     99,063       106,181   Long-term debt, net of current portion     136,461       140,760   Long-term operating lease liabilities, net of current portion     17,735       19,248   Other long-term liabilities     46,112       48,672   Total liabilities     299,371       314,861   Contingencies (Note 12)                     Stockholders' equity:                 Preferred stock, $.01 par value, 10,000,000 shares authorized, none issued and outstanding     —       —   Common stock, $.01 par value, 300,000,000 shares authorized; 137,597,000 shares issued and outstanding as of April 2, 2022 and 137,239,000 shares issued and outstanding as of January 1, 2022     1,376       1,372   Additional paid-in capital     675,781       701,688   Accumulated deficit     ( 253,898 )     ( 289,976 ) Accumulated other comprehensive loss     ( 1,704 )     ( 1,451 ) Total stockholders' equity     421,555       411,633   Total liabilities and stockholders' equity   $ 720,926     $ 726,494         See Accompanying Notes to Unaudited Consolidated Financial Statements.   - 6 - Table of Contents     LATTICE SEMICONDUCTOR CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)       Three Months Ended       April 2,     April 3,   (In thousands)   2022     2021   Cash flows from operating activities:                 Net income   $ 36,078     $ 18,813   Adjustments to reconcile net income to net cash provided by (used in) operating activities:                 Depreciation and amortization     7,179       5,901   Stock-based compensation expense     14,125       10,454   Amortization of right-of-use assets     1,696       1,628   Other non-cash adjustments     44       51   Changes in assets and liabilities:                 Accounts receivable, net     ( 3,196 )     ( 6,509 ) Inventories, net     ( 4,179 )     5,143   Prepaid expenses and other assets     1,292       780   Accounts payable     3,894       ( 146 ) Accrued expenses     ( 444 )     1,064   Accrued payroll obligations     ( 11,639 )     ( 6,436 ) Operating lease liabilities, current and long-term portions     ( 1,645 )     ( 1,372 ) Net cash provided by (used in) operating activities     43,205       29,371   Cash flows from investing activities:                 Capital expenditures     ( 4,426 )     ( 1,270 ) Cash paid for software and intellectual property licenses     ( 2,704 )     ( 3,056 ) Net cash provided by (used in) investing activities     ( 7,130 )     ( 4,326 ) Cash flows from financing activities:                 Restricted stock unit tax withholdings     ( 25,629 )     ( 7,981 ) Proceeds from issuance of common stock     601       1,111   Repurchase of common stock     ( 15,000 )     ( 15,002 ) Repayment of long-term debt     ( 4,375 )     —   Net cash provided by (used in) financing activities     ( 44,403 )     ( 21,872 ) Effect of exchange rate change on cash     ( 253 )     ( 237 ) Net increase (decrease) in cash and cash equivalents     ( 8,581 )     2,936   Beginning cash and cash equivalents     131,570       182,332   Ending cash and cash equivalents   $ 122,989     $ 185,268                     Supplemental disclosure of cash flow information and non-cash investing and financing activities:                 Interest paid   $ 552     $ 592   Operating lease payments   $ 1,884     $ 1,731   Income taxes paid, net of refunds   $ 761     $ 675   Accrued purchases of plant and equipment   $ 963     $ 1,120   Operating lease right-of-use assets obtained in exchange for lease obligations   $ 314     $ 7,440       See Accompanying Notes to Unaudited Consolidated Financial Statements.   - 7 - Table of Contents     LATTICE SEMICONDUCTOR CORPORATION CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (unaudited)       The following summarizes the changes in total equity for the three month period ended April 2, 2022:       Common Stock ($.01 par value)     Additional Paid-in     Accumulated     Accumulated Other Comprehensive           (In thousands, except par value data)   Shares     Amount     Capital     Deficit     Loss     Total   Balances, January 1, 2022     137,239     $ 1,372     $ 701,688     $ ( 289,976 )   $ ( 1,451 )   $ 411,633   Components of comprehensive income, net of tax:                                                 Net income for the three months ended April 2, 2022     —       —       —       36,078       —       36,078   Other comprehensive income (loss)     —       —       —       —       ( 253 )     ( 253 ) Total comprehensive income                                     35,825   Common stock issued in connection with employee equity incentive plans, net of shares withheld for employee taxes     602       6       ( 25,034 )     —       —       ( 25,028 ) Stock-based compensation expense     —       —       14,125       —       —       14,125   Repurchase of common stock     ( 244 )     ( 2 )     ( 14,998 )     —       —       ( 15,000 ) Balances, April 2, 2022     137,597     $ 1,376     $ 675,781     $ ( 253,898 )   $ ( 1,704 )   $ 421,555           The following summarizes the changes in total equity for the three month period ended April 3, 2021:       Common Stock ($.01 par value)     Additional Paid-in     Accumulated     Accumulated Other Comprehensive           (In thousands, except par value data)   Shares     Amount     Capital     Deficit     Loss     Total   Balances, January 2, 2021     136,236     $ 1,362     $ 770,711     $ ( 385,898 )   $ ( 1,748 )   $ 384,427   Components of comprehensive income, net of tax:                                                 Net income for the three months ended April 3, 2021     —       —       —       18,813       —       18,813   Other comprehensive income (loss)     —       —       —       —       ( 237 )     ( 237 ) Total comprehensive income                                     18,576   Common stock issued in connection with employee equity incentive plans, net of shares withheld for employee taxes     472       5       ( 6,875 )     —       —       ( 6,870 ) Stock-based compensation expense     —       —       10,454       —       —       10,454   Repurchase of common stock     ( 307 )     ( 3 )     ( 14,999 )     —       —       ( 15,002 ) Balances, April 3, 2021     136,401     $ 1,364     $ 759,291     $ ( 367,085 )   $ ( 1,985 )   $ 391,585           See Accompanying Notes to Unaudited Consolidated Financial Statements.   - 8 - Table of Contents   LATTICE SEMICONDUCTOR CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)     Note 1 - Basis of Presentation   Lattice Semiconductor Corporation and its subsidiaries (“Lattice,” the “Company,” “we,” “us,” or “our”) develop technologies that we monetize through differentiated programmable logic semiconductor products, silicon-enabling products, system solutions, design services, and licenses.   Basis of Presentation and Use of Estimates   The accompanying Consolidated Financial Statements are unaudited and have been prepared in accordance with U.S. Generally Accepted Accounting Principles ("U.S. GAAP") and pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). In our opinion, they include all adjustments, consisting only of normal recurring adjustments, necessary for the fair presentation of results for the interim periods. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted as permitted by the SEC's rules and regulations for interim reporting. These Consolidated Financial Statements should be read in conjunction with our audited financial statements and notes thereto included in our Annual Report on Form 10 -K for the year ended January 1, 2022 (" 2021 10 -K").   The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and judgments affecting the amounts reported in our consolidated condensed financial statements and the accompanying notes. We base our estimates and judgments on historical experience, knowledge of current conditions, and our beliefs of what could occur in the future considering available information. While we believe that our estimates, assumptions, and judgments are reasonable, they are based on information available when made, and because of the uncertainty inherent in these matters, the actual results that we experience may differ materially from these estimates under different assumptions or conditions. We evaluate our estimates and judgments on an ongoing basis.   We describe our accounting methods and practices in more detail in our  2021 10 -K. There have been no changes to the significant accounting policies, procedures, or general information described in our 2021 10 -K that have had a material impact on our consolidated financial statements and related notes. The purchase price allocation for our acquisition of Mirametrix, Inc. in November 2021 has been substantially completed, but may be subject to revision as we perform and complete more detailed analysis of certain tax matters. Certain prior year balances have been reclassified to conform to the current year’s presentation.   Fiscal Reporting Periods   We report based on a 52 or 53 -week fiscal year ending on the Saturday closest to December 31. Our fiscal 2022 will be a 52 -week year and will end on December 31, 2022, and our fiscal 2021 was a 52 -week year that ended January 1, 2022. Our  first quarter of fiscal 2022 and first quarter of fiscal 2021 ended on April 2, 2022 and April 3, 2021 , respectively. All references to quarterly financial results are references to the results for the relevant  13 -week fiscal period.   Concentrations of Risk   Potential exposure to concentrations of risk may impact revenue and accounts receivable. Distributors have historically accounted for a significant portion of our total revenue. Revenue attributable to distributors as a percentage of total revenue was 90 % and 85 % for the first quarter of fiscal 2022 and 2021 , respectively. Distributors also account for a substantial portion of our net accounts receivable. Our two largest distributors accounte d for 46 % and 34 % of net accounts receivable at April 2, 2022  and 59 % and 28 % of net accounts receivable at January 1, 2022 .     Note 2 - Net Income per Share   Our calculation of the diluted share count includes the number of shares from our equity awards with market conditions or performance conditions that would be issuable under the terms of such awards at the end of the reporting period. For equity awards with a market condition, the number of shares included in the diluted share count as of the end of each period presented is determined by measuring the achievement of the market condition as of the end of the respective reporting periods. For equity awards with a performance condition, the number of shares that qualified for vesting as of the end of each period presented are included in the diluted share count when the condition for their issuance was satisfied by the end of the respective reporting periods. See "Note 9 - Stock-Based Compensation" to our consolidated financial statements for further discussion of our equity awards with market conditions or performance conditions.   - 9 - Table of Contents   A summary of basic and diluted Net income per share is presented in the following table:       Three Months Ended       April 2,     April 3,   (in thousands, except per share data)   2022     2021   Net income   $ 36,078     $ 18,813                     Shares used in basic Net income per share     137,500       136,401   Dilutive effect of stock options, RSUs, ESPP shares, and equity awards with a market condition or performance condition     3,781       5,273   Shares used in diluted Net income per share     141,281       141,674                     Basic Net income per share   $ 0.26     $ 0.14   Diluted Net income per share   $ 0.26     $ 0.13     The computation of diluted Net income per share excludes the effects of stock options, restricted stock units ("RSUs"), Employee Stock Purchase Plan ("ESPP") shares, and equity awards with a market condition or performance condition that are antidilutive, aggregating approximately the following number of shares:       Three Months Ended       April 2,     April 3,   (in thousands)   2022     2021   Stock options, RSUs, ESPP shares, and equity awards with a market condition or performance condition excluded as they are antidilutive     268       350       Note 3 - Revenue from Contracts with Customers   Disaggregation of revenue   The following tables provide information about revenue from contracts with customers disaggregated by major class of revenue, revenue by channel, and by geographical market, based on ship-to location of the customer :       Three Months Ended   Revenue by Channel   April 2,     April 3,   (In thousands)   2022     2021   Product revenue - Distributors   $ 135,413       90 %   $ 98,779       85 % Product revenue - Direct     11,565       8 %     12,813       11 % Licensing and services     3,537       2 %     4,124       4 % Total revenue   $ 150,515       100 %   $ 115,716       100 %                                   Revenue by Geographical Market                                 (In thousands)                                 United States   $ 17,703       12 %   $ 9,110       8 % Other Americas     3,837       3 %     6,733       6 % Americas     21,540       15 %     15,843       14 % China     75,431       50 %     67,119       58 % Japan     18,903       13 %     7,777       7 % Other Asia     14,418       9 %     13,494       11 % Asia     108,752       72 %     88,390       76 % Europe     20,223       13 %     11,483       10 % Total revenue   $ 150,515       100 %   $ 115,716       100 %     - 10 - Table of Contents   Contract balances   Our contract assets relate to our rights to consideration for licenses and royalties due to us as a member of the HDMI Founders consortium. The balance results primarily from the amount of estimated revenue related to HDMI that we have recognized to date, but which has not yet been collected from the customers of the HDMI licensing agent. Contract assets are included in Prepaid expenses and other current assets on our Consolidated Balance Sheets. The following table summarizes activity during the first three months of fiscal 2022 :   (In thousands)         Contract assets as of Year Ended January 1, 2022   $ 5,672   Revenues recorded during the period     3,061   Transferred to Accounts receivable or collected     ( 3,942 ) Contract assets as of April 3, 2022   $ 4,791     Contract liabilities are included in Accrued expenses on our Consolidated Balance Sheets. The following table summarizes activity during the first three months of fiscal 2022 :   (In thousands)         Contract liabilities as of Year Ended January 1, 2022   $ 4,768   Accruals for estimated future stock rotation and scrap returns     1,396   Less: Release of accruals for recognized stock rotation and scrap returns     ( 1,424 ) Contract liabilities as of April 3, 2022   $ 4,740       Note 4 - Balance Sheet Components   Accounts Receivable   Accounts receivable do not bear interest and are shown net of an allowance for expected lifetime credit losses, which reflects our best estimate of probable losses inherent in the accounts receivable balance, as described in our 2021 10 -K.       April 2,     January 1,   (In thousands)   2022     2022   Accounts receivable   $ 83,055     $ 79,859   Less: Allowance for credit losses     —       —   Accounts receivable, net of allowance for credit losses   $ 83,055     $ 79,859     Inventories       April 2,     January 1,   (In thousands)   2022     2022   Work in progress   $ 47,115     $ 43,546   Finished goods     24,658       24,048   Total inventories, net   $ 71,773     $ 67,594     Accrued Expenses   Included in Accrued expenses in the Consolidated Balance Sheets are the following balances:       April 2,     January 1,   (In thousands)   2022     2022   Liability for non-cancelable contracts   $ 9,719     $ 9,930   Current portion of operating lease liabilities     5,878       5,696   Contract liability under ASC 606     4,740       4,768   Other accrued expenses     6,725       6,050   Total accrued expenses   $ 27,062     $ 26,444     - 11 - Table of Contents   Property and Equipment – Geographic Information   Our Property and equipment, net by country at the end of each period was as follows:       April 2,     January 1,   (In thousands)   2022     2022   United States   $ 25,240     $ 26,509                     Taiwan     8,727       6,555   Philippines     3,098       2,498   China     1,546       1,643   Other     1,015       889   Total foreign property and equipment, net     14,386       11,585   Total property and equipment, net   $ 39,626     $ 38,094     Cloud Based Computing Implementation Costs   We capitalize the implementation costs for cloud computing arrangements, which are recorded in Prepaid expenses and other current assets and Other long-term assets on our Consolidated Balance Sheets. The following table summarizes activity during the first three months of fiscal 2022 :   (In thousands)         Cloud based computing implementation costs as of January 1, 2022   $ 2,380   Costs capitalized     55   Amortization     ( 206 ) Cloud based computing implementation costs as of April 2, 2022   $ 2,229       Note 5 - Long-Term Debt   On May 17, 2019, we entered into a credit agreement (the “Current Credit Agreement”), which provides for a five -year secured term loan facility in an aggregate principal amount of $ 175.0 million and a five -year secured revolving loan facility in an aggregate principal amount of up to $ 75.0 million. Details of the term loan and the revolving loan (collectively, "long-term debt"), including the basis for interest, payment terms, and covenants are described in the Current Credit Agreement.   During the first three months of fiscal 2022, we paid required quarterly installments totaling $ 4.4 million on our long-term debt. The fair value of our long-term debt approximates the carrying value, which is reflected in our Consolidated Balance Sheets as follows:       April 2,     January 1,   (In thousands)   2022     2022   Principal amount   $ 154,375     $ 158,750   Unamortized original issuance discount and debt costs     ( 732 )     ( 817 ) Less: Current portion of long-term debt     ( 17,182 )     ( 17,173 ) Long-term debt, net of current portion and unamortized debt issue costs   $ 136,461     $ 140,760     As of April 2, 2022 , the effective interest rate on the term loan wa s 1.92 %, and the effective interest rate on the revolving loan was 1.71 %. We pay a commitment fee of 0.20 % on the unused portion of the revolving loan. Interest expense related to our long-term debt was included in Interest expense on our Consolidated Statements of Operations as follows:       Three Months Ended       April 2,     April 3,   (In thousands)   2022     2021   Contractual interest   $ 562     $ 598   Amortization of original issuance discount and debt costs     85       92   Total interest expense related to long-term debt   $ 647     $ 690       - 12 - Table of Contents   Expected future principal payments are based on the schedule of required quarterly installments. As of April 2, 2022 , expected future principal payments on our long-term debt were as follows:   Fiscal year   (in thousands)   2022 (Remaining 3 quarters)     13,125   2023     17,500   2024     123,750       $ 154,375       Note 6 - Restructuring   Under the Q1 2020 Plan, which is described in the 2021 10 -K, we recorded a credit adjustment of approximately $ 0.1 million during the first quarter of fiscal 2022 and we recorded no expense during the first quarter of fiscal 2021. Approximately $ 2.1 million of total expense has been incurred through April 2, 2022 under the Q1 2020 Plan. Substantially all actions planned under the Q1 2020 Plan have been implemented.   Under the June 2017 Plan, which is described in the 2021 10 -K, we incurred restructuring expense related to our partially vacated facility in San Jose, California of approximately $ 0.2 million during the first quarter of both fiscal 2022 and 2021. We have incurred approximately $ 21.8 million of total expense through April 2, 2022 under the June 2017 Plan, and all planned actions have been implemented. We expect the total cost of the June 2017 Plan to be approximately $ 22.0 million to $ 23.5 million as ROU asset amortization expenses related to our partially vacated facility in San Jose, California will be incurred over the remaining lease term.   These expenses were recorded to Restructuring charges on our Consolidated Statements of Operations. The restructuring accrual balance is presented in Accrued expenses and in Other long-term liabilities on our Consolidated Balance Sheets. The following table displays the activity related to our restructuring plans:   (In thousands)   Severance & Related (1)     Lease Termination & Fixed Assets     Other (2)     Total   Accrued Restructuring at January 1, 2022   $ 251     $ 7,130     $ —     $ 7,381   Restructuring charges     ( 97 )     151       —       54   Costs paid or otherwise settled     ( 138 )     ( 445 )     —       ( 583 ) Accrued Restructuring at April 2, 2022   $ 16     $ 6,836     $ —     $ 6,852                                     Accrued Restructuring at January 2, 2021   $ 246     $ 8,233     $ 664     $ 9,143   Restructuring charges     —       176       —       176   Costs paid or otherwise settled     ( 9 )     ( 439 )     ( 656 )     ( 1,104 ) Accrued Restructuring at April 3, 2021   $ 237     $ 7,970     $ 8     $ 8,215     ( 1 )  Includes employee relocation and outplacement costs ( 2 )  Includes termination fees on the cancellation of certain contracts under previous restructuring plans     Note 7 - Leases   We have operating leases for corporate offices, sales offices, research and development facilities, storage facilities, and a data center, the terms of which are described in our 2021 10 -K. All of our facilities are leased under operating leases, which expire at various times through 2028, with a weighted-average remaining lease term of 3.9 years and a weighted-average discount rate of 5.4 % as of April 2, 2022 .   We recorded fixed operating lease expenses of $ 2.0 million for the first quarter of both fiscal 2022 and 2021.     - 13 - Table of Contents   The following table presents the lease balance classifications within the Consolidated Balance Sheets and summarizes their activity during the first   three months of fiscal 2022 :   Operating lease right-of-use assets   (in thousands)   Balance as of January 1, 2022   $ 23,818   Right-of-use assets obtained for new lease contracts during the period     314   Amortization of right-of-use assets during the period     ( 1,696 ) Adjustments for present value and foreign currency effects     ( 58 ) Balance as of April 2, 2022   $ 22,378     Operating lease liabilities   (in thousands)   Balance as of January 1, 2022   $ 24,944   Lease liabilities incurred for new lease contracts during the period     314   Accretion of lease liabilities     302   Operating cash used by payments on lease liabilities     ( 1,884 ) Adjustments for present value and foreign currency effects     ( 63 ) Balance as of April 2, 2022     23,613   Less: Current portion of operating lease liabilities (included in Accrued expenses)     ( 5,878 ) Long-term operating lease liabilities, net of current portion   $ 17,735     Maturities of operating lease liabilities as of April 2, 2022 are as follows:   Fiscal year   (in thousands)   2022 (Remaining 3 quarters)     5,168   2023     7,581   2024     5,405   2025     3,645   2026     2,532   Thereafter     2,081   Total lease payments     26,412   Less: amount representing interest     ( 2,799 ) Total lease liabilities   $ 23,613     Lease obligations for facilities restructured prior to the adoption of Topic 842 totaled approximately $ 6.8 million at April 2, 2022 and continued to be recorded in Other long-term liabilities on our Consolidated Balance Sheets.     Note 8 - Intangible Assets   On our Consolidated Balance Sheets at April 2, 2022 and January 1, 2022, Intangible assets, net are shown net of accumulated amortization of $ 136.9 million and $ 135.5 million, respectively. In prior years, we entered into license agreements for third -party technology and have recorded them as intangible assets. These licenses are being amortized to Research and development expense over their estimated useful lives.   We recorded amortization expense related to intangible assets on the Consolidated Statements of Operations as presented in the following table:       Three Months Ended       April 2,     April 3,   (In thousands)   2022     2021   Research and development   $ 263     $ 198   Amortization of acquired intangible assets     1,169       603       $ 1,432     $ 801     - 14 - Table of Contents     Note 9 - Stock-Based Compensa tion   Total stock-based compensation expense included in our Consolidated Statements of Operations is presented in the following table:       Three Months Ended       April 2,     April 3,   (In thousands)   2022     2021   Cost of revenue   $ 935     $ 666   Research and development     4,845       2,767   Selling, general, and administrative     8,345       7,021   Total stock-based compensation   $ 14,125     $ 10,454     Market-Based and Performance-Based Stock Compensation   In the first quarter of fiscal 2022, we granted awards of RSUs with a market condition to certain executives. Under the terms of these grants, the RSUs with a market condition vest over a three -year period based on the Company’s total shareholder return ("TSR") relative to the Russell 2000 index, which condition is measured for the grants on the third anniversary of the grant date. The awards may vest at 250 % or 200 %, depending upon the executive, if the 75th percentile of the market condition is achieved, with 100 % of the units vesting at the 55th percentile, zero vesting if relative TSR is below the 25th percentile, and vesting scaling for achievement between the 25th and 75th percentile.   In the first three months of fiscal 2022, certain awards with a market condition or performance condition granted in prior fiscal years have vested. During the first quarter of fiscal 2022 , the market condition for awards granted to certain executives in the first quarter of fiscal 2019 exceeded the 75 th percentile of their TSR condition, and the third tranche of these awards vested at 200 %. During the first quarter of fiscal 2022 , the market condition for awards granted to certain executives in the first quarter of fiscal 2020 exceeded the 75 th percentile of their TSR condition, and the first tranche of these awards vested at 250 % or 200 %, as applicable for the respective executive. During the first quarter of fiscal 2022, the fourth tranche of 40 % of the base number of the awards with an EBITDA performance condition vested, as the Company had met the adjusted EBITDA performance criteria on a trailing four -quarter basis for two consecutive trailing four -quarter periods as of the end of the previous quarter. As of April 2, 2022, the Company had met the final two adjusted EBITDA performance criteria on a trailing four -quarter basis for two consecutive trailing four -quarter periods, and the fifth and sixth tranches of 40 % and 70 %, respectively, of the base number of the awards with an EBITDA performance condition qualified for vesting.   For our awards with a market condition or a performance condition, we incurred stock compensation expense of approximately $ 6.9 million and $ 4.6 million in the first quarter of fiscal 2022 and 2021, respectively, which is recorded as a component of total stock-based compensation.   The following table summarizes the activity for our awards with a market condition or performance condition:   (Shares in thousands)   Total   Balance, January 1, 2022     1,246   Granted     183   Effect of vesting multiplier     358   Vested     ( 638 ) Balance, April 2, 2022     1,149       - 15 - Table of Contents     Note 10 - Common Stock Repurchase Program   On November 8, 2021, we announced that our Board of Directors had approved a stock repurchase program pursuant to which up to an additional $ 100 million of outstanding common stock could be repurchased from time to time (the "2022 Repurchase Program"). The duration of the 2022 Repurchase Program is through the end of December 2022. Under the 2022 Repurchase Program during the first quarter of fiscal 2022, we repurchased 244,063 shares for $ 15.0 million, or an average price paid per share of $ 61.46 . As of April 2, 2022 , the remaining portion of the amount authorized for the 2022 Repurchase Program is approximately $ 75 million. All repurchases were open market transactions funded from available working capital. All shares repurchased pursuant to the 2022 Repurchase Program were retired by the end of the first quarter of 2022.     Note 11 - Income Taxes   We are subject to federal and state income tax as well as income tax in the foreign jurisdictions in which we operate. For the first quarter of both fiscal 2022 and 2021 , we recorded income tax expense of approximately $ 1.0 million. Income taxes for the  three month period ended April 2, 2022 and April 3, 2021 represent tax at the federal, state, and foreign statutory tax rates in addition to withholding taxes, changes in uncertain tax positions, as well as other non-deductible items in foreign jurisdictions. The difference between the U.S. federal statutory tax rate of 21 % and our effective tax rates for the three months ended April 2, 2022 and for the three months ended April 3, 2021 resulted primarily from U.S. valuation allowance, foreign withholding taxes, foreign rate differentials, and the discrete impacts of uncertain tax positions due to lapsing of the statute of limitations.   We updated our evaluation of the valuation allowance position in the United States through April 2, 2022 and concluded that we should continue to maintain a full valuation allowance against the net federal and state deferred tax assets. In making this evaluation, we exercised significant judgment and considered estimates about our ability to generate revenue and taxable profits sufficient to offset expenditures in future periods within the U.S. We will continue to evaluate both positive and negative evidence in future periods to determine if we will realize the net deferred tax assets. We do not have a valuation allowance in any foreign jurisdictions as we have concluded it is more likely than not that we will realize the net deferred tax assets in future periods.   Our liability recorded for uncertain tax positions (including penalties and interest) wa s $ 21.3 million and $ 21.6 million a t April 2, 2022 and January 1, 2022 , respectively, and is included as a component of Other long-term liabilities on our Consolidated Balance Sheets.     Note 12 - Contingencies   Legal Matters   On or about December 19, 2018, Steven A.W. De Jaray, Perienne De Jaray and Darrell R. Oswald (collectively, the “Plaintiffs”) commenced an action against the Company and several unnamed defendants in the Multnomah County Circuit Court of the State of Oregon, in connection with the sale of certain products by the Company to the Plaintiffs in or around 2008. The Plaintiffs allege that we violated The Lanham Act, engaged in negligence and fraud by failing to disclose to the Plaintiffs the export-controlled status of the subject parts. The Plaintiffs seek damages of $ 138 million, treble damages, and other remedies. In January 2019, we removed the action to the United States District Court for the District of Oregon. At this stage of the proceedings, we do not have an estimate of the likelihood or the amount of any potential exposure to the Company; however, we believe that these claims are without merit and intend to vigorously defend the action.   From time to time, we are exposed to certain additional asserted and unasserted potential claims. We review the status of each significant matter and assess its potential financial exposure. If the potential loss from any claim or legal proceeding is considered probable and a range of possible losses can be estimated, we then accrue a liability for the estimated loss. Legal proceedings are subject to uncertainties, and the outcomes are difficult to predict. Because of such uncertainties, accruals are based only on the best information available at the time. As additional information becomes available, we reassess the potential liability related to pending claims and litigation and may revise estimates.   - 16 - Table of Contents     ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS   The following discussion should be read along with the unaudited consolidated financial statements and notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q, as well as the audited consolidated financial statements and notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2021 10-K.   Overview   Lattice Semiconductor Corporation and its subsidiaries (“Lattice,” the “Company,” “we,” “us,” or “our”) develop technologies that we monetize through differentiated programmable logic semiconductor products, silicon-enabling products, system solutions, design services, and licenses. Lattice is the low power programmable leader. We solve customer problems across the network, from the Edge to the Cloud, in the growing communications, computing, industrial, automotive, and consumer markets. Our technology, long-standing relationships, and commitment to world-class support helps our customers quickly and easily unleash their innovation to create a smart, secure, and connected world.   Lattice has focused its strategy on delivering programmable logic products and related solutions based on low power, small size, and ease of use. We also serve our customers with intellectual property ("IP") licensing and various other services. Our product development activities include new proprietary products, advanced packaging, existing product enhancements, software development tools, soft IP, and system solutions for high-growth applications such as Edge Artificial Intelligence, 5G infrastructure, platform security, and factory automation.   Critical Accounting Policies and Use of Estimates   Critical accounting policies are those that are both most important to the portrayal of a company's financial condition and results of operations, and that require management's most difficult, subjective, and complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. There have been no significant changes to the items that we disclosed as our critical accounting policies and estimates in Management's Discussion and Analysis of Financial Condition and Results of Operations in our 2021 10-K.   The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and judgments affecting the amounts reported in our consolidated condensed financial statements and the accompanying notes. We base our estimates and judgments on historical experience, knowledge of current conditions, and our beliefs of what could occur in the future considering available information. While we believe that our estimates, assumptions, and judgments are reasonable, they are based on information available when made, and because of the uncertainty inherent in these matters, actual results may differ materially from these estimates under different assumptions or conditions. We evaluate our estimates and judgments on an ongoing basis.   Impact of COVID-19 on our Business   The ongoing COVID-19 pandemic has caused, and may continue to cause, a global slowdown of economic activity (including the decrease in demand for certain goods and services), and volatility in and disruption to financial markets, labor markets, and supply chains. The severity, magnitude and duration of the ongoing COVID-19 pandemic and its economic consequences have been and continue to be uncertain, evolving and difficult to predict, and the pandemic’s impact on our operations and financial performance, as well as its impact on our ability to successfully execute our business strategy and initiatives, remains uncertain. We continue to take actions to safeguard the health and safety of our employees and our business. Furthermore, we continue to manage our cash position and liquidity needs in light of the evolving COVID-19 pandemic, and we have additional resources available under our Current Credit Agreement, if needed.   The full extent of the effects of the COVID-19 pandemic, including recent variants of the virus, continue to be uncertain. We anticipate that these effects caused by the COVID-19 pandemic may continue to negatively impact business activity across the globe. Demand for our products may be impacted, which could have a negative impact on our revenue, given the global reach and continued economic impact of the virus. We have previously seen and could again see delays or disruptions in our supply chain due to governmental restrictions or voluntary precautionary measures adopted by our suppliers. If our suppliers experience similar impacts, or if rising rates of inflation increase, we may have compounded difficulty sourcing materials necessary to fulfill customer production requirements and transporting completed products to our end customers. It is difficult for us to predict the scope, magnitude, and length of supply chain disruptions and the rising rate of inflation. Supply chain delays and disruptions may also affect the ability of our customers to obtain materials or products from other suppliers which may constrain or delay their demand for our products.   - 17 - Table of Contents   We may take further actions altering our business operations that we determine are in the best interests of our employees, customers, partners, suppliers, and stakeholders, or as required by federal, state, or local authorities. It is not clear what the potential effects of any such alterations or modifications may have on our business, including the effects on our customers, employees, and prospects, or on our financial condition or results of operations. The future impacts of the ongoing COVID-19 pandemic on our business, results of operations and financial position remain uncertain and will depend on many factors that are not within our control, including, but not limited to: the duration and scope of the evolving pandemic; governmental, business and individuals’ actions that have been and continue to be taken in response to the pandemic; general economic uncertainty in key global markets and financial market volatility; global economic conditions and levels of economic growth; and the pace of recovery when the COVID-19 pandemic subs ides. See the section entitled “Risk Factors” in Item 1A of Part I of our Annual Report on Form 10-K for the fiscal year ended January 1, 2022 for further information about related risks and uncertainties.   Results of Operations   Key elements of our Consolidated Statements of Operations, including as a percentage of revenue, are presented in the following table:       Three Months Ended       April 2,     April 3,   (In thousands)   2022     2021   Revenue   $ 150,515       100.0 %   $ 115,716       100.0 %                                   Gross margin     100,767       66.9       70,586       61.0                                     Research and development     32,555       21.6       24,066       20.8   Selling, general and, administrative     28,771       19.1       25,092       21.7   Amortization of acquired intangible assets     1,169       0.8       603       0.5   Restructuring charges     54       0.0       176       0.2   Acquisition related charges     455       0.3       —       —   Income from operations   $ 37,763       25.1 %   $ 20,649       17.8 %   Revenue by End Market   We sell our products globally to a broad base of customers in three primary end market groups: Communications and Computing, Industrial and Automotive, and Consumer. We also provide IP licensing and services to these end markets.   Within these end markets, there are multiple segment drivers, including: • Communications and computing: 5G infrastructure deployments, client computing platforms, and cloud and enterprise servers, • Industrial and automotive: industrial Internet of Things ("IoT"), factory automation, robotics, and automotive electronics, • Consumer: smart home, and prosumer.   We also generate revenue from the licensing of our IP, the collection of certain royalties, patent sales, the revenue related to our participation in consortia and standard-setting activities, and services. While these activities may be associated with multiple markets, Licensing and services revenue is reported as a separate end market as it has characteristics that differ from other categories, most notably a higher gross margin.   The end market data below is derived from data provided to us b y our customers. Wi th a diverse base of customers who may manufacture end products spanning multiple end markets, the assignment of revenue to a specific end market requires the use of judgment. We also recognize certain revenue fo r which end customers an d end markets are not yet known. We assign this revenue first to a specific end market using historical and anticipated usage of the specific products, if possible, and allocate the remainder to the end markets based on either historical usage for each product family or industry application data for certain product types.   The following are examples of end market applications for the periods presented:   Communications and Computing Industrial and Automotive Consumer Licensing and Services Wireless Security and Surveillance Cameras IP Royalties Wireline Machine Vision Displays Adopter Fees Data Backhaul Industrial Automation Wearables IP Licenses Server Computing Robotics Televisions Patent Sales Client Computing Automotive Home Theater   Data Storage Drones       - 18 - Table of Contents   The composition of our revenue by end market is presented in the following table:       Three Months Ended       April 2,     April 3,   (In thousands)   2022     2021   Communications and Computing   $ 62,440       41.5 %   $ 49,328       42.6 % Industrial and Automotive     69,635       46.3       49,745       43.0   Consumer     14,903       9.9       12,519       10.8   Licensing and Services     3,537       2.3       4,124       3.6   Total revenue   $ 150,515       100.0 %   $ 115,716       100.0 %   Revenue from the Communications and Computing end market increased by 27% for the first quarter of fiscal 2022 compared to the first quarter of fiscal 2021 primarily due to our key growth drivers in data center servers, client computing and 5G infrastructure.   Revenue from the Industrial and Automotive end market increased by 40% for the first quarter of fiscal 2022 compared to the first quarter of fiscal 2021 primarily due to strong customer adoption in a broad range of applications, including industrial automation and robotics. Growth in Automotive was driven by the adoption of new designs in advanced driver assistance ("ADAS") and infotainment applications.   Revenue from the Consumer end market increased by 19% for the first quarter of fiscal 2022 compared to the first quarter of fiscal 2021 primarily due to increased demand for our products in Consumer end market applications.   Revenue from the Licensing and services end market decreased by 14% for the first quarter of fiscal 2022 compared to the first quarter of fiscal 2021 primarily due to lower royalties.   Revenue by Geography   We assign revenue to geographies based on ship-to location of the customer.   The composition of our revenue by geography is presented in the following table:       Three Months Ended       April 2,     April 3,   (In thousands)   2022     2021   Asia   $ 108,752       72.3 %   $ 88,390       76.4 % Americas     21,540       14.3       15,843       13.7   Europe     20,223       13.4       11,483       9.9   Total revenue   $ 150,515       100.0 %   $ 115,716       100.0 %   Revenue from Customers   We sell our products to independent distributors and directly to customers. Distributors have historically accounted for a significant portion of our total revenue, and the two distributor groups noted below individually accounted for more than 10% of our total revenue in the periods covered by this report .   The composition of our revenue by customer is presented in the following table:       % of Total Revenue       Three Months Ended       April 2,     April 3,       2022     2021   Weikeng Group     35.5 %     38.9 % Arrow Electronics Inc.     28.5       26.1   Other distributors     26.0       20.4   All distributors     90.0       85.4   Direct customers     7.7       11.0   Licensing and services revenue     2.3       3.6   Total revenue     100.0 %     100.0 %   - 19 - Table of Contents   Gross Margin   The composition of our Gross margin, including as a percentage of revenue, is presented in the following table:       Three Months Ended       April 2,     April 3,   (In thousands)   2022     2021   Gross margin   $ 100,767     $ 70,586   Gross margin percentage     66.9 %     61.0 % Product gross margin %     66.2 %     59.6 % Licensing and services gross margin %     100.0 %     100.0 %   Gross margin, as a percentage of revenue, increased 590 basis points in the first quarter of fiscal 2022 compared to the first quarter of fiscal 2021. Improved margins were driven by benefits from our pricing optimization and gross margin expansion strategy.   Because of its higher margin, the licensing and services portion of our overall revenue can have a disproportionate impact on Gross margin.     Operating Expenses   Research and Development Expense   The composition of our Research and development expense, including as a percentage of revenue, is presented in the following table:       Three Months Ended               April 2,     April 3,           (In thousands)   2022     2021     % change   Research and development   $ 32,555     $ 24,066       35.3 % Percentage of revenue     21.6 %     20.8 %           Research and development expense includes costs for compensation and benefits, stock compensation, engineering wafers, depreciation, licenses, and outside engineering services. These expenditures are for the design of new products, IP cores, processes, packaging, and software solutions. The increase in Research and development expense for the first quarter of fiscal 2022 compared to the first quarter of fiscal 2021 was due primarily to increased headcount-related costs as we continue to invest in the expansion of our product portfolio and the acceleration of our new product introduction cadence. We believe that a continued commitment to Research and development is essential to maintaining product leadership and providing innovative new product offerings and, therefore, we expect to continue to increase our investment in Research and development, particularly with expanded investment in the development of software solutions.   Selling, General, and Administrative Expense   The composition of our Selling, general, and administrative expense, including as a percentage of revenue, is presented in the following table:       Three Months Ended               April 2,     April 3,           (In thousands)   2022     2021     % change   Selling, general, and administrative   $ 28,771     $ 25,092       14.7 % Percentage of revenue     19.1 %     21.7 %           Selling, general, and administrative expense includes costs for compensation and benefits related to selling, general, and administrative employees, commissions, depreciation, professional and outside services, trade show, and travel expenses. The increase in Selling, general, and administrative expense for the first quarter of fiscal 2022 compared to the first quarter of fiscal 2021 was due primarily to increased headcount-related costs to support ongoing customer growth.   - 20 - Table of Contents   Amortization of Acquired Intangible Assets   The composition of our Amortization of acquired intangible assets, including as a percentage of revenue, is presented in the following table:       Three Months Ended               April 2,     April 3,           (In thousands)   2022     2021     % change   Amortization of acquired intangible assets   $ 1,169     $ 603       93.9 % Percentage of revenue     0.8 %     0.5 %           The increase in Amortization of acquired intangible assets for the first quarter of fiscal 2022 compared to the first quarter of fiscal 2021 is due to the amortization expense for new intangible assets added in the fourth quarter of fiscal 2021 through the acquisition of Mirametrix, Inc., partially offset by end of the amortization period during the first quarter of fiscal 2022 for acquired intangible assets from previous acquisitions.   Restructuring Charges   The composition of our Restructuring charges, including as a percentage of revenue, is presented in the following table:       Three Months Ended               April 2,     April 3,           (In thousands)   2022     2021     % change   Restructuring charges   $ 54     $ 176       (69.3 )% Percentage of revenue     0.0 %     0.2 %           Restructuring charges are comprised of expenses resulting from reductions in our worldwide workforce, consolidation of our facilities, removal of fixed assets from service, and cancellation of software contracts and engineering tools. Details of our restructuring plans and expenses incurred under them are discussed in "Note 6 - Restructuring"  to our Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q. Restructuring charges decreased in the first quarter of fiscal 2022 compared to the first quarter of fiscal 2021, as we had no significant restructuring activity in the current year.   Acquisition Related Charges   The composition of our Acquisition related charges, including as a percentage of revenue, is presented in the following table:       Three Months Ended               April 2,     April 3,           (In thousands)   2022     2021     % change   Acquisition related charges   $ 455     $ —       100.0 % Percentage of revenue     0.3 %     — %           Acquisition related charges include legal and professional fees directly related to acquisitions. For the first quarter of fiscal 2022, Acquisition related charges were attributable to our acquisition of Mirametrix in November 2021 and were comprised primarily of professional services including legal and accounting fees.   Interest Expense   The composition of our Interest expense, including as a percentage of revenue, is presented in the following table:       Three Months Ended               April 2,     April 3,           (In thousands)   2022     2021     % change   Interest expense   $ (708 )   $ (718 )     (1.4 )% Percentage of revenue     (0.5 )%     (0.6 )%           Interest expense is primarily related to our long-term debt. This interest expense is comprised of contractual interest and amortization of original issue discount and debt issuance costs based on the effective interest method. The decrease in Interest expense for the first quarter of fiscal 2022 compared to the first quarter of fiscal 2021 was driven by the reduction in the principal balance of our long-term debt.   - 21 - Table of Contents   Other (Expense) Income, net   The composition of our Other (expense) income, net, including as a percentage of revenue, is presented in the following table:       Three Months Ended               April 2,     April 3,           (In thousands)   2022     2021     % change   Other (expense) income, net   $ (22 )   $ (162 )     (86.4 )% Percentage of revenue     (0.0 )%     (0.1 )%           The decrease in Other (expense) income, net for the first quarter of fiscal 2022 compared to the first quarter of fiscal 2021 was primarily due to lower foreign currency exchange losses.   Income Taxes   The composition of our Income tax expense is presented in the following table:       Three Months Ended               April 2,     April 3,           (In thousands)   2022     2021     % change   Income tax expense   $ 955     $ 956       (0.1 )%   Our Income tax expense is composed primarily of foreign income and withholding taxes, partially offset by benefits resulting from the release of uncertain tax positions due to statute of limitation expirations that occurred in the respective periods .     Liquidity and Capital Resources   The following sections discuss material changes in our financial condition from the end of fiscal 2021, including the effects of changes in our Consolidated Balance Sheets, and the effects of our credit arrangements and contractual obligations on our liquidity and capital resources. There continues to be uncertainty around the extent and duration of the disruption to our business from the ongoing COVID-19 pandemic, which may impact our liquidity and working capital needs in future periods.   We have historically financed our operating and capital resource requirements through cash flows from operations, and from the issuance of long-term debt to fund acquisitions. Cash provided by or used in operating activities will fluctuate from period to period due to fluctuations in operating results, the timing and collection of accounts receivable, and required inventory levels, among other things.   We believe that our financial resources, including current cash and cash equivalents, cash flow from operating activities, and our credit facilities, will be sufficient to meet our liquidity and working capital needs through at least the next 12 months. As of April 2, 2022, we did not have significant long-term commitments for capital expenditures. For further information on our cash commitments for operating lease liabilities and required future principal payments on our long-term debt, see Note 7 - Leases and  Note 5 - Long-Term Debt , respectively, under Part I, Item 1 of this report.   In the future, we may continue to consider acquisition opportunities to further extend our product or technology portfolios and further expand our product offerings. In connection with funding capital expenditures, acquisitions, securing additional wafer supply, increasing our working capital, or other operations, we may seek to obtain equity or additional debt financing. We may also seek to obtain equity or additional debt financing if we experience downturns or cyclical fluctuations in our business that are more severe or longer than we anticipated when determining our current working capital needs.   - 22 - Table of Contents   Cash and cash equivalents   (In thousands)   April 2, 2022     January 1, 2022     $ Change     % Change   Cash and cash equivalents   $ 122,989     $ 131,570     $ (8,581 )     (6.5 )%   As of April 2, 2022, we had Cash and cash equivalents of $123.0 million, of which approximately $49.0 million was held by our foreign subsidiaries. We manage our global cash requirements considering, among other things, (i) available funds among our subsidiaries through which we conduct business, (ii) the geographic location of our liquidity needs, and (iii) the cost to access international cash balances. The repatriation of non-US earnings may require us to withhold and pay foreign income tax on dividends. This should not result in our recording significant additional tax expense as we have accrued expense based on current withholding rates. As of April 2, 2022, we could access all cash held by our foreign subsidiaries without incurring significant additional expense.   The net decrease in Cash and cash equivalents of $8.6 million between January 1, 2022 and April 2, 2022 was primarily driven by cash flows from the following activities:   Operating activities — Cash provided by operating activities results from net income adjusted for certain non-cash items and changes in assets and liabilities. Cash provided by operating activities for the first three months of fiscal 2022 was $43.2 million compared to $29.4 million for the first three months of fiscal 2021 . This increase of $13.8 million was primarily driven by an increase of $22.3 million provided by improved operating performance, partially offset by $8.5 million of net changes in working capital, primarily from cash used by inventories . We are using cash provided by operating activities to fund our operations.   Investing activities — Investing cash flows consist primarily of transactions related to capital expenditures and payments for software and intellectual property licenses. Net cash used by investing activities in the first three months of fiscal 2022 was $7.1 million compared to $4.3 million in the first three months of fiscal 2021.   Financing activities — Financing cash flows consist primarily of activity on our long-term debt, proceeds from the exercise of options to acquire common stock, tax payments related to the net share settlement of restricted stock units, and repurchases of common stock. During the first three months of fiscal 2022, we paid required quarterly installments on our long-term debt totaling $4.4 million . Payments for tax withholdings on vesting of RSUs partially offset by employee exercises of stock options used net cash flows of $25.0 million in the first three months of fiscal 2022, an increase of approximately $18.1 million from the net $6.9 million used in the first three months of fiscal 2021. During the first three months of fiscal 2022, we also repurchased approximately 0.2 million shares of common stock for $15.0 million, as further discussed below under "Share Repurchase Program."   Accounts receivable, net   (In thousands)   April 2, 2022     January 1, 2022     Change     % Change   Accounts receivable, net   $ 83,055     $ 79,859     $ 3,196       4.0 % Days sales outstanding - Overall     50       51       (1 )           Accounts receivable, net as of April 2, 2022 increased by approximately $3.2 million, or 4% , compared to January 1, 2022. This increase resulted primarily from higher revenue shipments in the first quarter of fiscal 2022 compared to the year-end period. We calculate Days Sales Outstanding on the basis of a 365-day year as Accounts receivable, net at the end of the quarter divided by sales during the quarter annualized and then multiplied by 365.   Inventories   (In thousands)   April 2, 2022     January 1, 2022     Change     % Change   Inventories   $ 71,773     $ 67,594     $ 4,179       6.2 % Days of inventory on hand     132       122       10             Inventories as of April 2, 2022 increased $4.2 million, or approximately 6%, compared to January 1, 2022 primarily to meet the increased demands of our customers.   The Days of inventory on hand ratio compares the inventory balance at the end of a quarter to the cost of sales in that quarter. We calculate Days of inventory on hand on the basis of a 365-day year as Inventories at the end of the quarter divided by Cost of sales during the quarter annualized and then multiplied by 365.   - 23 - Table of Contents   Credit Arrangements   On May 17, 2019, we entered into our Current Credit Agreement with Wells Fargo Bank, National Association, as administrative agent, and other lenders. The details of this arrangement are described in "Note 8 - Long-Term Debt" in the Notes to Consolidated Financial Statements of our 2021 10-K.   As of April 2, 2022, we had no used or unused credit arrangements beyond the secured revolving loan facility described in the Current Credit Agreement.   Share Repurchase Program   See Part II, Item 2, “Unregistered Sales of Equity Securities and Use of Proceeds,” of this Quarterly Report on Form 10-Q for more information about the share repurchase program.     ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK   Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily a result of fluctuations in foreign currency exchange rates and interest rates. We assess these risks on a regular basis and have established policies that are designed to protect against the adverse effects of these and other potential exposures. There have been no material changes to either the foreign currency exchange rate risk or interest rate risk previously disclosed in Part II, Item 7A, "Quantitative and Qualitative Disclosures About Market Risk," of our Annual Report on Form 10-K for the fiscal year ended January 1, 2022.     ITEM 4. CONTROLS AND PROCEDURES   Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures   In connection with the filing of this Quarterly Report on Form 10-Q, our management, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls were effective as of the end of the period covered by this report.   Changes in Internal Control over Financial Reporting   There were no changes in our internal controls over financial reporting (as defined in Rules 13a-15(f) under the Exchange Act) that occurred during the first quarter of fiscal 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. We do not believe there has been any material impact to our internal controls over financial reporting notwithstanding that most of our employees are working remotely due to the COVID-19 pandemic. We continue to monitor and assess any potential impact of the COVID-19 pandemic on the design and operating effectiveness of our internal controls.   Inherent Limitations on Effectiveness of Controls   We do not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.   - 24 - Table of Contents   PART II. OTHER INFORMATION   ITEM 1. LEGAL PROCEEDINGS   The information set forth above under " Note 12 - Contingencies - Legal Matters " contained in the Notes to Consolidated Financial Statements is incorporated herein by reference.     ITEM 1A. RISK FACTORS   The risk factors associated with our business were previously described in Part I, Item 1A, “Risk Factors,” in our Annual Report on Form 10-K for the fiscal year ended January 1, 2022 ("2021 10-K"). There have been no material changes in the risk factors included in our 2021 10-K, and this report should be read in conjunction with the risk factors set forth in our 2021 10-K. If any of these risks occur, our business, financial condition, operating results, and cash flows could be materially adversely affected, and the trading price of our common stock could decline. These risk factors are not the only risks facing our company. Additional risks and uncertainties not presently known to us or that we may currently deem to be immaterial could materially adversely affect our business, financial condition, or operating results, including related to the ongoing COVID-19 pandemic or the conflict between Russia and Ukraine, which has also affected surrounding countries. These factors, together with all of the other information in this Quarterly Report on Form 10-Q, including our unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q, should be carefully considered before making an investment decision relating to our common stock.     ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS   Issuer Purchases of Equity Securities   On November 8, 2021, we announced that our Board of Directors had approved a stock repurchase program pursuant to which up to an additional $100.0 million of outstanding common stock could be repurchased from time to time (the "2022 Repurchase Program"). The duration of the 2022 Repurchase Program is through the end of December 2022. Under the 2022 Repurchase Program during the first quarter of fiscal 2022, we repurchased 244,063 shares for $15.0 million, or an average price paid per share of $61.46. All shares repurchased pursuant to the 2022 Repurchase Program were retired by the end of the first quarter of fiscal 2022.   The following table contains information regarding our repurchases of our common stock that is registered pursuant to Section 12 of the Securities Exchange Act of 1934 during the first quarter of fiscal 2022.   Period   Total Number of Shares Purchased     Average Price Paid per Share     Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (a)     Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs ($M) (b)   January 2, 2022 through January 29, 2022     —     $ —       —     $ 89.9   January 30, 2022 through February 26, 2022     81,200     $ 61.58       81,200     $ 84.9   February 27, 2022 through April 2, 2022     162,863     $ 61.40       162,863     $ 74.9   Total     244,063     $ 61.46       244,063     $ 74.9     (a)   All repurchases during the quarter were open-market transactions funded from available working capital made under the authorization from our board of directors to purchase up to $100.0 million of our common stock announced November 8, 2021. (b)   As of April 2, 2022, this amount consisted of the remaining portion of the $100.0 million program authorized through the end of December 2022 that was announced November 8, 2021.     - 25 - Table of Contents   ITEM 5. OTHER INFORMATION   Bylaws Revisions   On April 29, 2022, our Board of Directors approved our amended and restated bylaws (the “Amended and Restated Bylaws”) to make clear that stockholders may act by written consent subject to certain procedures, clarify our advance notice procedures for bringing business at annual meetings, provide that the federal district courts of the United States of America shall be the exclusive forum for any litigation asserting a claim under the Securities Act, and reflect certain other immaterial updates.   The foregoing description of the Amended and Restated Bylaws does not purport to be complete, and is qualified in its entirety by reference to the full text of the Amended and Restated Bylaws, a copy of which is filed as Exhibit 3.1 to this Quarterly Report on Form 10-Q and is incorporated herein by reference     ITEM 6. EXHIBITS   Exhibit Number   Description       3.1   The Company's Bylaws, as amended as of April 29, 2022.       31.1   Certification of Chief Executive Officer pursuant to the Securities Exchange Act of 1934 Rule 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.       31.2   Certification of Chief Financial Officer pursuant to the Securities Exchange Act of 1934 Rule 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.       32.1   Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.       32.2   Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.       101.INS    Inline XBRL Instance Document (the Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)       101.SCH    Inline XBRL Taxonomy Extension Schema Document       101.CAL   Inline XBRL Taxonomy Extension Calculation Linkbase Document       101.DEF   Inline XBRL Taxonomy Extension Definition Linkbase Document       101.LAB   Inline XBRL Taxonomy Extension Label Linkbase Document       101.PRE   Inline XBRL Taxonomy Extension Presentation Linkbase Document       104   Cover Page Interactive Data File - formatted in Inline XBRL and included in Exhibit 101   - 26 - Table of Contents   SIGNATURES   Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.     LATTICE SEMICONDUCTOR CORPORATION   ( Registrant)       /s/ Sherri Luther   Sherri Luther   Chief Financial Officer   (Principal Financial and Accounting Officer)   Date: May 4, 2022   - 27 -